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Daily briefing - 22 November 2018

Last year, observing the progress of Amazon and Amazon Pay as the e-commerce giant strengthened its run of brick and mortar acquisitions, we wondered how long before the digital wallet also made the leap out of the digital and into the physical. Reports this week suggest that is about to happen, with unnamed sources floating the story in the Wall Street Journal that Amazon Pay will begin working with gas stations and other merchants that won't see Amazon Pay as a direct threat. For many small and medium retailers, Amazon is a direct challenge to their business, even though many also work with the e-commerce behemoth. "The report claims Amazon is particularly interested in offering Amazon Pay in Asia, where digital wallets are popularly used. The sources also claim Amazon is keen on deploying its digital wallet in the United States, hoping to get consumers to adopt its option while competitors are still rarely used by consumers. Assuming the report is accurate, Amazon is reportedly willing to offer merchants lower payment processing fees than competitors, among other things, in hope of luring in customers. Specific stores allegedly targeted by the company weren't disclosed." With Amazon already offering merchant lending, will we now see Amazon extend credit at the point of sale, online and offline?An almighty rumble is brewing between three financial powerhouses, one a global bank and the other two sovereign wealth funds. Abu Dhabi sovereign wealth fund International Petroleum Investment Company is suing Goldman Sachs, accusing the investment business of bribing its officials. The charges revolve around manipulation of Malaysia's 1MDB fund, which issued around six billions in bonds that were guaranteed by IPIC. When the 1MDB fund defaulted, IPIC was on the hook, and the Malaysia government agreed to refund the IPIC for its losses. A new government then ruled out making the payment. "The long-running 1MDB scandal, in which high-ranking Malaysian officials including former prime minister Najib Razak have been accused of helping loot $4.5bn from the government fund, has spread beyond the country's borders, ensnaring officials and executives around the globe," writes the FT. The IPIC filed the suit in New York on Wednesday. Goldman Sachs denies the charges. UK challenger bank Monzo is the latest of the new breed to take aim at the underserved UK business banking market. It will join Starling Bank, Metro, CYBG and Santander in competing for a chunk of the £775 million fund that has been set aside as part of the rescue of RBS, under the aegis of the comically-named Banking Competition Remedies. Monzo, which say it has 800,000 customers, has focused to date on consumer banking. "Chief executive Mr Blomfield said Monzo hoped to launch a business account that integrated with payroll systems and accounting software, which would primarily be aimed at digital businesses that did not process large amounts of cash. Monzo would be less likely to refuse to open an account for a business without a good credit history, he added. 'Any business that is newly incorporated has no credit history,' said Mr Blomfield, adding that banks that refused to open accounts for this reason were 'acting as a brake on entrepreneurs'". One part of the fund is available to encourage switching but it appears that part will only go to banks that already offer business banking.Starling hires Helen Bierton as head of retail bankingLAFFERTY BENCHMARKINGGoldman Sachs scored two stars, and RBS scored three stars, in the 2018 Lafferty Banking 500. The maximum score is five stars.

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Daily briefing - 21 November 2018

Does success beget success for whistleblowers? Can one honest person take down an entire organisation? Yes — and there's a new trend following that too, which is class action or group action lawsuits being taken against banks. Today the Danske Bank whistleblower Howard Wilkinson will address the European Parliament, as solicitors Danish NĂ©meth Sigetty prepare to take a group action lawsuit funded by US, German and Dutch firms which have already earned multibillion dollar payouts from Volkswagen and Petrobras. "The law firms involved in the coalition include Tilp, the German group behind a $10bn investor lawsuit against VW for its emissions scandal; Pomerantz, the US group that secured a $3bn settlement against Petrobras; Lieff Cabraser Heimann & Bernstein, which reached a $10bn civil settlement with VW; and Lemstra van der Korst, a Dutch firm active against Petrobras and Royal Dutch Shell," reports the Financial Times. "This is the A-team of law firms you could assemble, and rightly so because it's the biggest money-laundering scandal ever seen," said Peter Hanssen, an expert on class actions that is helping process the claims for the coalition of law firms. UK digital bank Tandem returns to the East for funding, with Hong Kong's Convoy Capital announcing its acquisition of a key stake in the bank. The amount is currently undisclosed, but Convoy will allocate $64 million in capital for a virtual bank operating out of Hong Kong. "We believe the investment from Convoy, which will be a significant shareholder at Tandem, will help our company to expand in Asia," said Ricky Knox, founder and chief executive of Tandem in an exclusive interview with the South China Morning Post on Tuesday. Referring to last year's turmoil at Convoy, which ended in the arrest of senior executives, Knox said: "We have conducted our due diligence and we believe the ICAC and SFC investigation is related to the misconduct of certain pervious management and has nothing to do with the current management. A previous deal between Tandem and the Chinese-controlled House of Fraser group fell apart in 2016 and resulted in Tandem losing its banking licence. "Convoy president and executive director Ng Wing-fai said the company would allocate HK$500 million (US$63.84 million) as working capital for the virtual bank should it receive approval from the HKMA," reports the South China Morning Post. Mr Ng said Tandem would target customers in Indonesia, Malaysia, Philippines and other Asian countries.The potential for apps to turn into multifunctional wallets is a major trend in 2018, with services such as Uber and Grab evolving into food delivery services and other services, and investors hoping to see a Tencent-like platform evolve from one of these. Middle East ridehailing app Careem, which has engaged in a high-profile battle with Uber — and with taxi drivers in the UAE often driving for both apps — will seek fresh investment from China, according to a Reuters report. "Earlier this week, it was reported that CICC and Jefferies, the New York investment bank, were acting as advisors to Careem on its potential capital-raising strategies," according to pymnts.com. "There was talk of a potential deal with Uber in the Middle East. Careem already has Daimler and Didi Chuxing as backers of the startup, which compete against Uber in the Middle East. It said in October it had raised $200 million in funding from investors that had already backed the company. Reuters noted Careem has a valuation of higher than $2 billion." Will Nigeria make life easy for fintechs?LAFFERTY BENCHMARKINGDankse Bank scored a three-star rating in the 2018 Lafferty Banking 500 research. The maximum score is five stars.

