As befits a system that operates 365/24/7, real-time payments (RTP) developments have enlivened the traditionally quiet summer news cycle, with Mastercard's takeover of Nets' RTP business announced this week. At $3.2bn, the deal marks the biggest acquisition in Mastercard's history. Nets is a powerful force in European payments, particularly in the Nordics, but Mastercard is focused on a very particular slice of its business: real-time payments infrastructure. Crucially, the Nets system is ISO 20022-compliant - unlike the UK's system, which predates that standard and is currently migrating: the later version allows for more data to be included and greater flexibility, such as Request to Pay (RTP) messages. RTP in turn opens up new commercial possibilities: beyond person-to-person payments and credit transfers to merchants, bill payment is one area that Mastercard will want to capitalise on as the global cards scheme morphs into a full-fledged multi-rail provider.
That was not the only news involving Nets this week: the FT reported that Worldline and Nets were among the several that failed to win control of Heidelpay, a German payments specialist serving over 30,000 merchants across German-speaking Europe and the Benelux countries. In the end, it was New York-headquartered investment firm KKR that won out. Also from Manhattan came good news for smaller banks with formal confirmation from the Federal Reserve that it would indeed be building a faster payments system, FedNow, to rival that of The Clearing House (run by and for the larger banks): the first transactions should take place in four or five years' time.
We have previously noted in these pages that innovative consumer credit arrangements have come back to life worldwide in the digital era: this week saw contrasting fortunes for two major players in the space. First, Sweden's Klarna became Europe's most valuable fintech through its latest investment round: the estimated value now stands at $5.5bn. Over 130,000 retailers offer Klarna, which primarily provides financing based on instalment plans. Meanwhile GreenSky, which went public last year, has seen a humiliating drop in its value (tumbling by over a third in Tuesday's trading alone) following a half-year earnings report that fell short of analyst expectations. The GreenSky app lends smaller amounts that might previously have been put on a credit card for funding out-of-the-ordinary expenses such as healthcare and home repairs. Although its model has been praised, it seems that business strategy has proved a weakness. According to American Banker, the company is now "exploring a potential sale".
A telling contrast too is provided by a pair of historic events that took place in the American credit cards market this week: first the launch of the Apple Card, which has begun rolling out on an invitation-only basis. Will this high-profile product ultimately prove an industry game-changer as the iPod and iPhone became in times past? Partners Goldman Sachs and Mastercard in particular are hoping so. The two percent cashback on Apple Card payments made through Apple Pay should prove a tantalising lure in such a crowded market. The other milestone is receiving decidedly fewer acres of coverage in the media: interest rates on US credit cards are now at their highest level, 17 percent, in a quarter of a century, an all-the-more-remarkable statistic given the low Fed rate of the last decade. In an insightful FT piece syndicated in the Los Angeles Times, two major causes are identified: issuers pricing in risk from the beginning (as regulations constrain adjustments later in the relationship) and customer focus on rewards and perks.
Another crop of bank results from Europe is once again accompanied by executives complaining of the difficulties earning interest income in a perennially low-rate environment: this week it was the turn of Dutch lender ABN Amro (profits up by a percent in the second quarter), Germany's Commerzbank (the addition of almost a quarter of million new customers domestically helping a H1 profit of €391m) and Italy's UniCredit (which cut its revenue outlook). All three cited European Central Bank rates as a material factor in their results. Meanwhile, second quarter figures from HSBC, based in London but doing over three quarters of its business in Asia, were overshadowed by the sacking of its chief executive a mere 18 months into the job: John Flint's final half-year earnings saw profits up by just under a fifth to reach £8.18bn ($9.94bn) overall; for its retail banking and wealth management operations, the news was even better: a 35.5 percent rise in profit before tax to £3.66bn. The bank is cutting 4,000 jobs worldwide to trim expenses.
Finally, Santander's unit in Brazil has come up with a crafty way to entice small merchants into using GetNet, its card processing service: rather than taking on new hardware, the merchants can now switch using an app that is compatible with its rivals' terminals. This could potentially connect Santander with four million merchants, although the explicit target is less than one in ten of this cohort.
To end, links to some other stories of interest this week...
India: SBI considers sale of majority stake in cards unit
UK: Losses widen at Funding Circle, but loans value and revenues surge
UK: Push payment fraud prevention coming in March
US: State regulators probing payroll advance industry