Payments News Update – September 10, 2021
Legal and Regulatory Developments
SPOTLIGHT: Biden’s SEC Is Ready to Regulate Cryptocurrency
Vox – September 9, 2021
Cryptocurrency has an SEC problem — and it just got bigger. The Biden administration is taking a more hands-on approach to the highly volatile, little understood, and barely regulated cryptocurrency industry. Cryptocurrencies are decentralized digital currencies secured by blockchain technology. Bitcoin, ethereum, and other cryptocurrencies have become almost as accessible as government-issued currency in recent years, but the government offers few consumer protections for them.
The Securities and Exchange Commission (SEC) — led by Gary Gensler, who taught a class on cryptocurrency at MIT — is trying to make the case that it can and will regulate whatever cryptocurrency investment schemes it decides fall under its purview. The relative newness and rapid expansion of the cryptocurrency industry have put it in a regulatory gray area. The Internal Revenue Service (IRS) classifies crypto as property. The Commodity Futures Trading Commission (CFTC) considers crypto to be a commodity. And the SEC has said that digital assets “may be securities, depending on the facts and circumstances.” . . .
Sweden Launches World’s Second Digital Currency Backed by a Central Bank
Investing.com – September 10, 2021
The country is rapidly becoming a cashless economy. Riksbank authorities have clarified that the eKrona is not a cryptocurrency like Bitcoin or others that exist in the market. Open competition begins between centralized digital currencies (CBDC) and decentralized cryptocurrencies. Sweden officially launched eKrona, the world’s second digital currency backed by a central bank. Since the beginning of September, the currency has been available on a trial basis with external clients on the official website created by the Swedish government so that citizens can buy and sell within the country or in stores abroad.
The Bahamas was the first country to launch a global central bank digital currency (CBDC) called the “Sand dollar” in May last year. But the eKrona is the first digital currency to hit the market with the backing of a major economy. About 80% of central banks around the world are also conducting pilot tests. . . .
Afterpay Informs Australian Senate Stablecoin Could Clip Merchant Fees
PYMNTS – September 8, 2021
In response to a government inquiry, Australian buy now pay later (BNPL) firm Afterpay told the Australian Senate that the use of cryptocurrency could shave merchant fees associated with payments and urged the government to develop a framework for an AUD-backed stablecoin. Afterpay is scheduled to speak before the Senate committee on Wednesday (Sept. 8).
Afterpay’s submission to the public hearing, “Australia as a Technology and Financial Center,” told the senate that transactions working across the blockchain could reduce the fees merchants pay that are associated with cards, network operators and banks, news outlets reported. The customer pays for the cost of validating a crypto payment, and fees vary depending on the digital currency, blockchain and the network’s traffic at the time of transaction. The fees would be transparent, and users could opt out of the purchase and “wait for more favorable network conditions and a lower cost,” Afterpay said. . . .
Apple App Store Changes Fail to Sway Lawmakers Bent on Overhaul
Bloomberg – September 8, 2021
U.S. lawmakers are barreling ahead with legislation to change the way Apple Inc. runs its App Store, unconvinced by the company’s recent moves to address antitrust complaints from developers and regulators around the world. A proposed bill from a bipartisan trio of senators would force significant changes to the way consumers download and use apps on their iPhones and other Apple devices. Minnesota Democrat Amy Klobuchar, head of the Senate antitrust subcommittee and one of the bill’s sponsors, said Congress is no longer willing to trust tech companies to “do the right thing.”
“Though Apple has taken some small steps to respond to criticism of its anti-competitive conduct, they did not go nearly far enough,” Klobuchar said Tuesday in a statement to Bloomberg. “There is growing momentum to pass the Open App Markets Act to finally address Apple and Google’s twin monopolies, and I will continue working with my colleagues on both sides of the aisle to get it done.” . . .
Stripe Takes a Giant Step in China With UnionPay Deal
American Banker – September 7, 2021 (subscription required)
China is one of the toughest markets for U.S. payment companies to crack, leaving the UnionPay network the main gatekeeper for payment firms looking to enter the world’s second-largest consumer market. Stripe last week launched an integration with China’s UnionPay International covering merchants in more than 30 markets including the U.S., Canada, the U.K., Australia, Singapore, the European Union and Hong Kong. The partnership will allow retailers to accept payments from UnionPay cardholders globally and access Stripe’s dashboard, which includes services for online acceptance, security and other needs.
The collaboration demonstrates the importance and power of the government-backed UnionPay as a way to access the lucrative Chinese market. While the major U.S. card networks remain stuck in regulatory purgatory, rivals such as PayPal and Splitit have instead formed partnerships with Chinese companies to get a foothold in the country. . . .
The DoJ on Debit Routing: A Tougher Rule, Please
Digital Transactions Magazine – September 1, 2021
The U.S. Department of Justice in August lent its weight to a proposed rule from the Federal Reserve Board that would reinforce merchants’ choice of networks for e-commerce transactions arising from debit cards. At the same time, it suggested the rule could be made more stringent. Justice’s support for the proposal came as the comment period for the Fed proposal was ending. The Fed in May opened the proposal for public comment after receiving complaints from merchants that some banks were skirting a legal requirement to offer a choice of at least two unrelated networks for processing debit transactions.
The complaints focus specifically on online transactions, contending big financial institutions haven’t enabled technology to send these payments to networks other than Visa and Mastercard. Debit transactions from computers and mobile apps have exploded in in the past year as consumers piled into e-commerce in reaction to the pandemic. . . .
Industry Developments
SPOTLIGHT: PayPal’s $2.7 Bln Japan Deal Heats up Buy Now, Pay Later Race
Reuters – September 8, 2021
U.S. payments giant PayPal Holdings Inc (PYPL.O) said it would acquire Japanese buy now, pay later (BNPL) firm Paidy in a $2.7 billion largely cash deal, taking another step to claim the top spot in an industry experiencing a pandemic-led boom. The deal tracks rival Square Inc’s (SQ.N) agreement last month to buy Australian BNPL success story Afterpay Ltd (APT.AX) for $29 billion, which experts said was likely the beginning of a consolidation in the sector. read more
Buying Paidy will help PayPal expand in a country where online shopping volume has more than tripled over the last 10 years to some $200 billion, but more than two-thirds of all purchases are still paid in cash, PayPal said in an investor presentation. “I wouldn’t view this (deal) as impacting the U.S. BNPL market but more as PayPal’s route into the Japanese market,” Kunaal Malde, analyst at Atlantic Equities, said. Shares of the payments company were up 1% in heavy volumes in premarket trading, while those of rival Square were marginally lower. . . .
Amazon Developing New Point-of-Sale System to Attract Small Businesses – Insider
Reuters – September 8, 2021
Amazon.com Inc (AMZN.O) is working on a new type of point-of-sale system that can be sold to third-party sellers, Insider reported on Wednesday. The new system can handle both online and offline transactions and can also link to other services including Prime and Flex, the report added, citing an internal document. The move will allow Amazon to compete with Canada’s Shopify (SHOP.TO) and U.S. payments giant PayPal (PYPL.O), which already offer POS systems for payments for small businesses, that have moved online during the pandemic to boost sales.
Project Santos, created by an internal Amazon team to compete with Shopify, is leading the project, the report said. Amazon declined to comment. . . .
JPMorgan to Buy Majority Stake in Volkswagen’s Payments Business
Reuters – September 8, 2021