A battle is brewing over who controls real-time payments in the US. It was reported last week that the Fed is considering developing its own instant payments system to rival the one launched by The Clearing House in 2017. The Clearing House, which is owned by 25 of the world's largest banks, argue that their system is fit for purpose and that a competing service will hinder adoption of real-time payments. Community Banks, retailers and tech companies on the other hand are uncomfortable with a for-profit company having a monopoly and are pushing for the Fed to build a competing service. The battle may ultimately be fought out in the corridors of Washington with the Democrats, led by presidential hopeful Elizabeth Warren supporting a Fed built system with Republicans supporting the big banks.
Deutsche Bank's woes continue as it posted a loss of €3.15 billion in the second quarter of 2019. The losses are larger than the €2.8 billion they forecast when announcing a restructuring plan earlier in the month and cast fresh doubt over whether the troubled lender can transform itself. CEO Christian Sewing didn't try to defend the poor performance of the bank's investment banking division, telling analysts "I could make excuses," but "this simply doesn't matter. We must do better and we will do better." "The next challenge on the horizon for DB", according to Patrick Houlihan of Verisk Financial Research, "is to avoid going cap in hand to shareholders for a fresh cash injection in the short-term, having pledged not to do so. However it is difficult to see how this can be avoided given the latest loss-making quarter. Given the benign economic conditions of the last few years, one wonders how long DB can survive in its current form once the next downturn hits."
In the UK, Nationwide is the first major bank to announce its revised overdraft charges following the Financial Conduct Authority's clampdown on excessive fees in June and it's not good news for most consumers. The FCA has prohibited banks from charging higher rates for unauthorised overdrafts than for authorised ones. Nationwide's response is to move to a single overdraft interest rate of 39.9 percent which is more than double the existing charge for authorised overdrafts. The result is that two-thirds of Nationwide's customers will pay more for overdrafts as they look to compensate from the revenue they will lose from lowering rates on unauthorised overdrafts. This outcome was seemingly anticipated by the regulator whose primary concern was to ease the burden on vulnerable consumers.
The National Payments Corporation of India (NPCI) has partnered with JCB to launch the RuPay JCB global card. Issuers of the card include the State Bank of India (SBI), Pujuab National Bank and Axis Bank. In true Indian payments fashion there will be eye-watering cash-back offers in place to entice users to the card. For POS expenditure outside of India, 15 percent cash-back is on offer, with an additional 15 percent (30 percent total) being offered for spending in Thailand, Singapore and the UAE. The tie up is undoubtedly a bid to boost credit card uptake on the local RuPay network, which although launched in 2017, has failed to make significant headway yet against the global networks in the affluent segment. Although the majority of Indian banks offer Rupay credit cards, uptake has been low with high-value individuals that travel often preferring the acceptance security that the global networks offer overseas.
To end, links to some other stories of interest this week...