Payments News Update – May 28, 2020

Legal and Regulatory Developments

SPOTLIGHT: French Anti-Trust Watchdog Shines a Light on Fintech
Finextra – May 27, 2020

France’s competition authority has launched a public consultation into the fintech sector, with a focus on payment services. The payments sector is being upended by a combination of new technologies, such as mobile phones and blockchain, and new players, both fintech startups and big tech outfits. The Autorité de la concurrence is seeking industry feedback to establish whether these new providers and services, and how they interact with old-fashioned bank efforts, bring up competition issues.

Google, Amazon and Other Top Tech Cos. Making M&A Deals Amid Pandemic
PYMNTS – May 28, 2020

Giant tech companies are seeking deals at their fastest pace in years, fueled by COVID-19 despite an increase in scrutiny by regulators. The Financial Times reported Google, Amazon, Apple, Facebook and Microsoft have made 19 deals so far this year, according to Refinitiv, the London-based global provider of financial market data. This represents the fastest pace of acquisitions and strategic investments since 2015.

On Wednesday (May 27), PYMNTS reported Amazon is negotiating to purchase the California self-driving car company Zoox. Two years ago it was valued at $3.2 billion, FT reported. Last month, Facebook closed a $5.7 billion deal for a minority stake in Indian telecom startup Reliance Jio, giving the social media giant a larger foothold in the region. . . .

Bitcoin Daily: Swiss Startup Eidoo Launches Visa-Branded Crypto Debit Card in EU, UK; Louisiana Senate Eyes Licensing Crypto Firms
PYMNTS – May 26, 2020

Swiss startup Eidoo wants it to be easier to pay with bitcoin at points of sale using a debit card, typically a hefty proposition as retailers shy away from the currency due to volatility. Visa has approved the Eidoo Card, which will allow Visa merchants to accept crypto-derived fiat currencies, such as the British pound and the euro.

Eidoo CEO Thomas Bertani explained how the card would work, saying that users with crypto tokens could exchange them on DeFi DEXes like Uniswap for the stablecoin, which would then be matched at a 1:1 ratio on the Eidoo Card. The card is a result of a partnership with Contis, which is a member of Visa Europe and has an e-money license. Contis will act as the licenser of the card, similar to how fellow crypto cards like Monolith operate. . . .

Payment Modernization – An Engineering Hurdle to Overcome
Finextra – May 25, 2020

Payment is no longer a protected territory of few large financial institutions (FI) and intermediaries. An evolving eco-system with technology players in the mix, and their rapid innovation, are continuously disrupting ways of making payments, ease of accepting cashless payments and the experience around it.

Regulatory moves from financial bodies are increasingly lowering entry barriers for Fintechs – be it democratization of customer data thru PSD2 directive in the UK or UPI (Unified Payment interface) based Payments in India. A regulation in the like of PSD2 shifts the control of customer data from FI to customer herself, and, necessitates building a new market place of API based Open Banking system; legacy players are not left with choices but to be part of the eco-system to stay relevant. . . .

CCPA Is 1 of Many Retailer Data Privacy Class Action Worries
Law 360 – May 22, 2020 (subscription required)

The privacy landscape has drastically evolved over the last few years. On March 17, 2018, The New York Times and The Guardian simultaneously broke the story that Cambridge Analytica Ltd. had harvested the personal data of 87 million people to be used for predominantly political advertising. On May 25, the EU General Data Protection Regulation went into effect. Barely a month later, on June 28, the California Consumer Privacy Act was enacted.

The CCPA was born out of rising concerns in the wake of serious data breaches, which revealed that consumers did not understand how their personal information is collected, much less how it may be shared or sold. Once the CCPA was passed, other states considered, passed or began enforcement of their own data privacy laws. . . .

Cryptoassets Emerge as New Battleground for UK Litigation
Law 360 – May 22, 2020 (subscription required)

New anti-money laundering rules and a key decision on cryptoassets are poised to make digital currency a growing litigation battleground in the U.K. as the asset class matures.

Most of the disputes in the British courts have so far centered on fraud allegations and protecting cryptoassets stolen by cybercriminals in phishing and ransomware attacks, but attorneys expect to see more litigation involving insolvencies, misselling, divorce and probate as the market evolves.

