Payments News Update – July 23, 2020
Legal and Regulatory Developments
SPOTLIGHT: Open Banking for the Unbanked: How the Pandemic Is Affecting Innovation in LatAm
PYMNTS – July 22, 2020
With nearly 50 percent of the Latin American population unbanked, there’s a growing appetite for mobile banking services. And the ongoing pandemic is only accelerating this trend, says Paula Arregui, chief operating officer for Mercado Pago. In the latest Merchants Guide To Navigating Global Payment Regulations, Arregui discusses how merchants can best adjust to open-banking rules and tailor their offerings to meet the needs of a mobile-first, unbanked customer base.
Open banking in the Latin American region has expanded for several years, but the regulators and financial authorities underpinning these initiatives have had to quickly adapt to changes brought on by the pandemic. The forced closure of brick-and-mortar businesses has made many consumers interact with banks and businesses exclusively online to make their daily purchases or transactions. . . .
Cardholders’ Bid to Revive Class Action Suit Denied in Brooklyn Federal Court
Law.com – July 22, 2020 (subscription required)
Brodie’s dismissal is a victory for the defendants including JPMorgan Chase & Co, which was represented by a Skadden, Arps, Slate, Meagher & Flom team led by partner Boris Bershteyn. U.S. District Judge Margo Brodie of the Eastern District of New York has denied a motion to set aside an earlier ruling in an antitrust class action suit, finding that a 2018 U.S. Supreme Court ruling changed decisional law but did not disturb the court’s prior reasoning in the class action case.
Brodie’s dismissal is a victory for the defendants, including JPMorgan Chase & Co., which was represented by a Skadden, Arps, Slate, Meagher & Flom team led by partner Boris Bershteyn. The ruling comes after years of litigation in a sprawling multidistrict case related to credit charge interchange fees. In 2014, former U.S. District Judge John Gleeson dismissed the claims of lead plaintiff Marvin Salveson and other members of the cardholding class. The case was reassigned to Brodie soon after, and the U.S. Court of Appeals for the Second Circuit affirmed the dismissal. . . .
Exchange Body Calls for Creation of a Global Crypto Taxonomy
Finextra – July 22, 2020
The World Federation of Exchanges has called for the creation of a common taxonomy to cover the growth in stablecoins and other cryptoassets and curb regulatory fragmentation. The industry association has asked the Financial Stability Board, and other international standard-setting bodies, to generate, adopt and use a global taxonomy as it would drive a common understanding of whether a global stablecoin (GSC) or cryptoasset fits a certain classification or definition. This would reduce the variance between jurisdictions and curb regulatory dissonance, the WFE argues.
Further, a periodic review of the taxonomy would ensure that forms of GSC and cryptoassets, which have matured and may constitute a new, viable and commonly used product, can be incorporated and regulated accordingly. The WFE has asked the FSB to consider three areas for further work: • Creating classifications via a taxonomy for all GSC and cryptoassets, • Application of the recommendations to all cryptoassets, • Applying the cross-border co-operation recommendations and information-sharing requirements to the supervision of all those trading GSC/cryptoassets. . . .
Swipe Fee Ruling Brings Clarity to UK Competition Litigation
Law360 – July 21, 2020 (subscription required)
The ruling by the U.K. Supreme Court last month in the multilateral interchange fees, or MIFs, cases is an important milestone in the litigation saga and for competition litigation in the U.K. more generally. The Supreme Court confirmed the position in the MasterCard ruling by the Court of Justice of the European Union that the MIFs were in breach of Article 101(1) of the Treaty on the Functioning of the European Union, thereby bringing clarity to a number of inconsistent decisions on this issue.
In addition, the case provides welcome guidance on the issue of pass-on in damages claims. Thus, while the judgment opens the door for merchants to bring damages claims against MasterCard and Visa, it will also assist the card system operators with their arguments that the merchants’ losses were reduced to the extent they managed to recoup these losses through higher retail prices. . . .
