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Payments News Update -- July 17, 2019

Posted  July 17, 2019

Legal and Regulatory Developments

SPOTLIGHT: How Digital Banks Are Breaking up Latin America’s Finance Monopolies
OZY – July 11, 2019

Gabriela Franco clutches her phone, frustrated. Her bank in São Paulo is on the other end. She needs to wire money right away to a separate account at her bank. But the representative is telling her she has “to be there — like, physically — at the bank in São Paulo to approve the transfer.”

The thing is, Franco works and lives in Mexico City, and getting to her São Paulo branch in an hour is, well, impossible. The answer to her problems may instead lie in a wave of alternative banking solutions now emerging across Latin America. . . .

The Playbook to Faster Payments: Nacha Partners With the FPC to Provide Faster Payments Education
Payments Journal – July 17, 2019

With faster payments becoming more popular, Nacha and the U.S. Faster Payments Council (FPC), two major players in the payments space, have announced that they will be collaborating to ensure that financial institutions, businesses, and other stakeholders have the information they need to adopt the right faster payments solutions for their organization.

At Nacha’s Smarter. Faster. Payments 2019 event in May, the two groups revealed that they will be partnering to create the Faster Payments Playbook, an educational resource intended to aid financial institutions and other audiences as they develop a faster payments strategy. . . .

France to Approve First Crypto-Issuers as New Rules Loom
Reuters – July 16, 2019

France’s financial watchdog is poised to approve a first tranche of cryptocurrency-related companies under new rules on digital coins, some of the first such regulations to be launched by a major economy.

Under the rules, set to come into force late this month, crypto-related firms will voluntarily abide by standards on capital requirements and consumer protection and pay tax in France, in exchange for approval from the regulator. . . .

Facebook Says It Won’t Launch Libra Until Regulators Are Happy
Digital Trends – July 15, 2019

Facebook says it won’t roll out its Libra cryptocurrency until it has “fully addressed regulatory concerns” – though it added that regulation of the currency itself would largely happen in Switzerland, not the U.S.

In prepared testimony released ahead of his appearance before the Senate Banking Committee on Tuesday, Facebook’s Calibra head David Marcus said regulators should have a say in the cryptocurrency ahead of its launch. . . .

Winklevoss-Backed Virtual Commodity Association Aspires to Become Self-Regulatory Organisation for the Cryptocurrency Industry
Yahoo Finance – July 11, 2019

Winklevoss-backed Virtual Commodity Association is planning to become a self-regulatory organization for the cryptocurrency industry, according to a Medium post. It hopes to operate similarly to other financial regulators like the Financial Industry Regulatory Authority and the National Futures Association.

The non-profit was set up last year. It gathers cryptocurrency exchanges—Gemini, bitFlyer, Bittrex, and Bitstamp—and will be governed by a Board of Directors. . . .

Watchdog Probes Payment Providers On Interchange Fee Rule
Law360 – July 10, 2019 (subscription required)

Britain’s payments regulator revealed Wednesday it has opened seven investigations into whether credit and debit card issuers are circumventing European Union rules on interchange fee caps.

The Payment Systems Regulator said it is digging into whether regulated companies are complying with rules that prohibit them from side-stepping caps on interchange fees. The cap places limits on the amount paid between issuer and acquirer banks for accepting card-based payments. Firms that breach the rules could face a fine, the watchdog said. . . .

Retailers Retry For Cert. In Visa, AmEx Chip Fraud Risk Suit
Law360 – July 10, 2019 (subscription required)

Merchants suing Visa, American Express and other major card networks for allegedly conspiring to dump credit card fraud risk on retailers took their second swipe at class certification, insisting they’ve tightened up the definitions that a New York federal judge found lacking.

In a heavily redacted filing that was made public Tuesday, the proposed class of merchants ditched the open-ended timeline they had laid out to encompass the damage that Visa, AmEx, Mastercard and Discover allegedly inflicted when they shifted the risk amid the rollout of chip-enabled cards. . . .

Industry Developments

SPOTLIGHT: U.S. Proposes Barring Big Tech Companies From Offering Financial Services, Digital Currencies 
Reuters – July 14, 2019

A proposal to prevent big technology companies from functioning as financial institutions or issuing digital currencies has been circulated for discussion by the Democratic majority that leads the House Financial Services Committee, according to a copy of the draft legislation seen by Reuters.

In a sign of widening scrutiny after Facebook Inc’s (FB.O) proposed Libra digital coin aroused widespread objection, the bill proposes a fine of $1 million per day for violation of such rules. . . .

Facebook Moves Closer to WhatsApp Payment Service Debut in India
Bloomberg – July 16, 2019

Facebook Inc. is moving a step closer to launching its long-delayed WhatsApp payments service in India after wrapping up an audit of related data practices, according to people familiar with the matter.

The payments offering has been in beta mode in India since early 2018 for a million users, but the nationwide debut has been delayed, in part because of government regulations. WhatsApp is required to show a third-party auditor that all data involved in payments will be stored on servers only in India. WhatsApp is preparing to submit the report for approval to India’s banking regulator, the Reserve Bank of India, said one of the people, asking not to be named as the matter is confidential. . . .

