Payments News Digest 14 October 2022

US: BofA chief has confidence in consumers as 3Q22 reporting begins

Publicly traded lenders in the United States start releasing their third-quarter results today, with interest-derived income set to increase on the succession of rate rises this year. The American consumer is in a curious place as things stands, with employment levels high but inflation yet to be tamed by monetary measures, bringing with it fears that the Fed's strong medicine might bring recession in its train. Brian Moynihan, chief executive of Bank of America, notes that his customers are well placed to weather the storm, citing the fact that they "have more money in their accounts by multiples than they did pre-pandemic [and are] earning more money." For all the turbulence of recent months and years, the "US economy is...in pretty good shape" by Mr Moynihan's estimation.

At the same time, a new TransUnion study of liquidity in card portfolio management provides more indicators of consumers' financial health, using a dataset of 5.9 million consumers from the third quarter of 2019 through the end of last year. The global information and insights company, which owns Argus Advisory, notes that a rise in card balances and an uptick in delinquency rates can be expected now that Covid-related relief has ended – with the corollary that correctly identifying risk segments via careful data analysis is increasingly vital. At the end of the second quarter, serious delinquency across the half-a-billion credit cards issued by banks rose significantly to 1.57 percent – while remaining below the levels seen before the pandemic hit.

US: Point of sale the focus as PSPs look for unconquered territory

In the United States, PayPal and Shopify are going head-to-head with new products for real-world aisles and counters. The handheld devices offer smaller retail operations the kind of adaptability and analytics they have come to expect for their online channels. The American point of sale has changed considerably in the last half-decade, with contactless having finally taken its place along with newer forms such as digital wallets and also the QR codes used by Zelle and Venmo. PayPal's Zettle Terminal can handle all of these, and comes with a modular form factor, which provides smaller merchants with the option of buying just the core component with its all-important app for managing inventory, sales and payments as well as all the necessary reporting functions.

Shopify for its part is coming to market with POS Go, a dedicated device about the same size as a smartphone that comes with an integrated barcode scanner and card reader. Interestingly, as described in Modern Retail magazine, merchants "can build carts in-store for shoppers, then email customers a corresponding link". They can also see a shopper's purchase history. The move marks an expansion for Shopify, generally associated with online webstore provisioning. The Ottawa-headquartered firm recorded remarkable growth during the lockdown era. Both launches indicate that in-person acceptance has become an intensified commercial battleground post pandemic as PSPs take their online know-how into bricks-and-mortar retail spaces – although self-checkout is proving a harder nut to crack even for the mighty Amazon.

Germany: End of an era as conservative market prepares for Maestro's exit

Mastercard's decision to cease Maestro-badging in Europe from next July has passed largely unnoticed in most cards markets, but it is leading to some anxiety in Germany, where about half of the world's Maestro cards originated. The brand's departure is particularly problematic for the popular Girocard, also known as the EC Card. Germans, who suffered ravaging hyperinflation a century ago, retain a pronounced dislike of unsecured borrowing, with the switch to the kind of debit cards now commonplace elsewhere potentially perceived as a step along the road to full-blown credit-card usage.

Nonetheless, the increasing importance of online shopping channels has left the traditional Girocard in danger of being left behind: described as "beloved" in one local media report, it was created in a time when e-commerce did not exist. The standard Girocard can only be used at websites to trigger a direct debit. "Germany's migration to more adaptable card instruments will enable its payment sector to keep pace with developments taking place elsewhere in the EU," commented Gary Brennan of Argus Advisory Research.

Other stories of interest this week...

Global: BofA and fintech Banked expand Pay by Bank to euro-currency payments
Europe, US, Canada: IXB pilot across North Atlantic draws near
Europe: Worldline to enable India's UPI/RuPay trx at POS
UK: Fintechs claim credit cards restrict access to consumers' own data

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