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Home » Daily Briefing » Daily briefing - 22 May 2017

Daily briefing - 22 May 2017

Cards in 2016

Whither MoneyGram? The future of the remittance provider based in Dallas, Texas remains uncertain even as Ant Financial's bidding war with American rival, Euronet, showed that the Chinese player was fully committed. According to reports last week in the US media, Jack Ma's firm is able and willing to raise a $3.5 billion debt round for key payments acquisitions. MoneyGram's network of agents, despite the onward march of digital payments, remains a key attraction for many remittance users, who value bricks-and-mortar and prefer in-person transactions to faceless swipes and clicks. Tying up with Ant Financial and its e-commerce affiliate, Alibaba, would seem to make great business sense for an American firm needing to get on board with a truly innovative company. But, with news yesterday that China had executed US-funded spies, it is abundantly clear that a surveillance war continues behind the scenes and that, on national security (not to mention protectionist) grounds, the Ant Financial-MoneyGram deal may, in the end, come to grief in Washington's corridors of power.

The picture of what exactly happened in the world of payment cards in 2016 is clearing up. Lafferty Research data shows that purchase volume on payment cards globally grew by 125 percent between 2010 and 2016. Growth on debit (137 percent) is stronger than on credit (113 percent). "Interestingly," notes our colleague, David Hickey, "global growth has been fuelled by emerging markets; emerging markets accounted for almost half of global volume (47 percent) in 2016, up from less than a quarter (23 percent) in 2010." In addition, the periodic rumblings about the major card schemes being disintermediated by mobiles capable of direct payment from bank accounts (eg, the Pay by Bank app in Britain) appear to have subsided in recent times, although a threat from China remains with the rise of distinct and popular payment ecosystems. South Korea is the latest market reporting record cards spending, particularly for consumers using their cards overseas. One thing for the global schemes to watch out for though is the rise of domestic networks, such as RuPay, Troy and Mir and their developing propensity to start interconnecting with each other for mutual benefit. Iran and Russia have now connected their ATM card payment switches, announced the Mehr news agency in Tehran, with automated payments and other electronic clearance systems due for interoperability in the next phase.

Everyone seems to be looking to credit cards, not least retailers in the United States suffering an epochal shift in consumer habits as e-commerce reorders the market. In this new dispensation, the last hope may be credit card profits. But is this strategy amounting to a new sub-prime bubble in the making? Another aspect of using cards, as we have covered over the years in these pages, is the merchants' dislike of the fees paid to the traditional cards schemes and to issuers for their services: Nilson Report figures for 2016 show that "processing fees, which include interchange, paid by US merchants to handle all card payments, were $88.39 billion".

Google is turning your account into a mobile wallet
US banks want a piece of the payday-loan pie [WSJ paywall]
Canadian banks in spotlight over house price fears [FT paywall]
Largest Indian bank's profit surges as bad-loan ratio narrows

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