Payments News Update – January 19, 2024
Legal and Regulatory Developments
SPOTLIGHT: States Race Ahead of US Lawmakers in Payments
Payments Dive – January 12, 2024
The federal government has made a valiant effort to keep up with the fast-changing world of payments, but it’s falling behind the 50 states lately. New York is a striking example of the phenomenon. Not only did that state pass a law requiring merchants to cap their credit card transaction surcharges and to better display them, the state’s governor, Kathy Hochul, is pursuing a proposal for buy now, pay later providers to be licensed.
New York follows New Jersey in passing a surcharge law. Down in Florida, the state is considering a law that would force merchants to accept cash, essentially prohibiting them from digital-only methods of payment. On the other coast, California regulators and Washington legislators are weighing guardrails for earned wage access after some states, including Nevada, passed laws. State legislation on payments issues is pending in seven states already this year and was percolating in nearly 20 last year, according to information from the National Conference of State Legislatures. . . .
Apple Revises US App Store Rules to Let Developers Link to Outside Payment Methods, but It Will Still Charge a Commission
9to5Mac – January 16, 2024
In light of the US Supreme Court denying to hear Apple’s appeal in its legal battle with Epic Games, Apple has announced a handful of changes coming to the App Store Guidelines. Starting today, Apple is updating the App Store Guidelines to comply with the outcome of the 2021 Apple vs. Epic trial. The changes reform Apple’s guidelines to relax its anti-steering rules that have previously prohibited developers from linking to alternative payment systems in their apps.
The changes Apple is making to the App Store guidelines apply in the United States. They are similar to the changes Apple previously made specifically for dating applications in the Netherlands. Apple is updating its App Store guidelines to allow developers to link to alternative payment methods, provided that the app also offer purchases through Apple’s own In-App Purchase system. This means that an app can’t include links to alternative payment platforms if that app doesn’t also use Apple’s In-App Purchase system. . . .
Merchants Nudge Congress to Vote on the CCCA as Members Reconvene for 2024
Digital Transactions News – January 11, 2024
The battle between merchants, on one hand, and financial institutions and payment networks, on the other, over the Credit Card Competition Act continues to heat up. The Merchants Payments Coalition on Thursday sent a letter to Congress signed by nearly 2,000 merchants, including hundreds of small businesses, calling on legislators to pass the CCCA. The latest move follows a similar letter sent to Congress Wednesday from 291 merchant trade associations from every state and Puerto Rico.
The letters are a reminder to Congress, which reconvened this week after adjourning for the holidays, that the bill needs to be voted on before the current session ends early next year, according to an MPC spokesperson. The letters emphasize that small merchants are actively pushing for passage of the CCCA. Merchants argue the bill, if passed, would help improve their thin margins by instilling more competition in credit card processing. Sellers pay transaction fees—sometimes called swipe fees—each time a customer pays with a credit card. . . .
Marshall Eyes February Hearing for Swipe Fee Bill
Politico Pro – January 9, 2024 (subscription required)
The Senate Judiciary Committee will “most likely” hold a February hearing on legislation targeting credit card transaction fees, Sen. Roger Marshall (R-Kan.) said Tuesday. “It couldn’t be more timely; Americans have now passed a trillion dollars of credit card debt,” said Marshall, who is sponsoring the bill along with Senate Judiciary Chair Dick Durbin (D-Ill.).
Banks have spent months battling retailers over the legislation, which would require them to offer two networks for use with their cards. The Congressional Research Service said in a recent report that it’s unclear what the bill’s effects would be and who would benefit from it. . . .
Industry Developments
SPOTLIGHT: ‘Trust Is Great, but You Need Relevance as Well’: Behind the Paze Launch with Early Warning’s James Anderson
Tearsheet – January 16, 2024
When Early Warning launched Zelle in 2017, it seemed a very big mountain to climb. For a bank-backed P2P payments app to replace or at least compete with Venmo seemed unbelievable. Venmo was clearly one of the most popular consumer fintech apps. But if you look at the growth today, Zelle slowly but surely surpassed PayPal’s favorite brand. In early 2023, Zelle had 120 million customers with 69 million monthly unique Zelle users. Venmo, which launched more than a decade ago, had 90 million active accounts, with 60 million being active monthly. It took time but it shows the massive power of bank distribution.
