Payments News Update - May 14, 2020

Legal and Regulatory Developments

SPOTLIGHT: A Third Rail for Europe: SEPA Instant Payment Card Comes Into Focus
PaymentsSource – May 11, 2020 (subscription required)

The potential for a new card scheme throughout Europe has been a discussion point surrounding the Single Euro Payment Area since its inception more than a decade ago. A new proposal could bring this concept into reality. The Smart Payment Association is calling for use of a physical or virtual card that would work on current EMV terminals, but not use the card brand rails for clearing or processing. The new SEPA card would operate as its own customer identification and authorization card and fit within the concepts of new open banking frameworks defined by PSD2 in Europe.

The Smart Payment Association operates out of Munich, Germany as a non-profit global trade body for the smart payments industry. Its members include card manufacturers, issuers, app developers and other industry stakeholders. Two months ago, the association presented its proposal to EuroCommerce to get the idea more firmly established at discussion tables. . . .

Top UK Court to Decide Key £14b Antitrust Class Action Suit
Law360 – May 12, 2020 (subscription required)

Britain’s Supreme Court will hear a landmark appeal on Wednesday in a proposed £14 billion ($17.2 billion) consumer lawsuit against Mastercard over the credit card company’s allegedly unfair swipe fees in a case widely seen as a litmus test for the country’s opt-out class action regime.

The Supreme Court will decide whether Walter Merricks, the former head of the U.K.’s Financial Ombudsman Service, can represent 46 million consumers in the country’s largest class action lawsuit over claims they paid higher prices in shops over a 16-year period because of excessive credit card fees charged by Mastercard. . . .

U.K. Again Delays New Payment Authentication Standards
Business Travel News – May 12, 2020 (click here for the Financial Conduct Authority’s announcement)

The United Kingdom will delay by six months the introduction of tough new payment verification requirements that will affect many business travel users of plastic corporate cards, the country’s Financial Conduct Authority said.

Mandatory application of Strong Customer Authentication in the U.K. now will be enforced from Sept. 14, 2021, owing to the “exceptional circumstances of the Covid crisis,” according to FCA. SCA is a European Union initiative that the U.K. signed up to before its departure on Dec. 31, 2019. Remaining EU members are scheduled to enforce SCA from Dec. 31, 2020, but face strong lobbying from the payments industry to delay as well. . . .

Amex Faces Another Anti-Steering Suit in California State Court
Bloomberg Law – May 12, 2020 (subscription required)

American Express Co. must face claims over its anti-steering rules in state court, after a federal district judge in California ruled the company didn’t allege sufficient information to show the court had diversity jurisdiction.

It failed to demonstrate that the owners of an AmEx-accepting laundry service resided in California, and were therefore diverse in citizenship from AmEx itself, which is based in New York, the court said. . . .

Payments Experts Call for Regulation
Newsroom – May 9, 2020

Payments industry experts have called on the Government to regulate their sector, but Minister Kris Faafoi is reluctant to do that until he has talked to Visa, MasterCard and the big banks, Dileepa Fonseka reports.

Contactless payment systems and credit card fees have become hot topics during Covid-19 as the technology behind it has become more crucial for maintaining public health. Banks announced they were wiping Paywave fees on debit cards, but not credit cards, and raising limits to enable more contactless transactions. Government and supermarkets told consumers to use contactless payments where possible to stop the spread of Covid-19. . . .

Amex, Retailers Set Anti-Steering Suit up for New Appeal
Law360 – May 8, 2020 (subscription required)

A group of retailers appears set to ask that the Second Circuit revive its antitrust claims targeting ​​​​American Express’ anti-steering rules, after both sides agreed in court filings on Friday that the federal court case is essentially finished.

The retailers made the first move with a brief seeking entry of partial final judgment. AmEx then said in its own brief that it does not oppose final judgment, and thus a pathway to appeal, for the district court’s finding. The lower court had found that retailers that don’t accept AmEx cards can only assert indirect injury from the contract language banning retailers from offering customers incentives to use cards that bear much lower merchant fees. . . .

Paypal Looks for Win in Challenge to CFPB’s Prepaid Rule
Law360 – May 7, 2020 (subscription required)

PayPal Inc. moved Wednesday to bring its D.C. federal court challenge to the Consumer Financial Protection Bureau’s prepaid rule to a swift conclusion, stressing that the agency made a “fundamental category error” in subjecting digital wallets to the same standards as plastic payment cards carried in stores.

In a bid for summary judgment, the California-based online payments giant pressed its case for U.S. District Judge Richard Leon to overturn the CFPB’s 2016 rule, which took effect last year and set out certain fee disclosure requirements, credit-linking restrictions, and other consumer protections for prepaid cards and digital wallets. . . .

Industry Developments

SPOTLIGHT: Samsung to Launch a Samsung Pay Debit Card This Summer
The Verge – May 7, 2020 (click here for Samsung’s announcement)

Samsung plans to launch a Samsung Pay debit card this summer, the company announced today in a blog post by Sang Ahn, vice president and general manager of Samsung Pay in North America (via Android Central). Samsung will launch the card, which will be backed by a cash management account, in partnership with personal finance company SoFi, Ahn said.

Samsung is also developing a “mobile-first money management platform,” according to Ahn. His blog doesn’t detail what features that money management platform or the upcoming debit card may have, but he does say that Samsung will share more details “in the coming weeks.” . . .

