Payments News Digest 26 August 2022

US: Interchange and APRs coming in for scrutiny

As the cost of living puts pressure on household budgets and counter-inflationary measures raise interest rates, both credit-card interchange fees and APRs have moved right back to the top of the political agenda. This week, the Consumer Financial Protection Bureau (CFPB) set about a further round of browbeating in a bid to bring down the annual percentage rates applied to credit card balances. The consumer watchdog lacks the power actually to cap these rates but, as it successfully did with overdraft fees earlier this year, appears to be using its influence to trigger unilateral action by banks.

On the merchant-facing side of credit cards, the political push against the cards establishment is being spearheaded by Senator Dick Durbin, who tabled a bill over the summer that sets out to mandate network-routing choices at the point of sale. In time, he and his Republican co-sponsor hope that this will reduce interchange through competitive pressure: the changes, if successful, would certainly put rewards funding at risk, an outcome that many millions of US cardholders may object to.

US: Spotlight trained on person-to-person payment apps

Some smaller merchants have been encouraging P2P-app solutions with store discounts in a bid to reduce their interchange outlay; others avoid accepting cards altogether. Such tactics would seem to be swimming against the tide, with TransUnion's latest Quarterly Credit Industry Insights Report for example, showing that the number of bank-issued credit cards in this market broke the previous record in the quarter just ended.

There is also the matter of potential fraud when it comes to instant-payments platforms: the CFPB has signalled it may take a different view than banks over who is liable when Zelle users innocently send money to the wrong third party, sometimes as a result of bad actors. The fight "could play out for years," notes American Banker. "Banks and credit unions are likely to sue the bureau if it tries to assign broad liability for fraudulent payments authorized by consumers. Some expect the CFPB will need to issue [rules] if it tries to mandate that consumers get repaid for fraud."

Global: Dramatic BNPL moves in both hemispheres

The summer season has afforded no respite in a hectic year for Buy Now, Pay Later firms who continue to feel the dual pressures of increasing regulatory attention and funding constraints that went far beyond what was projected for 2022: "It's clear the world is vastly different than when we started the year," Zip's co-founder and current chief executive, Larry Diamond, said, as news broke that his company would be leaving the UK market having lost over a billion Australian dollars ($701.3m) in the financial year to June.

Having also quit Singapore recently, the company plans to focus on the United States (now home to 56 per cent of its customer base) and New Zealand, as well as its home market of Australia. (Another Australian lender, Humm, announced that it would be leaving the New Zealand BNPL market next month. )

By contrast, fellow pay-later company Afterpay, now owned by Square (recently renamed Block), is launching BNPL solutions under its Clearpay brand across all its platforms in Britain, both online and in shops. The move comes as the Financial Conduct Authority warned BNPL providers to be more careful in their advertising conducted through social media influencers, who, in the regulator's view, have failed to point out the possibility of risks for borrowers using the format.

The tightening circumstances in recent quarters mean that all eyes will be on Klarna's results next week.

Other stories of interest this week...

Global: Visa tokens overtake its physical cards in circulation
India: Central bank lifts curbs on Amex after data compliance
Nigeria: Nearly $10m worth of CBDC transactions since October
South Africa: Google Wallet launches as digital payments boom

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