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Payments News Digest 15 October 2021

15 October 2021
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US: Issuers contend with combination of low balances and tight interest income

In New York, the latest round of quarterly results kicked off yesterday with JPMorgan Chase's earnings sharpening industry concerns around muted loan demand, despite sales volumes on Chase payment cards as a whole up by over a quarter year on year. At the end of the third quarter, lending to consumers was down two percent, with the knock-on effect of net interest earnings remaining low. "We expect it to take some time for revolving credit card balances to return to pre-pandemic levels given the amount of liquidity in the system," commented JPM's chief financial officer, Jeremy Barnum. The lack of income from both commercial and consumer lending was offset in the bank's statement summary however by the release of more reserves that had been put aside last year before the extent and effect of government stimulus became apparent.

Sluggish loan performance affected revenues too for retail rivals Bank of America and Wells Fargo: however, BofA diverged sharply when it came to overall net interest income, bumping up that line item by a tenth thanks to more successful investment strategies.

US: BNPL pioneer gains significant pitch in shopping centre empire

Europe's biggest fintech, Klarna, has struck a deal with America's biggest mall owner, Simon Property Group, that will place the Swedish firm's in-store financing options before millions more American shoppers. "We are increasingly seeing online payment options being repurposed for in-store use, which is a reversal of what we have seen for much of the last quarter of a century," noted David Hickey of Verisk Financial Research. "The advent of e-commerce meant that the payments industry had to engineer ways for traditional payment methods including cards and even cash to be used online, which often proved clunky and unsecure. The current direction of travel is a signal that most payments innovation is now originating from the virtual world."

Retailers continue to face headwinds: having survived the worst pandemic in decades last year, bricks-and-mortar operators are now contending with supply-chain uncertainties, most concretely manifested in dramatic bottlenecks currently gripping major ports in Britain and America. Even as demand fires up again in the West, supply is faltering – to the extent that the fourth quarter's customary borrowing boost may be curtailed as a result.

Australia: Digital uptick in stores as merchants anticipate interoperable QR launch

Australia's banking association has found that debit card usage rose by 17 percent last year while cash withdrawals fell by a tenth. That is translating into new patterns at the POS, with supermarket Woolworths now reportedly finding 90 percent of transaction values coming from digital or electronic methods. Through almost a thousand stores nationwide, the chain is responsible for over a third of the country's spending on groceries. Now, alongside several other leading merchants, it is partnering with domestic scheme Eftpos and a pair of leading lenders (Commonwealth Bank and National Australia Bank) in rolling out a new 'eQR' interoperable QR code system, which backers hope will further transform payments in this market. It is surely helpful for retailers, who are set to garner more transactional data than possible before.

To end, here are links to some other stories of interest this week...

Brazil: Central bank builds mobile payment system with 110m users
UAE: Central bank begins issuing retail payment licences
UK: Radically raised contactless cap leads some to seek lower limit
US: JPM Chase 'will spend whatever we have to' on BNPL

Published here weekly, the Payments News Digest from Verisk Financial Research is also distributed by email: sign up here.

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.

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