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Payments News Update – July 9, 2021

Posted  July 9, 2021

Legal and Regulatory Developments

SPOTLIGHT: Clash Over Debit Card Routing Persists In Comments to Fed
Payments Dive – July 8, 2021

Clashing comments have gushed into the Federal Reserve in the past two months over its proposal to clarify rules on the routing of debit card transactions, and they show familiar battle lines being drawn. The Fed in May proposed a clarification of existing rules requiring that debit card issuers ensure that at least two unaffiliated payment card networks are available for routing debit transactions. It had given interested parties until July 12 to comment and 41 comments have been filed to date, but on June 22 the central bank board extended the deadline for comments to Aug 11.

Nonetheless, it’s clear that commenters’ so far, including merchant groups and bank supporters, are taking the same opposing stances they’ve had for years. At issue is whether merchants and their consumers have access to competing networks for routing debit card transactions. Merchants and their interest groups have long argued that having more than one network available for routing holds down costs for consumers while companies that take fees for processing such transactions, including card networks and banks, have said that’s not necessarily the case. . . .

With Jack Ma’s Ant Group Reined In, China’s Central Bank Sets Sights on Other Fintech Firms’ Monopolistic Behaviour
South China Morning Post – July 8, 2021

The People’s Bank of China (PBOC) will continue to crack down on mainland payment companies’ practices that fall afoul of the country’s anti-monopoly law, with a senior central bank official pointing out that billionaire Jack Ma’s Ant Group was not singled out for such behaviour.

“Ant Group is not the only company that engages in monopolistic behaviour, while in fact there are other payment companies in China with similar misconduct issues,” Fan Yifei, deputy governor of PBOC, said during a media briefing on Thursday. While Fan did not name any companies, he said that the actions taken against Ant Group would also be taken against other payment platforms engaging in malpractice, adding that “the central bank continues to support the payment industry to grow faster and better, but at the same time we would also crack down on any misconduct or malpractice in the sector”. . . .

Colorado Gov. Repeals Ban on Credit Card Surcharges
Law360 – July 8, 2021 (subscription required)

Colorado Gov. Jared Polis has signed into law a measure repealing the state’s prohibition on credit card surcharges, joining a wave of other states that have recently done the same. Polis’ signature on Wednesday comes after the bipartisan bill, S.B. 21-091, passed the state House and Senate with overwhelming support. The law was backed by payment processing technology company CardX LLC, which lobbied the legislature to push through the bill and allow surcharges.

The measure repeals the surcharge prohibition and applies the surcharge to the consumer, who will pay either a maximum of 2% of the transaction amount or the actual fee the merchant pays its processor. Polis’ office was not immediately available to comment Thursday. CardX CEO Jonathan Razi said in a statement Thursday that he applauded the sponsors of Colorado’s bill and key stakeholders who helped pass the legislation, which he said gave merchants an important and balanced option. . . .

Commentary: Congress Could Scrap Debit Pricing Caps—if It Feels Enough Heat
Digital Transactions News – July 8, 2021

With his eponymous Durbin Amendment, passed into law just over a decade ago, Illinois’s senior senator intended to hurt large banks, along with Visa and Mastercard. The text, however, couldn’t be as expressly punitive as Durbin might have liked. He would likely have preferred capping debit interchange and network acquirer fees at zero or a penny. But that wouldn’t have passed. So the crafty legislator instructed the Fed, charged with implementing the regulation, to get close, without spelling out the number.

Banks lobbied the Fed to defang the bill. The Fed understood losing billions of dollars of interchange revenue, along with severe debit-routing choice, would batter banks already reeling from the financial crisis. So the Fed mitigated the harm by taking an expansive view of what debit-issuer costs could be recouped through interchange, and requiring the least-onerous debit-routing-choice option. . . .

Reserve Bank Sees No ‘Policy Case’ for Digital Aussie Dollar Just Yet
ZDNet – July 6, 2021

The Reserve Bank of Australia (RBA), alongside its Council of Financial Regulators partners — RBA, Treasury, the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission — has been looking into a potential central bank digital currency (CBDC).

