Technology, fees and a mega-merger: top payments news of 2024

December 20, 2024 2:30 PM

The payments industry is evolving at a rapid clip.

Technologies such as instant payment schemes, account to account, digital wallets, virtual cards and stablecoins are gaining greater adoption as the industry looks to modernize the speed and ease with which money moves.

The tides are also shifting with the major payment companies: Fiserv this year sought a bank charter; Capital One is looking to acquire Discover in what would mark one of the largest acquisitions since SunTrust and BB&T merged in 2019; and Visa is battling an antitrust dispute with the Department of Justice that is threatening its debit-card-processing stronghold.

Of course, mounting fraud and the shifting regulatory environment were also top of mind.

American Banker readers flocked to articles focused on forthcoming change in the industry.

Read on to see which payments stories were the most read in 2024.

Bloomberg

What Capital One would get from buying Discover

Discover Financial Services' new CEO only arrived at his desk at the beginning of February, but the company is already rocketing in a new direction.

Capital One Financial plans to acquire Discover in a $35.3 billion deal that would create a credit card behemoth with its own payments network.

The proposed merger of two of the six largest U.S. card issuers requires approval from federal regulators and is likely to invite heavy regulatory scrutiny. The companies, however, say the deal would help the Discover payments network compete against larger rivals such as Visa and Mastercard.

By October, the deal was facing antitrust scrutiny from New York state officials, and Capital One's longtime CEO, Richard Fairbank, pushed the deal-closure timeline to early next year.

Another complicating factor is a Securities and Exchange Commission investigation into Discover in connection with its practice of overcharging merchants.

Read the full article here.

Fiserv

Fiserv wants a special purpose bank charter. What does this mean?

In a tightly competitive payments market in a cost-conscious economy, Fiserv is trying to expand the amount of processing work it can do for merchants.

The bank technology seller applied for a merchant acquirer limited purpose bank charter in Georgia. That would allow Fiserv to control the entire payment process, including authorizing, settling and clearing debit and credit card transactions. Fiserv normally uses bank partners as part of payment processing.

In an email, Fiserv's public relations office said the company is "taking this step in response to recent market changes, as third-party financial institutions that have traditionally provided access to the card networks as sponsor banks increasingly focus on other areas of their business."

The Georgia Department of Banking and Finance said the application was approved Sept. 27.

Read the full article here.

Andrew Harrer/Bloomberg

Republicans to Visa and Mastercard: Figure it out, or we will

Lawmakers on both sides of the aisle pressed executives from Visa and Mastercard on the cost of so-called swipe fees to small businesses and consumers.

Notably, Republican lawmakers — who will have full control of the White House and Congress for the next two years — signaled openness to legislation that would require banks with more than $100 billion in assets to offer retailers the choice between two unaffiliated card networks, one of which cannot be Visa or Mastercard.

The legislation is currently cosponsored by Sen. JD Vance, R-Ohio, who is also the vice president-elect. It's unclear whether the legislation will have the backing of the White House under the Trump administration, or whether the next administration will continue pursuing an antitrust case brought by the Department of Justice against Visa.

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Callaghan O'Hare/Bloomberg

Bank of America is the latest bank to face AML scrutiny

Bank of America is in discussions with several federal regulators over certain aspects of its efforts to combat money laundering and comply with economic sanctions, the Charlotte, North Carolina-based company said. BofA said it may enter into one or more public enforcement actions to resolve the issues.

BofA's communications with regulators have touched on issues such as transaction monitoring, training, governance and customer due diligence, the $3.3 trillion-asset bank said in a securities filing.

The bank also said it has been implementing enhancements to its anti-money-laundering and sanctions-compliance programs and will continue to do so. Based on the company's discussions with regulators, BofA does not expect the issues that have been raised to have a "material adverse financial impact," the filing stated.

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Andrew Harrer/Bloomberg

Visa blurs line between debit, credit cards in new 'flexible credential'

Visa in February announced new digital capabilities for its credit and debit cards, including the ability for users to tap their own card on their own device to instantly provision a new card in a digital wallet; pay via credit or debit from a single account; and use facial identification for one-click checkout more broadly.

