Payments News Digest 14 May 2021

US: Credit card balances keep falling, even as economy roars back to life

New figures from the New York Fed suggest a historic shift might be underway in credit card usage behaviours, with balances having fallen by $49 billion in the first quarter, a level only bested in this century by the second quarter last year, when non-essential spending by households all but vanished. What is striking in these results though, is that the concerted reduction of revolving debt is happening in the midst of dramatically eased travel restrictions and a reviving economy, leading researchers at the NY Fed to describe the combination as "confounding". However, it may transpire that borrowers will return to plastic when travel and entertainment possibilities approach more normal levels: second-quarter data will be scrutinised for signs of a permanent change. Household debt as a whole, however is growing fast, thanks to credit being extended for mortgages, mortgage refinancing and vehicle loans. Meanwhile, in a clear sign of the resurgence underway, payments app Zelle reportedly saw the value of its transactions for the quarter rising by 74 percent year on year, with the number of transactions processed up by 61 percent to 392 million.

UK: eBay makes "landmark" move into financial services

E-commerce pioneer eBay has unveiled a new programme in the United Kingdom called Capital for eBay Business Sellers, which will be offering loans to its small and medium-sized business marketplace sellers from as low as £500 ($700) to as high, potentially, as a million pounds. The programme is a partnership with British fintech YouLend. In China too, eBay has announced a new commercial relationship, this time with Payoneer, which will manage payouts to its sellers there, with other markets set to come on board later in 2021. (Interestingly, Payoneer has been offering seller financing on other platforms for four years now.) The marketplace sector, currently dominated by Amazon, eBay and Alibaba, has been booming, adding some $120bn annually to Amazon's top line alone, according to Forbes reporting. Now platform owners are clearly set to further intensify relationships with their sellers, which could see the value of an already booming sector skyrocketing.

Canada: Draft legislation for retail payments published

The publication of the Canadian government's draft Retail Payments Activities Act appears to presage a new dawn coming for the industry in that country, whose consumers and fintechs have long outstripped regulators in their appetite for innovation. The proposed body of law, in fact, represents the first regime for regulating providers of retail payments in the country. "This payments market is poised to witness dramatic change in the next few years, with development of a new real-time payments system (Real Time Rail) expected to go live next year and Open Banking framework proposals also in the works", commented Gary Brennan of Argus Advisory Research. One advantage of Ottawa's caution is that policymakers and legislators have plenty of case studies from around the world to study in their deliberations, taking on board lessons learned by their peers in Britain, Europe and elsewhere. Interestingly, Canadians refer to Open Banking as "Consumer-Directed Finance", in the belief that laypeople will be less confused (and perhaps more reassured about cybersecurity) as a result.

To end, here are links to some other stories of interest this week...

Europe: Open Banking fintech inks deal with Amex for seamless onboarding
New Zealand: Government to cut card interchange fees
US: Banks plan to issue credit cards to people without credit scores
US: Facebook-backed Diem scales down ambitions, decamps to DC
US: Fed proposes to reopen Durbin Amendment rulemaking