India's Paytm Payments Bank is a step closer to its founder's long-cherished ambition to become a "full-stack payments player" with news that the firm, prevented by law from lending directly, is partnering with Citibank to launch the Visa-branded Paytm First Credit Card. As it is already numbered among the top five largest credit card issuers in the country, Citi's strategy turns on opening up a neglected customer base. Considerably sweetening the deal for customers mulling the offer is a one percent cashback at the end of each month. Those who spend over 50,000 rupees ($714) using the card in a year will have their annual fees waived. Reportedly, the payments bank has over 40 million debit cards in use and over 150 million active users of its wallet, while the e-commerce company (Paytm.com) that gave birth to the payments bank is the country's largest m-commerce platform.
Two globally familiar names are among the backers of Paytm: Warren Buffett and Jack Ma, with the latter's firm, Alibaba, holding a majority stake in Paytm's holding company, One97 Communications. As Beijing and Washington joust over trading arrangements, businesses from both countries are clearly finding profitable ways to cooperate in burgeoning new markets such as India. In other news from the subcontinent, the QR code is set for an official boost as the authorities consider mandating a QR code-based option for payments using the country's Unified Payments Interface (UPI) at all retail points-of-sale.
Time was when banks in different regions faced strikingly different challenges. Now, the boardrooms of Toronto, Madrid or Sydney generally echo to the sounds of similar concerns, from BIS capital ratios to digitalisation. This week, one of the big Japanese banks, Mitsubishi UFJ Financial Group (MUFG), provided a striking example of the challenges faced by incumbents in an increasingly mobile-first world. The financial services giant reported a fall in annual net profit of 12 percent, with an almost $900m write-down for its credit card operations cited as a leading culprit: the bank has had to suspend an overhaul intended to consolidate management of its three separate card brands. Cashless challengers have been exploiting new payment modes such as QR, which reportedly confounded the abandoned MUFG system. The firm can hardly be accused of not making an effort however: later this year it plans to issue its own virtual currency. In other banking results, Crédit Agricole's retail banking operations reported a climb in loan outstandings and improved origination in vehicle loans; Russia's Tinkoff Bank meanwhile saw a 72.5 percent growth, compared to the same period last year, in its net loan portfolio.
In Europe, the established banks are preoccupied with how best to manage the decline of their branch networks and the changing nature of staff roles. For Spain's Banco Santander, the latest plan is to cut over a tenth of its workforce and close one in four branches; making money in Europe is becoming increasingly difficult and so the bank is looking to Latin America to improve profitability. Meanwhile, as a costly integration with Postbank continues, Germany's Deutsche Bank has closed over 400 branches and is now accelerating steps to reduce staff at headquarters and consolidate consumer finance operations to a single centre in Bonn. "Having never really recovered from the Global Financial Crisis, Deutsche continues to be the sick man of European banking," said Patrick Houlihan of Verisk Financial Lafferty Research. "Santander, on the other hand, has established itself as a major player in the relatively underdeveloped markets of Latin America, which opens up the opportunity to grow revenue and profits from the region over the next decade or two. In the meantime, margins will continue to be squeezed in Europe due to a combination of low interest rates, tightened regulation and increased competition from the neo-banks."
To end, links to some other stories of interest this week...