Payment News

In-Person Support Needed by 20% of Dutch Bank Customers

The Dutch National Bank (DNB) has carried out research into how people are coping with adapting to digital payments. Nearly 20% of those over 18 years old, 2.6 million, struggle with digital payments. Opening bank accounts or blocking a bank card cause particular problems because of the dependence on online banking. It appears a chatbot is not the answer.

The research gives detailed information on digital and cash experience of Dutch bank customers.

US Proposal to Limit Late Payment Fees

Fees on late payments of credit cards are a major source of income for card companies, with low income users particularly likely to be paying the fees.

The US Consumer Financial Protection Bureau (CFPB) is proposing a cap on late fees of $8, down from the current average of $30. Late fees over 25% of the consumer’s required payment would be stopped. The proposal would also end inflation adjustments that are currently applied automatically.

The CFPB’s proposal is out for comment but, if passed, could save consumers $9 billion a year.

Bangladesh Trials Extended QR Payments Scheme

Bangladesh Bank is, like many central banks, actively promoting the use of electronic payments, and is currently trialling an interoperable payments system based on smartphones scanning a standardised QR code.

Bangladesh has a QR code mobile payments service, Bangla QR, but this only allows customers of specific banks to make QR code payments at merchants that have an account at the same financial institution.

The new system allows merchants to accept payment from customers of more than 15 major banks and payment service providers without the merchant having to have an account with them all. Mastercard, Visa and American Express are part of the scheme.

Kenya Railways Goes Cashless

Kenya Railways has announced that it will no longer accept cash for the purchase of tickets at Madaraka Express Passenger Service stations, with passengers required to pay using MPesa or by card. The change is being made in the name of efficiency and convenience, as well as enhanced security and to reduce the risk of fraud.

There are 13 stations on the line and it will be interesting to see how people cope with the change, particularly when the service becomes more of a commuter train between Nairobi and Suswa.

Do’s and Don’ts of Introducing an E-Levy

It appears introducing a charge on digital payments is not straightforward and the law of unintended consequences applies. Ghana introduced the e-levy – a tax on the transfer amount of electronic transactions – in May 2022, with the objective of improving tax revenues by tapping into fast-growing digital financial services. A recent paper based on a webinar from the International Center for Tax and Development looked at what was done, the process used to introduce it and thoughts about how it might have been done differently.

It is fair to say the participants feel the e-levy design was flawed, starting with an opening 1.75% level which has now been reduced to 1.5%. They felt this level led to market distortions and encouraged people to avoid it.

The tax was on transfers which included a number of categories, such as loans, that subsequently had to be excluded from the levy.

There was a discussion about whether it was ‘fair’ to levy electronic transfers but not cash transfers and whether a new levy on top of existing levies and income tax, self-employed tax, corporate income tax and value added tax, particularly with exemptions, is fragmenting the established tax system. In addition, taxing the growth area of e-commerce and potentially discouraging digitalisation was felt to be counter-productive.

The paper is interesting even if not entirely objective, perhaps useful for others contemplating an e-levy.

Why Merchants Pay Too Much

The payments consultancy CMPSI claims that North American retailers paid $12.5 billion in network fees in 2022 and European merchant annual costs have gone up €1.46 billion since the interchange fee caps were introduced in 2015. It gives three reasons merchants find it hard to pay less.

Firstly, network fees are only one component of Merchant Service Charges, and each transaction incurs multiple network fees. To make things worse, each processor charges differently and fees change constantly. Unlike interchange fees, network fees are not publicly available, across borders currency exchange rates vary, some charges are per-item and some by value. Strong Customer Authentication in Europe has added additional layers of complexity. Inevitably there are errors and the chances of correcting them is varied.

Secondly, each continent is different. Acceptance channels, the authentication method and card type vary. Europe is split by intra-regional, intra-European Economic Area countries, and domestic rates. Demarcations can differ by network.

Third, regulators have capped interchange fees in a number of jurisdictions but have largely left network fees alone. In the US, the 2011 Durbin Amendment guaranteed merchants the right to choose between at least two competing networks on single-message PIN debit transactions. Recently the Federal Reserve has acted on Card Not Present transactions. The effect has been downward pressure on network fees.

Australia has introduced least cost routing to its domestic electronic fund transfer point of sale network. Where countries have introduced local card networks to compete with the international brands, again savings have been possible. Competition works.

CMPSI suggests two actions merchants can take. First, spend the time to investigate transaction-level network fee data. Second, where competition between providers exists, use it.

Mexican Banks Form Alliance to Cut Charges

Six Mexican banks have decided to work together to allow users to withdraw cash and check account balances without being charged commissions. 9,352 ATMs, about 15.5% of the total in Mexico, are involved and available to 13.2 million customers of the banks – HSBC, Scotiabank, Inbursa, Banregio, Banca Mifel or Banco del Bajío. The Multired alliance started in 2021 but it was only in January 2023 that HSBC joined.

The average commission for cash withdrawal from a bank other than your own is between 27 and 30 pesos (US$1.6-$1.92). HSBC estimate that around 49% of account holders use an ATM up to five times per month to get cash. 85% of transactions with a value of under 500 pesos are made in cash.

The Bank of Mexico data says 153 million interbank operations are made with cards, worth 463 billion pesos (US $24.3 billion), each year.