Data Dive

Data Dive, New Rules Edition: Starbucks, San Francisco And Card Interest Rate Caps

Date Dive: Starbucks, San Francisco, Rate Caps

Ralph Waldo Emerson is credited with saying that if one were able to build a better mousetrap, the world would beat a path to their door. But he never actually said or wrote that – he wrote something that had a similar meaning, but never actually mentioned mousetraps. The original quote was about corn, chairs, pipe organs and knives, and said something to the effect that if one could make a better version of those, the world would beat a path to their door, even if they lived in the woods.

At some point after Emerson’s death, the phrase was changed to be about mousetraps.

But the original point – if one can build the latest-and-greatest version of something familiar, the world will come racing to buy it – is true in some cases, but not necessarily all … particularly when a regulatory roadblock pops up in the path.

As it turns out, there were several better mousetraps – and a few roadblocks – populating the payments and commerce news last week.

Starbucks’ and Microsoft’s High-Tech Endeavors

Starbucks and Microsoft are teaming up on artificial intelligence (AI)-powered projects that, among other things, aim to help customers through the ordering process by predicting what their orders will be.

At the drive-thru, for example, customers may receive AI-prompted recommendations from staff based on their order history. While it’s unknown whether the AI technology will evolve to include facial recognition software or license plate readers, Microsoft did say customers will eventually be able to agree to more personalized drive-thru recommendations.

Starbucks will also connect pieces of equipment in each of its 30,000 or so locations to the Azure cloud. The goal is to streamline maintenance costs by solving problems in advance of mechanical failures. The machines operate 16 hours a day at high volume, and any mechanical issues can bring store operations to a standstill.

In addition, Microsoft is working with Starbucks on a new blockchain program. The revelation coincides with the tech giant’s announcement earlier this week that it has launched the Azure Blockchain Service, which simplifies the formation, management and governance of consortium blockchain networks. The companies will use blockchain to connect coffee drinkers with coffee farmers. In addition, customers will be able to use the Starbucks mobile app to trace the journey of their coffee from the farm where the beans originate all the way to their cup.

San Francisco Says No to Cashless

The list of locations banning cashless shops in the name of financial inclusion grew this week, with San Francisco joining Philadelphia and New Jersey in barring cashless retailers from the city. Under the new rules, all physical stores will be required to accept cash as a payment method.

“I just felt it wasn’t fair that if someone wanted to buy a sandwich in a store, and they had cash, that they would be turned away,” Supervisor Vallie Brown, who introduced the legislation, said in an interview with the AP. “We also have our homeless population. They’re not banked.”

The rule calls on physical stores to accept cash for goods and services – though some firms are exempt, including ride-sharing firms like Uber, temporary pop-up stores and food trucks, which are allowed to be digital-only retail spots. Though San Francisco is known as an affluent city that is home to many well-paid tech workers, it also has many low-income residents and a homeless population of about 4,000, almost all of whom are completely unbanked.

Reports indicate that New York City is expected to soon follow suit with its own cashless ban.

AOC and Bernie Sanders Look to Cap Credit Card Fees

Democratic presidential candidate Sen. Bernie Sanders and New York Rep. Alexandria Ocasio-Cortez moved last week to introduce legislation that would cap rates on credit cards and other consumer financial services at 15 percent, while also empowering the post office to offer financial services for consumers.

“Today’s loan sharks wear expensive suits and work on Wall Street, where they make hundreds of millions of dollars in total compensation by charging sky-high fees and usurious interest rates,” Ocasio-Cortez said in a statement on the proposed legislation.

The 15 percent interest cap would also apply to other forms of consumer credit, including payday loans, and would also turn roughly 30,000 post offices into providers of basic, low-cost financial services including checking accounts, savings accounts and some unspecified types of loans. The 15 percent mark, they said, was selected to match the interest rate cap that already exists for cards issued by credit unions.

An outline of the plan released ahead of their formal announcement sharply criticized banks for charging on average more than 17 percent interest on credit card balances, in an environment in which consumers are able to borrow money at less than 2.5 percent.

Sanders and Ocasio-Cortez cited data from CreditCards.com to support their assertion that the average interest rate on credit card debt is roughly 17 percent, and that sub-prime card holders often pay higher rates.

The legislation is expected to draw strong resistance from the banking industry, which brought in $113 billion in interest and fees from credit cards last year – up 35 percent since 2012, according to S&P Global Market Intelligence.

It is also considered almost certain not to pass, given the current configuration of the federal government – though some commentators thought this or similar, future legislation, given a big enough change in 2020, would not be impossible.

So, what did we learn this week?

Something new is always on the horizon – though how fast it gets from the horizon to the immediate world can vary depending on the technology underlying the change, and the mood of legislators.

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 Pay Advances: The Gig Economy’s New Normal, a PYMNTS and Mastercard collaboration, examines pay advances – full or partial payments received before an ad hoc job is completed – including how gig workers currently use them and their potential for future adoption.

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