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Home » Daily Briefing » Daily briefing - 08 May 2017

Daily briefing - 08 May 2017

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If there is one remarkably underserved market in the world when it comes to credit cards, that market is India. But that situation is about to change, and dramatically, as the latest in a series of ambitious projects emerging from Delhi hits the headlines. RuPay, the domestic scheme launched in 2012, has long had an eye on the credit cards opportunity in a country that will be the most populous on the planet in less than a decade. Now the chief executive of RuPay parent National Payments Corporation of India (NPCI) has told the Times of India that "our credit cards will be launched soon. These would be RuPay credit cards. A pilot is going on with five banks.". The point-of sale infrastructure is in the process of being dramatically expanded, doubling in the last six months, and international acceptance is also in the works. RuPay has already proven its ability to break open the market: over 300 million RuPay debit cards had been issued by the end of 2016. As Sriram Natarajan, COO at Quatrro Global Services, puts it: "A huge market for credit cards is going to open up with a bang. Today India, at 29 million holders, has fewer credit cards than Hong Kong."

Meanwhile the Russian cards network, Mir, has also announced plans to expand its network: according to the state-controlled news agency in Moscow five million Mir-branded cards have been issued to date. That will change however, at least if state employees enjoy getting paid: to receive their wages after July 2018, they must sign up for the domestic network.

Although the nationalist wave in the West suffered a distinct setback yesterday with the rejection by French voters of the far-right Front National party, Turkey's newly emboldened strongman leader, Recep Erdo─čan, is now reportedly pushing ahead with securitisation of bank loans, among other measures, to boost short-term growth — along with his own personal popularity. Lafferty macroeconomics specialist Patrick Houlihan notes: "Securitising the loans and fiddling with the pension funds are ways to increase credit. Although, at one level, a political gimmick, it is true that banks throughout the West have been doing this for some time. Turkey, as a developing country, wants to raise the ceiling on credit growth, which has reached the natural limit that consumer deposits can produce. Sub-prime loans were a huge part of the last crisis in the US, but what really caused damage was the securitisation of such loans — not only were they a way to raise cash, more importantly, they were a way to get problem assets off the balance sheet, thus enabling further credit growth. However, the danger is that the counterparty might not know that these assets are sub-prime, which is a sub-optimal scenario, and stores up trouble for the future. But that isn't the bank's problem anymore."

The hottest ticket in town at the weekend may well have been the Berkshire Hathaway annual meeting: 40,000 people attended. Could there be more of a contrast with certain bank meetings we have reported on in recent times? The contrast with Wells Fargo, for one, is striking. If only Wells had had the same internal hotline for reporting potential misbehaviour that Warren Buffet's 367,000 employees have access to — and, he revealed, avail of four thousand times a year. With characteristically winning candour, Buffett told his audience in Nebraska: "If there's a major problem, the CEO will get wind of it. At that moment, that's the key to everything. The CEO has to act. The main problem was [that Wells Fargo executives] didn't act when they learned about it." Nonetheless, the Sage of Omaha has chosen to support the current board and management, paving the way for their reelection a few weeks back. The bank is drawing up plans for further cost cutting measures, in a bid to save up to $3 billion, report the Financial Times

Italy's bad debt problem refuses to go away [FT paywall]
Westpac meets first-half profit expectations [FT paywall]
Square launches debit card
Bank of England says number of banknotes in circulation is increasing

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