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Visa saw net revenues up by almost a fifth year on year in its latest quarterly results, with a payments-volume rise of 12 percent distinguished by a 40 percent boost in cross-border usage. Even with the darkening prognostications for coming quarters as the Fed hiked up its benchmark interest rate by three-quarters of a percent, the network seems in an enviably insulated position as, while people's ability to buy premium goods and services may diminish, they still need to pay for things, with cards increasingly the method of choice. Profits for the company rose by a third to reach $3.4 billion.
With 3.2 million new proprietary cards being issued during the quarter, American Express' latest set of results far outstripped analyst expectations. Spending on a currency-neutral basis rose by almost a third. As noted by its own executives in press reports, Amex is benefitting from the premium nature of its customer base, a segment that has yet to feel the pinch of an inflationary environment and has been enthusiastically unwinding pent-up demand for travel and entertainment spend. As reported in this newsletter last week, issuers have been reporting robust consumer spend and impressive rates of growth in spend by card. All in all, the industry has not been experiencing credit losses and spend levels remain undeterred by gloomy reports in the media.
"Net-net, consumers are still spending their hearts out which keeps the recession from becoming a reality," FWDBonds' chief economist Chris Rupkey told Axios. "The old rule of thumb from the 80s is that three consecutive months of declining retail sales meant the economy had fallen off the cliff and into the recession abyss...[but] the economy hasn't even entered the danger zone that warns recession is imminent."
Rising interest rates made a material difference to the latest set of results in British banking, with Lloyds' profits for the quarter beating expectations. Customer loans and advances rose by 95 basis points to reach £456.1bn ($552.9bn) in the second quarter on the back of both unsecured loans and credit card balances edging up. All in all, though inflationary fears persist and provisions for future losses hurt the headline numbers, the figures for consumer banking remain steady.
Barclays' credit card operations saw borrowing fall and also cardholders upping their repayments, but the rise in interest rates brightened up the bank's UK business. Analysts warned however that shaky consumer confidence may erode enthusiasm for credit cards in the second half of the year as the cost-of-living crisis seems likely to intensify thanks to rising energy costs.
The rain-or-shine need for credit may lead people to look for pay-later solutions, which continue to come to market: this week Virgin Money opened a waitlist for its forthcoming Virgin Money Slyce, which will allow consumers to make BNPL purchases with a single monthly payment: for example, £30 could be repaid on a fee-free pay-in-three or pay-in-six basis. Longer terms will be available for a fee.
BNPL, despite its rocky year to date, is here to stay. As noted in a new white paper published by Argus Advisory Research, the format could let Apple, for example, "quickly convert tens of millions of its payments customers into borrowers, a live possibility given consumer enthusiasm for BNPL generally and the compelling proposition now formed by Apple's suite of products. Any significant gain of this sort could quickly take the Big Tech champion into the level of customer base that is currently served by America's biggest consumer bank: JPMorgan Chase, which has 60 million customers." The white paper is free to download, with no registration required.
Banking and commerce have traditionally been separated in the United States (as opposed to how banking evolved in Germany or Japan, for example), but Apple's decision to take on its own funding for its new BNPL offering has caught the attention of Rohit Chopra, head of the country's consumer finance watchdog: speaking to the Financial Times this week, he shared fears concerning anticompetitive outcomes and raised the spectre of the consumer-lending marketplace collapsing into a Chinese-style duopoly: superapps WeChat Pay and Alipay have cooked up a massive unsecured-lending pot there atop their two-billion strong customer base. If Apple and the federal government come into regulatory conflict over financial products, the consequences could be seismic for the future of consumer lending in the United States.
In other moves that could, in time, reshape American payments, Senator Dick Durbin is reportedly crafting a bill with a colleague from across the partisan divide that would give merchants routing alternatives at the point of sale : given the current political calculus in Washington however, a softened compromise is the most likely legislative product – though it has struck at least one analyst as revealing that the lawmaker, famous in the world of payments for the Durbin Amendment of 2011, seems to have shifted his focus from interchange to routing.
Other stories of interest this week...
Brazil: Digital bank Neon raises $80m to expand credit offerings
Spain: Govt details windfall tax as Santander profits hit record
UK: Plaid launches Open Banking feature worth up to £1.5bn
US: One in five dodging credit card statements as interest spikes
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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.