TransUnion Completes Acquisition of Verisk Financial Services
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The Federal Reserve increased interest rates on Wednesday for the first time since 2018, in what is expected to be the first of up to seven such increases this year. The Fed was joined on Thursday by the Bank of England, which increased rates for the third consecutive meeting. The central banks are entering a tightening cycle in an attempt to dampen soaring inflation, yet the question remains: can this trajectory be maintained?
With consumer borrowing now starting to tick up after the pandemic period in which many issuers saw balances decline, every incremental increase will intensify pressure on borrowers. This places the central banks in an unenviable position: attempting to negotiate a goldilocks path that tames inflation while not putting too much pressure on borrowers, while at the same time ensuring that markets do not react adversely. For lenders, these latest moves will improve margins on credit card outstandings but will also most likely lead to increased net credit losses.
As the war in Ukraine continues, so does the economic blowback facing Russia. Two of the most important European banks, Austria's Raiffeisen and UniCredit of Italy, are the latest international entities to announce that they are considering a possible withdrawal from the Russian market. The ECB, meanwhile, has asked Eurozone banks to scrutinize transactions carried out by Russian and Belarussian nationals, to ensure that European banks are not used to evade international sanctions.
While Russia is dealing with the economic repercussions of the invasion, it is also looking at possible alternatives to circumvent the sanctions. Moscow is in discussions with India about setting up a bilateral trade arrangement, which would see the dollar bypassed as the settlement currency for trade between the two nations, instead using their respective local currencies to settle accounts (Russia already has a similar arrangement in place with China).
In a similar vein, the WSJ reported on Tuesday that Saudi Arabia is considering yuan priced contracts for some of its oil sales to China. This may potentially herald a seismic shift in international payments, threatening the greenback's position as the global reserve currency. The world has watched as Washington has weaponized the (petro)dollar in recent times, leading to a growing awareness among some state actors that this dollar dependence represents a potentially fatal Achilles heel. Policymakers will be mindful of the potential for unintended second-order consequences of recent events: should de-dollarization gain traction, it would be very difficult to reverse its course.
More signs of the banking and payments sector taking tentative steps into the worlds of Augmented and Virtual Reality emerged this week, as American Express filed patents hinting at an entry into the metaverse and HSBC announced a partnership with The Sandbox, a blockchain-based videogame. These developments follow JPMorgan's announcement last month of a plan to open a "lounge" in Decentraland, a popular metaverse. Although all early stage developments, these moves highlight the fact that payments firms are actively looking at the potential of digital environments as future revenue streams and opportunities to serve clients outside of the traditional branch network. A virtual land-grab may ensue, with payments brands looking to develop new rails for digital worlds and to capture market share in digital-to-fiat exchanges.
Meanwhile in Japan, a consortium of companies has rolled out holographic self-checkouts, providing a true contactless payment experience for shoppers in six 7-Eleven stores in Tokyo. The projected display offers the usual cashless checkout experience but without the need to press a physical screen, with technology developer Neonode highlighting the hygiene benefits to customers.
Some other stories of interest this week...
UK: Contactless payments soar following increase in limit
China: Tencent faces potential stiff fine for AML breaches
India: Paytm Payments Bank barred from onboarding new customers
Europe: Klarna teams up with eBay to offer German consumers another payment option
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The Weekly News Digest from Argus Advisory Research highlights significant developments in payment cards, digital payments, acquiring, processing, retail banking and consumer credit. Our writers and researchers frame these items in contexts such as historical, sectoral and regional trends, adding a layer of value often missing from the rolling news cycle.
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