Fintech Startup Finix Raises $18 Million, Aims To Become The Twilio Of Payments
Forbes – July 16, 2019

In the U.S., electronic payments is a highly regulated business whose esoteric ins and outs can make your eyes glaze over. But for those who master its complexities, it can be extremely lucrative.

Finix, a three-year-old, 30-person startup based in San Francisco, raised $17.5 million in Series A funding from Bain Capital Ventures, Visa and Insight Partners, among other investors. It aims to help companies manage and monetize payments by becoming their own payment processors. In the same way Twilio’s white-label software lets Uber users seamlessly call their driver through the app, and just as Marqeta lets DoorDash control how debit card transactions are processed, Finix lets companies own and control their payment processing. . . .

SWIFT’s Battle For International Payments
Forbes – July 16, 2019

Perhaps the most useful thing that disruptive technologies such as cryptocurrencies have done is to kick existing payments providers out of their complacency. Two days after Facebook announced its One Cryptocurrency To Rule Them All, the international messaging service SWIFT announced its own plan for world domination. According to its press release: “SWIFT’s aim is simple: to make cross-border payments real-time, 24/7 and as seamless, convenient, cost-efficient and accessible as domestic payments.”

That’s quite an ambition. Despite their claim to have revolutionized international payments, cryptocurrencies and other disruptive financial technologies have not so far achieved anything like this level of service. Could legacy providers succeed where they have failed? . . .

Why Tech Providers Increasingly Push QR-Code Payments Despite NFC’s Prevalence
PaymentsSource – July 15, 2019 (subscription required)

Merchants outside of China who have the QR code technology to accept Alipay and WeChat Pay are part of a growing trend to serve Chinese tourists who are comfortable paying via their smartphones.

Despite these wallets’ popularity, Western merchants are more likely to accept wallets based on NFC contactless payments. To serve Chinese tourists, having the proper coding and gateway connections to accept the QR codes for these ultra popular mobile wallets has to come first — and it doesn’t happen simply because the POS accepts other forms of mobile payment. . . .

Credit Cards Fall Behind in Asia’s Race to Go Cashless 
Nikkei Asian Review – July 15, 2019

Credit cards are losing out to e-payments as Asia rushes to go cashless, with users who are unwilling or unable to shoulder the high fees associated with cards opting for mobile alternatives.

Credit card penetration remains at 10% or less in Thailand, Indonesia and Vietnam, while mobile payments are used by 47% to 67% of the population in those countries, according to data from the World Bank, Nomura and Japan’s economy ministry. In China, where everyday transactions are largely carried out by smartphone, many people grow up without ever seeing a credit card. . . .

Can China UnionPay Defeat Alibaba’s Alipay and Tencent’s WeChat Pay? 
Yahoo Finance – July 13, 2019

China UnionPay, also known as CUP, originally dominated all payments in China. The company was effectively a state-backed monopoly in China’s electronic payments market due to its central bank mandate. It was almost impossible for any other firm to compete.

In 2019, CUP no longer dominates payments in China as it was too slow entering the lucrative mobile payments sector. CUP launched its mobile payment solution, QuickPass, at the end of 2017 whereas Alipay launched its mobile payments solution in 2009 and WeChat Pay followed in 2013. . . .

The ACH Posts Its Highest Growth Rate Since 2008
Digital Transactions News – July 12, 2019

The nation’s automated clearing house network went on a tear in the quarter ended June 30, notching its highest growth rate since 2008 thanks to double-digit growth for key categories like Internet payments and business-to-business transfers.

Total volume for the quarter came to 6.1 billion transactions, an increase of 7.7% from the same three months last year, according to Nacha, the Herndon, Va.-based organization that administers the 45-year-old network. The system has been steadily posting 5%-plus quarterly growth rates in recent years as new features such as same-day ACH processing have been introduced. . . .

The SEC’s Crypto Moves Are at Odds With Its Own Mission
PaymentsSource PayThink – July 11, 2019

The Securities and Exchange Commission and other state and federal regulators have increasingly focused their attention on cryptocurrencies and the exchange platforms on which such digital assets trade.

While such attention may be warranted in light of the strong growth characterizing this still nascent industry, the SEC’s efforts may have begun to run counter to the SEC chairman’s priority to foster greater innovation and capital formation in the U.S. . . .

Facing a Big Jump in U.S. CNP Fraud, Retailers Turn to Automated Tools 
Digital Transactions News – July 11, 2019

With merchants facing a projected 16.4% increase in U.S. card-not-present fraud by 2021, many are relying more and more on automated screening tools to cull bad transactions from the pile of good ones. That’s the assessment from Aite Group Inc. in its report, “The E-Commerce Conundrum: Balancing False Declines and Fraud Prevention,” released this week.

This fraud will increase from an estimated $5.5 billion this year to $6.4 billion in 2021. “CNP fraud losses continue to increase globally due to the wealth of data available from data breaches and other sources,” Shirley W. Inscoe, a senior analyst at Boston-based Aite, says in an email. “Some countries that saw a decline last year are seeing these losses on the rise again. CNP fraud is a low risk/high reward crime, and will continue to grow until major changes occur.” . . .