Payments News Update – August 6, 2020
Legal and Regulatory Developments
SPOTLIGHT: Exclusive: China’s Central Bank Urges Antitrust Probe Into Alipay, WeChat Pay
Reuters – August 6, 2020
China’s top antitrust agency is looking at whether to launch a probe into Alipay and WeChat Pay, prompted by the central bank which argues the digital payment giants have used their dominant positions to quash competition, sources with knowledge of the matter said. The State Council’s antitrust committee has been gathering information on Alipay, owned by Ant Group which in turn is an affiliate of Alibaba Group Holding Ltd (BABA.N), as well as on Tencent Holdings Ltd’s (0700.HK) WeChat Pay for more than a month, they said.
Any investigation would likely dampen enthusiasm for Ant Group’s planned dual listing in Hong Kong and Shanghai that is seeking a valuation of more than $200 billion. The antitrust committee has not made a decision about whether to proceed with an investigation, the sources said, and it was not clear when a decision might be made. One source said the committee is taking the People’s Bank of China’s recommendation “very seriously”. . . .
WhatsApp Awaits OK From India’s RBI to Launch Payments Feature
PYMNTS – August 5, 2020
WhatsApp, the Facebook-owned messenger program, is expected to enter India’s payments market after becoming compliant with the country’s data-localization standards, according to a report from YourStory.com. WhatsApp Pay made its first foray into India in 2018 with a beta launch. Now it will be available once the Reserve Bank of India (RBI) gives it the green light. That will give WhatsApp Pay the approval to access the 400-million-strong user-base of the messenger app, YourStory reported.
The National Payments Corporation of India (NPCI) certified to the Supreme Court that WhatsApp has “localized five data elements” identified by the banking regulator. WhatsApp, meanwhile, said it has spent “significant engineering time and effort” in the past seven months to comply with the country’s banking regulator’s guidelines, YourStory reported. Will Cathcart, head of WhatsApp, in an opinion piece in The Financial Express, said the Indian government had done well on launching the initiative to help Indian residents make digital payments. . . .
Indian Government Actively Working Toward New Crypto Ban
Coin Telegraph – August 5, 2020
An Indian government official has claimed that two ministries and the Reserve Bank of India are actively working on a legal framework to ban cryptocurrencies on the subcontinent. According to an Aug. 4 report from Indian news website Moneycontrol, authorities in India are making preparations to pass a law banning cryptocurrency trading. The site quoted an anonymous official as saying that consultations between the Ministry of Electronics and Information Technology, the Ministry of Law and Justice, and the Reserve Bank of India had begun regarding the framework of such a law.
“Once Parliament resumes for the session, we are hoping to get [the law] ratified,” the official said. Parliament is expected to reconvene in late August or early September. The official stated that the government was considering banning crypto through legislative change — rather than methods such as the blanket ban from the RBI for banks dealing with crypto firms — because it would be more binding. “It will clearly define the illegality of the trade,” the person said. . . .
Bank Trade Groups Push Back on OCC’s Payments Charter Plans
Banking Dive – July 30, 2020
The regulator should take care not to introduce risks that would encourage regulatory arbitrage, the groups said, urging the OCC to be transparent when considering a new charter. Several trade groups representing banks and credit unions spoke out against the Office of the Comptroller of the Currency’s plans to create a special banking charter for payments companies.
Acting Comptroller Brian Brooks told the American Bankers Association (ABA) last month the regulator plans to unveil a national money transmitter license which would offer nonbank payment companies “a national platform with preemption.” Nonbank payment companies now must obtain a money transmitter license from each state in which they operate. In a letter to Brooks, the group — which includes the ABA, Bank Policy Institute, Consumer Bankers Association, Credit Union National Association and Independent Community Bankers of America — said they had “serious concerns around the recent discussion of a narrow-purpose payments charter.” . . .
