Payments News Update – February 11, 2021

Legal and Regulatory Developments

SPOTLIGHT: Big Banks, Big Tech Face off Over Swipe Fees
American Banker – February 7, 2021

The fees generated from consumers’ debit card spending have long been a source of acrimony between big banks and retailers. But now the banks have a new adversary: Apple, PayPal and other fresh competitors from the tech industry. In recent months, banking heavyweights have sought to persuade the Federal Reserve Board to cap the revenue that some tech firms collect from debit cards — a move that would bring those companies under the rules that already apply to larger banks.

The campaign sets up a clash between large incumbents and Silicon Valley firms that have been gradually encroaching on the industry’s turf. “If they are going to act like a bank, they should be regulated like a bank, too,” one big-bank official said in comments that could presage a wider fight over a range of issues. A tech industry lobbyist, who also spoke on condition of anonymity, fired back at the big banks. “They’re trying to play the victim,” the lobbyist said. “It’s clear that their strategy is to take the shine off of new entrants and new competition.” . . .

Mastercard Megaclaim Returns to Court Next Month
The Law Society Gazette – February 10, 2021

A group action brought on behalf of 46 million credit and debit card holders will be considered again next month following the Supreme Court’s remittal to the Competition Appeal Tribunal (CAT). The £14bn consumer claim accuses Mastercard of subjecting UK customers to higher prices through so-called ‘interchange fees’ levied between 1992 and 2008. It is brought by former financial services ombudsman Walter Merricks CBE.

In 2017, the CAT refused the application for a collective proceedings order on the grounds that the claims were not suitable for an aggregate award of damages and Merricks’ proposed distribution of any award did not satisfy the compensatory principle in common law. However, last December the Supreme Court found that the tribunal’s decision was undermined by five errors of law and proceedings were remitted. . . .

Megamergers Could Be a Thing of the Past Thanks to New Senate Bill
Business Insider – February 8, 2021

A new Senate antitrust bill could complicate M&A efforts. The bill would require merging companies to prove that combining wouldn’t harm competition, making it harder to execute major tie-ups. Sen. Amy Klobuchar, D-M.N., has introduced the Competition and Antitrust Law Enforcement Reform Act, which aims to give federal agencies dealing with antitrust more resources, create new teams to investigate mergers and markets, and bring new reforms.

It remains to be seen if the bill will be passed, but Klobuchar’s position as the lead Democrat on the Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights may make it more likely that firms will face added antitrust scrutiny in the coming years. Most notably, the bill would shift the burden of proving a merger’s impact on competition to the merging parties, and it cites three situations that the payments industry has seen in recent years. . . .

Regulation in Cross-Border Cryptocurrency Payments: How Is International Adoption Changing the Rules of the Game?
Digital Transactions News – February 7, 2021

The Federal Reserve reported late Monday it has received more than 110 expressions of interest from financial institutions and processors for a real-time payments pilot program slated to start later this quarter. That number exceeds the 80 entities the Fed expected to participate in the pilot for the FedNow service, which the central bank has been working on since announcing the program in August 2019.

Among the institutions on the pilot list are major banks like Capital One Financial Corp., Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., and Wells Fargo Co. But scores of small community institutions are also listed, along with large and small processors with roots in the banking industry, including Fiserv Inc., FIS Inc., and Jack Henry & Associates. Among fintechs listed are Green Dot Bank and ACI Worldwide Inc. . . .

PayPal Says App Venmo Being Investigated by U.S. Consumer Watchdog
Reuters – February 5, 2021 (click here for PayPal’s form 10-K annual report)

PayPal Holdings Inc said on Friday it received a civil investigative demand from the U.S. Consumer Financial Protection Bureau related to its app Venmo’s alleged unauthorized fund transfers and collections processes.

From PayPal’s 10-K filing with the SEC:

On January 21, 2021, we received a Civil Investigative Demand (“CID”) from the Consumer Financial Protection Bureau (“CFPB”) related to Venmo’s unauthorized funds transfers and collections processes, and related matters. The CID requests the production of documents and answers to written questions. We are cooperating with the CFPB in connection with this CID. . . .

Independent Grocers Ask Feds to Rein in E-Commerce Credit Card Fees as Online Orders Explode
Financial Post – February 3, 2021

A group of independent grocers is pushing the federal government to rein in credit-card companies charging high fees for online purchases, as web orders for groceries surge during the pandemic. The Canadian Federation of Independent Grocers (CFIG) on Monday sent a letter asking Ottawa to revisit its 2018 agreement with Visa and Mastercard that put a cap on the fees — known as interchange fees — that they can charge retailers.

Despite that agreement, retailers say they are still getting hit with big bills for online transactions, which have emerged as an important channel for retailers in the lockdown. “This shift in consumer purchasing has been entirely at the expense of small business and again, solely to the benefit of Visa, Mastercard and the banks,” CFIG senior vice-president Gary Sands said in the letter to Finance Minister Chrystia Freeland and Small Business Minister Mary Ng. “Canadians would hope that the banks and card companies would have stepped up and voluntarily reduced their fees. But that did not happen and calls to do so have been met with a deafening silence.” . . .

Industry Developments

SPOTLIGHT: Merchant Gripes Concern Fees And Onboarding More Than Technology, J.D. Power Finds
Digital Transactions News – February 5, 2021

Against the backdrop of an overall decline in small businesses’ satisfaction with payment processors, Square Inc. ranks highest with a score of 857 out of 1,000, according to the J.D. Power 2021 U.S. Merchant Services Satisfaction Study. PayPal Holdings Inc. comes in second with a score of 852, with Bank of America Merchant Services and PNC Merchant Services tied for third with a score of 849. Overall, the industry average satisfaction score for merchant services providers is 836.

Of the seven merchant-services providers that ranked above the industry average, only Elavon saw its overall satisfaction score rise year over. The Atlanta-based processor saw its satisfaction score increase 38 points. The overall decline in merchant satisfaction was driven largely by small and micro merchants that came under immense financial stress from sales declines sparked by the Covid-19 pandemic. That pressure made them more likely to contact their payment processor for service requests and to resolve problems, says Paul McAdam, senior director of banking and payments intelligence at J.D. Power. These interactions can be moments of truth, McAdam says. . . .

America’s Oldest Bank, BNY Mellon, Will Custody Bitcoin
Cointelegraph – February 11, 2021