Payments News Update – June 18, 2020
Legal and Regulatory Developments
SPOTLIGHT: With a Loss Before Britain’s High Court, Visa and Mastercard Face an Interchange Reckoning
Digital Transactions News – June 17, 2020
Merchants in the United Kingdom won an important battle against interchange fees on Wednesday but it remains uncertain just how much that will mean to them in terms of remuneration from Visa Inc. and Mastercard Inc. The case also could have ramifications for similar action in the U.S. market, some observers say.
Britain’s Supreme Court handed down a long-awaited ruling that the networks’ interchange schedules unlawfully restrict competition. The verdict dismissed an appeal of a lower-court decision by Visa and Mastercard and could benefit card-accepting merchants in the country by requiring the networks to compensate them for years of interchange-fee payments. . . .
Visa, Mastercard Lose Swipe Fee Antitrust Appeals At Top UK Court
Law 360 – June 17, 2020
The U.K.’s highest court ruled on Wednesday that credit card giants Visa and Mastercard set fees at an unlawful level which restricted competition, upholding a judgment in favor of some of the country’s biggest retailers. The Supreme Court affirmed a lower court ruling from 2018 that found so-called multilateral interchange fees, or MIFs, set by Visa and Mastercard breached European Union antitrust rules by illegally restricting competition in the acquiring market.
The fees are bank-to-bank charges paid from a merchant’s lender to a card-issuing bank when a purchase is processed. Handing down the ruling over video-link, Justice Nicholas Hamblen said the Supreme Court unanimously dismissed all grounds of appeal brought by the credit card companies, except one point over the degree of precision required to calculate loss. . . .
Apple Pay and iOS App Store Under Formal Antitrust Probe in Europe
TechCrunch – June 16, 2020
Apple is under formal investigation by antitrust regulators in European Union — following a number of complaints related to how it operates the iOS App Store and also its payment offering, Apple Pay. The Commission said today that it has concerns that conditions and restrictions applied by the tech giant may be distorting competition in a number of areas, following a preliminary probe of the issues.
Back in March 2019, European music streaming service Spotify filed an antitrust complaint against Apple — railing very publicly against what it dubbed an “Apple tax”; aka the 30% tariff the tech giant applies on accepting payments in apps on its App Store. Spotify also accused Apple of impeding its business by applying arbitrary rules — such as making it harder to offer its own users discounts. . . .
CMA Invites Comments on Visa Acquisition of Plaid Inc
Finance Magnates – June 16, 2020
The Competition and Markets Authority (CMA) announced this Tuesday that it is inviting comments on the proposed acquisition which will see Visa Inc buy Plaid Inc, a privately held software startup, in a deal worth $5.3 billion.
In a statement published by the CMA today, the authority said that it is considering: “whether it is or may be the case that this transaction if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.” . . .
India to Strengthen Oversight Process for Card Payment Networks
Verdict – June 15, 2020
The Reserve Bank of India has revealed plans to boost the oversight process for the card payment networks and cross-border money transfer operators. The central bank said if required it will conduct on-site inspections of these networks, which are usually regulated and controlled by off-site surveillance only.
This is because these networks, except the National Payments Corporation of India (NPCI), are domiciled in foreign jurisdictions. In addition to NPCI, the card payment networks operating the country include Mastercard, Visa, American Express, and Diners Club International. . . .
AmEx Cleared to Process Transactions in China
PYMNTS – June 14, 2020
American Express has won initial approval from the People’s Bank of China (PBOC) to process the nation’s currency, the global financial services network announced in a press release Saturday (June 13).
Express Company, a joint venture between American Express and LianLian DigiTech, a Chinese FinTech services company, are expected to begin processing transactions later this year. It comes as political tension between the U.S. and China is rising, sparked by the COVID-19 pandemic. Last month, President Donald Trump blamed China for the outbreak at a Fox News virtual Town Hall. . . .
Industry Developments
SPOTLIGHT: Airlines Are Using Frequent-Flyer Programs as Collateral for Loans to Stay Alive
PYMNTS – June 15, 2020
In times of crisis, we mortgage what we have to get to where we need to be. The pandemic has seen a flurry of capital raising as firms across all verticals have sought to shore up their balance sheets. By getting cash on the books, there’s the chance to keep going — to continue operating and pay expenses until the horizon is a bit clearer. Along the way, pledging assets that aren’t in use now can be an effective strategy.
It’s no secret that not many of us are flying now. Air traffic is just starting to rebound and the nadir seems to have been reached in April when traffic was down about 94 percent. Still, airlines are burning cash at the rate of tens of millions of dollars a day to stay alive. United Airlines has said it’s spending $40 million per day in the second quarter but added that that should slow to $30 million daily in the third period, as per CNBC. . . .
Did Coronavirus Permanently Increase Merchants’ Transaction Costs?
PaymentsSource – June 18, 2020 (subscription required)
E-commerce sales boomed during the height of the coronavirus when consumers were stuck at home, and merchants had no choice but to accommodate the surge. But some retail industry observers are concerned about potential long-term costs from the pandemic. When coronavirus forced consumers to stay home, the proportion of retailers’ Card Not Present (CNP) transactions soared, increasing many merchants’ expenses because of the higher cost of handling fraud risks and declined transactions for online purchases.
In the U.S. in the apparel category alone, CNP transactions between February and April went from no more than 40% of transactions to virtually 100% of clothing sales, while restaurants saw CNP transactions rise from less than 20% of all sales to around 80%, according to CMSPI, a global consultancy focusing on merchant issues. . . .
