Cash Loyalty, Digital Gifting, and Crypto Warnings

This week’s Today in Payments covers a $200 million settlement by Visa and Mastercard over chargeback rule changes, new data showing rapid growth in gift card popularity—especially among Gen Z and Millennials—and fresh insights into America’s complicated relationship with cash. We also spotlight a troubling rise in crypto ATM scams, as scammers increasingly use these machines to defraud victims out of thousands in unrecoverable funds.

Welcome to Today in Payments, I’m your host, Patti Murphy, here with your weekly dose of payments notes.

Visa, Mastercard Settle Lawsuit Over Chargeback Rule Change

Visa and Mastercard have agreed to pay merchants nearly $200 million to settle a class action lawsuit filed nearly a decade ago concerning rule changes around chargebacks.

Merchants alleged that Visa, Mastercard, American Express, and Discover violated antitrust laws by coordinating changes that made merchants responsible for chargeback costs unless they had chip readers. Discover and AmEx settled earlier, agreeing to pay a combined $32.2 million to resolve the claims against them.

Merchants argued that the rule changes increased their expenses—specifically, that they faced higher chargeback costs without any relief on transaction fees. The credit card companies admitted no wrongdoing; however, Visa agreed to pay $119.7 million and Mastercard $79.8 million to settle the lawsuit.

The settlement must still be approved by a judge in the U.S. District Court for the Eastern District of New York, where the lawsuit was filed.

Gift Card Demand Growing Faster Than Ever

A new report from Bank of America shows that more shoppers are choosing gift cards—especially for special occasions—and demand is growing faster than ever.

Some key findings:

• 3 in 4 consumers prefer purchasing gift cards over merchandise for holiday gifts

• Gift card purchases for graduations, anniversaries, and other occasions are up for both digital and physical cards

• Digital gift card purchases are up 6% year over year; physical cards are up 5%

• 71% of consumers are prompted to buy gift cards while in-store

• About 1 in 3 consumers are asking friends and family for gift cards more often than in the past

• 68% received a gift card during the 2024 holiday season—up 6% from the previous year

• Gen Z and Millennials are driving the rise in digital gift card purchases

• Gen Z bought more gift cards last year than in any year prior

The takeaway: it’s increasingly important for merchants to offer digital gift card options, especially as younger consumers purchase cards for Millennial and Gen Z friends and family.

Americans Still Like Cash

Data collected by the wealth management firm Empower suggests that despite the rise of digital payments, Americans still like having cash on hand.

Nearly 2 in 5 (38%) say cash feels more “real” than digital money. But in practice, physical currency is used less frequently: only 1 in 5 people say they use it a few times a year, and just 18% report using it daily. Still, 1 in 4 Americans say they often find themselves wishing they had cash.

Economic uncertainty may be influencing cash behavior. One in four respondents said they view cash as a “safety net” during downturns, and 20% reported increasing their cash holdings in the past year.

How are people using cash?

• 50% use it for tips

• 46% use it to pay small businesses that don’t accept cards

• 33% use it to get discounts for paying in cash

• 30% use it to split costs with friends at restaurants

• 24% use it for parking or tolls

Crypto ATMs: The Latest Tool for Scammers

Cryptocurrency ATMs that accept cash deposits are becoming a favorite tool for scammers, according to media reports and law enforcement agencies.

These are old scams with a new twist: romance schemes, fake arrest calls, or “your computer’s been hacked” threats. In the past, scammers asked for gift cards. Now, victims are being directed to deposit cash into crypto ATMs tied to a scammer-controlled wallet—often losing thousands of dollars in the process.

CNN reports that one Bitcoin ATM in Prescott, AZ was used in at least four scams in a single week this past summer. Four women reportedly lost a combined $54,000, depositing cash into that machine bill by bill. Since last year, that same ATM has been linked to at least 12 victims and $118,000 in total losses.

Scammers, often targeting elderly victims, walk them through the ATM process step by step. The money is instantly converted into crypto and deposited into anonymous wallets—making it virtually impossible to recover.

According to the FBI, Americans lost $240 million to crypto ATM scams last year.

Law enforcement says many scammers are based offshore—particularly in Southeast Asia—making prosecution difficult. What investigators find most frustrating, however, is that the ATMs are owned and operated by U.S.-based companies that profit from transaction fees but often do little to prevent fraud. Some prosecutors have compared the machines to “getaway vehicles” that allow scammers to vanish with victims' money.

In response to the growing threat, the Secret Service has begun visiting locations that host crypto ATMs to distribute paper warnings. And in August, the U.S. Treasury Department issued an alert urging vigilance.

That’s all for Today in Payments. Stay tuned for your weekly dose of payments notes.