Payment News

Class Action Allows Credit Card Fee Surcharge in Canada

The settlement of a class action lawsuit against Visa and Mastercard in Canada has allowed retailers to pass on credit card fees to their customers. Processing fees are around 1.4-2.4%. Credit card usage is reported by Equifax Canada to be a historic high with balances reaching a record level of, on average, C$2,121. Equifax Canada say 60% of Canadians use their credit card for at least half their purchases.

In this context Angus Reid Institute has conducted a poll about how consumers might react if these fees are passed on. The results were that faced with paying an extra 1.5% credit card fee, 40% of people would buy elsewhere. If it was a small business, rather than a large organisation, that number dropped to 28%. 60% of respondents said they would pay with their debit card or with cash at large businesses, 50% at small businesses.

The power of loyalty programmes is significant. 82% of people said their main credit card was part of a cash-back, points or some other type of loyalty scheme. Despite that, faced with fees, 61% said they would stop using the card rather than pay fees.

The Canadian Federation of Independent Business (CFIB) sees the ability to pass on fees as allowing businesses to offset these, to be transparent with customers about fees and to help push back against future credit card fee increases.

Given the survey results, perhaps it is not surprising that only 20% of small businesses are currently planning to pass on fees. Only one large company, Telus Corp, is charging fees.

UK Interchange Fee Class Action Moves Closer

In March, the Competition Appeals Tribunal allowed the former head of the UK Financial Ombudsman Service, Walter Merricks, to sue Mastercard on behalf of 46 million claimants over Interchange Fees who were alive on 6 September 2016, irrespective of whether they have subsequently died.

Visa and Mastercard appealed against the inclusion of people who have died since September 2016, about three million of the 46 million, but the court has rejected their appeal.

The claim is for about £14 billion pounds.

Technocrat Meets Libertarians?

The ECB has issued a blog about Bitcoin. The blog does not represent the official position of the ECB, but it is interesting. The blog made four key points:

Bitcoin is rarely used for legal transactions
Regulation can be misunderstood as approval
Bitcoin system is an unprecedented polluter
Promoting Bitcoin bears a reputational risk for banks.

The reaction to the blog is fascinating. Whether the Financial Times, Forbes or Coindesk, a stream of comments were unhappy, arguing that the evidence suggests Bitcoin is used less for crime than other payment means, central banks have consistently pointed out the risks of cryptocurrencies and that proof of stake offers a solution to the pollution.

One response quoted in the criticism of the ECB blog was 'Bitcoin Is the Rediscovery of Money'. It put forward an almost philosophical justification for Bitcoin going back to defining what money is, what it should be and shouldn’t be. It defines attributes of money and claims that Bitcoin delivers these while electronic money does not.

If your money requires permission to be spent, it is not your money
Money has no counterparty risk. If your money has counterparty risk, it is not money—but credit
Money is not credit
Money has no yield
Money does not need to grow
Money doesn’t require identity. If your money requires identity, it is not money but a social credit score system
Money has no memory.

Legislative changes in recent years, such as limiting the use of cash and AML/CFT/ KYC, have impinged on some of these attributes but those are, of course, political decisions. It appears this piece is based on unhappiness with the willingness of politicians to encroach on the historic freedoms of the citizen. Central banks had better prepare their arguments for CBDCs anticipating reactions that argue for liberty.

BSP Initiatives to Increase Digital Payments

The Bangko Sentral ng Pilipinas (BSP) and Philippine Payments Inc (PPMI) have launched Bills Pay Ph, a new digital payment channel.

Bills Pay Ph is an interoperable facility to unify the various bill payment networks. It wants to allow consumers to pay their bills using their own transaction accounts even if they do not have a relationship with the payment service provider (PSP) of the organisations whose bill they are paying. Linking accounts from different PSPs will help enable digital transactions and improve the ease and efficiency of bill payments.

BSP has a goal of digitalising not less than 50% of total retail payments and of including at least 70% of Filipino adults in the financial system by 2023. At the end of 2021, the share of electronic payments as a proportion of total retail transactions was 30.3% and the number of banked adults was 56%. While 43.4% of Filipinos made bill payment transactions in 2021, only 8% were made digitally.

Separately, BSP has run what it calls an e-Cash-in Points initiative in the Mindanao region. People are encouraged to swap unfit banknotes and coins for e-money. This has the dual benefit of maintaining the quality of currency in circulation and supporting BSP’s goal of increasing digital payments.

The e-Cash-in was held at the launch of the Paleng-QR Ph, a joint initiative of the central bank and the Department of the Interior and Local Government that allows the use of digital payments in public markets and public transportation services.

Regulator Fines Barclays over Fees

Barclays Bank has been fined £10 million for not giving retailers full information about fees for different card services between December 2015 and December 2018 as required by the UK’s Interchange Fee Regulation (IFR). Without full information, retailers could not compare prices of card services and shop around for cheaper deals or negotiate with Barclays.

Barclays processes a third of all card payments in the UK. NatWest Group banks were fined £1.82 million for overcharging interchange fees on credit cards earlier this year.