Visa, Mastercard won't raise European fees; Alipay adds AI copilots

Visa, Mastercard keep limits on European tourist fees

While Visa and Mastercard's interchange fee battles with U.S. merchants has dragged on for nearly two decades, the card brands have reportedly reached an agreement on some payment fees in Europe.

Visa and Mastercard will maintain a cap on fees for payments made in Europe with cards issued outside of the EU. The card brands agreed to the fee reduction in 2019 following an investigation by the EU, which alleged Visa and Mastercard were violating competition rules by charging higher fees for "tourist cards," which the EU claimed increased expenses for all payments at European merchants.

That deal with the European Commission, which was set to expire this October, will run through at least October 2029, according to Reuters. Visa and Mastercard did not provide comment by deadline.

The fees cannot be higher than 0.2% for debit cards and 0.3% for credit cards. For card-not-present payments, which cover most e-commerce purchases, the caps are 1.15% for debit cards and 1.5% for credit cards. These fees are about 40% below their pre-2019 levels. Under the extension, the EC retains the right to investigate the card networks.

In the U.S., the card brands have long battled merchants over payment fees. Visa and Mastercard settled with merchants, making a deal to lower fees following years of court cases, disputes and appeals that date to 2005. But a judge in a Brooklyn federal court in late June told the parties that the settlement was likely to be rejected, suggesting that the legal battles are here to stay. —John Adams

U.K. payments lobby pushes new leadership for tech crackdown

The Payments Association is calling on the U.K.'s incoming government to impose a financial penalty on social media and other large technology companies for payments fraud that is linked to the platforms.

The lobby group, which represents more than 200 banks and payment companies covering most of the U.K., argues that the government should require social media companies and other "Big Tech" firms to compensate consumers or other parties that are victimized under U.K. rules that require polluters to bear the costs of environmental damage. The Payments Association is also calling for an anti-fraud minister to coordinate fraud investigations and prevention across different agencies.

The Labour party won the U.K.'s recent elections, ending 14 years of Conservative Party dominance. The Labour government is expected to push for harsher financial penalties against technology companies for failing to protect consumers from financial fraud.

The association is also pushing U.K. regulators to lower the maximum bank refund for payments fraud from about $560,000 to about $38,000, costs that large technology firms would presumably absorb. —John Adams

Alipay adds a team of AI copilots

Chinese technology company Ant Group has introduced what it's calling artificial intelligence "smart assistants" to support a range of payments and other services for its Alipay app.

The first assistant enables users to directly request functions via a large language model, using "I want to order a tall iced latte from Starbucks" as an example. That results in an automatic order, payment and pickup at the nearest store.

A second copilot, Zhixiaobao, supports investment and insurance. Users can access market analysis, portfolio management, insurance underwriting and claims through generative AI. Zhixiaobao at launch has 43 million users through the Ant Fortune and Ant Insurance services that can be accessed through Alipay.

A third product, called Angel, includes augmented reality to help consumers navigate hospital visits and access telehealth services that are also part of the broader Alipay app. Ant contends that a test at a local hospital reduced desk inquiries by 50%, with deployments planned for more hospitals in China.

At a company event, Ant also demonstrated how AI can produce and fight deepfakes used in financial crime. Ant, which is affiliated with Alipay and the e-commerce firm Alibaba, additionally introduced versions of AI designed for large corporate deployments and to measure the environmental impact of business strategies and product development.

In the U.S., banks are using AI copilots to help employees produce drafts for projects, aid contact-center scripts, support loan officers and other functions. Payment companies such as Stax, Tipalti, Klarna and Stripe are using copilots as personal assistants, aiding in internal technology projects, marketing and risk management. —John Adams

Hong Kong joins EU's CBDC experiments

Central banks from France and Hong Kong have partnered to test a structure that processes cross-border central bank digital currency payments, making Hong Kong's central bank the first from outside the EU to participate in Europe's digital currency initiative.

The test will focus on wholesale CBDCs, which are designed for high-volume transactions between large banks or other corporations that involve parties in different countries. Wholesale CBDCs are considered to be less complex than retail CBDCs, which are designed for consumer use and generally involve a larger number of small transactions.

CBDC projects are underway in more than 100 countries, though the actual number of CBDCs in circulation is much smaller. Most central banks, including major payment markets such as the U.S. and U.K., are running tests while awaiting approval from lawmakers.

Since most CBDCs are focused on domestic transactions, cross-border interoperability is a concern. The EU/Hong Kong project joins other initiatives such as a collaboration between the New York Federal Reserve and the Monetary Authority of Singapore to study how CBDCs can improve international transactions. —John Adams

PayPal teams with U.K. firm to sell subscription payments

PayPal is partnering with London payments technology provider Ecommpay to enable merchants to accept PayPal for recurring payments for subscriptions and similar services.

The PayPal option will reside with other options for repeating transactions, such as meal kit deliveries, streaming television services and other services that sell monthly products.

