Payments News Update – June 7, 2024
Legal and Regulatory Developments
SPOTLIGHT: CFPB to Consult Consumers and Small Businesses on Open Banking Standards
PYMNTS – June 5, 2024
In the move to solidify the framework for open banking, the field for just who will help set the standards is wide open.
News came Wednesday (June 5) that the Consumer Financial Protection Bureau (CFPB) has set in motion what it terms a “process” for setting data sharing and technical standards.
Regarding those technical standards, the agency said, “federal regulations with very granular technical requirements could rapidly become obsolete, while industry-led standard-setting would be better able to keep pace with changes in the market and technology.” . . .
New York Races to Pass BNPL Bill
Payments Dive – June 6, 2024
New York State lawmakers are negotiating three different proposals to regulate the buy now, pay later industry, in an attempt to pass legislation before the end of the session on Thursday, said Paul Alexander, legislative director for State Sen. James Sanders Jr., during a phone call on Wednesday.
Sanders, a Democrat, introduced the third and latest proposal to regulate BNPL providers in a Senate bill last month, following an Assembly bill introduced in March by Democratic Assembly Member Pamela Hunter and a proposal included in the executive budget in January from Democratic Gov. Kathy Hochul. . . .
Australia Introduces BNPL Rules
Finextra – June 5, 2024
Australia’s government is prepping legislation that would require buy now, pay later providers to carry out basic credit checks on new customers.
Australia has seen take up of BNPL products from firms such as Afterpay, Klarna and Zip soar in recent years, with around 40% of people using them in the first half of the year, according to a Finder survey.
The government says it recognises the competition that BNPL has brought into the credit markets but notes that most of these products are not currently covered by the National Consumer Credit Act. . . .
Illinois Consumers May Have to ‘Swipe Twice’ When Paying With Credit Card
The Center Square – June 4, 2024
If Gov. J.B. Pritzker signs the budget and revenue package legislators approved, consumers paying by card may have to swipe to pay for their goods and swipe again to pay the sales tax for those goods.
Part of the deal with the Illinois Retail Merchants Association in exchange for a cap on the credit retailers get for collecting and remitting sales taxes is a change to the so-called interchange fee, limiting the fees financial institutions can charge on the sales tax of transactions.
During a Senate committee before the measure passed last month, Ashly Sharp with the Illinois Credit Union League said the change is flawed and impossible to implement. “What this could mean for consumers is two swipes for a single transaction, one of the purchase of the goods or services subject to interchange and one for the tax or gratuity not subject to interchange,” Smith said. . . .
Is the CFPB Reining In Buy Now, Pay Later Loans Too Soon?
American Banker – June 4, 2024 (subscription required)
The fast-growing market for buy now/pay later loans has moved from simply a pandemic-era convenience to a vital financial access tool in about four years, making the product a potential vector for consumer risks in a tightening economy.
The Consumer Financial Protection Bureau’s recent move to extend credit card protections to buy now/pay later lenders seems long overdue to some, coming three years after the agency announced plans to monitor the industry. But to some providers, the action seems premature.
After booming during the pandemic when customers welcomed the ease of one-click installment-loan financing for e-commerce purchases, BNPL lending is still in the throes of evolution. Thus, it’s the wrong time to apply shackles that could stunt the market’s development, according to some key BNPL industry operators. . . .
Mammoth Swipe Fees Cases Joined Together In Pass On Trial
Law360 – June 3, 2024 (subscription required)
Two mammoth class actions against Mastercard and Visa will be heard together at a trial in November to resolve common issues about whether retailers passed on the credit and debit card giants’ fees to consumers, a London tribunal has ruled.
The Competition Appeal Tribunal ruled on Friday that a £10 billion ($12.7 billion) consumer group action claim against Mastercard can be considered alongside a group of retailers suing both it and Visa over their interchange fees to collectively decide issues concerning the “passing on” of allegedly unlawful fees.
The tribunal ruled that although there was actually only a small amount of overlap between the two cases, hearing them together would be the best way to avoid inconsistent rulings. Evidence related to passing on will be heard at a hearing at the end of 2024, while closing submissions will be made in 2025. . . .
Industry Developments
SPOTLIGHT: Are Digital Wallets Safer Than Debit Cards?
Payments Dive – May 31, 2024
Young people are gravitating toward digital wallets, believing them to be more secure than other forms of payment such as credit or debit cards. But those in the cybersecurity field say the reality is a little more complicated.
In a survey conducted late last year, Michigan-based research firm J.D. Power found that 48% of consumers say they use digital wallets, a 12-percentage-point rise from the previous year. The increase is driven by people under 40 who list security as one of the major reasons to use a digital wallet over other payment methods, J.D. Power said.
In theory, digital wallets should be safer, because the information is encrypted. But the relative safety depends on how the wallet is used and who has control over it, cybersecurity researchers said. . . .
Visa Marks 10 Billion Tokens Since Launching the Technology a Decade Ago
Digital Transactions News – June 4, 2024
Visa Inc. says the 10 billion tokens it’s issued since 2014 are just the tipping point, as it expects Visa’s tokenized transactions to grow exponentially over the next several years. Visa announced the 10-billion milestone Tuesday.
As of April, 29% of all transactions processed by Visa used tokens. Tokenization uses a cryptographic key that replaces sensitive payment data, such as that found on credit and debit cards, and that can be embedded into any device. Perhaps best known as a critical component of mobile-payments apps like Apple Pay and Google Pay, tokens have made their way to vehicles for in-car payments.
Visa’s 1 billionth token was issued just in 2020. More than 8,000 issuers have enabled Visa tokenization, the network says. And in the past 12 months, more than 1.5 million e-commerce transactions use Visa tokens every day, Visa adds. . . .
Is it Time for Pay-By-Bank at Retail?
Digital Transactions Magazine – June 1, 2024
Consumers and merchants may be primed for it. New technology, consumer affinity for digital payments, and the allure of cheaper payment processing may be setting the stage for broader use of pay by bank in the United States.
Paying by a bank account is not unfamiliar to most consumers. Already, many use the electronic payment method to pay mortgages, rent, utility bills, and car payments. That usage may soon evolve beyond traditional obligations to include online commerce.
The factors driving this activity have been around a while, but the advent of updated technologies, growing consumer ease with digital payments, and a ready merchant disposition to accept whatever payments consumers choose to use—especially if they are cheaper than traditional credit and debit card processing—appear to be setting the stage for broader use of pay by bank. . . .