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Payments News Update – November 12, 2020

Posted  November 12, 2020

Legal and Regulatory Developments

SPOTLIGHT: DOJ Suit Over Visa, Plaid Deal Sounds a Lot Like a Monopoly Case
Bloomberg Law – November 10, 2020

The government’s lawsuit to block Visa Inc.’s $5.3 billion acquisition of Plaid Inc. contains language that could stir expectations of possibly stronger actions against the credit card giant. The case, filed Nov. 5 in the U.S. District Court for the Northern District of California, only seeks to block Visa’s proposed deal to buy the fintech developer, known for its software used for linking apps to users’ bank accounts. But the complaint also details Visa’s “long history” of trying to stop other emerging rivals, including PayPal Holdings Inc., from expanding into the online debt market. The deal “fits within an established pattern of Visa trying to thwart others from challenging its monopoly power,” the agency said. If the DOJ were to pursue stronger actions, it could expand its complaint to include monopolization claims or file an entirely separate monopoly case.

“This could be a monopolization case, it’s all there,” said John Newman, a former attorney at the DOJ’s antitrust division who is now an antitrust professor at the University of Miami School of Law. “There’s allegations of threats, coercion to prevent innovation, you have exclusive deals, and a high market share in an industry with high barriers to entry,” he said. Visa allegedly used threats and exclusive deals to undermine competitors. That has prevented “cheaper, more efficient online debt options from gaining traction” the DOJ said. Such accusations are similar to the monopolization claims the DOJ is pursuing against Alphabet Inc.’s Google. Such claims, if found to be true, can carry hefty repercussions, including a possible court-ordered breakup of a company’s assets. There are “enough strong allegations of exclusionary conduct” and “clear evidence of monopoly power” listed in the DOJ’s complaint to bolster a stand-alone monopolization case against Visa, said Sally Hubbard, the director of enforcement strategy at Open Markets Institute. . . .

CBD Retailer’s Suit Over Visa Blacklist Moves Forward
Law360 – November 10, 2020 (subscription required)

An online CBD retailer alleging Visa erroneously withheld $66,000 in payments and placed it on a transaction blacklist can pursue unjust enrichment and defamation claims against the credit card giant, a Missouri federal court has ruled. U.S. District Judge John A. Ross on Monday found retailer MNG 2005 Inc. made a strong enough case to beat Visa’s dismissal bid, though he tossed antitrust claims and released JPMorgan Chase Bank NA and subsidiary Paymentech LLC from the majority of claims against them. Judge Ross found MNG’s contract with Chase limited it to pursuing only breach of contract claims against the bank and the subsidiary over the withheld funds, which according to MNG were frozen after Visa wrongly flagged its CBD sales as “illegal activities.”

Visa allegedly based its decision to blacklist MNG on a report from G2 Web Services LLC, a company Visa hires to monitor potentially reputation-damaging transactions. Judge Ross released G2 from the suit, finding he lacked jurisdiction over the company. MNG, however, can keep Visa in court on the unjust enrichment claim because the company didn’t have any direct agreement with MNG. Judge Ross also found that the defamation claim against Visa cleared the bar. “Visa’s alleged statement that plaintiff engaged in illegal activities and was the subject of a law enforcement inquiry … is potentially a false statement of fact published to a third party,” he said. MNG’s attorney, Nathan S. Cohen, told Law360 on Tuesday that his client plans to refile its claims against G2 in another jurisdiction while forging ahead with the case against Visa. “We’re feeling like the case just got wider, not smaller,” he said, adding that he is considering bringing cases on behalf of other CBD retailers whose businesses have been erroneously flagged as illegal by credit card companies. . . .

India Opens Antitrust Case Against Google Over Its Payments App
TechCrunch – November 9, 2020

India’s antitrust watchdog has opened an investigation into Google for allegedly abusing the dominant position of its app store to promote its payments service in the world’s second largest internet market. In its Monday announcement (PDF) about opening an antitrust case against Google, Indian watchdog Competition Commission of India (CCI) said it is directing an in-depth investigation into the claims of whether the Android maker prominently promotes Google Pay during the setup of an Android smartphone (and whether phone vendors have a choice to avoid this); and if Play Store’s billing system is designed “to the disadvantage of both i.e. apps facilitating payment through UPI, as well as users.”

