Payments News Digest 17 March 2023

Global: Fintech optimism takes a hit as rate risks move into spotlight

Impacts are being keenly felt in the fintech sector from Silicon Valley Bank's collapse a week ago today: fortunately the potential damage to payment runs (and cashflows for merchants depending on Etsy, Shopify and other services) seems to have been confined to the level of inconvenience thanks to the regulatory rescue operation. The deeper damage however will probably come in the form of reduced innovation as the funding necessary from investors and lenders to carve out new niches and products becomes increasingly harder to come by. With balance sheets under even more stress than before at smaller startups and more pessimistic risk assessments, takeovers at a discount by incumbents and private-equity firms are seeming likelier.

Michael Moritz, chair of Sequoia Capital, writes that "regardless of the reasons behind the bank's collapse, it leaves a huge hole for the start-up scene: SVB provided for tech when everyone else ignored us". (One successful graduate of that world however had positive news this week: Stripe succeeded, albeit at a near-halving of its 2021 valuation, in procuring a $6.5bn funding round. The press release included this eyecatching stat: "one hundred businesses now handle more than $1 billion on Stripe every year".)

Brazil: Fintech's move for SVB deposits a telling sign

As often in business, trouble for one spells opportunity for another: Sao Paulo-based Trace Finance reported $100 million in deposits in a new current account by businesses removing funds from the stricken bank: TechCrunch reports that the account is aimed at startups and its creation took place as a direct result of the developments in Santa Clara. The capital flight goes to show that, thanks to digital infrastructures, money can not only move fast (a factor in last week's collapse of three US banks, as was social-media fuelled panic) but also into other jurisdictions.

Africa: Major funds-transfer debuts in continent's two biggest markets

Nigeria's central bank has approved Open-Banking regulations drawing on the roles and protocols defined in Europe's PSD2, with the array of third-parties able to avail of the API-centred ecosystem including mobile-money operators and microfinance banks. Among the institutional partners in the move are FirstBank, Union Bank and Sterling Bank. As noted in Argus Advisory Research's current market report for the country, "mobile-payments transactions are growing at one of the fastest rates in the region, with the sector looking set to dominate the future of payments here." In tandem with the new breed of fintechs, the banked population are likely to be enthusiastic about the empowerment Open Banking can offer.

In South Africa meanwhile, a central-bank endorsed real-time payments service called PayShap has gone live, with the four most prominent lenders all on board, a buy-in that bodes well for mass uptake. In the near future, challengers Investec, TymeBank, Capitec and five more banks will be supporting the platform, which allows users to transact values worth up to 3,000 rand ($163) via mobile-phone number. In time, a request-to-pay facility will be added. The system was developed by BankservAfrica, created by the big banks thirty years ago to handle interbank switching and settlement services.

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

Global: Worldline enters metaverse via white-label mall
UK: NatWest to limit customers' crypto payments
UK: Why HSBC swooped on SVB's British unit
US: FedNow may draw in low-income users says Boston Fed researcher

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