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Payments News Update - April 30, 2020

Posted  April 30, 2020

Legal and Regulatory Developments

SPOTLIGHT: What Asia-Pacific Can Learn From EU’s Open Banking Initiatives
PYMNTS – April 30, 2020 (click here for PYMNTS report)

The COVID-19 pandemic has caused an impact on open banking developments worldwide as regulators, financial institutions (FIs) and businesses set their sights on helping their current customers rather than future innovations. Implementing any new standards during the pandemic was off the table for many markets, though some regulators were left scrambling to figure out how the rules they already passed would adapt to life in lockdown.

Rules like the revised Payment Services Directive (PSD2) and the General Data Protection Regulation (GDPR) have been operating for several years in the European Union, for example, but there are different considerations when it comes to online transactions and privacy during a time when most consumers and businesses are operating indoors. Regulators are determining how to change these standards and where they apply for best results in a way that keeps both FIs, third-party providers and consumers as safe and secure as possible. . . .

US Congress Considering More Than Two Dozen Cryptocurrency and Blockchain Proposals
Daily Hodl – April 29, 2020

Members of the 116th US Congress have now proposed a total of 32 bills related to cryptocurrency and blockchain technology this year. They cover a wide range of concerns, possible use cases and new approaches to regulating, integrating and curtailing the use of the emerging technology depending on the players, their activities and their goals.

Citing data from Value Technology Foundation, a non-profit think tank focused on blockchain, Forbes reports that US legislators introduced 12 bills that are expressly designed to curb the use of cryptocurrency in criminal activities like money laundering, terrorism and trafficking. . . .

EU Interchange Fee Regulation: Card Payments Cheaper for Retailers but Full Impact Unclear
Politico EU – April 28, 2020

The caps on debit and credit card interchange fees that resulted from the EU’s Interchange Fee Regulation (IFR) in 2015 have delivered on their intended purpose: bringing lower costs to merchants across Europe. However, given that the payments market is rapidly evolving, it is too early to see the full impact of the regulation across the whole of the payments’ ecosystem.

These were the main findings of an independent study carried out by my team at Edgar, Dunn & Company (EDC). The research, which was commissioned by Mastercard, looked at the impact of IFR in a representative sample of seven EU countries in 2019, France, Germany, Italy, Poland, Romania, Spain and the U.K. in light of the European Commission’s upcoming review of the regulation. The study compares data collected before and after the IFR came into force (2014-2018) and the results were extrapolated to the full EU28. . . .

Mastercard Aims to Trim Dixons’ Swipe Fee Claims on Appeal
Law360 – April 28, 2020 (subscription required)

Mastercard told the Court of Appeal on Tuesday that U.K. electronics retailer Dixons Carphone can’t claim losses on swipe fees further back than 1997, in a bid to scale back the potential damages in the case. The credit card giant asked the court to overturn a February 2019 decision by the Competition Appeal Tribunal dismissing its application for summary judgment on part of Dixons’ antitrust suit. The retailer is suing over the fees it paid on transactions between 1992 and 2008.

The action stems from the European Commission’s enforcement decision against Mastercard in December 2007, which found that the way that the credit company set multilateral interchange fees, or MIFs, since 1992 violated EU competition law. The fees, commonly known as swipe fees, are bank-to-bank charges paid from a merchant’s lender to a card-issuing bank when a purchase is processed. . . .

European Payments Industry Calls for Extra Six Months to Implement Strong Customer Authentication
NFCW – April 27, 2020 (click here for EPIF’s letter to regulators)

“It is now clear that the Covid-19 crisis has significantly reduced the capacity available to progress SCA development and implementation… The signatories therefore call on the European Commission and the EBA to consider appropriate additional measures and coordination to assist in the smooth transition to SCA in all EU Member States equally. In the light of Covid-19, this should also include the possibility of an at least additional six months for the market to be fully SCA ready.” . . .

The Pros and Cons of CBDCs
Finextra – April 27, 2020

Multiple central banks are looking closely at developing digital currencies to address the threat posed by projects such as Libra. There are many benefits to be found in central bank digital currencies (CBDCs), likely to be magnified amidst the Coronavirus pandemic as more and more transactions are carried out electronically and cash usage continues its decline.

However, central banks must grapple with the challenges and complexities of issuing a CBDC which mean there is still some way to go before we can expect to see a digital pound, a digital euro or a digital dollar. . . .

China’s Digital Currency to Be Given a Test Drive by U.S. Companies
Forbes – April 23, 2020

China, the country that banned initial coin offerings and made it tough for Bitcoin to operate has been tossing around the idea to build its own digital currency, and some U.S. multinationals are reportedly willing to help roll it out, the South China Morning Post reported today. Starbucks, McDonald’s and Subway chains in China were named on the People’s Bank of China’s list of firms that will test the national digital currency in the near future.

A digital currency is a generic term that may or may not be a cryptocurrency. Cryptos are decentralized by design, and also used for their privacy — something that is anathema to the Chinese government. This particular currency, once referred to as a digital yuan, will also be given a test at Chinese hotels, convenience stores, a bakery, a bookstore and a gym in the Xiong’an New Area, a city being built south of Beijing. . . .

Industry Developments

SPOTLIGHT: After Plaid and Stripe Hit It Big: Why the API Economy Is the Web’s Next Phase
Forbes – April 24, 2020

There are currently almost three million apps available in the Google Play store. There’s an abundance of fitness, food, productivity, dating, ride-sharing, delivery, shopping and community apps to choose from in the quest to make life healthier, easier and more meaningful.