“Last year we saw the maturity of cryptoassets as treated by law with the first cases to give rulings on the definition of Bitcoin as property,” explained Giles Hawkins, partner at Ashfords. . . .

Will the Pandemic Finally Get Central Banks Interested in Building Digital Currencies?
PYMNTS – May 21, 2020

The tipping point might be nigh for digital dollars and other central bank-issued currencies done through bits and bytes.

As politicians across the globe grapple with the pandemic’s continued economic fallout and the need to get stimulus funds to individuals, corporations and even local governments with speed and security, digital delivery of those dollars is likely to gain increasing traction.

As reported in this space last month, the efforts are still nascent. In the United States, the digital dollar was floated in a draft proposal of one of the early stimulus bills. . . .

Industry Developments

SPOTLIGHT: Retailers Call out Banks Over Inaction on Contactless Payments
Banking Day – May 21, 2020

Small business groups and government agencies are ramping up pressure on the major banks to offer least cost routing on contactless debit transactions as part of merchant servicing plans.

Industry lobby groups such as the Master Grocers Association (MGA) and the Australasian Association of Convenience Stores (AACS) are intensifying their long running campaigns to secure least cost routing for independent retailers as the Covid-19 crisis drives up retailers’ total costs of accepting contactless payments.

The Reserve Bank’s Payments System Board directed banks more than two years ago to allow retailers to select the cheapest network to process contactless debit payments instead of the longstanding practice of banks routing such transactions to Visa and Mastercard. . . .

Providing Card Services to Fintech Companies Around the World Gives Marqeta a $4.3 Billion Valuation
Tech Crunch – May 28, 2020

This could have been Marqeta’s year to list as a public company on a major American stock exchange. The company, while still unprofitable, is a darling of the financial services sector and only last year reached a $2 billion valuation on the back of a $260 million round of financing.

In the previously torrid public market environment that was supposed to see public listings from Airbnb and other unicorn companies, Marqeta could have been a contender. Now, in the wake of an American economy pushed over the edge by a global pandemic the company has turned to an undisclosed financial services firm for another $150 million in equity funding. The round values the company at over $4 billion. . . .

Coronavirus Puts Real Time Payments Network to the Test
PaymentsSource – May 27, 2020

Mobile and contactless payments have generated more consumer attention as ways to safely move money during the coronavirus pandemic, but there’s also a growing wave of support for The Clearing House’s Real Time Payments network for banks.

In place in the U.S. since 2017, the Real Time Payments network is getting a boost in adoption and transaction volume at least partly because banks and their customers are more clearly seeing the benefits in fast digital payments as other methods have been crippled by COVID-19. . . .

Walmart and Green Dot Beef Up the Moneycard With a New Savings Rate and Other Features
Digital Transactions News – May 26, 2020

Looking to make their reloadable prepaid card more attractive as retailers and consumers alike deal with the uncertainty created by the coronavirus pandemic, Walmart Inc. and Green Dot Corp. on Tuesday said they are now offering a 2% rate on the Walmart MoneyCard’s associated savings account.

The rate is applicable for balances up to $1,000. Previously, no rate applied as users earned the chance to win prize savings instead, a Green Dot spokesperson says. The prize program is still in effect. The companies also announced cardholders can get as many as four more cards for family members who are at least 13 years old, make free cash deposits, and use a feature allowing cardholders to add funds from an existing bank account. . . .

Facebook Renames Blockchain Division After Libra Confusion
PaymentsSource – May 26, 2020

Facebook Inc. has renamed its blockchain division, called Calibra, to distance it from the Libra digital currency that Facebook created. The blockchain team is building a digital wallet for Facebook’s apps, which will eventually hold the Libra digital currency, but Facebook won’t control the coin. “People were confusing Libra and Calibra all the time,” said David Marcus, Facebook’s head of blockchain. “In hindsight it’s hard to blame them.”

The blockchain division is now called Novi — a combination of two Latin words: novus, meaning “new,” and via, meaning “way,” Facebook said in a blog post Tuesday. Facebook’s digital wallet will also be called Novi. . . .

