Payments News Digest 16 September 2022

US: Consumer watchdog intends to regulate Buy now, pay later companies and products

The credit-cards industry in the  United States  should be cheered by news that the currently unregulated BNPL sector is being pulled firmly into the same standards and guidance frameworks that credit card companies have long been subject to. In the process, the Consumer Financial Protection Bureau (CFPB) is doing away with the regulatory shibboleth of separating banking and commerce, a division long muddied by tech innovation.

Interestingly the CFPB, which has been studying BNPL for months now, is also looking at how borrower data is being harvested by the nascent sector in the course of conducting a probe at the same time into Big Tech's payments strategies.

Pay-later loan delinquencies are a growing concern, especially with the deep involvement of the subprime segment and signs too that BNPL is being increasingly used for necessities such as groceries: "In the best-case scenario, this will enable people to hang on or, in the worst case, overextend themselves," Marshall Lux of the Harvard Kennedy School told CNBC.

US: Walmart to pilot digital banking services

Big box retailer Walmart, in conjunction with a fintech called One in which it holds a majority stake, will shortly begin trialling a digital banking service that should, in time, offer its users a wide array of financial products, including loans. The bricks-and-mortar giant has been carefully approaching the huge opportunity presented by its on-the-ground presence, with an addressable market centred around its 1.6 million-strong domestic workforce and almost 100 times that number in weekly customers, which it plans to attract with discounts and cashback offers.

"The move, which should drive customer loyalty and enhanced spend, is reminiscent of  Latin American markets, " commented Patrick Houlihan of Argus Advisory Research. "It is common there for a large retailer to also offer its own private-label card with a credit line. Some of these have bloomed over the years to become some of the largest financial services companies in the market, a conceivable outcome in this case also."

The timing too seems ideal from Walmart's perspective, as there may be heightened demand for micro or small loans as many Americans come under financial pressure: the latest TransUnion Consumer Pulse survey reveals that most Americans (64 percent) are planning to cut spend in the face of darkening economic conditions, while an even greater majority (87 percent) see credit as being important to achieving their financial goals.

Other stories of interest this week...

Global: Ethereum Merge is done, opening a new era for second-biggest blockchain
Nigeria: Flutterwave adds local CBDC as payment option for merchants
US: JPMorgan Chase buys Renovite to battle Stripe and Block
US: Visa, Mastercard and American Express to code firearm purchases

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