Payments News Digest 5 March 2021

US/Canada: Real-time infrastructure moves will mean faster service in time

Zelle, the P2P transfer service boasting almost seven thousand financial institutions in its network, is now compatible with the real-time payments (RTP) settlement system operated by The Clearing House, meaning that the older ACH system can be bypassed, giving the app more of an edge over rivals when it comes to speed. So far, PNC Bank and Bank of America have completed the integration process. The Zelle app was released in 2017, with an eye on the runaway success of PayPal's Venmo, especially among younger consumers; faster transfers because of the banks' involvement proved a winning feature in that initial rivalry. In another instant payments-related story, Canada's Interac has been chosen as the solution for the exchange component of the country's new real-time payments system, dubbed Real-Time Rail; it will operate alongside Mastercard's Vocalink solution, which will be responsible for the settlement aspect.

Global: BNPL pioneers define appeal and bolster offerings

Media interest in the rise of Buy now, pay later (BNPL) has become ever keener as the sector has built its user base and begun to make more headlines. Increasingly in-demand executives at the pioneer companies, for their part, are making no bones about the fact that the credit cards establishment is very much in their sights. In the latest salvo, Affirm co-founder Max Levchin has been telling reporters that his firm's debit card, due to come to market later this year, is an 'anti-credit card', allowing holders to pay in full or by instalment directly from their bank account. Although interest rates on deferred amounts could run as high as 30 percent, one key selling point will be the fact that Affirm does not compound interest, a stance that is appealing on principle to younger consumers in particular. In other recent BNPL news, Afterpay has struck a deal with Stripe to offer instalment plans at the online POS in America, Australia and New Zealand, with other territories such as Britain and Canada to come. In Europe meanwhile, Klarna has raised another billion dollars in investment and is on the lookout for mergers and acquisitions that will round out its offering: "We do believe this is going to be a transformative time for retail banking and payments," chief executive Sebastian Siemiatkowski told the Financial Times. "And we want to serve our customers with as much value as we can."

UK: Contactless limit to jump up to three-figure threshold

This time twelve months ago, the limit on a single contactless transaction in the United Kingdom was £30 ($42); later this year, according to the government's new budget plan, it will rise to more than three times that level: £100. Hygiene concerns have led both retailers and their customers worldwide to prefer the method to notes and coins. In late March 2020, with the first lockdown in place, the limit was abruptly raised to £45, leading to a sharp rise in the share of contactless, although associated revenue was constrained by public health measures that limited opportunities to spend. Once restaurants, shops and pubs fully reopen, the proportion of offline payments commanded by cash should drop significantly. "Contactless has been embraced to such an extent that chip and pin feels like an inconvenience", commented David Hickey of Argus Advisory Research. "The higher limit could encourage fraud though, and we may see a concerted push towards more secure mobile wallets in the longer run".

UK/Ireland: Announcements suggest digital landing body blows on branch banking

Although a relatively small operation with only 29 branches, the decision by Marks & Spencer Bank to close all of its branches and current accounts demonstrates a sea-change in everyday banking that is now well underway in this part of the world. According to the firm, a joint venture of the well-known retail chain and HSBC, it plans to centre its financial services on digital channels from August, in the process slimming down the product range to exclude current accounts. Although branch-based banking in Britain had seen some high-profile innovations in recent decades, spearheaded by the efforts of Metro Bank to provide a rich experience, the aggregate network has been falling fast, a tendency only exacerbated by Covid-era restrictions and cash avoidance. In the words of Argus Advisory Research's current market report for the UK : "Thanks to progressive regulation and consumer adoption of modern technology, the United Kingdom has become one of the world's most advanced and competitive payments markets and is gradually moving to a cash-lite economy". In neighbouring Ireland, the fall of branches has been even more dramatic: in the last week alone, a pair of announcements have suggested a total of 176 branches, at least a quarter of the entire network, is in peril of closing.

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

Australia: Eftpos launches new digital payments technology
Germany: Banks tell customers to take deposits elsewhere
New Zealand: Bad loans rise on P2P platforms
US: Square's bank enhances its abilities in merchant acquiring