The informant, who has not been identified, alleged that in addition to Google Play Store’s billing system favoring Google Pay app, in-app purchases for apps downloaded through Play Store are also mandated to support Google Pay service “if they want to be listed on the Play Store” and they are required to pay a “high commission” for that. The call for an in-depth investigation comes after the CCI concluded in its initial review that requiring Google Pay to be used buy apps or make in-app payments was an “imposition of unfair and discriminatory condition, denial of market access for competing apps of Google Pay and leveraging on the part of Google,” the watchdog said. The informant also alleged that Google “unfairly” skews the search results on the Play Store in favor of Google Pay app over others — though CCI is not investigating this claim citing not enough evidence to support them. Google “rigs its feature app lists such as ‘Editor’s Choice Apps’, ‘User Choice Apps’ and ‘Top Free apps’ … demonstrating clear bias in favor of its own app; by manipulating the search advertisements algorithm on the Play Store in favour of Google Pay.”. . .

Worldpay Accused of Seizing Funds in $2.7m Contract Suit
Law360 – November 9, 2020 (subscription required)

A California-based credit card processor claims Worldpay LLC seized and is “unreasonably withholding” $2.7 million after hastily terminating a merchant agreement between the companies without proper explanation. Integrity Business Partners LLC brought its accusations in a lawsuit that Worldpay removed to Ohio federal court on Friday. The independent sales organization alleges it had worked with Worldpay from September 2019 until August, when Worldpay issued a termination letter accusing IBP of breaching their contract. The termination letter did not specify how IBP had violated the contract, stating only that the company’s underwriting activities were “outside of the approved underwriting guidelines … and reasonably may result in increased regulatory scrutiny or reputational harm,” according to the complaint.

“IBP has not received any information or reason for the termination other than what the termination letter outlines, nor was IBP provided an opportunity to cure the alleged breach,” the suit alleged. “Instead, Worldpay seized and is currently holding $2.7 million in reserves and refusing to return the funds to IBP for another six months to one year, effectively freezing over $2 million in funds.” IBP provides credit card processing services to merchants and business owners, and signed a contract in September 2019 in which Worldpay agreed to process and facilitate electronic transactions for IBP, according to the suit. Under that agreement, Worldpay is allowed to “hold in reserve only a sum reasonably projected to cover amounts that may come due from IBP,” but after Worldpay abruptly terminated their contract on Aug. 26, IBP ceased all operations with the company and moved its merchants to a new provider, the suit alleges. . . .

Britain’s Fintech Industry Braces for a No-Deal Brexit as Transition Deadline Looms
CNBC – November 9, 2020

U.K. fintech firms Curve and Modulr recently established new European outposts to ensure they can continue operating in the EU after Brexit. Revolut, meanwhile, is seeking an e-money license with Ireland’s central bank in addition to a license in Lithuania, which it secured in 2018. Fintech industry body Innovate Finance said a no-deal Brexit could affect the U.K.’s standing “as a leading financial services hub.” Financial technology start-ups in the U.K. are quietly rushing to get Brexit contingency plans in place as the prospect of crashing out of the European Union without a trade deal looks increasingly likely.

Britain and the EU are yet to come up with a trade agreement ahead of a Dec. 31 deadline. The U.K. has enjoyed continued access to Europe’s single market during a transition period this year but, once that ends, banks and fintechs are expected to lose “passporting” rights that allow them to operate throughout the bloc. Some U.K. fintechs have established new European outposts to ensure they can continue operating in the region and avoid disruption to their users, even in the event of a no-deal scenario. The issue is creating a great deal of “stress” and “nervousness” in the fintech sector, two well-placed industry sources who preferred to remain anonymous due to the sensitivity of the situation told CNBC. Curve, an app that lets users link their bank cards to one spending card, says it set up a new entity in Lithuania and won regulatory approval in the country. Nathalie Oestmann, Curve’s chief operating officer told CNBC this move was intended to “ensure we could continue to serve the 50% of our customers who are European after Brexit.” . . .

