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Borrowing by credit card in the United Kingdom surged by an additional £1.5 billion ($1.97bn) in February according to the latest statistical release from the Bank of England. That figure indicated a 9.4 percent annual growth rate for borrowing on plastic. Economists are not quite unanimous that such a sharp uptick can be attributed to the cost-of-living crisis: one widely quoted note holds out the possibility that the behaviour was in fact a sign of consumer confidence, though with the proviso that any such momentum is a short-term characteristic. That month too most consumers would have discounted the possibility of the geopolitical chaos that was to upend projections for all major economies in the month following. As things stand now, energy and fuel costs have yet to manifest the full effects of the war in Ukraine and the manifold secondary effects currently working their way through the economy. It also remains to be seen how many consumers have been turning to Buy now, pay later options as disposable income falls in the face of rising inflation.
In the United States homeowners are bracing for a blow to their budgets with news that, according to a survey from Freddie Mac, the average interest rate for a typical fixed-rate mortgage, which stood at 2.65 percent in February, has now shot up to 4.42 percent, a rise not seen since the early years of this century. The US has a sizable population of renters as well, numbering 109 million according to Wells Fargo, which is now launching a credit card in partnership with Bilt Rewards that offers holders one rewards point per dollar spent on rent. Like variable-rate mortgage repayments, median rent in the country has been soaring, up by almost a fifth last month to a record high of $1,792 in February according to a News Corp-owned property listings website. To accommodate tenants whose landlord does not accept electronic or digital payments, a cheque will be sent on triggered by a tenant's payment through Bilt's app. Bilt's solution comes as Americans are being enticed away from cheques for rental payments: for many the monthly outlay is their single biggest expense and thus ripe for corralling into a steadily swelling rewards ecosystem.
In other news from the US credit cards market, the Consumer Financial Protection Bureau's director, Rohit Chopra, has complained that "many credit card issuers have made late fee penalties a core part of their profit model" as he opens up another front in his bureau's war on what it calls "junk fees": according to the CFPB, issuers took in $12 billion from penalties for late payments in 2020. "Given their current practices," stated Mr Chopra, "we expect that credit card issuers will hike fees, based on inflation, as limits continue to rise."
For many years now, savers in the UK have not had the opportunity to earn much by way of interest in their bank accounts. Now, deep-pocketed Wall Street lender JPMorgan Chase is launching a savings account with 1.5 percent interest, double the central bank's base rate. The eyecatching offer contrasts dramatically with those on offer from leading incumbents Lloyds and NatWest, who have been recently criticised for rates as low as 0.01 percent, though they will reportedly be rising. Chase's move comes six months after its digital bank was launched in Britain, the first step along a path which Sanoke Viswanathan, head of JPM's international consumer division, hopes will take his firm's digital bank into other European and Latin American markets.
Last week we noted that Apple had acquired credit check-software provider Credit Kudos; according to a Bloomberg article this week citing unnamed sources, the move is part of the tech giant's 'Project Breakout', through which it plans to develop strong in-house capabilities for payments processing and financial tasks from loan-risk assessment to dispute handling. Although there is no talk of replacing current partners such as CoreCard or Apple Card-issuer Goldman Sachs, a new BNPL product called Apple Pay Later will reportedly include an "Apple Pay in 4" offering which may be reliant on new in-house tech and also leverage the company's extensive assets for financing purposes. Beyond instalment lending, the Bloomberg piece claims that Apple is developing its own "tools for calculating interest, rewards, approving transactions, contacting and reporting data to credit bureaus, accepting or rejecting applications based on its own risk assessments, determining and increasing credit limits, and handling transaction histories".
Other stories of interest this week...
Europe: Lunar offers €132m to acquire Instabank
India: Axis Bank accelerates retail push with $1.6bn Citi deal
Italy: Central bank bans N26 from onboarding new customers
Thailand: Crypto payments banned – with an eye on a digital baht
UK: Payments watchdog takes on card scheme fees and A2A deals
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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.
About Argus Advisory Research The market-leading online, interactive database and data dashboards covering the global cards and payments industry in detail, plus a range of data-packed country and regional reports. Leveraging financial cards data going back to 2010 – and forecasts up to 2025 – our unique datasets cover countries around the world and feature more than 250 metrics per market.