News Roundup
Pandemic Prompts Scrutiny of Actions by Global Networks
July 27, 2020 — Are global payment networks taking advantage of the coronavirus crisis to diminish competition? That’s the question posed to Fed Chairman Jerome Powell in a letter from Sen. Richard Durbin. The namesake of the Durbin Amendment asks the Federal Reserve to probe practices around debit card fees levied during the coronavirus crisis by global networks. The letter calls on the Fed to determine whether the global networks have a shared incentive to limit the transactions processed by EFT debit networks. He said practices by the large card networks are diminishing competition in the online payments marketplace.
You can read the letter in its entirety here.
You can read The Wall Street Journal article here.
COVID-19 Causes Cash Shortage, But Who Wants It?
July 24, 2020 — In response to the pandemic, the U.S. Mint decreased staffing, and fewer coins were produced. Then, demand for coins exceeded supply, causing Kroger, the largest supermarket chain in the U.S., to temporarily ask customers in almost 3,000 stores to pay with exact change. Other retailers, including Walmart, followed similar paths. At the same time, demand for cash has crashed. Consumers of all ages used cash in 26% of transactions in 2018, down from 30% the previous year, according to an annual survey published by Federal Reserve System’s Cash Product Office. The decline was even more pronounced among Americans aged 35 to 44, whose use of cash dropped from 32% to 19% between 2016 and 2018.
Pandemic Prompts 7-Eleven to Enable Contactless on App
July 20, 2020 — Mirroring the example of department and big-box stores, 7-Eleven has expanded its 7NOW delivery app to offer customers the option to order and pay for items ahead of time. The convenience chain said the contactless initiative provides customers with convenience and minimizes time in stores.
Pandemic Reveals Advantages of Virtual Cards
July 16, 2020 — The pandemic has revealed a vulnerability to issuing plastic cards not previously imagined: it relies on a real-world supply chain, with a factory and distribution setup that can be disrupted during a crisis. On the other hand, virtual cards can be issued in an instant and offer controls that define when, where, and how a card could be used. Moreover, virtual cards can be created for a single authorized use, eliminating opportunities for fraudulent charges to be added to a card later. Simon Barker, CEO at Conferma Pay says that while the majority of digital wallets are still enabled by traditional plastic cards, more issuing banks are championing virtual cards that feed directly into mobile wallets, doing away with plastic once and for all.
Pandemic’s Late B2B Payments Impact
July 13, 2020 — Research from Atradius found 43% of invoices across the U.S., Mexico and Canada have gone unpaid by their due date. The firm’s USMCA Payment Practices Barometer report warned that the figure is a significant 25% increase from this time last year. Further, the value of invoices that are more than 90 days past due has doubled, while 4% of outstanding invoices across the region have been written off as uncollectible. In the U.S. alone, businesses reported a 72% year-on-year increase in payment defaults.
Digital Purchases Grow
July 9, 2020 — According to Mastercard’s SpendingPulse™, which tracks overall retail sales across all payment types, ecommerce in the U.S. in April and May made up 22% of all retail sales — up from 11% during the same timeframe in 2019. For the brick-and-mortar environment, things are changing dramatically as well. Based on a Mastercard weekly survey launched on April 27, almost seven in 10 consumers say the shift to digital payments will likely be permanent, and nearly half of consumers plan to use cash less often — even after the pandemic subsides.
Apple Pay to Add Support for QR Mobile Payments
July 7, 2020 — With the COVID-19 pandemic causing mobile payments to increase and businesses looking for new ways to sell and get paid, Apple appears to be preparing to add support for both merchant-presented and consumer-presented QR mobile payments to Apple Pay later this year. Users would point the iPhone camera at a QR code or traditional barcode to pay bills and other things with a card registered with Apple Pay. The opposite would also work, with users holding the iPhone in front of a scanner with a QR code generated by the Wallet app.
