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Payments News Update – July 9, 2020

Posted  July 9, 2020

Legal and Regulatory Developments

SPOTLIGHT: Bipartisan Senate Bill Would Punish Retailers for Refusing Cash Payments
CNBC – July 2, 2020

Sens. Bob Menendez, D-N.J., and Kevin Cramer, R-N.D., have introduced a bill prohibiting retailers from declining cash payments from customers, as businesses promote “contactless” digital payment as they grapple with the coronavirus pandemic. Retailers and mall owners, including Nordstrom and Simon Malls, have encouraged the use of contactless transactions such as Apple Pay to minimize the risk of spread in their stores and properties. But the senators warned that should any retailer ban cash entirely, it would be discriminatory at a time when many Americans are facing financial hardship.

About 20% of U.S. households have no or limited access to checking and savings accounts. Of those households, about 6% are “unbanked,” meaning they have no access at all. Fourteen percent of unbanked Americans are Black, 11% are Hispanic and 4% are White. And as weekly jobless claims grow by the millions, the number of Americans without access to bank accounts may rise. “While I fully understand that businesses have expanded their contactless payment options during the pandemic, refusing cash discriminates against certain populations and denies people equal access to the same goods or services,” said Menendez in a statement. . . .

Judge OKs $7.6m Deal to End Processing Fee Class Claims
Law360 – July 8, 2020 (subscription required)

A Pennsylvania federal judge gave preliminary approval to a $7.65 million settlement to end a pair of class actions accusing CardConnect Corp. of concealing charges imposed on merchants for its payment processing services. U.S. District Judge Gerald Pappert said Tuesday that the deal had been reached only after some three years of rigorous litigation to flesh out potential strengths and weaknesses of the case, and that resolving the claims now made sense considering the uncertainty involved in continuing to press the matter in court.

“Experienced class counsel strongly recommend the proposed settlement,” the judge said. “It appears to the court on a preliminary basis that the settlement amount and terms are fair, adequate and reasonable as to all settlement class members when balanced against the probable outcome of further litigation.” Teh Shou Kao, the owner of a Chinese restaurant in Michigan, first filed suit against the Pennsylvania-based CardConnect in November 2016, alleging that the company manipulated contracts signed by merchants in order to jack up payment processing fees. . . .

Paypal’s Prepaid Rule Protest ‘Distorts’ Purpose, CFPB Says
Law360 – July 8, 2020

The Consumer Financial Protection Bureau said that PayPal Inc. has distorted the reasons the agency adopted its prepaid card rule and its scope, as it seeks to end the online payments company’s attempt to invalidate the rule. In a Tuesday filing that both opposes PayPal’s motion for summary judgment and moves for its own motion to tie up the case, the CFPB argued that its 2016 prepaid rule falls well within the bounds of its statutory authority and does not violate the First Amendment. The rule, which took effect in 2019, sets out certain fee disclosure requirements, credit-linking restrictions, and other consumer protections for prepaid cards and digital wallets.

“[PayPal’s] challenges distort the governing statutory framework, the Bureau’s reasons for adopting the Rule, and the scope of the Rule itself, and the Court should reject them,” the CFPB said. “While PayPal may not agree with the Bureau’s policy judgments, Congress and the [Administrative Procedure Act] leave those judgments to the agency.” . . .

Coinbase Exec Says Capital Will Flee US Due to Crypto Tax Laws
Cointelegraph – July 8, 2020

Coinbase, the largest U.S. cryptocurrency exchange, believes other countries are much more open-minded in terms of crypto regulation and taxes than America. Lawrence Zlatkin, chief tax officer at Coinbase, shared the exchange’s outlook on taxation and the global cryptocurrency market during a Unitize panel on July 7. He was joined on the panel by Fidelity’s senior tax counsel Jessica Reif-Caplan and Deloitte’s global tax leader, Rob Massey.

During the discussion, the speakers highlighted the lack of clarity around cryptocurrency taxation in the U.S.. According to the tax experts at Coinbase and Fidelity, the uncertainty is a result of the complex nature of digital assets as well as a huge variety of different types and features of different coins. Staking — the practice of locking crypto to receive rewards — is just one aspect that poses a big challenge from a tax perspective. “There are so many differences between various digital assets, and staking alone is such a complicated thing to understand if you are not that close to digital assets,” Reif-Caplan noted. . . .

