Payments News Digest 29 January 2021

US: Clearing house data shows extent of shifted consumer payment trends

In the US, new figures from the National Automated Clearing House Association (NACHA) show historic changes in consumer behaviour as tracked in the back-end systems that keep retail banking humming. For the final quarter of last year, compared to the same period the year before, NACHA saw P2P payments grow by 44 percent to reach 62 million transactions, while the volume of cheque payments, the paper-based form of P2P that Americans have clung to longer than elsewhere for its simplicity and ease of use, fell by 23 percent. Direct Deposit, primarily used for salary transfers, social security and unemployment assistance, increased by just over 11 percent, while internet-initiated ACH payments by consumers grew by 15.2 percent. (All comparisons are year-over-year for the quarter.) Looking back over tables from the Fed shows the figures on cheques being sent by Americans: twenty years ago, with a smaller population, over twelve billion were being written every year; for 2020, the trend is now less than a billion a quarter.

US/UK: JPM Chase reveals big plans for digital retail challenger in British market

Following in the footsteps of rival Goldman Sachs, JPMorgan Chase has announced that it will be opening a branchless banking business in the United Kingdom later this year, headquartered in London and operationally rooted in a contact centre in Edinburgh. Already 400 members of staff have been hired with "personalised service around the clock" promised. In time, credit cards as well as loans for vehicles and mortgages should be added to the offering. Challengers in the British market have found the going tougher than they, or regulatory supporters, expected, with the Big Five incumbents holding on to some 86 percent of the current accounts held and proving difficult to dislodge, even as many millions of Britons grow accustomed to using banking apps. However the Wall Street giants certainly have deeper pockets than the likes of high-profile digital banks in the country such as Monzo or Starling, neither of which even existed eight years ago. By contrast, JPMorgan has been operating in the City of London for over a century and a half.

UK: Mastercard to change interchange rates for purchases from EU

In Britain, Mastercard has informed merchants that purchases on credit cards from countries in the European Union, of which the UK is now no longer a member, will be subject to a new interchange rate of 1.5 percent per transaction from the middle of October, a rise from the 0.3 percent rate they had enjoyed when their country was part of the trading bloc. In the case of debit cards, the fee will rise from 0.2 to 1.15 percent on the same date. The new policy will affect travel-related sectors in particular, with lawmakers under pressure from trade bodies to introduce caps that keep interchange within limits akin to those imposed by Brussels. Interestingly, the network refers to the rates used in European Economic Area countries such as Iceland to explain its logic: even with the Brexit project now accomplished, global companies seem likely to define Britain in terms of Europe.

Europe: E-commerce disrupted by Brexit as all parties rethink established habits

For their part, consumers in the European Union who have been purchasing from British retailers such as Amazon UK have been finding the accumulation of new charges (such as tariffs, customs and extra VAT from their own governments) so expensive that they are looking for alternatives: eg, Amazon Germany for Irish consumers. This response is mirrored by logistics companies that are now bypassing Great Britain when it comes to transporting goods between Continental Europe and the Republic of Ireland, which is not part of the UK: ferry companies have opened up new routes to meet the demand. Domestic e-commerce suppliers in the republic have already been boosted by a series of lockdowns that has stopped most high-street retailing activity; now they seem set to benefit too from consumers who want the listed price to reflect the actual cost of purchase. "Although the long-term economic effects of Brexit are still up for debate, small and medium-sized businesses, not to mention the average consumer, are definitely going to lose out in the short term", commented Lorna Baek of Argus Advisory Research. "While online retail grew in 2020, the fragmenting e-commerce landscape in this part of Western Europe mean that the UK may not end up with as large a piece of the pie as it had once expected."

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

China: Central bank says time 'ripe' to scrap credit card interest rate limits
Global: How pandemic turbocharged the QR revolution
Global: Venture capital floods into banking-as-a-service
UK: ATM withdrawal value last year down by 30 percent over 2019