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Daily briefing - 14 January 2019

Is this how the West ends? Indifferent? When even hanging on in quiet desperation is too much effort? Tomorrow the UK government will try to get the Brexit withdrawal agreement approved by Parliament. UK Labour leader Jeremy Corbyn is making noises about a no confidence vote leading to an election and then on to a second referendum. The issue of reconciling trade agreements and maintaining open borders has sunk the British attempt to exit the European Union. Now the best that Theresa May can manage is to show her MPs some non-binding letters of assurance from Jean-Claude Juncker, who appears unmoved at the UK's imminent departure. But sympathy is in short supply. Reporters are finding that UK voters are now actively annoyed by the whole Brexit saga, and just want it to be over. Visiting a BMW plant in the UK Midlands, Guardian reporter John Harris notes that "questions about Brexit being met with an exasperated indifference, as if it were something in which people are barely interested." (The Guardian story ends with a quote from Pink Floyd's Time: 'Hanging on in quiet desperation is the English way.')Meanwhile, among the sticking points in trade negotiations between China and the US is the question of allowing Visa and Mastercard to process renminbi-denominated cards in China. (Currently they work with international cards for Chinese banks.) According to insiders quoted by the FT, China has not only failed to issue domestic licences to Visa and Mastercard — as required by a WTO ruling from 2012 — but the People's Bank of China has not even acknowledged receipt of the applications more than a year after they were made. In the intervening years, China UnionPay has grown to more than a third of the global payments cards market, ahead of Visa or Mastercard. Last year Amex won approval to operate in China but in a joint venture with a local business. Of course, the US has lately been minded to block Chinese acquisitions such as Alipay's thwarted attempt for Moneygram, along with the latest rumblings about Huawei. Fintech firms are chomping at the bit to get access to the US Federal Reserve's toolbox of payments and settlement services as the Fed considers what access to offer to non-banks in order to drive competition in the finance business. "Many Fed officials fear these firms lack robust risk-management controls and consumer protections that banks have in place," writes Reuters, leading us to wonder what the Fed is thinking at all. Fearing that fintechs could cause the next crisis seems wildly improbable, considering the lack of actual bank reform that has happened in the last decade. "They probably do want access to the payments system, but they don't want the regulation that would come with that access," St. Louis Fed President James Bullard told Reuters in November. "I am concerned that fintech will be the source of the next crisis," he added. Not a million miles different than the Chinese after all then, eh?

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Daily briefing - 11 January 2019

Two years after the Wells Fargo cross-selling scandal gave the bank's reputation a beating, what has changed at one of America's favourite banks? "Despite huge fines, a congressional mauling and public apologies, employees at the 166-year-old bank claim little has changed. "It doesn't feel like they've changed much of anything, to be honest," Meggan Halvorson, a Wells Fargo private mortgage employee for six years, told the Guardian. "Things put in place don't seem to be doing much of anything and we still hear complaints from customers." It's often reported that changing the culture of an organisation is not easy, and is time-consuming. But Halvorson says there's no real respect for people's work-life balance at the company. "The overwhelming thing you hear from management is: 'Just be thankful you have a job.'"So much for changing bank behaviour. But we have regulators for the purpose of reigning in excess. Has the behaviour of regulators changed in the UK? The Financial Times reports today that the FCA appears to be taking a robust approach to an investigation of corporate culture at Royal Bank of Canada, following allegations that whistleblowers were dismissed or disregarded. "The UK's City watchdog has begun a full-blown investigation into the working culture at Royal Bank of Canada in London after dozens of former employees complained over their treatment, several people familiar with the matter told the Financial Times." Comments below the article suggest that disenchanted City workers are practically queueing up to speak to any regulator willing to listen. RBC received a rating of two stars in our 2018 bank quality benchmarking report. The maximum score is five stars. The Kenyan Central Bank has approved the new loan offering by Safaricom's M-Pesa, which will allow Kenyans to tap a lending facility provided by CBA Bank. The scheme, which was announced in November, will offer short-term loans of up to 90 days. The "facility fee", in reality an interest rate, is set at 0.5 percent daily. Demand for the service is expected to be significant: Michael Kimani at kionecki.com calls it "a credit card on the phone". "According to the Safaricom, 58% of all daily M-Pesa transactions fail due to insufficient funds," reports Techweez. "Fuliza's aim is to solve this issue. The overdraft facility will only apply to Lipa na M-Pesa transactions, ie, PayBill and Buy Goods." The loans will not be available in cash. CBA is already the major partner of Safaricom, providing popular short-term emergency loans through M-Pesa.Nigerian bank Keystone announced this week that its app would be available to users with no data requirements. However, it's worth remembering — as pointed out frequently by Niti Bhan — that most subscribers to mobile services in Africa are pre-paid — and that the prepaid and overlapping informal economies are in fact the dominant economic modes. As such, paying attention to the growth of sub-$50 smartphones and the search for the most efficient data services is full-time work. A recent study showed that Whatsapp uses the least data of over-the-top messaging services, and we've highlighted the success of Whatsapp as a banking tool in Africa and India. Keep eyes on this space. Africa's 50 most funded tech startups in 2018 raised $618 million

