More Merchants Add Credit Surcharges

Fed to Propose Lowering Debit Card Swipe Fees

The Federal Reserve is preparing a proposal that would lower the fees merchants pay to many banks when consumers shop with debit cards. Today, merchants pay large card issuers 21 cents plus 0.05% of the transaction amount, the level set by the Fed in 2011. The Fed can lower the cap if it determines the costs for processing debit-card payments are declining, but it has never done so. The Fed said it would hold a meeting next week to vote on a proposal about revising the fee cap, without being more specific. The proposal would lower the cap, according to people familiar with the matter. The Fed would then start a public-comment period that would likely include heavy lobbying from card issuers and merchants and congressional discussion. It would require a final vote by the central bank’s governors to be implemented. [The Wall Street Journal]

Credit Cards: Surcharges Surge as U.S. Businesses Pass Costs on to Customers

Last year, U.S. merchants paid a record $160 billion in processing fees to accept $10.6 trillion in card payments, according to the Nilson Report. The bulk of those fees, about 79%, was from credit cards. Many companies’ profits margins are narrowing as they get squeezed by higher inflation. That has prompted a growing number of businesses to attempt to pass higher costs on to their customers. They are adding a surcharge or a convenience fee on those who want to swipe their plastic. Payment consultancy TSG reckons between 5-10% of 8 million card-accepting small businesses in the US now charge fees for credit card usage. That is up from 2% five years ago. Underscoring the growing trend, TSG said about 15% of new merchants who accept card payments have a surcharge policy. [Financial Times]

Credit Card Losses Are Rising at the Fastest Pace Since the Great Financial Crisis

Credit card companies are racking up losses at the fastest pace in almost 30 years, outside of the Great Financial Crisis, according to Goldman Sachs. Credit card losses bottomed in September 2021, and while initial increases were likely reversals from stimulus, they have been rapidly rising since the first quarter of 2022. Since that time, it’s an increasing rate of losses only seen in recent history during the recession of 2008. It is far from over, the firm predicts. [CNBC]

American Express Introduces AI-Powered Virtual Corporate Credit Cards

According to American Express, nearly 70% of companies use AI to manage different aspects of business trips, such as traveler expenses and last-minute itinerary changes. The company is now promoting its own solutions, which include trip-specific virtual corporate credit cards. American Express business customers can issue employees trip-specific virtual corporate credit cards configured with the company policies and spending parameters and automatically populated into travelers’ digital wallets. Virtual cards offer greater security, customization, and cash flow management and provide data to the company on employee spending. Automation sets controls such as spending limits, expiration dates, and allowed merchant categories. [Business Traveler]

Credit Cards: Americans Do Leave Home Without Them

One thing we know about the future of fintech is the everything is going to be connected, even if intermittently. The Internet-of-Things (IoT) will be a platform for payments., for sure. Even cards. American Express is launching a card with built-in communications in South Korea so that customers will never leave home without it by accident! In addition to credit card payments and Bluetooth location finding, the KB Kookmin Card will also help you to find a your mobile phone with a ringtone through the smart button at the bottom of the card and gives in an app push notification when disconnecting (in case you walk away and forget your card). The card, which can be charged through wireless charging, seems to me to be to an interesting example of what economists refers to as the “Sailing Ship Effect”. [Forbes]

Who Uses Buy Now, Pay Later?

We find that about 64% of respondents in the June 2023 survey have ever been offered a BNPL payment option, while 19% (29% of offerees) have used it as payment method in the past year. Among users, 77% made installment repayments using a debit card, bank account, or bank check; 10% used a credit card; 6% used a prepaid card; and 8% used a payment service such as Venmo. We also find from other survey answers that the vast majority of BNPL loan users tend to be banked and usually have a credit score. [Liberty Street Economics]

NY Attorney General Sues Crypto Firms Gemini, DCG, Genesis for ‘Fraud’

The New York attorney general, Letitia James, on Thursday sued the cryptocurrency firms Genesis Global, and its parent company Digital Currency Group (DCG), and Gemini for allegedly “defrauding” investors of more than $1billion. At the heart of the lawsuit is a program Gemini ran in partnership with Genesis. Dubbed “Gemini Earn”, the program let customers lend crypto assets such as bitcoin to Genesis. Gemini had billed the program as a “low-risk investment” even when its internal analyses had found Genesis was on risky financial footing, James alleged. [Reuters]

Senate Votes to Overturn CFPB Small Business Lending Rule

The Senate voted 53-44 Wednesday to overturn a Consumer Financial Protection Bureau rule requiring personal information on small-business borrowers, including race and sex, from the financial institutions that lend to them. House Small Business Chairman Roger Williams has introduced a companion resolution in the House. The CFPB rule finalized in April would require financial institutions to report information about minority- and women-owned firms, and small businesses applying for loans, in order to aid enforcement of fair lending rules. Congress mandated the rule in its 2010 financial regulatory overhaul law. [Roll Call]

Egypt Restricts Foreign Currency Credit Card Use

Egypt’s central bank told commercial banks on Tuesday to restrict customers from using credit cards for transactions in foreign currencies both domestically and abroad, the second time in a week it has cracked down on plastic. Last week, the central bank told banks to suspend the use of Egyptian pound debit cards for purchases outside the country to stop a foreign currency drain. Now in oral instructions to banks it has extended restrictions to credit cards. [Reuters]

Major League Soccer Punts New Credit Card

Die-hard supporters of Major League Soccer may twirl their scarves for the new MLS Forward Credit Card, but even the most fervent fans will do better with another card. Issued by WebBank through a partnership between MLS and financial technology company Avant, the $0-annual fee MLS Forward card earns 5 points per $1 spent on purchases at MLSstore.com; 3 points per $1 spent on gas; 2 points per $1 spent on dining and grocery; 1 point per $1 spent on everything else. Unfortunately, rewards earning is capped at 6,000 points per year across all bonus categories. [Nerd Wallet]

Venmo and InComm Team to Offer Digital Gift Cards

Payments firm InComm has teamed with Venmo to enhance that company’s digital gift card offering. The new feature, dubbed “InComm InCentives”, offers eligible Venmo customers personalized ways to mark gifting occasions with popular gift card brands directly via the app. Customers can now use Venmo to send and receive digital gift cards for popular consumer brands, with those cards stored on the in-app wallet for future redemption. Customers can also customize their gifts with a short animation that comes with digital gift cards, to celebrate things like holidays and birthdays to graduations and weddings. [PYMNTS]