EU regulators aim at Apple checkout policy; JPMorgan's former payments boss finds a new job

ByJohn Adams, Kate Fitzgerald, Bloomberg News

June 26, 2024 12:21 PM

Revolut is seeking a bump in its valuation; Visa extends and expands its partnership with Lloyds; and more. Here's what's going on in the world of payments.

Jasper Juinen/Bloomberg

Europe threaten billions in fines over Apple payment violations

Apple's App Store payment policies may be violating competition rules, according to the European Commission, which says the company could be fined nearly $40 billion as a result.

The EU's rules say developers using the App Store and similar marketplaces must inform their customers of less expensive payment options, and enable steering to those options free of charge. The EU accuses Apple of violating these rules by not allowing developers to provide pricing information, among other alleged violations.

Apple was given until March 25, 2025 — which is one year after the original investigation was announced — to respond to the EU's most recent assessment, which was issued June 24. If the EU finds Apple is in violation of Europe's Digital Markets Act, it could be fined 10% of its global revenue for 2023, which would be more than $38 billion. The commission this week also opened a new compliance investigation into Apple's updated contract terms, contending Apple has retained older terms that do not allow alternative payment channels.

Apple said this week that it would not provide some of its new artificial intelligence-powered products in the EU due to the tougher regulations. Apple did not provide comment to American Banker by deadline. It told CNBC it would work with the EU to find a "solution" that would enable it to offer the new AI services in Europe. Apple also told The Verge and other media outlets that it has made several changes to follow EU payment processing regulations, including giving developers the opportunity to direct app users to the web to complete payments at a competitive rate.

The EU has been investigating Apple for potential anti-competition rules violations for at least four years. In 2022, the Commission accused Apple of limiting access to the near-field communication technology that enables contactless payments, thus giving an unfair advantage to Apple Pay.

And Apple and Google have faced lawsuits and regulatory pressure in different countries due to the fees the two firms charge for payments made through their respective app stores. These fees can be as high as 30%, though both companies have lowered these fees for smaller companies and in a few countries.

In earlier American Banker interviews, payment experts have said the accumulated pressure on big technology firms from suits, regulatory enforcement and new laws will create opportunities for bank-led payment systems, such as the Early Warning-powered Paze Wallet. Technology companies that offer payment facilitation — or routing — could have an opportunity to enroll new consumers if Google and Apple's control over mobile payment app checkout is loosened.

These analysts also caution that Apple and Google's security products and user experience will continue to provide an advantage for the large technology firms. — John Adams

Revolut pushes for a higher valuation

London mobile payment firm and challenger bank Revolut plans to sell about $500 million of its existing shares in an effort to reach a $40 billion valuation, which would make it Europe's most valuable startup.

Revolut was most recently valued at $25 billion, which is down from its $21 billion valuation at the peak of the fintech market in 2021, according to the Financial Times. The FT also reports that Revolut is working with Morgan Stanley on the pending fundraising. Revolut did not comment on the report.

Revolut in late 2023 redesigned its app as part of a global expansion strategy and an effort to become a financial "super app," or a centralized source for a variety of services that would enable it to compete with banks.

Revolut is also attempting to extend its strong European payments business to the U.S. to compete with U.S.-based payment firms such as Block and PayPal.

The success of Revolut's pending share sale will draw attention from other payment firms and fintech investors that are looking for signs that the fintech market is rebounding after a slowdown that has lasted for most of the past two years. —John Adams

Former JPMorgan payments boss will join Fiserv

Bank technology seller Fiserv has hired payments veteran Takis Georgakopoulos to be senior advisor, executive vice president and member of the management committee. Georgakopoulos, who left JPMorgan Chase earlier in June, was global head of payments at the banking giant. He will join Fiserv September 6 and will work with Fiserv's management team on technology and other products.

Fiserv's recent moves include seeking a special purpose bank charter, which would enable it to control the entire payments processing, including authorization, settling and clearing debit and credit card transactions. Fiserv has traditionally used banking partners for payment processing. The company is also expanding its open banking strategy, using account-aggregation tools acquired from technology firm Finxact to power a hub that connects sponsor banks to merchants that offer their own loans, card-issuing and loyalty programs.

"Takis' extensive payments and leadership experience and operational expertise will be an outstanding addition to our strong team, as we continue to focus on creating value for our clients while investing in our products, services and people," said Frank Bisignano, chairman, president and CEO of Fiserv, in a release.

During his 17-year career at JPMorgan, Georgakopoulos helped lead the bank's moves in mobile payments, including the development of clearXchange, the bank-supported funds transfer app that became Zelle. He was also involved in the bank's adoption of e-commerce, biometrics and blockchain.

Current JPMorgan payment executives Umar Farooq and Max Neukirchen will succeed Georgakopoulos. — John Adams

iPhone payment picks up steam in Germany

European payment companies Viva.com and Nexi this week activated Tap to Pay on iPhone, an Apple technology that enables iPhones to accept payments without added hardware.

