Payments News Digest 17 September 2021

US/UK: Goldman and JPM Chase extend digital banking ambitions

Wall Street giant Goldman Sachs is acquiring Atlanta-based fintech GreenSky for $2.2bn. Through its mobile app, GreenSky provides loans for once-off, big-ticket expenses such as healthcare, vet bills or home improvement projects. Goldman, traditionally known as an investment bank, has been steadily building its presence in consumer finance, most notably in the form of retail brand Marcus, which celebrates its fifth birthday next month. However, Goldman's comparative lack of experience and relationships at the consumer (and merchant) level means that buying the loanbook of an established player is more expedient than laboriously assembling its own network.

A key element of Goldman's plan involves credit cards, building on its high-profile Apple Card debut as an issuer: earlier this year it announced a partnership with GM and Mastercard to innovate new products beyond the existing co-branded card presence. Goldman's ambitions in the sector are not confined to its home market, as Marcus is doing well in Britain thanks to a comparatively generous interest rate; its parent recently invested £50m ($69m) in digital bank Starling in a bid to build its involvement in cutting-edge retail tech. Time is of the essence: next week, leading rival JPMorgan Chase is launching a digital retail bank in the UK, with its deep pockets and regulatory experience set to make it a much more serious competitor to the established banks than the recent crop of digital challengers.

Global: Asia pulls ahead of Europe in interoperable RTPS race

In an audacious move, India and Singapore are planning to make their real-time payments systems – PayNow and UPI, respectively – completely compatible with each other within a year. The move will allow bank account holders in either country to transfer funds cheaply and without the need to involve a third-party solution. As pointed out by Mastercard executive Ari Sarker last November, cross-border RTPS tie-ups are "a governance challenge versus a technology challenge....Many facets of interoperability have to be decided and regulated, including the right of ownership of data. Also, a significant level of financial and time investment is required to build integrating connections between systems".

The highest profile multinational RTPS to date is P27, which has been working for several years now towards a pan-Nordics launch. In August a significant regulatory obstacle was removed with the EU's decision to allow P27's merger with Swedish clearinghouse Bankgirot. Once operational, account-to-account payments should be a matter of a few clicks on a phone app for bank customers in Denmark, Norway, Sweden and Finland who want to send funds to friends and family across the region. In time, cross-border RTPS would seem a logical development in the case of closely related geographies such as DACHS ( Austria, Germany and Switzerland ) or Canada, Mexico and the US in North America. Southeast Asia too would seem ripe for such cooperative wins: as noted in Argus Advisory Research's recent country reports in the region, RTPS infrastructures are already up and running in many markets, with Singapore, Thailand and Malaysia working on an interoperable arrangement, according to a central banker involved.

China: Authorities muscle in on Alipay's lending business

The Chinese government has instructed Ant Financial's Alipay to spin off its CreditTech operations into an entirely separate app. The valuable division provides finance in the form of either a credit card-like product (called Huabei) or through unsecured microloans (Jiebei). According to the Financial Times, CreditTech "overtook Ant's main payment processing business for the first time in the first half of 2020, to account for 39 per cent of the group's revenues. The [unit] helped to issue about one-tenth of the country's non-mortgage consumer loans last year". That is a big operation and, falling as it does completely outside traditional bank governance, small wonder that it should sound alarm bells for a state that increasingly monitors its citizens, especially the entrepreneurial class. Crucially, the new lending app will not use Alipay's usage-behaviour algorithms to power its credit decisions; CreditTech will now rely on traditional credit scoring providers owned, at least in part, by the authorities.

Some other stories of interest this week...

Australia: Competition agency investigating Apple Pay
UK: Monzo unveils BNPL product with $4.1k limit
US: Capital One to test BNPL with POS offering
US: Consumers still spending despite Delta risk, say banks

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