5 Predictions for Banking Regulation in a Biden Presidency
Law360 – November 8, 2020

The regulatory landscape facing banks and other lenders has shifted with Joe Biden’s apparent victory in the U.S. presidential election, bringing with it what financial services attorneys predict will be a greater focus on economic inequality and consumer protection, even as the pandemic’s economic fallout is likely to continue dominating the agenda. Biden won the presidency Saturday with his apparent victories in Pennsylvania and Nevada. While President Donald Trump is continuing to fight the results in court, the former vice president said he was moving forward with his transition plans.

Biden will enter the White House in the shadow of a crisis, much as he did in the wake of the 2008 financial meltdown that felled Wall Street giants and led to the creation of a vast new financial regulatory framework. This time he will confront a novel coronavirus pandemic that has killed more than 230,000 in the U.S. alone, threatened millions of businesses with closure and put the banking system through its greatest strain since the financial crisis. While financial regulation wasn’t a defining issue of his candidacy the way it was then, Biden is expected to pivot from the rule rollbacks favored by the Trump administration and push for stronger oversight of financial firms, greater public sector involvement in providing financial services and increased emphasis on economic justice. At the same time, the incoming administration will assume responsibility for shepherding banks through the COVID-19 crisis and confronting the regulatory challenges posed by the rise of fintech. . . .

Brazil Central Bank’s Regulatory Sandbox Targets Payment Development
PaymentsSource– November 6, 2020 (subscription required)

Brazil’s central bank and the country’s National Monetary Council have established operation guidelines for a regulatory sandbox to encourage financial and payments technology innovation. Regulation from the Banco Central do Brasil and the council provides conditions for the supply of products and services tested under the controlled tests environment within the scope of the National Financial System and the Brazilian Payment System — with an emphasis on security and efficiency within the domestic financial and payment systems. Financial services and payments providers would be licensed to test for a specific period of time, limited to one year, under regulated controls. The first cycle is scheduled for 2021. To be considered an innovative project, the bank states, the experiment has to employ technological innovation or promote alternative use of existing technology, while also bringing improvements to the financial industry.

In order to be licensed to operate within the bank’s regulatory sandbox environment, the institutions — in addition to carrying out their transactions with integrity, reliability, security and confidentiality — must comply with the regulation on the prevention of money laundering and combat of the financing of terrorism and the handling of complaints of their clients and users. Because new products or services are subject to specific requirements, the bank will monitor results and, when detected that the participant’s activities may pose excessive risks, it may establish limits and additional criteria. The bank says its license to participate in the regulatory sandbox does not imply a guarantee that the participant will receive a definitive license from the bank to operate. . . .

India Is Letting Whatsapp Offer Payments to Millions More Users
CNN – November 6, 2020

Millions more WhatsApp users in India can finally start sending each other money through the app. Facebook (FB), which owns the popular messaging platform, announced Friday that it had gone live with the new feature after years of regulatory hurdles prevented it from making the service widely available in India. The National Payments Corporation of India, an organization affiliated with the Reserve Bank of India, confirmed in a statement Thursday that it had given approval for WhatsApp to roll out the service to more people, starting with a user base of up to 20 million accounts. The company had been testing the tool in India since 2018 with up to 1 million users. The country is WhatsApp’s biggest market, with 400 million users.

