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Payments News Update – October 1, 2021

Posted  October 1, 2021

Legal and Regulatory Developments

SPOTLIGHT: Alibaba Apps Start Offering WeChat Pay Option After Government Orders
Reuters – September 28, 2021

China’s Alibaba Group Holding Ltd has begun offering payment services from Tencent Holdings Ltd’s WeChat on a number of its apps, after the government ordered major tech firms to stop blocking each other’s services and links. Local tech blog 36Kr reported on Tuesday that users of Alibaba’s food delivery app, luxury goods app Kaola and e-book app Shuqi can now purchase goods via WeChat Pay, one of China’s most popular online payment options.

Alibaba’s used-goods marketplace app Xianyu and supermarket app Freshippo have also applied for WeChat Pay integration, the tech blog said. Alibaba confirmed the contents of the report to Reuters. Previously, the main way users could make payments on those apps was via Alipay, from Alibaba’s financial affiliate Ant Group. . . .

Tech Giants Brace for Impact in India as New Payments Rule Goes Into Effects
TechCrunch – September 30, 2021

Apple, Sony, Google, Zoom, PayPal and several other tech companies as well as scores of banks have cautioned customers and partners in India to expect a surge in declined transactions as the world’s second-largest internet market’s central bank enforces a new directive for the way recurring payments are processed in the country.

The Reserve Bank of India’s directive, which goes into effect on Friday, requires banks, financial institutions and payment gateways to obtain additional approval for auto-renewables transactions worth over 5,000 Indian rupees ($67) from users by conducting notifications, e-mandates and Additional Factors of Authentication (AFA). The directive impacts all such transactions for debit cards as well as credit cards. . . .

Visa, Mastercard Swipe Fee MDL Gets Class Certification
Law360 – September 28, 2021 (subscription required)

A New York judge has partially granted class action status in multidistrict litigation accusing Visa, Mastercard and several U.S. banks of jointly maintaining a series of anti-competitive rules that cause merchants to pay high transaction fees. Chief U.S. District Judge Margo K. Brodie’s order on Monday remains sealed, but the case docket says that class members will consist of all individuals or businesses that accepted credit or debit cards issued by Visa and Mastercard in the U.S. at any time between Dec. 18 and the date of the court’s final judgment in this case.

Judge Brodie has approved the challengers’ requests to appoint Hilliard & Shadowen LLP, Grant & Eisenhofer PA, Freed Kanner London & Millen LLC and Nussbaum Law Group PC to serve as co-lead class counsel, according to the docket. . . .

Retailers Alerted to Card Scheme Fee Hikes
Banking Day – September 28, 2021

Australian retailers are being warned to monitor their monthly merchant service plan statements amid concern that banks have begun to pass on fresh fee hikes. CMSPI, a leading international consultant on merchant cost management, last week alerted 40 Australian retailers to the potential for runaway growth in so-called “scheme fees” as banks and global card companies try to boost revenue from merchant customers.

In an online briefing of local merchants, CMSPI warned that the lack of disclosure by banks and global card schemes about scheme fees meant that they were being used to recoup revenue that had been lost because of the introduction of caps on interchange rates for debit and credit card transactions. Scheme fees are payable by acquiring and card issuing banks to global card schemes such as Visa and Mastercard for various services they provide. . . .

Across Four Continents, Apple’s Control of Payments Is Under Attack
American Banker – September 27, 2021

Apple has long wielded its global market power as a blunt instrument, enabling it to dictate the terms of contracts with banks, app developers and anyone else that wants entry into its ecosystem. It may finally be meeting its match. A federal judge recently ruled Apple must allow developers to use third-party payment options for App Store purchases.

The App Store is a lucrative business for Apple, with App Store revenue totalling about $64 billion in 2020 with a profit margin above 75%. Apple receives a fee of up to 30% for any digital services sold through its App Store or within apps, but not physical goods ordered from apps. Developers bristled at the terms, but few fought back. One exception is Epic, maker of the popular game Fortnite, which defied Apple by putting third-party payment options in its game. Apple removed the game immediately, prompting a long court battle that ended with Epic owing Apple $6 million for payments over the past year, according to 9to5Mac. . . .

Industry Developments

SPOTLIGHT: Apple Pay Glitch May Be Exploited for Unauthorized Contactless Payments
PYMNTS – September 30, 2021

Researchers have recently discovered a loophole in iPhones that allows hackers to make unauthorized contactless payments on locked mobile phones by exploiting an Apple Pay feature that’s supposed to help users pay quickly using their Visa cards, according to a BBC report Thursday (Sept. 30). A video shows the researchers from the Computer Science departments of Birmingham and Surrey Universities making a contactless £1,000 (almost $1,350) payment from a locked iPhone, the report says, but Apple called the glitch “a concern with a Visa system.”

Visa, in turn, said its payments are secure and that hacks of this sort aren’t likely to happen outside of a lab. The researchers say the loophole can be exploited on Visa cards set up in Express Transit mode — which allows contactless payments on a locked phone — in the user’s iPhone wallet. The BBC outlined the basics of the attack, although it left out several of the key details to prevent a rash of copycats. . . .

Visa Working on Blockchain Interoperability Hub for Crypto Payments
Cointelegraph – September 30, 2021

Visa’s new blockchain interoperability project is designed to serve as a “network of blockchain networks.” Global payments giant Visa has introduced a project that aims to be a “universal adapter” of blockchains that can connect multiple cryptocurrencies, stablecoins as well as central bank digital currencies (CBDC).

According to an official announcement on Thursday, Visa’s research team is working on a “Universal Payment Channel” (UPC) initiative, a blockchain interoperability hub connecting multiple blockchain networks and enabling transfers of digital assets from different protocols and wallets. “Imagine splitting the check with your friends, when everyone at the table is using a different type of money — some using CBDC like Sweden’s eKrona, and others preferring a private stablecoin like USDC,” Visa wrote, adding that such a tool “well may be a reality” in the “not-too-distant future” with the UPC project. . . .

Square Teams With TikTok
Finextra – September 29, 2021