How payments companies are driving their businesses forward

ByStewart Bowling, Courtney Hoff Dockerty

January 10, 2024 11:41 AM

Enjoy complimentary access to top ideas and insights — selected by our editors.

Payment processing firms recognize the need to constantly take on new opportunities as well as adapt to unexpected challenges, from Mastercard partnering with banks and other third parties in new open-banking relationships to PayPal stepping into the cryptocurrency payments market by launching its own stablecoin.

Read our roundup for more stories on how some of the payments industry's biggest players are navigating the current landscape.

Visa, Mastercard Reach $6.2 Billion Settlement on Swipe Fees

Daniel Acker/Bloomberg

Mastercard envisions matchmaking role in open banking

Payment-processing giant Mastercard is looking to take on a new role as an intermediary between banks and third parties in the expanding world of open banking. Recently announced partnerships with JPMorgan Chase and BNPL lender Zip among others signal the company's intent.

"Our position in the U.S. open-banking industry allows us to work with our customers and partners to enhance secure data-sharing methods as APIs become more available," said Jess Turner, EVP of open banking at Mastercard.

While potential new CFPB rules on open banking will extend protections for consumers over their data, the firm is unperturbed. "Consumers and businesses own their data; they should control it and benefit from its use," said Turner.

Read more:

Mastercard adds open-banking partners as it preps for CFPB rules

Amex rides out minor turbulence from Delta loyalty program change

American Express' nearly three-decade relationship with Delta Air Lines hit a patch of rough air recently after Delta's changes to its rewards program generated several complaints from their frequent flyers, but nothing that Amex chairman and CEO Steve Squeri is too worried about.

"As Delta makes changes, we are in lockstep with them all the way," said Squeri during the company's earnings call in October, referring to the shift in Delta's SkyMiles program to providing rewards based on the amount of money spent rather than the number of miles flown.

Despite the change, Amex's business with Delta is flying high. "As far as spending goes there has been zero impact," said Squeri. "Delta card spending is up 20% year over year."

Read more:

American Express CEO brushes off Delta's controversial rewards shift

PayPal adds stablecoin to its payment options

PayPal has moved firmly into the cryptocurrency payments market with the launch of its PYUSD stablecoin, joining crypto-native companies, such as BitPay with USDC and Tether with USDT.

Early usage has been less than enthusiastic, but with more than 400 million consumer accounts and 33 million merchant accounts, PayPal has scale on its side.

"We're not surprised by PayPal's slow start with PYUSD," said Bill Zielke, CMO at BitPay. "It takes some time for a new coin to get traction. USDC started slow and it's now 15% of our payment volume."

Read more:

PayPal's stablecoin: Who are the early adopters?

Visa pumps $100 million into generative AI

A host of generative AI startups could be the beneficiaries of a new $100 million Visa investment fund that the payments company has earmarked for financing the new technology.

The firm's "need to understand" how generative AI may transform commerce is the driving force behind the move, said Visa in launching the fund. The announcement has certainly got the industry's attention.

"Visa is one of a handful of companies that brings together payments experience, access to data and global scale in ways that could position them to make impactful investment decisions," said Christopher Miller of Javelin Strategy & Research.

Read more:

Why Visa is investing in artificial intelligence startups

Discover agrees to FDIC consent order terms

Discover's failure to adequately manage compliance issues related to its consumer banking products has unsurprisingly resulted in an FDIC consent order, but the firm was at least able to avoid any financial repercussions.

"We believe these recent events will be in the rearview mirror fairly soon, with the company resuming its share buyback in the near future," said analysts for Jefferies Research Services in a note to investors.

Discover has already started upgrading its compliance processes by hiring more than 200 new employees, increasing compliance oversight by its board of directors and adding an ex-FDIC official to the board. The firm also named a new CEO in December after the previous CEO resigned in August in the wake of these compliance issues and other slipups.

Read more:

Inside the Discover consent order: A sweeping audit, but no fines