Payments News Update – February 23, 2024
Legal and Regulatory Developments
SPOTLIGHT: US Supreme Court Wrestles With Bid to Challenge Debit Card ‘Swipe Fee’ Rule
Reuters – February 20, 2024
U.S. Supreme Court justices on Tuesday grappled with a North Dakota convenience store’s challenge to a government regulation on debit card “swipe fees” – a case that could make it easier for businesses to try to undo longstanding federal rules. Arguments in the case focused on whether the store was too late in bringing its 2021 lawsuit challenging a 2011 Federal Reserve regulation governing how much businesses pay to banks when customers use debit cards to make purchases.
The store, called Corner Post and located in Watford City, appealed after lower courts threw out its lawsuit on the basis of missing the six-year statue of limitations that generally applies to such litigation. Corner Post argued it should not be bound by the statute of limitations because it opened for business in 2018, meaning its legal injury arose only after the deadline had passed. . . .
Expert Analysis – NY’s Revamped Card Surcharge Ban Is Unique Among States
Law360 – February 20, 2024 (subscription required)
As of Feb. 11, New York has bolstered its ban on credit card surcharges by allowing two-tier pricing. Posting the cash price plus a percentage surcharge will continue to be prohibited, with violations subject to a $500 penalty. New York’s reformulation of its surcharge ban may reinvigorate such laws, many of which have been ruled unconstitutional. Under the act, merchants that impose a credit surcharge fee are required to post prices inclusive of the surcharge fee.
New York’s response is unique among states that have passed recent legislation to control or restrict credit card surcharges. Specifically, A.B. 2672, which was signed into law Dec. 13, 2023, permits a seller in a sales transaction to impose a surcharge on customers that elect to use a credit card in lieu of payment by cash, check or similar means — such as a debit card — so long as: [t]he seller clearly and conspicuously posts the total price for using a credit card in such a transaction, inclusive of the surcharge; [t]he final price of the transaction, including any surcharge, is not greater than the posted price for the transaction; and [t]he surcharge does not exceed the amount charged to the business by the credit card network for the transaction. . . .
Industry Developments
SPOTLIGHT: Capital One Is Buying Discover Financial for $35 Billion
Wall Street Journal – February 19, 2024 (subscription required)
Capital One said it will buy Discover Financial Services for more than $35 billion, a deal that will marry two of the largest credit-card companies in the U.S. Under the terms of the all-stock deal, Discover shareholders are set to receive 1.0192 Capital One shares for each Discover share, representing a premium of about 27% based on Discover’s closing price Friday. After the deal closes, Capital One shareholders will hold roughly 60% of the combined company, with Discover shareholders owning the rest.
Capital One is making a big bet at a booming time in the credit-card sector. More consumers are moving from paying with cash to cards as a result of generous rewards programs and the digitization of commerce—a transition that accelerated with the pandemic. A recent increase in credit-card debt has provided a further boost to issuers. . . .
Volt Builds Global Payments Network to Take on Visa and Mastercard
Forbes – February 21, 2024
Fintech start-up Volt says a new deal in Australia underlines its determination to take on Visa and Mastercard by disrupting the global payments industry. The British company, founded in 2019, has signed an agreement to integrate with PayTo, the Australian digital payments platform; the move marks Volt’s second foray outside the UK and Europe, following a similar tie-up in Brazil in 2021.
The company is fast becoming one of the UK’s most closely watched fintechs, having raised $60 million of funding last year in a series B round led by IVP, the Silicon Valley venture capitalist that has previously worked with technology sector star turns ranging from Klarna to Slack. . . .
Good News for Paze: 44% Would Use a Bank-Provided Digital Wallet
Digital Transactions News – February 21, 2024
When it comes to online checkout, consumers like using digital wallets. Seventy-two percent of them value digital-payment tools like digital wallets to make the online checkout easier, says Paze in its inaugural Paze Pulse report.
Paze is an upcoming digital wallet from Early Warning Services LLC. Backed by seven large U.S. banks, the wallet could come preloaded with up to 150 million credit cards and billing addresses, eliminating some of the tedium consumers experience when having to type that information in. . . .
BNPL Popularity Rises Among ‘Financially Fragile’ Consumers
Payments Dive – February 15, 2024
“Financially fragile” buy now, pay later users are turning to the installment payment method more frequently than financially stable consumers, according to new research from the Federal Reserve Bank of New York.
BNPL users who are financially fragile “appear to have embraced BNPL as a regular payment option,” the New York Fed said in its second report on BNPL, released Wednesday. About 60% of that group have used BNPL five or more times in the past year, compared to just over 20% of financially stable consumers.
Financially fragile users are also tapping BNPL for smaller purchases, the NY Fed said. The majority of financially fragile users are turning to BNPL to make purchases under $250, while financially stable users are far more likely to use it for purchases between $1,750 and $2,000. . . .