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Home » Daily Briefing » Daily Briefing - 27 July 2017

Daily Briefing - 27 July 2017

PayPal, already a partner of China UnionPay, yesterday announced a new partnership in China, this time with Baidu Wallet. Baidu is placed regularly in the internet-ruling triumvirate along with Alipay and Tencent, but it's wallet has had about as much success as Google Wallet. "However, the two providers PayPal and Baidu lag far behind Alipay, the online payment app offered by Alibaba's affiliate Ant Financial, as well as WeChat Pay, which is integrated into Tencent's social messaging 'killer app' WeChat," notes the FT. "'Alipay and WeChat Pay are unshakeably dominating the Chinese payment market, while Baidu's status has been a little awkward,' said Xue Yu, analyst at IDC". Research firm Analysys estimated Baidu Wallet's share of the market as 0.4 percent against Ant Financial's 54 percent and Tencent's 37 percent. Plenty of room for upside then.

We've seen a shift in 2017 towards collaboration and partnership, and PayPal stands out. "The accelerating and extensive scale of our two-sided global platform creates a strong foundation for PayPal's growth, enabling consumers and merchants to transact in new contexts and across operating systems, technologies and platforms," said Dan Schulman, President and CEO of PayPal, announcing the company's second quarter results. "Our strong results reflect PayPal's transformation from a single product to a platform company, from a vendor to a strategic partner to both merchants and ecosystem players, and from a checkout option to an increasingly more central way for consumers to manage and move their money." PayPal has been leaning towards mobile-first for some time, characterised by its acquisition of Venmo — which the big banks fervently hope will be undercut by Zelle.

In the FT today, Martin Sandbau considers the slow-moving but powerful shift towards a banking union in Europe: "Where taxpayer-funded rescues have frequently served to maintain existing ownership and control networks, bail-in can transfer ownership and control from previous owners to creditors who face writedowns." This, he says, will serve to increase the influence of investors from surplus economies in Europe. "This will gradually dissolve the tight bonds between national political and banking elites, intermingled everywhere in Europe and especially the eurozone." Of course, Germany has both in abundance — financial surpluses and a deeply unhealthy relationship between banking and political elites. Sandbau hones in instead on Italy: "The bank-state complex is most resistant to reform precisely where it causes the greatest harm. Italy is a prime example of both things. Its leaders may resent the impositions banking union brings. Its citizens should greet them with open arms."

Speaking of which, the FCA has now moved to extend the approved persons regime to all sectors of the financial industry. The FCA site notes: "Five Conduct Rules that will apply to all financial services staff at FCA authorised firms. This simple set of rules means that individuals must act with integrity, act with due care, skill and diligence, be open and cooperative with regulators, pay due regard to customer interests and treat them fairly, and observe proper standards of market conduct. The responsibilities of Senior Managers will be clearly set out and, should something in their area of responsibility go wrong, they can be personally held to account. The Senior Managers will be approved by the FCA and appear on the FCA Register. Under the Certification Regime, firms will certify individuals for their fitness, skill and propriety at least once a year, if they are not covered by the Senior Managers Regime but their jobs significantly impact customers or firms." The Guardian notes that the scheme will now cover even businesses that are not financial businesses at core, such as gyms or dentists that offer credit to their customers. "This certification must now happen annually, whereas under the previous system the FCA approved individuals only once, unless they moved roles."

Unicredit has reported a data breach of 400,000 accounts, blaming an unnamed "third-party provider" for the incidents. "It said the first was thought to have occurred between September and October 2016, and the second happened some time over this month and June," reports BBC News. Although the numbers pale in comparison to a Yahoo-style disaster, the timescale sounds familiar. Yahoo lost information on more than 500 million accounts in September 2014, and came clean in September 2016. Keeping customers in the dark for years (even though customer information is potentially being used for nefarious purposes) speaks loudly about a company's attitude to its customers but it also points to the shock that is going to hit companies once the General Data Protection Regulations come into force in Europe in less than a year. Under the new regime, companies are obliged to report data breaches within 72 hours — or face fines of up to 4 percent of turnover. (There is an exception when an organisation can produce a "reasoned justification" for not meeting that deadline.) For a bank such as UniCredit that produced revenues of 18.8 billion euros according to its 2016 annual report, that 4 percent fine would be a whopping imposition.

London's investment managers are looking at Brexit in horror, as it now looks likely to threaten their ability to continue to manage trillions of euros of assets elsewhere in Europe. "Asset managers in London oversee funds worth 1.2 trillion euros ($1.4 trillion) in the EU — more than their peers in France, Germany and Italy combined, according to figures from UK industry body the Investment Association," reports Reuters. France is eager to attract asset managers and the European Securities and Markets Authority appears to be relishing the change. For the full story, Brexit Council members can check the Lafferty Brexit Newsletter, which is published today.

And finally — the Lafferty Daily Briefing has returned into secure mode, and we hope that there will be benefits to you, our readers, not least that we encourage you all to leave us the occasional comment on the briefings! You'll find the comment box below the morning briefing, and on the articles in the Global Intelligence newsletter.

So, what does Cerberus know about Commerzbank?
Zhong An's headwinds and Ping An's ambitions
The most digital companies are leaving the rest behind
Tencent keeps stringing pearls in India

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