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Spurred on by the recent bout of bitcoin mania, the Basel Committee on Banking Supervision is forming the view that tough capital rules should be put in place for any banks exposed to cryptocurrencies that lack an underlying asset. A public consultation paper from the global banking regulator this week recommends a risk weighting of 1,250 percent: such "conservative prudential treatment" would mean banks having to hold onto enough capital to fully absorb a complete write-off if necessary a dealbreaker for traditional lenders to say the least.
The development comes at the end of yet another headline-grabbing week for bitcoin. On the one hand, China escalated its anti-crypto campaign by blocking several widely followed bitcoin influencer accounts on the country's main social network, with expectations that legal ramifications via stringent regulation could follow as Beijing paves the way for its own e-yuan. On the other hand, El Salvador may well become the first country to adopt bitcoin as legal tender after lawmakers voted in favour of the move. Bitcoin could make remittances, which account for a fifth of the country's GDP, easier, cheaper, and faster. Even a one percent investment of bitcoin into the country could reportedly raise its GDP by a quarter. It certainly seems an attractive proposition for the country's macroeconomic boosters, perhaps bringing in valuable dollars from investors worldwide, but concerns remain around price volatility and liquidity.
Citi may be pulling back from many of its overseas markets, but that is not stopping it from engaging in white-label issuing such as seen in a new arrangement with PayPal in Australia, a partnership to compete with the Big Four banks as well as the new breed of Buy now, pay later (BNPL) such as Afterpay. No cards market worldwide has been more impacted by the popularity of BNPL, which has seen credit card balances shrink. At the same time, debit payments ballooned by almost a quarter year-on-year, according to central bank figures late last year.
Another long-running source of friction in the country has centred on the routing of debit card payments. The competition authority's latest move has highlighted concerns that need further assessment concerning a proposed merger of payments troika BPAY, Eftpos and the NPP (New Payments Platform). The root of the issue is a fear that the "Least-Cost Routing initiative may be neglected or abandoned". In 2022, Australians will be able to avail themselves of the NPP's new PayTo service for easier access and fuller control over their direct debits, further reshaping the payments landscape.
Flush with the raising of another billion dollars in investment three months ago, continental Europe's most valuable fintech, Klarna, is attempting to deepen its reach in a pair of key markets. In France, in whose capital a new office and dedicated team are being set up, the Stockholm-headquartered BNPL player is hoping that consumers will be enticed by the prospect of spreading the cost of online purchases over three interest-free monthly payments. So far, so normal. But in Britain, the firm is also expanding its services to include online retailers that are not partnered with Klarna – essentially challenging the dominance of credit cards in the deferred payment segment. Should the credit card industry be worried? That remains to be seen, but with 90 million active users across 17 countries, it seems many consumers, especially the young, are already voting for BNPL with their checkout method choice.
To end, here are links to some other stories of interest this week...
Chile: EVO to acquire payments gateway Pago Facil
UK: Retail sales in May saw the highest rise since the start of Covid crisis
US: Amazon explores replacing JPMorgan Chase in credit-card tie-up
US: Marqeta IPO puts the spotlight on fintech fees
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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