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Daily briefing - 10 January 2019

Weird things are happening in the world when German banking licences are suddenly the rage. And while London continues to attract the lion's share of fintech investment in the UK and in Europe, the German capital is stealthily becoming a fintech champion. This morning German fintech-turned-bank N26 announced a $300 million investment round led by Singapore fund GIC and New York's Insight Ventures. The new injection of money will value the business at around $2.7 billion, making it the most valuable fintech business in Europe. "While it's hard to top the incredible year we had, 2019 is also starting off on a high: We have closed our Series D funding round with an incredible $300 million," said the co-founders Maximilian and Valentin Stalf. "This figure represents the largest private equity financing round for a fintech business in Europe in recent years. With a valuation of $2.7 billion, it also makes N26 one of the most valuable technology startups around the world." Chief executive Valentin Stahl told the FT that the business is still lossmaking but is making money on a per-customer basis. "Mr Stalf also said about 30 per cent of UK users had signed up for the bank's premium account, which charges a £14.90 per month subscription fee and offers a metal debit card, plus perks such as travel insurance, discounted hotel bookings and WeWork membership."Meanwhile, the UK's big banks are queueing meekly for German banking licences. RBS already has a Dutch licence and applied for a German banking licence in December to help expand its German operations. "Lloyds Banking Group is to set up three subsidiaries in Berlin, Frankfurt and Luxembourg, while Barclays is expanding its Dublin office," the BBC reported. "Under the plan, RBS will upgrade its current branch in Frankfurt with a new licensed unit. It will be responsible for processing and settling euro-denominated payments and offering loans to large German companies. It would also allow RBS to maintain its ties to Germany's central bank and continue benefiting from passporting rights that give financial services firms cross-border access to EU clients."But Berlin's not about to outpace London anytime soon. Data compiled by Reuters suggests that London remains a premiere destination for fintech investment capital. "Eileen Burbidge, a partner at venture capital firm Passion Capital, said London was the leading hub for financial technology thanks to its position as one of the world's biggest financial centres, while its universities helped to create companies offering artificial intelligence (AI). 'We get a lot of calls and inquiries from investors in the U.S. and Asia looking for fintech opportunities,' she told Reuters. 'In fintech, AI and a few other sectors such as life sciences and robotics, London genuinely leads the world.'" Its lead in fintech remains strong — though we anticipate that China will catch and overtake the UK in all things AI-related. "In Britain as a whole, investment in AI rose 47 percent to 736 million pounds while 1.2 billion pounds went into the booming fintech sector and companies such as digital banks Revolut and Monzo," reports Reuters.

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