Competition Creates Innovation in Point-Of-Sale Credit Market
PaymentsSource – June 16, 2020 (subscription required)
The coronavirus’ economic fallout has drawn more attention to buy-now-pay-later options, leading to fresh creativity in business models and marketing. Klarna has introduced a rewards plan just as all-in-one card company Curve enters the point of sale credit market. The moves give both companies their own differentiators as the point of sale credit market heats up in the U.S.
Curve Credit has opened a waiting list in anticipation of launch later this year, and will allow consumers to pay credit card debt and split transactions into installments made on any connected card at any merchant. The function for the credit product builds off of Curve’s back in time feature, which allows users to retroactively change the card they used for a prior payment. The London-based Curve recently extended the window for this feature to 90 days from 14. . . .
Spend on Retail Fuels Strong Debit Transactions, Latest PSCU Report Says
CU Times – June 16, 2020
Consumer credit and debit spending on travel and entertainment remains down year-over-year, but retail spend is continuing to strengthen, the CUSO PSCU said in its latest weekly transaction report. The report, which compared the week ending June 7 with the same period last year, said credit spend on travel was down about 64% and debit spend down about 33%. Credit and debit spending on entertainment were down year-over-year 53% and 43%, respectively. The dip has been attributed to local, state and federal restrictions imposed at the start of the pandemic.
Still, the PSCU report said debit card spend was up 16% for the week, the eighth consecutive week of growth. Overall, transactions were down 1.6%, but the report said transactions have shown improvements for 10 weeks straight. . . .
WhatsApp Finally Launches Payments, Starting in Brazil
TechCrunch – June 15, 2020
After months of talks and trials, WhatsApp has finally pulled the trigger on payments in its app. Today the Facebook-owned messaging service announced that users in Brazil would be the first to be able to send and receive money by way of its messaging app, using Facebook Pay, the payments service WhatsApp owner Facebook launched last year.
WhatsApp says in its blog post that the payments service — which currently is free for consumers to use (that is, no commission fee taken) but businesses pay a 3.99% processing fee to receive payments — will work by way of a six-digit PIN or fingerprint to complete transactions. . . .
Shopify Advances After Deal With Walmart Expands Its Reach
PaymentsSource – June 15, 2020
Walmart Inc. has partnered with e-commerce giant Shopify Inc. to expand its third-party marketplace site and grab more of the pandemic-fueled surge in online shopping. Shares of the Canadian technology company rose on Monday.
The world’s largest retailer aims to add 1,200 Shopify sellers this year, Walmart executive Jeff Clementz said in an interview. The company’s marketplace site, which already offers more than 75 million products, grew at a faster pace than Walmart’s overall web business in the first quarter, and third-party sales are typically more profitable as the sellers pay a fee when a sale is made and often shoulder the delivery costs. . . .
Cardtronics Sees a Recovery in U.S. ATM Cash Withdrawals as States Reopen
Digital Transactions News – June 15, 2020
Volume in some of its foreign markets is still way down as a result of the Covid-19 pandemic, but leading non-bank ATM network operator Cardtronics plc reported Monday that same-store U.S. cash-withdrawal transaction volumes were off only 3% in the first half of June from a year earlier. PSCU, a credit-union service organization, reported a different story Monday, saying its ATM cash withdrawals are still down by more than 20%.
But Houston-based Cardtronics said in a business update that total cash dispensed in its U.S. ATMs jumped nearly 10% year-over-year on a same-unit basis in June following 3% growth in May from May 2019. “With our recent performance and better than expected recovery, effective July 1 we will remove the company-wide temporary salary reductions that we implemented on April 1,” chief executive Edward H. West said in a statement. . . .
How’s This for a Bitcoin Use Case—Payments
CoinGeek – June 15, 2020
Using Bitcoin to pay for purchases—how’s that for an idea? Somewhere, in all the noise about price movements, ideological differences and the race to find the most novel use case, we forgot that Bitcoin is suppose[d] to be a digital electronic cash system. But even though it could one day be possible to have the entire internet running on the blockchain, it’s important to remember that you can actually use Bitcoin to send and receive money, and make purchases.
Even the payments use case is more complicated now. It’s not just about walking into a store and scanning a QR code with your phone. Bitcoin, at least since Bitcoin SV (BSV) developers restored its original protocol rules, once again enables low-fee micropayments to create an entirely new digital economy. A new breed of “wallets” is emerging that connect to novel online content and gaming platforms that actually make money for their users. . . .
Walmart Tests Self-Checkout Only Location
FOXBusiness – June 14, 2020
A Walmart in Fayetteville, Arkansas is reimagining the shopping experience during the coronavirus pandemic by using self-checkout counters only, in lieu of traditional cashier lanes.
A spokesperson for the company told FOX Business that Walmart Supercenter Store #359 is removing its conveyor belt lanes and replacing them with self-checkout counters. The goal is to see if the increased use of self-checkout will speed up purchases while providing a safer experience for shoppers through less interaction. . . .
Mom-And-Pop Shops Left Holding Bag in Consumer Card Disputes
PaymentsSource – June 12, 2020
In her time using Square as a payments processor, Stephanie Rubio’s digital marketing agency had never had a customer challenge a card transaction. So the May 14 email came as quite a surprise. Rubio was told that, beginning in seven days, 20% of the payments her SoVerve Marketing Group received through Square would be held as a reserve against any future disputes. The money wouldn’t be available for four months.
“I wasn’t expecting that at all,” Rubio said. “I get this email in the middle of COVID. It threw me for a loop because I’m already having to make drastic pivots in my business.” The world’s biggest payment companies have grown increasingly worried about a surge in disputed card transactions at retailers, especially as the coronavirus pandemic stifles economic activity. . . .
– Curated by Kristian Soltes. For questions about the newsletter or its content, contact [email protected].