Click here for a confidential contact or call:


Payments News Update – December 24, 2020

Posted  December 24, 2020

DEEPER DIVE: The DOJ Is Right in Suing to Stop Visa’s Deal for Plaid. Here’s Why: Part I and Part II

In a two-part article, payments industry expert Mark Horwedel discusses the DOJ’s lawsuit concerning Visa’s acquisition of Plaid.

Legal and Regulatory Developments

SPOTLIGHT: Apple Pay Antitrust Pressure Grows as Service Heads Towards 10% of All Transactions
9to5Mac – December 18, 2020

Apple Pay antitrust pressure is growing as the coronavirus crisis has boosted the popularity of contactless payment in general, and Apple’s mobile wallet service in particular. Contactless cards have a relatively low limit, above which the card needs to be inserted into the terminal and a PIN used. Apple Pay, in contrast, qualifies for very much higher limits or no limits at all, allowing contactless payment for even major purchases.

That has accelerated what was already rapid growth in Apple Pay usage. A Financial Times report says that it is now used by every other iPhone user in the world – with much more to come. It is now used by 507m people, according to analysts at Loup Ventures, or roughly half of the people in the world who own an iPhone, up from just 67m four years ago. . . .

China Launches Antitrust Probe Into Tech Giant Alibaba
Yahoo! Finance – December 23, 2020

China has launched an antitrust investigation into Alibaba Group and will summon the tech giant’s Ant Group affiliate to meet in coming days, regulators said on Thursday, in the latest blow for Jack Ma’s e-commerce and fintech empire. The probe is part of an accelerating crackdown on anticompetitive behaviour in China’s booming internet space, and the latest setback for Ma, the 56-year-old former school teacher who founded Alibaba and became China’s most famous entrepreneur.

It follows China’s dramatic suspension last month of Ant’s planned $37 billion initial public offering, which had been on track to be the world’s largest, just two days before shares were due to begin trading in Shanghai and Hong Kong. In a strongly worded editorial, the ruling Communist Party’s People’s Daily said that if “monopoly is tolerated, and companies are allowed to expand in a disorderly and barbarian manner, the industry won’t develop in a healthy, and sustainable way”. . . .

SEC Sues Ripple and Two Executives for Selling XRP Crypto: A $1.3 Billion Securities Fraud
CNN Business – December 23, 2020

The US Securities and Exchange Commission filed a lawsuit against cryptocurrency platform Ripple, its CEO, and its chairman, for orchestrating securities fraud worth $1.3 billion, the agency said Tuesday. The SEC said Ripple illegally marketed XRP (XRPLX), the world’s third-largest cryptocurrency, to retail customers. According to the complaint, Ripple’s chairman, co-founder and former CEO Christian Larsen, and the company’s current CEO Bradley Garlinghouse, raised capital for the business through the sale of XRP in an unregistered securities offering.

The failure to register the XRP sales — or qualify for a registration exemption — constitutes a violation of federal securities law, the SEC said. On top of that, the company also allegedly received services, including labor and market-making, in exchange for the XRP offering. Larsen and Garlinghouse also orchestrated personal unregistered sales worth $600 million, the SEC alleged. . . .

DOJ’s Visa Merger Challenge Gets Late June Trial Date
Law360 – December 21, 2020 (subscription required)

The California federal judge presiding over the DOJ’s challenge to Visa’s purchase of Plaid on Monday set a June 28 kickoff of a trial estimated at 20 days, somewhat splitting the difference between the February start requested by the companies and the September start desired by the government. U.S. District Judge Jeffrey S. White said in his order that the trial is estimated by the U.S. Department of Justice to last 20 days, but the court will determine the final estimated length at an upcoming pretrial conference.

The DOJ last month said Visa’s wish to commence the trial in February is “infeasible” and accused the companies of attempting to deny the government “a fair chance” at pursuing the merger challenge. Counsel for the parties did not immediately respond to requests for comment. . . .

US Treasury Proposes Sweeping New Disclosure Rules on Bitcoin, Other Cryptos
PYMNTS – December 18, 2020

The U.S. Treasury Department proposed sweeping new rules late Friday (Dec. 18) that the government says would make convertible digital currencies like bitcoin less attractive to criminals engaging in crimes such as ransomware attacks.

