Daily Dash: Card Schemes Reportedly Mulling Credit Card Fee Increase

September 1, 2023
Visa and Mastercard are reportedly planning to increase credit card fees that US merchants pay, Klarna has announced positive results, but is still not profitable, and Mastercard Send has been selected to power instant cash-outs for traders in APAC.

Visa, Mastercard To Raise Credit Card Fees In Fall - WSJ

Visa and Mastercard are reportedly planning to increase the credit card fees that US merchants pay in October and April next year respectively, the Wall Street Journal (WSJ) reported on Tuesday (August 29).

According to the report, the increases will mostly apply to online purchases. Merchants payments consultancy CMSPI estimates that the reported changes will add an extra $502m annually to the fees that merchants pay for accepting credit cards.

Commenting on the news, however, a Mastercard spokesperson said the WSJ reporting “was not correct”.

“We were clear on two points before the story was filed — there are no changes to Mastercard interchange rates,” the spokesperson told VIXIO.

“And the one ‘change’ referenced is an existing service we provide to acquirers, who can activate it as needed to drive a safer and more streamlined checkout experience for consumers.”

As reported by VIXIO, credit card fees are not regulated in the US. In June, Senator Richard Durbin re-introduced the Credit Card Competition Act in Congress to enable dual routing on certain credit cards.

Commenting on the WSJ report, Durbin said this news "solidifies" that it is time to pass the proposed legislation and they "strongly urge" Visa and Mastercard to withdraw their plan.

Klarna Losses Drop 70 Percent But Business Still Not Profitable

Buy now, payer later (BNPL) firm Klarna has released its results for H1 2023 and, despite reducing its losses by 67 percent compared with the previous period, the firm is still not profitable.

As per the report, Klarna reduced its losses from SEK1,152m ($150m) to SEK775m ($70.7m), and reported net operating income of SEK9.2bn ($843.5m) — an increase of 21 percent year-over-year.

Although Klarna could not generate a half-year profit, the BNPL giant said it had reached “a significant milestone” by recording its first month of net profit.

“Our results clearly rebut the misconceptions around Klarna’s business model, evidencing that it is incredibly agile and sustainable, as we support our healthy consumer base in making sound financial decisions,” said Sebastian Siemiatkowski, co-founder and CEO of Klarna.

“Some claimed Klarna would face difficulties in the tough macroeconomic climate with high interest rates, but having led the company through the 2008 financial crisis I knew we had a robust business model to see us through.”

As have many other firms, Klarna has laid off more than 10 percent of its employees in the past year. The firm is also now relying on AI in a bid to achieve sustainable growth and profitability.

Nuvei To Expand Instant Cash-Outs For Online Traders Via Mastercard Send

Canadian fintech Nuvei has announced plans to expand its instant cash-out feature for online trading platforms and investors in the Asia-Pacific region.

Already available in Singapore, Nuvei said the service will also launch by the end of this year in Hong Kong and Australia.

The cash-out feature allows investors to withdraw funds from an online trading platform to a Mastercard debit card in real time, using an integration with Mastercard Send.

Trading platforms where the feature will be available include Plus500, which already uses the cash-out feature in Singapore.

“In an unpredictable trading environment where price fluctuations happen in seconds, Mastercard Send provides online traders with the peace of mind that they can cash-out instantly, at the click of a button,” said Alon Cohen Naznin, COO, Plus500.

Media Company In SEC Firing Line In First NFT Enforcement 

The US Securities and Exchange Commission (SEC) has charged Impact Theory LLC, a media and entertainment company headquartered in Los Angeles, with conducting an unregistered offering of crypto-asset securities in the form of purported non-fungible tokens (NFTs). 

Impact Theory raised approximately $30m from hundreds of investors, including investors across the United States, through the NFT offering. 

According to the SEC’s order, from October to December 2021, Impact Theory offered and sold three tiers of NFTs, known as Founder’s Keys, which Impact Theory called “Legendary”, “Heroic” and “Relentless”. 

The SEC order finds that Impact Theory encouraged potential investors to view the purchase of a Founder’s Key as an investment into the business, stating that investors would profit from their purchases if Impact Theory was successful in its effort.

“Absent a valid exemption, offerings of securities, in whatever form, must be registered,” said Antonia Apps, Director of the SEC’s New York Regional Office. “Without registration, investors of all types are deprived of the protections afforded them by the robust disclosures and other safeguards long provided by our securities laws.”

Half Of Klarna Employees Now Using ChatGPT Enterprise

Swedish buy now, pay later (BNPL) giant Klarna has announced that 2,500 of its 5,000 employees are now using ChatGPT Enterprise. 

The AI product, which was created by Open AI’s ChatGPT, purports to bring higher security, higher-speed and advanced data analysis capabilities to internal work systems. 

“One of the things I'm following closely right now is exactly how many of our employees are using their Open AI account,” said Sebastian Siemiatkowski, CEO at Klarna. We are currently at 2,500 out of 5,000 employees. So even though we push everyone to test, test, test and explore, still only 50 percent of our employees use it daily. That's why we have to find new ways to get more people to use OpenAI’s fantastic tech,”

Klarna has attempted to make itself a pioneer in AI adoption. For example, in March this year, it became the first fintech globally and the first European company in any sector to launch the ChatGPT plugin for consumers.

