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Weekly News Digest 13 March 2020

13 March 2020
bank of england

Much as one would like to move on to other stories, the worldwide experience of the Covid-19 pandemic continues to dominate. One notable theme this week has been a radical response in major economies, with central bankers, finance ministers and major lenders adjusting policies and practices: a welcome development for the cards and payments industry, given the vulnerabilities of households, small businesses and particular sectors (most notably tourism) in what continues to be a fast-moving situation with far-reaching consequences. On Wednesday, London followed the lead of Washington in announcing an emergency rate cut. On both sides of the Atlantic, policymakers and executives are cultivating as far as possible an environment in which lenders can alleviate pressure on borrowers through measures such as mortgage holidays and fiscal adjustments. The British government also announced a new budget centred on economic stimulus, with loan facilities being readied to assist small and medium-sized businesses. Uppermost in everyone's mind of course is the need to find viable treatment of the disease: Mastercard has joined with Wellcome and the Gates Foundation in a $125 million seed funding effort to that end.

Secondary knock-on effects of the Coronavirus also remain inescapable: one consequence that may have understandably escaped the notice of many is the effect on airline loyalty programmes. In a nutshell, many frequent fliers are now likely to miss qualifying thresholds as a result of both travel bans and shifting guidance from employers and public health authorities. In the words of the Financial Times, "airlines are scrambling to keep high-spending frequent flyers loyal amid a global slump in business travel caused by the coronavirus", one of many headaches for players of all sizes in the travel and tourism sector.

In other news, Cincinnati-headquartered Fifth Third Bank allegedly opened both bank and credit card accounts from 2008 on without customers' knowledge or authorisation, according to a court complaint filed by the Consumer Financial Protection Bureau (CFPB). The root of the problem lay in unrealistic sales targets, says the CFPB, although the bank has responded that a regulatory enforcement is "unwarranted" and that it will "vigorously" defend itself. The issue of fake accounts continues to dog its bigger rival, Wells Fargo: this week saw two boardmembers, including chairman Betsy Duke, resign from their positions following criticism from leading public representatives in Washington that the bank was failing to take its clean-up duties with due seriousness.

Almost half a decade on from the capping of interchange fees in the European Union, an official study of outcomes from the EU has found that the key goal of the regulation has been achieved, estimating that interchange fees on consumer cards fell by over a third in the first two years, bringing lower charges for merchants in its train along with falling prices in shops. "Increased cross-border acquiring services and card transactions have led to a higher degree of market integration," says the report , although concerns are expressed about issuer and acquirer scheme fees as well as an increase in the acquiring margin. There are also several recommendations, including a call for POS terminal and processing activity harmonisation.

To end, links to some other stories of interest this week...

China: Alipay steps up battle with WeChat to win merchants
Europe: ECB rate unchanged but stimulus coming, capital rules relaxed
Ireland: AIB introducing fee for contactless card transactions
UK: Behind N26's failed expansion in Britain
UK: OakNorth Bank sees pre-tax profits jump 95 percent in 2019
US: Amazon launches business selling automated checkout to retailers

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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