Payments News Digest 3 February 2023

US: Administration planning to impose cap on credit-card late fees

In the United States, the Consumer Financial Protection Bureau (CFPB) is proposing a long-flagged rule that would reduce late fees on credit cards. However the eight-dollar limit being sought would be a sharper cut than even consumer advocates had expected. Were the rule to be formalised, it would be a marked departure from the expected course as, under a formula approved by the Federal Reserve in 2010, late fees were set to increase this year in line with inflation.

Throughout last year, the CFPB had been closely analysing the role that these fees were playing in industry profitability. "Markets work best when companies compete on price and service, rather than relying on back-end fees that obscure the true cost," said the bureau's director, Rohit Chopra, as his team embarked on this process. Credit cards have seen phenomenal growth since the onset of the pandemic, especially in the US, with half of issuing coming from four major banks.

US, Global: Sources reveal details of Twitter's do-or-die push for slice of payments pie

New owner Elon Musk is pushing ahead with greatly expanded value-transfer plans for Twitter as the platform looks to develop new revenue streams following a decline in advertising income. It is a logical move given Mr Musk's origins in PayPal; however, intense commitment to regulatory compliance would be called for as well as much tighter data-protection and anti-fraud efforts. Compliance may be a challenge given the workforce cuts since his arrival.

Among the moves reported (via anonymous sources) by the Financial Times this week is the creation of a dedicated team, currently coding protections for the new dimensions of user data that come with Know-your-customer requirements. A new strategic plan for Twitter Payments now includes a wide array of content-creator rewards, item purchasing (a big earner for TikTok) and P2P payments.

Three months ago the firm registered with the government as a payments processor, although lawmakers have since begun crafting a bill that would see it and other such players subjected to FDIC-level regulation. Ex-Morgan Stanley banker Caitlin Long said of Mr Musk at the time: "He's been trying to disintermediate ACH his whole career".

Europe: Improving environment revives market interest in retail banking

In September, the millionth customer was onboarded by Chase UK, JPMorgan's neobank operation headquartered in London that is currently responsible for more than £10 billion ($12.2bn) in customer deposits. Now the Wall Street giant is drawing up plans to duplicate its British success in Germany and, in time, other European markets. A launch is hoped for within the next two years. Although German retail banking has traditionally not appealed to foreign competitors, there is a notably digital-centric precedent: Dutch bank ING has already picked up nine million retail customers in the Federal Republic.

The signs are, despite market exits by Citi as well as HSBC's actions to move its commercial centre of gravity towards Asia, that there is money being (finally) made again in European banking, especially by Italy's long-beleaguered lenders: UniCredit for instance, the second-largest credit card issuer in the country, just reported €2.46 billion in fourth-quarter profit, double the average analyst expectation and the best return for over a decade.

To end, here are links to some other stories of interest this week...

Brazil: Crypto exchange Binance and Mastercard launching prepaid card
Global: Outgoing Visa chief executive reflects on his leadership tenure
Global: PayPal cuts seven percent of workforce
UK: Government promises robust crypto regulation

The Payments News Digest from Argus Advisory Research is also distributed by email: sign up for your newsletter here.