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Capital One has announced that it will be eliminating overdraft fees and offering related protection for free to customers whose accounts show a steady deposit history. It will join smaller lender, Ally Bank, in adopting a groundbreaking policy that arguably reflects unease amongst American public representatives and regulatory bodies about the fee practices around overdrawn customers by nationwide lenders. The Consumer Financial Protection Bureau (CFPB) has signalled that it intends to take action, prompted by the finding that the biggest banks (JP Morgan Chase, Wells Fargo and Bank of America most particularly) have been earning over half their fees as a result of overdrawn accounts. The new head of the agency, Rohit Chopra, wants banks to compete on "transparent upfront pricing".
Meanwhile, in its quarterly profile of the retail banking sector, fellow regulator FDIC notes that credit card lending by institutions whose deposits it insures rose by 1.2 percent year over year in the third quarter to reach almost $806 billion. Notably, net charge-offs of credit card loans halved year-on-year to $3.4bn. The latest report singled out higher interchange fees as a leading driver of noninterest income, which rose by almost five percent over the year-earlier total.
A new rule from the central bank in Beijing seems potentially onerous for payments super apps, whose hold on digital transactions has been appreciably weakening in the face of commercial competition and intensified scrutiny from regulatory authorities. In the latest edict from the People's Bank of China, firms such as Alipay and WeChat Pay must differentiate individual and merchant QR codes more accurately, which should make life harder for cross-border gambling operations but might also create problems for street vendors and corner shop merchants who have taken to QR with great enthusiasm in the last decade.
According to Nikkei reporting, Alibaba's operating profit for its commerce activities fell by 17 percent in the last quarter while rival JD.com rose by about the same amount in percentage terms. In another sign of the times, technical barriers between WeChat Pay and Alibaba's Taobao appear to be in the process of being dismantled such that e-commerce shoppers on Taobao may soon, for the first time, be able to use WeChat Pay for purchases. Meanwhile, Ant Group (like Alipay and Alibaba, a Jack Ma-founded company) has been approved by the central bank to set up a new joint-venture credit rating agency in partnership with state-backed firms: Qiantang Credit Rating will be 35 percent owned by Ant.
For centuries now, the biggest lenders in Britain have controlled the clearing and settlements function at the heart of everyday banking operations. Almost five years ago, the first new clearing bank in over 250 years arrived, now joined by a second purely digital institution called the Bank of London, led by Anthony Watson, formerly managing director and CIO of Europe, Middle East and Global Operations for Barclays Bank. Already boasting a billion-dollar valuation, his company will also be looking for business as a provider of transaction-banking activities such as cash management and card payments, where it hopes to chip away at the volumes enjoyed by the global card schemes.
Mr Watson is unimpressed by the role being played by the recent crop of digital challengers in the United Kingdom : "They offer nothing more than incremental improvements in speed, cost and ease of use. These 'digital' bolt-ons to analogue legacy systems are the fax machines of finance. They are not paradigm busters," he told the Irish Times, in whose country he is considering basing his firm's EU base. "The world of global transaction and clearing banking needs disrupting," he went on. "Fewer than 100 banks control the flow of money in, around, between and out of the UK, the EU and the US."
Other stories of interest this week...
Canada: Wise Card rolls out four years after Wise Account
Global: Microsoft in-browser Zip BNPL meets with heavy criticism
US: Amex taps Opy for first domestic third-party BNPL offering
UK: No-fee/no-purchase cashback service coming to shops
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