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Daily briefing - 19 November 2018

The Global Legal Chronicle reports this morning that Tencent is investing a further $90 million in Brazilian fintech Nubank. "This brings the total amount of funding raised to $420 million over seven funding rounds since Nubank's launch in 2013. Tencent is one of the world's biggest companies by market capitalisation and operates digital services including mobile games, e-commerce, online payment systems — including WeChat, a Chinese messaging app with more than a billion monthly active users." Nubank offers a fee-free credit card to more than five million users. The card is supported by an app. Tencent has previously backed the German challenger bank N26, and appears to be building a portfolio of investments in challenger banks. Sometimes news arrives from the US that forces us to check the publication date in case it's been lost in the post for ten years. When we checked, we saw that "JP Morgan Chase and Visa are rolling out contactless payments to millions of the bank's cardholders starting later this year, including debit, credit and co-branded cards, according to a blogpost from the card issuer and company release from the bank," dated from November 2018. "Starting later this year, Chase customers receiving their renewed cards or being issued a new Visa card will get the contactless Tap to Go capabilities in their new cards, starting with Chase Freedom Unlimited and Chase Slate customers." Better late than never. Such is the bad faith between the UK's revolving Brexit minister and EU's Brexit negotiator Michel Barnier that Barnier's offer on Sunday to extend the transition period to 2022 is being looked at with horror by the UK's Brexiters. Brexiters see it as a guarantee that the UK will continue to pay £10 billion per annum while continuing to have free movement of people in and out of the country but no say in EU affairs. The catastrophic state of affairs within the Conservative party saw five of Theresa May's top ministers agree to support her over the weekend. That support is being offered in the form of re-writing the agreement that was agreed a few days earlier. The UK's business secretary Guy Clark cautiously welcomed the proposal as one way to avoid the backstop. "Mr Clark confirmed on Monday morning that if a full UK-EU trade deal was not in place before the end of December 2020 -- when the transition is due to end -- his preference would be to extend the transition, rather than use the contentious "backstop" plan, intended to avoid a hard border in Ireland. The backstop would include a customs arrangement for the whole UK but it would not give full frictionless access to the single market; businesses would still face checks for regulatory compliance at the border and more paperwork."Danske Bank's whistleblower is just getting startedLAFFERTY BENCHMARKINGJPMorgan Chase scored three stars in our benchmarking report. The maximum score is five stars.

Featured Articles

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Monday 12th November @ 9:54am

American Express will be the first international card scheme to gain a settlement and clearing licence in China. "The card scheme has formed a joint-venture with China's LianLian to build a network business that will enable charges on American Express branded cards to be cleared and settled domestically by the joint-venture," according to Finextra...MORE

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Wednesday 7th November @ 9:27am

Is Michael Jordaan, former chief executive of FNB, trolling his competitors? This week, he tells MoneyWeb that his new bank will have zero fees and won't do any lending. "There is a massive amount of software that is available for free," Jordaan tells Moneyweb, explaining that his new venture Bank Zero — which he co-founded with former FNB Head of Retail Yatin Narsai — won't even have a website, just an app...MORE

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Tuesday 6th November @ 12:48pm

Barclays fared worst of the 48 European banks tested in the ECB's latest stress tests. The results of the test, according to Bloomberg, underscored the vulnerability of UK lenders to "weak growth, credit losses and Brexit", and won't help Jes Staley and his plans to boost returns to shareholders. "Staley has previously said he's wary of the risks...MORE

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Friday 2nd November @ 9:50am

A terrific story from Reuters this morning is going to cause ructions for US business Mastercard. The payments company will be digging in for a losing battle after Reuters got sight of a note showing that Mastercard complained to the US government about Indian protectionism and nationalism because India's RuPay...MORE

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Wednesday 24th October @ 8:42am

Just because we're interested in the function of decentralisation and digitalisation in finance doesn't mean we think it's the answer to everything. Yesterday we noted Barry Silbert's counter-intuitive reasoning on digital currencies and decentralisation. Aditya Menon, a member of Lafferty's Banking Fintech Council Advisory Board...MORE

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Tuesday 23rd October @ 10:59am

Lending is going digital, from the foothills of Kilimanjaro to Beverly Hills, as banks and non-bank lenders compete to offer quick and automated unsecured loans. Players are entering the market from all directions, ranging from global banks to payments businesses. Take Paypal, which has been building out an infrastructure that includes its recent acquisition of card...MORE

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