What a difference a name makes - and in the case of Facebook we now have a pair of new terms to get used to: Libra, the firm's planned cryptocurrency, and Calibra, the accompanying digital wallet. Another key element in the payments ecosystem that is expected to launch next year will be its governing body: the Geneva-based Libra Association, an independent, non-profit organisation with a worldwide membership including both the world's biggest social network itself and the various bodies that will provide continuous validation for the distributed ledger underlying the new digital coin. Governance therefore will not be just at Facebook's whim but come from an assortment of private firms, universities and non-profit organisations. Given Mark Zuckerberg's strategic moves in recent years away from social media and towards messaging, the words of historian Neil MacGregor on Alexander the Great seem remarkably apposite: "The ambitious ruler shapes the currency: the message is in the money."
The internet is shaping our expectations in all sort of ways: decades of free software and services online has engendered a mentality that financial institutions are increasingly including in their calculations. Discover, for instance, has responded to feedback from customers that the very notion of fees carried negative connotations with an announcement that fees are being eliminated on all deposit accounts; "free checking" will also be on offer. "Our data shows that Discover has placed a strategic focus on increasing outstandings on its cards products," commented David Hickey, head of research at Verisk Financial Research. "Attracting more depositors will help to fund balance sheet growth while also providing cross-selling opportunities."
Executive minds were perhaps also concentrated by the imminent arrival in the market of the new Apple Card, which will have, for example, no late fees, no annual fees, no foreign transaction fees and no fees for going over the spending limit. What Apple and its issuer, Goldman Sachs, lose in fees they plan to make up on interest, although Citi reportedly turned down the role now taken by Goldman on the grounds that its profitability prospects were insufficient. The product is now undergoing widespread testing among employees, with reports that Apple is currently in discussions with regulators in Europe about expansion across the Atlantic.
How do you solve a problem like Deutsche Bank? Well, getting Europe's troubled titan free and clear of investment banking would seem a good start, looking at the parlous state of its balance sheet and the dearth of partners willing to engage in a full-on merger or takeover. A series of initiatives over the years have failed to crack the nut; the latest strategy, according to unnamed sources talking to the Financial Times, is a plan to hive off toxic assets to a 'bad bank', with the rump institution then transforming into a largely retail and commercial operation. Could it work? Misplaced optimism has long been an occupational hazard when predicting Deutsche's future, but there are some encouraging signs. For a start, the current chief executive, Christian Sewing, came up through retail banking. Also, the firm has moved ahead of its peers on digitalisation, setting up innovation labs worldwide and launching application programming interfaces (APIs) well before the EU's revised Payment Service Directive (PSD2) brought Open Banking to its home continent. The bank's digital app, Yuna, currently used as a rewards and loyalty scheme manager but set to become a full-fledged digital wallet in time, gets largely positive reviews on the Google Play app store. But bad publicity seems to dog the lender like a shadow in recent years: as this piece was being drafted, news broke that it was facing investigation in the US for possible lapses in anti-money laundering standards.
Another long-time German heavyweight, Lufthansa, may have pulled back some of its rewards programme features for fear of being deemed a currency issuer (as we reported last week), but there are no such worries about airmiles in Australia, where Qantas has just announced a 25 million Australian dollar ($17.3m) revamp of its customer loyalty offering. The knock-on effect should be more incentives to spend on credit cards, as consultant Adam Posner points out: Qantas is "now overtly rewarding 'frequent buyers' in addition to 'frequent flyers' with the introduction of their new Points Club. This brings to life a visible recognition of where many members earn points - on transactions not travel." In other news from Australia, Woolworths has become the first supermarket to offer Apple Pay in the country.
To end, links to some other stories of interest this week...