Klarna vents at CFPB over BNPL rules, Discover bullish on Italy

May 29, 2024 11:43 AM

The Swedish financial institution argues over potential regulations that treat buy now/pay later lending like credit cards in the U.S; Discover seeks the next hot market for real-time payments; and more.

Here's what's happening around the world.

Hollie Adams/Bloomberg

Klarna: CFPB's new BNPL guidance 'baffling' and 'confusing'

Swedish financial institution Klarna lashed out at the Consumer Financial Protection Bureau's plan to classify buy now/pay later lending as credit cards under U.S. consumer protection law.

"It is baffling that the CFPB fails to acknowledge the fundamental differences between BNPL and credit cards in their guidance and this announcement does nothing to address the $1.15 trillion in credit card debt," Klarna said in a post. Klarna did not provide comment for this story by deadline.

Under the CFPB's new guidance, BNPL lending will be subject to the Truth in Lending Act, which requires credit-card lenders to provide lending terms and offer consumers the ability to dispute charges and receive refunds. In announcing the new rules, CFPB Director Rohit Chopra said the Truth in Lending Act covers any product that consumers can use to make purchases on credit.

"Trying to regulate BNPL like a credit card is like comparing apples with oranges. So today's announcement is confusing," Klarna said, contending that it provides "a high standard" in investigating disputes. Klarna also contended that regulators outside of the U.S. distinguish between credit cards and BNPL loans. "It is our hope that the CFPB will recognize the major differences between BNPL and credit cards, as they operate in fundamentally different ways," Klarna said.

The CFPB has focused on BNPL lenders for the past three years. In 2021, the agency requested that BNPL firms such as Affirm, Afterpay, Klarna, PayPal and Zip assess the impact of higher debt and how consumer data is used as part of BNPL lending. Chopra has likened BNPL lending to a traditional layaway plan but with new technology that speeds both the credit issuance and the accumulation of debt. The CFPB has issued research saying BNPL users are more likely to rely on high-interest financing tools and are more financially strained. Klarna contends that its BNPL loan is short-term, no-interest credit with no fees when paid on time.

The CFPB is collecting public input on new BNPL guidelines until August 1. The Office of the Comptroller of the Currency in December issued similar guidance for banks that service BNPL loans. —John Adams

Discover expands its reach in Italy

Italian financial institution Banca Sella has added support for Discover, Diners Club International and affiliated networks for in-store payments via Banca Sella's point of sale terminals. The integration is aimed at consumers who frequently travel to Italy from countries where Discover and Diners Club have a large presence, such as the United States, Brazil, India, China, Japan and Switzerland.

Discover's collaboration with Banca Sella follows a recent partnership with Bancomat, Italy's interbank payments network, to add Discover's mobile payment tools. "In the coming years, Italy will host world-class cultural and sporting events, and our cardholders, who are increasingly traveling to Italy, will benefit from paying with [Discover]," Matt Sloan, vice president of international markets at Discover, said in a release.

Capital One Financial plans to acquire Discover in a $35 billion deal that would dramatically expand Capital One's global payments business, though the proposed transaction faces regulatory hurdles. —John Adams

Visa adds a partner to simplify Web3 payments

Visa and London-based fintech Gnosis Pay are collaborating on a Visa debit card that uses Gnosis' decentralized network in an effort to ease connections between traditional financial institutions and Web3 companies.

Web3 uses relatively recent internet technology to enable users to control and access data through a blockchain or decentralized network. The use of virtual reality or digital communities creates a payments market that has been dominated by selling or trading non-fungible tokens or other digital assets.

Gnosis Pay and Visa's collaboration is aimed at broadening usage beyond these early adopters. Gnosis Pay's crypto-linked Visa card will use a blockchain to expand risk management and money-laundering mitigation by monitoring fund sources and transaction paths, spotting the origin of funds and movements across different addresses.

"This new partnership with Visa brings us a step closer to achieving our goal of building the next generation of banking by creating an efficient, cost-effective global payments system that provides payment optionality for all," said Marcos Nunes, CEO of Gnosis Pay, in a release. —John Adams

Real-time payments set to take off in the Middle East

There were 855 million real-time payments in the Middle East in 2023, and the region is on pace to reach 3 billion by 2028, or a compound annual growth rate of 29%, according to ACI Worldwide's 2024 Prime Time for Real-Time Payments Report.

Oman, Kuwait and Qatar launched real-time payment schemes in 2023, joining more established markets such as United Arab Emirates, Saudi Arabia and Bahrain. In Bahrain, more than 50% of all payments route through the country's real-time network, according to ACI.

