Payments News Digest 9 June 2023

US: Non-bank apps lack federal deposit insurance notes influential agency

America's high-profile consumer watchdog, the CFPB (Consumer Financial Protection Bureau), continues to use forceful rhetoric in its dealings with the cards and payments sector: now it is warning about deposits held by the plethora of payment apps that have come in the wake of smartphone ubiquity.

Noting that more than three quarters of adults in the country have used these applications, together transacting some $893 billion last year, the agency reminded consumers that, unlike traditional banks, any deposits in non-bank apps are not secured and insured as is customary with traditional retail banks. Household names such as Venmo, CashApp and PayPal, the CFPB hopes, will be viewed differently by users once they come to understand that funds in their care might in fact be used by the companies for investment purposes.

Much further along the digital-innovation spectrum, the authorities are cracking down hard on the main exchanges through which the big cryptocurrencies are traded: Coinbase and Binance were both hit this week with lawsuits from the Securities and Exchange Commission (SEC), with the latter accused of spawning a 'web of deception' in its activities. Responding to these developments, the head of the Blockchain Association, Kristin Smith, commented that "the SEC doesn't make the law – it only makes accusations – and we're confident the courts will prove [SEC chairman Gary] Gensler wrong in due time".

US: Durbin wins more backers for fresh interchange attempt

Last year the possibility of a Credit Card Competition Act bringing the routing choice customary for debit cards in the United States to credit cards as well raised a heated debate over potential outcomes, both intended and unintended. That legislative bid to indirectly reduce interchange fees has now been revived according to the Wall Street Journal, this time enjoying increased bipartisan backing as a result of pressure from small businesses, other merchants and advocacy bodies.

With three quarters of Americans holding credit cards, the argument that interchange is pushing up sticker prices as well as rewards may not find popular support, especially if those cardholders suspect that security may be compromised by sending their transactions over cheaper processing rails.

Speaking last summer, the prime mover behind the legislative effort, Senator Dick Durbin, said changing the law would "hold down costs for Main Street merchants and their customers", although a survey by the Richmond Fed two years after routing forks came to debit cards concluded that "few merchants are found to reduce prices or debit restrictions as debit costs decrease".

Australia: Authorities set countdown clock as time called on chequebooks

From Canberra comes news that the government is planning to put an end to cheques at the close of this decade. According to the finance minister, all but two percent of the paper-based instruments currently used by consumers could have been executed using mobile or internet banking platforms. In 2018, the country's New Payments Platform (NPP) went live, facilitating around-the-clock payments between individuals and organisations.

On top of this major upgrade to the payments infrastructure, the pandemic was accompanied by a year-on-year trend of cheque usage falling by double-digit percentages according to data in Argus Advisory Research's current market report for cards and digital payments in Australia.

To end, here are links to some other stories of interest this week...

China: Apple ID linkable within Alipay to pay for apps, games or in-app purchases
Global: Stripe Issuing is getting into the credit game
India: Central bank allows banks to issue RuPay prepaid forex cards
UK: Barclays reviews options for payments business say sources

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