Weekly News Digest 15 May 2020

Loan officers survey reveals tightening credit cards standards in US, hoteliers offload loyalty points to issuers, while stimulus payments turbocharge digital platforms

The US Federal Reserve's latest quarterly survey of leading loan officers stands in stark contrast to the findings from this time last year, when the concern was a slight rise in charge-off rates. In its summary of institutional lending sentiment in a transformed America, the central bank wrote that it found "significant net shares" of lenders had tightened their standards on credit cards and for other kinds of consumer loans. Credit limits were being tightened too and the requisite minimum credit scores raised by many. "Significant net fractions" of loan officers reported weaker demand for credit card loans. "Tightening of credit criteria is a natural response to deteriorating economic conditions", noted Patrick Houlihan of Verisk Financial Research. "Beyond minimising the potential for future net credit losses, this reaction is a signal that lenders do not expect a return to the 'old normal' any time soon."

As noted in this newsletter before, now is the time to create new partnerships and leverage existing ones, especially in the case of sectors that are continuing to undergo unprecedented pressures. One such sector is tourism, virtually non-existent in much of the world as things stand. Two of the world's largest hotel companies, Marriott and Hilton, have both been busy making major deals with financial services partners, JPMorgan Chase and American Express respectively, to see them through these darkest of times. In the Hilton-Amex deal, the hotelier has sold a billion dollars' worth of loyalty points to the cards scheme to generate much-needed funds. Amex is doing a similar deal with Marriott worth $350 million and, reportedly, the latter will also "get $570 million from JPMorgan Chase in prepayment of future revenues and the early payment of a previously agreed-to signing bonus".

If tourism is flat out on the mat, then the experience for some of the major digital payments players is more like that of being suddenly wafted aloft on a flying carpet: PayPal, for example, has not only seen P2P payments and transaction volumes increase as consumer aversion to cheques and paper-based money grows, but has also served as one of the methods through which the US federal government has been sending out stimulus relief to citizens. To date, more than a billion dollars of such funds have reportedly passed through either PayPal or its popular Venmo platform. As with other digital players thrust into the role, distribution in this way allows consumers to avoid the delays involved in sending out a paper cheque and then the hassle of depositing it.

Samsung executive Sang Ahn meanwhile has announced in an official blog post that the company plans to extend its Samsung Pay offering through a new debit card in partnership with SoFi, a San Francisco-headquartered lender. The card will work in conjunction with a cash management account within the app. In August, Samsung Pay will celebrate its fifth birthday. Mr Ahn, who is general manager of Samsung Pay in North America, took the opportunity of that forthcoming milestone to point out that, during its first half-decade of life, the app was the first of its kind both to launch a rewards programme and cashback for online shopping.

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

Brazil: Currency shortage hits unbanked, prompts digital shift
Europe: ECB sees no business case for digital currency yet
Ireland: Leading bank foresees losses once repayment breaks end
Saudi Arabia: VAT trebled to support economy
UK: Covid-19 hit April household spending much harder than assumed