Real-time payments account for 12% of payments in the Middle East, and will account for nearly a quarter of payments by 2028, according to ACI, which notes that rate of adoption outpaces North America and Europe. Real-time payments also make up a large share of payments in India and Brazil. Nearly half of all global real-time payments are made in India, with 14% in Brazil.

In the U.S. for example, real-time payments are on pace to expand from 1.4 billion in 2023 to 11.4 billion in 2026, according to Statista, adding that 11.4 billion payments would be less than 4% of U.S. payment transactions for that year.

But there is room for further real-time payments growth in the U.S. Thirty-three percent of American banks and credit unions offer FedNow, and 38% offer The Clearing House's RTP network, according to research from Arizent, American Banker's publisher, which surveyed 126 financial services industry leaders in January and February. —John Adams

Spanish payments processor moves to acquire Brazilian fintech

Barcelona-based PayRetailers, a payments processor with operations in Latin America and Africa, has announced plans to purchase Transfeera, a Caterina, Brazil-based fintech that streamlines businesses' payments via Pix, according to a press release. Pix is Brazil's fast-growing instant payments service.

Transfeera, founded in 2017, has 450 corporate customers that use its payment application protocol interface to validate bank details for Pix and other transactions. PayRetailers, also launched in 2017, plans to integrate Transfeera's 100 existing employees into its global network for a post-transaction total of 550 employees spread across 10 offices.

Terms of the transaction, which is subject to approval by the Central Bank of Brazil and Brazil's Administrative Council for Economic Defense, were not disclosed. —Kate Fitzgerald

Energy giant weighs entering India’s payments arena

Adani Group, an India-based conglomerate with wide-ranging industrial and infrastructure operations, is preparing to launch a set of co-branded bank cards. It is also weighing plans to expand its payments operations by applying for a license to operate on India's Unified Payments Interface (UPI), TechCrunch reports.

The move would bring Adani Group into direct competition with Mukesh Ambani's Reliance operations, Google, Amazon, Walmart's two mobile payments operations, Flipkart and PhonePe.

Adani Group also plans to offer online shopping via India's Open Network for Digital Commerce. Walmart and Google Pay together process more than 86% of the UPI network's 12 billion monthly transactions. Adani would launch its mobile payment service to consumers via Adani One, a mobile app it debuted in 2022 that offers travel tickets to consumers, according to the report. —Kate Fitzgerald

Philippine telco plans IPO for GCash mobile payments app

Globe Telecom, which operates the largest mobile telecom network in the Philippines, is contemplating an initial public offering next year for GCash, its popular SMS-based money transfer network, according to ABS-CBN News. GCash, with 81 million users and 2.5 million connected merchants, raised $300 million from global investors in 2021.

GCash is a joint venture of Global Telecom's Mynt, Alibaba's Ant Group and Philippines-based conglomerate Ayala Corp. It offers QR code payments, online and mobile gaming purchases, bill payments, intrabank transfers and remittances. Mynt also operates GCash Jr. for youths ages 7 to 17. —Kate Fitzgerald

Alipay's mobile payment suite gains traction in the U.K.

London-based fintech DNA Payments has launched Alipay+, a collection of more than two dozen digital wallets, mobile payment apps and other digital financial services that are affiliated with Chinese e-commerce and financial services conglomerate Ant Group. Alipay+ will reach more than 50,000 merchants in the U.K., which will use DNA's point of sale terminals.

The service is aimed mostly at travelers from Asia, who can use their domestic e-wallets to pay in their home country's currency. "The U.K. is a popular destination with Asian visitors for leisure, study or work, who prefer to pay in ways they are familiar with," said JP Lips, CEO of DNA Payments, in a release.

Ant in April began recruiting merchants, tourist destinations and commercial districts inside China to build consumer zones, enabling travelers to use their own mobile wallets as part of the broader Alipay+ network. —John Adams

Revolut looks to cash in on payments between Europe and Africa

London challenger bank Revolut has added 14 payment corridors, nine countries and three mobile wallets in an attempt to boost payment flows between Europe and Africa.

The additions enable Revolut customers in the U.K. and most European countries to reach more than a dozen African countries, enabling payments via the recipient's mobile phone number or email address. This is safer than more traditional remittance methods since it makes it easier to trace transactions, Revolut argued.

"Sending money home to Africa is a challenge many expats face and so it is essential to provide a service that simplifies this and facilitates affordable and convenient international money transfers," said Samuel Fairburn, product owner for Remittance at Revolut, in a release. Revolut expanded its mobile payments offerings earlier this year as part of a strategy to accelerate its global expansion by adding new payment customers. —John Adams