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Payments News Update -- May 22, 2019

Posted  May 22, 2019

Legal and Regulatory Developments

SPOTLIGHT: U.S. May Follow Philly and New Jersey to Ban Cashless Businesses
WHYY – May 20, 2019

Earlier this year, Philly and New Jersey passed laws banning cashless businesses, restaurants and retail shops where customers can only pay with plastic or their phones. Now, two Democrats in Congress want the country to follow suit.

New Jersey U.S. Rep. Donald Payne, D-Newark,  recently introduced Payment Choice Act, which would require businesses to accept cash so customers without bank accounts — collectively called the “unbanked” — aren’t barred from shopping anywhere because they can’t pay with cards or electronically. . . .

Long-Awaited Crypto Guidance Coming Soon, IRS Chief Says
Law360 – May 21, 2019 (subscription required)

Federal guidance on the tax treatment of cryptocurrencies — guidance that practitioners have been waiting on for years — will be released soon, Internal Revenue Service Commissioner Chuck Rettig has told Congress.

The IRS, which has drawn pressure from lawmakers for not releasing guidance on cryptocurrencies since 2014, has been considering the calculation of cost basis and the treatment of “hard forks,” Rettig wrote Thursday in a letter addressed to Rep. Tom Emmer, R-Minn. Hard forks occur when one virtual currency splits off to form another, and it is unclear if income is realized when this happens. . . .

Man Who Claims To Be Bitcoin’s Inventor Registers Copyright for Its Code
Bloomberg – May 21, 2019

The U.S. Copyright Office awarded self-proclaimed Bitcoin inventor Craig Wright registrations for the whitepaper and early computer code underlying the original cryptocurrency.

The agency posted the registrations on its website, naming the controversial Australian computer scientist as the author of the marketing proposal and the code under the pseudonym Satoshi Nakamoto. Still, the registrations — which aren’t subject to the same exhaustive process as granting a patent — may not actually settle the issue. . . .

Apple Credit Card’s Legal And Ethical Implications For Fintech
Law360 – May 20, 2019 (subscription required)

Apple made waves in the financial technology industry with the Apple Card, becoming the first technology giant to break ground in the massive credit card industry. Announcing the Apple card in late March of 2019, Apple brings its trademark elegance and user-friendliness to the credit card arena — offering a digital and physical card that customers can apply for from the convenience of their iPhones. Successful Apple Card applicants can then use the card immediately upon approval. The physical Apple Card contains no number and no CVV. Instead, Apple stores this information securely in your phone’s wallet app.

With digital wallets set to overtake credit cards as the most popular form of online payment by 2020, Apple is making a strong case to dominate the growing digital payment industry. With nearly one billion iPhone users worldwide, Apple Card is likely to make a splash when it debuts this summer. The consumer privacy legal and policy impacts of the Apple Card are likely widespread and significant. This article discusses the potential legal and ethical implications of the Apple Card on financial technology law as well as what industry leaders should expect as Apple unveils the Apple Card. . . .

As Growth Continues, OCC Sees Credit, Liquidity Risk Elevated
ABA Banking Journal – May 20, 2019

Underlying credit and liquidity risks associated with the current point in the economic cycle should be on bankers’ radar screens, the OCC advised today in its Semiannual Risk Perspective report. While the economy notched robust economic figures in 2018, the agency warned that imbalances like inflation can emerge when the economy operates above its full potential. “Successive years of growth, incremental easing in underwriting, risk layering, and building credit concentrations result in accumulated risk in loan portfolios,” it said.

While the OCC acknowledged that the health of the financial system remains strong—citing sound asset quality, capital reaching near-historic highs and improving earnings as positive indicators—credit risk remains a top concern. The report noted that banks and nonbanks have continued the recent trend of easing underwriting standards as they compete for quality loans. The report also observed that commercial real estate loans grew at 7.8% at community banks in 2018, compared to 1.4% industry-wide—although the number of OCC-supervised banks with CRE exposure over 300% of capital or construction and development loans of over 100% of capital declined. . . .

