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Payments News Update – August 13, 2021

Posted  August 13, 2021

Legal and Regulatory Developments

SPOTLIGHT: Merchants Redouble Their Efforts to Push the Fed on Debit’s Routing and Pricing Rules
Digital Transactions News – August 11, 2021

With a Federal Reserve deadline hitting Wednesday for comments on decade-old debit card regulations, large merchants are firing some last-minute salvos in hopes of influencing the Fed to make major revisions to rules governing transaction routing and pricing. “[M]ajor banks and networks continue to interfere with competition for debit business,” contends a release issued early in the day from the Merchants Payments Coalition, a trade group representing supermarket, convenience-store, gasoline, and other retail chains. The group’s statement calls on the Fed to follow through on a proposal that underscores merchant choice in routing debit transactions.

Specifically, the Fed on May 7 invited comments on a proposed clarification to its rules implementing the 2010 Durbin Amendment that would specify that merchants must have a choice of at least two unaffiliated networks for routing card-not-present transactions. The proposal came in response to widespread merchant complaints that larger banks were routing online debit transactions to the Visa or Mastercard networks in preference to a dozen or so alternative debit switches, such as Pulse, NYCE, or Shazam. Merchants have long contended the alternative systems offer lower pricing and improved security. . . . .

FTC Urges Federal Reserve Board to Require Debit Card Gatekeepers to Compete Fairly
Federal Trade Commission – August 12, 2021 (click here for the FTC’s comment letter)

The Federal Trade Commission announced that staff have submitted a comment urging the Board of Governors of the Federal Reserve System (the Fed) to clarify and strengthen the implementation of debit card fee and routing reforms to the Electronic Fund Transfer Act (EFTA) made under the Dodd-Frank Wall Street Reform Act of 2010 (Dodd-Frank).

According to a 2019 study, Americans use debit cards almost twice as often as credit cards. Merchants, including millions of small businesses, must pay fees to card issuers, usually banks, and card networks like Visa and Mastercard, in order to accept debit cards. But merchants cannot select low-fee networks unless the issuer enables those networks. Typically, merchants work with payment processing companies to ensure that they get paid. When merchants pay high fees to accept payments, this can lead to price hikes for customers. . . .

Financial Trades Strongly Oppose Fed’s Durbin Proposal
ABA Banking Journal – August 12, 2021

The American Bankers Association and five other financial trade groups yesterday urged the Federal Reserve to withdraw its proposal to expand the Durbin Amendment’s implementing rule (Regulation II), unless the Fed fixes key legal and technical deficiencies. Earlier this year, the Fed proposed to mandate that banks of all sizes enable two unaffiliated payment debit card networks and accept “PIN-less” transactions for internet purchases. In the letter, the financial groups warned that this rule would become a costly and complicated compliance burden, particularly for smaller card issuers, and would result in $27 billion in lost revenue by 2031.

“At a time when they are rightly focused on doing everything they can to support the economic recovery, our members did not anticipate a new government mandate that would require us to undertake costly, time-consuming, inefficient and unnecessary efforts to change our core network infrastructure,” the groups wrote. . . .

US Senate Bill Focuses on App Store Payment System Rules
PYMNTS – August 11, 2021

U.S. Senators Richard Blumenthal (D-CT), Marsha Blackburn (R-TN), and Amy Klobuchar (D-MN) have introduced legislation Wednesday (Aug. 11) that would set rules governing app stores and allow developers to use third-party payments services and stores. The bill, if signed into law, would establish the Open Markets App Act, which will be used to fight monopoly-like structures imposed by Big Tech, according to a press release. Google and Apple have come under fire for the rules developers must follow to sell apps in their app stores. The act would set enforceable rules protecting competition and strengthening consumer protections.

“This legislation will tear down coercive anticompetitive walls in the app economy, giving consumers more choices and smaller startup tech companies a fighting chance,” said Blumenthal. “For years, Apple and Google have squashed competitors and kept consumers in the dark-pocketing hefty windfalls while acting as supposedly benevolent gatekeepers of this multi-billion dollar market.” . . .

Justice Department Supports the Federal Reserve Board’s Proposed Rule on Debit Card Interchange Fees and Routing to Promote Competition
Department of Justice, Office of Public Affairs – August 11, 2021

Today, the Justice Department’s Antitrust Division filed a comment in support of the Federal Reserve Board of Governors’ (Board) notice of proposed rulemaking on Debit Card Interchange Fees and Routing. The Board’s proposed rule would require banks that issue debit cards (“issuers”) to give merchants a choice of debit networks for transactions made online and in circumstances where consumers pay without physically presenting their debit cards. By introducing choice, the proposed rule has the potential to reduce merchants’ transactional costs and ultimately save consumers money.