It took approximately five years for the Play store to reach its first million apps and an additional six and a half years to triple that number, surpassing Apple’s App Store. In the 12 years since these two leading app stores debuted, they’ve had millions of apps downloaded hundreds of billions of times by users worldwide.

Don’t expect to see this trend slow down anytime soon. Apps have proven to satisfy a massive assortment of needs, and it has never been easier to build software that delivers delightful customer experiences. . . .

WhatsApp Eyes Lending Feature in India as Amazon Rolls out Pay Later to Tens of Thousands of Customers
TechCrunch – April 28, 2020

WhatsApp, which began testing its mobile payments feature in India two years ago, could offer at least one more financial service to people in its biggest market. In a filing with the local regulator in India, the Facebook -owned messaging platform has listed credit as one of the areas it will pursue in the country.

The Facebook-owned service declared with the local regulator earlier this month providing credit or loans as one of the “main objects to be pursued by it in the country.” No other financial service is listed in the filing. At an event in Bangalore late last year, Abhijit Bose, WhatsApp’s head in India, said he believed that the mobile payments market in India, which has attracted dozens of local and international firms in recent years, is still at a very early stage in the country and may eventually see firms move beyond just offering a way for people to send money to one another. . . .

As Online Usage Surges, Watch out for an Even Bigger Jump in Fraud, Experts Warn
Digital Transactions News – April 28, 2020

Payments fraud was already rising, and now experts predict increased online usage brought on by stay-at-home orders will only exacerbate the trend. While losses haven’t shown up yet, e-commerce activity taking place now is sowing the seeds of a dramatic jump in coming months. “Fraud is always a trailing activity,” notes David Mattei, a senior analyst at the Aite Group, a Boston-based consultancy.

One client, a financial institution, has already flipped its fraud-loss forecast for the year from an 8% drop to an increase ranging from 10% to 15%, Mattei says. “Other financial institutions shared the same sentiment,” he says. In some cases, “they’re already starting to see an uptick,” he adds. . . .

Facebook-Backed Digital Currency Project Libra Has a New Member
CNBC – April 28, 2020

British payments start-up has joined the Libra Association, the digital currency project set up by Facebook last year. is the first payment processor to join the initiative since U.S. giants Visa, Mastercard and Stripe all pulled out over regulatory concerns in October. In recent weeks, other firms have said they will back Libra, including e-commerce giant Shopify, non-profit organization Heifer International and cryptocurrency brokerage Tagomi.

Libra was introduced by Facebook back in June as a global currency that would allow users to make faster and cheaper cross-border payments. But the project quickly drew the ire of policymakers around the world who worried it could heavily disrupt the financial system, risk potential money laundering and compete with fiat currencies like the U.S. dollar. . . .

Zelle Says COVID-19 Boosting P2P Enrollment
Mobile Payments Today – April 27, 2020

Early Warning Services, the parent firm of Zelle, said the COVID-19 pandemic is boosting demand for the P2P network as more consumers are sending money to family and friends to help manage economic disruption.

Company officials said Zelle enrollment is up double digits above prior-year figures as consumers use the service to reimburse friends and family for canceled events, pay back neighbors for groceries and send money to family members, according to a press release. . . .

Millions of Credit-Card Customers Can’t Pay Their Bills. Lenders Are Bracing for Impact.
Wall Street Journal – April 25, 2020 (subscription required)

Credit-card debt kept many consumers afloat. Now that the debt bubble is bursting, lenders and borrowers alike are preparing for pain.

Robert Rodriguez and Migdalia Wharton, a married couple in Orlando, Fla., have been out of work for more than a month and can’t afford to pay their credit-card bills. When they called Capital One Financial Corp. to explain, the bank told them they could skip their April payments. But they doubt they will have money in May. Ms. Wharton, a school-bus driver, was told she wouldn’t get paid until school reopens. Mr. Rodriguez, a cancer survivor, is worried for his health and has stopped driving for Uber. . . .

Coronavirus Drastically Alters the Landscape for Merchant Acquirers
PaymentsSource – April 23, 2020 (subscription required)

Merchant acquiring is a very face-to-face, sales-oriented business. And that culture has to change before any acquirers can convince their clients that they know how to adapt to the coronavirus pandemic.

The unprecedented shutdown on social interaction, combined with the clunkiness of legacy payments technology, is forcing many merchants to find a way to handle payments digitally. Acquirers must adapt even more quickly to be able to solve their clients’ problems remotely. . . .

Payments Startup Stripe Rolls Out Card Issuing for U.S. Clients
PaymentsSource – April 23, 2020

Financial-technology startup Stripe Inc. is starting a card-issuing service for U.S. clients as it expands beyond payment processing. Stripe’s issuing technology will allow companies to develop cards for specific uses. Postmates Inc., for example, is able to give Stripe-issued cards to its food-delivery drivers to allow them to make payments at restaurants assigned to them through the app.

“The natural tendency is to pull back and go to the mattresses in a time like this, but we want to zig while others are zagging,” John Collison, president and co-founder of Stripe, said in an interview. “So we’re continuing to invest to help not only the new users, but to make the platforms more robust and reliable.” . . .

Credit Cards Start Cutting Limits for People Facing Tough Times
American Banker – April 23, 2020

Major U.S. credit card issuers are starting to lower customer spending limits as the coronavirus pandemic leaves millions of Americans jobless and struggling to keep up on loans.

Discover Financial Services just became the largest lender yet to acknowledge it’s begun reining in lines of credit. In a regulatory filing late Wednesday, the firm said it’s also easing off efforts to sign up new customers and that it expects to take a hit from programs letting existing borrowers skip payments or delay the accrual of interest.