AmEx gives early holiday boost to small businesses
A s the holiday shopping season approaches, several programs are underway to help small businesses end the year profitably. In advance of Small Business Saturday, which will be celebrated on Nov. 26, 2016, American Express Co. ramped up its support of the national retail campaign it founded in 2010 to promote independently owned businesses.
Building upon past successes – 95 million consumers were reported to have flocked to small businesses last year on Small Business Saturday – AmEx created the Shop Small Studio, a new resource center that offers tools to create customized print and digital store campaigns. The AmEx ShopSmall.com multimedia hub also features how-to guides to help small businesses prepare for the holiday season.
"Our ultimate goal is to help small businesses do more business – and for Small Business Saturday, that includes arming them with the tools to help make the day a success," said Amy Marino, Vice President and Head of Small Business Saturday at AmEx. She noted that the company collaborated with small business experts, entrepreneurs and influencers to create digital content and easy-to-customize marketing materials for small businesses.
AmEx also hosted a Small Business Saturday Boot Camp in Chicago on Oct. 18. Additional boot camps are slated for New York and San Francisco, on Oct. 20 and 27, respectively. These feature strategic planning workshops and panel discussion led by experts, community leaders and retailers who have participated in previous Small Business Saturday retail campaigns.
To further support Small Business Saturday and merchants for the duration of the holiday season, AmEx also launched the Shop Small for 2X Rewards campaign for select U.S. consumer and OPEN Small Business American Express cards. Card members can enroll at www.amex.co/shopsmalloffer to earn rewards at participating merchants through the end of this year.
According to AmEx, the first-of-its kind offer builds on each eligible card's specific rewards program. When card members use an eligible card to shop at qualifying small merchants, they can earn 2X rewards, from points to miles to cash back. For example, Hilton HHonors hotel rewards program members who enroll in the AmEx rewards campaign can earn three additional Hilton HHonors Bonus Points per dollar of purchases.
Easing merchant cash flow, integrations
Another way AmEx hopes to bolster small business activity is through short-term, low-cost financing. In partnership with Intuit Inc., AmEx OPEN Business Card Members who are also QuickBooks Online users can take advantage of this program to pay vendors, thus easing cash flow constraints that sometimes occur.
"We've heard time and again from small business customers that cash flow is a key area of concern when it comes to managing day-to-day business expenses," said E-Bai Koo, Executive Vice President of Global Product Management at American Express Global Commercial Payments. Koo added that because AmEx Working Capital Terms' digital loans are directly embedded into QuickBooks, account management is greatly simplified.
AmEx stated the program allows small businesses to request a term, as well as a loan amount from $1,000 to $750,000, and receive approval in as little as 60 seconds. It can also help streamline vendor management by making and tracking vendor payments, consolidating payment and accounting transactions in one central location, and reconciling accounting ledgers with up-to-date cash flow insights readily available, the company said.
In addition, to further simplify small business network integrations, AmEx recently unveiled Amex for Developers, a portal that provides single-point access to company application programming interfaces (APIs) and developer resources to provide an end-to-end approach to integrating payments, data intelligence, fraud prevention and other business applications.
"American Express has long used APIs to enable selected merchant partners to grow their businesses by engaging their customers who are Card Members in innovative ways," said Marc Gordon, Executive Vice President and Chief Information Officer at AmEx. "With the launch of Amex for Developers, we are expanding access to our APIs to additional partners, creating new opportunities for business growth, both for our partners and for American Express."
U.S. Supreme Court to rule on credit card surcharging
Monday, October 17, 2016
T he contentious battle over credit card surcharges has escalated to the U.S. Supreme Court, giving hope to retailers in 10 states that currently ban the practice of adding a fee to credit card transactions. A court challenge brought by five retailers in Expressions Hair Design v. Schneiderman, 15-1391, made its way through New York courts, initially winning in September 2013, only to be overturned on appeal two years later by New York's 2nd U.S. Circuit Court of Appeals.
The retail petitioners allege surcharge laws violate their First Amendment rights to free speech and due process under the U.S. Constitution. These claims became the basis for the Supreme Court review.
The New York court disagrees that surcharge laws violate free speech, calling its measures "price-control laws" that "regulate economic conduct rather than speech." New York Attorney General Eric Schneiderman and Manhattan District Attorney Cyrus Vance noted these price-control laws do not control pricing for goods and services, but only "how those prices are communicated ‒ that is, which of the two prices the merchant may frame as the 'regular' price on the label, and which the merchant may convey through a separate sign."