Discover Moves EMV Deadline
NACS – May 14, 2020

Discover said yesterday that it is delaying the EMV fraud liability shift deadline for chip payments at automated fuel dispensers until April 16, 2021, due to the COVID-19 pandemic.

Visa and American Express had already said they would delay the EMV deadline, leaving Mastercard the only major card company that hasn’t yet announced plans to postpone the liability shift at the pump. Like Discover, American Express’ new deadline is April 16, 2021, but Visa’s new deadline is April 17, 2021. . . .

JPMorgan Chase Starts Accepting Bitcoin Businesses for Banking Services
Bitcoin.com – May 12, 2020

JPMorgan Chase has reportedly started providing banking services to bitcoin businesses, with the first two clients being Coinbase and Gemini exchanges. JPMorgan also recently recommended having cryptocurrency in investment portfolios as its CEO, Jamie Dimon, changed his mind about bitcoin.

JPMorgan Chase & Co. has reportedly started to accept clients from the cryptocurrency industry. The Wall Street Journal reported on Tuesday that two prominent bitcoin exchanges, Coinbase Inc. and Gemini Trust Co., have become banking customers of JPMorgan Chase, citing people familiar with the matter. . . .

Coronavirus Shakes Long-Held Beliefs About Payments
PaymentsSource – May 12, 2020 (click here for podcast with Steve Mott of BetterBuyDesign)

The payments industry is in a unique position during the coronavirus crisis: It is a lifeline for many businesses, but it is also facing its own upheaval as habits and needs drastically change.

Steve Mott, principal of BetterBuyDesign, looks at the full scope of the payments industry and how it can survive the pandemic. The payments industry is difficult to disrupt, according to Mott, but the coronavirus has the best shot of setting new priorities for investors, clients, vendors and consumers. . . .

FIS Launches Mobile Credit, Debit Card Issuance
Mobile Payments Today – May 12, 2020

FIS is launching FIS Digital Issuance, which lets financial institutions provide immediate digital access to their credit and debit accounts via a smartphone. The program will help banks get new card customers up and running immediately as it now takes three to seven business days for cards to be issued by mail, according to a press release.

The program kicks off with Avidia Bank, a Massachusetts-based community bank with $1.6 billion in assets, which is the first financial institution to have access to the service. The service uses a mobile app to allow customers to connect with a digital wallet and make immediate purchases. . . .

PayPal Raises $4 Billion in Debt Deal as Business Soars During Pandemic
MarketWatch – May 11, 2020

The coronavirus might be making paper money seem dirtier than ever. PayPal Holdings Inc., a digital payments platform that helps money move online, raised $4 billion in the corporate bond market on Monday, underscoring how companies that make life under lockdown easier can also borrow cheaply.

How Coronavirus Penalizes Late Adopters of Contactless Cards
PaymentsSource – May 11, 2020 (subscription required)

Coronavirus has been a boon to contactless card usage and awareness — tens of millions of consumers across Europe, Asia and Canada prefer tapping over swiping a card to minimize viral exposure, according to new data. But U.S. card issuers aren’t getting the full benefit of the contactless phenomenon because of their slower contactless card rollout strategies.

Most large U.S. card issuers only began contactless card rollouts last year by replacing EMV contact-only cards one by one as they expired, or issuing them when customers open a new account. Many small issuers still haven’t begun their contactless migrations because they’re still burning through older EMV card stock. . . .

China’s Digital Pay Mix Holds Is a Road Map for the World
PaymentsSource PayThink – May 8, 2020

The coronavirus pandemic is changing consumer habits around the world. As consumers are forced to stay at home, offline retail outlets, restaurants and bars are all but completely shut down. Many consumers are trying food and grocery delivery services for the first time, and many retail players are at a loss as to how to handle this unique situation.

China’s advanced retail ecosystem indicates what such a scenario should look like when every transaction moves online. Even before the coronavirus crisis occurred, a large percentage of retail transactions in China occurred online. According to eMarketer, approximately 44% of China retail sales are conducted online, compared to just 12% in the United States. . . .

Point of Sale Credit Has Its Moment as a Crisis Hedge
PaymentsSource – May 8, 2020 (subscription required)

A mix of consumer debt and economic anxiety is shining a light on firms that offer alternatives to revolving credit. This, in turn, creates a chance to further tie financing directly to checkout. Companies like Splitit, Affirm and Klarna have different models, but all approach consumers with an alternative to revolving credit card debt for larger purchases at the point of sale.

Splitit reports 165% year over year growth in April, and a 153% jump from March to April in volume. Klarna reported a 16% weekly jump for the final full week of April for online warehouse volume, with similar weekly jumps dating to late March — just before most of the U.S. went under lockdown. . . .

Square Challenges Paypal With Branded Online Checkout Button
PYMNTS – May 7, 2020

Square has launched an alternative to PayPal, according to VentureBeat. The new payment tool was designed for small businesses looking to move from brick-and-mortar to eCommerce, the news service reported. As COVID-19 has forced shutdowns and social distancing, web sales have been on the rise, and many entrepreneurs are moving their business models online.

According to Essential Retail, online sales in March increased by 97 percent for home products and furnishings compared to March of 2019; 136 percent for do-it-yourself products; 163 percent for garden essentials; 27 percent for electronics and 30 percent for jewelry. . . .