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NewsBriefs

Merchants, banks press their cases hospital systems, grounded airlines and shut down man-
over Illinois interchange law ufacturing plants. Yet 21 percent of businesses surveyed
believe they would not be seriously affected even if a key
The legal battle over Illinois' first-in-the-nation law ban- supplier went offline for five days—an assumption re-
ning interchange fees on sales tax and worker tips intensi- searchers say is wildly unrealistic.
fied this week as attorneys for merchant groups urged a
federal judge to dismiss banks' attempts to overturn the The survey also found growing concern about AI-driven
law. The Illinois Interchange Fee Prohibition Act, original- cyber risks, with 59 percent of respondents calling artifi-
ly set to take effect in July 2025, was delayed one year after cial intelligence the top emerging threat to supply chain
the Illinois Bankers Association filed suit arguing the law security.
is preempted by federal banking statutes and would cre- Governments are responding with tighter regulations, in-
ate operational chaos. cluding the EU's NIS2 Directive and the UK's forthcom-
ing Cyber Security Resilience Bill. However, NCC Group
Merchant advocates countered that Visa and Mastercard, warns the expanding patchwork of rules may be difficult
not banks, actually set interchange fees, meaning banks for multinationals to navigate—and could widen the vis-
cannot claim exemption. They argue merchants should ibility gap.
not pay swipe fees on tax and gratuity amounts that never
become revenue, calling the practice "unfair" and "eco- PayPal goes all-in on agentic commerce
nomically irrational."
PayPal is taking a major step into AI-driven "agentic com-
A preliminary injunction has already shielded national- merce" through dual announcements involving partner-
ly chartered banks by affirming federal preemption, but ships with Mastercard and OpenAI. First, the company
state-chartered banks and credit unions remain in limbo revealed it will integrate Mastercard Agent Pay into the
pending the final ruling. Banks warn the law would re- PayPal wallet, enabling AI agents to complete transactions
quire recalibration of POS systems, confuse consumers on behalf of users wherever PayPal is accepted. Second,
and create inconsistent card acceptance policies across PayPal is adopting the Agentic Commerce Protocol (ACP),
states. an emerging open standard co-developed by OpenAI and
Stripe that allows AI agents to interact with merchants
Merchants argue rising bank profits prove reform is over- and checkout systems securely.
due, while financial institutions claim forced routing will
increase fraud and reduce consumer rewards. If Illinois' The move positions PayPal as an early leader in a new
law survives, other states—including New York, Colorado model of commerce in which consumers issue commands
and Texas—are expected to follow, potentially creating a to AI systems—such as ChatGPT—and the AI handles
fragmented regulatory landscape for card transactions na- product discovery, comparison and checkout. Mastercard
tionwide. said the integration removes the need for merchants to
adopt new technical frameworks, because payments will
Cyber confidence in supply chain be routed via existing PayPal credentials.
exceeds reality, researchers find
A consumer example provided by Mastercard illustrates
New research from global cybersecurity firm NCC Group the shift: a shopper asks an AI assistant to find running
reveals a dangerous gap between business confidence shoes, selects a recommended pair from a merchant that
and actual preparedness when it comes to supply chain accepts PayPal, and instructs the agent to complete the
cyber threats. The State of Supply Chain Security Report, purchase. The AI then triggers a PayPal checkout flow au-
based on surveys of 1,010 cybersecurity leaders across tonomously, requiring only user verification.
eight countries, found that 94 percent of organizations are
confident they could respond to an attack—even though PayPal confirmed a broader partnership with OpenAI to
45 percent experienced a supply chain-related breach in bring its merchant network into ChatGPT. The integra-
the past year and nearly half of those incidents disrupted tion will allow PayPal to power payments for sellers using
operations. OpenAI's Instant Checkout and will give millions of Chat-
GPT users the ability to complete purchases with PayPal
Despite this optimism, only 34 percent of respondents in a few taps, using bank accounts, cards or balances.
said they have full visibility into third-party cyber risks,
and the same percentage reported conducting regular
supplier risk assessments. The report suggests many firms Also find us on Facebook,
place unwarranted trust in vendors rather than verifying
protections, creating an environment where ransomware LinkedIn & Twitter for the
groups easily exploit weak links. most up-to-date stories,
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NCC CEO Mike Maddison called the results "a wake-up industry announcements.
call," noting that modern supply chain attacks have halted

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