Wirecard Flourished in Regulatory Blind Spot That’s Growing
Bank Innovation – July 7, 2020

Wirecard AG’s collapse displayed a growing blind spot for the guardians of the world’s financial system: how do you regulate a firm that acts like bank, but isn’t really a bank? For years, Germany’s supposed fintech star escaped strict scrutiny because financial watchdog BaFin was focused on its banking unit rather than Wirecard as a whole. With the scandal undermining Germany’s reputation as a place to do business, the government is overhauling who regulates who, but it could also spark a regulatory rethink with consequences for the broader fintech industry.

As banks retrenched after the 2008 financial crisis and spent billions on settling the resulting litigation, rather than new technology, other companies stepped in. Wirecard and competitors like Adyen NV process payments far quicker than traditional banks while also offering clients services to manage their risk and learn more about their own customers. Technology giants like Inc. and Google parent Alphabet Inc. are also increasingly offering financial services. Swathes of the fintech sector are currently unsupervised, particularly in the area of cryptocurrencies. Around 31% of fintech firms in Europe are not subject to any regulation, according to the European Banking Authority. . . .

Will Libra’s Compliance Efforts Be Enough to Sway Critics?
Law360 – July 2, 2020 (subscription required)

The planned Libra digital currency faced such unrelenting backlash that the group behind it modified its underlying structure and packed leadership positions with compliance experts in recent months. But whether these changes will allow the project to realize its ambitions remains uncertain. In June 2019, Facebook announced the Libra cryptocurrency project, which it said was aimed at democratizing banking for the 1.7 billion people worldwide with limited or no access to banking. The Geneva-based Libra Association officially launched Oct. 15 with 21 founding members — including Facebook, Spotify, Uber, Coinbase and Andreessen Horowitz — and has since added more partners.

Fintech attorneys and experts who spoke with Law360 noted that Libra’s recent effort to put compliance front and center is prudent, given the scale of the proposed payments system and fears that the new currency could destabilize global financial markets. Timothy Massad, senior fellow at the Harvard Kennedy School and former chairman of the U.S. Commodity Futures Trading Commission, told Law360 that Libra’s changes to its white paper and recent hires — including CEO Stuart Levey and general counsel Robert Werner, who both have extensive Treasury experience — “signify that they are making compliance a priority.” . . .

Industry Developments

SPOTLIGHT: Card Schemes to Take Click to Pay Standard Global
Finextra – July 8, 2020

American Express, Visa, Mastercard and Discover are to roll out the online ‘Click to Pay’ standard globally, having signed up 10,000 merchants in the US since launch in 2019. The major card schemes are each beginning technical preparations for global expansion of Click to Pay – based on the EMV Secure Remote Commerce industry standard – in additional geographies including Australia, Brazil, Canada, Hong Kong, Ireland, Kuwait, Malaysia, Mexico, New Zealand, Qatar, Saudi Arabia, Singapore, United Arab Emirates and the United Kingdom, with others to follow.

Major payments service providers, gateways and acquirers across the ecosystem have also been roped in to the initiative, including the likes of ACI Worldwide, Aurus, Blackbaud, BlueSnap, Braintree, Cybersource, Global Payments, Mastercard Payment Gateway Services and Square. Click to Pay aims to make online shopping easier for consumers by replacing time-consuming key entry of personal account numbers and information at checkout with a universal payments button. . . .

Blockchain Makes Headway Over Legacy X-Border Rails
PYMNTS – July 9, 2020

There’s no single path to payments infrastructure innovation. This week’s examination of the latest initiatives to target B2B payments friction from the ground up finds a mix of strategies. For some, like Currencycloud and Steamchain, the path involves bypassing legacy payment rails and embracing blockchain. For others, including AeroPay and Oxbury Bank, the journey involves adding value onto existing rails. And still for others, like InstaReM, payments innovation involves a mix of infrastructure. Below, PYMNTS rounds up the top stories in payment rail innovation.

InstaReM Expands BizPay – With its solution designed to address friction in supplier commercial card acceptance, Nium‘s InstaReM brand announced the expansion of BizPay into a new market: Australia. The tool enables companies to make payments using their commercial card, while InstaReM receives funds from that card payment, then passes them through to the supplier via bank transfer. It’s a mixing of payment rails that aims to overcome one of the largest barriers to commercial card adoption. . . .

Saudi Payments and Discover Sign Network Alliance Agreement
Business Wire – July 8, 2020

Discover and Saudi Payments signed a strategic agreement that will increase the global acceptance footprint for both organizations. The agreement will give Discover, Diners Club International, PULSE and network alliance cardholders the ability to use their card on the mada network. This includes at Point-of-Sales (POS), on e-commerce platforms and at ATMs across the Kingdom. It also allows Saudi banks to issue cards that will be accepted on the Discover Global Network for international purchases and cash access outside of the Kingdom.

