U.K. considers a faster-payments slowdown, Brazil moves ahead on CBDC

March 13, 2024 12:59 PM

The U.K. is considering a bill that would let banks and payment service providers put suspicious-looking peer-to-peer payments on hold for up to four days to conduct security reviews; Giesecke+Devrient is working with Brazil's central bank to develop an offline payment approach to a central bank digital currency; and more in global payments news this week.

Hollie Adams/Bloomberg

U.K. banks may slow peer-to-peer payments down by 72 hours to fight fraud

The U.K. government on Tuesday proposed a draft bill that would let banks and payment service providers put suspicious-looking peer-to-peer payments on hold for up to four days to conduct security reviews, as part of the country's broader plan to minimize instant-payment scams and fraud within the U.K. Currently U.K. banks process many P2P payments instantly, but they are required to clear by the next business day.

The move comes after the U.K. last year finalized a rule requiring banks to reimburse their customers who are victims of instant-payment scams beginning this fall. Since 2022, U.K. financial authorities have been developing a legal framework for protecting consumers who are tricked into sending funds to fraudsters via numerous types of scams leveraging Faster Payments, the U.K.'s real-time payments system launched in 2008.

During the first half of 2023, the U.K. saw 116,324 cases of authorized push payment (APP) scams leveraging its faster-payments service, according to a statement from the U.K. Parliament. Similar scams are also rampant in the U.S., where victims are prompted to make irreversible bank account funds-transfers to fraudsters via legitimate-looking emails, texts and phone calls. U.S. lawmakers are pressuring peer-to-peer payment providers including Early Warning Services' Zelle, Block's Cash App and PayPal's Venmo to increase consumer protections. EWS said the firm reimburses certain victims of some Zelle scams, and lawmakers recently asked EWS to clarify its reimbursement policies for scam victims.

The U.K.'s newest proposal would give banks up to four days to explore whether a suspicious P2P transaction is fraudulent before processing it. Banks would have to notify the customer of the delayed payment, the reason for the delay and give the customer streamlined methods to provide information or take actions to clear up the confusion. Banks would also be liable for any interest or charges the customer incurs as a result of a delayed payment.

The U.K. government is soliciting public comments on the proposal through April 12, 2024, with the goal of finalizing the new rule by midyear and implementing it on Oct. 7, 2024, the same date that banks are required to begin reimbursing consumers for APP scams. Under that rule, banks must reimburse consumers who are victims of APP scams within five business days after the victim reports the incident. The maximum compensation amount the government originally set is £415,000 (US$530,000). To be reimbursed for accidentally authorizing a payment to a scammer, victims must demonstrate that they observed reasonable standards of caution, including any police warnings about the transaction in question, and that they reported the scam to authorities within 13 months of its authorization. —Kate Fitzgerald

G+D teams with Brazil's central bank on CBDC projects

Giesecke+Devrient, the Munich-based payment technology firm, has agreed to work with Brazil's central bank to develop an offline payment approach to a central bank digital currency feature, according to Ledger Insights. The project is part of Banco do Brasil's "Drex" CBDC tests to encourage innovation around interbank settlement for tokenized deposits. The offline CBDC approach would enable users in remote areas without internet access to conduct secure, wholesale bank transactions; it could also provide secure transfers in case of power outages or disasters. G+D helped develop offline payments for Hong Kong's CBDC trials. — Kate Fitzgerald

The U.S. is 'nowhere near" developing a CBDC: Powell

Federal Reserve Chairman Jerome Powell has clarified that the U.S. is unlikely to issue its own digital currency in the foreseeable future, Yahoo Finance reports. The move marks an official divergence from other countries, including India, that are moving full speed ahead on CBDC development.

"We're nowhere near recommending — or let alone adopting — a central bank digital currency in any form," Powell told lawmakers in a March 7 hearing before the U.S. Senate Committee on Banking, Housing and Urban Affairs, noting that the Fed isn't interested in establishing an alternative banking system.

CBDCs are in various stages of exploration in 130 countries, with nine countries that are part of the G20 actively piloting the currencies, according to Forbes. China and Singapore launched a CBDC pilot last year aimed at streamlining cross-border payments, and India this year significantly expanded its CBDC pilot meant to increase consumer financial access and merchant options. —Kate Fitzgerald

Danish, Malaysian firms collaborate to power cross-border European payments

Denmark's Inpay has partnered with Malaysia-based global services provider Tranglo to streamline European cross-border payments, according to a press release. The alliance will enable Tranglo to expand cross-border payouts in dozens of European nations, while Inpay will lean on Tranglo's platform to extend its own cross-border reach to a diverse range of organizations within Asia, including banks, corporations, gaming platforms and nonprofits, the release said. Both firms, formed in 2008, are working to increase the speed and cut the cost of global cross-border payments while providing fee transparency. —Kate Fitzgerald

Spanish IT firm buys travel-payments provider

Madrid-based Amadeus IT group is buying another Spanish firm, Barcelona-based travel payments firm Voxel, according to Fintech Futures. Amadeus said the deal, which provides business-to-business payments through its Outpayce platform, will boost its presence in the hospitality industry by promoting travel expense management for corporations and smooth travel transactions across different providers. Voxel, which has 200 employees, provides electronic invoices and B2B payments support for the travel industry through its Bavel platform, customized for group tour operators and third-party hotel-room aggregators. Terms of the deal were not disclosed. — Kate Fitzgerald

FleetCor invests in Brazilian vehicle-payment firm

Atlanta-based FleetCor has finalized a majority investment in Zapay, Brazil's first mobile payments service for paying vehicle taxes, registration fees and tickets, according to a press release. Zapay is integrated with Brazil's national motor vehicle offices across the country's 27 states. FleetCor, which already operates many other vehicle-related digital payment services in Brazil, including for buying fuel, parking, insurance and tolls, is marketing Zapay directly to Brazil's motorists. Although FleetCor didn't disclose the size of its investment, the firm has the right to acquire the remainder of Zapay within four years, the release said. — Kate Fitzgerald

El Salvador eliminates income tax on investment, remittances from overseas

El Salvador eliminated income tax on investments from overseas and remittances as leader Nayib Bukele seeks to attract capital and wealthy foreigners to the Central American nation.

Congress voted 69 to zero to cut the rate to 0% from 30%, with five abstentions, according to a post on X by the legislature. The tax is eliminated regardless of the amount of money being brought in. Bukele and congress didn't immediately provide an estimate of the fiscal cost of the move. Bukele was elected to a second five-year term in February.

Some enthusiasts of cryptocurrencies have relocated to El Salvador in recent years after Bukele made bitcoin legal tender. Other foreign citizens moved to the country after Bukele's mass roundup of gang suspects lead to a plunge in the homicide rate.

The nation's dollar bonds have rallied in recent weeks after Bukele told investors the country is working to reach an agreement with the International Monetary Fund. El Salvador recently won credit rating upgrades by S&P Global Ratings and Fitch Ratings, though the nation remains deep in junk territory. —Matthew Bristow and Michael McDonald, Bloomberg News