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Home » Daily Briefing » Daily briefing - 09 August 2017

Daily briefing - 09 August 2017

Here's a masterclass in obfuscation from Commonwealth Bank of Australia (CBA), which cancelled bonus payments for its chief executive, Ian Narev, following allegations that the bank had been used in serial incidents of money laundering. CBA says that the incident has damaged the bank's reputation, leading to the withholding of bonuses. A Royal Commission, which would have powers to question witnesses and to examine internal documents, has public support. According to Reuters: "The bank is accused of systematically failing to identify, monitor and report suspicious transactions totalling over A$77 million [$61m], and failing to act promptly on police instructions to suspend suspicious accounts. Narev has played down the allegations, blaming most of the breaches on a software issue that was fixed as soon as it came to light." Here is the bank's actual statement explaining away the breach: "Following the [2012] software update, a coding error occurred which meant the [Intelligent Deposit Machines] did not create the TTRs [Threshold Transaction Reports] needed. This error became apparent in 2015 and within a month of discovering it, we notified [the authorities], delivered the missing TTRs and fixed the coding issue. The vast majority of the reporting failures alleged in the statement of claim (approximately 53,000) relate specifically to this coding error."

"I feel like now that I have a phone, I exist," says Ilphaz Khan, a station porter in New Delhi. Mr Khan appears in a short video on the Wall Street Journal website that accompanies a must-read article on the next billion internet users called "The End of Typing: The next billion mobile users will rely on video and voice". It's not just cheap smartphones and low-cost data plans that are pushing this change, though these help. Instead it's the reality that millions of poor and uneducated people cannot read or write — but can speak and see perfectly well. So internet searches are conducted through voice, and return images and videos instead of text. The implications for the banking and payments world are immense. Think of making an electronic payment when you can't read text or numbers. What's the use of fingerprint verification in place of a PIN number when the user cannot read the amount to be paid and could easily be cheated by merchants? As the article illustrates, 'mobile' is now becoming a poor term to describe the combination of cheap computing power — via fast processors and data streaming — that is becoming available even to very low-paid workers. Pocket computers powered by new operating systems little known in the Western world, such as the Alibaba-owned UC browser, are able to squeeze the most juice out of low-data environments. The article follows a Google team around India as they try to understand the needs of Indians, while Facebook has a "2G Tuesday" in its California headquarters to simulate operating in a restricted environment.

Chinese consumers meanwhile continue to adopt mobile payments with a speed that is astonishing outside observers. A new report released by Tencent Research Institute, the Chongyang Institute for Financial Studies at Renmin University in Beijing, and research firm Ipsos suggests that "the cashless society is rapidly becoming a reality in China". What makes the People's Republic so unique? "The mobile payment percentage for supermarkets, shopping malls, brand retailers, appliance stores are 63%, 62%, 57% and 51%, respectively," says the China Money Network. With a total of $5.5 trillion in the last year, that's about 50 times the volume of mobile payments made by consumers in the United States.

Etisalat's ignominious departure from Nigeria has left all parties looking the worse for wear, as details continue to trickle out about the affair. Thirteen banks in the country backed the telecoms network back in 2013, and provisioning for the losses will likely cause the banks to take a hit. While that's another burden for the banks, it's going to be an opportunity for a big foreign player to get into Nigeria's telecoms market, where the potential appears enormous. "The Etisalat debacle will further diminish the appetite for foreign currency loans amongst banks for a long time," writes Chibuike Oguh in Financial Nigeria. "In the 2016 financial year, Nigerian banks' NPLs spiked largely due to the impact of the devaluation of the naira. The banks had granted huge foreign currency loans to oil and gas companies and other large corporates who couldn't meet repayment obligations as Nigeria suffers both quantity and price shocks in the oil market. With the expected impairment of 9mobile's foreign currency debt in this financial year, banks are likely to be weary of granting such types of financing in the near term, notwithstanding any improvement in the foreign exchange market."

Fed study finds expanded credit access resulting from fintech lending

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