US Consumer Regulator Comes Down Hard On Credit Repair Firms

The US Consumer Financial Protection Bureau (CFPB) has entered into a proposed settlement with a ring of corporate entities operating some of the largest credit repair brands in the country, including Lexington Law and CreditRepair.com.

According to the regulator, the brands perpetrated a “years long scheme to illegally harvest billions in fees”.

The agreement follows a ruling from the court that the companies collected illegal advance fees for credit repair services through telemarketing in violation of federal law. 

If approved, the settlement would impose a $2.7bn judgment against the companies. The order will also ban the companies from telemarketing credit repair services for ten years.

“Americans across the country looking to improve their credit scores have turned to companies like CreditRepair.com and Lexington Law. These credit repair giants used fake real estate and rent-to-own opportunities to illegally bait people and pad their pockets with billions in fees,” said CFPB director Rohit Chopra.

“This scam is another sign that we must do more to fix the credit reporting and scoring system in our country.”

Vietnam Joins Southeast Asia Regional Payments Initiative

Vietnam has become the sixth nation to join the Southeast Asian Regional Payment Connectivity (RPC) initiative, following in the footsteps of Indonesia, Malaysia, Philippines, Singapore and Thailand.

Last week, at the 10th ASEAN Finance Ministers’ and Central Bank Governors’ Meeting (AFMGM) in Jakarta, the State Bank of Vietnam (SBV) signed a memorandum of understanding (MoU) on expansion of the RPC.

In November last year, as covered by VIXIO, the same MoU was initially signed at the G20 Leaders’ Summit by the central banks of Indonesia, Malaysia, Philippines, Singapore and Thailand.

The continued expansion of the RPC is both a mandate from the 9th AFMGM and a priority of Indonesia's 2023 chairmanship of the bloc.

The RPC initiative was launched to enable faster, cheaper and more transparent cross-border payments between ASEAN nations, using both QR code and instant payments linkages.

N26 Integrates With Dutch Instant Payment System iDEAL

European neobank N26 has announced the launch of a new integration with iDEAL, the Dutch instant payments system.

iDEAL is a Dutch online payment standard for account-to-account payments. Using iDEAL, customers can pay for goods and services directly from their bank account.

When shopping online, users must select "iDEAL" at checkout and then select "N26" to be redirected to their banking app. This includes an in-app authorisation process for added security.

At present, some merchants may be yet to add N26 to their list of accepted banks, but N26 said that coverage among merchants will improve over time.

ASIC Suspends Licence Of Cross-Border Payments Firm Following Administration

The Australian Securities and Investments Commission (ASIC) has suspended the financial services licence of Navigate Global Payments, following the company’s entry into voluntary administration.

On June 30, Nick Combis of Vincents Chartered Accountants was appointed as voluntary administrator of Navigate. On the same day, David Hardy, Sarah Seeckts and Ryan Eagle of KPMG were appointed as receivers and managers of Navigate.

Founded in 2017, Navigate is a wholly Australian-owned company that offers FX payment services, payment technologies and risk management services.

ASIC has encouraged clients of Navigate to “carefully monitor” and “watch for updates” from Navigate, as well as its administrator, receivers and managers.

Navigate may also apply to the Administrative Appeals Tribunal for a review of ASIC’s decision.

BRICS Nations Encourage More Payments Linkages

Leaders of Brazil, Russia, India, China and South Africa concluded the 15th BRICS Summit in Sandton on Thursday (August 24) with the release of the Johannesburg II Declaration, which “reaffirms” and commits to further “mutually beneficial” cooperation between BRICS countries. 

As part of this commitment, the countries said they “recognise the widespread benefits of fast, inexpensive, transparent, safe, and inclusive payment systems”, especially in cross-border payments.

They encourage the use of local currencies in international trade and financial transactions between BRICS nations and task their central bank governors and finance ministers to “consider the issue of local currencies, payment instruments and platforms”. The officials will have to submit a report to the policymakers before the next summit.

The document also calls for further cooperation among BRICS countries “to enhance the interconnectivity of supply chains and payment systems”.

Mastercard Partners With UAE Government On AI

Mastercard has established a global centre for advanced artificial intelligence (AI) and cyber technology in Dubai, United Arab Emirates (UAE).

The country’s Artificial Intelligence, Digital Economy and Remote Work Applications Office signed a memorandum of understanding (MoU) with the payments giant to increase AI capabilities and readiness in the region. 

The initial focus of the the partnership will be tackling financial crime, securing the digital ecosystem and driving inclusive growth in the UAE and beyond.

“AI plays a critical role in our operations, powering our products and fueling our network intelligence to improve digital experiences while reducing financial fraud and risk,” said Ajay Bhalla, president, cyber & intelligence, at Mastercard. 

“The combination of this latest Advanced AI Center and our partnership with the government of the UAE will deliver greater value for our customers and ultimately reinforce trust in the digital ecosystem.”

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