Payments News Update – January 10, 2025
Legal and Regulatory Developments
SPOTLIGHT: The Fight Over Credit Card Swipe Fees Enters a New Year With No End in Sight
NBC News – January 4, 2025
Many small businesses are breathing a bit easier as inflation has cooled and the race for workers slows. But consumers’ steady embrace of credit cards is taking a growing bite out of their margins.
Gene-Christian Baca, the owner of Walter’s Hot Dogs in Mamaroneck and White Plains, New York, estimated that he now pays $50,000 a year in costs associated with processing credit card transactions, a sum he says has ballooned with rising card processing rates and more customers paying with cards over cash. “Every year, 3% of all of our sales is washed away just to credit card processing,” he said.
Merchants have long shouldered these “swipe fees,” the catchall term for businesses’ payments to banks and card companies each time customers swipe. While a federal rule caps debit card swipe fees at 21 cents per transaction, those for credit cards can be much higher. . . .
UK Antitrust Regulator to Launch Two Probes Under New Digital Markets Powers
Reuters – January 7, 2025
Britain’s antitrust regulator said it would begin two investigations this month using its new powers over the biggest tech firms, which are aimed at stimulating investment, innovation and growth.
The CMA will designate firms as having “Strategic Market Status” (SMS) in relation to a particular digital activity before they can be investigated. The bar for SMS status is high, with only the largest, most influential tech firms affected.
The CMA said in November it believed Apple could be holding back innovation in smartphone browsers, and said it could investigate Apple’s and Google’s duopoly in mobile ecosystems following the launch of its new powers, which came into force this month. . . .
The Three Most Important US Crypto Policies to Watch This Year
PYMNTS – January 7, 2025
The 119th U.S. Congressional session has begun, and the digital asset sector is hoping there will soon be favorable and clear regulatory guardrails for cryptocurrency markets and stablecoins.
During his campaign, President-elect Donald Trump pledged to transform the United States into the “crypto capital of the planet,” and, per the nonprofit industry group Stand With Crypto, the 2024 elections saw 250 “pro-crypto” members of Congress elected along with 16 “pro-crypto” senators.
While the stage appears to be set for a sea of regulatory change, with crypto proponents set to head the Securities and Exchange Commission, Department of Commerce and more, one fundamental gap remains: actual policy being drafted, sponsored and referred to the relevant House or Senate committee. . . .
CFPB Details BNPL, EWA Supervision for First Time
Payments Dive – January 6, 2025
The Consumer Financial Protection Bureau’s supervisory actions in the areas of buy now, pay later and earned wage access financing were highlighted for the first time in an agency review of the fourth quarter of last year. Those findings, and some industry reactions, were detailed by the agency in a document included in the federal government’s Federal Register on Jan. 6.
Some consumers who used BNPL complained to the federal agency that they didn’t receive goods or services under the terms specified, according to the document for the period from Oct. 1 through Jan. 1.
The edition also detailed other supervisory issues with respect to how earned wage access providers advertised consumer options for tipping and closing accounts. . . .
Merchants, Banks Spar Over Fed’s Debit Card Fee Proposal
Payments Dive – January 3, 2025
The Merchants Payments Coalition and the American Bankers Association revived their battle last week over whether the Federal Reserve should finalize a rule that would lower the amount card issuers can charge merchants when consumers swipe their debit cards.
The central bank proposed in October 2023 to reduce the base debit interchange fee card issuers can charge by about 30% to 14.4 cents from 21 cents, per a memo produced by the Fed’s staff. As part of those proposed changes to Regulation II, the amounts issuers can charge for fraud prevention and fraud losses would also adjust.
The Fed hasn’t changed the interchange fee cap since 2011 after the limit was made possible under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. For bankers, the proposed fee cap reduction would eat into revenue, while for merchants, it would mean reduced costs. . . .
Payments Under Trump
Digital Transactions Magazine – January 1, 2025
The new President’s second term will mold the digital payments business in unpredictable ways. Here’s what to expect (we think). Normally, a U.S. President taking office for the second time would embark on a term whose contours shouldn’t be too hard to predict. After all, we saw what he did, and what happened, in the first term. But there’s nothing conventional, politically or otherwise, about Donald Trump, who this month takes office for the second time following a convincing victory in the November presidential election.