Industry Developments
SPOTLIGHT: Google Expands Digital DDA Program to Six New FIS
PYMNTS – August 4, 2020
Six additional U.S. banks and credit unions (CUs) have signed on to offer checking and savings accounts through Google Pay. BankMobile, BBVA USA, BMO Harris, The Coastal Community Bank, First Independence Bank (a federally designated minority depository institution) and SEFCU will join Citi and Stanford Federal Credit Union in the offering beginning next year.
“We are thrilled to be collaborating with Google to offer our student customers enhanced digital bank accounts,” Luvleen Sidhu, BankMobile’s co-founder and CEO, said on Monday (Aug. 3) in announcing the bank’s agreement with Google. Google’s banking services strategy is an effort to reinvent the banking experience for consumers by enabling them to connect commerce to their customers underlying bank accounts via Google Pay. These “smart DDAs” leverage the Google Pay front end and existing compliant bank account infrastructure to provide consumers with an end-to-end view of their money to more efficiently budget and plan their spend. Consumers get to keep their existing banking relationship, but receive real-time, value-added financial management services based on spending patterns and goals. . . .
Consumers Would Switch Merchants for a Contactless Payment Option, Says a Visa Survey
Digital Transactions News – August 4, 2020
Contactless payments apparently have sway with U.S. consumers. Fifty-four percent of them would switch to a new store that offers contactless payments, according to a global survey by Visa Inc. measuring changes in payments habits in the face of the Covid-19 pandemic. The effects of the pandemic, and the resulting urge of many consumers to limit their contact with point-of-sale devices and cashiers, also means 35% are using cash less often. Younger consumers, perhaps, are the most motivated. Seventy-two percent of Millennials are likely to switch, compared to 56% of Generation X consumers, and 31% of Baby Boomers.
Indeed, many small businesses have tried different ways to cope with all the changes. Overall (the survey also includes data from Brazil, Canada, Germany, Hong Kong, Ireland, Singapore, and the United Arab Emirates), 20% of merchants adopted contactless payments in recent months. Another 33% say they either have accepted less cash or stopped accepting it completely since the Covid-19 onset. The survey canvassed 2,000 small businesses and 4,500 consumers. Within the United States, 60% of U.S. small and medium-size businesses have made some change to adjust to the pandemic. Twenty-three percent used targeted advertising on social media, 20% adopted alternative payments, and 18% applied for a business loan. . . .
Apple’s Mobeewave Deal Could Turn iPhones Into No-Dongle POS Devices—Just Not Right Away
Digital Transactions News – August 1, 2020
Apple Inc. has reportedly acquired technology that enables smart phones equipped with near-field communication to act as point-of-sale devices with no other hardware. In the deal, news of which broke as the weekend began, the Cupertino, Calif.-based iPhone maker has bought Mobeewave Inc., a 9-year-old technology firm based in Montreal. The price was not disclosed, though sources contacted by Digital Transactions News say the deal may have closed as early as February and involved a price tag anywhere from $120 million to $150 million.
Mobeewave in October launched with Samsung Electronics Co. Ltd. a capability that allows mobile phones without dongles or other card-reader attachments to process card transactions via an NFC link between a contactless card and the device. In January, it followed up with a service that speeds up onboarding for merchants looking to exploit the capability. . . .
PayPal’s Plan for Seamless, Touch-Free QR Code Commerce
PYMNTS – July 31, 2020
From complex biopharma work on a vaccine to a galaxy of cloud solution providers harnessing artificial intelligence (AI) and machine learning, the commercial response to COVID-19 is decidedly high-tech. Lately, however, a half-forgotten 1990s optical technology that couldn’t find its groove is suddenly the hottest thing in post-pandemic touch-free payments. It’s the humble QR code.
PYMNTS CEO Karen Webster recently spoke with Jeremy Jonker, senior vice president, head of consumer in-store and digital commerce at PayPal, about the platform’s embrace of QR codes, particularly its pilot in 28 markets worldwide announced in mid-May. PayPal’s move comes amid a global resurgence of QR code usage, as both buyers and sellers look for ways to conduct in-person transactions in an era of ongoing social distancing requirements. . . .