Pandemic Changed Buying Behavior and Fraud Rules Became Obsolete
July 3, 2020 — The security efforts of FIs depend on analyzing consumers’ transaction histories to gain understandings of their normal behaviors. The COVID-19 pandemic has undermined this practice, as normal purchasing behavior has been disrupted. Machine learning can help FIs ensure their fraud-fighting models quickly adapt as consumers’ behaviors change. The technology can help detect developing patterns and compare specific consumer behaviors with those of the larger customer base. This analysis helps machine learning predict which transaction behaviors consumers are likely to exhibit in the future.
COVID-19: The Contactless Payment Catalyst
June 12, 2020 — Research from Paysafe suggests the shift in favor of contactless is likely to endure long after the restrictions tied to the pandemic have been lifted. The data shows 50% of U.S. consumers reported using contactless payment methods at least four times in May, with 69% agreeing contactless payments were more convenient than cash. In fact, many stores are encouraging customers to use contactless to reduce the virus' spread. Paysafe's research showed 60% of U.S. consumers said using contactless during the pandemic has made them more comfortable with the idea of using the payment method in the future.
COVID-19 Pandemic Revealing Grocery’s Digital Future
June 8, 2020 — Online grocery orders in the U.S. reached a record 62.5 million in April. That month saw 40 million customers head online to shop for groceries, and these customers are expecting their preferred chains to keep up with the shift. Grocery wholesaler and services provider UNFI typically sees between five and eight requests per month in the eCommerce space, but in April UNFI received 129 requests for eCommerce payment setups — and May was just as busy. Enabling innovative payment experiences in brick-and-mortar stores is proving important for grocers. Contactless payments or automated checkout experiences are seeing interest as the pandemic continues.
When We Go Back to Eating Out, More Will Pay with Phones
June 3, 2020 — People stuck at home are turning to pickup and delivery more than ever, sending digital sales at restaurants through the roof. At Chipotle, digital orders in the first three months of the year grew 81% to $372 million. For companies like Starbucks and Chipotle, mobile orders are a way to speed up the line and serve more people. Plus, people who order digitally usually spend about 20-30% more, according to Peter Saleh, restaurant analyst at BTIG. About one third of respondents to an April survey of U.S. consumers performed by fintech company FSIS and Ipsos said that they plan to use contactless or mobile wallet payments rather than cash or checks moving forward. Altogether, 45% said they are using a mobile wallet to make payments.
Digital Banking No Longer a Differentiator
June 1, 2020 — Closures of physical branches have meant many account holders no longer have access to brick-and-mortar banking, leading to a 60% rise in mobile financial app downloads in April. PYMNTS.com’s inaugural, Digital Payments in A Digital World Playbook analyzes how recent events such as the COVID-19 pandemic have impacted consumer banking behaviors and how FIs are responding to these shifting needs. The Playbook examines which digital tools - such as mobile wallet payments, QR codes or the use of additional technologies – can help FIs fulfill these needs as well as what these developments mean for the future of banking.
MoneyGram Reports Digital Money Transfer Surge
June 10, 2020 — MoneyGram International Inc. has offered more proof that the COVID-19 pandemic has prompted consumers to embrace mobile payment options. MoneyGram reports digital transactions grew by 100% year-over-year in May, and for the first quarter, MoneyGram reported a 57% increase in digital transactions. MoneyGram Online, the company’s direct-to-consumer channel, saw a volume increase of 107% in May, compared with the year-ago period. More than 80% of transactions were completed on a mobile device. Account deposit and mobile wallet transactions grew 156% in May, which compares with 80% growth during the first quarter.
FBI Warns that Digital Banking Surge Poses Cyber Threat
June 11, 2020 — The Federal Bureau of Investigation has issued a public bulletin warning that mobile banking customers could face increased risk of cyber-attacks as more consumers embrace digital banking amid COVID-19. The FBI warned cyber attackers are embedding malicious apps, called banking trojans, inside third-party software like games or other tools. The banking trojan can replicate legitimate banking sites and appears to be part of the legitimate login page. The agency suggests using two-factor authentication when logging onto a mobile banking app and also to use complicated passwords, with upper and lowercase letters and symbols.