Ecommpay, which offers other PayPal services such as e-commerce checkout, is trying to add revenue streams by enabling more choice for payments. PayPal is adding new products as part of a transformation under new CEO Alex Chriss, who is attempting to lead a recovery from a stock and growth slump in 2022 and 2023.

"Small businesses face myriad challenges from finding new customers and managing cash flow to driving sales," said Vincent Belloc, senior vice president for PayPal UK, in a release. "Putting the customer preference at the heart of the payment and providing shoppers more choice in how they can pay can help turn prospects into customers." —John Adams

Mastercard expands UAE payments tech project

Mastercard and UAE-based retail firm LuLu Group plan to collaborate on a series of projects that address sustainability, new digital payment options and transaction processing.

The collaboration covers Bahrain, Kuwait, Oman, Qatar, the UAE and Saudi Arabia. Mastercard will integrate its development operation into Lulu Group's network, which manages online and brick-and-mortar stores in the region. Projects will include carbon reduction strategies, co-branded credit cards, incentive marketing and expanded data management.

LuLu will additionally introduce Mastercard's Point of Interaction product, which enables consumers to make digital payments inside stores.

Mastercard has developed technology in the Middle East through a number of initiatives, such as collaboration with the Rochester Institute of Technology's Dubai campus, focusing on artificial intelligence and local talent development. —John Adams

Australia's Commonwealth Bank aims to make mobile 'super app'

Commonwealth Bank of Australia is trying to take advantage of its large base of mobile banking users by stacking more payments and shopping products on top of the app.

The bank this week added car payments, automobile buying and selling and travel booking and payments. More than 8.5 million consumers use the bank's app regularly, with more than 42 logins per month, up from 15 logins per month in 2014.

That volume has created habits that the bank hopes will extend to product searches and other shopping tasks, such as choosing a flight or the make and model of a car. Once a consumer has made those choices, they will presumably use or expand their use of CBA's mobile app for additional payment or financial products.

This week's additions follow an 2023 update that enabled telecom payments and management through the bank's app. An increase in the cost of living is leading consumers to centralize as many expenses as possible into a single app to simplify their financial management, the bank contends.

CBA has long been an early adopter of digital banking and payments. The bank recently partnered with JPMorgan Chase to use new forms of artificial intelligence to develop payment products and other financial services. CBA also uses generative artificial intelligence to test products and mitigate financial abuse. —John Adams

Visa boosts crypto payments in Switzerland

Swiss cryptocurrency company Tangem has partnered with Visa to support a payment card that will be linked to Tangem's wallet.

That will enable users to access their crypto or stablecoin balances to make payments at merchants that accept Visa. Tangem's card includes a private key in the chip and requires the card's use for payments, rather than using third parties, which Tangem contends is a safer model.

Cryptocurrency has been used mostly as an investment, and has lagged as a payment option. Visa and Mastercard have separately launched a series of initiatives designed to bring more banks and merchants into the cryptocurrency market and to make digital assets easier to access and use. —John Adams

Shoko Takayasu/Bloomberg

SoftBank Group firm PayPay Securities aims to double accounts

PayPay Securities aims to double the number of its brokerage accounts to 2 million by the end of this fiscal year through March from about 1 million now, backed by users of the group's cashless payment system, according to its chief executive officer.

The Tokyo-based company's top shareholder operates PayPay app, which had about 60 million registered users as of October, and investors are able to conduct brokerage transactions on the payment app. PayPay Securities expects the convenience of that setup to boost the number of its users, said CEO Kenji Bansho in an interview.

PayPay Securities needs to increase its users and the amount of assets they invest in to meet its goal of becoming profitable in the next few years. The company has been in the red since it opened for business in February 2021, and it posted a net loss of ¥4.6 billion ($29 million) in the fiscal year ending March 31, 2023, according to its latest disclosure document.

The company's biggest shareholder, PayPay Corp., is a subsidiary of SoftBank founded by billionaire Masayoshi Son. PayPay Securities has already seen its accounts double in a year to about 1 million as of March. And the start of tax-exempt savings accounts known as NISA this year has accelerated the opening of accounts by retail investors in Japan.

But it's a crowded field, even without the country's big bank-backed brokerages. PayPay Securities ranks No. 6 for online brokerage accounts as of March, trailing No. 1 firm SBI Group including SBI Securities Co. with 12.5 million accounts and Rakuten Securities Inc. with 10.9 million. Nomura Holdings Inc., Daiwa Securities Group Inc. and units of Japan's largest banks dominate the traditional brokerage arena.

PayPay Securities will likely exceed 2 million accounts and "it will continue to grow at a considerable pace," said Bloomberg Intelligence analyst Hideyasu Ban. But it will take time for the firm to break even because of the small amount of investments per customer, and it's important for the company to make efforts to boost that figure, he said. —Nao Sano, Bloomberg News