“We commend the Board for its efforts to promote competition in this important part of the debit card industry by ensuring that smaller debit networks will have a greater ability to compete for merchants’ business,” said Acting Assistant Attorney General Richard A. Powers of the Justice Department’s Antitrust Division.  . . .

UK Watchdog Clears ATM Giants’ Merger With No Conditions
Law360 – August 10, 2021 (subscription required)

Britain’s competition watchdog signed off Tuesday on NCR Corp.’s $2.5 billion takeover of the world’s largest nonbank ATM operator without putting any conditions on the merger. The U.K. Competition and Markets Authority had spent part of the summer investigating NCR’s deal with Cardtronics, both American companies, for any ramifications in the British market from combining their operations.

But the CMA approval was apparently the last domino standing for any regulatory holdups to the megadeal, as NCR quickly announced Tuesday that with British authorities’ approval the merger could be completed in short order. “NCR and Cardtronics can now operate as one company. The integration between NCR and Cardtronics will begin immediately,” said Michael Hayford, NCR president and CEO, in a statement. Hayford said the combination of “two trusted brands” accelerates what the company calls its “NCR as a service strategy.” . . .

USDC Builder Circle Says It Wants to Become a National Crypto Bank
CoinDesk – August 9, 2021

Fresh on the heels of announced plans to go public, Circle said Monday it intends to become “a full-reserve national commercial bank.” If approved, the proposed digital currency bank would operate under the supervision of the Federal Reserve, U.S. Treasury, Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC).

To be clear, this would be an industry first, with a scope far beyond the OCC banking charter already conditionally issued to Anchorage, Paxos and other crypto-native financial services firms. “We are embarking on this journey alongside the efforts of the top U.S. financial regulators, who through the President’s Working Group on Financial Markets are seeking to better manage the risks and opportunities posed by large-scale private-sector dollar digital currencies,” Circle said in a blog post. . . .

Sainsbury’s Settles Swipe Fee Case Against Mastercard
Law360 – August 6, 2021 (subscription required)

Sainsbury’s Supermarkets Ltd. has reached a settlement with Mastercard Inc. ending litigation between the sides over fees that the U.K.’s highest court ruled are unlawful last year, according to a filing in the proceeding Friday. The U.K.’s Competition Appeal Tribunal issued an order withdrawing Sainsbury’s claim against Mastercard over so-called multilateral interchange fees, which are bank-to-bank charges paid by a merchant’s lender to a card-issuing bank when a purchase is processed.

The order said the companies reached a confidential settlement on July 16 but did not disclose any terms of the agreement. A representative for Sainsbury’s said Friday that the company is pleased the litigation has been “satisfactorily resolved.” A representative for Mastercard similarly said the company is pleased the matter has been “resolved amicably.” . . .

Industry Developments

SPOTLIGHT: Amazon’s Singapore Surcharge May Signal Sea Change Ahead on Cards
PYMNTS – August 10, 2021

As Amazon and surcharges go in Singapore, might there be signals or tea leaves for other countries? In a statement emailed to PYMNTS on Tuesday (Aug. 10), an Amazon spokesperson noted that the eCommerce giant is putting a surcharge in place in Singapore for transactions that use the Visa card. The surcharge equates to 0.5 percent, according to the information sent to PYMNTS. The surcharge will take effect on Sept. 15.

In its emailed statement, the company said that “the cost of accepting card payments continues to be an obstacle to providing the best prices for customers. These costs should be going down over time with innovation and technological advancements, which allows merchants to reinvest savings into low prices and shopping enhancements for customers. Yet, despite these advancements, some cards’ cost of payments continue to stay high or even rise.” . . .

Giant Eagle Now Takes PayPal, Venmo Payment at Checkout
Supermarket News – August 12, 2021

Giant Eagle has become the first grocery and convenience store retailer to enable PayPal and Venmo transactions at checkout, according to card and digital payment specialist Blackhawk Network. All 474 Giant Eagle supermarket and GetGo fuel/convenience store locations now accept PayPal online and Venmo mobile payments by allowing shoppers to scan QR codes at checkout, Pleasanton, Calif.-based Blackhawk said Thursday. The retailer partnered with Blackhawk to integrate the two digital payment options — PayPal owns the Venmo mobile payment service — in its stores.

“We are thrilled to be the first supermarket and convenience chain in the country to accept PayPal and Venmo in our stores,” Graham Watkins, executive vice president of retail innovation and business development at Pittsburgh-based Giant Eagle, said in a statement. . . .

Labor Shortage Gives Retail and Restaurant Workers the Upper Hand—for Now
CNBC – August 11, 2021