Brazil Will Authorize Payments System Involving WhatsApp If Rules Are Respected, Central Bank Director Says
Reuters – July 13, 2020
Brazil’s central bank will authorize a payments system involving Facebook Inc’s (FB.O) WhatsApp messaging service, to send money and make payments via chats, as long as all rules are respected, director Joao Manoel Pinho de Mello said on Monday.
“We view the entry of ‘big tech’ as a huge opportunity. Everyone can participate. We will allow it, no problem. People can take whatever path they want, (do) whatever initiatives they want,” as long as rules and regulations are met, he said during a live online event hosted by Genial Investimentos. The central bank suspended the newly launched WhatsApp payment service last month and said it is analyzing whether the service can operate safely in terms of data protection and competition. . . .
Sabre-Farelogix Ruling Made Moot by Scrapped Deal
Bloomberg – July 20, 2020
A potentially groundbreaking court decision greenlighting the planned merger of travel booking platforms Sabre Corp. and Farelogix Inc. was set aside Monday by the Third Circuit, which held that the ruling became moot when the deal was scrapped after U.K. regulators came out the other way. Because the appellate order expresses “no opinion on the merits,” it “should not be construed as detracting from the persuasive force of the district court’s decision, should courts and litigants find its reasoning persuasive,” a three-judge panel wrote.
The one-page ruling rewarded the Justice Department’s persistent efforts to undo a Delaware federal judge’s ruling rejecting the government’s bid to block the $360 million tie-up. Even after the U.K. decision the next day led the parties to terminate the deal, the DOJ pressed on to the U.S. Court of Appeals for the Third Circuit, arguing that Judge Leonard P. Stark’s widely criticized reasoning could upend merger enforcement. . . .
Top Payment Cos. Embrace Innovation With Fintech Buys
Law360 – July 17, 2020 (subscription required)
This year has seen two notable fintech infrastructure companies, Plaid and Finicity, gobbled up by the world’s leading payments behemoths, highlighting the importance of under-the-hood financial technology and signaling a continuing trend of established financial institutions embracing fintech.
In January, Visa Inc. said it would acquire San Francisco-based Plaid Inc. for a robust $5.3 billion, wrapping the fintech company’s technology that allows users to easily connect their financial accounts with thousands of online applications into the payment processor’s global business. Perennial competitor Mastercard Inc. likewise made a move into the fintech infrastructure space last month, snapping up Salt Lake City-based Finicity in a deal that could be worth just under $1 billion to expand its foray into open banking. Attorneys who spoke with Law360 see these acquisitions as a sign that legacy financial institutions understand that the future of payments and banking will need to be technology-focused as new generations of consumers force the financial services industry to move largely online. . . .
Industry Developments
SPOTLIGHT: Jack Ma’s fintech giant Ant starts IPO process in Hong Kong and Shanghai
TechCrunch – July 20, 2020
The Jack Ma -controlled Ant Group finally sets in motion what the market has been anticipating for years. The financial services and payments behemoth said Monday that it has kickstarted the process of a concurrent initial public offering on the Hong Kong Stock Exchange and Shanghai Stock Exchange’s Nasdaq-style Star Market.
The public listing will enable Ant, which operates the Alipay wallet used across Alibaba’s e-commerce networks, to work toward several goals: digitize China’s service industry, such as getting mom and pop shops in far-flung regions to use its payments service; drive domestic demands, such as being a conduit of government-issued coupons for consumers amid coronavirus pandemic; expand globally through its e-wallet partners in nine countries; and finally, invest in new technologies. . . .
The Precarious Rise of Subscription Payments
PaymentsSource – July 23, 2020
The COVID-19-induced shock to the world’s largest economy has created a rush of interest in the subscription industry, as millions of captive consumers with almost nowhere to go and plenty of time — and for those employed, plenty of unspent money — on their hands. Since fewer people are flying, visiting hotels and going to restaurants, consumer entertainment needs are being severely underserved. The see-saw battle of states and cities reopening and then closing, as in cases of California and Texas, has only exacerbated the situation.
