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First-half numbers released by Klarna this week prompted stark headlines as net losses at the Stockholm-headquartered company leapt fourfold to 6.2 billion kronor ($579m). With 150 million customers worldwide and a fast-evolving set of offerings (including a Visa-branded Klarna Card launched in America in June), Europe's top unicorn is hoping it can continue to draw more shoppers while skirting the pit of default: an easier task in the near-zero interest-rate environment that is fast becoming a thing of the past. Revenues were up by a quarter to $850m.
As a Fitch analyst told Bloomberg last month, pay-later services provision "is a dangerous game – you see your loan volume pick up but if unemployment ticks up, this becomes defaults and that's going to be a challenge." In Britain, where Klarna leads the market, credit losses are in fact, down to just under half a percent of purchases, an encouraging sign as investors in the firm are shifting their expectations from high growth to signs of profitability.
A partnership between Sionic and Open Banking specialist MX is using Google Cloud Services to support a pay-by-bank offering that will run on the off-card rails of The Clearing House. Credit card users, standing to lose rewards points and robust anti-fraud coverage if they transact directly from their bank, might not be attracted, but merchants might well come on board with discount vouchers to sweeten the deal for on-the-fence customers.
"With proposed increases to interchange fees from Visa and Mastercard expected to come to fruition later this year, merchants would seem motivated to welcome instant bank-to-bank payments", commented Gary Brennan of Argus Advisory Research. ''Pay-by-bank is the norm in many parts of Asia and Europe, but the current focus on fraud via Zelle and Venmo will be offputting, as will the irrevocable nature of such arrangements."
The development raises the question of whether Alphabet might be planning to beef up its wallet offering in a bid to emulate Apple's payments performance: relaunched earlier this year; Google Wallet could easily accommodate new methods.
In the regionally influential city-state of Singapore, the central bank has clarified its stance on digital innovations under the title Yes to digital asset innovation, No to cryptocurrency speculation. Ravi Menon, managing director of the Monetary Authority, set out to dispel any ambiguities in a strikingly direct speech delivered at a local fintech seminar.
In a nutshell, the authority remains keen on well-regulated stablecoin and blockchain-supported innovation generally but plans to intensify its curbs on crypto speculation – understandably fearful of the irrational exuberance that has periodically enveloped markets as diverse as India, South Korea and the United States.
Mr Menon made clear that Singapore has also cooled on any need for retail Central Bank Digital Currencies (CBDCs). Meanwhile, in China, the digital yuan has now made its way onto public transport systems in Guanzhou and Ningbo. As of the end of May, some 264 million transactions had taken place using the central bank's innovation, to a value of approximately 83 billion yuan ($12bn); over four and a half million merchants in the country accept e-CNY payments.
Other stories of interest this week...
Australia: Afterpay shuts Money app, ends deal with Westpac
Nigeria: Flutterwave secures highest payments processing licence
US: Number of adults using mostly cash drops sharply
US: Visa payments volume up 11 percent yoy last month
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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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