US consumers may soon be able to literally wave goodbye to their money as they spend, with Amazon reportedly testing a system that uses an individual's hand for authentication. Amazon's goal is to roll out the payment system at its Whole Foods chain of supermarkets. It is now approaching five years since Apple Pay's high profile launch in America but use of mobile payments remains low in the country despite continued investment from some of the world's richest companies. Amazon's move is unlikely to turn the tide in itself but it is yet another sign that the tech industry is determined to change the way people pay and sooner or later they will surely strike gold.
In China, where mobile payments are booming, Alipay and Tencent are betting on facial recognition technology for payment authentication. Shoppers can now leave their mobile phone at home and simply scan their face at the checkout instead. The software, popularised by China's 'social credit' system and now being rolled out by payment firms, remains contentious due to its original purpose. Consumers themselves, however, seem less worried about security implications than being made to feel 'ugly' by the process. Alipay has responded by promising to introduce beauty filters into their cameras which have already been rolled out to 100 cities in China. Alipay plans to spend a further $420 million on the technology in the next three years, while Tencent unveiled a new facial payment machine dubbed the 'Frog Pro' in August.
The ECB meets next week to discuss monetary policy with a further rate cut widely forecast. However, a deeper discussion on the effectiveness of rate cuts and the side effects of negative rates is expected to take place. With banks struggling in this environment and reports of cash-hoarding emerging, the belief that an alternative approach is needed is gaining ground. The catalyst for this may be the ascension of Christine Lagarde to the ECB presidency. Lagarde, who will replace Mario Draghi at the helm has hinted that she favours a change in policy and has committed to a broad review of strategy.
With many of Europe's big banks struggling, there should be ample opportunities for challenger banks. According to research by Accenture, digital-only banks are indeed expanding rapidly with UK-based digital banks adding five million customers across Europe in the first half of 2019. Despite this growth though, profitability seems no closer for most of them as they are losing on average £9 per customer despite having much lower operating costs than the traditional banks. "Part of the problem may lie in the type of customers digital banks are currently attracting" commented David Hickey of Verisk Financial Research. "Customers typically open accounts with digital banks simply to save on transaction fees. They maintain their primary account at and continue to borrow from traditional banks. Until digital banks can offer attractive yet profitable products, they will struggle to make money".
To end, links to some more stories of interest from this week...
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