The Fallout from a Credit Card Shake-Up
Visa and Mastercard said they had agreed to reduce swipe fees, costs associated with the use of a credit card, for about five years. Lawyers for merchants who had brought the case estimate that this could save about $30 billion worth of fees. Perhaps more important, merchants will be able to raise their prices based on the kind of card. For example, buying groceries with a higher-fee card, typically a premium card like the Chase Sapphire Reserve, could become more expensive than paying with a lower-end one. Retailers will have the freedom to charge more for the use of rewards cards, but will they want to annoy customers? [The New York Times]
Changes may be coming with your credit card rewards due to the new swipe fee deal
Credit Card Points Might Be Entering a New Era
One of the great American pastimes, using your credit card to accumulate points, could be about to change. A good chunk of that interchange fee revenue is spent by banks encouraging you to use their fancy cards. And the best way to do that is via points and rewards. Cards with better rewards and cash-back economics typically charge higher interchange fees. Merchants have to accept all types of credit cards from Visa and Mastercard under an "honor all cards" rule. But now, they'd be able to charge consumers more depending on the type of card they're using. It's not likely that banks will completely punt on rewards. The card programs were too important for banks to stop engaging those customers. [Business Insider]
Walmart Can End Capital One Credit Card Partnership Early, U.S. Judge Rules
A federal judge ruled on Tuesday that Walmart can end its credit card partnership with Capital One early because the bank failed to provide the required level of customer service. The world's largest retailer had accused Capital One of being too slow to post many transactions to cardholders' accounts, and failing to promptly replace many lost cards. [Reuters]
Capital One/Discover: What's In Their Wallet For You?
If two of the country’s largest credit card issuing banks merge, will the combination create a behemoth that limits consumer choice and pushes up card rates? Will it benefit the public or just the new bank? Those are among the concerns of critics of Capital One’s $35.3 billion planned acquisition of Discover Bank, a deal that has continued to face considerable headwinds since it was announced last month. The latest group to question the proposed merger is a coalition of 30 community, consumer, civil rights and public interest groups. The group said the merger between the bank and payment processing network "presents unique anticompetitive considerations and potentially negative impacts on depositors and customers," who should have the chance to voice their concern. [Kiplinger]
15 Million Americans, Including Those Making More than $100K, Buy Groceries with Buy Now, Pay Later Apps as Inflation Rages
The soaring rate of food inflation is forcing more Americans to use “buy now, pay later” apps when shopping for groceries, including shoppers who are earning six figures. An analysis by PYMNTS Intelligence found that 15 million people, or 6.5% of the US population, reported using “buy now, pay later,” or BPNL apps to pay for groceries last year. Of those using the apps, around 5.4% were low-income Americans, according to the study. The rest were those whose yearly incomes were at least $100,000. [New York Post]
Starbucks Mobile Orders Surpass 30% of Total Transactions at U.S. Stores
Starbucks continues to see a steady increase in the number of customers using its mobile app to buy coffee and other items. The Seattle company said 31% of total transactions at U.S. company-operated stores were made via the app, as of Dec. 31. That’s a new record, and up from 27% in the year-ago quarter, and 25% two years ago. Starbucks debuted its mobile order-ahead feature a decade ago. The company is now among the leading mobile payment providers in the U.S. [Geek Wire]
CFPB to Examine Credit Card Rewards, Buy-Now, Pay-Later Companies
The top U.S. agency for consumer financial protection will scrutinize credit card reward programs after a surge in customer complaints. "We are going to be looking into the credit card rewards market due to an increase in consumer complaints," said Rohit Chopra, director of the CFPB. Companies that offer "Buy-now, pay-later" services could also face stricter rules, Chopra said, underscoring a longstanding stance. [Reuters]
New York City Begins Giving Illegal Immigrants Prepaid Debit Cards as Part of $53 Million Pilot Program
Officials in New York City have begun giving out prepaid debit cards to migrant families residing in the Big Apple. The first batch of debit cards, which are reportedly meant to be used by the illegal immigrants to purchase food and baby supplies, were handed out Monday to a handful of migrant families in the city. The effort is part of a reported $53 million pilot program to hand out prepaid credit cards to migrant families housed in hotels despite public outcry. [Fox News]
As Their Popularity Grows, More Banks Are Eyeing Gift Cards as a Loyalty Perk
Consumer interest in gift cards remains high, with 56% planning to purchase them for major life events and 38% preferring them as Christmas gifts over physical items. Given consumer interest, multiple FIs and fintechs are partnering with technology providers to offer gift cards and drive consumer loyalty and engagement. But even though gift cards aren’t new, how and where customers are buying these cards is changing. Urban dwellers are two times more likely to purchase a gift card through a P2P app like Venmo. Last year, the company announced a partnership with gift card manufacturer Hallmark, which enabled customers to gift money in a physical card by Hallmark. Venmo reports that 78% of its customers regularly use the P2P app to send money as a gift to their friends and family. [Tear Sheet]
Klarna Takes Aim at Visa, Mastercard With Open Banking Push
Klarna will begin allowing users in the UK to make payments directly from their bank accounts as part of the fintech giant’s efforts to reduce its reliance on Visa and Mastercard. Initially, the move will help Klarna cut costs because bank payments are cheaper than accepting Visa and Mastercard’s products. Longer term, though, the product will help Klarna create a stronger alternative to the payment giants’ networks. [Bloomberg]
Robinhood Makes Major Push into Credit Cards with 3% Cash Back Rewards, 10 Karat Gold Visa Card
Robinhood announced the launch of its first credit card, which will offer a suite of premium rewards that includes a new travel portal that offers 5% cash back on purchases and 3% cash back on everything else. Those rewards are among the most generous in the industry, and signify that the company is intent on becoming a significant player in credit card sector as part of a larger push to offer a full suite of financial services, including retirement accounts. [Fortune]