Viva.com already offers Tap to Pay in the U.K., the Netherlands, France and Italy. Nexi offers the technology in Italy.

Tap to Pay has emerged as an option for banks and payment companies to lure merchants by offering mobile payments with minimal upgrades. The technology is also considered part of a migration toward checkout-free retail systems similar to Amazon Go.

Apple recently announced upgrades to its operating system that include a newer version of Tap to Pay called Tap to Cash, which enables people to tap their iPhones together to make payments. —John Adams

Visa keeps Lloyds card business

Lloyds Banking Group has renewed a 40-year-old partnership with Visa, making the card network the main payment scheme for Lloyds Bank, Halifax; Bank of Scotland; and MBNA. Lloyds and Visa will develop a new set of products as part of the deal, and will expand use of Visa's fraud protection products.

The current deal includes services for all consumer and business debit cards, and a majority of credit cards, totaling more than 30 million accounts. The renewal will migrate an additional 10 Lloyd Banking Group-issued cards to Visa by the end of 2026.

In addition to expanding card issuance, Lloyds, Halifax and Bank of Scotland also recently became part of a project to pool ATMs with other banks in the U.K. to protect access to cash in underserved areas. — John Adams

PayPal invests in tech-financing firm

PayPal Ventures has led a $20 million funding round in Gynger, a platform that supports financing and payments for firms that buy and sell technology. Gynger also received a debt facility from Community Investment Management to fund up to $100 million.

Gynger plans to use the funding to scale by tapping into the growing market of businesses that are buying new software and other technology, particularly as generative AI expands into the mainstream for enterprise use.

PayPal also recently invested $6.5 million in Mesh, a firm that sells account aggregation technology with a focus on digital asset companies. — John Adams

Nuvei gets approval to expand in the Middle East

Canadian payment firm Nuvei has received in-principal approval for a license from the Central Bank of the UAE, enabling Nuvei to sell merchant acquiring, aggregation and fund transfers in the UAE.

The move gives a boost to Nuvei's strategy to reach clients in the Middle East and North Africa, or MENA, region, and its broader international expansion plans. Nuvei recently signed a deal with American Express to support Amex's pay-by-bank transfer service in the U.K. — John Adams

Corpay to buy cross-border payments firm

Atlanta-based Corpay recently announced plans to acquire GPS Capital Markets, a cross-border payments firm based in Salt Lake City, Utah. The firm, founded in 2002, specializes in business-to-business cross-border payments and treasury management services for upper middle-market firms primarily based in the U.S., according to a press release. Financial terms of the deal, set to close early next year pending regulatory approval, were not disclosed.

Corpay Chairman and CEO Ron Clarke said in the release that the proposed deal would be Corpay's third-largest acquisition, putting the firm on track to reach $2 billion in annual corporate payments volume by 2026. If the acquisition is approved, Corpay will be in a position to process cross-border payments for 23,000 customers in more than 145 currencies across six continents, the release said. —Kate Fitzgerald

Russia’s richest woman gets Putin’s nod to build payments system

Tatyana Bakalchuk made billions selling everything from brooms to bridal gowns on her online marketplace. Now Russia's richest woman is making a surprise pivot: to help insulate the economy from sanctions by building an alternative to the global payment system major Russian banks were excluded from.

Bakalchuk's Wildberries — Russia's answer to Amazon — is starting a venture with Russ Group, the nation's biggest outdoor advertiser, to build a digital market to help small- and medium-size businesses promote and export their products, the company said this week. They also plan to create a payments platform that may offer a substitute for the dominant cross-border network, known as Swift, according to two people close to the Kremlin who declined to be identified.

The effort has been personally approved by President Vladimir Putin, who chose Maxim Oreshkin, deputy head of the Kremlin's administration, to supervise it, the people said, asking not to be identified. There are no guarantees that the payment system will be successful, one of them said. Putin spokesman Dmitry Peskov said by text message that the president has ordered officials to consider Wildberries' and Russ' digital platform project, but that there aren't any details yet.

Swift is the main messaging network through which international payments are initiated. Created in the 1970s, it links some 11,000 institutions across more than 200 countries and territories. The U.S. and European Union sanctioned Russia's key lenders after the Ukraine invasion, cutting them off from Swift and forcing Russia to use other payment options for imports and exports.

Wildberries declined to comment on its plan for a payments system.

Bakalchuk — who isn't viewed as close to the Russian president — spoke at his flagship economic forum in Saint Petersburg earlier this month and said she believed that private business in Russia has a future and is developing, although state support is required.

"Bakalchuk understands very well that the crisis is the time of opportunities," said Alexandra Prokopenko, a fellow at Carnegie Russia Eurasia Center. "She's seeking to expand the business to protect it, to become too big to fail and more visible to the Kremlin." — Bloomberg News