The New York attorneys compared surcharging credit card transactions to "bait-and-switch" tactics that reportedly occur at gas stations. Restricting surcharge practices protects consumers by maintaining price consistency and preventing surprises during the checkout process, they said.
Banned in 10 states
Retailers filed similar complaints in Florida and Texas in May and June 2016, petitioning courts to "resolve a direct and acknowledged circuit split over whether state no-surcharge laws violate the First Amendment, and they have been filed from each of the three circuits that have thus far divided on the issue," the plaintiffs stated.
Surcharging is restricted in New York, California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, Oklahoma and Texas. In New York, retailers found guilty of adding fees to credit card transactions can face a $500 fine and up to a year in prison. New York U.S. District Judge Jed Rakoff issued a preliminary injunction against the law in September 2013, siding with complainants by stating the law violates the First Amendment and "perpetuates consumer confusion by preventing sellers from using the most effective means at their disposal to educate consumers about the true costs of credit card usage."
Court to decide state rights
The Supreme Court's stated purpose is to clarify "whether and to what extent the Constitution limits state-imposed restrictions on the manner by which merchants can frame and convey truthful pricing information."
David Leppeck, President and Chief Executive Officer of Transaction Services LLC, said, "The Supreme Court will not decide on the legality of surcharging, but on whether or not individual states have the right to ban the practice. Federal restrictions against credit card surcharging can be traced back to the 1980s, when card brands tried to make credit card transactions equivalent to cash. These campaigns were done relatively quietly, with little fanfare. Consequently, very few states can recall why surcharging was banned in the first place."
Surcharging compliance guidelines became effective Jan. 27, 2013, following a class action settlement by retailers against Visa Inc. and Mastercard. The guidelines specify criteria for qualifying transactions, including mandatory signage and disclaimers for participating merchants. For example, merchants may surcharge credit cards, but not debit or prepaid transactions. Merchants are also required to post point-of-entry and point-of-transaction signage and specifically worded disclaimers on credit card receipts.
Varying state-by-state guidelines and restrictions can make surcharge compliance a daunting process for merchants doing business in multiple states, which has prompted some ISOs and acquirers to explore ways to simplify the practice
"Transaction Services has automated the compliance process, confirming that transactions originate in states that allow it and that it meets all criteria," Leppeck said. "The solution can be implemented at the POS, a hosted payment page or as a direct integration tool. Surcharged transactions are flagged at auth and settlement, routed directly to card brands and settled with our processor."
One year in, reviews mixed for EMV in U.S.
Tuesday, October 11, 2016
P ayments industry stakeholders met the one-year anniversary of chip card implementation in the United States with a mixture of celebratory messages and class action lawsuits, revealing a fractured payments landscape.
For example, on Sept. 29, 2016, Visa Inc. reported that counterfeit card fraud is down and EMV (Europay, Mastercard and Visa) usage is up. However, on Sept. 30, 2016, a California Federal judge supported anti-trust proceedings concerning chargeback liability brought by a group of small retailers against Visa Inc., Mastercard, Discover Financial Services and American Express Co., denying the card brands' motion to dismiss the lawsuit.
Visa's client financial institutions processed more than half a billion EMV transactions during August 2016, an increase of more than 1,000 percent, Visa representatives stated. The company additionally noted that chip-enabled merchant establishments with EMV accounting for at least 80 percent of transaction volumes reported a 47 percent reduction in counterfeit fraud during May 2016, compared with the same period during the previous year.
Visa set three objectives for U.S. chip card implementation: prevent counterfeit card fraud, accelerate mobile payments adoption, and improve convenience and security for international travelers. Executing on all three goals has resulted in a considerable uplift across the United States, with more than 1.46 million chip-enabled businesses and 363 million chip-enabled Visa cards, making the United States the largest Visa chip card market, according to company sources.
"Thanks to efforts across the ecosystem, we're seeing a positive impact on counterfeit fraud," said Stephanie Ericksen, Vice President of Risk and Authentication Products at Visa. "We're focused on continuing that momentum to bring counterfeit steadily down and simplifying the way businesses can adopt chip technology."
Payments analysts who have been tracking the progress of EMV implementation in the United States, however, have observed its impact on the small merchant community, many of whom were unprepared for the liability shift due to lack of instruction, equipment or processor readiness. As a result, numerous noncompliant retailers are being held responsible for more chargebacks, regardless of whether the chargebacks had anything to do with counterfeit fraud, which is the basis for the California court filing.
