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Mobile money: Delivering banking and payments




Paul Stoddart, managing director, strategy and business development, VocaLink



A host of new payments companies combined with rapid growth in smartphone ownership has catapulted the possibility of mobile payments into the consumer conscience. This consumer awareness and curiosity is forcing established banks and retailers alike to assess their mobile offerings, or risk losing ground to newer, more agile competitors. The ‘tipping point’ for mobile payments has been hotly anticipated for a number of consecutive years across the payments industry but has never quite arrived. However, research now suggests that the availability of technology, consumer readiness and pressure from new players could finally lead to widespread adoption of this technology.

This year VocaLink conducted one of the largest ever pieces of research into consumer behaviour and attitudes towards mobile banking and payments. 10,000 adults across the UK provided detailed insights into how they use, how they perceive and ultimately what they desire from m-commerce services.

Although extensive surveys have been run in this space, they have focused largely on end user experience. The VocaLink research focuses not only on consumers, but provides insight into how businesses, banks in particular, are well placed to benefit from the ubiquitous uptake of mobile payments. So what does the future for mobile payments look like? And more importantly, what steps do banks need to take to realise the potential opportunities this technology can bring?

Mobile appetite
The research found that consumers are using mobile technologies more today than ever before. Smartphone ownership in the UK has reached a record level of 60% amongst adults and continues to grow. Furthermore, with almost half of all 45-54 year olds in possession of a smartphone, it is clear that this technology is no longer the preserve of the early adopter Generation Y.

Smartphones are increasingly used to orchestrate our daily lives across a range of activities – financial management is no exception, and has been swept up with the mobile revolution. It is possible to understand the link between smartphone ownership and mobile banking and payments based on how activity increases amongst device owners. 43% of smartphone owners bank on the move, compared to the wider population where this statistic falls to just 27%.

The research reveals that 50% of all consumers are either interested in (30%) or already conducting mobile payments (20%). When looking at interest amongst smartphone owners specifically, the combined percentage reaches 63%. This is broken down into 31% of smartphone users who are already making mobile payments, with the remaining 32% interested in doing so.

In banks we trust
With so many different players trying to claim a slice of the mobile payments pie, it has left the market in a somewhat fragmented state. Telecoms providers, banks, card issuers, handset manufacturers and alternative payment start-ups have created an incredibly congested sector. As our research has highlighted, convenience is the greatest concern and desire of consumers. To date, this convenience has been held back by the number of service propositions available. Each with their own registration process and interface, consumers are faced with a daunting range of options, which can lead to mistrust, as well as detracting from the central attraction of the service – ease of use.
Banks have been challenged continuously in recent years on their trustworthiness and customer service. Our research however, reveals that there is still significant support amongst consumers for banks to provide a universal payments service. 35% of respondents reported that they would be more likely to use mobile payments services if they were provided by their bank. This corroborates recent research into consumer attitudes towards banks from PricewaterhouseCoopers. It would appear that banks, with their centuries of experience are still viewed as the best placed organisations to deliver reliable and secure technology and infrastructure for financial services.

Everyone benefits
With consumers stating their desire to make mobile payments, and a predisposition towards the banks to provide this service, how should banks position themselves? The post crisis bank is still trying to repair its balance sheet and for finance departments, developing and marketing a new mobile payments service is a huge commitment. However our research has identified a number of exciting opportunities for banks if they choose to invest in mobile payments.

With the impending account switching deadline on the horizon, banks’ focus will be firmly on not just attracting, but retaining customers. Mobile payment services are emerging as a valuable platform for banks to increase customer engagement levels, which is in turn proven to boost loyalty and retention. The survey findings suggest that innovation in payments could provide a useful olive branch for banks to improve relationships with customers. 30% of the UK adults interviewed said they would increase their engagement with the bank if they used a mobile payments service from the bank. Of course, satisfied customers represent a business opportunity for driving additional revenue through cross and up-selling. Customers who feel they are receiving good services from their bank are more likely to purchase products from them in the future.

Stepping up to the plate
Technology is forever changing the dynamics of society. With any new innovation there comes the moment where market demand and existing social behaviour combine with the availability of technology to bring about a real and lasting cultural change. VocaLink’s research suggests that we have reached this point of lasting change for mobile payment technology in the UK. The ability to deliver mobile payments via a range of devices (devices that almost saturate the adult population and often dictate our behaviour) supported by strong consumer interest means that all is left for the banks, is to bridge the gap between demand and supply.

Banks should see the value of collaborating in this space. The central database for mobile banking developed for the Payments Council is already one example of how banks can work together to deliver something for a greater cause. The research findings suggest that in 2014, mobile payments will no longer be spread across and defined by a host of alternative solutions, but the predominant and preferred payment method, with our high street banks leading the charge.


Take on more risk or taper? BOJ faces tough choice with REIT buying



Take on more risk or taper? BOJ faces tough choice with REIT buying 1

By Kentaro Sugiyama and Leika Kihara

TOKYO (Reuters) – The Bank of Japan (BOJ) is under pressure to relax rules for its purchases of real-estate investment trusts (REITs) so that it can keep buying the asset at the current pace, highlighting the challenges of sustaining its massive stimulus programme.

The fate of the rules, which limit the central bank’s ownership of individual REITs to a maximum of 10%, could be discussed at the BOJ’s review of policy tools at its March 18-19 meeting, with an industry estimate putting nearly a third of its REIT holdings at close to the permissible threshold.

