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HOW CAN BANKS STAY RELEVANT IN THE MOBILE PAYMENT ERA?

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HOW CAN BANKS STAY RELEVANT IN THE MOBILE PAYMENT ERA?

Jonathan Duffy, EMEA managing director, Netclearance

Mobile payments are gaining momentum in the UK. 2016 will be the year mobile payments make their mark as this method is expected to increase dramatically. A week after Android Pay launched in the UK, 460,000 payments had been accepted. Google is aggressively marketing it with the recent launch of the Android Pay Day promotion.

 Countries across the globe are increasingly moving towards cashless societies thanks to advances in contactless payments: Instead of carrying a physical wallet with cash and bank cards, mobile wallets are becoming an increasingly popular method of payment. What role will banks play in this new era?

 Mobile first

The number of smartphone users worldwide is predicted to grow to 6.1 billion by 2020 according to the 2015 Mobility Report from Ericsson. With the growth of smartphones across the globe, and the consequential shifting consumer habits, mobile payments are a natural step beyond plastic cards. Smartphones have become an extension of ourselves; they are always on and we always have them with us. They are arguably safer to use than contactless cards for payments for this reason – we notice instantly if we have lost our mobile phone whereas it can take longer to realise we have lost a card.

 Less than half of consumer payments made last year were cash, according to Payments UK, who found that cash made up 45% of payments, compared with 64% in 2005. This number is expected to continue to fall to around 25% by 2025. With millennials being digital-natives and mobile-first, they put online and convenience above physical presence and traditional banking services.

 Mobile payment apps have added a new and convenient way for people to pay for goods and services. The total value of proximity mobile payments is seeing significant growth in 2016 and has the power to revolutionise the shopping experience, making payments more convenient and faster. It is an attractive option for brands and customers alike as it makes the payment journey for the customer much simpler.

 The major technology players from Apple to Google and Samsung are pushing forward with their mobile wallets and banks need to move quickly to avoid being left behind and lose all control of the purchase process.

 Don’t become a dumb pipe

The risk of banks losing market share is very real, especially as the likes of Apple build on their consumer relationships to make further progress into mobile payments. Banks need to innovate and explore ways to retain their brand position and their customers’ loyalty or face becoming side-lined.

 Take Mobile Virtual Network Operators (MVNOs) as an example. In the early 2000s MVNOs had all the influence over their customers. Fast-forward to 2007 and Apple iPhone is launched. Exclusive contracts with operators were signed (AT&T in the US and O2 in the UK) and the operators’ worst nightmare of becoming ‘dumb pipes’ began turning to reality. Gone are the MVNO heydays and Apple is now the brand most synonymous with mobile innovation. The banks could be headed towards the same fate.

 Follow the Nordics

Banks can ward off tech firms and disrupt the industry if they look at innovative ways to use existing technology quickly. There are a few early movers such as Danske Bank in the Nordics which has the MobilePay app, a consumer payment app with 2.9 million active users and an installed base of an estimated 90% of Denmark’s smartphones. Danske Bank is using a phone-agnostic beacon payment technology, based on Netclearance’smBeaconPay, to accept payments at retailers via MobilePay. The payment system has also been rolled out to Norway and Finland and over 90 million transactions were made through MobilePay in 2015.

 Banks can lead the way to cashless societies

Denmark is well on its way to becoming the world’s first cashless society and MobilePay shows that frictionless, tech agnostic and highly secure POS systems are winning the hearts and minds of the customer, and delivering real value to merchants. It is enabling banks to retain or even grow their customer base.

 Mobile payments platforms from banks can provide retailers with an intuitive customer experience via inexpensive technology. Most importantly it removes costly merchant fees as the technology takes transactions directly from the bank to retailers, changing the value chain. Without requiring tokenised card details to be held on a centralised database, the technology is inherently more secure.

 By directly engaging their customers, banks can also create additional brand loyalty as well as providing a desirable feature to entice new customers, both on the retail and the merchant side.

Frictionless first

At its core, mobile payments are about making payments easy and creating a process that is as frictionless and simple as possible whilst also being secure and adding value to the end user. Banks have the ability to provide this through mobile beacon technology and the time is now to start using it in order to stop the tech giants getting there first.

Banking

Citigroup considering divestiture of some foreign consumer units – Bloomberg Law

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Citigroup considering divestiture of some foreign consumer units - Bloomberg Law 1

(Reuters) – Citigroup Inc is considering divesting some international consumer units, Bloomberg Law reported on Friday, citing people familiar with the matter.

The discussions are around divesting units across retail banking in the Asia-Pacific region, the report https://bit.ly/3pD57WP said.