Plaintiffs Milam's Market and Grove Liquors reportedly installed EMV readers but were unable to activate them due to delays in certification. The retailers were subsequently found liable by Mastercard and Visa for 88 chargebacks totaling $9,196.22 that began in October 2015 and continued until March 2016, when the lawsuit was filed. Plaintiff counsel Patrick J. Coughlin stated, "In the end, our hope is to secure some relief for the millions of merchants ‒ many of them small businesses ‒ who have suffered and continue to suffer enormous losses from this conspiracy."
As EMV implementation continues, retailers and card brands have launched new payment schemes aimed at reducing contact chip card transaction time at the POS. Visa's Quick Chip, reportedly reduces transaction times to two seconds or less. Mastercard's M/Chip Fast is designed for high-volume environments such as quick serve restaurants, where transaction times are at a premium. These and similar enhanced chip card methods have decreased processing time and waiting time in checkout lanes.
Ongoing delays in processor and device certifications and widespread complaints by small to midsize merchants have prompted card brands to relax penalties and regulations related to the liability shift. Card brands have tried to improve outreach, resources and support for merchants who are trying to implement EMV technology. Visa's recent move to restrict the number of fraudulent transactions that issuers can charge back to noncompliant merchants and card issuing banks has cut reported chargebacks in half since March 2016, Visa representatives stated.
Despite numerous setbacks and legal confrontations, U.S. payments industry stakeholders remain committed to implementing chip card technology to improve security and provide a consistent payment experience worldwide. Visa reported that foreign banks approved nearly 97 percent of U.S. Visa chip transactions overseas, compared with about 87 percent non-chip cards.
"Chip is an important investment in the payment system, not only in security but also in driving future innovation and making payments easier for consumers," Visa's Ericksen stated. "The U.S. is clearly well on its way, and we're looking forward to many more advancements ahead."
Ajay Bhalla, President of Enterprise Risk and Security at Mastercard said, "Ultimately, we all want to deliver great experiences for consumers and merchants. That's why we believe that M/Chip Fast or any similar product should be implemented in consultation with the industry."
CFPB issues rules for reloadable prepaid debit cards
Friday, October 7, 2016
T he Consumer Financial Protection Bureau adopted tough new rules for prepaid debit cards that are set to take hold in October 2017. The new rules apply specific federal consumer protections to mobile wallets, person-to-person payment products and other electronic accounts that store funds, as well as to general purpose prepaid debit cards.
“Many consumers rely on prepaid cards to make purchases and access funds, but until now they were not guaranteed strong consumer protections under federal law,” said CFPB Director Richard Cordray. “This rule closes loopholes and protect prepaid consumers when they swipe their card, shop online or scan their smartphone. And it backs up those protections with important new disclosures to let consumers know before they owe.”
Prepaid debit cards are the fastest growing consumer payment method in the United States, ballooning from $1 billion in card loads in 2003 to nearly $65 billion in 2012. And card loads are expected to grow by more than 72 percent, to $112 billion, by 2018, according to the CFPB. However, they have existed largely in a regulatory no-man’s land.
The industry’s rapid growth has attracted much attention and more than a few concerns from consumer groups and regulators. Early on, the cards were criticized for high fees, and more recently for technology glitches. RushCard, for example, sustained massive technical glitches in 2015 that kept hundreds of thousands of cardholders from accessing their accounts for days.
The CFPB began working on a set of prepaid rules in 2014. The final rule, published Oct. 5, 2016, and weighing in at just under 1,700 pages, applies specific consumer protections to the cards, including provisions of the federal Truth-in-Lending Act (as implemented by Federal Reserve Regulation Z) and the Electronic Funds Transfer Act (Regulation E).
Specific provisions require:
- Free and easy access to account information, such as online or by telephone
- Error resolution rights and provisional credits for disputed transactions
- Limited cardholder liability for unauthorized transactions ($50 limit)
- Easy-to-understand disclosure statements
- Easy access to standardized card agreement information (via the web or paper) to support comparison shopping
The most contentious provisions, however, spell out specific consumer protections for prepaid card products that allow cardholders to overdraw their prepaid accounts. The CFPB had proposed disallowing overdrafts, which the National Consumer Law Center estimates cost consumers over $50 million a year. Prepaid companies balked, and the final rule instead imposes Reg Z protections on these activities. The final rule includes provisions for underwriting requirements, detailed periodic statements, limits on late fees and charges, and a 30-day waiting period before a new cardholder can be offered overdraft privileges.
