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Weekly News Digest 16 August 2019

16 August 2019
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With consumer debt reaching unprecedented proportions it is perhaps of no surprise that more credit card holders and recipients of student loans are struggling to keep their heads above water. The recent New York Federal Reserve's Household Debt and Credit Report warned that the share of student loans and credit card debt remaining unpaid for 90 days or more were on the increase. In fact, delinquency rates across the board are up – auto loans, mortgages and other types of debt too. In a move to ease press pressure on borrowers and induce spending as a short-term economic boon, interest rates were cut for the first time since 2008. Ultimately consumer debt may have to be tackled at a national level, particularly as the economy becomes further endangered by the ongoing trade war with China. As prices rise and consumers household budgets are pinched even further, they're likely to lean more heavily towards indebting themselves further to make ends meet.

But help is at hand if you're a Venmo app user and you can induce your family or friends to help you out with that overdue payment that needs to be paid asap. The U.S. payment app Venmo has announced support for instant transfers to domestic bank accounts. The PayPal-owned peer-to-peer (P2P) payments company has been offering instant deposit capability with Visa and Mastercard debit cards for some time but adding the convenience of moving cash to a bank account instantly in real-time brings it in line with its nearest competitor, Zelle. According to Venmo, users will be able to send and receive funds within minutes for a one percent fee, at a minimum of 25 cents and a maximum of $10. Venmo was the dominant P2P payment app for many years, but Zelle, which operates directly and through bank and credit union apps has recently overtaken its compatriot. Gary Brennan of Verisk Financial Research commented, 'Venmo is now on par with Zelle with regards to instant payments,' he continued, 'coupled with its independence from the banking fraternity and having more than 40 million active accounts, Venmo's market share should increase.' Venmo also has plans to launch its own credit card, which if done right, will push profits.

On the other side of the Atlantic, you could soon be asking, 'Hey Google. How much money do I have left in my bank account?', as NatWest is to begin trialing a new way of internet banking. Akin to making automated calls to your bank but calling on Hey Google instead, this is the first trial of its kind in the UK and promises to initially allow customers to check their balances and transactions. The Google Assistant will answer verbally, and the result will also appear in text on the customer's smartphone. For security purposes, customers will be asked for their password and answer the traditional security questions that one would normally answer in an automated phone banking scenario. How impactful will this be? "We are exploring voice banking for the first time and think it could mark the beginning of a major change to how customers manage their finances," Kristen Bennie, NatWest's head of Open Experience, said in a statement Monday.

One of India's largest lenders, HDFC Bank, has revealed its ambitious growth plans. Despite dire warnings coming out of the unsecured loans segment of India's economy, HDFC Bank is determined to double its credit card base and triple its merchant acquiring business. Currently, the bank boasts a credit card user base of 12.5 million and 900,000 merchants, and with it adding 0.5 million new accounts and 100,000 new merchants monthly, bank executives would have us believe that they barely have to lift a finger to achieve their goals. However, it will require an investment which helps to build scale in semi-urban and rural areas to get this over the line. While this desire to grow and develop is admirable, HDFC Bank must be aware of the risks when playing fast and loose with unsecured lending. As it stands, RBI data shows that India's exposure to unsecured lending has risen to an all-time high with credit card outstandings growing by 27.5 percent in just one year and Indian borrowing fast outpacing growth in income. Unless consumers can keep pace with their borrowings and a rising interest rate, HDFC's expansion via unsecured lending may be more a 'debt wish' than a leap of faith.

The London-based international money transfer startup, TransferWise, believes it has the answer to hidden travel cost woes for some consumers south of the equator. Research conducted by Capital Economics showed that Australians lost $2.14 billion and Kiwis $1 billion last year by using their bank-issued card abroad. Fear not though as TransferWise has launched its Mastercard debit card in Australia and New Zealand. TransferWise's card, already available for free in Europe, includes unlimited commission-free spending in the UK, US, Eurozone, Australia and New Zealand. The money wiring expert claims its card is 11 times cheaper than those currently offered by banks as its cards don't have transaction fees or exchange rate markups and cardholders can withdraw up to USD $240 every 30 days for free at any ATM in the world.

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

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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