“I am excited today that WhatsApp has been approved to launch payments across India,” CEO Mark Zuckerberg said in a video statement. “Now you can send money to your friends and family through WhatsApp as easily as sending a message.” The feature is already available on the latest version of the app in 10 Indian languages. Facebook noted that anyone who wants to use the service needs to have a bank account and debit card with a lender that allows users to make transactions across different apps in India. WhatsApp has made no secret of its ambitions to start providing more services to users in India. It first announced plans to move into online payments more than three years ago and in 2018, appointed the co-founder of a digital payments firm, Abhijit Bose, as its first India chief, signaling a desire to ramp up its plans in the space. Facebook’s latest move also comes as the company is spending big money in India. In April, it pumped $5.7 billion into Jio Platforms, the tech firm run by Indian billionaire Mukesh Ambani. Jio Payments Bank, which operates under Ambani’s Reliance Industries umbrella, is one of the partners on WhatsApp’s new payments venture. . . .

Industry Developments

SPOTLIGHT: The ‘Fintechization’ of Everything: The 7 Hottest Fintech Trends in 2021
Finance Magnates – October 29, 2020

We all know that 2020 has been a total paradigm shift year for the fintech world (not to mention the rest of the world.) Our financial infrastructure of the globe has been pushed to its limits. As a result, fintech companies have either stepped up to the plate or hit the road for good. As the end of the year appears on the horizon, a glimmer of the great beyond that is 2021 has begun to take shape. Finance Magnates asked the experts what is on the menu for the fintech world. Here is what they said.

Jackson Mueller, director of policy and government relations at Securrency, told Finance Magnates that one of the most important trends in fintech has to do with the way that people see their own financial lives. Mueller explained that the pandemic and the resulting shutdowns across the globe “led to more people asking the question ‘what is my financial alternative’?” In other words, when jobs are lost, when the economy crashes, when the concept of ‘money’ as most of us know it is fundamentally changed – what then? “The longer this pandemic continues, the more comfortable people will become with it, and the more adjusted they will be towards new or alternative forms of finance (lending, payments, wealth management, digital assets, et cetera),” Mueller said. “We’ve already seen an escalation in the use of and comfort level with alternative forms of payments that are not cash-driven or even fiat-based, and the pandemic has sped up this shift even further,” he added. After all, the wild fluctuations that have rocked the global economy throughout the year have caused a massive change in the perception of the stability of the global financial system. . . .

Number of Bitcoin ATMs up 85% This Year as Coronavirus Drives Adoption
Coindesk – November 11, 2020

The number of bitcoin automated teller machines (ATMs) across the globe has surged this year amid the coronavirus-induced shift toward contactless payments. Bitcoin (BTC, +2.02%) ATM installations have increased by 85% to 11,798, outpacing the previous year’s near 50% rise by a significant margin, according to data source Coin ATM Radar. The spike demonstrates the rising popularity of bitcoin as a payment mode. The fear of getting a coronavirus infection has accelerated the growth in the broader contactless payment market this year, according to Global Trade Magazine.

Bitcoin’s borderless network facilitates a seamless transfer of money in any amount from anywhere across the globe, through any mobile or computer, and at relatively lower fees than traditional banking channels. A bitcoin ATM allows a person to purchase the cryptocurrency by using cash or debit card. Some machines facilitate the purchase of bitcoin and the sale of cryptocurrency for cash. The U.S. added over 800 ATMs in October alone and is leading cryptocurrency adoption, followed by Canada and Germany, as noted by Coin ATM Radar. With several public companies investing in bitcoin and online payments giant PayPal adding support to the cryptocurrency, mainstream adoption could continue to grow. . . .

COVID-19 Could Push Merchant Surcharging to the Mainstream
PYMNTS – November 11, 2020

A settlement some 10 years ago between card networks and merchants over swipe fees technically granted merchants the right to surcharge consumers who pay with credit, as a means of offsetting interchange fees. But Payroc CEO Jim Oberman told PYMNTS in a recent conversation that the capability has long gone unused by the vast majority of merchants. He said that’s because laws in California, New York, Texas and other states nonetheless made it illegal for merchants to add card use surcharges. So, there wasn’t much point for processors like Payroc to build in the capacity to allow merchants to assess surcharges. “A lot of us on the processing/acquiring side of the aisle said, ‘Why put a lot of money into this technology when three of our biggest markets can’t do it anyway?’” Oberman said.

