Payment News

Amazon UK Continues to Accept Visa Credit Cards

Amazon has decided to continue to accept Visa credit cards in the UK, reversing its decision to stop on 19 January. The reason for the change of heart is not clear but it is assumed that Amazon will have negotiated price concessions from Visa. The Guardian newspaper reports Amazon’s UK sales reached £19.4 billion in 2021, up 51% on the year before, so a lot was at stake for both parties.

The reason for the planned ban was never explained by Amazon.

Although it was suggested this was to do with Visa increasing its interchange fees now the UK is not part of the European Union, Amazon was still accepting Visa debit cards and the ban did not apply to Mastercard.

Another possible explanation was that this was an opening move in a shift of market power to large retailers, particularly with Accountto-Account payments now on the horizon.

So perhaps this was just a negotiating tactic.

New Chinese Regulations Have Implications for WeChat Pay and Alipay

The People’s Bank of China (PBoC) introduces new regulations on 1 March 2022 that stop businesses using barcodes generated by personal accounts on WeChat Pay and Alipay to take money from their customers.

PBoC wants to prevent financial crimes such as cross-border gambling by clearly distinguishing between business and personal transactions. It wants businesses to use more tightly regulated accounts that feature merchant barcodes, which the payment platforms use to facilitate transactions between businesses and their customers.

It appears the ‘growth’ phase of financial innovation by the fintech sector, which includes WeChat Pay and Alipay, is over and the regulator is now bringing in restrictions to manage risks to the financial system.

The scale of payments using nonbank mobile payments is huge – in the fourth quarter of 2020 iResearch, a consulting firm, estimates 71.2 trillion yuan ($11.2 trillion) was transacted using nonbank mobile payments. The value transacted using QR codes was 11 trillion yuan. The investment bank China International Capital Corp estimates 100 million small and micro businesses in China use individual QR codes on WeChat Pay and Alipay. In 2020 these two platforms were believed to account for 90% of the nonbank mobile payment market.

PBoC says that the focus on gambling is because online gambling sites have routinely rented personal accounts to receive money from their clients. Gambling is banned on the Chinese mainland and QR codes help gamblers transfer money to gambling websites through these rented personal accounts. The ban aims to prevent QR codes from being sold, rented or lent as channels for gambling funds, the central bank said.

Effectively PBoC is requiring these payment platforms to know their customers, but this is adding to their costs and, ultimately, those of the customers. The task is particularly challenging for micro businesses such as, for example, a food cart that moves location.

Today deposits from private accounts earn interest from PBoC for payment platforms as they are kept in special accounts overseen by PBoC. Funds sent to merchant accounts by customers must be transferred within 24 hours and earn the payment platforms no interest. Good for Chinese banks, bad for the payment platforms.

Vulnerability of Electronic Payments Highlighted in Kazakhstan

The recent civil unrest in Kazakhstan caused a shut down of the internet for protracted periods. In Almaty, the largest city, the internet was unavailable for five days. The electronic payment system was affected resulting in long queues at ATMs. Limits had to be placed on how much cash could be withdrawn.

As ever, such events underline both the importance and limitations of cash, and are a reminder that central banks need to plan future payment solutions to include cash and/or find a solution that works when power and the internet is cut.

A part of this story affects bitcoin. When China banned the mining of bitcoin in China, other countries benefited. One of these was Kazakhstan, which now accounts for 18% of computing power dedicated to bitcoin mining. The closing down of the internet also disrupted the flourishing bitcoin mining work, adding to the volatility of bitcoin’s price.

Indonesia Introduces Lower Cost Money Transfer System

Bank Indonesia has launched its Bi-Fast system, a new retail payment system, to enable real-time money transfers, up to 250 million rupiah ($17,400), cheaply. The maximum transaction cost is 2,500 rupiah ($0.17), which is 4,000 rupiah ($0.28) cheaper than the old system.

The bank is keen to accelerate digitalisation to promote economic and financial inclusion.

Ghana Debates an Electronic Communications Tax

Ghana is proposing to tax electronic payments.

Legislation is being considered to charge 1.75% on electronic payments, including mobile payments in order to expand the tax base. It is said that this could raise $1 billion a year.

This is a controversial proposal which is being vigorously opposed on the basis that it will hurt the poor and unbanked.

Mobile Money Continues to Grow in Africa

Kenya’s use of mobile money continues to grow. Central Bank of Kenya data for January to November 2021 shows transactions worth Sh 6.2 trillion ($5.1 billion), a record. In 2020 the government had subsidised the use of mobile money during the pandemic, but this did not apply in 2021.

Over the last five years, World Bank data shows that Ghana has had the fastest growing mobile money market in Africa. A recent study, ‘Five Strategies for Mobile Payment Banking in Africa’ found that Ghana is closing the gap with Kenya. Ghana’s mobile phone and wallet transactions made up 82% of its GDP. Kenya’s figure was 87%.

The success of mobile money in Africa is attributed to it not requiring users to have bank accounts, allowing those who are not part of the formal financial banking system to use it. The next opportunity for growth comes from improving the level of interoperability between systems. Ghana and Kenya achieved this in 2018 and have seen rapid increases in usage as a result. The need for systems and regulations to manage and oversee data is rising, particularly as cross-border payments increase.