Bitcoin No Threat Yet but Crypto ‘Phenomenon’ Needs Monitoring: European Central Bank
CCN – May 18, 2019

The European Central Bank (ECB) has found that crypto does not pose risks to financial stability in the Eurozone. The central bank does recommend, however, that European legislatures create a uniform approach to crypto-assets.

The ECB has set up an advisory committee called the Crypto-Assets Task Force (ICA-TF) to examine the ramifications and impact of cryptocurrencies on the European economy. Their May 2019 report, “Crypto-Assets: Implications for financial stability, monetary policy, and payments and market infrastructures”, has some interesting findings. . . .

Industry Developments

SPOTLIGHT: TCH Says Avidia Bank Is Just the First Smaller Bank Lining up For Real-Time Payments
Digital Transactions News – May 17, 2019

The real-time payments network built by The Clearing House Payments Co. LLC is often viewed as a creature of the big banks, including the ones that own and control TCH, but on Friday it became clear that some of the nation’s smallest financial institutions are ready to sign up for the faster-payments system.

TCH announced that Avidia Bank, a Hudson, Mass.-based institution, has agreed to connect to the RTP system. At $1.6 billion in assets, Avidia ranks around number 400 among the nation’s commercial banks, according to the Federal Reserve. And Avidia Bank is just the first institution of its size to be made public as an RTP client. Other smaller banks and credit unions are also “in the pipeline,” though not yet announced, Steve Ledford, senior vice president of product and strategy at New York City-based TCH, tells Digital Transactions News. . . .

Visa’s Tokenization Push Gains Steam in Europe
PaymentsSource – May 21, 2019 (subscription required)

Visa’s tokenization began as a way to shield digital commerce and has developed into a major catalyst for Visa in landing partnerships.

The card network’s five year old Token Service has added 11 European partners, including Adyen, Cardstream, Computop, Datatrans, HiPay, Ingenico/Bambora, Monext, Safecharge, Secure Trading, Wirecard and Worldline. . . .

As U.S. Contactless Card Payments Ramp up, Canada and the U.K. Point the Way to Mass Adoption
Digital Transactions News– May 21, 2019

Contactless payments account for only an estimated low-single-digit share of U.S. general-purchase credit and debit card transactions, but contactless has a much greater share of payments in Canada and the United Kingdom, recently released data show.

Canada’s largest merchant acquirer, Toronto-based Moneris Solutions Corp., says that in the first quarter contactless for the first time accounted for more than half of card-present transactions—51.5%. Contactless payments grew nearly 25% year-over-year while overall credit and debit card spending rose only 2.5%, Moneris reported. . . .

How the Rise of Fee-Charging ATMs Threatens the U.K.’s Small Merchants
PaymentsSource – May 21, 2019

Fears are growing that the rapid rise in fee-charging ATMs could have catastrophic consequences for the U.K.’s fragile SME market, with major supermarkets and card networks predicted to be the biggest beneficiaries.

Nearly 1,700 of the U.K.’s free-to-use cashpoints were converted into fee-paying machines between January and March this year, according to research conducted by consumer association group Which? in April. Increasing numbers of ATM operators are following this trend, with NoteMachine planning to start charging on 4,000 of its 7,000 ATMs this year. As a result, the U.K. is expected to lose 13% of its 52,000 free cashpoints within the next few months. . . .

Small Cross-Border Deals Play a Big Role for Visa, Mastercard
PaymentsSource – May 21, 2019 (subscription required)

Visa’s recent green light from U.K. regulators to complete its Earthport acquisition was more than just the clearing of a regulatory hurdle — it was a revealing look at how important it has become for the card networks to diversify.

