Payment News

The Mobile Money Account Paradox

GSMA has published the number of mobile money accounts in 2020 in different regions, and how many of them are active.

The paradox is why are only 25% of registered accounts overall actually active? The data goes on to pose further questions, eg. why is there such a variation between the lowest percentage active region, Middle East and Africa region at 5%, and the highest, Latin America and the Caribbean at 41%?

The variation between regions for transactions per active account is also surprising. No doubt remittances play a big part, hence Europe having a relatively low figure.

With all the focus and hype on Fintech, both the total number of accounts and the number relative to the population of each of these regions, is small.

As if to confirm these questions, a recent report in PYMNTS, based on an August survey of 3,671 US consumers, found that seven years after Apply Pay was launched, only 6.1% have Apple Pay activated on their iPhones. In 2015, a year after it was launched, 5.1% had activated it and the current figure is the same as it was in 2019 before the pandemic.

M-Pesa Developments

Fourteen years after M-Pesa was launched, it has reached 50 million active users. The number has doubled in the last five years. Safaricom and Vodacom launched a joint venture 18 months ago to accelerate growth across Africa. M-Pesa has expanded its partnerships to allow customers to send and receive money across more than 200 countries and territories.

M-Pesa is credited by the Central Bank of Kenya with increasing access to financial services and products. Between 2006 and 2019 this is said to have increased by about 56%. M-Pesa has also been credited with lifting roughly 2% of Kenyan households out of extreme poverty.

In June 2021, M-Pesa launched what it refers to as a Super App across all its markets. The app consists of a series of mini apps which allow people and businesses to use only one app rather than multiple apps to access everything from shopping to government services.

M-Pesa has opened its API to over 45,000 developers and 200,000 businesses to develop innovative solutions. Its new eco-system also includes its Business Super App, the Transacting Till, that enables businesses to receive payments, and to make business payments, and Pochi La Biashara, that enables small businesses to separate their personal and business funds.

Based on new technologies and partnerships, it wants to offer products that encourage savings and lending, wealth management, and insurance.

UK Retail Trade Bodies Campaign for Lower Card Payment Costs

UK trade bodies are campaigning against the cost of payments driven by what they suggest are anti-competitive practices in card payments. The group (which includes the British Retail Consortium, the British Independent Retailers Association, Association of Convenience Stores, Federation of Small Businesses, and UKHospitality) regards the UK Payment System Regulator (PSR) as doing too little to tackle the problem. PSR has just closed a consultation exercise about what should be in its next five year strategic plan and this campaign is clearly intended to focus the PSR’s mind on this issue.

The group has pointed out that cards are used to pay for more than 80% of UK retail sales, with Visa and Mastercard accounting for 99% of card transactions. Retailers paid £1.3 billion in 2020 in fees and charges to card companies to receive payments from their customers. This sum, equivalent to more than £46 per household, is passed onto consumers.

The trade bodies joined together to make this point to the PSR in 2020 and has now asked Parliament and its Treasury Committee to intervene. So far, 40 cross-party MPs have written to the regulator this year calling for robust regulatory measures on card fees.

The PSR’s response included the statement: ‘more competition in retail payments should keep card acceptance costs at reasonable levels for merchants and, in the long-term, increase innovation. We are consulting on our strategy, which includes recognition that further regulatory intervention might be needed.’

PayPal to Increase UK Payment Fees

PayPal is reported to be planning to increase its fees between the UK and the EU from 0.5% to 1.29% in November, although this will still be lower than the fee charged to other countries in the world from the UK, 1.99%. Visa and Mastercard are planning similar increases mid-October.

Now that the UK is not in the EU, payments are no longer in-region but inter-regional, which is largely how these payment service providers explain the increases.

The Case for Regulating Stablecoins

Do stablecoins threaten financial stability? Stablecoins are pegged to fiat currency, or other assets, in a bid to make them immune to the large and rapid changes in price associated with cryptocurrencies such as Bitcoin.

Tether, a leading stablecoin, backs its tokens with assets such as the dollar and corporate debt. The US Treasury Secretary, Janet Yellen, is concerned that Tether’s claim to hold significant amounts of corporate debt, debt which is usually issued to meet short-term funding needs, is creating risks to financial markets and onwards into the real economy should the value of cryptocurrencies fall dramatically. Currently there is little or no regulation of stablecoins.

$120 million worth of stablecoin tokens are held by CoinMarketCap.com. Increasingly they appear to be being used for traditional financial activities such as bank savings account. The lack of regulation means consumers have little protection. The Financial Stability Oversight Committee is being urged to declare stablecoins a financial risk and to bring in regulations.

Federal Reserve Chairman Jerome Powell told Senators in July that if the US issues a CBDC, it would make stablecoins obsolete.