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Flush with the success of its involvement with the Apple Card, Goldman Sachs has announced another high-profile consumer finance partnership, this time with General Motors, for whom the bank will issue Mastercard-branded credit cards from September on. The announcement moves beyond the plans revealed three months ago for the Wall Street titan to take over issuance of GM's existing one million-strong account book from Capital One. Now new co-branded cards with strong rewards incentives are in the offing, with Goldman's digital bank brand, Marcus, likely to feature in the new consumer-friendly mix. "Our focus remains on delivering a simple and transparent experience that helps customers manage their spending and borrowing needs better," said Omer Ismail, Goldman's global head of consumer business, in an accompanying press release. With Marcus and the Apple Card particularly, his firm seems better placed than ever to match offerings to consumer needs.
Meanwhile, fourth-quarter results for the country's major lenders have been coming out. Bank of America executives, despite a smaller loan book versus the year before, are reportedly optimistic for growth this year, although the ongoing low interest rate environment is a more consequential pressure for such a consumer-facing financial institution. Year-on-year profits fell almost 22 percent in the quarter just ended. JPMorgan Chase, like all banks since the beginning of last year, is now required by new regulations to take the most pessimistic view when it comes to possible loan losses, causing provisions for credit card losses to balloon year on year: however those losses, staved off by stimulus payments, unemployment insurance and more prudent consumers, have yet to materialise. An interesting footnote from this latest round of quarterly reports: "Consumers using the [bank-backed] Zelle payments network...sent and received 157 million transfers worth $43 billion overall" in the last three months of 2020.
The boom in Buy now, pay later frequently mentioned in this newsletter looks set to continue to drive the news in 2021, with American market leader Affirm currently basking in the afterglow of its stock market debut last week: share value doubled following the high-profile IPO. Behind the growth in the sector, some of the press is suggesting a deeper shift appears to be in the works, in one case pointing to a regulatory filing by Visa last month noting that the year-on-year increase of eight percent for its payment cards during October and November was driven completely by debit cards (up 21 percent) as credit cards fell by four percent. Yahoo Finance, citing Afterpay's chief financial officer, attributes that shift to an underlying shift to debit from credit, arguing that the use of simple interest will impress younger consumers who will turn away from revolving credit products. "However, given that the BNPL business model is so reliant on merchant fees," commented David Hickey of Argus Advisory Research, "the sector may not fare so well as defaults tick up and when higher interest rates return."
The new US president's SEC pick, Gary Gensler, should prove quite a change from his predecessor if he is approved by lawmakers on Capitol Hill. In his previous role, heading up the agency tasked with cleaning up derivatives trading, he is reported to have been strikingly productive. If installed as head of the Securities and Exchange Commission, he will be turning his attention to a wider arena: the country's banking system, which he will be sworn to protect. That particular field of regulation in the United States is more complex than in other countries, which has led, for example, to the ongoing tussle between federal and state bodies over which side should be the ultimate supervisory authority over fintechs, a matter that has been argued in courts for almost half a decade now. The latest salvo is from the Conference of State Bank Supervisors (CSBS), which has filed a complaint maintaining that the Office of the Comptroller of the Currency's chartering of fintechs oversteps its mandate in federal law. Although the fierceness of the battle bespeaks the vast potential of the market in dispute, the regulatory ambiguity is holding up progress in developing the market. Time will tell if the shift in power in the nation's capital will bring about a resolution: it is certain however that a very different ethos will now be in effect.
To end, links to some other stories of interest this week...
India: The illegal instant loan app problem
Japan: JCB starts testing blockchain machine micropayments
UK: HSBC to axe one in seven UK branches
US: Millions to receive second stimulus by debit card
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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