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Payments News Update – May 10, 2024

Posted  May 10, 2024

Legal and Regulatory Developments

SPOTLIGHT: Senate Leaders Committed to CCCA Vote, Marshall Says
Punchbowl News – May 3, 2024

Sen. Roger Marshall (R-Kan.) told reporters he’d received a commitment from Senate leadership to hold a vote on the Credit Card Competition Act before the end of the 118th Congress, the senator’s latest move to up pressure on the chamber’s leadership.

Marshall spoke to reporters Thursday night about his push for amendment votes in the reauthorization of the FAA, including a bill co-sponsored by Majority Whip Dick Durbin that attempts to reduce the transaction fees card companies charge. The legislation allows merchants to use a secondary, cheaper network to process payments, and it’s staunchly opposed by the banking sector.

Asked whether Marshall had received any commitment from Senate leadership about holding a vote on the CCCA, the Kansas Republican replied: “They told me months ago that I would get a vote on it this Congress. So, hopefully, this is it.” . . .

Visa, Mastercard Settlement More Symbolic Than Substantive
PaymentsJournal – May 6, 2024

When Visa and Mastercard settled with retailers for $30 billion, it was touted as a win for the underdogs. Merchants, who have struggled for decades with the high fees imposed by credit card companies, were said to have secured a significant victory over the big banks.

But how big of a win was it? In his recent report, Visa and Mastercard Settle With Merchants: What Does It Mean?, Don Apgar, Director of Merchant Payments Practice at Javelin Strategy & Research, explored the wide-ranging ramifications of the settlement.

The settlement marks the conclusion of litigation that has lingered since 2005. The drawn-out lawsuit resulted in fatigue on the part of both Visa and Mastercard, with both companies strongly desiring to resolve the matter. Because of that fatigue, merchants secured several concessions regarding card acceptance rules, in addition to the fee reduction. . . .

Merchants Urged to File Claims for $5.5B Payment Card Settlement
Payments Dive – May 6, 2024

Starting late last year, class-action claim forms were sent to about 18.6 million merchants across the U.S. who processed Visa and Mastercard payments during a 15-year period.

Now, lawyers for the merchants are wondering how many of them will seek compensation ahead of a fast-approaching deadline. The claim forms were mailed in the aftermath of a $5.5 billion settlement that partially resolved a long-running antitrust case in which the two credit card network giants were alleged to have overcharged merchants by exacting excessive interchange fees.

Those swipe fees are what a merchant pays to accept credit card or debit card payments. Visa and Mastercard didn’t admit to any wrongdoing in the civil case as part of the settlement that was upheld by the Court of Appeals for the Second Circuit in March 2023. . . .

Barnes & Noble Joins Visa, Mastercard Settlement Objectors
Law360 – May 2, 2024 (subscription required)

A new collection of major retailers is joining Target Corp. and Grubhub in objecting to a proposed settlement deal cut by Visa and Mastercard, saying the deal would actually codify an illegal price-fixing agreement.

The wide-ranging group of plaintiffs, led by 7-Eleven, includes chain retailers like Barnes & Noble Inc., Dick’s Sporting Goods, Starbucks, The Gap Inc. and Ralph Lauren Corp. At the very least, they say, the objecting retailers should be allowed to opt out of the settlement, which as proposed would bar claims from plaintiffs who opted out of the class that agreed to the settlement.

“This settlement asks this court to put its imprimatur on supracompetitive credit card interchange rates that Visa and Mastercard, improperly, jointly agreed to with the complicity of the [equitable relief class counsel],” the 7-Eleven plaintiffs write. . . .

Behind a Card Industry Group’s Strategy to Stop the CCCA
Digital Transactions Magazine – May 1, 2024

A trade group representing card networks and issuers is taking aim at restaurant surcharges and price increases by large grocers as part of its efforts to defeat the Credit Card Competition Act.

The Electronic Payments Coalition earlier this spring fired its first salvo in its new campaign against the CCCA. In a press release, the EPC highlighted restaurant surcharges, including a 5% dine-in fee, a 4% hospitality charge, and a 4% employee-benefits fee. The EPC argues the surcharges, which it terms “sneaky restaurant fees,” run counter to restaurants’ claims that they need relief from credit card swipe fees. . . .

Merchant trade groups counter that the EPC’s new line of attack is a tacit acknowledgment that its previous efforts to derail legislative support for the CCCA haven’t worked. “It’s hard not to chuckle when banks say restaurants make too much money, when restaurants are one of the lowest-margin businesses,” says Sean Kennedy, executive vice president for public affairs at the National Restaurant Association. “Restaurants compete on price, and every restaurant I talk to says swipe fees are one of their biggest costs and show no signs of slowing down.” . . .

Industry Developments

SPOTLIGHT: How Online Shopping Is Saving the Bricks-and-Mortar Store
The Wall Street Journal – May 6, 2024 (subscription may be required)

Store owners once viewed e-commerce as a mounting threat to their survival. Now, more bricks-and-mortar stores are thriving after integrating their properties with the online shopping experience.

Shoppers browse in person to see, touch or try on items before ordering them online. They are picking up or returning purchases in stores. And retailers are increasingly relying on their shops as fulfillment hubs, shipping items ordered online from store stockrooms in addition to warehouses.

Overall, nearly 42% of e-commerce orders last year involved stores, up from about 27% in 2015, according to research firm GlobalData. “There was a narrative that as online grew, stores would become less relevant. But it hasn’t worked out that way,” said Neil Saunders, managing director at GlobalData. “In many ways, the store is still the heart or hub of retail.” . . .

