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Payments News Update – October 6, 2023

Posted  October 6, 2023

Legal and Regulatory Developments

SPOTLIGHT: Supreme Court to Consider Debit Fee Case
Payments Dive – September 29, 2023

The Supreme Court on Friday granted a petition from a group of North Dakota merchants who brought a case against the Federal Reserve Board in 2021 over the central bank’s setting of a debit card fee cap.

The merchants’ petition for review isn’t with respect to the merits of the case, but rather an appellate court’s affirmation last year that the merchants brought their case too late, past a statute-of-limitations period for challenging a Fed action in setting the fee cap. The Supreme Court’s notice that it’s willing to hear the case may mean that the court is at odds with the U.S. District Court in North Dakota that ruled the complaint was tardy, and the U.S. Court of Appeals for the 8th Circuit subsequent ruling upholding that lower court’s decision. . . .

Payments Bill Defies Congressional Rancor
Payments Dive – October 3, 2023

Politics is as polarized as ever in Washington, but a bill related to the processing of credit card payments has managed to gather bipartisan momentum in Congress. It’s a testament to the bill’s potential impact that it’s attracted attention from powerful lawmakers this month even as Congress struggled to reach a consensus on a stop-gap budget measure that narrowly averted a Sunday federal government shutdown.

The Credit Card Competition Act proposal, aimed at boosting competition for card network giants Visa and Mastercard, has drawn support not just from Democratic Majority Whip Dick Durbin, a long-time critic of the two networks, but also Sen. Roger Marshall, a Republican who threatened to withhold his support for the National Defense Authorization Act if the CCCA didn’t get a vote. . . .

D.C.’s Ban on Cashless Businesses Takes Effect
Axios DC – September 29, 2023

No cash, no more — D.C. will enforce a law starting Sunday that bans businesses from refusing cash payments. Cashless policies have been controversial for years — and often deemed discriminatory — so there’s finally clarity on how D.C. businesses should proceed.

The D.C. Council passed legislation in 2020 prohibiting retailers from discriminating against cash payments, but funding from the city to enforce it didn’t kick in until the new fiscal year. The law was also unenforceable during a public health emergency — bad timing with the Covid pandemic when a bunch of businesses went digital to limit contact and prevent the spread via dollars (which we know now is not a thing). . . .

Apple Is Ordered to Face Apple Pay Antitrust Lawsuit
Reuters – September 27, 2023

Apple (AAPL.O) was ordered on Wednesday to face a private antitrust lawsuit by payment card issuers accusing the company of thwarting competition for its Apple Pay mobile wallet. U.S. District Judge Jeffrey White said the plaintiffs could try to prove that Apple violated the federal Sherman antitrust law by enforcing a 100% monopoly over the domestic market for tap-and-pay wallets for iPhones, iPads and Apple Watches.

The Oakland, California-based judge also dismissed a “tying” claim, which accused Apple of requiring purchasers of iOS devices to buy Apple Pay or forego purchases of competing wallets. Apple, based in Cupertino, California, did not immediately respond to requests for comment. . . .

Why Many Business Owners Would Love It If You Stopped Using Your Credit Card
NPR – September 26, 2023

Whenever someone uses a credit card to buy a scoop of mango ice cream at one of Victor Garcia’s shops in Texas, the financial system takes a bite. Credit card fees gobbled up more than $25,000 of Garcia’s sales last year. He’s now posted signs at his two shops near Fort Worth urging customers to think twice before paying with plastic.

“Most are shocked,” Garcia says. “Half of them say, ‘Gosh, I have no cash. I wish I did.’ People don’t know. They just say, ‘Hey, I get points, so I’m going to use my card.’” Retailers have long complained the so-called “swipe fees” they have to pay for accepting credit cards in the U.S. are much higher than those in Europe, where the fees are strictly regulated. . . .

Congressional Committee Passes Bill to Thwart CBDC
Payments Dive – September 25, 2023

The House Financial Services Committee last week passed a bill that would stop the Federal Reserve from working on a central bank digital currency, giving the full House a chance to consider the legislation.

The legislation would amend the Federal Reserve Act to prohibit Federal Reserve banks from issuing “a central bank digital currency, or any digital asset that is substantially similar under any other name or label, directly to an individual,” according to the text of that proposed bill, H.R. 5403. Rep. Tom Emmer, a Republican from Minnesota, who is also the House Majority Whip, proposed the bill, which he refers to as the “CBDC Anti-Surveillance State Act.” It was passed by the committee last Wednesday to the House floor. . . .

Mastercard Tells Congress Credit Card Competition Act Is Bad for Consumers, Businesses
PYMNTS – September 22, 2023

Mastercard has written a letter to several members of the United States Congress, outlining its opposition to the Credit Card Competition Act. The legislation would “remove consumer choice, erode security, eliminate rewards and prevent small businesses from investing in their future,” the company said in a Friday (Sept. 22) press release.

The Credit Card Competition Act would mandate banks to enable card payments to be routed over at least one network that competes with Mastercard and Visa, PYMNTS reported in June. Proponents say the legislation would give merchants a greater range of choice, because they would have the option to embrace networks with cheaper fees, including interchange (or “swipe”) fees, than those seen with Mastercard and Visa, which together account for 80% of the credit card market. . . .

