Third-quarter results from Visa and Mastercard show that transaction volumes may be continuing to rise, albeit less than hoped, but that cross-border performance, crippled by ongoing travel restrictions, is dragging down overall revenues. Ajay Banga, Mastercard's chief executive, noted that his company was "seeing encouraging progress in the trajectory of domestic spending, while travel spending remains a challenge". Both networks reported double-digit falls in cross-border business. Domestically, American consumers are reaching for their debit card where, before the pandemic, they might have opted for a credit card, a phenomenon that may affect Mastercard more than Visa, since the latter is responsible for two-thirds of debit cards in issue in the US market, according to Verisk Financial Research data. However, both in the US and globally, infrastructural improvements continue to roll out that will support long-term growth: in a year that has seen consumer payments behaviour dramatically change, Mastercard revealed in its earnings call that contactless penetration has reached 41 percent at the in-store POS globally, up from 30 percent at the same point in 2019.
Payday lenders have long been a subject of debate among policymakers in the United States: are they a vital part of the everyday economy for underprivileged communities or do their high annual payment rates amount to the mistreatment of a sub-prime clientele, effectively captive as mainstream banks are wary of lending to them? An interesting piece in the Financial Times this week shows that the pandemic has brought a new breed of player into that debate: wage access companies such as DailyPay and Earnin have been of great value to workers in, for example, fast-food restaurants and the hospitality sector. In some cases, the fees for salary advances before payday are borne by employers; in other cases, the interest-free loan contract is with the consumer directly, though some critics see the optional fees involved as tantamount to unreasonably high APRs.
A stream of bank results from Europe's biggest firms shows that the big consumer lenders are, as a rule, doing better than they had anticipated earlier in the year. Pre-tax profits at both HSBC and Santander were in the black, although the former is considering whether to charge account holders for a basic bank account, breaking with tradition in the British market, but seen by its leadership as a potentially necessary step with interest rates so low and a significant cost-cutting exercise underway. Britain's largest retail bank, Lloyds, reported a return to profit thanks in part to reduced bad loan provisions, while Standard Chartered profits exceeded analyst expectations. Santander benefited from more enthusiastic repayment behaviour from borrowers than it had feared, boding well for its full-year results. Barclays and Natwest too are seeing less need for bad debt provisions than envisaged in the previous quarter. So far Barclays has provided some 640,000 payment holidays and waived overdraft interest and fees income to the tune of "some £100m" ($129m) the bank said: its consumer, cards and payments division reportedly produced a profit of about £165m.
Since February 2019, holders of Virgin Money credit cards in Britain have been able to use either an app or a web platform to manage their accounts; now the latter is being discontinued, with the result that some two million customers will have to use the app for everyday management activities such as freezing the card, transferring funds, viewing transactions (or balances and statements) and setting up payment arrangements such as for utility bills, subscriptions and the like. The issuer says that only around ten percent of its customer base avail of the website, but it will surely present problems for those who, for one reason or another, remain unpersuaded when it comes to cybersecurity on their mobile or who simply do not care to use a smartphone in the first place.
To end, links to some other stories of interest this week...
China: Multi-city push for digital yuan following Shenzhen trial
Global: Bahamas and Cambodia first to debut central bank digital currencies
Sweden: Cash almost abandoned finds central bank survey
US: Through savings and repayments, households doing better than expected
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