More Time for Pay-at-the-Pump Switch to EMV
May 5, 2020 — At least two major card networks have agreed to give merchants who operate automatic fuel dispensers (AFDs) more time to make the switch to chip card terminals at the pump. With the AFD liability shift looming, Visa has agreed to extend the deadline by six months from October 20, 2020 to April 17, 2021. American Express has extended it until April 16, 2020. Under the liability shifts, fuel retailers, not card issuers, will be financially responsible for fraud if their automated fuel dispenser can’t read a chip card. The National Association of Convenience Stores, National Association of Truck Stop Owners, Petroleum Marketers Association of America, Society of Independent Gasoline Marketers of America and Merchant Advisory Group requested the delay, suggesting that social distancing policies and "stay at home" orders have caused shortages in personnel, delays in equipment and increased lead times to change payment terminals at pumps across the country. Pay-at-the-pump is the final category to be subject to a chip-card liability shift.
Pandemic’s Winners are Digital
April 23, 2020 — Stripe Co-Founder and President John Collison tell PYMNTS.com the global coronavirus pandemic has been the catalyst for a massive shift toward digital everything. That shift is forcing companies to examine their abilities to meet their consumers, employees and business partners at these new points of interaction. Collison says this highlights the robust commerce capabilities of “digital first” platforms, such as Amazon, Uber and Instacart, which are on the front lines of powering the global economy, providing goods and services to consumers as offline businesses are locked down. If businesses have the right infrastructure in place, the disruption can offer them the chance to seize new revenue opportunities as online demand spikes. Unfortunately, countless other companies struggle to make that transition, and face challenges in expanding reach and boosting conversion rates online.
Digital Identity in the COVID-19 Era
April 23, 2020 — For a post-coronavirus world, biometrics technology holds immense promise for certifying identities securely — and at a distance. While fingerprint scanning may face challenges in an era when people are afraid of touching buttons, a range of biometric innovations are emerging around the world are helping businesses and healthcare institutions tackle the effects of the COVID-19 pandemic. In China, a facial recognition software is being used to diagnose potentially infected patients on smart buses. In Japan, technology providers have improved facial recognition technology so it is effective even when consumers are wearing face masks. These advances have triggered ethical discussions about how the technology can be abused. The greatest concern is whether the U.S. government will relax protections of citizen’s data to track COVID-19’s spread.
Federal Reserve Lifts Six-withdrawal Limit on Savings Accounts
April 24, 2020 — The Federal Reserve Board has announced an interim final rule to amend Regulation D, allowing consumers to make an unlimited amount of withdrawals or deposits from savings deposit accounts instead of being capped at six. This should make it easier for people to pay bills more frequently online from a savings account. While the rule doesn’t require banks to suspend the six-transaction limit, financial institutions are now able to give customers an unlimited number of transfers and withdrawals if they choose to. Bankrate chief financial analyst Greg McBride, CFA, worries about the unintended consequences of this change. “If savings accounts and money market deposit accounts start to look more like everyday transaction accounts, the interest earnings are going to start to look more like everyday transaction accounts,” McBride says.
April 16, 2020 — Use of contactless mobile payments is surging as people come to see their phones as the safer way to pay. They’re also using mobile apps tied to payments to place delivery or pickup orders for groceries. A survey of 361 companies released in April by the Strawhecker Group and the Electronic Transactions Association found that 27% of U.S. small businesses have seen an increase in customers using services like Apple Pay. A couple of weeks ago, Walmart Inc. tweaked its self checkout system to go completely contactless when shoppers use Walmart Pay. Previously, you had to touch a “Pay now” button after scanning your groceries. Now, you can read a QR code with your phone to pay. Use of pickup and delivery at Walmart is growing as well.
NYC Encourages Contactless Pay for Parking
April 21, 2020 — The New York City Department of Transportation is urging residents to use contactless parking payment by smartphone to reduce risk of spread of COVID-19. Two different apps -- ParkNYC and ParkMobile are now available for download to pay for parking at 80,000 metered spots across New York City. "Contactless Pay-By-Cell reduces exposure risk for the public and our workforce," DOT Commissioner Polly Trottenberg said. "Please help us reduce the need to physically service parking meters and collect, sanitize and securely store cash during this crisis."
