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Home » Daily Briefing » Daily Briefing - 06 July 2017

Daily Briefing - 06 July 2017

The EU's dream of wresting control of Euro currency trading from the City will be far from easy to realise. It turns out that London's advantage has a strong infrastructural element: like any good hub, it has all the facilities of a terminus, with electronic highways flowing into it directly. The Financial Times, quoting an ECB study, writes that "financial centres next to oceans have an advantage 'because they are directly connected to the internet backbone, at the expense of landlocked cities like Zurich....By one estimate, cable connections have boosted the share in global turnover of London, the world's largest trading venue, by as much as one-third'." Around eight thousand miles of cables emerge from the sea in the south of England, linking into the city of London. Diverting them to Europe would take a lot of time and money. Add to that the infrastructure built up around the Thames to support the FX market, and another factor that frequently defies ambitious plans for change: institutional inertia. Score one for London.

Well, that was quick. Yesterday afternoon, just a few hours after news that the UK payments processor was the subject of bids, Vantiv announced the takeover of Worldpay. Innovations such as contactless cards have driven increases in volumes of card transactions at the expense of cash, and stories about payment processors are becoming mainstream financial news. The US payments processor will have been warily watching Amazon, which is threatening to overwhelm the entire retail and payments market in the United States — for a start. "Vantiv's acquisition of Worldpay would create an acquiring giant with a global presence," said David Hickey, head of research at Lafferty Group. "Vantiv vies with Chase for the title of world's largest acquirer but it's operations remain very US centric. Worldpay has strong domestic businesses in the UK, Ireland and the US but also has a large e-commerce division with a global focus. The transaction would also give Vantiv access to the European single market in which several of their US rivals are already significant players." Bloomberg notes that as much as half of Vantiv's revenue comes from big chains that have struggled to compete with online retailers. "Acquiring Worldpay is therefore a defensive move against the Amazon effect. It's easier to imagine revenue growth in this business than others, given its global reach, but it will take time."

Lloyds is taking transformative steps with a push to increase digital offerings, move more customers to mobile banking, and redevelop its branch network with more micro-branches requiring fewer staff. Vim Maru, the former head of products, will move to head of retail, and is tasked with integrating cards business MBNA. "Lloyds also made a number of other senior moves, including appointing Juan Colombas, chief risk officer, to the newly created role of chief operating officer," says the FT. "In this position, he will oversee the shift to digital across divisions, including branches. The bank is planning to resize hundreds of branches, for example, into 'micro' versions staffed by only a few people." There's a longer list of the changes at City AM.

Japan's economic heft is such that it occasionally goes off on its own path. While the rest of the world cheers on electric motors, Toyota has stubbornly pursued plans for hydrogen-powered vehicles. When it comes to payments, the country has taken an early positive regulatory stand on bitcoin and is going to double down on fintech. "A report in the Nikkei on Wednesday has revealed that Japan will install a 'testing hub' for financial technology startups and companies to trail new services," writes Cryptocoinnews. "Established by the Japanese Financial Services Agency (FSA), the hub will help enable developers and regulators to understand hurdles in the way of the fintech industry's growth and identify legal concerns that need to be adhered to. Expected to launch this summer, the fintech hub is likely to be the 'precursor' toward a regulatory sandbox — a testing environment commonly seen with fintech-forward countries including the likes of Singapore, the United Kingdom and Australia, among others." The bank association will play a part too: the FSA will be a liaison between fintech businesses and the Japanese Bankers Association.

Lafferty Thought Leadership's next publication Social Media in Banking looks at the convergence of banking and the world of online social media and messaging services, so it's worth taking a look at this story from the Financial Brand, which lists banks with the greatest number of likes on Facebook. Notably, several of the world's biggest banks — the Chinese state-owned banks — are absent from the list, letting Indian bank SBI earn first place on the list. Indeed, Indian banks dominate the numbers in the top ten — Nigeria figures strongly too, with GT Bank among the top three.

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