Payment News

Danish Payment Overview

Danmarks Nationalbank has issued an analysis that summarises the full range of digital money options. The analysis provides the context for the consideration of Central Bank Digital Currencies (CBDCs) and describes with great clarity how payments are organised, their strengths and weaknesses and Danish adoption of them to date.

Beyond looking at cash, bank deposits and e-money, the paper explores options for the underlying technologies and consensus mechanisms for cryptocurrencies, explains stablecoins and reviews CBDCs in detail.

A relatively short document captures in one place a great overview of the payment landscape.

Expanding Digital Transactions in Brazil

A Brazilian Federal Deputy is looking to allow digital currencies to be used for payments without giving them legal status. Brazil already has a rich payment landscape, including its successful mobile payment platform Pix, and it is exploring a CBDC.

The proposal would amend the law to give digital assets the same status as financial assets used for investments and other uses. The proposal would allow the authorities to confiscate digital assets, courts to freeze digital assets held by a debtor with intermediaries such as exchanges and to hold and liquidate digital assets to settle debts. Courts will not be able to seize private keys of users of non- custodial wallets.

There is legislation with the President awaiting signature which regulates the digital currencies sector. It gives the executive powers to create oversight bodies for the industry. It also recognises digital assets as ‘digital representations of value that can be traded or transferred by electronic means.’ The Senate has already passed an amendment that taxes digital currency transactions.

Bank Branches in the UK

The UK’s Financial Conduct Authority is concerned that some banks and building societies are closing branches without considering carefully enough the impact on their local communities. It is looking at updating guidance to rectify this, including requiring banks to consider options such as operating with shorter opening hours instead of closing branches.

Santander and HSBC have cut branch opening hours and moved to an appointment-only model in the late afternoon.

Bucking the trend, the Nationwide Building Society has extended its pledge not to leave any town currently with a branch without one until 2024. It first made the pledge in November 2020 lasting until 2023. Nationwide has said that this won’t necessarily apply in the event of a lease expiry, or where there are multiple branches in an area and where a branch needs significant financial investment and there are branches nearby.

M-Pesa Links Up with Visa

M-Pesa has signed a deal with Visa that allows M-Pesa users to transact through the Visa network around the world.

M-Pesa’s owner, Safaricom, has agreed with Visa the creation of M-Pesa GlobalPay Visa Virtual card. Users can transact up to Sh150,000 per transaction (approximately $1,280) and Sh300,000 per day. The ability to use Visa is achieved through the phone. The service is exclusive to online payments outside of the user’s home country to protect them from incurring foreign exchange conversion costs on local online payments.

Safaricom and Visa intend to launch M-Pesa GlobalPay Visa Virtual card in Tanzania, Congo DR, Mozambique, Lesotho and Ghana. The deal is good for Visa because it extends their reach further into the African market.

Resilience Remains a Challenge

Resilience must be on the mind of commercial banks around the world after a series of major IT payment system failures. In the UK, ten major banking sites crashed at the start of June with customers unable to transfer funds in and out of their accounts after experiencing issues with online Faster Payments.

In South Africa the Chief Engineer of Standard Bank resigned recently after a series of payment problems culminating on 21 May with the banks biggest system outage in its history. Only transactions made using contactless means below R200 (approximately $12.94) could be made while the banking app, online banking and ATMs failed.

Switzerland also had problems. Although only a short outage, the payment services of UBS and Raiffeisen, Swiss banks, and Visa’s credit card were blocked in shops, for online transactions, for e-banking and at ATMs in the German- speaking part of Switzerland recently. PostFinance, the banking arm of the Post Office and the payment app Twint also experienced problems.

Canadian Retailers Settle with the Card Companies

The Canadian Federation of Independent Businesses (CFIB) has reached a settlement with Visa and Mastercard over rules that stopped them from passing on fees to customers or refusing to accept credit cards that cost them more to accept.

The membership of the CFIB tends to be smaller retailers and they have seen their credit-card processing costs rise during the pandemic. In addition to the change in rules, the settlement could see eligible merchants receive up to $600 as part of the settlement.

The federal government consulted in 2021 about reducing credit-card transaction fees but no report has yet been issued.

70 Years of Queen Elizabeth II

In the UK Her Majesty the Queen celebrated being on the throne for 70 years this year.

A lot has happened to the payments over that time. Examples include:

Cash

• The Queen was the first monarch to appear on an English bank note in 1960.  27 billion coins in circulation feature the Queen’s portrait.

• The first cash machine was launched in London in 1967. By 2017 there were 70,180 in the UK. There are now 52,282 ATMs.

• The UK had over 20,000 bank branches in 1988 but only 8,810 last year.

Cheques & cards

• Cheque usage peaked in 1990 with 4 billion written. Last year, 185 million were used.

• Barclays issued the UK’s first credit card in 1966. Now 69% of adults have one. Debit cards were launched in 1987. 98% of the population use them today.

• Nationwide Building Society introduced the first-ever internet banking service in 1997. By 2020, 72% of adults banked online.

• Chip-and-PIN payments were introduced in 2003 to cut fraud. Contactless cards were first issued in September 2007 with a £10 limit. Today’s limit is £100.