First came the global push to widen acceptance, alongside partnerships with domestic players along the Belt-and-Road route; now UnionPay's thirst for fresh sources of income has led it to Europe, where a major new deal with issuing processor Tribe Payments has just been announced. The arrangement will provide the support needed by the Chinese scheme to partner with European issuers and also launch consumer-attracting tie-ups with big merchants. QR code-based payments players such as Alipay and WeChat Pay in UnionPay's domestic market have eroded profitability at home, so abroad it must go. Tribe says that, with this deal now in place, two financial institutions are actively preparing to issue UnionPay cards in Europe, one of them a debit card in Britain. There are over seven billion UnionPay-branded prepaid, debit and credit cards circulating worldwide, so direct provisioning in Europe is arguably past due - and with UnionPay's app also in use in over 30 markets worldwide, there is the strong possibility that the first directly issued European card will be a virtual one. "UnionPay will be relieved to set-up shop in card-loving Europe," said Patrick Houlihan of Verisk Financial Research. "It will be interesting to see what kind of technology it will use: having been left behind once by the popularity of a non-card-based payments ecosystem, it would be careless of them to be trapped in that situation a second time".
We often think of the unbanked as a population living outside of the developed world, but, as advocates like to point out, there is a massive body of people in the United States that traditional banking is unable or unwilling to reach. The latest official estimates from Washington indicate some 8.4 million households are unbanked. It is true that some major banks, such as Citi and TD Bank, are investing in retail locations in major metropolitan areas, with TD actually extending its bricks-and-mortar network along the Eastern Seaboard. But that doesn't touch the needs of rural communities. Why not turn to a post office network that reaches from the northern tip of Alaska to Florida's Key West, serving countless low-population areas that have been dubbed "banking deserts"? The idea is in the news this week as some high-profile candidates for the Democratic presidential nomination are re-examining the notion, taken with the prospect of giving the US Postal Service's 31,000 offices a new lease of life. That might be politically popular and also curb the excesses for which the American payday loan sector is notorious, but the fact remains that unsecured lending is always risky: is the US Postal Service fit to take on such an uncertain line of business? Meanwhile commercial competitors such as FedEx, in a bid to keep up with the ongoing boom in e-commerce, is moving to a seven-days-a-week delivery schedule in urban and residential locations.
Following the collapse of the Lendy P2P platform last month, regulators in London have moved fast to tighten regulations and standards in the peer-to-peer and investment-based crowdfunding sector in the United Kingdom. Foremost are how the opportunities are characterised by platforms, but governance, systems and controls are also being clarified. Furthermore, if any home finance investment involves unauthorised providers, the mortgage lending industry's handbook of requirements must be applied. Industry players are concerned that the regulator might be overreacting to the collapse, maintaining that Lendy was particularly badly run. "Restrictions on the industry may result in the 'peer' being removed from 'peer-to-peer'", warned Iain Niblock, founder of P2P investment aggregator and analysis firm ORCA Money.
Bitcoin may be forever controversial but Distributed Ledger Technology (DLT), upon which such cryptocurrencies rely, is becoming ever more respectable. Now blockchain tech seems set to power the back-end of clearing and settlement in financial markets, as a baker's dozen of banks from around the world are shaping up to launch a 'Utility Settlement Coin' next year. Institutions reportedly involved include Credit Suisse, Barclays, HSBC, Deutsche and Santander, with UBS acknowledged as the leader of the initiative. American participants appear to include Bank of New York Mellon, State Street and Nasdaq. A new venture called Fnality will operate the system, with the aggregate investment by the founders coming to £50 million ($63.5m). Small wonder that so much is being put in, with DLT promising the Eldorado of instantaneous settlement. Four years ago, as the project came to life, its team leader noted that "the simple lesson for banks is that, if we don't do it, someone else will".
Finally, we hear a lot about the extraordinary take-up of Chinese payments apps such as Alipay and WeChat Pay, but the region's LINE app is surely worthy of notice too: the Tokyo-headquartered messaging service is used regularly by 187 million people, with Japan being its most popular market. The app is notable for its crafty harnessing of social media tools and features, even as it morphs into a financial services provider. Now a new deal with Visa will see approved users be able to avail of a digital Visa-branded card as well as add existing cards from the scheme to LINE to more easily make payments through the app.
To end, links to some other stories of interest this week...