Payments News Update – October 29, 2021

Legal and Regulatory Developments

SPOTLIGHT: Report: Apple ‘Very Likely’ to Face Antitrust Lawsuit From US Department of Justice
9to5Mac – October 25, 2021

A new report from The Information today indicates that Apple is “very likely” to face an antitrust lawsuit from the Department of Justice in the United States. The report explains that the US DOJ has “accelerated” the antitrust probe into Apple, which it first opened back in 2019.

Citing people familiar with the matter, the report says that there has been a “flurry of activity on the investigation” since the summer. This includes a new round of subpoenas being sent to Apple’s business partners, additional DOJ staff being assigned to the probe, and more. The investigation thus far has revealed what DOJ lawyers believe are “serious issues.” . . .

Justice Department Probes Visa’s Relationships With Fintech Firms
The Wall Street Journal – October 27, 2021 (subscription required)

The Justice Department is scrutinizing Visa Inc.’s relationships with large financial-technology companies as part of its antitrust investigation of the card giant, according to people familiar with the matter.

Antitrust investigators are looking into the financial incentives that Visa gave Square Inc., Stripe Inc. and PayPal  Holdings Inc., the people said. Investigators want to know if those deals kept the payments firms from using other card networks or money-movement technologies, the people said. The probe is part of an existing antitrust investigation that The Wall Street Journal previously reported. There is no indication that the department has reached any conclusions or is nearing the end of its probe. . . .

CFPB Chief ‘Worried’ About Big Tech Takeover in Payments
Law360 – October 27, 2021 (subscription required)

The Consumer Financial Protection Bureau’s director told House lawmakers Wednesday that he is “very, very worried” about large technology firms like Apple and Google dominating the payments landscape.

Appearing before the House Financial Services Committee, Rohit Chopra said he wants to make sure the U.S. payments system is “vibrant and serving everybody” and will accordingly be scrutinizing the practices of tech giants like Amazon, Facebook and Google that have rolled out payment services. “I am very, very worried, as I think many in the regulatory community have been, about Big Tech taking more control of the U.S. dollar and the global flow of payments,” Chopra said. . . .

New Fintech Regulations to Be Discussed by the U.S. Congress
FinTech Magazine – October 27, 2021

A congressional committee is anticipated to address the need for a new regulatory approach to financial technology in America. The U.S. House Committee on Financial Services announced that it will hold a hearing during the current meeting of the U.S. federal government’s legislative branch to discuss how to update the regulatory approach for fintech.

The committee is made up of representatives from both parties. It has jurisdiction over laws affecting banks, credit unions, savings associations, securities firms, insurance companies and other entities that participate in the country’s financial system. . . .

U.S. Regulators Exploring How Banks Could Hold Crypto Assets – FDIC Chairman
Reuters – October 26, 2021

A top U.S. bank regulator said U.S. officials are looking to provide a clearer path for banks and their clients that are looking to hold cryptocurrencies, in order to keep control over the fast-developing asset. Jelena McWilliams, who chairs the Federal Deposit Insurance Corporation, told Reuters in an interview on Monday that a team of U.S. bank regulators is trying to provide a roadmap for banks to engage with crypto assets.

That could include clearer rules over holding cryptocurrency in custody to facilitate client trading, using them as collateral for loans, or even holding them on their balance sheets like more traditional assets. . . .

Three U.S. Banks Agree to $66 Million ATM Antitrust Deal, Class Counsel Says
Reuters – October 26, 2021

Three U.S. banks have agreed to pay $66.7 million to settle consumer antitrust claims alleging a conspiracy to fix ATM charges, say plaintiffs’ lawyers seeking preliminary approval of the deal.