The net result is that as more Americans seek to satiate their shopping and entertainment needs, and with fewer options available to them, the subscription industry is stepping up in ways that could not have been predicted at that start of 2020. But despite this spike in customer demand, the subscription industry, in particular streaming services, is experiencing a very high churn rate due to subscriber fatigue. . . .
Could FIS Use Open Banking to Pry Merchants Away From Card Networks?
PaymentsSource – July 20, 2020 (subscription required)
Merchants finally have a range of alternatives to accepting payment cards in Europe, thanks to open banking initiatives. But switching to instant payments is no easy decision, even if it’s cheaper on paper. Interchange rates — at least in Europe — have steadily declined in recent years under regulatory and legal pressure, so the cost of accepting cards is lower than it was years ago when merchants began their fight for alternatives. Card networks have also stepped up their technology game.
Merchants considering switching to the cheaper, account-to-account payments must weigh the benefits against the costs of upgrading existing technology and changing internal processes to support an open banking-driven payment method. Getting paid instantly from a buyer’s bank accounts means retailers can use data to customize offers, but it introduces new responsibilities for managing irrevocable payments directly with customers, including handling refunds. . . .
Shopify Pairs up With Affirm to Offer an Installment-Payment Option for Small Businesses
Digital Transactions News – July 22, 2020
The installment-payment movement has gained the big e-commerce services provider Shopify Inc. as a convert with Wednesday’s announcement that Shopify will offer a credit option to its U.S. customers through Affirm Inc. San Francisco-based Affirm, an online credit-services provider, said approved Shop Pay customers at checkout will be able to split their total purchase amount into four equal, interest-free bi-weekly installments under Shopify’s new Shop Pay Installments service set to debut later this year. Merchants will be assessed an undisclosed fee, and Affirm will handle payment collection.
“With the acceleration of online spending, many small businesses must reinvent themselves. This includes embracing the rising importance of e-commerce strategies and meeting consumers, particularly young shoppers, where they are,” Max Levchin, Affirm’s founder and chief executive, said in a news release. “By partnering with Shopify, the gold standard of commerce platforms for businesses that want to sell direct to consumers, we can help merchants seamlessly enable a pay-over-time option at checkout. In doing so, we’re helping them reach new customers, particularly Gen Z and Millennials, who are looking for more transparent and flexible ways to pay.” . . .
WhatsApp to Expand India Banking Partnerships
PYMNTS – July 22, 2020
Facebook is upping its commitment to the Indian tech market with a bid to have WhatsApp work with more Indian lenders. WhatsApp will expand banking services in rural areas and work with the “informal economy,” an official said, according to a Reuters report. Facebook’s investment in Reliance could give it a leg up with the Indian company’s retail business, which is expanding, too.
“We now want to open up with more banks over this coming year to help simplify and expand banking services, especially to the rural and lower-income segments,” said Abhijit Bose, WhatsApp’s India head, speaking at a webcast FinTech summit. He said WhatsApp will also work with financial institutions to expand offerings. “Our collective aim over the next two to three years should be to help low-wage workers and the unorganized, informal economy easily access three products — insurance, micro-credit and pensions,” Bose said. . . . .
Credit Unions Accelerate Modernization With Fintech Collabs
PYMNTS – July 22, 2020
Credit unions continue to drive modernization efforts, often with a focus on their growing business member segment, and often with a FinTech as a co-pilot. This week’s look at bank-FinTech collaboration finds more credit unions embracing the collaboration trend to accelerate innovation, while a legacy financial institution turns the traditional bank-FinTech tie-up model on its head.
While FinTechs are often the ones to drive Banking-as-a-Service innovation, Goldman Sachs has recently taken steps to broaden its own BaaS offering as a legacy financial institution. Earlier this year reports said Goldman was collaborating with technology giants like Amazon to offer financial services to sellers on the platform. Now, reports in ZDNet said Goldman is looking to broaden that effort to roll out a small business lending program in partnership with Amazon and the Apple Card. . . .
