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Payments News Update – January 26, 2024

Posted  January 26, 2024

Legal and Regulatory Developments

SPOTLIGHT: ‘More Than Enough’ Amex Evidence for Visa, Mastercard Trial
Law360 – January 23, 2024 (subscription required)

Visa and Mastercard appear bound for trial on antitrust claims over network rules forcing merchants to accept the companies’ cards without the ability to steer consumers to cheaper swipe fee options, under a New York federal judge’s ruling unsealed Monday finding sufficient evidence under a key high court precedent. U.S. District Judge Margo K. Brodie’s ruling, first issued under seal Jan. 8, sided almost entirely against arguments from Visa, Mastercard and bank defendants that the various merchants suing them failed the tests to look at both sides of the market in an instantaneous transaction, under the U.S. Supreme Court’s landmark 2018 decision Ohio v. American Express Co.

In rejecting the most important parts of Visa and Mastercard’s bid for summary judgment to nix the antitrust allegations, Judge Brodie said it doesn’t matter that the high court found in Amex, which similarly targeted high transaction fees charged to merchants, that there was an increase in output, meaning the frequency of contested transactions. “Output increasing over time does not address whether output would have increased at a greater rate in the absence of the network restraints. Similarly, the Supreme Court’s factual finding in Amex has no bearing on the record before the court,” Judge Brodie said. “There is more than enough evidence in support of plaintiffs’ case that jurors would not be compelled to return a verdict in favor of defendants.”. . .

Fed Extends Comment Period on Debit Card Fee Proposal
Payments Dive – January 23, 2024

The Federal Reserve extended the period during which it will accept public comments on its October proposal lowering the cap on interchange fees that can be charged for processing debit card transactions, according to a Monday notice. The deadline was postponed three months to May 12, instead of Feb. 12.

The central bank also provided more data for would-be commenters and others to consider in assessing the proposed revisions to Regulation II. That data showed that the average per-transaction cost for processing the payments has drifted downward since the central bank started collecting that information in 2009.

“The Board extended the comment period to allow the public more time to analyze the proposal and prepare their comments,” the notice said. . . .

Apple Offers to Open Mobile Payments to Third Parties Amid EU Antitrust Case
The Wall Street Journal – January 19, 2024 (subscription required)

Apple has agreed to let third-party mobile wallet and payment services in Europe use the technology behind its Apple Pay app in a move to allay competition concerns from European regulators. The U.S. tech giant said Friday that it would allow other companies’ apps to make contactless payments on iPhones and other devices that use its iOS operating system for free, without the need to use Apple Pay or Apple Wallet. It follows an investigation by the European Commission, the European Union’s executive arm, into whether restricting access to NFC technology—the software and hardware necessary for mobile devices to communicate with pay terminals—violated competition rules. . . .

The commission said Friday that it was inviting feedback from competitors on Apple’s proposal. If competitors say the commitments Apple offered are sufficient, the commission can make them legally binding. . . .

Credit Card Surcharge Bills Lurk in State Legislatures
Payments Dive – January 19, 2024

State legislation relating to surcharges that merchants can impose on card transactions is pending across the country, from North Carolina to Washington, according to research from the National Conference of State Legislatures. The organization that tracks state legislation tallied six states where such legislation is “pending” this year, albeit much of it in the form of bills that were introduced last year and remain below the legislature this year. Other states include Minnesota, Kansas, Massachusetts and New York.

Some of the legislative proposals in New York may be pushed aside by a big move that state made in December enacting a new law that prohibits merchants from imposing credit card surcharges that are more than what they are charged by the “credit card company” for such transactions. . . .

Florida Bill Would Force Businesses to Accept Cash as a Form of Payment
CL Tampa Bay – January 18, 2024

As digital financial transactions increase, many Florida retail businesses would be required to accept cash as a form of payment, under a bill that continued moving forward Wednesday in the state Senate. Despite opposition from the attractions industry, the Senate Agriculture & Natural Resources Appropriations Subcommittee unanimously supported the measure (SB 106). Sponsor Shevrin Jones, D-Miami Gardens, said the bill would address challenges faced by people who rely on paying cash.

“Many Floridians, specifically our senior citizens and minority communities rely on cash to make their payments for goods and services, either by necessity or choice,” Jones said. “Currently, individuals are unable to do this with the current landscape of some businesses.” . . .

