Payment News

Fintech Interchange Fees Capped in Brazil

The Banco Central do Brasil has said it will limit interchange fees for pre-paid cards offered by FinTechs in free digital accounts to 0.7% from April 2023. Debit card interchange fees will be capped at 0.5% per transaction.

It issued a consultation paper in 2021 which had a limit of 0.5% on both debit and pre-paid cards. Currently fintech fees are uncapped.

G+D Raises Funds for Investment

Giesecke+Devrient (G+D) is raising money using a promissory note loan to be used for general corporate financing and to support operational growth in the areas of payments, connectivity, identities and digital security. It would appear that G+D is investing for the future.

An initial term sheet for €75 million was oversubscribed several times so G+D has increased the volume to €130 million. It has been placed with maturities of between three and five years.

G+D last issued a promissory note four years ago.

Ghana Reduces its Electronic Transfer Levy

Ghana introduced an Electronic Transfer Levy as a means of widening the tax base in March 2022. This was vigorously opposed in parliament at the time. The government has now decided to increase sales tax (value added tax) by 2.5% to 15% in 2023 but will, at the same time, reduce the Electronic Transfer Levy from 1.5% to 1%.

It will remove a number of exemptions, in particular cumulative transfers of up to GHS 100 per day by the same person, transfers between accounts belonging to the same individual, transfers for the payment of government taxes, charges and fees, transfers between principal, agent and master-agent accounts, specified merchant payments, and electronic clearing of cheques.

The government had hoped to raise GHS 7 billion from the levy, but in July 2022 the projections were reduced to GHS 611 million. The levy has proved unpopular.

A2A Payments on Their Way?

Account-to-account payments (A2A) are how Sweden’s Swish and the Dutch iDEAL payments systems work. Created in response to growing online shopping, they provide convenient real-time payments. The arrival of open banking and Application Programming Interfaces (APIs) is speeding innovation based on access and connectivity.

A2A has significant implication for credit cards because it allows point-of-sale (POS) payments without having to use the card infrastructure. Europe’s Single Euro Payment Area (SEPA) Credit Transfer (SCT) scheme is enabling quick transfer of funds in the SEPA zone.

The key to unlocking the potential of A2A payments is said to be regulation keeping up with the innovation. Regulation is needed to allow non-issuing banks to be able to offer a full range of services and guarantees. Card systems provide security and reimbursement of fraudulent transactions, albeit at a high price.

Proponents of A2A payments argue they are a much more efficient way to pay since the accounts settle in real time. To create real competition and to allow the use of new innovative technologies, consumers need to be able to access card-based payments and A2A payments for the same price and without friction.

Europe’s requirement for Strong Customer Authentication (SCA) has allowed A2A payments to compete with card-based payments by providing frictionless payment experiences that are still highly secure.

It will be interesting to see if A2A is able to break the hold of the card companies on payments.

RBA to Learn from Major Payments Outage

On 12 October, an outage in Australia delayed settlement of some real-time payments for up to five days. The Reserve Bank of Australia has issued its report on the incident. An ‘operational error’ on a planned change to software used by the RBA’s virtual servers took place. The error randomly disrupted a number of servers over a 25-minute period.

The problem was caused by a failure to comply with the established Technology Change Management policy. Control gaps associated with the virtual server solution design contributed to the rapid propagation of the error.

The result was that 17% of the daily average volume of New Payments Platform (NPP) unique payments sent by the public were delayed. The delay was at least four hours. Some were delayed for five days. The scale and haphazard pattern of disruption significantly complicated the incident response. The RBA said the incident had identified a number of serious weaknesses in the NPP platform, covering governance, monitoring of payment flows, recovery procedures and communications.

Nigerian Neo Bank Targets UK Market

A Nigerian neo bank, Kuda, is challenging the remittance market offering flat fee of £3 with a transfer limit of £10,000. In 2021, Kuda raised $55 million in funding. It is working with Modulr and Tell Money to offer a mobile wallet and a virtual and a physical card and to be able to take advantage of open banking. The opportunity is to disrupt the market for the £3 billion sent from the UK to Nigeria each year. Currently the average fee is 8% per transaction.

The Power of Open Banking

Just as open banking is allowing OneBanx to offer shared bank branches, a UK start-up is using it to offer merchants and alternative to Visa and Mastercard’s debit card payments. Atoa Payments has raised $2.2 million in a pre-seed funding round.

Mastercard and Visa’s net margins are high, and critics put this down to the duopoly they effectively have from their control of their payment rails. Atoa’s claim is that use of its system will reduce the cost of payments by up to 70%, plus ensuring instant payments rather than the lag merchants experience with debit cards.

Atoa’s approach is for businesses to download their app and connect their merchant accounts enabling them to take payment using SMS messaging, QR codes or Pay-by Link. The customers of those businesses can scan a QR code or click on the link, select their bank and use their bank app to approve the payment.