But while states like Massachusetts still prohibit merchant surcharges, California and Texas have since moved to allow them. And although New York hasn’t completely removed all regulation of surcharges, it has loosened up the rules significantly in recent years. Oberman said that was enough to motivate Payroc to invest several million dollars in building Reward Pay™, a fully compliant surcharging platform for merchants. The system lets merchants give their customers a choice: Pay with debit, ACH or cash and skip the surcharge altogether, or pay with one’s credit card of choice and face a 3 percent to 3.99 percent surcharge. Oberman said Reward Pay was gaining traction before COVID-19, but the pandemic has given it an unexpected boost – pushing surcharges toward becoming a more mainstream practice among merchants and consumers. “It’s not mainstream yet, but it’s becoming more mainstream,” he said, noting that Payroc remains very bullish on Reward Pay’s potential for the near and middle term. . . .

Walmart in Canada Will Introduce Debit on Apple Pay and Google Pay via Interac
Digital Transactions News – November 10, 2020

Walmart Inc. will start next spring allowing customers in Canada to pay with debit in-app and in-browser using wallets like Apple Pay and Google Pay, the Canadian national payments network Interac announced Tuesday. Interac positions the new service as enabling so-called proprietary wallets, which it confirmed includes the apps from Apple Inc. and Alphabet Inc.’s Google unit. Walmart has already started introducing Interac Flash, the national payment network’s contactless payment technology, at its in-store payment terminals, Interac said. The move represents a departure from Walmart’s policy in the U.S. market, where its 11,000 stores do not accept mobile wallets other than the retailer’s own Walmart Pay app. Walmart’s Canadian stores have not yet adopted Walmart Pay, which Walmart introduced in December 2015. The service became available chainwide in the United States the following summer.

Tuesday’s announcements represent a significant expansion for Walmart of its relationship with Canada’s national payments network. The Bentonville, Ark.-based merchandising giant operates more than 400 stores in Canada. “Walmart Canada is very excited to now offer Interac debit and provide more convenient and contactless ways for customers to check out in-store and online,” said Nicolai Salcedo, Walmart Canada’s chief information officer, in a statement. “We listen to our customers and want them to have even more choices for how they pay for their items. This is part of our ongoing effort to make shopping at Walmart easy, safe and seamless, especially during these challenging times.” . . .

Amex Says Its Cardholders Are Stockpiling Their Points and Miles
Bloomberg – November 10, 2020 

AmEx customers are sitting on a pile of points. Customers of American Express Co.’s travel-related co-brand cards, as well as the firm’s Platinum, Gold and other proprietary cards, have been stockpiling their points and miles during the pandemic, according to Chief Financial Officer Jeff Campbell. That means the rewards are likely to be used eventually for big vacations, he said. “They’re not choosing to redeem them for online retail, which they could,” Campbell said at a virtual conference Tuesday. “They’re just stocking up the points to travel.”

AmEx added temporary perks to some of its most popular cards — including the $550-a-year Platinum card — to make them more relevant to customers stuck at home during the Covid-19 crisis. The new rewards can be used on purchases popular during the pandemic, such as streaming services. Those perks have helped the company keep a lid on attrition, with about three-quarters of U.S. Platinum cardholders having used some portion of the new benefits, Campbell said. Still, the company isn’t moving away from its longtime focus on travel. “We’d be crazy to dramatically pivot the whole company because of what we view as a fairly temporary change in the way people are going to spend,” said Campbell, who was at American Airlines Group Inc. during the Sept. 11, 2001, terrorist attacks. “The human urge to travel – to gather, to explore — is insatiable.” . . .