Synchrony Cautiously Optimistic
April 21, 2020 — Despite a sharp downturn in consumer spending, the nation’s largest issuer of store cards sees reason for optimism. Synchrony, which issues branded cards on behalf of more than 100 major merchants, says it is not sitting back and is instead pursuing deals in the pipeline with merchants. They have plans to issue a card for PayPal Holdings Inc.’s Venmo peer-to-peer payment service later in 2020 and a Verizon card is on track to launch before July. Synchrony reported first-quarter purchase volume of $32 billion, which was down slightly from the year-ago quarter, but executives noted the second half of March was down 26%. The first part of April saw a year-over-year decline of 30% to 35%.
Banking Will Become ‘Digital-Always’
April 17, 2020 — Fundamental shifts are underway in financial services and the way in which those services are delivered — and a report from PYMNTS.com predicts the shifts will be permanent. As social distancing takes root, a digital-first mentality will become a strategic imperative for financial institutions (FIs) and presents an opportunity for smaller banks to shine. Individuals are embracing technology more and leveraging relatively new offerings, such as remote agent assists, text chats and interactive teller machines, sometimes accessed from their cars. The pandemic is forcing FIs to reassess not only how many branches they operate, but also how activities within the physical setting can be streamlined and made relevant to tech-savvy consumers. Analytics, APIs and other advanced technologies can help FIs improve their operations and customer interactions as well as gain the confidence to innovate.
Bank Call Centers Busier Than Ever
April 28, 2020 — The limits on in-branch banking due to the COVID-19 pandemic have created huge backlogs at telephone banking centers, as retail customers have struggled to complete many in-branch transactions. A story in Mobile Payments Today says many of the early calls were customers researching assistance programs, and in more recent weeks more customers are calling to utilize the relief programs. Fifth Third Bank proactively called about 1 million customers, asking them if they needed hardship assistance. Citibank set up a microsite with information about COVID-19 assistance programs, including payment deferrals, stimulus payment information and branch hours. At JPMorgan Chase, customers have used the call centers to get help with delaying payments or increasing lines of credit. A J.D. Power study found that digital banks lagged traditional banks in managing telephone banking issues. Overall, customer satisfaction with call centers fall 34 points when hold times exceed 4 minutes.
Consumers Spending Trending Down
April 15, 2020 — Consumers have been forced to change their spending behavior to adapt to COVID-19. Overall credit card spending was down 30% year-over-year for the 13th week of 2020, and overall debit card spending was down 18% . That's what Payments Journal learned when it sat down with executives from PSCU and Mercator Advisory Group to look at transaction trends. Grocery stores and supermarkets saw spending growth of 25% for credit card and 10% for debit card. This indicates consumers were easing back from their “stock-up” purchases conducted during the early weeks of the COVID-19 pandemic. Spending at drug stores and pharmacies was up 0.7%, and debit card spending was down 7.5%. In the prior week, the growth rates were up 33% and 27% respectively.
USA Today Says Mobile Pay is Safest Way
April 16, 2020 — USA Today's article, "Is it safe to go grocery shopping? Helpful tips during the coronavirus pandemic," suggests the safest way to pay for grocery items is through mobile pay apps on your phone, such as Apple or Google Pay. If the pin pads the grocery store don’t have a mobile pay option, then using a credit or debit card is safer than cash, since studies have found paper money can harbor thousands of microbes from various environments. Most cashiers at grocery stores and fast-food restaurants have been instructed not to handle credit or debit cards, so shoppers are required to use the pin pad. Experts recommend using hand sanitizer or washing your hands right after checkout and avoiding touching eyes, nose and mouth.
Disinfect Common Surfaces Being Touched
March 13, 2020; In the article, “Should You Disinfect Your Phone? Here’s How,” Wirecutter offers recommendations for disinfecting a phone or tablet, cautioning against spraying directly onto a device. This is good advice for those responsible for disinfecting PIN pads and ATMs as well. Dr. Sankar Swaminathan, chief of the Infectious Diseases Division at the University of Utah School of Medicines recommends consumers use hand sanitizer, or wash their hands as soon as they can to be careful when interacting with objects touched regularly by others in quick succession, such as an ATM or the PIN pad at a grocery store.