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Payments News Update – February 9, 2024

Posted  February 9, 2024

Legal and Regulatory Developments

SPOTLIGHT: Lawmakers Clash on CFPB Digital Payment Rule
Payments Dive – February 1, 2024

Three Democratic U.S. senators wrote an open letter on Wednesday to Rohit Chopra, director of the Consumer Financial Protection Bureau, expressing support for a proposed rule that would let the bureau oversee digital payment apps, such as Zelle and Venmo.

The letter, from Sens. Jack Reed of Rhode Island, Sherrod Brown of Ohio and Elizabeth Warren of Massachusetts, came just a day after Republican Congressmen Patrick McHenry of North Carolina, French Hill of Arkansas and Mike Flood of Nebraska wrote to Chopra. The three lawmakers asked for an additional sixty days to comment on the proposed rule.

“This rule would introduce more regulatory uncertainty into the payment industry, particularly with respect to third-party service providers and digital asset companies,” the three Republican Congress members wrote in their letter. . . .

Industry Developments

SPOTLIGHT: Why ‘Pay-by-Bank’ Faces Adoption Hurdles in US Retail
Payments Dive – February 5, 2024 

For U.S. merchants butting heads with card networks over card swipe fees, the answer might be to bypass cards altogether and allow funds to move directly from the payer to recipient via account-to-account payments — the so-called pay-by-bank method. The problem is that it’s far from catching fire among U.S. consumers.

Account-to-account payments have been around for decades. They’ve gained only limited momentum in recent years in the U.S. because the alternative — cards — have high transaction fees; increased adoption of pay-by-bank in other countries; and the launch of faster payments systems like FedNow and RTP, according to industry consultant Peter Tapling.

U.S. adoption has been slow because faster payments haven’t been rolled out at in-store retail checkouts, and consumers haven’t (yet) felt a compelling enough reason to ditch their cards, say merchants and industry analysts. But merchants may still want to make this happen to avoid steep card swipe fees. . . .

ABA Formalizes BIN Administration Handoff to Long-Term Partner CUSIP
Digital Transactions News – February 8, 2024 

CUSIP Global Services announced late Wednesday that it will be taking over day-to-day operations of the administration of the issuer identification number system from the American Bankers Association. The change is not monumental as CUSIP has a long history of managing numbering programs for the financial services industry. The ABA will maintain overall registration authority for the IIN standard, which was developed in the early 1970s.

The administrative handoff is part of a larger strategy to modernize the technology behind the IIN standard and is not expected to have any impact on how card issuers manage their programs, CUSIP says. A BIN is an 8-digit number used to uniquely identify card-issuing institutions, such as credit, debit and points/rewards card issuers. . . .

Affirm, Afterpay Cut Rewards Programs as BNPL Firms Try New Loyalty Models
PYMNTS – February 6, 2024 

As buy now, pay later (BNPL) companies tinker with different methods to drive long-term engagement, Affirm and Afterpay are rethinking their loyalty strategies.

On Monday (Feb. 5), Affirm shut down its rewards program, which offered points per BNPL purchase that could be redeemed for $5 or $10 off loans at select merchants. The FinTech company will continue to allow program participants to use their existing points until April 5. “We’re constantly testing new features and looking for ways to improve Affirm’s products,” an Affirm spokesperson told PYMNTS in a statement. “While Affirm’s Rewards beta program will no longer be available, we are continuing to explore how we can bring a best-in-class rewards experience to our consumers.”

Afterpay, too, is making changes, although it would appear the BNPL firm is not getting out of the rewards game altogether. . . .

The ACH’s Star Still Burns Bright
Digital Transactions Magazine – February 1, 2024 

Despite increased competition from real-time payments networks, the automated clearing house remains a force in payments and is expected to remain one for the foreseeable future. “Ubiquitous,” “reliable,” “low-cost,” and “highly efficient” are the adjectives that payments executives seize on when asked to describe what makes the automated clearing house the dominant network for account-to-account payments.

But with the launch last July of the Federal Reserve’s FedNow network, which followed the 2017 debut of The Clearinghouse Payment Co.’s Real Time Payment network, real-time payments systems have firmly established themselves as competitors to the 52-year-old ACH. Indeed, the emergence of these new networks raises in the minds of some observers the question: Just where does the ACH fit in the payments landscape going forward?

While slower than real-time payments, transactions routed through the ACH, whether they are same-day ACH or traditional ACH—which processes in up to three business days—the ACH provides plenty of value to businesses and financial institutions. This is especially the case when it comes to processing transactions in bulk. . . .

Mastercard Preps for China Business
Payments Dive – February 1, 2024

Mastercard is preparing for a speedy rollout of services in the “massive economy” of China, Mastercard’s CEO said on a call with analysts Wednesday. Mastercard, the second-largest U.S. card network, is on track to launch services in China in the first half of this year because an approval it won from the country requires services be started within six months. The Purchase, New York-based company won approval last November for a joint venture offering domestic services in China.

“We’re busy right now with our partners in China, with the banks, with acquirers, issuers and so forth to discuss rolling out on the issuing side as well as on the acceptance side,” Mastercard CEO Michael Miebach said on the call to discuss Mastercard’s fourth-quarter earnings. “For years, we have been very active in China on the cross-border side, and those are strong relationships with the same exact banks.” . . .

AI’s Time Has Come
Digital Transactions Magazine – February 1, 2024

Machine learning has long been a tool used by payments companies. Now, artificial intelligence is poised to offer even more utility. Safeguards will be needed. Artificial intelligence is on the cusp of changing how payments companies interact with each other and extract insights from the billions of units of data they collectively hold and gather. All in all, AI is about to make some aspects of payments processing easier. But adoption of the technology is not without costs. How that will play out, which factors will be most influential, and which basic choices payments companies make regarding how they employ AI will determine their success.

As defined by IBM Corp., artificial intelligence is a field that combines computer science and robust datasets to enable problem solving. It is not a new endeavor for the payments industry. Machine learning, a branch of AI that uses data and algorithms to imitate the way humans learn, has been in use in the payments industry for years, again according to IBM. . . .