Payments regulations are essential for protecting merchants, consumers, and stakeholders in the payments ecosystem. However, legislation and standards are always changing, and when they do, it impacts how people do business.
As an ISV or VAR, you need to stay informed of regulatory changes and how you need to adapt the solutions you provide so you can comply. Here are some of the most consequential payments regulation changes to have on your radar:
- Antitrust Investigation into Token Technology
The Department of Justice began an antitrust probe in 2021 against Visa to determine if the company uses anticompetitive practices in the debit card market. This investigation has received fresh scrutiny over tokenization that could lock in merchant clients.
- Interchange Fee Settlement
Visa and Mastercard reached an antitrust settlement with U.S. retailers in March 2024. The pending settlement would reduce merchant fees on swiped transactions primarily by allowing merchants to negotiate lower rates. While this would help the merchant’s bottom line, these fees play a pivotal role in funding Visa rewards member programs. With less funding, these programs would likely result in fewer benefits for the consumer. In the long term, it could mean that consumer payment preferences shift from their rewards cards to other methods.
- Open Banking
The Consumer Financial Protection Bureau (CFPB) has proposed new payment regulations that will give consumers more flexibility to move financial data from one service provider to another. This proposed rule accelerates the shift towards open banking and empowers consumers with greater control over how their personal financial data is used, and new protections against companies that misuse it. Additionally, the rule would jumpstart increased competition from new kinds of payment companies and other types of Fintechs.
- Buy Now, Pay Later Regulations
In recent years, the CFPB has said it would provide more guidance to rising payment methods including buy now, pay later (BNPL) loans. However, little progress has been made. In general, oversight of the growing payments and Fintech sphere has been slow. A key challenge is that technology advancement and adoption are moving so fast that they often eclipse legislators’ and regulators’ knowledge of certain aspects of it. As a result, regulators often act reflexively, and tension rises in the absence of clear payment regulations. This is an area to watch and help merchants stay ahead of requirements for disclosures and other consumer protections of so they can continue to offer this payment method compliantly. - Safeguard from AI Risks
As fraud, particularly artificial intelligence (AI)-based attacks increase, the U.S. Senate is pressuring peer-to-peer payment providers like PayPal, Venmo, and Cash App to implement stronger fraud protections. Fraud actors can use these apps to push payments under false pretenses to conduct scams against businesses and consumers. Watch for the outcry to put antifraud measures in place to increase.
Payments Regarding Cannabis
The news on April 30 is that the U.S. Drug Enforcement Administration (DEA) would reschedule cannabis under the Controlled Substances Act from a Schedule I to a Schedule III drug. Driving the decision are its currently accepted medical use and moderate to low potential for abuse and dependence. This decision would ease tax burdens on state-licensed cannabis operators and could open up the ability for cannabis retailers to accept credit card payments.
With this news, look for additional movement in cannabis regulations, potentially:
- SAFER Banking Act’s Passage
The Secure and Fair Enforcement Regulation (SAFER) Banking Act would provide protections for federally regulated financial institutions that serve state-sanctioned marijuana businesses. This, combined with approval of the rescheduling of cannabis would make it easier for cannabis retailers to acquire merchant and banking services without limit or penalty.
- The Farm Bill’s Reauthorization
The reauthorization of the Farm Bill provides the flexibility legitimate agricultural and industrial producers need to navigate growing in the field without taking away loopholes created in the market when it comes to hemp-derived intoxicants.
With the US. The cannabis industry expected to reach about $42 billion in 2024, ISVs and VARs should be keenly focused on the outcomes of these decisions to help best position new or expanding dispensaries for success with expanded payment options.
Stay Up to Date on Payments Regulations
This legislative activity will impact the relevance of the solutions you provide. Keeping up with proposed regulations positions you as an expert to your customers and helps you stay a step ahead with the solutions you offer.
While it’s challenging to stay on top of all proposed regulatory changes and the likelihood that they’ll become laws, we can help. Partner with us for solutions that comply with current regulations and as a resource to help you stay informed. Give us a call!