“As our incoming CEO Jane Fraser said in January, we are undertaking a dispassionate and thorough review of our strategy,” a Citigroup spokesperson told Reuters.

“Many different options are being considered and we will take the right amount of time before making any decisions.”

The move, part of Fraser’s attempt to simplify the bank, can see units in South Korea, Thailand, the Philippines and Australia being divested, the Bloomberg report said.

However, no decision has been made, according to the report.

Revenue from Citi’s consumer banking business in Asia declined 15% to $1.55 billion in the fourth quarter of 2020.

The divestitures could be spaced out over time or the bank could end up keeping all of its existing units, the Bloomberg report said.

The firm is also reviewing consumer operations in Mexico, though a sale there is less likely, the report said, citing one of the people.

Last month, New York-based Citigroup beat profit estimates but issued a gloomy forecast for expenses. Finance head Mark Mason said the lender’s expenses could rise in 2021 in the range of 2% to 3%, weighing on its operating margins. (https://reut.rs/2ZwXRB1)

(Reporting by Niket Nishant in Bengaluru; Editing by Maju Samuel)

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Banking

European shares end higher on strong earnings, positive data

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European shares end higher on strong earnings, positive data 2

By Sagarika Jaisinghani and Ambar Warrick

(Reuters) – Euro zone shares rose on Friday, marking a third week of gains, as data showed factory activity in February jumped to a three-year high, while upbeat quarterly earnings boosted confidence in a broader economic recovery.

The euro zone index was up 0.9%, with strong earnings from companies such as Acciona and Hermes brewing some optimism over an eventual economic recovery.

The pan-European STOXX 600 index rose 0.5%, as regional factory activity was seen reaching a three-year high on strong demand for manufactured goods at home and overseas.

Another reading showed the euro zone’s current account surplus widened in December on a rise in trade surplus and a narrower deficit in secondary income.

Still, the STOXX 600 marked small gains for the week, having dropped for the past three sessions as investor concern grew over rising inflation and a rocky COVID-19 vaccine rollout.

But basic resources stocks outpaced their peers this week with a 7% jump, as improving industrial activity across the globe drove up commodity prices.

“This week’s slightly adverse price action has all the hallmarks of a loss of momentum temporarily and not a structural turn,” said Jeffrey Halley, senior market analyst at OANDA.

“There is not a major central bank in the world thinking about taking their foot off the monetary spigot, except perhaps China. (Markets) will remain awash in zero percent central bank money through all of 2021 (and) a lot of that will head to the equity market.”

Minutes of the European Central Bank’s January meeting, released on Thursday, showed policymakers expressed fresh concerns over the euro’s strength but appeared relaxed over the recent rise in government bond yields.

The bank’s relaxed stance was justified by the euro zone economy requiring continued monetary and fiscal support, as evidenced by a contraction in the bloc’s dominant services industry in February.

The STOXX 600 has rebounded more than 50% since crashing to multi-year lows in March 2020, with hopes of a global economic rebound this year sparking demand for sectors such as energy, mining, banks and industrial goods.

London’s FTSE 100 lagged regional bourses on Friday due to a slump in January retail sales and as the pound jumped to its highest against the dollar in nearly three years. [.L] [GBP/]

French carmaker Renault tumbled more than 4% after posting a record annual loss of 8 billion euros ($9.68 billion), while food group Danone and German insurer Allianz rose following upbeat trading forecasts.

(Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Sriraj Kalluvila and Shailesh Kuber)

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Banking

ECB plans closer scrutiny of bank boards

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ECB plans closer scrutiny of bank boards 3

FRANKFURT (Reuters) – The European Central Bank plans to increase scrutiny of bank board directors and will take look more closely at diversity within management bodies, ECB supervisor Edouard Fernandez-Bollo said on Friday.

The ECB already examines the suitability of board candidates in a so-called fit and proper assessment, but rules across the 19 euro zone members vary, so the quality of these checks can be inconsistent.

The ECB plans to ask banks to undertake a suitability assessment before making appointments, and they will put greater emphasis on the candidates’ previous positions and the bank’s specific needs, Fernandez-Bollo said in a speech.

The supervisor also plans more detailed rules on how it will reassess board members once new information emerges, particularly in case of breaches related to anti-money laundering and financing of terrorism, Fernandez-Bollo added.

Fernandez-Bollo did not talk about enforcing diversity quotas, but he argued that diversity, including diversity in gender, backgrounds and experiences, improves efficiency and was thus crucial.

“Supervisors will consider furthermore all of the diversity-related aspects that are most relevant to enhancing the individual and collective leadership of boards,” he said.

“Diversity within a management body is therefore crucial … there is a lot of room for improvement in this area in European banks,” he said.

(Reporting by Balazs Koranyi, editing by Larry King)

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