US Leads Global Commercial Card Market: Report
Payments Dive – May 8, 2024

The U.S. led the global commercial card market last year, accounting for 58% of total payment value, according to a report issued last month by research firm Euromonitor International.

However, the U.S. also accounted for 78% of the “absolute value lost to fraud from financial cards” last year, ranking first out of the 47 global markets covered, the report said.

“What we’re seeing with talking with issuers and networks is the beginning of launching products and converting [the business-to-business] payment channel,” said Kendrick Sands, Euromonitor’s global head of consumer finance research, in a Tuesday interview. “We’re not necessarily seeing the the growth yet. But we kind of expect it to accelerate going forward.”. . .

The Gap Between the Price You See and What You Pay Is Getting Worse
The Wall Street Journal – May 7, 2024 (subscription may be required)

Surprise fees are widely hated, but they are still sneaking onto the bottom of bills for everything from concert tickets to dinners out.

More companies are unbundling the cost of their goods and services, retail analysts say, tacking on 3% for swiping a credit card or adding a little extra for gas. With Live Nation Entertainment facing scrutiny over its ticketing process, singer Maggie Rogers recently urged her fans to buy tickets to her next show at the box office “like it’s 1965” to avoid fees, even showing up at one herself. The Cure’s Robert Smith, meanwhile, convinced Live Nation Entertainment subsidiary Ticketmaster to offer some fee refunds.

The upshot is that prices we see, whether on a restaurant menu or flight-booking site, are rarely the ones we end up paying. . . .

Fed, TCH Joust Over Interoperability
Payments Dive – May 7, 2024

The Federal Reserve isn’t putting a priority on making its new instant payments system FedNow interoperable with The Clearing House’s rival RTP network.

For the Fed, driving financial institution adoption of FedNow is top of mind, with interoperability an issue that will follow, Mark Gould, chief payments executive for Federal Reserve Financial Services, said at an industry conference this week.

“I think we should keep talking about interoperability, we should consider other changes we might want to make in the future, but really, step one is we’ve got to build the network,” Gould said Tuesday in speaking on a panel focused on the future of faster payments at the Nacha Smarter Faster Payments conference in Miami. . . .

Americans Are Racking Up ‘Phantom Debt’ That Wall Street Can’t Track
Bloomberg – May 7, 2024 (subscription may be required)

It’s hard enough for central bankers and Wall Street traders to make sense of the post-pandemic economy with the data available to them. At Wells Fargo & Co., senior economist Tim Quinlan is particularly spooked by the “phantom debt” that he can’t see.

That specter lurks behind buzzy “Buy Now, Pay Later” platforms, which allow consumers to split purchases into smaller installments. The major companies that provide these so called “pay in four” products, such as Affirm Holdings Inc., Klarna Bank AB and Block Inc.’s Afterpay, don’t report those loans to credit agencies.

Time and again, they’ve resisted calls for greater disclosure, even as the market has grown each year since at least 2020 and is projected to reach almost $700 billion globally by 2028. That’s masking a complete picture of the financial health of American households, which is crucial for everyone from global central banks to US regional lenders and multinational businesses. . . .

Worldpay Launches Tap-to-Pay Offering for Merchants
PYMNTS – May 2, 2024

Payment facilitators (PayFacs) using Worldpay’s services can now offer their merchants tap-to-pay on iPhone.

The payments technology firm said in a Thursday (May 2) press release that two of its PayFac partners — Fullsteam and Autobooks — have already launched the service, which allows merchants to use an iPhone to securely accept contactless payments.

“Many businesses are mobile, and if we can utilize existing business tools like iPhone as an untethered POS acceptance device, we are making their lives easier,” Fullsteam CEO Michael Lawler said in a news release. “With tap-to-pay on iPhone, those businesses can capitalize on the powerful technology already in a device that’s likely in their pocket. Fullsteam’s integration with Worldpay has made it easier to offer this advanced experience to our clients and their customers.”. . .

Payment Networks Spotlight Rise of Tokenization and Contactless Payments
PYMNTS – May 2, 2024

Four years ago, the pandemic began to give wings to contactless payments. Now, as shown by earnings results from the likes of Mastercard and Visa, the payment methodology has taken flight.

PYMNTS Intelligence data noted earlier this year that more than half of consumers surveyed said they still preferred to use physical cards in in-store settings. The tap-to-pay, contactless functionality that’s built into those cards has helped transform what happens when we wield them at the register or in the aisles.

Both Visa and Mastercard’s executive leaders said on their respective conference calls that contactless options are a preferred means of transacting in brick-and-mortar settings. . . .

Security Notes: AI, Privacy, and the End of Credit Cards—Again
Digital Transactions Magazine – May 1, 2024

The initial penetration was slow. The original Diner’s Club credit card of 1949 was too different to quickly catch on. But it had a compelling message, as the historic burden of trusting the customer was shifted away from the merchant, a service for which the merchant was willing to pay.

Merchants reluctant to adopt the new cards were bypassed by consumers, and in due time virtually no business sustained itself without accepting credit cards. Over recent decades, many organizations have challenged the credit card solution and offered to help merchants by offering cheaper fees. Still, merchants were not persuaded. Nobody could compete with the gravitas of the ubiquitous cards, which, until very recently, looked invincible.

Only now a new technology has emerged offering consumers a robust answer to a rising concern: privacy. It’s a concern the credit card cannot address, while the concern itself becomes more serious by the day. . . .