Weekly News Update -- December 19, 2019
Legal and Regulatory Developments
SPOTLIGHT: Visa, Mastercard $6.3 Billion Settlement With Merchants Wins Approval
MLex – December 13, 2019 (subscription required) (click here for Judge Brodie’s Order)
Visa and Mastercard’s $6.3 billion class action settlement over their rules for merchants has won a judge’s final approval. The deal is fair, reasonable and adequate, US District Judge Margo Brodie said in an order published today.
The settlement approval comes after more than 13 years of litigation. Merchants sued under antitrust laws over so-called interchange fees, or swipe fees, associated with credit card transactions. The merchants said those fees were excessive and alleged that the companies stopped them from trying to push consumers to use other payment methods. . . .
Federal Reserve Payments Study Finds Growth in Card and Automated Clearinghouse Payments
Press Release – December 19, 2019 (click here for the 2019 Federal Reserve Payments Study)
The growth of payments using debit and credit cards and the automated clearinghouse (ACH) system continued to accelerate from 2015 to 2018, while check payments continued their long-run decline, according to U.S. noncash payments data collected by the Federal Reserve.
The 2019 Federal Reserve Payments Study shows that the growth rate of core noncash payments, defined for the report as debit card, credit card, ACH, and check payments, was 6.7 percent per year between 2015 and 2018. During the prior three-year survey period, core noncash payments grew at a rate of 5.1 percent per year. These core noncash payment types have retained their ability to be used in traditional ways even while they increasingly function as the means of settlement for innovative types of alternative payment methods and services, such as smartphone and internet-based services. . . .
Google Offers Advice To The Fed On FedNow
PYMNTS – December 17, 2019
Google sent a letter to the Federal Reserve, asking the U.S. central bank to consider modeling FedNow after the Unified Payments Interface (UPI) framework used in India, The Economic Times (ET) reported on Sunday (Dec. 15). FedNow is the new interbank real-time gross settlement (RTGS) service that will offer integrated clearing functionality for faster digital payments.
Mark Isakowitz, Google’s head of U.S. government affairs and public policy, said in a letter to the Fed that Google “worked closely” with the National Payments Corporation of India (NPCI) to build Google Pay for the Indian market. NPCI, the payment regulator governed by the Reserve Bank of India (RBI), launched real-time payments in 2016. . . .
Why Paypal Is Suing the CFPB Regarding Its Prepaid Rule
Bank Innovation – December 17, 2019
PayPal this month filed a lawsuit against the Consumer Financial Protection Bureau (CFPB) regarding fee disclosure requirements, arguing that the requirements of the CFPB’s Prepaid Rule would hurt its business and confuse customers.
“PayPal supports the mission of the CFPB and regulations that empower consumers to make informed financial decisions,” a PayPal spokesperson told Bank Innovation. “Although well intentioned, the Prepaid Rule was designed primarily for physical prepaid cards and fails to account for the significant differences between those cards and digital wallets.” . . .
Digital Asset Regulation Poses Challenges For Insurers
Law360 – December 16, 2019 (subscription required)
Bitcoin was born out of the 2008 recession — a complex financial crisis resulting in a bailout of companies deemed too big to fail. The primary goal of Bitcoin was to create a new digital financial system that removed reliance on centralized banks, yet still ensured the safety of consumers’ finances and personal data.
Public blockchain, the underlying technology upon which bitcoin was built, is a decentralized peer-to-peer network that is powered by its users and free from central authority. Blockchain removes the need for a middleman because the technology itself verifies and records each transaction on an open ledger. . . .
Google’s Shopping Comparison Draws Justice Department Scrutiny
Bloomberg – December 13, 2019
U.S. antitrust enforcers are examining Google’s conduct in the online shopping comparison market as they continue their probe of the search giant.
Richard Stables, chief executive officer of the shopping comparison site Kelkoo Group, said he spent more than an hour with Justice Department officials on Thursday to discuss how Alphabet Inc. allegedly hurt his European-based business. . . .
Apple Keeps Payments Tech for Itself and Europe Has Had Enough
ITPro Today/Bloomberg – December 12, 2019
Apple Inc.’s digital wallet is expanding in Europe just as regulators crack down on the tech giant’s move into financial services.
At issue is Apple’s role as a platform for other services. Spotify Technology SA already complained to antitrust regulators that Apple favors its own music service. Now banks and other payments providers say the company gives its Apple Pay service an unfair advantage by limiting access to a key component inside iPhones. . . .
Industry Developments
SPOTLIGHT: Eye on Gas Stations: Networks Reject Delay in EMV Liability Shift; Visa Warns of Malware Attacks
Digital Transactions – December 16, 2019
Gas stations and convenience stores won’t be getting an extension of the upcoming October 2020 fuel-pump EMV liability shifts, according to a merchant trade group. Meanwhile, Visa is warning of malware-based attacks against fuel retailers that invade their point-of-sale systems.
