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 /  News  /  Weekly News Digest 19 July 2019

Weekly News Digest 19 July 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
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
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
Wall Street image

It's earnings week for the big banks in the US with the industry receiving its quarterly health check from Wall Street. Despite earnings beating analysts' expectations, the overall outlook is more pessimistic; investment banking is suffering on the back of an ongoing trade war with China and looming rate cuts are squeezing margins. Profits are instead being driven by tax cuts and consumer banking. US consumers are taking advantage of low interest rates to borrow more and delinquencies continue to fall. This perhaps explains why Goldman Sachs is so keen to enter the retail market. The firm has poured $1.3 billion into its consumer arm Marcus and is preparing for the launch of the Apple card. In its analyst call, Goldman confirmed that this investment will continue into next year and declined to give a timeframe for when it expects the unit to become profitable.

The encroachment of technology companies into the world of banking and finance is gathering pace but it is fair to say it is not being broadly welcomed everywhere.Facebook executive David Marcus faced a barrage of questions from US lawmakers, over the company's plans to create a new digital currency. House Democrats meanwhile circulated a draft bill entitled the "Keep Big Tech Out of Finance Act", which needs little further explanation. While the bill will probably face opposition from Republicans making it unlikely to pass, the reaction in the US goes some way to explaining Facebook's decision to base Libra in Switzerland.

One country in which big tech is already playing a significant role in payments is India. The latest to step into the ring is Facebooks' WhatsApp payments service. It has been present in the market since early 2018 in beta mode with approximately one million users, and reports suggest it is now ready to make its debut and merely awaits approval from the Reserve Bank of India. The domestic Paytm and international players such as Amazon, Google and Walmart are leaders in the mobile payments market. WhatsApp enters the payment arena with 300 million active users to leverage. "If Facebook gets this right, it has the potential to entirely alter the market share structure and dominate the mobile payments scene" commented Lorna Baek of Verisk Financial Research. "However, it still won't be an easy fight and competition is thick with excessive cash-back offers to entice users to join or stay with providers, affecting profitability." Recent reports also suggest Apple Pay is gearing up to enter the market, which will add to the pressure of competition. It remains to be seen who the last man standing will be, but there's one thing for sure - the fight will be of epic proportions with consumers winning out in the short-term.

A new wave of challenger banks are setting-up shop in Australia. The latest of these is '86 400' (named after the number of seconds in a day), which has just been awarded a full banking licence by the APRA. Like in the UK and other countries, neobanks would like to take advantage of the elevated smartphone penetration rate to offer specialised digital banking services. Chief executive Robert Bell was bullish as he outlined the bank's ambitions to the SMH: "None of us are interested in building a small niche bank. We want to build a serious alternative to the big four banks...". However, is this being realistic? One would have to think so, given the way that market share is so heavily concentrated among so few players in Australia. With complaints that the Reserve Bank of Australia's recent rate cut has not been fully passed on to customers, it is clear that consumers are open to alternatives. Either way, competition should be welcomed and at a minimum it should force the big four banks to up their standards.

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