This strategic alliance enhances Saudi Payments’ strategy to grow the number of options available in the Kingdom’s digital payment environment providing more choices to consumers. It will benefit customers by increasing the number of payment options available and provide them access to more than 48 million outlets in 200 countries. Discover Global Network cardholders will have access to more than 470,000 POS terminals at local merchants and more than 18,000 ATM access locations in Saudi Arabia. . . .

Exclusive: Apple Is Working on QR Code Payments for Apple Pay, iOS 14 Code Reveals
9to5Mac– July 7, 2020

Apple today released the second developer beta of iOS 14 with some small changes across the system. And now 9to5Mac was able to find a hidden feature in the Wallet app to allow users to make payments with QR Codes using Apple Pay. References found in the iOS 14 code reveal that Apple is working on a new method for letting users make payments with Apple Pay by scanning a QR Code or traditional barcode with the iPhone camera.

We’ve managed to access this feature hidden in iOS 14 beta 2, and although it still doesn’t work, we can clearly see an image showing how it will work. Users will point the iPhone camera at a QR Code or traditional barcode to pay bills and other things with a card registered with Apple Pay. The opposite would also work, with users holding the iPhone in front of a scanner with a QR Code generated by the Wallet app. We can also say that there will be some kind of interaction with third-party apps, as this code was found in a public system API. . . .

Venmo Testing a Mobile-Payments Service for Small Merchants
Digital Transactions News – July 3, 2020

Taking a page from Square Inc.’s playbook, PayPal Holdings Inc.’s Venmo peer-to-peer payments service is testing what it calls Venmo Business Profiles, a potentially revenue-generating service that enables Venmo users who are sole proprietors of small businesses to sell goods through an affiliated page visible to other Venmo users. Announced Wednesday, the service is being offered by invitation only to a “limited number” of users, Venmo said in a blog post. Venmo, whose P2P service has social-network aspects, seems to be courting the same legions of part-time sellers and small-business owners who formed Square’s original merchant base a decade ago.

“Business Profiles allows sole proprietors, casual sellers, and users with a side hustle to create an additional Venmo profile to accept payments for goods and services,” the post says. “Whether you’re an artist, selling homemade planters at a craft fair, serving up one-of-a-kind haircuts, selling floral arrangements or mowing lawns, you can now leverage the power of Venmo’s community of more than 52 million users to generate interest, referrals and awareness for your business.” That user count is up from 40 million just over a year ago. Venmo processed more than $31 billion in total payment volume in the first quarter, up 48%, according to PayPal’s latest financial report. . . .

Can EU Banks Unite Against Visa and Mastercard?
PaymentsSource – July 2, 2020 (subscription required)

More than a dozen large European banks plan to launch a payment system that would rival U.S. payment companies and technology firms, an idea that hasn’t worked in the past but may have a better chance given the current global health, economic and political crises. Called the European Payments Initiative, it will initially provide consumers and merchants in the European Union with a card, a digital wallet and a Zelle-style bank-backed P2P payment app.

EPI is both a political move and a coronavirus response. The initiative argues existing European payment products are fragmented, which hurts interoperability and has made it harder to unite digital payment rails at a time when many businesses and consumers are migrating to digital. The lack of cohesion makes it more difficult for European issuers and technology companies to compete with Visa and Mastercard. Visa and Mastercard control about 80% of the European payment market, with Visa alone enjoying about 66% of the market, according to Statista. . . .

Will Consumers’ Payment Habits Return to Their Pre-COVID-19 Patterns?
Digital Transactions News – July 2, 2020

Before being upended by the Covid-19 pandemic, the payment choices U.S. consumers made were fairly stable. The biggest changes from 2018 to 2019 were an upswing in online bill payments and continued slippage in cash usage, according to new findings from the Federal Reserve Bank of Atlanta. Based on a nationally representative poll of nearly 3,400 consumers, the Atlanta Fed’s latest Survey of Consumer Payment Choice released last week found that the average number of payments per consumer per month was 68.5 in 2019. Debit cards once again were the most popular payment instrument, a title they’ve held since 2010. In a typical month, consumers on average made 24 debit card payments for 35% of all monthly payments.

Consumers used credit or charge cards 17 times for 24% of all payments, and cash for 15 payments, or 22% of the total. Credit cards surpassed cash in payment share for the first time in 2019, according to the Atlanta Fed. Additionally, consumers made three check payments per month on average last year, for 4% of all payments. They made eight payments directly from a bank account via the automated clearing house network or online-banking bill payments, for 12% of monthly payments. . . .


– By Kristian Soltes. For questions about this newsletter or its content, contact