The instalment payments arrangement, once a cornerstone of consumer finance in the days before revolving credit, has come back to life in the mobile age, as evidenced by the remarkable growth of buy-now-pay-later phenomenon Afterpay. With Millennial consumers particularly receptive to the model, inventive start-ups have revived point-of-sale financing, with examples worldwide including Europe's Klarna, Affirm (created by a PayPal co-founder), Sezzle and Vyze, acquired by Mastercard less than three months ago. The potential revealed by this resurgence has not been lost on Visa, which has announced the intention to launch its own instalment payments programme next year. Pilots are currently underway in the United States and with partners in India, Romania, Russia and the UAE. "Visa is mining yet more value from its pivotal position between cardholder and issuer", noted David Hickey of Verisk Financial Research. "Challengers, however successful and inventive, have a long way to go before they can dislodge global players that are so fundamental."
In March, PayPal announced an interesting tie-up with JP Morgan Chase to use the latter's access to America's faster payments system (The Clearing House) for instant transfers into bank accounts. With Airbnb and online employers/platforms often disbursing via PayPal, liquidity functions are becoming a must if the internet's biggest payments service is to maintain its dominance. Now, in Canada, PayPal is going down the debit card route to the same end: courtesy of a partnership with Visa, consumers and SMEs will be able to transfer to their bank accounts by debit card, with Visa Direct doing the heavy lifting.
One of the tell-tale signs that competitive pressures are threatening an established market is when all the incumbents cooperate to significant effect, finding ways to leverage their aggregate power. Such collaboration seems to be on the rise in Europe currently: last week, for example, we touched on the P27 project in the Nordics. Now, in Spain, local media is reporting that a new domestic payments card, supported by all the banks, is undergoing trials, with hopes for a full launch by the end of the year. The product is being made possible by the ongoing merger of the country's three POS and ATM systems into a single, as-yet-unbranded entity. Disintermediating the global schemes is one of the explicit motives behind the move, as are the anti-fraud gains to be made. Looming above it all though is the prospect of super-apps such as WeChat Pay and ongoing innovations from Big Tech players such as the Apple Card. With PSD2 bedding down in the European banking business, competition in payments there is only going to get fiercer.
Across the Mediterranean, it was announced in Italy that UnionPay has agreed a card acceptance deal with Banca Sella. Although not one of the major banks in the country, the Piedmont-based firm specialises in e-commerce and so fits neatly with the Chinese scheme's plans for Europe, where issuing levels are set to rise thanks to a new contract with issuing processor Tribe Payments; the signs are that the first UnionPay-branded card to be directly issued in Europe will be a virtual one (see the top story in our first issue last month).
Finally, a new era for banking dawned in Australia as the second half of the year began: both Open Banking and a new code of practice for the industry went live on the same day. In common with Open Banking regulations elsewhere, the new API-based ecosystem arrived with more of a whimper than a bang; it takes time for new interfaces to be crafted, published and then go on to generate third-party activity. All the more so in Australia in fact, since Open Banking is beginning in the most modest way possible, as a means to supply comparison services with fresh data. The rulebook for conduct meanwhile is intended to bolster the welfare of customers, with grace periods, jargon-free loan contracts and account-switching measures among the many new rules now in place.
To end, links to some other stories of interest this week...