Payments News Digest 15 January 2021

US: Traditional retail stalwarts commit to financial services push

Although concrete details are lacking, Walmart's announcement of its decision to create a fintech heralds a profound departure for the company as it seeks out new revenue sources far beyond its enormous bricks-and-mortar outlets. The enterprise is to be supported through a joint venture with disruptor specialist Ribbit Capital and is no doubt inspired by the pandemic-proof success of Ant Group in China. As noted by TheFinancialBrand.com, Walmart's boss told analysts last month that "the business model of Walmart is changing". The company is no stranger to financial services, with perhaps one percent of its income reportedly coming from prepaid cards, wire transfers, bill payments and the like. That contribution will have to increase significantly if the new ambitions are to bear fruit. In a similar story from the United States this week, ubiquitous pharmacy chain Walgreens (no relation) announced that it too is looking to consumer credit to buck up its top line. Responding to pricing-aggressive online competitors, it will be chasing revenue through financial services such as a prepaid debit card and a relaunched loyalty programme linked to a forthcoming credit card, issued by Synchrony on the Mastercard network, which is set to hit the market in the second half of 2021.

US: New figures show consumers remained wary of credit card borrowing as holidays loomed

Figures for November published by the US Federal Reserve show that consumer credit was up by almost 4.5 percent in November , the best performance since July, but that revolving debt, which is largely a matter of credit card borrowing, fell by just over three-quarters of a billion dollars that month: a considerable improvement over the drop in the previous month of $5.5 billion. The data reveals ongoing consumer caution in America when it comes to flashing the plastic, even as end-of-year purchasing opportunities and seasonal traditions began to exert their customary pressure. In its accompanying note, the central bank added that, for the month of November, "revolving credit decreased at an annual rate of 1.0 percent, while non-revolving credit increased at an annual rate of 6.1 percent".

UK/EU: New realities for retail banking as history's wheel turns

Now that the United Kingdom has left the European Union, neobank Revolut, which operates in the EU courtesy of a banking licence granted by Lithuania's central bank, has applied for a British banking licence from the Bank of England's regulatory agency. The move stands in contrast to rival N26, which chose to exit this market altogether rather than take on a set of UK regulatory requirements to maintain its presence in a highly competitive market – even though it reportedly served several hundred thousand customers. Both apps have met with great success in neighbouring Ireland, which remains a member of the EU. Now Bank of Ireland, AIB, KBC Bank Ireland and Permanent TSB are creating their own app : a logical, if long-overdue, move from four of the five major lenders in the Republic. "Ireland's domestic banks have never been renowned for their collaborative spirit", commented Gary Brennan of Argus Advisory Research. "However, beyond the growing popularity of the challenger apps, this banking sector's mobile solutions are well behind the likes of Sweden's Swish, iDEAL in the Benelux and Zion in Austria." The new app is called Pegasus, with the developers hoping that it can reach consumers in the middle of the year.

UK: Pandemic relief bonanza sharpens Starling's appetite for P2P acquisition

What a difference a licence can make: with its loan book at an all-time high, digital banking pioneer Starling Bank is reportedly thinking of acquiring a non-bank lender. As noted by Sifted in an exclusive story based on an interview with Anne Boden, founder and chief executive, this might include P2P lenders such as Zopa and Funding Circle. Before the pandemic, with challenger banks finding the headwinds of British retail banking tougher than expected, such a move was not on the cards, but now digital banks have been boosted by their involvement in the disbursement of emergency loans to the small business sector during last year. This led, in Starling's case, to a balance sheet last October with a gross lending total that had soared by some 4000 percent year on year to reach £1.5bn ($2bn). For their part, P2P lenders now have to contend with tightened regulations on their sector in the UK.

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

Australia: Some banks want to consign credit-card interest to history
US: Digital banks gain and impress customers during pandemic
US: Square's Cash App could generate $1bn profit if bitcoin hits $100k
US: Visa drops planned acquisition of Plaid after antitrust lawsuit