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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.

Daily briefing - 12 November 2018

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. Previously, foreign card businesses have had to partner with UnionPay for access to the country's payments network. "The opening up of the market comes as China bids to mend fences with Trump's Government in the US and follows almost a decade of lobbying by US-based payment schemes." Mastercard and Visa are still waiting on their licences. What kind of signal is China sending? With the shift in economic heft to the East, there is now speculation that in the next decade, China will displace France as the world's biggest tourist destination. China would clearly like to see Amex-wielding tourists at the head of the queue. Two years ago, Lafferty News warned that only two banks out of 100 selected for our benchmarking project dealt with climate change in their strategic outlooks in their annual reports. This weekend, Finland's central bank governor Olli Rehn warned that banks will have to take risks caused climate chance into account. "For a banker or any financial institution, climate change poses physical risks, such as extreme weather... and the debt servicing ability of a borrower or their credit quality may be affected," he said, according to the FT. Notably, both of those banks — Denmark's Ringkjøbing and Turkey's Garanti Bank were among the four-star contenders. Yet Mr Rehn's intervention on climate change may be overshadowed by his comments on big tech and finance. As banks move much of their tech infrastructure to cloud-based services, regulators are questioning the wisdom of a handful of companies including Amazon, Alibaba, Google and Microsoft supplying cloud infrastructure to banks while also becoming significant players themselves in financial services. "His remarks could also signal a new front in the tussle between European authorities and US tech groups, which are already being subjected to intense scrutiny by EU competition authorities and moves to extract more tax from their European operations. When asked whether the ECB was considering regulating big tech groups that have moved into financial services, Mr Rehn said: We see big tech is moving in there,' adding that it was 'currently a matter for discussion among financial supervisors'."HSBC plots return to Brazil as new chief targets growthLAFFERTY BENCHMARKINGGaranti Bank scored four stars and HSBC and Spar Nord scored three stars in the 2018 Lafferty Banking 500. The maximum score is five stars.

Daily briefing - 07 November 2018

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. "And the hardware costs much less than the existing banks pay to maintain their legacy systems. Our technology costs will be 1% of 1% of the usual tech budgets. This is the challenge that start-ups — not just banks — pose to big established businesses." Mr Jordaan tells Moneyweb that Bank Zero will focus on "business market, individuals, families and communities", leaving corporates to the existing market. Significantly, BankZero will not do lending. "The real need in South Africa is not for more lending. We should all be saving more. We are on a bit of a crusade. So we want to give people the ease of transactability on a smartphone, but with competitive deposit rates." BankZero is expected to launch in mid-2019, bringing more competition to the South African banking market. Digital credit scoring app Credit Karma is expanding into the UK market through the acquisition of UK credit scoring app Noddle, which claims four million users. Noddle was founded in 2011 and was previously owned by US credit scoring business Transunion. Credit Karma, founded in 2007, has 85 million users in the US. "'We've had a lot of success with our business model in the US and are ready to take that overseas,' Nichole Mustard, cofounder and chief revenue officer of Credit Karma, told Forbes ahead of today's announcement. 'We''ll aggressively scale our technology to provide many of our services that are so popular in the U.S. to our new members in the UK, plus explore more products tailored to their financial needs'"."If there's a revolving door between Wall Street and Washington, Citigroup's new board member, John Dugan, is on a regular tour," writes The Street. Washinton law firm Covington & Burling was home to Eric Holder, between his stints as Clinton-era Deputy Attorney General and Obama-era Attorney General. Under Obama, he proceeded to implement a policy of not prosecuting financial institutions, declaring them too big to prosecute without imperilling the financial system. He departed government in 2015, back to Covington & Burling, prompting Matt Taibbi of Rolling Stone to pronounce Holder's revolving door as the biggest ever. Well, step aside, Eric. John Dugan moved from the US Treasury Department to become head of the Office of the Comptroller of the Currency under George Bush Jr in 2005, overseeing Citi and other banks that were drilling into the subprime market. He stepped down in 2010 and went on to Covington & Burling. "Then in October of this year, the circle was closed when he was tapped by Citigroup to serve on its board of directors, where he'll get paid about $300,000 annually for attending roughly six meetings a year. That amount is almost twice the $162,900 salary he was making in his full-time job as Comptroller of the Currency. (Profits per partner at Covington & Burling are typically at least $1 million a year, according to the publication"LAFFERTY BENCHMARKINGCitigroup scored three stars in the 2018 Lafferty Banking 500 report. The maximum score is five stars.

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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

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

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

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

Monday 22nd October @ 2:33pm

It's fair to say that we've moved from a broadcast work (think television and radio) to a narrowcast world (think email, Youtube and podcasts) and the precision deployment of technology in agriculture is a good example of this. Our recent Retail Banking Council Africa in Lagos brought together several partners working up and down the financing of the agricultural supply chain, with the head of agricultural financing of one of our member banks leading a panel that...MORE

Friday 19th October @ 10:57am

The new Lafferty Banking 500 has some head-turning results on the big US banks: Wells Fargo, Morgan Stanley, Goldman Sachs, JPMorgan and Bank of America each scored 2 stars on our 5-star band, with Citi scoring three stars. Those are the scores of troubled banks, not champions. Ahead of the US midterm elections, the incumbent Republicans are banging the gong that the economy has never been doing so well. We've reported on the increase...MORE


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