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Payments News Update – May 26, 2022

Posted  May 26, 2022

Legal and Regulatory Developments

SPOTLIGHT: CFPB Recasts Innovation Office to Emphasize Competition
Banking Dive – May 25, 2022

The Consumer Financial Protection Bureau (CFPB) is leaving the sandbox and recasting its innovation efforts to emphasize its role in promoting competition.

The agency’s newly established Office of Competition and Innovation, announced Tuesday, aims to explore how customers can more easily switch accounts and financial providers. The office also will hold “incubation events” such as open houses, sprints, hackathons, tabletop exercises and war games to help entrepreneurs and tech specialists troubleshoot barriers to innovation and share their frustrations with regulators, the bureau said Tuesday. Results of those events would be shared publicly, the agency said. . . .

Tackling Visa and Mastercard Fees Could Take Years, Says UK Regulator
Reuters – May 25, 2022

It could be years before card fees from global payments duo Mastercard and Visa can be capped again to cut costs for retailers and consumers, Britain’s payments regulator told lawmakers on Wednesday. Chris Hemsley, managing director of the Payment Systems Regulator, came under heavy pressure from parliament’s Treasury Select Committee to tackle card fees faster.

So-called interchange fees levied by Mastercard and Visa on retailers for consumer purchases from the European Union rose in 2021 after an EU cap ceased to apply in Britain following its departure from the bloc. . . .

FedNow Pilot Brings New Features, Use Cases for Instant Payments in ‘23 and Beyond
PYMNTS – May 24, 2022

Round-the-clock, real-time payments often are credited to the Venmos and PayPals of the world. But next year, the nationwide introduction of the Federal Reserve’s FedNowSM Service will offer 24/7/365 funds availability to help all types of financial institutions move beyond the person-to-person (P2P) use cases that FinTechs popularized.

The FedNow Service will broaden access to instant payments features and use cases by clearing and settling payments between financial institutions around the clock every day in a Federal Reserve Bank master account. . . .

CBDC Would Pull Deposits Away From Banks, Trade Groups Tell Fed
Payments Dive – May 24, 2022

A U.S. digital dollar poses too great a threat to the nation’s banking system to be deployed, the American Bankers Association (ABA) and Bank Policy Institute (BPI) said in separate letters Friday.

A central bank digital currency (CBDC) would serve as advantaged competition for retail bank deposits, depriving banks of funding and restricting credit availability in the U.S. economy, the trade groups each argued. Even if the Federal Reserve were to cap CBDC accounts at $5,000 per “end user,” the ABA estimates the deployment of digital central bank money could cause $720 billion in deposits to leave the banking system.  . . .

US Senators Lummis and Gillibrand Set to Propose Crypto Oversight Bill Next Month
Coindesk – May 24, 2022

One of the highest-profile efforts to create a cryptocurrency law in Washington, D.C., would finally differentiate the roles of the two key U.S. market watchdogs as well as free crypto miners from being considered broker-dealers, according to the two U.S. senators pushing the bill.

Kirsten Gillibrand (D-N.Y.) and Cynthia Lummis (R-Wyo.), who are both speaking at Consensus 2022 in June, have been at work for months on the bipartisan legislation, which they said they expect to make public in June – an unveiling that has slipped later and later over recent months. . . .

CFPB Is ‘No Longer Sleeping’ on Payments, Former Regulators Say
American Banker – May 19, 2022 (subscription required)

For years, there were usually less than a handful of cases at the Consumer Financial Protection Bureau that involved payments. That is rapidly becoming a thing of the past.

CFPB Director Rohit Chopra has made payments a top priority, and is looking closely at impacts on competition and the impact of rapid payments innovation on consumers, according to Thomas Ward, a partner at Sidley Austin in Washington who was an enforcement director at the bureau from February 2021 to May 2021. . . .

Mastercard Loses Bid to Appeal Expanded Class Action
Law360 – May 18, 2022 (subscription required)

A competition tribunal has refused to let Mastercard challenge a decision that added 3 million people no longer alive into a £14 billion ($17.3 billion) collective action against the credit card giant over interchange fees.

The Competition Appeal Tribunal said on Friday that Mastercard’s grounds of appeal have “no real prospect of success” at overturning its ruling from March. It ruled then that people who were alive when the claim was filed in 2016 can be part of the class of 46 million people who sued Mastercard Inc. for paying higher prices in shops between 1992 and 2008 because of excessive swipe fees charged. . . .

Industry Developments

SPOTLIGHT: Open Banking in the U.S. Is Moving Ahead, but Not Without Some Debate About Standards
Digital Transactions News – May 20, 2022

With open banking fast becoming the backbone of today’s payments landscape, the need for an industry standard to ensure protection of consumer data is moving front and center.

In the United States, where no such standard currently exists, the payments industry is at odds over whether the country should adopt a standard already implemented elsewhere, even if it is a modified version, or develop a standard specific to the U.S. At the heart of the push for an open-banking standard is the need to eliminate the practice of screen scraping, a process that allows the gathering of customers’ financial-transaction data from multiple sources and copying of data silos.  . . .

JPMorgan’s Digital Banking Push, Deep Pockets, Should Worry Neobanks
PYMNTS – May 24, 2022

To build a business from the ground up takes money. To build a business from the ground up in an increasingly crowded space — and a high-tech, digital space to boot — well, that takes a lot of money.

And one wonders, by extension, how and even whether, the smallest firms, the challengers with relatively lighter pockets, can make a go of it. JPMorgan Chase has said that it will lose at least $1 billion over the next several years as it sets up its digital bank — branching out from its initial market in the United Kingdom. . . .

Don’t Skirt Cash Discount and Surcharging Rules
Green Sheet – May 23, 2022

Cash discount and surcharge programs have appeal, because merchants hate paying a fee to get their money. They can easily identify and quantify payment processing costs. Less clear are the costs for reconciling a sudden increase in cash. Any bar owner can attest cash shrinks faster than a new pair of 501’s.

The goal of surcharge and cash discount programs is to lessen payment processing costs without impacting sales or burdening staff with extra duties. But these programs need to be explained to cardholders, and this takes time and slows checkout. A day may come when the programs are self-evident, but as Aragorn reminds us, “It is not this day.” . . .

From Superstore to Super App: Walmart’s Next Steps in Finance
American Banker – May 20, 2022 (subscription required)

To date, Walmart’s approach to financial services has been like its approach to running a superstore: Whatever you need, it’s in there somewhere. This can still be daunting, however, so the retail giant is working to make its financial offerings a bit more cohesive — and a lot more digital.

“We want to centralize all financial solutions on one platform so it doesn’t feel like it’s 25 different things,” Julia Unger, vice president of financial services at Walmart, said during American Banker’s Payments Forum this week. “People who have financial services can then shop for more.” . . .

Mastercard to Launch Biometric Checkout Tool for Retailers
Payments Dive – May 19, 2022

Following other fintech companies and retailers experimenting with biometrics, Mastercard announced Tuesday that it is introducing a biometric checkout program. The card issuer is working with NEC, Aurus, PaybyFace, PopID and Fujitsu Limited to deploy the tool internationally and protect the data collected.

Consumers will be able to review their bill and smile into a camera or wave their hand over a reader to pay. Mastercard is first piloting the program in Brazil and later plans to test out the feature in the Middle East and Asia, per the announcement. . . .

Two-Card Monte: Why Mastercard and Visa Rarely Shut Down Scammers Who Are Ripping off Consumers
BuzzFeed – May 18, 2022