‘Buy Buttons’ and Push Provisioning Are Meeting Consumers’ New Concerns
PaymentsSource – July 30, 2020
Only two short years ago, less than half of consumers reported making a transaction using a digital wallet, according to the Independent Community Bankers of America (ICBA). Today, nearly a quarter of consumers use digital wallets daily, with 40% using them on a weekly basis. Accenture predicts that by the end of 2020, 64% of consumers will have used a mobile wallet at least once. As consumers embrace digital forms of payments, financial services organizations and retailers continue to push new developments. Click to pay and push provisioning are among the evolving trends that meet consumer demand for fast, simple and secure digital payments.
Click to pay has recently taken center stage in the payments world, with payments giants Visa, Mastercard, American Express and Discover announcing their intentions for global expansion and continued development toward making payments easier and more secure for consumers. Click to pay is an online checkout method based on the Secure Remote Commerce (SRC) industry standard that features one-click buying when shoppers make a purchase on a website, mobile app or any other digital channel with the major credit card networks. . . .
Is Your Chip Card Secure? Much Depends on Where You Bank
Krebs on Security – July 30, 2020
Chip-based credit and debit cards are designed to make it infeasible for skimming devices or malware to clone your card when you pay for something by dipping the chip instead of swiping the stripe. But a recent series of malware attacks on U.S.-based merchants suggest thieves are exploiting weaknesses in how certain financial institutions have implemented the technology to sidestep key chip card security features and effectively create usable, counterfeit cards.
Traditional payment cards encode cardholder account data in plain text on a magnetic stripe, which can be read and recorded by skimming devices or malicious software surreptitiously installed in payment terminals. That data can then be encoded onto anything else with a magnetic stripe and used to place fraudulent transactions. Newer, chip-based cards employ a technology known as EMV that encrypts the account data stored in the chip. The technology causes a unique encryption key — referred to as a token or “cryptogram” — to be generated each time the chip card interacts with a chip-capable payment terminal. . . .
Pandemic Gives U.S. Faster Payments Council Role of Easing Digital Transitions
PaymentsSource – July 30, 2020 (subscription required)
Whether deserved or not, the payments industry has had a hard time shaking its decades-long stigma that any type of forward step will be long and drawn out. But contrary to that trend, the U.S. Faster Payments Council — created through a recommendation from the Faster Payments Task Force — has proved to be effective in its mission of promoting faster payments and pushing the industry through potential roadblocks with information and data for merchants, corporations and banks to better understand how systems work and what they offer.
The agency’s voice carries even more weight in light of the coronavirus pandemic, which has hastened the transition to digital and remote payments. Through it all, the council has been able to avoid the pitfalls of other industry groups that often have to dig in their heels and argue over who gets the deciding vote on standards, operations and fees. “I do think we have a tendency, in general, to create these narratives that are X versus Y, whether it be cash vs. electronic, or debit versus. credit, or contactless versus chip, or this versus that,” said Reed Luhtanen, a former Walmart payments executive who now heads the U.S. Faster Payments Council. . . .
Amazon Pushing Deeper Into Banking in the Post-Pandemic World
The Financial Brand – July 30, 2020
Amazon may not have immediate plans to launch a bank of its own, but their partnership model still poses real threats to traditional banking providers. Will retail banks and credit unions face the same fate as brick-and-mortar retailers like Borders and Barnes & Noble if they don’t play Amazon’s game
In late 2019 Angela Strange, General Partner at Silicon Valley venture capital firm Andreessen Horowitz, predicted that “in the not-too-distant future, I believe that nearly every company will derive a significant portion of its revenue from financial services.” Strange explained that this would not be by adopting banking charters, but by availing themselves of “infrastructure-as-a-service,” or, more specifically “banking-as-a-service.” The huge structural hurdles of getting into banking proper would be leveled for nonbanks by the banking industry itself, she predicted. She drew a parallel with software — it once took millions to set up to be a software company. Today, thanks to Amazon Web Services, “anybody can start a software company with a credit card and a laptop.” . . .
– By Kristian Soltes. For questions about this newsletter or its content, contact ksoltes@constantinecannon.com.