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Weekly News Digest 19 June 2020

19 June 2020
shaking hands on business deal

US/China: Amex licensed for yuan clearing and settlement

American Express has made history in becoming the first foreign cards scheme to be granted a licence for clearing and settlement in China in that country's own currency. One striking feature is that Amex has had to form a joint venture with payment service provider LianLian to get this far, highlighting the fact that the global schemes have yet to enter this enormous market on their own, partnering with local companies in order to satisfy Beijing. Visa and Mastercard, for example, cooperate with UnionPay such that the Chinese network handles yuan-denominated payments, dramatically shrinking the potential for revenue in their cases. "This approval represents an important step forward in our long-term growth strategy," commented Amex chief executive Stephen Squeri. One of the terms of the licence is that clearing services must commence within six months.

US/Brazil: WhatsApp make payments through Facebook Pay

WhatsApp's users can now, using Facebook Pay, make payments through the app in Brazil, the first of what should become a global service given Facebook's reach. No commission is charged for ordinary consumers, while businesses receiving funds are liable for a processing fee of 3.99 per cent of the value involved. Verification is based on fingerprint or PIN, with the funds ultimately originating from a Mastercard- or Visa-branded debit or credit card. Partners in the country include Sicredi, Nubank and Banco de Brasil, with payments processor Cielo also on board. "Facebook is clearly determined to leverage its customer base to muscle its way into the payments ecosystem", commented Patrick Houlihan of Verisk Financial Research. "It makes sense to leverage WhatsApp in a developing payments market such as Brazil, rather than an advanced payments market where there are already a plethora of payment options available. However, linking the account to a payment card/bank account necessarily limits the service to the financially included, when approximately 27 per cent of the adult population is unbanked. We can expect tweaks and modifications as time goes on to make the service more accessible, by which time it may be ready in other markets."

UK: Metro explores RateSetter purchase

From London comes news that Metro Bank is in discussions to buy RateSetter, a peer-to-peer lender headquartered in London. This is a somewhat surprising development given Metro's recent decision to ditch plans for any further expansion following troubles with both regulators and shareholders that led to its founder's resignation as chairman last year, but, with some fintechs' volumes now reaching existentially challenging lows, those who can grab a useful start-up at a bargain price will surely seek to do so. Once billed as one of Britain's hottest fintechs, the company attracted funding from high-profile investors such as Ken Costa and Neil Woodford, with its balance sheet reportedly peaking at about one billion pounds ($1.24bn). As Sky News points out in its coverage, "the broader P2P sector [in the UK] has been hurt by the pandemic, although some players such as Funding Circle have been accredited under some of the government's emergency coronavirus lending schemes".

Ireland: Cards recovering from lockdown shock

Data from the central bank in Dublin suggests that the Republic of Ireland, still in the early phases of easing its lockdown, is already seeing a return to pre-COVID levels of spend on debit and credit cards. As in other markets, cash appears to be losing its hold, with usage levels at cash machines failing to match the recovery from the initial Covid-19 shock that is now underway for electronic payment methods: by 8 June, the total amount of ATM withdrawals was down by just over a third on the level of two months before, with the usage of automated tellers for withdrawing money almost halved. A month ago, the country began cautiously emerging from one of the most extreme lockdowns seen in the West, with tourism and nightlife sectors particularly hard hit.

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

Europe: Visa hails 'permanent' shift in consumer spending habits
Germany: Wirecard says €1.9bn of cash is missing
Global: 57 per cent prefer internet banking in the Covid-19 era
India: Payment providers in limbo as lockdown bites
US: Bank profits fell 69.6 per cent in 1Q20 says FDIC

The Weekly News Digest from Argus Advisory Research highlights significant developments 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 often missing from the rolling news cycle.

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