Payments News Digest 28 January 2022

Global: Fourth-quarter results from cards giants reveal new optimism

American Express' latest results see profits for the final quarter of last year up by a fifth to $1.7 billion; the company is notably confident about the future, with executives observing that travel spend is steadily stabilising after a series of successively milder drops since the Covid crisis began in early 2020. However, Amex is looking to retail spending on goods and services rather than travel for its 2022 resurgence, believing the latter will, as things stand, continue to trend below pre-pandemic levels.

Mastercard meanwhile is also setting out its expectations in the light of an improving public health situation: "We are optimistic about the coming year as consumers, businesses and governments have become more adaptable to the changing environment," said chief executive Michael Miebach. In 2021, the global scheme's number of switched transactions rose by 25 percent year-on-year, with net revenue up by over a fifth: gross dollar volume increased by 23 percent worldwide, mirroring the very same percentage shift within its domestic market. Visa, which also reported its results yesterday, reached an expectation-beating $7.1 bn in net revenue for the quarter, with e-commerce, cross-border travel and economic recovery all credited as factors.

US/UK: Authorities reach out for comment on cards players

Credit cards issuers in the United States are coming in for renewed scrutiny from consumer credit watchdog CFPB, which has been featuring more in this newsletter in recent months as new director Rohit Chopra returns the bureau to its founding mandates. Mr Chopra now promises to root out unfair and anti-competitive practices, with special attention being paid to "junk fees" and industry practices around balance transfers. The initiative is being run in tandem with a similar probe already underway into bank fees from overdraft and non-sufficient funds, responsible for $14 billion per annum in charges, according to the CFPB, which estimates a further $15bn levied for credit card fees which it describes as "punitive". The public are being invited to submit comments before the agency proceeds with new rules and revised guidance; it also promises to gear up resources for enforcement and supervision.

Across the Atlantic, the Payment Systems Regulator (PSR) in London is also canvassing for public input as it embarks on another phase of a long-planned reform of card acquiring in the United Kingdom. At issue is the official perception, expressed in an interim report, that merchants lack standard price information and fees transparency as well as finding themselves in apparently "indefinite contracts". The PSR has been reviewing the inner workings of the industry, which is highly concentrated, since 2018.

US: Fed starts the ball rolling for digital-dollar debate

China's trailblazing e-CNY does not directly feature in the Federal Reserve's toe-dipping paper on the possibility of creating a Central bank digital currency (CBDC) or 'Digital Dollar', but the fact that a CBDC is in daily use in China's major cities will surely have concentrated minds across the political spectrum in Washington. Earlier this month, the People's Bank of China revealed that its Digital Yuan now boasts a circulating population of 260 million people – with $13.8 billion already transacted. Currently confining itself to eliciting stakeholder comment, the Fed is careful to keep its powder dry on whether an American CBDC would be prudent or not, given that, among other effects, there is the possibility of threatening commercial bank deposits and short-term financial instruments. On the other hand, to do nothing risks losing ground to rival nations.

"The Federal Reserve does not intend to proceed with issuance of a CBDC without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing law," the report assures readers. With a fractured body politic, such a consensus may prove impossible to reach in the United States, which is not a difficulty that Beijing will encounter.

Other stories of interest this week

Australia: Uplift on the cards thanks to contactless growth
Europe: JPMorgan taking 49 percent stake in Viva Wallet
Europe: Santander bets big on BNPL with new service Zinia
UK: Contactless transactions surged last year

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