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Visa is reportedly planning to change how particular Apple Pay transactions are processed such that the fees paid by issuers to the tech giant would be reduced. With the advent of Apple Pay in 2014, seeing an opportunity to increase usage, issuers agreed to part with 0.15 percent of the purchase value when transactions took place on credit cards; however, that deal was struck before the Apple Card arrived and, indeed, before the soaring popularity in recent years of both mobile and subscription-based payments. According to the Wall Street Journal, a fee that the banks pay Apple for cardholders who opt to use Apple Pay will not be applied from next year on recurring payments for the likes of Spotify, Netflix or gym memberships.
"Issuers feel they are paying out more to Apple at the very time their own corporate, travel and entertainment portfolios have suffered", commented Gary Brennan of Argus Advisory Research. "However, they must decide whether the fees paid to Apple for its increased consumer usage counterbalance the fraudulent-transaction and reimbursement costs saved by Apple Pay's tokenisation. Consumers perceive Apple Pay as a safe and trusted method, which is now an important factor".
Google too has found itself rethinking the alchemy of tech/finance relationships. In its case, the Silicon Valley leader has decided to curtail its bid to directly offer bank accounts to consumers after almost two years of planning and testing with partners Citi and Stanford Federal Credit Union: Plex, as the project is named, was intended to offer both savings and current accounts without overdraft fees or monthly charges, along with a Mastercard-branded debit card. Google is now seeking ways to support financial institutions by enabling their digital offerings.
Ironically, British neobank Monzo, which has also given up on its branded-bank ambitions in the US this week, might well have been successful in launching an American digital bank had it had access to Google's cash reserves, but the OCC reportedly made it plain that approval of Monzo's banking licence application was unlikely given an uncertain path to profitability as it established itself in the market: the net result is the same though, and Monzo now plans, like Google, to partner with existing lenders.
A small but potentially historic pilot programme at four branches of the United States Postal Service (USPS) is allowing cheque cashing for gift cards up to a value of $500. If successful, and provided powerful political and incumbent opponents are overcome, the services could come to the more-than-30,000 post offices on the ground nationwide. It is possible that other financial services, including access to ATMs and bill-payment facilities, will be added in time. Advocates argue that USPS, which has encountered severe budgetary difficulties in recent years, needs a new purpose to survive. Government agency FDIC estimated in 2019 that over seven million Americans are unbanked, often using payday lenders and cheque cashing providers for day-to-day financial needs.
In California, where the FDIC says the unbanked proportion is slightly worse than the national average, state authorities have been authorised by the governor to study whether a public option could be established for banking services delivery. Among the potential entity's products could be debit cards, with a lengthy analysis of the idea's commercial viability now set to commence.
Links to some other stories of interest this week...
Australia: Visa Installments partners with ANZ, Quest on BNPL financing
Global: Banks need time to adjust to CBDCs per BIS
Global: Is BNPL a viable business model?
UK: NatWest admits historic AML monitoring failures
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