Industry Developments

SPOTLIGHT: PIRG Calls Out Mastercard’s Data Sales Practices
Payments Dive – October 5, 2023

Selling consumer data has become a lucrative business, and the personal data market involves advertisers, tech companies, hedge funds and data brokers, PIRG said. Purchase, New York-based Mastercard “is far from the only company engaged in data sales, nor is it necessarily the worst actor,” PIRG acknowledged in the report.

“But in its position as a global payments technology company, Mastercard has access to enormous amounts of information derived from the financial lives of millions, and its monetization strategies tell a broader story of the data economy that’s gone too far,” the report noted. . . .

PayPal and Venmo Cards Now Compatible With Apple Wallet
PYMNTS – October 3, 2023

This integration allows users to make payments with a tap of their iPhone or Apple Watch, both in-store and online, the company said in a Tuesday (Oct. 3) press release. The added benefit is that customers can still earn the same cashback and rewards on their eligible purchases. Security is a priority for both Apple Pay and PayPal, the release said. When customers pay with Apple Pay, every purchase is authenticated with Face ID, Touch ID or a device passcode, along with a one-time unique dynamic security code. PayPal also ensures that transactions are protected and secure, whether customers pay using a smartphone or their physical card.

Setting up and using a PayPal or Venmo credit or debit card with Apple Wallet is a straightforward process, per the release. Users visit the Apple Wallet app, select “add debit or credit card,” and then either scan their card or manually enter the card details. . . .

Apple Is Piloting Open Banking in the UK
PaymentsJournal – October 2, 2023

Apple is testing out a new feature for UK Apple Wallet users, allowing them to view their current bank account balance and transaction history directly within the app. The tech giant is leveraging UK’s Open Banking API to fuel the effort, and according to 9 to 5 Mac, the feature will be available to a select group of Wallet users who have linked their Apple Pay card with one of the participating banks, which include Barclays, HSBC, Lloyds, RBS, Monzo, and Starling. Apple’s move into open banking expands the capabilities of its Apple Wallet app beyond just facilitating digital payments.

Open banking will allow users to monitor their financial activities and make more informed spending decisions by displaying their balances and knowing—in real-time—how much money they have in their account without having to open up their separate banking app. . . .

Visa to Invest $100 Million in Generative AI for Commerce and Payments
PYMNTS – October 2, 2023 

Visa has launched a new $100 million generative artificial intelligence (AI) ventures initiative, aiming to invest in companies focused on developing generative AI technologies and applications that will shape the future of commerce and payments. This initiative builds upon Visa’s long-standing use of AI in payments and its commitment to driving innovation in the industry, the global payments company said in a Monday (Oct. 2) press release.

Generative AI, an emerging subset of AI, utilizes large language models (LLMs) to create artificial general intelligence capable of generating text, images, and other content from vast amounts of existing data. . . .

Visa’s Friendly Fraud Rule Change Could Cut $1 Billion From Small Firms’ Chargeback Costs
Digital Transactions News – September 29, 2023

Visa Inc. is touting recent changes to how chargebacks that could be first-party fraud, also known as friendly fraud, are processed as potentially saving small businesses globally $1 billion in costs over the next five years.

Expectations are that the streamlined process will increase merchants’ ability to provide more accurate data that could root out the fraud without impeding legitimate chargeback transactions. How bad is friendly fraud? Nearly three quarters of the 300 merchants in a Chargebacks 911 survey released in May saw a 19% increase in illegitimate chargebacks on average in 2023 compared to the same period last year. . . .

Could ‘Amazon One’ Palm Payments Get the Upper Hand Over Digital Wallets?
The Financial Brand – September 21, 2023

Amazon One palm payments technology will be in every Whole Foods store by the end of 2023, and that might just be the beginning of its wider adoption in the retail environment… and beyond. But will consumers take to paying with their hands? Will security and privacy concerns prevail in their minds? … And just how user-friendly is it? We take a field trip to Amazon Fresh to find out.

The startling ease of using Amazon One — and the growth in consumer use of the palm-recognition payments technology — just begs for a handy pun or play on words. Something like: “You’ve got to hand it to Amazon.” . . .

Affirm Is Exploring Subscription Service to Guarantee 0% APR on Purchases
Bloomberg – September 21, 2023 (subscription required)

Affirm Holdings Inc. is exploring the introduction of a subscription service in a bid to create more recurring revenue beyond interest collected from its buy now, pay later plans. The company’s work was discovered inside code hidden within its iPhone application. The code — not present to end users — indicates the firm is looking at charging $7.99 per month for the service, which would offer upgrades for both Affirm’s buy now, pay later plan users and savings account holders.

The subscription service under exploration — called Affirm Plus — would guarantee a rate of 0% APR on installment loans totaling up to $2500, according to the code, which was discovered by developer Steve Moser and shared with Bloomberg News. The company’s payment offerings currently come with APRs ranging from 0% to 36%. . . .