Mastercard Launches Sustainable Card Programme
Finextra – July 22, 2020
Mastercard is launching a sustainable card programme to get its card issuers to switch to greener alternatives such as recycled, biodegradable and ocean plastics. Around six billion payment cards are produced each year – most of them made from non-biodegradable plastics such as PVC (polyvinyl chloride). Replaced every 3-4 years, these cards then collectively contribute around 5.7m tons of excess plastic in landfill around the world. Mastercard initiated a Green Payments Partnership (GPP) in 2018 to help the payments industry reduce its reliance on first-use PVC plastic in card manufacturing.
“Our goal is simple: we want to help banks offer more eco-friendly cards to consumers, and we are taking concrete steps to bring about that change,” says Ajay Bhalla, president of Cyber & Intelligence, Mastercard. “This way, everyone benefits – it’s better for the environment, it’s better for business and it meets evolving consumer needs.” Already, more than 60 financial institutions – including top tier banks such as DBS, Santander and Crédit Agricole – are to begin issuing cards with approved materials. . . .
Mastercard Expands Crypto Card Partner Program
PYMNTS – July 20, 2020
Mastercard, responding to the burgeoning cryptocurrency space, has updated its Accelerate program to help make it easier for partners to bring cards to the market, according to a press release. The Accelerate program works to provide a streamlined entry point to the Mastercard range of cryptocurrency programs, offering quick onboarding for crypto firms onto Mastercard, and support and assistance for their growth and transformation through market entry and global growth, the release stated. Participants can make use of Mastercard’s insights and cybersecurity services.
According to the release, the Accelerate program allows for connections with other companies and new application programming interface (API) options for payment, security and analytics needs. The updates to the program come as Wirex has recently become the first cryptocurrency platform to be granted a Mastercard principal membership, letting it issue payment cards directly. That, according to the release, lets customers buy, hold and exchange numerous traditional and cryptocurrencies. They can convert funds between fiat and cryptocurrency and use Wirex’s Cryptoback program to get 1.5 percent back in bitcoin for every purchase made in-store. . . .
Its PayPal Deal Having Expired, eBay Acts on Its Global Ambitions for Managed Payments
Digital Transactions News – July 20, 2020
Free of the restraints of a legal agreement with PayPal Holdings Inc., eBay Inc. said early Monday it will now start on a global expansion of its 2-year-old managed-payments program. The program has already delivered $4.7 billion in total payment volume in the United States and Germany, the company said, adding that some 42,000 merchants had been enrolled by June 30.
The managed-payments regime, in which eBay has replaced payments-processing from PayPal with a gateway arrangement with Dutch processor Adyen NV, now serves 255,000 sellers in total and has cut their total transaction costs by $17 million so far, eBay said. “Most sellers can expect to see savings in managed payments,” the San Jose, Calif.-based company said in its Monday news release. The program is active in Germany as well as in the U.S. market, with announced plans to expand to the United Kingdom, Canada, and Australia. These markets will now come online “over the coming weeks,” the company said. . . .
Covid-Fighting Stimulus Programs Help Deliver an Unexpected Growth Surge for the ACH
Digital Transactions News – July 16, 2020
Thanks to federal programs to deliver stimulus funds to businesses and individuals, the second-quarter slowdown automated clearing house governing body Nacha expected due to Covid-19 didn’t happen. In fact, the massive ACH network saw year-over-year growth in the April-through-June quarter of 7.9%, Nacha reported late Wednesday. The second quarter’s growth rate easily exceeded the first quarter’s 7.1% growth as well as the 7.4% rate the network posted for all of 2019.
During the quarter, Congress enacted programs that put cash in the hands of consumers to help fight the effects of business shut-downs and stay-at-home orders meant to fight the spread of Covid-19. It also created the Paycheck Protection Program to make forgivable loans to businesses in an effort to keep companies operating and payrolls funded. Much of this stimulus money flowed through the ACH, which saw its payments count soar to 6.6 billion for the three months ended June 30, up from 6.4 billion in the first quarter. . . .
– By Kristian Soltes. For questions about this newsletter or its content, contact [email protected].