Weekly News Digest 26 June 2020

US: Regulator sees sharp rise in deposits

American deposit account values have grown by an unprecedented amount so far this year, according to the Federal Deposit Insurance Corporation, the US regulator charged with guaranteeing the safety of those funds for bank customers. The total amount has swollen by over two trillion dollars since the novel coronavirus outbreak began in the country, with April alone responsible for a $865 billion growth rise. The Paycheck Protection Program got underway in the early weeks of that month, with nationwide megabanks JPMorgan Chase, Citigroup and Bank of America gaining deposits at a faster clip than smaller competitors. April also saw a continuously growing cohort of sheltering citizens with a reduced appetite or opportunity for spending money.

UK: Payment holiday extended for three months

British regulator, the Financial Conduct Authority has told banks it expects the credit card payment holidays currently in effect in the United Kingdom to be extended for a further three months. The option will also be made available in the case of store cards or personal loans. Certain other forms of lending, including buy-now-pay-later arrangements are in line for regulatory action also, but at an unspecified date. "Where consumers can afford to make payments, it is in their best long-term interest to do so", commented the regulator's interim CEO. "But for those who need help, it will be there." Britain currently has the highest number of deaths attributed to Covid-19 per capita among major countries in Europe; the country's GDP, according to an OECD forecast, will shrink by 11.5 percent for 2020, exceeding the impact expected on the German, French, Spanish and Italian economies.

Germany: Wirecard files for insolvency

Wirecard appears to be reaching the end of the road as the embattled processor filed for insolvency in a German court on Thursday. Just last week, it emerged that €1.9 billion in cash was missing with auditor E&Y refusing to sign off on the company's 2019 accounts. In a dramatic week, CEO Markus Braun was arrested on Monday having stepped down from his role the previous Friday. Wirecard owes about €3.5 billion, including €1.75 billion in bank loans with creditors believed to have little chance of recouping much of what they are owed. The post-mortem is likely to drag on for some time with lawsuits already being lined up and questions being asked over how such accounting irregularities went undetected for so long.

Italy: Coronavirus forcing the country to go digital

Italy has made the equivalent of five years of progress in the space of two months when it comes digital adoption, according to the man tasked with leading the reopening of the economy. Italy is home to Europe's largest black economy, with 20 per cent of the economy believed to be off the books, but with a surge in demand for e-commerce and non-cash payment, businesses are being forced to adopt. Italy has an unusually large number of small businesses, many of which have long resisted card acceptance, the result of which is a cash-intensive economy. This is good news for the government who can expect increased tax revenue but also for the payments industry which will be looking to capitalise on the changing habits.

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

Australia: Record sales for retailers raise quick recovery hopes
Brazil: Central bank suspends WhatsApp's payments service
Russia: Ingenico takes Russian e-commerce by storm
US: Mastercard to acquire Finicity to advance Open Banking strategy