Early Warning and its banking partners are back with a new digital wallet called Paze. Of course there are more popular digital wallets on the market. Will the power of bank distribution propel Paze’s growth in the market the way it did with Zelle? Joining me on the show is Early Warning’s Head of Paze, James Anderson. . . .
Mastercard Aims to Limit AI Bias, Cyber Risk
The Wall Street Journal – January 17, 2024 (subscription required)
With the rise of easy-to-use artificial intelligence, companies are looking to balance the pressure to churn out innovative new products against the cybersecurity and privacy risks that come with adopting the technology. Caroline Louveaux, chief privacy officer and data responsibility officer for Mastercard, said AI advancements, along with tougher regulations in the U.S. and elsewhere, mean that she is working more closely than ever before with the company’s cybersecurity team. The payments company has created an AI governance council with representatives from business lines, security, technology, human resources and other groups. “I view my role really as an orchestrator convening different parts of the organizations together to get it right,” she said.
Louveaux, who has served in her current role for more than six years, joined Mastercard in 2007 as a counsel for Europe. Based in Brussels, she has had a ringside seat on European Union regulatory proceedings for coming AI legislation. The EU is setting out detailed rules that outlaw certain applications, such as untargeted scraping of online images for facial recognition, and require transparency so consumers understand how their data could be used. Several U.S. states have passed or proposed rules on AI. . . .
Launched in July, FedNow Hits the 400 Mark in Number of Participating Financial Institutions
Digital Transactions News – January 17, 2024
FedNow, the real-time payments network operated by the Federal Reserve, announced late Tuesday it has 400 financial institutions participating as senders or receivers after six months of operation. The much-anticipated Fed service launched last July with 35 participating financial institutions. Participating institutions range in size from less than $500 million to more than $3 trillion in assets, the Fed said.
The number of participants in FedNow puts the network on par with the other national real-time payments system, the Real Time Payments (RTP) network, which last July reported it had more than 350 participating financial institutions. In addition, New York City-based RTP has more than 20 payment processors and fintechs facilitating real-time transactions over the network. Launched in 2017, RTP is operated by The Clearing House Payments Co. LLC, which could not be reached for comment regarding the FedNow milestone. . . .
Business Credit Card Issuers Face Competition but Also Opportunities in BNPL
The Financial Brand – January 15, 2024
Small business interest in purchasing via nonbank buy now, pay later programs and bank card issuers’ flexible financing/installment loan options both accelerated in 2023 and could grow even more in 2024, according to J.D.Power research. BNPL in particular is both a new source of competition for business spending and a potential way for banks to gain share of purchase volume.
The J.D. Power study indicates that card issuers could take advantage of significant appetites for more such borrowing among small businesses in the year ahead — if they introduce installment purchase options as part of their business credit card offerings, or do a better job promoting payment plan choices that they may already offer. . . .
Despite Musk’s Bravado, X Faces an Uphill Battle in Launching Its P2P Network
Digital Transactions News – January 12, 2024
Despite its formidable reach, the social-media platform X faces a steep climb to achieve its goal of launching a peer-to-peer payments service, according to payments experts. X, formerly known as Twitter, announced in a blog post earlier this week its plans to add P2P payments to its platform this year as part of the company’s ambition to turn its platform into the next super app.
Obstacles facing X in this venture include building scale and achieving a solid user base, along with challenges concerning brand recognition, trust, and interoperability issues, Ariana-Michele Moore, an advisor in retail banking and payments for Datos Insights, says by email. “And of course, you must overcome the classic payment conundrum: which comes first, the payer or the acceptor. Zelle, despite its link to the largest U.S. banks, is still struggling to get consumer wallet share,” Moore adds. Other challenges facing X include protecting against fraud and attracting users in the face of competition from other P2P services such as Zelle, Venmo, PayPal, and Cash App. Add to this user errors and interoperability issues, according to Moore. . . .