The prepaid card industry is not happy with the final rule. “While we are still analyzing the lengthy final rule to determine its full impact, it is already clear that the CFPB has dismissed many of our serious concerns and moved forward with a rule that will harm the very consumers it aims to protect,” said Brad Fauss, President and Chief Executive Officer of the Network Branded Prepaid Card Association.
“Instead of fostering financial innovation and inclusion, the CFPB’s rule will ultimately limit access to an essential mainstream consumer product that helps millions of Americans participate in the digital economy, affordably manage funds and safely hold money,” he added.
World Payments Report 2016 released
Wednesday, October 5, 2016
C apgemini and BNP Paribas published the World Payments Report 2016 Sept. 22, 2016. The 12th annual comprehensive global payments study found continued growth in noncash and electronic payment transactions. Authors James Methe of Capgemini and Jan Dirk van Beusekom of BNP Paribas attribute growth to a number of factors, including economic progress in key regions and rising costs of cash management.
The report substantiates key trends in the World Payments Report 2015, co-authored by Capgemini and the Royal Bank of Scotland, which cited growth in noncash transactions, as well as in the regulatory and fintech sectors. Last year’s report estimated an 8.9 percent increase in noncash payments for a total of $389.7 billion in 2014. The noncash transaction forecast for 2015 was adjusted to 10.1 percent and $426.3 billion in the current report.
Noncash, fintech, regtech growth
According to the report, noncash transactions have been highest in Emerging Asia (Taiwan, Korea, Singapore, Indonesia, Malaysia, Philippines, Thailand and Vietnam). The report also stated, “The accelerated rate of growth in global non-cash transactions in 2015 will have been driven by a variety of factors, including improved U.S. economic growth, stronger security measures such as EMV, biometrics, and Host Card Emulation, increased penetration
of smartphones and POS terminals, and moves by governments in developing markets to encourage digital payments.”
The authors expect the banking industry to face multiple challenges from regulators and fintech innovators. They urged banks to collaborate with fintechs to improve and enlarge their value proposition and digital transformation, which is the focal point of this year’s report.
James Methe, Principal of Payments and Transaction Banking, Financial Services at Capgemini, said rapidly changing regulatory environments have prompted numerous corporations to evaluate how much of their budget is spent on regulatory items. “Corporations are updating the capacity and capabilities of their existing infrastructures," he said. "Implementing multiple compliances can be costly and time-consuming, and many have begun outsourcing to regtech providers.”
Greater cooperation, faster payments
Jan Dirk van Beusekom, Executive Director of Advisory & Strategic Marketing Cash Management at BNP Paribas, said institutional banks are dealing with more and more regulations and security mandates and need to adopt a spirit of cooperation, open-mindedness and pricing transparency to deal with increasing competition from well-known fintechs like Uber Technologies Inc. and Airbnb.
“The ISO 2002 Standard is old news for Europeans, but U.S. banks have been rushing to get up to speed on ISO standards,” van Beusekom said. “Interbank cooperation will enable financial institutions to compete with closed loop systems that facilitate instant fund transfers from one account to another.”
Despite a series of initiatives designed to eliminate paper currency, the authors expect cash to remain “a significant payment instrument in the near future, even in markets that offer advanced digital payments.” They expect immediate payment services to accelerate the migration to digital payment methods, particularly in entertainment, dining and peer-to-peer payments.
The authors additionally noted that Sweden’s central bank, Sveriges Riksbank, mandated that all banks must offer their customers at least one form of free payment service, such as cash. This and similar initiatives led the authors to conclude that “while there is a drive towards decreasing cash usage, the persistence of cash has prompted some countries to prioritize their efforts on reducing the cost of cash, rather than its elimination.”
Following are additional key findings cited in the report:
- Immediate payments may displace cash and checks in many markets but must overcome challenges to take market share away from traditional payment card brands.
- Banks have expanded product offerings beyond payment processing, some through partnerships with fintech firms, in an effort to compete in the digital arena.
- Banks face numerous challenges related to the ever-changing regulatory environment. Fintechs and regtech firms can help financial institutions achieve a holistic compliance vision.
- Developing markets experienced the highest noncash payment growth rates, but mature markets still hold the largest volumes of noncash payment transactions.
- The Asia-Pacific region held the highest growth in noncash payments and noncash transaction volumes.
- Latin America is the only region where payment card use is not expected to grow.
For a full copy of the report, visit www.worldpaymentsreport.com/ .
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