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The digital wallet, that all-important nexus for both data and money, is top of mind for America's bank executives now that a majority of consumers in the United States use them for e-commerce. Fortunately for the big banks, they already have a corporate vehicle to materialise their ambitions in the shape of Early Warning Services, operator of the Zelle P2P payments app.
However, at the online checkout, they have lost valuable ground to PayPal and also to Apple Pay, which has at least 45 million users and a strongly loyal customer base that skews towards the young. When the envisioned new digital wallet is launched (the second half of this year is the target) the banks will be emphasising their antifraud capabilities and incentivising cardholders to take the trouble to set it up. Merchants too will need to see a clear benefit.
As things stand, Visa and Mastercard are both on board, according to Wall Street Journal sources, with account-to-account payments a possibility that may be layered on also as the offering matures. Among the lenders involved are Wells Fargo, Bank of America and JPMorgan Chase: their deep pockets should be able to fund the effort – which is what it will take to gain meaningful share.
Although a final decision remains at least three years away, should the Eurozone choose to embark on the 'realisation phase' of a digital euro, its planners, according to task-force chair Dr Fabio Panetta, are envisaging a plain-vanilla app with core functionalities such as contactless and QR-code compatibility at the POS and similarly foundational solutions for online checkouts.
User-empowering features such as smart contracts that automatically trigger payments based on a set of preset conditions could then come from private-sector providers. The ECB is working with market stakeholders to ensure that a healthy commercial ecosystem is encouraged.
Dr Panetta previously noted the importance too of P2P and disbursement use cases, but says that the ECB will take care to avoid usage as an investment vehicle and will also not pursue programmable functions in its CBDC app: that suggests, for example, that it has no plans to dictate that digital euros could be spent in a particular place or in a particular time period, perhaps in contrast to the digital yuan.
The closing bell on Wall Street yesterday brought with it the release of Visa's latest quarterly results: profits beat analyst expectations on revenues of $7.9 billion, a 12 percent rise year on year. Total payment volumes were up seven percent, while cross-border transactions were up by over a fifth.
Mastercard's results report was released earlier in the day, with profits given a lift by higher-than-expected spend. "Consumer spending has been remarkably resilient", noted the network's chief executive. The company's wide footprint in Asia-Pacific also helped as life in that region got a lot closer to pre-pandemic normality, bringing increased travel in its wake.
Last week Discover revealed strong growth for its lending activities, with card spending also up; as with the rest of the industry, there is a rise in charge-offs that will be an area of concern this year given that 'friendly fraud' tends to flourish in darkening economic conditions. The recent step change in AI capability may yield a cost-effective countermeasure.
To end, here are links to some other stories of interest this week...
Brazil, Argentina: Neighbours drafting plans for common currency
Ireland: Revolut's new account numbers a challenge for incumbents
US, Europe, Canada: Amazon and Stripe expand their partnership
Philippines: Central bank on track to digitalise half of payments this year
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