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As President Putin's escalating invasion of Ukraine continues to shock the world, Western multinationals are departing Russia en masse, leaving its once-mighty banks now focused on survival. When it comes to co-badging for overseas spend, the country's card issuers are now reportedly looking to China's UnionPay. The world's biggest scheme offers acceptance by 64 million merchants in 180 countries and regions but, given this month's demolition of Russian spending power, that tie-up may be more meaningful symbolically than financially.
Whatever happens in coming months or years, Russians are not going to be able to undertake either non-essential travel or online spending for a very long time. With the big US schemes, popular consumer payments fintechs (PayPal, Revolut, Wise), big tech and Western Union now gone, they may well look to crypto for safety. But even in that sector, renowned for anonymity, Coinbase has not only closed off access to Russia-linked wallet addresses that seem suspect, but has shared 25,000 addresses with American law enforcement to curb sanctions infringement. That development signals crypto moving out of its libertarian phase, with exchanges likely to come under intense pressure from pro-democracy governments. Sanctioned individuals and businesses may however consider the murkier depths of digital coinage a better bet than their beleaguered banking system.
API-powered Open Banking has been more of a slow burn than a big bang when it comes to consumer adoption, but the arrival of Variable Recurring Payments (VRP) in the market might prove the gamechanger. VRP gives consumers the power to grant and tailor permissions for account-to-account payments within customisable parameters that match their wishes: a user could, for example, automatically 'sweep' funds above a specified threshold in their current account to a savings account at a different institution on a particular day each month.
As things stand, the worker bees of Open Banking that carry out those wishes, third-party payment providers, lack the wherewithal to action more than one such payment at a time. That is about to change with the impending launch of the first of these VRP offerings, Payit, created by NatWest in collaboration with fintech TrueLayer, which is now moving into a pilot phase. Among other uses, VRP facilitates sweeping between customers' own accounts and managing an ongoing stream of unpredictably sized payments (to Amazon, for example).
As a method, VRP might appeal to consumers more than Direct Debit or Card on File on the grounds of both security (Strong Customer Authentication is baked in) and control (customer configuration). Disputes remain a potential snag but one that should be solvable though industry and regulatory innovation. Argus Advisory Research's latest market report for the United Kingdom points out that British consumers have proven to be technologically adept when it comes to how they shop and pay, with the Faster Payments infrastructure allowing for payments in real time and designed to underpin innovative, consumer-friendly solutions such as Payit and its VRP stablemates promise to provide.
The small Swiss city of Lugano is partnering with Hong Kong-headquartered Tether to make the latter's own eponymous stablecoin as well as the city's local token (LVGA Points) and bitcoin available to residents for the purchase of goods and services. Stablecoins would seem to provide a fertile middle ground between unbacked innovations such as bitcoin and central bank digital currencies such as China's e-CNY, which are by definition sovereign. However an article published by the New York Federal Reserve last month drew attention to the drawbacks of stablecoins, noting that, by virtue of full backing, they tie up liquidity unnecessarily – or, where not fully backed, become riskier. The authors proposed tokenised deposits as a better way to take advantage of distributed-ledger possibilities.
Undaunted, lawmakers in the American state of Wyoming have made a move towards a state stablecoin, which will, all going to plan, be backed by US treasury bills and thus remain, according to one proponent, constitutionally valid. The initiative opens up the possibility that the US Supreme Court will ultimately be called upon to determine states' rights in this regard, as technology produces outcomes never envisioned by the nation's founders.
Other stories of interest this week...
Europe: Visa completes acquisition of Open-Banking platform Tink
India: HDFC aims to recoup credit card spend market share loss
Pakistan: Central bank issues unified QR code standard
US: Affirm, Klarna meet CFPB deadline, others mum
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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.
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