The big global schemes have been understandably careful about any disintermediation possibilities thrown up by new technology and regulation. When it comes to the European market, this means APIs on the one hand and the revised Payments Services Directive (PSD2) from the European Union on the other. The API access to bank accounts at the heart of PSD2 is the clearest threat yet, capable of bypassing the traditional card-based rails altogether to make payments at merchants directly from one's bank account.
That prospect has made a compelling M&A target for Visa of the Tink platform, which connects to thousands of banks potentially serving more than a quarter of a billion bank customers. Less than a decade old, the Stockholm-based firm is active in 18 European markets, but such is the power of its tech, packs a large punch for a comparatively small operation run by a staff of 400. The deal is reportedly worth €1.8 billion ($2.2bn) and will see its executive team, branding and location unchanged. The only question now is whether EU antitrust regulators will scupper the deal; after all, Visa's planned takeover of Plaid, an API-services provider in the US, fell at that same fence in January.
A key feature of the Venmo P2P platform, a Millennial-pleasing success over the last five or six years in the US, is the fact that the service is free for those who do not have a business account. Still, this is big business: payments volume on the platform came to $51bn in the first quarter. However, with goods and services increasingly being sold through Venmo by freelancers and content creators, owner PayPal has decided to give senders the option of identifying business-related transfers, enticed to do so perhaps by gaining additional purchase protections where applicable.
The sellers will certainly feel the difference too, with a charge of 1.9 percent plus ten cents being subtracted on the way. In another revenue-impactful change, instant transfer fees using PayPal rise by half to 1.5 percent, with the maximum fee now up by the same proportion to reach $15. The minimum fee is unchanged at 25 cents. The company has also added QR codes compatibility in its Australian market, such that bricks-and-mortar merchants can now accept payments from its wallet by displaying the code.
The Bloomberg headline emphasises soaring operational costs, especially for new staff, but full-year results from London-headquartered Revolut show that its customer base rose by almost half in 2020, reaching 14.5 million people. Its commercial services did even better, doubling business users to over half a million. However, mounting a revolutionary action in banking is an expensive business. So the company has been taking on new staff and burgeoning compliance responsibilities, thus ballooning its losses to $280 million for the year. Such burdens have sometimes been too onerous: three months ago, Revolut decided to leave the Canadian market, perhaps, it has been suggested, because the regulatory and commercial climate for challengers is not favourable enough.
In the United Kingdom, which has been trying for years to foster a challenger culture, the Financial Conduct Authority recently told the new breed of e-money licence-holders to remember they were not actually banks – and to remind their customers in turn of that fact. (Revolut has a banking licence in the European Union, though not yet in Britain, where an application has been filed.) "Revolut is determined to grow, but only where it will count", commented Lorna Baek of Verisk Financial Research. "These costs are necessary to the firm's longer-term strategy and will see it focused on markets where its business model works best."
To end, here are links to some other stories of interest this week...
Europe: Payments fintech Mollie now valued at $6.5bn
Germany: Deutsche and Fiserv announce acceptance JV
Global: CBDCs now seem a matter of when not if
India: Paytm plans to raise up to $3bn in listing
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.