The new regulations, if adopted after a comment period, would require banks and some other institutions to obtain and report the identities of parties engaging in certain digital transactions, including payments involving what are called “unhosted wallets” – effectively secret bank accounts that hold cryptocurrency. The rules effectively require financial institutions to report such digital transactions in much the same way they have been required to report cash transactions since 1970. The proposed limits for reporting digital transactions are $10,000 for non-wire transactions and $3,000 for wire transactions – the same as with cash. . . .

WEX Settles UK Merger Suit With Slashed $577m Fintech Deal
Law360 – December 18, 2020 (subscription required)

Financial technology company WEX Inc. has agreed to go through with its acquisition of two payment companies for $577.5 million, securing a massive reduction in the original $1.7 billion purchase price after winning at a preliminary trial in London. Maine-based WEX has settled the dispute and agreed to buy Optal Ltd. and eNett International (Jersey) Ltd. for less than half the original purchase price, WEX’s attorneys at Freshfields Bruckhaus Deringer LLP said on Friday.

The deal comes after WEX successfully argued in court that disruption caused by the COVID-19 crisis could trigger a material adverse effect clause and allow the company — which offers payment processing and information management services — to withdraw from the deal. . . .

Global Stablecoins Could Eventually Become Reserve Currencies: IMF Paper
Coindesk – December 17, 2020

Titled “Reserve Currencies in an Evolving International Monetary System,” the departmental paper looks at shifts in the global monetary system and factors that might influence the U.S. dollar’s role as the dominant reserve currency, including new payments systems and digital currency. While their study concluded overall that the dollar is safe for now, the authors said the reserve currency landscape would likely shift.

They posited that private digital currencies could “emerge as important international currencies,” with libra/diem possibly becoming the first example of a global stablecoin. Global stablecoins (or GSCs) could also increase the demand for reserve fiat currencies they’re backed by, according to the paper. “But GSCs do not need to be backed by existing fiat reserve currencies and could themselves attain reserve currency status,” the authors write. “It is also conceivable that more than one global stablecoin could become a reserve asset.”. . .

Industry Developments

SPOTLIGHT: Routing Headwinds Are the Reason for Debit Networks’ Lag
PaymentsSource– December 17, 2020 (subscription required)

The payments industry should not be fooled by the argument that implies U.S. debit networks have not kept up with investments as the broader market has evolved. The real reason that merchants face routing impediments is that the global brands have used their market share power to thwart industry and regulatory desires to maintain a robust, competitive, compliant and fair payments system.

U.S. debit networks have made significant investments in providing open, ubiquitous access to payment transactions allowing choice and flexibility for payment stakeholders to route and receive transactions. PIN-less debit products for e-commerce and dual message products for card-present transactions are two of the most recent examples. The U.S. debit networks have always been strong supporters of open standards created through open, consensus building. . . .

Ant Group Curbs Credit Limits of Some Users of Virtual Credit Cards
PYMNTS– December 23, 2020

Ant Group is best known for its wildly popular payment and loans app Alipay, which has both online and mobile platforms. Chinese regulators are looking to strengthen the rules for FinTechs. Ant has two credit subsidiaries, Huabei and short-term consumer loan provider Jiebei. In its IPO prospectus, Ant reported that these two were used by around 500 million people in the 12 months to June 30, said Reuters. . . .

Visa Reinstates Card Use on Some MindGeek Sites, Pornhub Still Banned
PYMNTS – December 23, 2020

Visa will continue its ban on payments processing for Pornhub, but will allow the use of its cards for some of parent company MindGeek’s other properties, Reuters reported. “Following a thorough review, Visa will reinstate acceptance privileges for MindGeek sites that offer professionally produced adult studio content,” a Visa spokesperson said, according to Reuters.

Visa said the ban for processing payments for Pornhub, a well-known site for professionally produced adult content, will remain in effect until the investigation into the site is completed. Mastercard, a rival of Visa, also pulled payments processing from the site permanently, seemingly with no plans to reinstate them thus far. . . .

