Visa has begun the new decade with a bang: the network has announced that it plans to buy API platform Plaid in a $5.3 billion deal. If finalised, this major strategic move will put Visa right at the heart of the burgeoning fintech-bank interface for tens of millions of bank accounts in the United States, Canada and Britain. San Francisco-based Plaid, founded in 2013, provides the programmable connections needed by apps for payments and data interactions with bank customers' accounts. According to Visa's investor presentation on the matter, one in four American bank account holders have indirectly used Plaid through the 2,600 financial technology developers that Plaid services.
In Britain, a ban on credit cards for internet-based gambling comes into effect on 14 April. The measure comes in the wake of independent research commissioned by the industry's regulator which found that 22 percent of those gambling online through a credit card are "problem gamblers". But the consequences go beyond the online gambling industry: John Jones of Verisk Financial commented that "around 800,000 credit card holders in the UK spent up to £1bn on gambling in 2018, and this measure will impact issuers' transaction volumes in 2020".
Fourth-quarter results for America's leading banks have been emerging, with consumer operations coming in for scrutiny following a year in which interest rates were cut three times. However, the country's strong economic performance is undoubtedly helping the big banks cope with the ongoing low-rate environment. Citigroup, for example, saw consumer banking revenue up by a tenth from the same period the previous year. JPMorgan Chase 's consumer operations enjoyed a rise of five percent in profit, with credit cards showing strong results. Bank of America outperformed Citi and Chase on the loan growth metric at six percent but, with so much riding on interest rates in its particular case, retail banking revenue ended up falling by five percent.
Wells Fargo, still saddled with litigation costs stemming from the accounts opening scandal, saw its net interest margin fall from last quarter's 2.66 percent to 2.53 percent, leading to an 11 percent drop in net interest income from the same quarter last year. "Consumer-loan balances at the 25 largest banks reached $1.19 trillion the last week of December...up 13 percent from a year earlier", calculated Reuters, quoting Federal Reserve data. "The biggest annual increase came from cards, where outstanding debt rose 16 percent."
Finally, it may well be that Goldman Sachs (whose own quarterly profits fell by almost a quarter) are to be commended for not foisting a half-baked app on customers of its online-only retail bank, but it is surprising that it took until this month to launch an app for Marcus, which was established over three years ago: until now, one had to use a website to see account information and for such tasks as making a loan repayment or transferring funds. In another unusual story, British bank TSB, still paying the price for a catastrophic computer system failure in 2018 that affected almost two million customers, has chosen IBM for many key IT needs. The computer giant will also help TSB's parent, Banco Sabadell, in what amounts to a billion euro ($1.1bn) overhaul to better match consumers' mobile-centric lifestyle. The odd aspect is that Sabadell already has its own in-house IT services provider: Sabis. Readers might recall that an independent report into the TSB system meltdown, which lasted weeks and cost the British bank £330m ($431m), found that Sabis was not ready when a new software system went live.
To end, links to some other stories of interest this week...
Hong Kong: First digital bank offers six percent rate for deposits
India: Amazon announces $1bn investment in SME digitalisation
Turkey tightens credit card borrowing terms for holiday purchases
UK: Banks see higher demand for credit card borrowing
UK: Interest-free periods on credit cards cut
US: BofA sees Zelle zoom, while U.S. Bancorp's merchant vol rises ten percent
The Weekly News Digest from Verisk Financial Research highlights significant developments that have recently occurred in payment cards, digital payments, acquiring, processing, retail banking and consumer credit. Our writers and researchers frame these items in contexts such as historical, sectoral and regional trends, adding a layer of value that is often missing from the rolling news cycle.
About Verisk Financial Research The market-leading online, interactive database and data dashboards covering the global cards and payments industry in detail, plus a range of data-packed country and regional reports. Leveraging financial cards data going back to 2010 – and forecasts up to 2022 – our unique datasets cover 72 countries around the world and feature more than 250 metrics per market.