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As the Federal Reserve continues to wage war on inflation through a series of interest-rate hikes, prices in America continue to rise – with the consequence that credit-card balances and fees are more likely to tick up. Now the country's consumer credit watchdog, the CFPB, is working on preparations for a rule to cap late-payment penalties for tardy cardholders.
Since 2010, issuers have followed provisions in this regard set down by the Fed which meant they could, in effect, track the CPI in setting late-fee amounts. According to American Banker, late fees could rise next year to as high as $33 and $45 for the first and subsequent late payments respectively: that would be a nine percent bump.
"Many credit card issuers have made late fee penalties a core part of their profit model. Markets work best when companies compete on price and service, rather than relying on back-end fees that obscure the true cost", said CFPB Director Rohit Chopra six months ago. "Given their current practices, we expect that credit card issuers will hike fees, based on inflation, as limits continue to rise."
With a new card tokenisation rule for online purchases coming into force next week, India is continuing its transformative journey into digital payments with its now-customary vaulting ambition; alongside that e-commerce security shift, the all-important UPI system is now being linked to credit cards for the first time with domestic brand RuPay the first to debut: "It is only a matter of time before the big international card networks, such as Mastercard, Visa, and American Express are forced to follow suit in order to maintain their dominance in the credit card business", says Business Today magazine.
At the same time, new service UPI Lite is designed to allow low-value payments of no more than 200 rupees ($2.50) to be made through the BHIM App wallet in 'near-offline' mode. This will be especially important for a large rural population not always able to rely on network connectivity. Finally, Bharat BillPay Cross-Border Bill Payments is intended to support Indian citizens living overseas needing to pay bills at home.
The British credit card's market is Europe's biggest and, as a new white paper from Argus Advisory makes clear, issuers need to plot a careful course in coming quarters with cardholders, like everyone else in the United Kingdom, facing into a rapidly changing economy. While data shows that credit card spend has grown strongly from pandemic lows, balances have yet to recover to the level seen before Covid hit. Spend patterns are beginning to change now, as consumers adjust to a new inflationary environment, and there are signs that household savings levels have reverted to pre-pandemic norms, with longer term implications for balances and payments.
"The outlook is changing fast for issuers in the UK", commented David Hickey of Argus Advisory Research. "Any uptick in balances as householders tap credit facilities will need to be accompanied by vigilance around fraud and delinquencies: a nuanced strategy will be more vital than ever."
Learn more and download the white paper here : no registration is required.
To end, here are links to some other stories of interest this week...
Australia: Central bank wants banks to cut smartphone payment costs for retailers
Europe: Five organisations to help craft UI for digital-euro apps
Global: Amex to hire 1,500 more tech staff by the end of this year
Ireland: Revolut launches BNPL product
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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.
About Argus Advisory Research The market-leading online, interactive database and data dashboards covering the global cards and payments industry in detail, plus a range of data-packed country and regional reports. Leveraging financial cards data going back to 2010 – and forecasts up to 2025 – our unique datasets cover countries around the world and feature more than 250 metrics per market.