Payments News Digest 6 May 2022

US: Open Banking moves in market as consumer protections mulled

Open Banking is on the march around the world, in Europe driven by regulation and in the United States by the marketplace. A perfect example of the latter comes this week from Stripe, which is launching a new product called Financial Connections to its business customers who, in turn, will be able to run queries on customers' bank accounts via API to verify their existence or retrieve the current balance, to take two typical examples. The B2B pricing can either be on enterprise-account or pay-as-you-go terms. End-customer trust will obviously be key to success, but those bank accountholders will, presumably, be motivated to grant appropriate permission as it may move along loan applications or speed up payments and payouts. However, with fraud an increasing headache for consumers, concerns over privacy protections have never been higher: customers, even when motivated by self-interest, may find themselves baulking at typing in a bank account number and granting permission for its usage.

In Washington, exactly how to disentangle such fears around privacy from consumer empowerment through permissioning is at the crux of internal debates reportedly underway at the Consumer Financial Protection Bureau (CFPB). The agency is currently in the midst of crafting its rulebook around Open Banking while at the same time, to go by its chief's public statements, avoiding the kind of free-for-all that attended the early days of social media over a decade ago. Less than ten minutes' walk away from the CFPB offices in Washington, the Federal Reserve has meantime been implementing monetary measures that will directly impact the world of payments: resolved to beat down inflation, chairman Jerome Powell announced a rate hike of half a percent, the sharpest increase in over two decades, though still well below the 2019 peak. Central banks in India, Australia and the United Kingdom have been making similar moves, with the European Central Bank signalling an upcoming rise in July.

Europe: Apple contemplates NFC objections from powerful EU regulator

Seasoned industry watchers may recall the efforts launched by a group of Australian banks in the middle of the last decade to prise open third-party access to Apple's NFC hardware. It came to nothing in the end, but a similar effort is now underway in the European Union. This time it is the antitrust regulator of the 27-country bloc that is leading the charge: an altogether more serious proposition for the American tech giant. On Monday, a statement of objections concerning the issue was delivered to Apple, laying out the argument that its closed-door policy on NFC hampered competition as would-be rivals lacked the direct access necessary to develop competing wallets. For its part, Apple's argument has always been that such restrictions are necessitated by security considerations. If deemed guilty at the end of the process, then Apple could be liable for fines up to a tenth of its global turnover.

Ireland: Dutch neobank Bunq takes on pillar trio

Though small, the Irish banking market can have a lot of money moving through it, as those affected by the 2008 crash can attest. As described in a soon-to-be-published Ireland payments market from Argus Advisory Research (AAR), the country's economy has coped well with the more recent twin threats of Covid and Brexit, with the end of last year bringing with it some of the strongest growth figures in the European Union. However, unlike neighbouring Britain, retail banking here has offered scant choice to consumers, with historic leaders Bank of Ireland and Allied Irish Banks only increasing their dominance in recent years as traditional competitors have exited and neobanks such as Revolut, though building significant user bases, have failed to capture exclusive customers. The latter's experience is instructive: the Lithuania-licensed digital bank does not offer Irish bank account numbers and thus lacks heavy-lifting solutions such as salary deposits. However, Dutch digital bank Bunq, which this week launched expanded services including local accounts, is out to change that.

"How big a challenger Bunq will be to Revolut in Ireland remains to be seen," commented AAR research analyst Gary Brennan. "1.7 million Irish customers have become reliant on Revolut's mobile ecosystem, splitting bills, sending immediate funds, trading crypto, holding various currencies and applying for loans. Fees and account charges are more expensive with Bunq, but the fact that it can dispense Irish IBANs (International Bank Account Numbers) may make it more attractive to customers who will see it as a viable alternative to the traditional banks rather than just another payments app."

Some other stories of interest this week...

New Zealand: Central bank sees CBDC as complementing cash
UK: Klarna to report BNPL use to credit agencies
US: Fed begins real-time payments service pilot
US: Fiserv and TCH team up on real-time payments access

Published here weekly, the Payments News Digest from Argus Advisory Research is also distributed by email: sign up here.