Payments News Update – November 10, 2023
Legal and Regulatory Developments
SPOTLIGHT: US Consumer Watchdog Proposes Rules for Big Tech Payments, Digital Wallets
Reuters – November 7, 2023
The top U.S. consumer financial watchdog on Tuesday proposed to regulate tech giants’ digital payments and smartphone wallet services, saying they rival traditional payment methods in scale and scope but lack consumer safeguards.
The Consumer Financial Protection Bureau’s (CFPB) proposal would subject companies like Alphabet, Apple, PayPal and Block’s Cash App to bank-like supervision, with CFPB examiners inspecting their privacy protections, executives’ conduct and compliance with laws barring unfair and deceptive practices.
If finalized, the proposal would cover about 17 companies that together send more than 13 billion payments annually, according to a CFPB official. The agency declined to name the other platforms that would be covered beyond Google Pay, Apple Pay, PayPal and Cash App. . . .
A New Merchant Group Voices Opposition to a Bill Aimed at Credit Card Acceptance Costs
Digital Transactions News – November 9, 2023
The political battle over the Credit Card Competition Act has heated up as the Small Business Payments Alliance (SBPA), a recently formed merchant trade group, has come out in opposition to the proposed legislation. The group argues that, if passed, the CCCA would harm small businesses. . . .
While many merchant groups have lobbied in favor of the CCCA, the SBPA’s position is that, if passed, the bill would have a detrimental impact on businesses “by circumventing the existing free market with a government routing mandate that dictates which processing networks banks can accept, without regard to security or quality.” The SBPA also argues that the bill would benefit only large merchants and businesses with large card volumes as they can leverage that volume to secure lower card-acceptance rates, while small businesses, which lack the transaction volume, can’t. . . .
While the emergence of the SBPA suggests there could be a divide in the merchant community over the CCCA, other trade associations supporting the bill counter there is widespread merchant support for the bill, particularly from small sellers. . . .
Bipartisan Group Requests Data on ‘Burden’ of Swipe Fees on Federal Budget
Punchbowl News – November 7, 2023
We’ve got another salvo to report in Washington’s credit card wars. This time, pro-retail lawmakers are trying to pull the finances of the federal government into the fight.
A bipartisan group of House members and senators will send a letter this afternoon to Comptroller General Gene Dodaro that asks for a full accounting of how much the federal government itself has been spending on credit card swipe fees in recent years.
Led by Rep. Lance Gooden (R-Texas) and Sen. Dick Durbin (D-Ill.), the members say they’re “concerned with the increasing burden of interchange fees paid by the federal government, an issue that affects countless taxpayers and nearly every federal agency.” The lawmakers estimate that “excessive fees” could cost the federal budget more than $200 million a year.
Several of the lawmakers signing on to this letter have been pushing for a vote on the Credit Card Competition Act. . . .
Apple’s Payments Regulation Woes Mount
Payments Dive – November 2, 2023
Tech giant Apple’s payment services are increasingly facing legal and regulatory challenges at home and abroad.
A Dutch regulator has ruled that the Cupertino, California-based company is charging too much in commissions for subscription-based apps like Tinder, according to a Tuesday report by Bloomberg. . . . Apple won’t allow users to pay for the subscriptions through third-party payment systems, yet charges a 30% commission in the Netherlands to use its own Apple Pay system, according to the Bloomberg report.
Another regulator, this one in South Korea, said last month that it plans to fine Apple up to 20.5 billion won ($15 million) for forcing Korean app developers to use its own in-app payment system according to a report by TechCrunch. Apple competitor Google also faced fines from the regulator for a similar issue.
In addition, Bloomberg reported last month that the Australian government plans to introduce legislation that would allow its central bank to regulate digital payment platforms such as Apple Pay and Google Pay. . . .
Industry Developments
SPOTLIGHT: Acquirers Seek Answers from a Visa Surcharging Executive
Digital Transactions News – November 3, 2023
More than 10 years after Visa Inc. wrote its rules permitting surcharging on its credit cards, questions remain among acquirers, especially those selling or considering surcharge programs for their merchants.
Now, as more merchants mull surcharge or cash-discount programs to alleviate some of their card-acceptance costs, and with recent changes put in place by Visa, the subject is getting more attention. Surcharging was enabled as part of a multibillion-dollar credit card interchange settlement in 2013.
Visa’s changes to its surcharge rules surfaced earlier this year. In April, after issuing a January bulletin noting it would reduce the cap on credit card surcharges from a maximum of 4% to no more than 3%, Visa quietly put the change in place. The move comes as Visa boosts enforcement of the cap. And it comes as more merchants turn to surcharge and cash-discount programs to recoup their card-acceptance costs. Surcharging is not allowed on debit cards, though some government entities may collect a service fee with either credit or debit cards. . . .
Many Consumers Aren’t Using Store Card Benefits
PYMNTS – November 8, 2023
Store cards, also known as retail cards or private-label cards, are credit cards issued by specific retailers or stores. . . . By offering discounts, special promotions and exclusive offers on specific products, store cards encourage customer loyalty and increase sales. In parallel, rewards programs linked to store cards offer cardholders special benefits such as cash back, points or discounts on future purchases.