In a court filing on Monday in the U.S. District Court for the District of Columbia, lead class lawyers at Hagens Berman Sobol Shapiro, Quinn Emanuel Urquhart & Sullivan and Mehri & Skalet said Bank of America NA agreed to pay $26.4 million, Wells Fargo & Co will pay $20.8 million, and JPMorgan Chase & Co will pay $19.5 million. Only the bank defendants have agreed to the proposed settlement resolving consumer claims brought in 2011 that they overpaid surcharges levied on certain transactions at bank-operated ATMs, the plaintiffs’ lawyers said. . . .

ECB Shuns Visa, Mastercard, PayPal for Digital Euro Advisory Panel
PYMNTS – October 25, 2021

The European Central Bank (ECB) has announced the 30 people to be on its Market Advisory Group for its digital euro project, according to a press release. The group will advise the ECB on the design and distribution of a possible digital euro, the release stated. It will also consider how a digital euro could add value to the eurozone’s payments ecosystem.

Absent from the list of advisory group members are major U.S. payment firms, such as Visa, Mastercard and PayPal, Ledger Insights reported. Although the U.S. is represented with the inclusion of Stripe’s Sean Mullaney, Stripe has headquarters in both the U.S. and Ireland as its founders are Irish. . . .

Apple Updates Its App Store Guidelines to Permit Developers to Contact Customers About Other Payment Methods
TechCrunch – October 22, 2021

Apple today introduced a new set of App Store Guidelines that include three key changes. One of the changes is the result of a previously announced settlement agreement with a class of U.S. app developers. It clarifies that developers are allowed to communicate with their customers about other payment methods available outside their app. Related to this, another new guideline explains that apps may request customer information like name and email, but the request must be optional for the user and shouldn’t prevent them from using the app.

The third guideline is unrelated to legal action, and simply details how developers can use a new App Store feature, called in-app events, which rolls out next week. . . .

Australia’s Central Bank Tells ‘Buy Now, Pay Later’ Firms to Drop Surcharge Ban
Reuters – October 22, 2021

Australia’s central bank said buy now, pay later (BNPL) firms will no longer be able to prohibit merchants from passing on surcharges for their services, robbing the fast-growing sector of one of its key advantages.

Following a two-year review, the Reserve Bank of Australia said on Friday it was now engaging with Treasury on “regulatory approaches” to enforce its decision – a move fiercely opposed by the industry. The central bank noted BNPL services tend to be quite expensive for merchants to accept and it “has now concluded that there is a public interest case for BNPL providers to remove their no-surcharge rules.” . . .

Industry Developments

SPOTLIGHT: A New Report Shows Just How Many Consumers Have Adopted Digital Payments Since COVID
Digital Transactions News – October 25, 2021 (click here for the report from Businesswire)

It has been known anecdotally over the past year that the impact of the Covid-19 pandemic has shifted consumers to digital payments. On Monday, survey results emerged to show just how extensive that shift has been. Roughly one-third of consumers who now use such services as digital wallets, peer-to-peer payments, QR code payments, and buy now, pay later services began using them only in the past year, according to “State of the Union: Global Digital Payments and Fintech Ecosystem,” from 451 Research and sponsored by Discover Network.

“Many consumers that previously used cash and swiped credit cards shifted to using more flexible and hygienic forms of payment,” says the report. . . .

[Update] POS Device Maker Pax Draws Scrutiny Following Allegations of ‘Strange Network Activity’
Digital Transactions News – October 27, 2021

A report released on Tuesday detailing a raid by federal investigators at a Florida warehouse linked to Pax Technology Inc. has stunned the payments industry and left some observers concerned about the big point-of-sale device maker’s reported reaction to allegations its technology was involved in cyber attacks against organizations both in the United States and overseas.

An article posted on Tuesday in the online newsletter “Krebs on Security” said investigators had told a local radio station they were executing a “court-authorized search” at a Jacksonville, Fla., warehouse belonging to Pax. They indicated the search involved agents with the U.S. Department of Homeland Security’s Customs and Border Protection service and the Naval Criminal Investigative Services (NCIS). . . .

Taking the Friction Out of Financial Services: A Conversation With Plaid COO Eric Sager
McKinsey & Company – October 26, 2021