Wells Fargo, as we heard last week, is keen to turn a new page in its history, with mortgages central to those plans. The news today that the city of Philadelphia is suing the bank on the grounds of predatory lending is therefore especially unwelcome. 'Redlining' is the issue, as the city accuses the bank of "having, since 2004, steered minority borrowers into higher-cost, riskier loans than white borrowers, even if they qualified for loans with easier terms, and refused to let minority borrowers refinance".
Safaricom's M-Pesa has long provided a fascinating and profitable instance of mobile money: however, with banking infrastructure varying between countries, it is has not proved straightforward to replicate that success in markets other than its domestic birthplace of Kenya. Now Vodacom's acquisition from its British parent, Vodafone, of a 35 percent stake in Safaricom may lead the way to organic growth in the region. Shameel Joosub, chief executive officer of Vodacom Group, instanced the word 'growth' no less than four times in his remarks on the deal: "This is an exciting occasion for Vodacom and a unique opportunity to diversify our revenue growth and profitability. Acquiring a strategic stake in Safaricom will provide our shareholders with access to a high growth, high margin, high cash generation business operating in a high growth market. In addition to producing mutually beneficial opportunities for growth, it will create further incremental value through the close cooperation between the two businesses, particularly in driving M-Pesa adoption across our operations."
Generally speaking, the world's banks seem to have gotten off lightly from the the WannaCry ransomware attack. Nonetheless, certain sites (including the controversial "ZeroHedge" site) published doctored images of Chinese ATMs apparently disabled by the malware. In fact, Chinese authorities acted quickly and decisively, although their machines are less likely to be running the Windows XP system whose vulnerabilities were exploited. One amusing post doing the rounds on social media points out that British banks, many of them rooted in 1970s-era COBOL, may have escaped the fate of those luckless networks running Millennium-era Windows XP precisely because their code is so ancient. But, with innocent lives in hospitals having been put in jeopardy, "the age of innocence is rapidly coming to an end", as Julian King, the European Commissioner charged with security and fighting cybercrime in the EU puts it. "The internet was designed and built on trust, not security....We have privatised the benefits of the internet and mutualised the risks. That balance now needs to be adjusted."
Just as malware has been making alarming incursions into some of the core systems (hospitals, mass transit, industrial manufacturers) running our civilisation, legitimate software is making inroads by fully legitimate means. In the case of banking and payments, that push is coming from fintech. The difficulty for those looking after the public interest — not to mention those safeguarding their own interest — is knowing how much ground to cede and in what form. This is a well-rehearsed debate, with the forthcoming implementation of PSD2 a key marker for how fintech and banking will interrelate. In the United States, one regulator, the Office of the Comptroller of the Currency (OCC), has proposed a fintech charter — and run into stiff opposition, not only from some politicians but also from the Conference of State Bank Supervisors, who have stated that "The OCC does not have the authority to issue federal charters to non-banks, and its unlawful attempt to do so will harm markets, innovation and consumers." China, meanwhile, is setting up a fintech committee to study impacts. Given how politics work in Beijing, whatever that body decides will no doubt rapidly become the law of the land.
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