The product updates, more than a decade in the making, come after Visa has worked for years to streamline e-commerce checkouts amid rising card fraud trends. The changes also represent a broad modernization that will bring certain digital payment shortcuts and funding options pioneered by fintechs within reach of banks and help Visa drive new revenue streams.

One of several new product features is the Visa Flexible Credential, which enables banks to issue a single card that toggles between payment methods.

Read the full article here.

Andrew Harrer/Bloomberg

'We are picky': Inside Amex's fintech strategy

American Express is employing multiple tactics to increase the scale and reach of its products, much of it centered on fintech.

That has included building new platforms that make it easier for fintechs to connect with American Express to co-brand cards or embed its payments capabilities; investing in companies with promising technology; and making selective acquisitions.

The time is ripe to entice new partners, especially for co-branding relationships, as analysts say American Express has successfully heightened its appeal to younger generations. Historically, the stereotype for Amex cards is that they are not widely accepted and they cater to the ultrawealthy, but that has not been true for several years, said Michael Miller, equity analyst at Morningstar.

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Adobe Stock

How Zelle fraud compares to other payment apps

By some measures, Zelle is a less popular target for scammers and fraudsters than other peer-to-peer payment platforms in the U.S., according to a variety of data sources. By others, it is a major offender — in line with its overall high usage.

Zelle has faced increasing pressure in recent months over fraud on the platform. Early Warning Services, a fintech co-owned by seven of the largest banks in the U.S., operates the Zelle network, and some lawmakers say these big banks are not doing enough to protect their customers.

JPMorgan Chase, one of the owners of Early Warning Services, has said it would fight enforcement actions it might face over Zelle after the Consumer Financial Protection Bureau sent inquiries to the bank about fraud and scams on the platform.

Click here to read the full article.

Daniel Acker/Bloomberg

What Mastercard's layoffs reveal about the fate of payment revenue

Mastercard, which in July posted earnings that beat analysts' projections and included upbeat commentary about consumer spending, plans to lay off about 3% of its employees by the end of September.

The card network said the cuts would unlock capacity that will enable investment and a redeployment of resources into growth areas, according to a report by Bloomberg.

The staff reductions come as both Mastercard and Visa focus on growing revenue from sources beyond payment fees particularly in mature markets. That includes focusing on emerging markets with a cash-reliant population and selling technology, artificial intelligence and consulting services to a large international network of financial institutions, partner fintechs and merchants.

Read the full article here.

Kent Nishimura/Bloomberg

What banks should know about SCOTUS' 'swipe fee' ruling

The Corner Post is a relatively remote gas station in Waterford City, a town of about 6,000 people in western North Dakota. But it's become the center of the universe for how businesses in financial services, payments and dozens of other industries can challenge regulations.

The Supreme Court on July 1 ruled 6-3 that The Corner Post can sue over a 2011 Federal Reserve rule that governs "swipe fees," or the funds that businesses pay banks for debit card payments. An appeals court in St. Louis had earlier ruled The Corner Post could not sue the Fed because it missed a six-year statute of limitations. The gas station began accepting debit cards when it opened in 2018, or seven years after the 2011 rule. The ruling in effect rejected the statute of limitations.

As a result of the ruling, timing will not necessarily hinder firms that are filing a grievance, suit or some other form of legal protest against a regulation.

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Postmodern Studio/Adobe Stock

The big pay-by-bank projects launching right now

Making payments directly between bank accounts is not a new idea. But a convergence of factors are making what's called pay-by-bank one of the hottest trends in the payments industry.

Also called account-to-account payments, several large projects were either announced or got underway in October.

"There are a number of contributing key factors to the growth of pay-by-bank, including open banking and real-time payments adoption, and a lower-cost alternative to card payments," said Elisa Tavilla, director of debit payments at Javelin Strategy & Research.

Read the full article here.