Payments News Digest 19 March 2021

Australia: Establishment players make BNPL-targeting bid for POS prize

The contest for the consumer at the Australian point of sale is set to heat up considerably with the launch of a new Buy now, pay later (BNPL) offering by Mastercard and the country's wealthiest and most profitable bank, Commonwealth Bank of Australia (CBA). The card, which will start to be issued in the middle of this year, is squarely aimed at the likes of Afterpay and Klarna, which have made more of an impact in this market than anywhere else worldwide. Strikingly, CBA is no stranger to BNPL, having invested in Klarna and indeed continuing to partner with the Swedish instalments-specialist such that CBA customers are able to sign up to Klarna using the bank's own app to personalise wishlists, receive price alerts and make the standard four payments in fortnightly intervals. According to Banking Day, BNPL providers charge merchants for the service to the tune, on average, of four percent of the purchase value; the new Mastercard-branded CBA card though will earn its keep through interchange fees at "80 basis points of the value of the BNPL transactions", says the website, citing unnamed sources. The quartet of major banks in the country are now waging war on several fronts simultaneously, notes the Australian Financial Review, reporting concerns among bankers that, in ceding ground to the likes of Adyen and Stripe on the merchant acquiring front, known for its high volumes and low margins, hidden but lasting damage is being done to the merchant-banker relationship, which might well see deposits flowing elsewhere over time.

UK: Visa to up interchange for purchases from European Union

Following a similar move by Mastercard at the start of this year, Visa has announced an increase to 1.5 percent for online credit card purchases made by Britons from EU-based merchants; on the debit side, the hike will take the cut up from 0.2 to 1.15 percent. "This move reflects one of the consequences of Brexit: the increased cost of trading with the European Union," commented Patrick Houlihan of Argus Advisory Research. "The higher margins will certainly help issuers at a time when revenue streams have been badly hit by the low-interest rate environment and the economic fallout of the pandemic. While this is disappointing for consumers, it is just as likely that transaction fees will continue to increase, rather than be rolled back." Travel-related sectors, already struggling with Covid-related restrictions, will probably feel the pinch most. As noted in this newsletter in January, British lawmakers are now coming under pressure from industry bodies to introduce interchange caps akin to those imposed by the European Union throughout the 27 nations of that bloc.

Canada: Revolut bows out of market, citing inability to widen service range

Revolut has proved expert, once it has established a foothold in a market, in building a customer base through the ease and low cost of transferring funds before going on to intensify its relationship with customers through an increasing array of services, from debit cards and rewards programmes to cashback and cryptocurrency trading. But that strategic playbook has not worked so well in Canada, a country comparatively slow to update its regulatory structures for the digital age, with banking licences reportedly difficult to procure for challengers. The company has now contacted its Canadian customers to inform them it is exiting, perhaps to return if and when conditions prove more favourable. As Argus Advisory Research's market report for Canada points out, the country's banking system, largely controlled by the Big Five established banks, is routinely praised as the world's soundest by the World Economic Forum, but that same conservatism makes innovation difficult and successful challengers a rarity, though domestic fintech Wealthsimple's Cash app has been a success with Canadians looking for a Venmo-like app to transfer funds.

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

Greece: Euronet to purchase Piraeus Bank's merchant acquiring business
India: Paytm turns Android phones into POS machines in merchants push
US: Digital banks fronted stimulus payments to customers, beating incumbents
US: Visa, Mastercard delay interchange fee increases