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The latest round of quarterly earnings reports from the payments industry in the United States continues to show encouraging card-spend performance in the opening three months of the year, belying fears of a tumble in consumer confidence. No doubt the burgeoning supply-chain issues and proliferation of unforeseen consequences from Russia's ongoing invasion of Ukraine will have more of an impact on second-quarter results, as will inflation. For now though, Mastercard will be happy to celebrate cross-border volume up by over a half on the recovered appetite for travel. Two days earlier, Visa reported a 38 percent rise in cross-border volumes for the quarter, with a 17 percent increase too in payment volumes. American Express also reported a healthy bounce-back in cardholder spend, with three million new proprietary cards added; in its largest spend category, goods and services, spend was up by over a fifth. For all three networks, customer engagement costs have risen, which was also the case for issuer Capital One, which has continued its energetic marketing push into 2022, having spent almost a billion dollars on that customer-acquisition strategy last year.
On the issuing side, results from British lenders were mixed as two major players, Lloyds and Barclays, saw consumers reacting to the cost-of-living crisis by cancelling subscriptions for gyms and streaming platforms. Spain-headquartered giant Santander reported a profits rise for its European operations of 30 percent: not easily done in a low interest-rate environment, but the bank has resolutely pursued efficiencies in recent years. Across the Atlantic, Goldman Sachs is continuing its push into Main Street as it begins trials of a planned current account offering, using its more than 20,000-strong staff as a test base. The move, which should culminate in the bolstering of mass-market contender Marcus, is being closely watched by banks such as Wells Fargo and Chase that, in the past, would not have had to compete so directly with the Wall Street investment giant.
Fabio Panetta of the European Central Bank told an audience at Columbia University this week that central banks cannot afford to indulge their innate conservatism for much longer as the advantages of digital money become more evident to consumers. The solution to their growing demand in this regard is not difficult, argues Mr Panetta: as well as movement on CBDCs, cheap and immediate payment systems would help to stave off a mass influx into riskier assets such as stablecoins or their unpegged rivals in the crypto realm.
As though in response, less than 72 hours after Mr Panetta delivered his remarks, two dozen financial institutions on either side of the North Atlantic, led by EBA CLEARING, SWIFT and The Clearing House, announced a pilot IXB (Immediate cross-border payments) service, with plans being laid for a full service launch next year. Participating North American lenders include Bank of America, JPMorgan, Toronto Dominion and Wells Fargo, while the 16 European banks involved include BBVA, BNP Paribas, Crédit Agricole, Deutsche, HSBC, Intesa Sanpaolo and UniCredit.
Meta (parent company of Facebook) just cannot seem to catch a break when it comes to payments: in the latest difficulty, acquirers are reportedly baulking at the modest level of WhatsApp's proposed merchant fees in Brazil, a key market that has demonstrated a huge appetite for mobile payments. Another stumbling block is the not-so-small contractual matter of legal responsibility . "The problem isn't technical," an unnamed source told the Financial Times. "It's contractual. The infrastructure is all ready." As Argus Advisory Research's market report for Brazil details, technology has transformed this market during the last decade, especially when it comes to retail payments.
The infrastructure is ready too in another emerging market of keen interest to Mark Zuckerberg: India. However, the difficulty here has been a government cap on WhatsApp's usage of the underlying infrastructure. Now, with that cap lifted from 40 to 100 million users, WhatsApp is rolling out cashback offers that are almost certain to appeal to those choosing an app-based solution for their P2P and bill/toll payment needs. By the end of next month, up to three P2P transactions made by a single user, no matter how small, could trigger up to $0.40 (33 rupees in local currency), with no minimum amount being required. The tactic, which worked like a charm for Google when it was building a presence for its service, certainly seems in order given WhatsApp's latest monthly share of transactions on the local system: 0.04 percent. Although the cashback amounts may seem small, in Google's case they later rose to as high as $50 according to TechCrunch, and with WhatsApp eyeing up a potential market of half-a-billion new users, the expense could be considerable, though commensurate with the scale of ambition involved.
Other stories of interest this week...
Global: Mastercard and Microsoft refresh ID solution for e-commerce
US: CFPB to revisit rules around credit card fees, abuses
US: PayPal and Venmo to increase instant transfer fees
US: Payroc acquires payments provider Worldnet
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The Weekly News Digest from Argus Advisory Research highlights significant developments 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 often missing from the rolling news cycle.
About Argus Advisory 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 2025 – our unique datasets cover countries around the world and feature more than 250 metrics per market.