While policy regarding payments would stay in flux for some time in any incoming administration, let alone one under the mercurial incoming president, signs are emerging that could presage significant moves under Trump to slash regulations and unleash the animal spirits of the world’s largest payments industry.
These moves are likely to include reining in activists at the Consumer Financial Protection Bureau and the Federal Trade Commission, which recently introduced a requirement simplifying cancellation of services for consumers, observers say. . . .
Industry Developments
SPOTLIGHT: How Credit Card Swipe Fees Are Affecting Shoppers
Fox Business – January 8, 2025
Credit card swipe fees, which are among the highest operating costs for retailers, are taking a bite out of household budgets, according to industry experts. When a credit or debit card is used, banks and credit card networks will charge retailers a fee to process the transaction. It’s known in the industry as an interchange fee, though some experts have also coined it a “swipe fee.”
Swipe fees average just more than 2% of the transaction for credit cards, but they can be as much as 4% for some premium rewards cards, according to the National Retail Federation (NRF), the nation’s largest retail trade group.
For debit cards, fees from the nation’s largest banks are capped by the Federal Reserve at 21 cents per transaction plus 1 cent for fraud prevention and 0.05% of the transaction for fraud loss recovery, but cards from small banks are exempt. . . .
Payments Plays Gather Momentum in 2025: 6 Industry Trends to Watch
Payments Dive – January 9, 2025
The payments industry has been on fire with change in recent years, and that’s unlikely to let up this year. While some of the trends, such as the industry’s move toward instant payments, will remain on a steady trajectory, others are expected to emerge as more important, including the use of artificial intelligence.
Of course, expectations for rolling back regulations are high, given President-elect Donald Trump’s record. That may mean undoing some aggressive moves by federal agencies during the Joe Biden administration.
Aside from government pressures, competition and commercial incentives will keep driving modernization of payments systems, whether in government, corporate or bank operations. That will lay the groundwork for other payments trends to gather momentum. Account-to-account payment use, open banking and acceptance of stablecoins are all expected to blossom, said industry analysts, consultants and executives. . . .
Seven Years In, the Big Banks’ Real Time Network Nears a Million Transactions a Day
Digital Transactions News – January 8, 2025
Consumers and businesses are embracing instant payments at a fast clip, even as volume growth makes double-digit increases harder to maintain. And while businesses account for a large portion of dollar volume, most of those blink-of-an-eye transactions involve consumers, says The Clearing House Payments Co., which early Wednesday released the latest statistics for its Real Time Payments network.
The New York City-based network, owned by some of the nation’s largest banks, has reached a pace of nearly 1 million transactions per day, with 343 million in 2024, up 38% from 2023. Total value for the year reached $246 billion, fully 94% over the prior year. For the fourth quarter alone, the transaction number came to 98 million, good for $80 billion in volume, up 12% and 16%, respectively, from the third quarter.
All in all, “we’re going in the right direction,” says a spokesman for the network. “We’re happy with the growth.” He shies away from making projections for 2025, however, saying such a forecast would be hard to make this early in the year. . . .
Crypto’s $205 Billion Stablecoin Market Set to Go Mainstream
Bloomberg – December 31, 2024 (subscription may be required)
While Bitcoin’s surge above $100,000 captivated the headlines in 2024, many financial firms were more focused this year on a different type of cryptocurrency whose price is never meant to rise — or fall for that matter.
Mainstream players such as Visa, PayPal Holdings Inc., Stripe Inc. and others are making investments in projects involving stablecoins, which are crypto tokens typically designed to be pegged to the value of the US dollar or another traditional currency.
This sub-sector of the digital-asset space has proven to be a lucrative business, now that issuers are able to invest reserves backing stablecoins in short-term US Treasuries with attractive yields. And unlike Bitcoin and other tokens prone to price volatility, use of stablecoins as actual currencies in transactions is gaining popularity around the world. . . .