New data from the National Credit Union Administration shows that outstanding balances on cards issued by credit unions in the United States fell to $60.9 billion in the second quarter, down 2.4 percent from the $64.4bn recorded in the previous quarter and by $1.5bn from the same period last year. The delinquency rate too is down: to 1.01 percent, compared to 1.37 percent in the opening quarter, and significantly below the 1.22 percent of 2Q19. The trend is becoming a familiar one, as commercial banks and cards networks have also seen a decline in credit card borrowing. That fall though has been accompanied by a rise in debit card spend, noted Visa in a recent filing, leading to a net uptick for the scheme in overall payment cards usage in July and August. According to the document, spending on debit cards increased by around a quarter year-on-year in both months while credit card spend fell by eight percent.
Across the Atlantic, Visa are cooperating with a preliminary investigation by the European Commission into whether the network's rules regarding certain digital wallets might constitute anti-competitive behaviour. At issue is an extra fee being applied to 'staged digital wallets', so called because the transaction involves discrete funding and payment stages, with wallets of this kind (eg, PayPal or Google Wallet) able to avoid passing on information to the merchant or acquirer – such as the purchaser's card details (as must happen with 'pass-through' digital wallets like Samsung Pay or Apple Pay). According to the Times newspaper in London, citing unnamed sources, "there are also concerns among regulators that some financial technology startups are pushing the rules too far through a desire to offer ultra-speedy payments to customers, making it difficult for Visa to check for money laundering."
A big merger in European payments is brewing, with talks between Nexi (which dominates the Italian acquiring market) and SIA (controlled by the government in Rome) reportedly having progressed to a make-or-break juncture. Italian lender Intesa too has been taking steps over the summer to take over UBI. While IPOs worldwide have been delayed by the pandemic, it seems that mergers are being accelerated in the continent that originally gave birth to banking: readers may recall that the European Central Bank made it known to executives at the beginning of the year that proposed tie-ups would be met with a softened regulatory stance. As reported last week, CaixaBank and Bankia are in the midst of discussions that may lead to a new leader in Spanish lending. In Germany, there were hopes before the pandemic of a 'Super-Landesbank' emerging if Helaba and Deka can find a way to agree a tie-up. Previously Deutsche and Commerzbank had considered merging, while there were rumours that UniCredit and France's Société Générale were exploring options a year or two before. As noted in our recent Merchant Acquiring Western Europe report, scale is increasingly vital to the payments industry: "Worldline is leading the charge, having snapped up competitors including SIX Payment Services and Ingenico, and now holds a strong position in several European markets. Similarly, the merger between Nets and Concardis creates a regional powerhouse."
Finally this week, a bold move from British fintech Revolut, which has announced the launch of its banking app in Japan. The immediate target is the expatriate community, but the longer term bet is on young Japanese workers disenchanted with the range of apps currently on offer. Online banks are nothing new in the country, with Japan Net Bank having debuted twenty years ago now; however, the sheer range of options has only led to consumer confusion. Rakuten Bank currently leads the field, but for everyday, low-value purchases, shoppers will, more often than not, reach for banknotes and coins. "Certainly, Revolut will have to move beyond their current business model", commented Lorna Baek of Verisk Financial Research. "Japanese consumers are interested in rewards, many merchants still don't accept card payments, cash is preferred because of concerns over card fraud, while QR codes are quickly increasing in popularity. However, the fact that Revolut offers appealing foreign exchange terms may attract the over three quarters of a million people there engaged in spare-time currency trading." For its part, Revolut has already had an eventful year, launching its app with a debit card attached in both the United States and Australia in the last six months. Already possessed of a European Banking licence, it is reportedly pursuing a banking licence in the United Kingdom, where it currently operates with an e-money licence.
To end, links to some other stories of interest this week...
Australia: NAB launches no-interest credit card in response to BNPL
Brazil: E-commerce tipped as instant winner of new payments system
Ireland: Rise of money apps threatens to undermine incumbent banks
New Zealand: Equifax data shows consumer loan arrears down significantly
The Weekly News Digest from Argus Advisory Research highlights significant developments in payment cards, digital payments, acquiring, processing, retail banking and consumer credit. Our writers and researchers frame these items in contexts such as historical, sectoral and regional trends, adding a layer of value often missing from the rolling news cycle.
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