Earthport’s a relatively small company, but important enough for Visa and Mastercard to have entered a bidding war over, and vital enough for the U.K. to raise flags over how buying Earthport could suppress competition. With the government fight out of the way, Visa has taken control of Earthport, and Mastercard has found a similar company in the space to acquire, Transfast. That deal is expected to close in September. . . .

WeChat Pay Eyes up Europe for Cross-Border Business
UK Tech – May 20, 2019

WeChat Pay has announced that Europe will be the next key market for WeChat Pay Cross-border Business.

As of April 2019, the number of merchants in the European region offering WeChat Pay as a payment method was 3.5 times higher than the previous year. WeChat has 1.112 billion monthly active users worldwide, of which 800 million are users of WeChat Pay. WeChat Pay has officially entered more than 49 overseas countries and regions, making it an excellent way for global merchants to quickly and effectively connect with Chinese tourists. . . .

Tackling The Interchange Fee Hurdle In Commercial Card Acceptance
PYMNTS – May 20, 2019

In a B2B climate of delayed payments and heightened pressure for cash flow optimization, the commercial card has emerged as what many card companies and issuing banks would consider to be a middle ground between buyer and supplier. Cards enable suppliers to get paid right away, without forcing corporate buyers to let go of their cash until weeks down the road.

It’s an enticing proposal, and one that promotes continued growth in the commercial card space. Data late last year from Accenture found that U.S. businesses spent $523 billion on cards last year, a figure expected to rise to $763 billion by 2022 as B2B payments go digital. . . .

Facebook Forms Swiss Fintech Firm With Payments Focus
Reuters – May 17, 2019

Facebook has set up a new financial technology company in Switzerland focusing on blockchain and payments as well as data analytics and investing, Geneva’s commercial register shows.

Libra Networks, with Facebook Global Holdings as stakeholder, was registered in Geneva on May 2 to provide financial and technology services and develop related hardware and software, plans submitted on the Swiss register reveal. . . .

Google Takes On Amazon With New eCommerce Features
PYMNTS – May 17, 2019

Google managed the surprise of the week with the announcement that it was dramatically and quickly leveling up its eCommerce capability by essentially turning any and every Google surface (think Search, Images, YouTube etc.,) into a shoppable location. Though perhaps it shouldn’t have.

Google’s enhancements to its shopping infrastructure have been more or less a steady drumbeat for the last 18 months. Since 2016, Google has been adding ads to an ever-increasing number of surfaces, has made it easier for local merchants to surface their inventory lists for consumers and has made so many enhancement to Google Express that it would be too time-consuming to list them all here. . . .

Lack of Banking Options a Big Problem for Crypto Businesses
Wall Street Journal – May 17, 2019

Banks, wary of the drug dealers and scammers attracted to the anonymity of cryptocurrency, shun many of the firms behind the electronic money, leaving them to turn to shadowy middlemen for payment processing and other financial services.

In a recent high-profile example, $850 million in customer funds went missing after Bitfinex, the exchange behind the digital currency tether, handed it over to Panama-based Crypto Capital Corp. to process customer withdrawals, the New York attorney general said last month. . . .

Exclusive: Banks to Invest Around $50 Million in Digital Cash Settlement Project – Sources
Reuters – May 16, 2019

Several of the world’s largest banks are in the process of investing around $50 million to create a digital cash system using blockchain technology to settle financial transactions, according to people familiar with the plans.

The previously disclosed project, known as the “utility settlement coin,” was first proposed by Swiss bank UBS Group AG and London-based technology startup Clearmatics in 2015. It aims to develop a system to make clearing and settlement in financial markets more efficient. . . .

Startup Launches To Combine All Of Your Credit And Debit Cards Into One Digital Card
Forbes – May 15, 2019

Forget checking your balance on your mobile phone. Startup Binji wants you to use your debit card instead.

In stealth mode for the past twelve months, the Irvine, California fintech is launching a debit Mastercard that enables consumers to consolidate as many as twenty-four credit cards and debit cards into a single account. . . .