The major networks have set next October for pumps to be able to read chip cards and not just magnetic-stripe cards, otherwise the station will be financially liable for any resulting transaction fraud. The Merchant Advisory Group, an association of retailers and other merchants concerned with payment issues, recently requested Visa and Mastercard postpone the shifts for another two years. The original liability shift had been set for October 2017, but the networks delayed it for three years citing pleas from fuel retailers about the costs and difficulties of upgrading pumps. . . .
PayPal Scores an Historic First With the Completion of Its Deal for China’s Gopay
Digital Transactions – December 19, 2019
PayPal Holdings Inc. officially opened the door to a vast market for payments on Thursday with the closing of its deal for 70% of the equity in China’s Guofubao Information Technology Co. Ltd., better known as Gopay. The Peoples Bank of China had already okayed the deal, for which terms were not announced, on Sept. 30.
With the acquisition, PayPal wins the right to be the first foreign company that can directly offer online payments in China, a market boasting 500 million online shoppers who are expected to ring up almost $2 trillion in sales in 2019. “We’re pleased to complete this historic transaction, which enables us to broaden our participation in such a dynamic market,” Dan Schulman, president and chief executive of PayPal, said in a statement Thursday. “This important step will allow us to be a stronger partner to Chinese financial institutions and technology platforms.” . . .
Software Availability Proves To Be a Drag on Fuel-Pump EMV Upgrades
Digital Transactions – December 17, 2019
Upgrading gas pumps to accept EMV chip cards is a complex affair for convenience stores and gas stations that involves installing new card-reading hardware and software, testing, and certifications. Many fuel retailers are expected to miss next October’s automated fuel-dispenser liability shift, and software is proving to be one of the major reasons.
In a Tuesday update about the EMV fuel-pump conversion and related issues, the U.S. Payments Forum urged gas stations and c-stores to forge ahead with pump upgrades, even if needed software currently isn’t available. “Retailers in the petroleum environment are encouraged to upgrade and certify hardware even with software not available rather than waiting to make the transition in one phase,” the Princeton Junction, N.J.-based trade group said in a statement posted on its Web site. . . .
PNC’s Fight With Venmo Highlights Bigger Issue Over Who Owns Your Banking Data
CNBC – December 16, 2019
PNC and Venmo are bickering over customers’ access to third parties, highlighting the sometimes murky area of connecting finance apps to bank accounts. Over the past month, PNC customers have taken to Twitter to complain about not being able to connect to peer-to-peer payments app Venmo, which is owned by PayPal.
Instead of guiding them through how to connect to that app, the Pittsburgh-based bank, in some cases, suggested switching to bank-backed alternative Zelle. The app is owned by major Wall Street banks and competes directly with Venmo. In response, Venmo suggested that affected users should tweet PNC to “let me use the financial service apps I need!” . . .
Mastercard Launches UK’s First All-Digital Gift Card
PYMNTS – December 16, 2019
Mastercard is partnering with CleverCards and Appreciate Group to offer gift cards directly to mobile wallets, Mastercard announced in a press release on Monday (Dec. 16).
The Select Digital Gift Card can be sent immediately by email, text or messaging app, and is available now as a last-minute Christmas present. Recipients can add the digital Mastercard to a mobile wallet for “tap-n-pay” capability, in-store or online. The gift card functions as a prepaid Mastercard once activated by a recipient. . . .
Fintech Lenders Tighten Standards, Become More Like Banks
Bloomberg – December 16, 2019
Lara Briehl had a desperate client who was itching to accept an offer. The man was struggling to pay his bills, and an online lender had offered him a personal loan to pay off some 10 credit cards. Accepting, he thought, would help him escape crushing debt. The interest rate offered, however, was about 10 percentage points higher than on his plastic.
“I told him I would not take that deal in a million years,” said Briehl, a Bremerton, Washington-based credit counselor at American Financial Solutions, a nonprofit that helps distressed borrowers repair their finances. . . .
Venmo Glitch Opens Window on War Between Banks, Fintech Firms
Morningstar/Dow Jones – December 14, 2019
PNC customers are getting a front-row seat on the rivalry between the banking industry and financial technology companies.
Many of the Pittsburgh bank’s clients are having trouble connecting their accounts to their Venmo apps, cutting off access to PayPal Holdings Inc.’s popular mobile payment service. When they have sought help, they have found the two companies blaming each other for the disruption. . . .
Cryptocurrencies Could Replace Fiat Currencies by 2030, Says Deutsche Bank
TokenPost – December 13, 2019 (click here for Deutsche Bank’s Imagine 2030 Report)
Cryptocurrencies such as bitcoin could rise to their full potential and eventually replace cash over the next decade, Deutsche Bank said in a new report.
The bank has published the ‘Imagine 2030’ report in which it has highlighted several ideas for what the coming decade may hold. This includes innovation in the payment space which could see the end of fiat money and plastic cards, India’s expansion, the rise of drones, risk of rising corporate taxation and others. . . .