What Price Loyalty? Ulta, KeyBank, Novae Say Points Must Be Spendable, Programs Flexible
PYMNTS – December 21, 2020

Rewards points and programs may spur customers to make purchases, but do they inspire loyalty that lives on after the transaction is made? It was the main question put to a panel of payments and customer-facing professionals who told Karen Webster that the “old” ways of doling out rewards, on a merchant-by-merchant, point-by-point basis — even with thresholds in place before redemption — no longer applies. Panelists included KeyBank Head of Payments Mitch Kime, novae Head of Payments Rodrigo McCarthy and Ulta Vice President of Customer Experience Kelly Mahoney.

The question has been an urgent one for years, and so far, there’s been no clear-cut answer. But the pandemic is changing the consumers’ expectation of their rewards programs and how they them — beyond air miles and beyond cash back. The questions looming over rewards programs have been around a long time. Consider the fact that as far back as the summer of 1995, the Harvard Business Review noted that companies spend millions of dollars to develop loyalty programs, without much insight returned. . . .

Scuppered Talks Between FIS and Global Payments Point to Enduring Importance of Size
Digital Transactions News – December 21, 2020

Mega-merger fever hasn’t subsided in the payments industry. A combination of FIS Inc. and Global Payments Inc., which have reportedly broken off talks to merge in a deal that could be valued at $70 billion, would represent a continued push for yet more economies of scale in a business whose profitability relies crucially on size, observers say. “It’s an example of a continued scale play,” says Jared Drieling, senior director of consulting and market intelligence at The Strawhecker Group, an Omaha-Neb.-based consultancy.

The two big processing companies had hoped to announce a deal this week and both entertain hopes of resuming negotiations, according to a report posted Sunday by The Wall Street Journal. Global Payments, headquartered in Atlanta, will not comment on the report. Jacksonville, Fla.-based FIS did not respond to a request for comment. . . .

Debit Use Gains as Consumers Tread Through Uncertainty
Digital Transactions News – December 18, 2020

A new report finds that debit card use is gaining favor among consumers compared to credit cards immediately following the national election in November. That’s according to The Future of Money Report 2020 from Logica Research. “This unprecedented year has uncovered contrasts between challenges and opportunities in the world as a whole and in the world of money, specifically,” the report says. “We have seen accelerated change and adoption of new behaviors on the financial front due to COVID-19. Americans have experienced unexpected stress in their ability to make money and to manage finances.”

In the weeks since the Nov. 3 election, 38% of consumers said their most recent in-person payment was made with a debit card, compared with 25% who said they used a credit card. San Francisco-based Logica surveyed 1,000 U.S. adults and, to have a generational comparison, a group of 200 aged 16 to 23. . . .

Ford, SumUp and Mastercard Put More Small-Biz Tech Into Cars and Trucks
PaymentsSource – December 18, 2020 (subscription required)

The interior of a car or truck is a fintech frontier — one that is undergoing a trial by fire during the pandemic, including as a point of sale venue for small merchants. SumUp and Mastercard are working with Ford to embed payment technology in commercial vehicles. The three companies are targeting small businesses that rely on the vehicles as an actual part of the business, such as a food truck, beverage supplier, florist or independent delivery businesses.

It’s an attempt to specialize services that are often associated with technology companies such as Square or Stripe, which enable non-technical companies to accept cards or online payments by providing a digital overlay. The businesses that Ford, SumUp and Mastercard are approaching usually accept cash for their services, or submit a bill to their customer. . . .

Bill Payments Account for One-Fifth of U.S. Consumer Spending, Research Shows
Digital Transactions News – December 17, 2020

Household bill payments now total $2.75 trillion per year in the United States, accounting for 21% of all spending by U.S. consumers, according to a report released Thursday by doxo Inc., a provider of digital billing and payment services. The Seattle-based company’s research looks at bill payments via bank accounts as well as on credit and debit cards, but excludes such spending as employer-paid portions of consumers’ insurance premiums.

On average, each U.S. consumer spends more than $21,000 annually on bill payments, according to doxo’s “2020 US Bill Pay Market Size & Category Breakout” report, which looked at household payments across 30,000 Zip Codes and 45,000 types of service to size the U.S. bill-pay market. . . .


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