“To date, there has been essentially no issuance of Australian dollar stablecoins nor use of them as a payment method in Australia,” the RBA said in a submission [PDF] to the Senate Select Committee on Australia as a Technology and Financial Centre. “Nevertheless … the working group [continues to] study the benefits and possible risks associated with stablecoins and to identify any possible regulatory gaps. “If a stablecoin is designed to be a safe payment instrument and act as an alternative to other forms of money, then it is important for consumer protection that it is appropriately regulated.” . . .

Fed Says Interchange Fee Rules Challenge Is Too Late
Law360 – July 6, 2021 (subscription required)

A pair of trade associations were too late in suing the Federal Reserve Board over its debit-card interchange fee rules, the board told a North Dakota federal court in asking that the suit be tossed. The regulation challenged by the North Dakota Retail Association and North Dakota Petroleum Marketers Association was issued 10 years ago, well past the six-year deadline to file suit, the Board of Governors of the Federal Reserve System argued Friday.

“A decade after the rule in question was promulgated — by a rulemaking proceeding in which plaintiffs directly participated — and subsequently upheld by the D.C. Circuit after a challenge by national retail trade associations … plaintiffs now belatedly seek to revive the claims of the prior litigation because they continue to disagree with its result,” the board said. . . .

Swedish Watchdog to Investigate Klarna for Bank Secrecy Breach
Reuters – July 5, 2021

State regulators and the Office of the Comptroller of the Currency have agreed to a temporary truce in their court battle over a controversial charter application, but analysts caution that the underlying conflict over fintechs’ pursuit of banking powers is far from resolved. Judge Dabney L. Friedrich, of the U.S. District Court for the District of Columbia, approved a motion this week by the Conference of State Bank Supervisors outlining the group’s agreement with the OCC to pause for 90 days CSBS’s litigation over Figure Technologies’ specialized charter application.

The stay comes amid signs that the OCC under acting Comptroller Michael Hsu could pump the brakes on plans developed in prior administrations to offer fintechs a special-purpose national bank charter. Those plans have drawn sharp objections from state regulators. . . .

Industry Developments

SPOTLIGHT: Emirates Rolls Out Instant Direct Payment Method for Travel Bypassing Credit Card Issuers
Skift – July 6, 2021

Emirates is rolling out a way for travelers to pay for tickets directly from their bank accounts into the airline’s bank account via an industry-run system, the company said on Monday. The move comes as many travel companies are eager to push consumers away from credit and debit card payments as cheaper options become commercially available. Branded Emirates Pay, the solution lets consumers in Germany and the UK purchase tickets at the airline’s website by directly debiting their bank accounts.

The Dubai-based carrier is the first airline to use a white-label system jointly developed by the International Air Transport Association (IATA) and financial partners, which in Europe includes Deutsche Bank, which exchanges the data needed to initiate payments. So-called IATA Pay is now available for use by other airlines in Germany and the UK, too. . . .

PayPal Zettle Comes to U.S., Enabling in-Person and Omnichannel Digital Payments
Vending Market Watch – July 9, 2021

PayPal Holdings Inc. is bringing PayPal Zettle to the U.S. The digital point-of-sale solution, already in use in Europe, enables small businesses to seamlessly sell across in-person and online channels. PayPal said the launch comes at a time when there has been a historic shift in consumer behavior toward digital and omnichannel commerce.

With PayPal Zettle, small businesses get an integrated solution to accept a range of payments in-person with the Zettle card reader. It also helps them start selling online, and manage sales, inventory, reporting and payments across channels, all in one place. PayPal Zettle will also enable businesses to leverage PayPal’s suite of payment and commerce solutions – from invoicing to PayPal’s Business Debit Mastercard. . . .

Report: Stripe Eyeing Blockbuster IPO
Modern Shipper – July 8, 2021 (subscription required)