Payment News

Payment Resilience Centre Stage

Japan has recently experienced a system failure that affected credit card payments at transportation hubs and shops. The outage affected multiple card companies and was reported to be due to a malfunction in Japan Card Network’s system.

Australia’s second largest telecommunication system, operated by Optus, recently went down, causing widespread disruption for its ten million customers for over 11 hours. In October Singapore also experienced an outage that lasted over 12 hours for customers of DBS and Citibank.

Dependence on digital payments makes payment systems key infrastructure.

M-Pesa Surging in Ethiopia

Safaricom started its M-Pesa service in Ethiopia in mid-August. Its half-year report says it already has 1.2 million users in the country. It is estimated that only 35% of Ethiopians are financially included.

Safaricom says that the usage level of mobile data by its phone subscribers has reached a level that Kenya took nearly 10 years to achieve. Safaricom has a telecoms competitor in Ethiopia, Telebirr, which is more established with 34 million users.

In late October M-Pesa partnered with Zemen Bank in a collaboration designed to establish a strong network of agencies and offer advanced mobile banking solutions. As a result, M-Pesa agents and customers across Ethiopia will be able to deposit and withdraw cash at any Zemen Bank branch and will have access to Zemen Bank’s mobile banking services through USSD and a mobile app. Safaricom announced a similar partnership in August with Abay Bank.

Opportunity or Threat? Reward Points

Research by PYMNTS reveals that in the US 71% of the ‘baby boomer’ generation (those born between 1946 and 1964) and older people are motivated by reward points to use credit cards. In comparison roughly half of Generation Z see them as a key driver.

A Federal Reserve study from September 2022 noted that issuers get about 1.3 cents in transaction fees (which would include interchange) for each dollar of consumer purchases made on cards. The expenses tied to the rewards programs, the Fed found, came in at 1.5 cents per dollar of card-related purchases.

Given that transaction fees broadly cover the cost of reward schemes, will the changes to interchange fees proposed by the Federal Reserve and encapsulated in the Credit Card Competition Act lead to a reduction in loyalty rewards?

In addition, the two senators who proposed the Credit Card Competition Act are now asking regulators to look at airline loyalty programmes.

Moroccan Regulator Seeks End to Online Payment Fees

It isn’t just in the US and Europe that transaction fees are being criticised. Morocco’s Competition Council is calling for Moroccan companies to stop the ‘unjustified’ fees they charge on consumers who choose to pay their bills online.

The Competition Council has in mind the telecommunications sector, private educational institutions, delegated management companies, water and electricity distribution authorities, as well as the National Office of Electricity and Potable Water (ONEE) who charge consumers extra money on payments made online.

EPI Acquisitions Allow It To Reach Half of Europe

The European Payments Initiative (EPI) wants to build a unified instant payment scheme and platform for Europe. It has completed the purchase of the Dutch Payment Scheme iDeal and Luxembourg’s Payconiq.

EPI is now in a position to start work to deploy its payment solution in countries that account for more than half of all non- cash payment in the euro areas – Belgium, France, Germany and the Netherlands.

The EPI has chosen ‘wero’ as the name for its digital wallet. This will be rolled out in phases starting with account-to-account based instant P2P and consumer-tobusiness payments, with online and mobile shopping payments and then point-of-sale payments to follow.

Major Reduction in Postbank Branch Operations in Germany

Deutsche Bank is to significantly change its ownership model for Postbank branches as part of a programme to move Postbank to being a ‘mobile-first’ provider. It will close 250 of the 550 Postbank branches. While 200 of the surviving branches will offer both banking and postal services, 100 will become banking only branches.

Deutsche Bank bought Postbank in 2008 and tried, unsuccessfully, to sell it in 2018. It ran a troubled IT integration project that only completed this year, although the German watchdog Bafin has appointed a supervisor to oversee customer service due to concerns about faulty operations and disrupted Postbank services.

X Starts Its Financial Services Journey

Elon Musk, owner of what was known as Twitter, but which has been renamed ‘X’, has plans for X to provide consumer finance. The ambition is wider than just payments, it includes money but securities and more. There will be no need for a bank account.

To support this ambition X now has payment licences in six US states – New Hampshire, Missouri, Michigan, Arizona, Maryland, and Georgia. It also has a money transmitter certification from the state of Rhode Island.

MAS Acts on Resilience for DBS

The Monetary Authority of Singapore (MAS) has taken action against DBS in the light of recent problems with its digital banking services. It has imposed additional capital requirements and barred it from acquiring new business ventures or reducing its branch or ATM network.

In addition, DBS has had a six month suspension on changes to non-essential IT services imposed on it by MAS following an investigation into the March downtime. This investigation identified shortcomings in system resilience, incident management, change management and technology risk governance and oversight.

Only changes related to security, regulatory compliance and risk management are allowed during the next six months. DBS is now working on a two-year technology resiliency roadmap to address the shortcomings.

DBS experienced outages in March and May and a data centre outage in October. These disrupted digital banking, ATM services and online and payment services respectively.

Ho Hern Shin, Deputy Managing Director, MAS, says: ‘DBS must put in place immediate measures to ensure service reliability while it continues to invest in the longer-term efforts to bolster its operational resilience. We have imposed this six-month pause on the bank to give it the space to take the actions needed to maintain customer trust.’