In times of persistent inflation and high economic uncertainty like the present, consumers rationalize their spending and seek purchasing options that can lead to savings at the end of the month. One of the strategies might be leveraging the benefits of their store cards as much as possible.
However, PYMNTS Intelligence found that although more than half of card users own a store card, only 12% have used store cards to pay for their purchases in the last 30 days. In addition, 87% of them are interested in using a card-linked offer tied to specific products, while only 2 out of 5 have used card-linked offers in the last 12 months, suggesting that store cards are being underused by consumers. Lack of familiarity is the main reason why store card owners have not used card-linked offers in the past. . . .
Cross-Border Payment Headaches Burden Consumers: Mastercard Report
Payments Dive – November 7, 2023
In a consumer and small business report issued last month, Mastercard zeroed in on cross-border payment headaches affecting consumers in the U.S. and other international markets as they transact between countries. The company’s survey research showed that consumers are grappling with inflation, searching for economic security and planning to execute cross-border payments more frequently, according to the report. Meanwhile, small and mid-sized businesses are navigating poor payment experiences with international suppliers and bracing for cross-border payment fraud. . . .
“The past few years have proven that our global economy depends on seamless connections — of people, raw materials, goods and services,” Alan Marquard, executive vice president of transfer solutions at Mastercard, said in a statement. “Among these important connections, the ability to make and receive payments quickly and easily is crucial, but failed, late and fraudulent payments risk undermining trust in these crucial networks. We must come together to enable money to move more safely, simply, reliably and transparently.” . . .
America Embraces Open Banking
Financial Times – November 7, 2023
Are you ready to share your entire financial life online? It’s called ‘open banking’ and it just took a big step forward in the world’s biggest market. Last month, US regulators announced measures to allow consumers’ financial data to be shared easily, following similar reforms in Europe and Australia that make it simpler to switch bank accounts and sign up for a range of financial products.
Banks “know every time you tap your card, they see you got the [train], and you go get your coffee, and you’re spending your money there,” points out Philip Benton, an analyst at tech research group Omdia and an expert on digital banking. “They [already] have all that data. [So] the whole point of open banking and finance is opening that up to the wider ecosystem.”
That is being made possible in the US by the Consumer Financial Protection Bureau under a new Personal Financial Data Rights rule that will, for the first time, guarantee Americans access to their data held at a bank or other provider at no charge. As a result, customers will be able to share that data with third parties — which will be subject to limits on how they use it — or revoke access to the data at any time. . . .
Retailers Plan to Up Use of Instant B2B Payments
PYMNTS – November 6, 2023
In an environment with high interest rates and the expansion of instant payment systems, retailers are shifting their payment preferences by leaving traditional methods and replacing them with faster and lower-cost systems such as real-time payments and instant ACH. Forty-two percent of retail firms in the U.S. predict they will rely less on checks for making B2B payments, paralleled by a similar decline in debit cards, at 42%, and cash at 20%. On the other side of the balance, they foresee increasing usage of real-time payments and same-day ACH by 54% and 40% respectively.
These are some of the key results drawn from the study “Corporate Changes in Payment Practices: A Deep Dive Into the Retail Industry,” a survey of 125 U.S. payment executives at enterprise retailers conducted by PYMNTS Intelligence in collaboration with The Clearing House in June. To understand the motivation behind this transition, we asked retailers which B2B methods they think real-time payments are most likely to replace when making payments. . . .
Breaking Down Buy Now, Pay Later
Payments Dive – November 3, 2023
Everyone’s buying now and paying later. At least that’s what the prevalence of BNPL buttons on online checkout pages would lead you to believe. Buy now, pay later is point-of-sale financing that allows consumers to make a purchase and pay for an item or service over a set period of time, often without interest. It’s exploded in the past few years, appealing to consumers seeking quick access to credit or those turned off by credit cards. It’s also attractive to merchants — from retailers to restaurants — gunning to increase a shopper’s basket size or close a sale.
The payment trend first gained traction in Europe and Australia about a decade ago. In the U.S., BNPL took off with the rise of e-commerce during the COVID-19 pandemic. Consumers stuck at home and flush with cash tried the financing tool to buy clothes or home goods. More recently, soaring inflation and high interest rates have inspired some shoppers to tap BNPL for everyday purchases, to spread out payments and avoid interest charges.
Using BNPL at checkout tends to be a seamless process for shoppers. That’s helped fuel its growth, especially with digital native generations that expect such experiences. . . .
9 New AI Moves in the Payments Industry
American Banker – November 3, 2023 (subscription required)
Even with concerns over a bubble and potential regulatory restrictions, payment technology firms are racing to develop products that use generative artificial intelligence, betting on robust demand in the near and long term.
Generative AI, which refers to newer forms of AI that can produce original content, has become one of the largest trends in technology over the past year. In the payments industry, firms are making investments and deciding on strategies while still looking for the best ways to use new AI. . . . [T]here’s also a lot of attention being paid to small businesses, with Block (formerly Square) and Stripe deploying several new generative AI products in October alone. “There is absolutely demand from small businesses for this sort of technology, but with the big caveat is that a lot of people are still figuring out what this technology is and how it works, and where do they begin with it?” said Gilles Ubaghs, strategic advisor for commercial banking and payments at Datos Insights. . . .
Here are some examples of generative AI projects that have launched in the payments industry since the start of September. . . .