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Payments News Update – March 1, 2024

Posted  March 1, 2024

Legal and Regulatory Developments

SPOTLIGHT: GOP Senators Propose Ban on Central Bank Digital Currencies
The Hill – February 26, 2024

Republican senators introduced legislation Monday that would ban official cryptocurrencies backed by central banks, a type of proposed digital asset that the Biden administration and Federal Reserve have expressed interest in studying. GOP senators said that Fed-backed cryptocurrencies would pose privacy concerns and allow regulatory authorities access to the private spending habits of individual Americans.

Sen. Ted Cruz (R-Texas) described Fed-backed digital currencies, which are also known as Central Bank Digital Currencies (CBDC) or stablecoins, as “programmable money that, if not designed to emulate cash, could give the federal government … significant transaction-level data down to the individual user.”

The Biden administration has been interested in studying the use of cryptocurrencies since 2022, when it issued a wide-ranging executive order on the technology and received reports from various agencies on how to incorporate it into the economy. . . .

Congress Members Lob Dueling Gun Code Bills
Payments Dive – February 26, 2024 

Republican and Democratic Congress members this month introduced bills related to the use of a merchant category code for firearm retailers, teeing up conflict over the issue at the federal level.

Republican Reps. Elise Stefanik of New York, Andy Barr of Kentucky and Richard Hudson of North Carolina filed a bill Friday that would prohibit use of the four-digit code that’s been created to identify merchants selling firearms. The codes are used in card transactions.

The legislation comes on the heels of a bill introduced by Florida Democratic Reps. Maxwell Alejandro Frost and Jared Moskowitz on Feb. 14, which would require use of the code. . . .

EU Adopts Euro Instant Payments Rules to Take on Visa, Mastercard
Reuters – February 26, 2024 

The European Union Council on Monday adopted rules to make instant payments in the euro currency fully available round-the-clock in a move it expected to help European payments companies compete against U.S. firms Visa and Mastercard.

The new regulation will allow customers to transfer euro-denominated money within 10 seconds at any time, including outside business hours, not only within the same country but also to another EU member state, the EU Council said. . . .

OCC’s Hsu Calls for Federal Payments Licensing
Payments Dive – February 22, 2024 

Acting Comptroller of the Currency Michael Hsu called Wednesday for federal money transmitter licensing standards to replace the state licensing system that currently covers payments companies.

Payments companies pose an increasing risk to the financial system as they take on banking functions like accepting paycheck deposits and consumer lending, Hsu said. That “blurring” of the roles of payments companies and banks could lead to a financial crisis similar to the one in 2008.

Congress should “create a federal framework for payments regulation,” Hsu said during his speech at Vanderbilt University. “Doing so would provide a clearer path for innovation and growth in payments with less risk of blurring and to financial stability.” . . .

Industry Developments

SPOTLIGHT: AI Brings New Opportunities to Payments
Green Sheet – February 26, 2024

Ecommerce continues to grow unabated. The global ecommerce market is projected to grow from $5.2 trillion in 2021 to $8.1 trillion by 2026. The number of digital buyers worldwide will also jump from 1.3 billion in 2014 to 2.6 billion at the end of 2023. And the footprint of e-commerce is expanding as well. . . .  And cyberfraud continues to plague ecommerce as well. . . .

The increase in transaction volume, continued high rates of cyberfraud and consumers’ interest in a more seamless payments process create the need for new levels of payments innovation. The integration of artificial intelligence (AI) addresses all three trends and has the promise to dramatically improve the payments experience for consumers, banks and merchants. However, AI can also be used by fraudsters to improve the means of fraud especially in the area of social engineering. Thus the AI revolution will continue a never ending race of fraud generation and fraud prevention. But let’s focus now on a positive aspect of AI. . . .

How Payments Executives Are Leading the AI Revolution
American Banker – February 27, 2024 (subscription required) 

Payment companies are rapidly embracing new forms of artificial intelligence, placing pressure on executives to come up with competitive strategies while staying current with technology that is evolving seemingly by the minute. Many of this year’s Most Influential in Payments weighed in on how AI in its many forms is impacting their business, suggesting a momentum that makes staying on the sidelines a nonstarter.

“Love it or fear it, it is game-changing technology. It has many benefits that help with risk modeling, fraud detection and making fraud teams more efficient,” said Cathy Beardsley, president and CEO of Segpay. “AI can help filter transactions and speed those that typically would need manual review.” . . .

EWS Launches Wallet in South Carolina, Arizona Ahead of Wider Rollout
Payments Dive – February 26, 2024 

Early Warning Services has launched its Paze digital wallet in South Carolina, and has begun the launch process in Arizona, according to EWS Managing Director James Anderson. “We are live, but we’re not very active yet,” Anderson said in an interview last Thursday. . . .

Scottsdale, Arizona-based EWS is backed by seven large U.S. banks and also operates the payment platform Zelle, which competes with peer-to-peer payment apps, such as PayPal-owned Venmo and Block-owned Cash App. Paze will be squarely focused on the U.S., Anderson said. . . .  And the digital wallet will remain purely focused on e-commerce for now. . . .

With Paze, EWS is targeting consumers who barely, or never, use other digital wallets, such as Apple Wallet and Google Wallet, to pay for things online, Anderson said. . . .

Google Pay Is Shutting Down in the US Later This Year
Engadget – February 23, 2024 

Google Pay was largely replaced by Google Wallet back in 2022, but it has still been operating in several countries, including the US. Now, the search giant has announced that Pay will be discontinued stateside on June 4, 2024 in a push to simplify its payment apps. After that, it will only be available in Singapore and India due to the “unique needs in those countries,” Google wrote in a blog. . . .