WEX’s Dearborn Says B2B Payments Has Reached Tipping Point
PYMNTS – November 9, 2020

When it comes to the scope of changes that businesses have implemented in the past seven months of COVID-era adaptation, characterizing the digital shift as a mere “acceleration” would be an understatement. “I think when the pandemic hit in early March, it really put a gun to the head of many companies by taking what have been Byzantine processes around accounts payable or accounts receivable and moving to much more digital means,” Jay Dearborn, president, corporate payments of WEX Inc., told PYMNTS. The Portland, Maine-based FinTech leader said from his view, at least one corner of the payments industry has reached a tipping point and is never turning back. “I really don’t think in today’s day and age that you can ignore the AP or the AR digitization question,” Dearborn said of the increasing merge of the corporate accounts payable and accounts receivable functions.

And apparently, he’s not alone. Dearborn points to a July study of FinTech decision-makers that WEX commissioned that showed 72 percent of respondents said their processes have become more digital throughout the pandemic. But what he found even more telling was that 86 percent felt that those companies leading with technology transformation in their payments department would be best poised for rebound heading into 2021 and 2022. “We had more than 300 respondents, more than half of them were C-suite executives, and what we see across the board was a resounding run toward the digitization of payments,” Dearborn said. In some ways, the rapid response that this unanticipated calamity demanded underscored how lucky companies were to have access to technological solutions that made the seemingly impossible, possible. “We’re all blessed in this industry that there are tools available to treasury banks and to FinTechs alike that allow those with legacy processes to modernize fairly quickly,” Dearborn said. As he sees it, corporates that still haven’t gone through an AP automation transformation “need to call up your local treasury bank and determine if there’s a digital offering that they can help steer you toward.” . . .

The Race to Be China’s Top Fintech Platform: Ant vs Tencent
TechCrunch – November 9, 2020

As Ant Group  seizes the world’s attention with its record initial public offering, which was abruptly called off by Beijing, investors and analysts are revisiting the fintech interests of Tencent, Ant’s arch rival in China. It’s somewhat complicated to do this, not least because they are sprawled across a number of Tencent properties and, unlike Ant, don’t go by a single brand or operational structure — at least, not one that is obvious to the outside world. However, when you tease out Tencent’s fintech activity across its wider footprint — from direct operations like WeChat  Pay through to its sizeable strategic investments and third-party marketplaces — you have something comparable in size to Ant, and in some services even bigger.

Ant refuted the comparison with Tencent or anyone else. In a reply to China’s securities regulator in September, the Jack Ma-controlled, Alibaba-backed fintech giant said it is “not comparable” to WeChat Pay, the fintech tool inside WeChat, Tencent’s flagship messenger. “In the space of digital payments and merchant service, there are many players around the world, including Tencent’s WeChat Pay. But the payments services offered by these companies are different from our digital payments and merchant services. They are not comparable. In terms of digital finance, our way of working with and serving financial institutions, as well as our revenue model, are novel and do not have a counterpart,” the company noted in a somewhat hubristic reply. . . .

New Data: More Than Forty Percent of U.S. Consumers Shop Through Digital Channels … and Stay There
PYMNTS – November 9, 2020

Not all that long ago, consumers would head to local business districts or malls without necessarily having set plans about what they might buy or which shops they might enter. The COVID-19 pandemic has fundamentally altered the age-old tradition of going shopping, however. The vast majority of United States consumers now know what they want to buy before they begin making purchases — and once they have made up their minds, they are far more likely to reach for their computers and mobile devices than they are their car keys. The share of all consumers making purchases with digital devices has increased from 27 percent in March to 42 percent.

These are among the key findings that have emerged from the Global Digital Shopping Index, an extensive PYMNTS study examining how consumers are using digital technology to augment and even replace traditional shopping experiences as well as how merchants are adapting to these shifts. The report focuses on the U.S. market and is based on a survey of 2,170 consumers and 500 merchants. Subsequent reports will examine markets in Australia, Brazil and the United Kingdom. Our research shows that consumers are more often starting their shopping journeys online and that a growing share are choosing to finish their journeys there and having products shipped to their homes. The portion of consumers who prefer wholly digital shopping journeys has increased 22 percent since the pandemic began, to the point that these digital natives now make up more than one-quarter of U.S. consumers. . . .


– By Kristian Soltes. For questions about this newsletter or its content, contact