Coinbase, SEC Lock Horns in US Court Over Crypto Securities
Reuters – January 17, 2024

A federal judge in Manhattan on Wednesday grilled Coinbase and the U.S. securities regulator about their divergent views on whether and when digital assets are securities, in a case closely watched by the cryptocurrency industry. Coinbase has asked the court to dismiss the Securities and Exchange Commission’s lawsuit alleging the largest U.S. crypto exchange is flouting its rules.

Judge Katherine Polk Failla on Wednesday heard arguments from both sides, focusing her questions on the legal precedent defining securities, and the attributes of several crypto tokens traded on Coinbase and elsewhere that the regulator has deemed investment contracts. Failla did not decide the matter from the bench, noting she was still weighing some questions after the more than four-hour hearing. . . .

Industry Developments

SPOTLIGHT: Digital Wallets Are Falling Short. Can Providers Fix That?
Digital Transactions News – January 19, 2024 

While digital wallets have established a beachhead in the payment ecosystem, consumers still aren’t embracing the apps with gusto. The primary reasons are concerns over security and the lack of value-added features, such as rewards and loyalty programs and spend-management capabilities, says Justin Passalaqua, managing director of North America for payments provider Worldline S.A. “Wallet providers are falling behind when it comes to meeting consumer expectations, which is why wallets haven’t been the silver bullet the industry thought they would be,” says Passalaqua. “Wallet providers can do a better job of meeting consumer expectations.”

He points out that, while wallets such as Apple Pay and Google Pay have made strong inroads in adoption, this is largely because they are standard apps on iPhones and Android phones, respectively. “Apple Pay is a top wallet and has a lot of brand recognition, but it comes with an iPhone. The same is true of Google Pay,” Passalaqua says. “If you don’t have a wallet that comes with a smart phone, it’s hard to gain traction, and that’s why wallets need value-added features to differentiate themselves.” . . .

Inside Amex’s Global Merchant Strategy
American Banker – January 22, 2024 (subscription required)

American Express has dispatched hundreds of staff to large cities to onboard new stores as it tries to close its gap in merchant coverage with Visa and Mastercard. It’s doing so in an uncertain economy, a challenge that Amex sees as an opportunity, rather than a headwind, relying on its healthy financial performance to overcome any short-term economic weakness.

“We’ve been a company for 174 years and have gone through major disruptions. We focus on the medium term and aren’t reacting to any cycle,” said Raymond Joabar, group president at Amex Global Merchant & Networking Services. Joabar has been in his current role for about three years, and has been with Amex for more than 30 years. His other positions included chief risk officer and roles in credit and fraud risk. “I tell my team it doesn’t matter what the economy does. We need more coverage and more merchants to accept Amex.”

While Amex and Discover reached parity with Visa and Mastercard in the U.S. about three years ago, Visa and Mastercard still dominate most non-U.S. markets with their merchant networks. . . .

FedNow Draws Some Banks, as Others Lag
Payments Dive – January 18, 2024 

The Federal Reserve has made headway in adding banks to its new FedNow system, with a tally of 400 participating financial institutions, but some of the biggest U.S. banks are still on the sidelines six months after the instant payments service launched. Bank of America, Citigroup, PNC and Capital One Financial, all among the nation’s 10 largest banks, still haven’t signed on to FedNow, according to the Fed’s latest list of participants.

FedNow launched last July, promising to speed up transactions for consumers and companies. It’s only available through banks so the Federal Reserve and its FedNow staff have been on a campaign, including via webinars and public communications, to encourage more banks to hook up to the system. The more financial institutions join, the more attractive the network becomes because of increased reach. . . .

‘It Hasn’t Delivered’: The Spectacular Failure of Self-Checkout Technology
BBC – January 15, 2024 

Unstaffed tills were supposed to revolutionise shopping. Now, both retailers and customers are bagging many self-checkout kiosks. It’s a common sight at many retail stores: a queue of people, waiting to use a self-checkout kiosk, doing their best to remain patient as a lone store worker attends to multiple malfunctioning machines. The frustration mounts while a dozen darkened, roped-off and cashier-less tills sit in the background.

For shoppers, self-checkout was supposed to provide convenience and speed. Retailers hoped it would usher in a new age of cost savings. Their thinking: why pay six employees when you could pay one to oversee customers at self-service registers, as they do their own labour of scanning and bagging for free?

While self-checkout technology has its theoretical selling points for both consumers and businesses, it mostly isn’t living up to expectations. Customers are still queueing. They need store employees to help clear kiosk errors or check their identifications for age-restricted items. Stores still need to have workers on-hand to help them, and to service the machines. The technology is, in some cases, more trouble than it’s worth. . . .