Payments News Digest 4 November 2022

US/Global: Latest rates rise promises outcomes far and wide

The effects of this week's monetary policy move in Washington, which takes key interest rates to a fresh high not seen since the financial crisis, are widespread, not only domestically but globally. Two very disparate examples follow: American Banker notes that "rising interest rates are forcing credit unions to pay more for deposits while they are sitting on low-yielding loans ", referencing the observations of a regulator in that sector. Meanwhile, on the far side of the world, the chief executive of Singapore's DBS Bank, Piyush Gupta, commented that if US rates peak above the five percent mark, recession will follow in America with a "sharper slowdown in Asia" on its heels.

As the BBC puts it, "four 0.75 percentage point hikes in a row is lightning fast". However, fears of entrenched economic contraction will have been somewhat mitigated by Fed Chair Jerome Powell's acknowledgement that this relentless tightening should ease up in the foreseeable future – once the data begins to show signs of price stabilisation.

UK: Regulator focuses on customer treatment as budgets squeezed

In London meanwhile, the Bank of England followed its transatlantic counterpart with a 75-basis-point rate rise yesterday, a move which will hit mortgage holders most particularly. Mindful of the impacts on households of continuing cost-of-living pressure, the Financial Conduct Authority (FCA) has told over 30 financial institutions to reform their customer-care approaches, with seven of these volunteering £12 million ($13.51m) to compensate their almost 60,000 customers affected. A further 40 companies are being "closely reviewed" by the watchdog, whose executive director warned "action to restrict or stop firms from lending to people if they fail to meet our requirements that consumers in financial difficulties should be treated fairly".

The broadside comes as consumer credit in Britain, according to the latest official figures, slowed down in September to £700m versus £1.2bn the month before. Savings rose by a further £8.9bn across the population. According to the central bank, additional credit-card loans dropped to a net total of £100m in September, quite a contrast with a plastic-borrowings total of £700m in the month before.

Europe: Revolut adds messaging feature

The success of apps such as Venmo proved that consumers, long confined to the memo line on their cheques (and sometimes not even that), do in fact like to have more room for communication when making payments. That insight, coupled with recognition of friction for transactors forced to jump over to the likes of WhatsApp for associated discussions, has led Revolut to add an encrypted layer for messages to its app in Europe. The vast majority of Revolut accountholders aged 18 and over in the region can avail of the new service.

Other stories of interest this week...

Australia: Klarna losses in country quadrupled last year
Global: Payments are the reason Musk bought Twitter
Global: Stripe lays off 14 percent of employees
Singapore: 3Q22 sees DBS profit jump by a third
US: Card networks are stocking up on tech talent

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