Payment methods — new and old — aren't getting any easier

The most-talked-about session at the April 27-28 Spring Seminar of the Bank Holding Company Association featured a couple of presenters who spoke about the new stablecoin being introduced by the Bank of North Dakota. The bank’s president, Don Morgan, and its vice president of innovation, Rick Geloff, explained the state-owned bank’s effort to get involved in the new payments options. Morgan considers it essential for community banks to carve out their niche in the stablecoin arena..There’s no question the payments segment of the community banking space is getting more complicated. Thinking about more traditional forms of payment, there are important developments unfolding in the credit card space which could affect the ability to pay with plastic according to geography. As June’s BankBeat magazine went to press, a 2024 law passed in Illinois is set to become effective July 1. It will require credit card issuers to exempt tips and taxes from credit card payment fees.Implementation of the law has already been delayed as financial institutions argued the law will substantially upset the existing credit card landscape in the state. Merchants, such as restaurants, have been clamoring for the law, saying the fees charged by credit card companies are simply too high. Over the years, card issuers have poured more money into fraud detection and prevention. Furthermore, the credit card marketplace has grown more competitive, and many players have added attractive benefits related to travel and other perks to win the attention of customers. The benefits cost money, and are driving some of the fees banks charge when customers use the cards to pay for a meal or anything else.In a recent development, it looks like the law will only apply to state banks, as the Office of the Comptroller of the Currency has issued new rules that would preempt the Illinois law, and the 15 or so other states which are considering implementing laws which mirror the one Illinois passed. The Wall Street Journal reported that many smaller state chartered banks in Illinois have said they will stop offering credit cards.Merchants are saying the law will save them thousands of dollars per year, while credit card companies and card issuers are saying it is costing thousands to update the software at point of purchase where new calculations will need to be used to figure the interchange on every transaction. One person I am pretty sure won’t benefit is the consumer. I would be surprised if any of the merchants’ savings found its way to the customer, and many of those attractive travel perks that used to come with popular credit cards are likely to dry up.