On both sides of the Atlantic, loans in forbearance are becoming a source of concern for major lenders. In the United States, though the number fell by more than fifty percent in the most recent quarter, the true situation remains something of an unknown given that the standard forbearance period of 180 days has yet to expire for many borrowers, though it should mostly be done with by next month. The latest Federal Reserve data on revolving debt – mainly a matter of credit card borrowing – shows that the seasonally adjusted level rose by four billion dollars between August and September (from $984.6bn to $988.6bn), according to preliminary estimates which saw a six-month decline finally come to a halt. However, as with loans in forbearance, it remains to be seen if household income will be able to meet the obligation. In Europe, the ECB has warned that the value of unpaid loans could surpass €1.4 trillion. As Reuters puts it, the European Central Bank does not want banks postponing loan write-offs, "warning that waiting for moratoria to expire could see many borrowers", in the words of a top ECB official, "unravel at once".
HSBC has launched a new mobile-based service called Global Money Account for international payments spanning 20 markets: the bank's customers will be able to send funds across currencies without any fees. Coming to the United States first, the new conduit should reach other countries next year. The move is a direct response to burgeoning competitors in the space such as Revolut and TransferWise. No wonder, as the Asia-Pacific market where HSBC does most of its business was revealed as the latter's fastest growing region in its most recent set of annual results. For the fiscal year ending in March 2020, TransferWise also reported an increase in annual revenue of 70 percent globally, a performance which is sounding alarm bells for incumbents. (Earlier in the year, global competitor Santander launched PagoFX in response to the new breed of payments fintechs.) In other HSBC news, the British unit has announced that it is simplifying its operational structure for retail operations in the country, with a hundred senior roles being abolished.
From Norway comes news that cash payments now account for a mere four percent of transactions, which may well make the country the most cash averse in the world. A central bank study from less than a month ago revealed the data, which showed no appreciable rise from the level recorded during the first lockdown in the spring. Of course, the more immediate challenge for policymakers seems to come from the private sector, where Facebook's Libra, now reimagined as stablecoins tied to collection of fiat currencies, is trying to gain its first licence from the Swiss Financial Markets Supervisory Authority. In a speech earlier in the month, Fabio Panetta of the European Central Bank noted that Libra and other potential digital currencies were problematic in three main ways : besides privacy/transparency concerns and the coins' potential susceptibility to runs, there are worries about the prospect of "financial volatility" and the official interest rates underpinning monetary policy being influenced by the massive reserves involved.
Facebook's WhatsApp Pay has been given approval to launch in India, giving it a chance to leverage the loyalty of WhatsApp's 400 million users to compete in one of the world's most lucrative markets for P2P payments by mobile. The value of such transactions has skyrocketed in the past five years, from $1.7 billion to an estimated $316.0 billion at the end of last year, according to Verisk Financial Research data on the country. However, New Delhi is being careful to let no single player dominate: the regulator controlling UPI (Unified Payments Interface), the underlying platform which allows these apps to direct funds to bank accounts via mobile numbers, has announced that it will limit processing activities such that no single firm handles more than 30 percent in a month. Both Walmart (via its PhonePe app) and Google have been making great inroads in the country, with the latter's offering, Google Pay, picking up 45 million users within two years of launching in 2017. The third of the leading trio is Paytm, which has in fact been losing market share despite heavyweight backers such as Alibaba (now at a 30 percent shareholding) and Softbank. "Paytm has chosen to focus on merchant payments to bring in revenue," commented David Hickey of Verisk Financial Research. "P2P is heavily loss making at present due to the incentives being offered by the likes of Google and Walmart."
To end, links to some other stories of interest this week...
Canada: Interac, Walmart partner to expand debit in digital shopping
Kenya: Court rules for right to tax interchange fees
Pakistan: Central bank set to launch micropayment gateway
UK: NatWest eyes Sainsbury's Bank for potential takeover
The Weekly News Digest from Argus Advisory Research highlights significant developments that have recently occurred in payment cards, digital payments, acquiring, processing, retail banking and consumer credit. Our writers and researchers frame these items in contexts such as historical, sectoral and regional trends, adding a layer of value that is often missing from the rolling news cycle.
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