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 /  News  /  Weekly News Digest 14 June 2019

Weekly News Digest 14 June 2019

Goldman Sachs office
Weekly News Digest 23 August 2019
Goldman issuing | Volcker reform | low-rate dominoes | ANZ challenges | DBS plans credit card for India
US credit cards
Weekly News Digest 16 August 2019
US consumer credit delinquency grows | Venmo boosts instant payments | NatWest trials voice banking | TransferWise launches in Australia and New Zealand
Spheres
Weekly News Digest 9 August 2019
Mastercard buys Nets' RTP | Heidelpay to KKR | Klarna soars while GreenSky dips | Apple Card launches | European bankers chafe at ECB rate
Fork in the road
Weekly News Digest 2 August 2019
BofA exits First Data JV | Citi at crossroads | Mastercard soars | European banks' 2Q | Indian cashless MSCs
Federal Reserve 2
Weekly News Digest 26 July 2019
Competition in US real-time payments | Deutsche Bank losses | Nationwide hikes overdaft charges | RuPay launch to boost credit cards in India?
Wall Street image
Weekly News Digest 19 July 2019
Consumer banking drives profits | Big Tech in payments | WhatsApp ready to join India's crowded payments market? | Challenger banks in Australia
Shopping bags
Weekly News Digest 12 July 2019
Revolving credit reaches YTD high in US | Volcker Rule 2.0 | Britain eyes future of payments | Australia bank capital buffers | Push mobile payments in Japan
Calendar
Weekly News Digest 5 July 2019
POS-financing draws global schemes | Spanish banks prepare domestic card | Australian Open Banking era begins
Beacon light
Weekly News Digest 28 June 2019
Regulators scrutinise Libra white paper | Bank of England mulls liquidity for fintechs | Citi trims perks on credit cards
libra logo
Weekly News Digest 21 June 2019
Facebook details crypto plans | Discover goes fee-free | 'Bad bank' might liberate Deutsche
Credit cards - abstract
Weekly News Digest 14 June 2019
Amazon/Synchrony subprime card | UK tackles overdrafts | Australians savvy with payments | European air miles an e-currency?
UnionPay logo
Weekly News Digest 7 June 2019
UnionPay readies for European issuance | postal banking on US political agenda | P2P regs tighten in UK
Credit cards - abstract

Could it be the most famous financial institution that has never existed? For years, the mythical 'Bank of Amazon' has haunted traditional banking with the spectre of instant customer satisfaction via digital device as regulators worldwide mandate the Open Banking infrastructure that gives Silicon Valley the APIs on which it feeds. But Amazon it seems is content to parlay its vast customer base into a succession of partnerships with incumbents, the latest being with Synchrony Financial. Now American consumers who cannot get a credit card elsewhere will find a warm reception at Amazon, thanks to a new tie-up announced this week that will allow Amazon Prime members to apply for a new secured credit card, with the risk for the issuer taken out of the transaction courtesy of a deposit that can range from $100 to $1000. A line of credit is then afforded the cardholder that is limited to the same amount. Alongside the card comes a suite of tools to help consumers budget and build their credit score. If there is a single online firm well placed to break into the cohort of underbanked Americans, it is Amazon, rapidly gaining on Walmart and Kroger as the country's mass retailer of choice.

The Financial Conduct Authority (FCA) in London has been busy this month, tightening standards not only on P2P platforms, as we discussed in last week's issue, but now turning to both overdrafts and BNPL) arrangements at the point of sale. Concerns over overdraft practices have been a long time brewing in the UK, with one revealing statistic reported last summer suggesting that half of profits from current accounts in fact came from one tenth of customers, a sign that mismanagement by personal finances might be the driver. According to the BBC, banks took in over £2.4bn ($3bn) from overdrafts, with almost a third of this income down to unarranged overdrafts. Now high overdraft fees are to be banned. When it comes to BNPL, the regulator is banning companies from charging retrospective interest if the consumer has retained an outstanding balance after an offer period that is typically of a year's duration.

BNPL has been particularly popular with shoppers in Australia and New Zealand, but new statistics from the central bank in Canberra show that traditional cards are still a bastion of purchase payments. Not only did the number of purchases made by Australians rise by four percent on credit cards (and an impressive 13 percent on debit cards), but the value of those purchases also increased by 2.1 percent and 8.7 percent for credit and debit cards respectively. "Australian consumers have decided not to throw the baby out with the bathwater," commented Lorna Baek of Verisk Financial Research: "These figures, together with a decrease in the value of credit card balances and historic lows in credit card cash advances, indicate that consumers are becoming savvier, rather than abandoning plastic for alternative payment methods".

Citibank Australia meanwhile has decided that the best form of defence is attack, by partnering with loyalty schemes offering new types of unsecured loans. This move comes at a time when trust in the Big Four banks that have long dominated the country's retail banking scene has been falling. As its competitors focus on transforming their cultures, Citi is positioned to focus on growth. As for digital challengers, Citi's head of consumer banking is sanguine, seeing room for traditional credit card issuers to extend into complementary digital services.

Issuers of all kinds will want to keep an eye on a court case that has bubbled up in Germany, after a Lufthansa passenger sued the airline because his air miles, it is argued, are in fact a form of e-currency that should be withdrawable as cash. The airline naturally maintains that its programme, Mile & More, is not e-money because it is a closed system which can only be used in relation to a particular selection of services from partner companies. However, until the court case arose, there were in fact indirect ways one could buy Lufthansa miles, by first buying points at partner hotels and then converting into Lufthansa miles, a cash-to-points loophole that has now been firmly shut by the carrier. The big question is, if Lufthansa is indeed deemed to be an e-money issuer or transmitter (and thus subject to the full rigours of the EU's revised Payments Services Directive, or PSD2), then will PSD2 regulations apply to all miles programmes in Europe, not to mention loyalty points and even gift voucher schemes? As the Financial Times puts it, "in the age of ICOs and cryptocurrency issuance, these details matter a lot in terms of regulatory implications. The long and short of it is, if you're issuing cash-like liabilities you have to be regulated as a bank or e-money issuer/transmitter. And that adds a whole lot of complexity to your business model."

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