COVID-19 Causes ‘Decade of Change’ in Consumer Payments Behavior
CU Times – May 26, 2020 (click here for white paper from Boston Consulting Group)

State shut-down orders and social distancing efforts tied to the novel coronavirus spurred “huge shifts” in consumer payments behavior that could affect long-term habits, Ondot Systems said in a new white paper. Ondot, a Santa Clara, Calif.-based digital card services platform for credit and debit issuers, described the impact of COVID-19 as a “decade of change in just a few months” in the new report.

“COVID-19 has increased demand for digital payment solutions among consumers who see changing the way they spend money as a potential health issue,” Prasanna Narayan, Ondot’s vice president for product management, said. “This added pressure is forcing financial institutions to review their digital banking roadmaps in order to meet the changing needs of consumers.” . . .

China’s Central Bank Digital Currency Will Strengthen Alipay and WeChat Pay, Not Replace Them
Forbes – May 24, 2020

China has been exploring the idea of a Central Bank Digital Currency (CBDC) since 2014. Six years later, it launched a pilot version. The official Digital Currency Electronic Payments (DCEP) platform currently looks set to launch within a year.

Some media observers have suggested that Beijing is launching the DCEP to wrest control from the digital incumbents: Alipay and WeChat Pay. The two fintech giants control about 90% of China’s digital payments market, and between 20-25% of retail spend across China, not to mention the distribution of many other financial products and services such as wealth management and lending. . . .

New Data: Better Customer Service Could Sway 3 in 10 Consumers to Switch Credit Cards
PYMNTS – May 22, 2020

There is a growing list of things millennials have seemingly been blamed for rendering obsolete, such as cocktail napkins, casual dining and expensive engagement rings. Part of the reason why this generation supposedly has little interest in such mainstays is that they have become used to convenience due to the use of smartphones and other digital devices. This means paper towels are just as good as napkins, cooking at home is cheaper and faster and unethical diamonds can’t buy love.

One might expect that calling up customer service would also go on that list of products and services that are falling out of style. When it comes to credit cards, however, PYMNTS found that effective customer service is so important that 28 percent of consumers would seriously consider switching to cards that offer superior service — and the proportion is considerably higher among millennials: nearly 43 percent of them would be very or extremely interested in switching to cards that are more responsive to their concerns. . . .

Rising Use of Digital Payments in Canada Is Likely a Permanent Trend, Interac Reports
Digital Transactions News – May 22, 2020

Some results from Interac Corp. on Friday show the novel coronavirus and its attendant restrictions are pushing Canadian consumers and businesses toward digital payments, a trend the company says could have lasting effects.

In April, e-Transfer transactions reached a record level at 61.3 million, according to the announcement from Interac, which operates the national switch in Canada for electronic payments. The e-Transfer capability allows consumers to pay others via online banking. First-time use helped drive up the numbers for the service, with new users growing by 43% since mid-March. . . .

Credit and Debit Cards Have More Germs Than Cash and Train Station Urinals, Study Says
USA Today – May 22, 2020

Now there’s another reason to beware using credit and debit cards too much: Handling them might make you sick. In addition to the budget-busting potential of spending too much with payment cards, especially credit cards, a new study says they’re among the dirtiest common items out there – even more so than cash.

LendEDU.com, a finance website, tested various items for their germ scores and found credit and debit cards to be near the top of the list – not as dirty as New York City park benches and rental-bike handles, for example, but more so than a urinal handle at Penn Station and more than the city’s subway poles. . . .

Banks Reengineer Instant Debit Card Issuance Amid Pandemic
PaymentsSource – May 21, 2020

When First Midwest Bank started closing branches as states ordered residents to stay at home, it decided that instantly issuing debit cards was a critical service for customers. So the Chicago bank migrated the normally branch-only service to the drive-through. “We wanted there to be no question that folks had full access to their funds,” said Jay Bernstein, the $19.8 billion-asset bank’s business solutions manager.

When a customer’s debit card is lost, stolen or otherwise compromised, visiting the branch to get a replacement card printed and issued on the spot beats waiting a week or more for a new card to arrive in the mail. But with many branches diverting service to their drive-throughs, banks have had to come up with creative alternatives for customers to get new cards and choose a new personal identification number with minimal human contact. . . .

 – Curated by Kristian Soltes. For questions about the newsletter or its content, contact ksoltes@constantinecannon.com.