Payments News Digest 11 February 2022

US: Households look to their credit cards as prices rise

Credit card balances in the United States surged by $52 billion in the closing three months of last year, according to the New York Federal Reserve's latest data release on household debt and credit nationally. The jump is the largest recorded in the 22-year history of its quarterly reports, note researchers. Although holiday shopping is a perennial fourth-quarter driver, inflation too played a role this time around as goods and services have sharply risen in price. (That trend is on track to influence this quarter as well: according to official data published in Washington yesterday, January's consumer price index, year over year, rose by 7.5 percent.)

Despite credit card balances seeing the largest quarterly jump so far this century, the NY Fed notes that the financial picture for the US country's household is "pretty good", with balances still lower than 2019's closing aggregate of $931 billion. One key indicator, the delinquency rate, remains at 3.2 percent for 90+ days-past-due accounts. Encouragingly too, Americans en masse are not maxed out, with available credit continuing to rise. Meanwhile, the Fed's monthly survey of senior loan officers has revealed that banks, in their opinion, have been easing standards when it comes to credit score requirements for a credit card, vehicle and other types of consumer loans. The bankers' perceptions reflected data showing stronger demand for credit card loans in the fourth quarter, with limits being relaxed as the year wore on.

US: Amex decks out new current account with eyecatching benefits

American Express has pushed further in its quest for more transactional business through the launch of a new current account for consumers, the first in the company's history. The branchless bank accounts will come with a debit card, called Amex Rewards Checking. Holders will not be subject to minimum balance or monthly maintenance fees and will benefit from earning a rewards point for every two dollars spent on eligible debit card purchases. The offering is notable for the fact that it comes with meaningful rewards, striking in a market with interchange caps on debit cards. The entry marks another transformative strategy shift by the high-profile lender, whose record spend totals in the most recent full quarter it credited to an intensified focus on the needs of younger cohorts and small businesses. Another feature that will stand out in a crowded market is the relatively high annual percentage yield of 0.50 percent: the payout will offer an easy way for customers to enjoy an additional balance lift each month.

The timing of the launch seems particularly opportune as Americans, influenced by both inflation and public debate, are paying more attention to their bank statements, looking to pare down expenses on the one hand and improve marginal returns on the other. Consumer transactions are on the rise wherever one looks in this market, with Bank of America noting that its customers' payments total rose by 17 percent last month versus the same period in 2021: credit card spend for January was up by a remarkable 28 percent.

Global: Adyen well placed as POS roars back to life

In another sign of a strong consumer spending recovery underway after the confidence shocks of 2020-21, Netherlands-based payments specialist Adyen has revealed that its worldwide transactions count jumped by 70 percent last year, with the pace accelerating in a final two quarters, which saw revenues up by almost half on the same period's totals the year before. The firm credits its success with a long-term commitment to building a bricks-and-mortar network as well as online capabilities. The chief executive told the Financial Times this week that "there have been tailwinds in e-commerce due to Covid, speeding up trends already happening there...But the strategy that we have is not just to be an online player – and you'll see point-of-sale grow very quickly." Adyen has been methodical in its approach over the years, allowing it to maximise economies of scale and efficiencies from in-house capacities as a payments gateway, merchant acquirer, payments processor and issuing-services provider.

Other stories of interest this week...

Global: UnionPay expands acquiring/issuing-processing relationship with Fiserv
India: Revolut to launch operations in the country later this year
UK: TransUnion first agency in the country to accept BNPL data
US: Payment splitting rolled out for Facebook Messenger users

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