Nexi has concluded an agreement to buy Nordic player Nets for $9.2 billion. The latest acquisition will see Nexi become the largest payment company by volume in Europe, providing access to Northern Europe's advanced digital payments market, in addition to Nexi's central and eastern European exposure. The deal was finalised a mere month after Nexi's agreement to purchase local rival Sia in a deal worth $5.4 billion. The strategic procurement of competitors by Nexi is the latest in a run of consolidations that have been occurring across the payments industry in a bid to create pan-European payment giants, largely pushing banks to the sidelines of the business. With much growth potential in the digital payments market yet to be realised – around half of all transactions are still cash-based – the flurry of M&As may not be over.
At the onset of the pandemic it might have been expected that consumers would increase their reliance on credit cards, but stimulus cheques along with unemployment benefits have kept the wolf from the door while typical credit card spending opportunities have largely evaporated. Thus consumers have been well positioned to pay down credit card debt and have opted to do so to a significant degree. With spending on restaurants, entertainment and travel limited, the Financial Times reports that card loans are down $100 billion since before the pandemic and new account openings are also in decline at almost 50 percent lower than in 2019. The Fed similarly reported in October that balances have been dropping over the last six months and revolving credit card debt is at its lowest level since 2017. The result has been falling card revenue for banks and little relief in sight as consumers seem hesitant to splash out even during holidays. It remains to be seen whether the holiday period will offer enough of an inducement to return to swiping.
A temporary Covid-19 reprieve has been withdrawn as Lloyds Banking Group puts back into action its plan to close 56 of its branches, impacting some 160 jobs. The closures are largely in response to a shift of customers to digital channels but are also indicative of a global trend responding to changing customer habits and vital reductions in operating costs. The press is full of news of European branch closures : Santander plans to close almost a third of its branches in Spain, Sweden's Handelsbanken announced it will halve its network and even the branch stronghold of banking in Europe – France – is facing mergers and subsequent branch closures as the pressure piles on. Do closures come as any surprise with behavioural shifts such as Britain's NatWest going from 100 to 9,000 video banking calls a week in just nine months? However, there exists a glimmer of hope as Jose Garcia Cantera, Santander's CFO, points out that branches will continue and merely the nature of them will shift away from transactional.
Low interest rates and the economic impact of the pandemic is pushing the trend for bank consolidation in Spain with BBVA and Sabadell announcing this week that they are in talks to create the second-largest banking force in the country. This news comes on the heels of CaixaBank and Bankia's agreement to merge to create the country's largest bank by market share and Unicaja and Liberbank also re-entering talks to create Spain's fifth-largest lender after negotiations previously failed in 2019. These moves are part of a wider consolidation of the Eurozone banking system, which has continued in fits and starts over the past decade, especially in Southern Europe. Patrick Houlihan of Verisk Financial Research notes that "Spanish institutions are probably acknowledging the likelihood of a Covid-related uptick in impaired loans, which will add to those left over from the last crisis, necessitating stronger balance sheets".
The Central Bank of Brazil has launched its long-awaited instant payments platform Pix, quickly attracting 72 million registrations for the service. The platform allows consumers and companies to transfer money via smartphones, online banking and ATMs 24/7/365 and will be free of charge for individuals, while merchants will not face charges for the first six months. It is expected and hoped that the launch of the platform will increase competition in Brazil's extremely concentrated banking system. As a result, Facebook has expressed interest in relaunching its WhatsApp payment function after having its operations suspended by the central bank in June. The imminent arrival on the scene of third-party payment providers like WhatsApp, coupled with the emergence of the new payments platform, will undoubtedly place pricing pressures on the domestic banking status quo.
To end, links to payments stories of interest this week...
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.
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