Given Japan’s fairly small REIT market, the BOJ may struggle to keep buying the asset unless it relaxes the ownership rule or accepts REITs with lower credit ratings, analysts say. The BOJ currently buys REITs with ratings of AA or higher.

“There’s a good chance the BOJ could tweak the rules for its REIT buying at the March review,” said Koji Ishizaki, senior credit analyst at Mizuho Securities.

The issue underscores the tricky balance the BOJ faces at the March review, where it hopes to slow risky asset purchases without stoking fears of a full-fledged withdrawal of stimulus aimed at weathering the prolonged battle with COVID-19.

As part of its stimulus programme, the BOJ buys huge amounts of assets such as exchange-traded funds and J-REITs.

It ramped up buying last March to calm markets jolted by the pandemic, and now pledges to buy at an annual pace of up to 180 billion yen ($1.68 billion).

The BOJ last year bought 114.5 billion yen worth of J-REITs, double the amount in 2019, bringing the total balance of holdings at 669.6 billion yen as of December, BOJ data showed.

The surge of its portfolio has led to the BOJ owning more than 9% for some REITs. An estimate by Mizuho Securities showed the BOJ owned more than 9% for seven out of the 23 REITs it held as of January, including Japan Excellent and Fukuoka REIT.

The BOJ did not immediately respond to a request for comment. The central bank normally does not comment on policy, besides public speeches and briefings by its board members.

BOJ Governor Haruhiko Kuroda has said the review won’t lead to a tightening of monetary policy.

But many BOJ officials are wary of relaxing rules for an unorthodox programme like J-REIT purchases, which critics say distorts prices and exposes the bank’s balance sheet to risk.

“Unless markets are under huge stress, it’s hard to relax the rules,” said an official familiar with the BOJ’s thinking.

($1 = 107.0200 yen)

(Reporting by Kentaro Sugiyama and Leika Kihara; Editing by Muralikumar Anantharaman)

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German watchdog puts Greensill Bank on hold due to risk concerns



German watchdog puts Greensill Bank on hold due to risk concerns 2

By Tom Sims and Tom Bergin

FRANKFURT/LONDON (Reuters) – Germany’s financial watchdog warned of “an imminent risk” that Greensill Bank would become over-indebted on Wednesday as it imposed a moratorium on the lender making disposals or payments.

BaFin’s move is another blow to the bank’s owner, Greensill Capital, which said on Tuesday it is in talks to sell large parts of its business after the loss of backing from two Swiss asset managers which underpinned key parts of its supply chain financing model.

Greensill, which was founded in 2011 by former Citigroup banker Lex Greensill, helps companies spread out the time they have to pay their bills. The loans, which typically have maturities of up to 90 days, are securitized and sold to investors, allowing Greensill to make new loans. Greensill’s primary source of funding came to an abrupt halt this week when Credit Suisse and asset manager GAM Holdings AG suspended redemptions from funds which held most of their around $10 billion in assets in Greensill notes, over concerns about being able to accurately value them.

Two sources told Reuters on Wednesday that SoftBank-backed Greensill Capital is preparing to file for insolvency, adding that the sale talks were with U.S. private equity firm Apollo.

Greensill and Apollo did not immediately respond to requests for comment on Greensill’s insolvency preparations, which were earlier reported by the Financial Times, or on the sale talks.

Japan’s SoftBank, which has invested $1.5 billion in recent years in Greensill, also declined to comment.

BaFin said an audit found that Greensill Bank could not provide evidence of receivables on its balance sheet purchased from mining tycoon Sanjeev Gupta’s GFG Alliance. GFG did not respond to a Reuters request for comment on BaFin’s findings.

“The moratorium had to be ordered to secure the assets in an orderly procedure,” BaFin said in a statement, adding that the Bremen-based bank would be closed for business with customers. It declined to elaborate.

Greensill Capital said in a statement that Greensill Bank always “seeks external legal and audit advice before booking any new asset.”


Greensill Bank had loans outstanding of 2.8 billion euros and deposits of 3.3 billion euros at the end of 2019, rating agency Scope said in an October report, which did not detail the bank’s exposure to GFG.

The bank is a member of the Compensation Scheme of German Banks which means deposits up to 100,000 euros ($120,740) are protected. The German regulator said withdrawals were not currently possible, but gave no further detail in a statement.

Prosecutors in Bremen said earlier they had received a criminal complaint from BaFin regarding Greensill Bank, but did not provide further details on it.

In Britain, meanwhile the financial regulator took action against GFG’s own trade finance arm Wyelands Bank. The Bank of England’s Prudential Regulation Authority said it had ordered Wyelands to repay all its depositors. It said in a statement that it had been engaging closely with Wyelands, but did not say why it had taken the action.

GFG said Wyelands, which had over 700 million pounds ($979 million) of deposits according to its latest annual report, would repay deposits and planned to “focus solely on business advisory and connected finance”.

A GFG spokesman declined to comment on the BoE statement.

Credit Suisse said on Wednesday it is looking to return cash from its suspended funds dedicated to supply chain finance, which is a method by which companies can get cash from banks and funds such as Greensill Capital to pay their suppliers without having to dip into their working capital.

“Given the significant amount of cash (and cash equivalents) in the funds, we are exploring mechanisms for distributing excess cash to investors,” Credit Suisse said in a note to investors on its website.

Credit Suisse said that more than 1,000 institutional or professional investors were invested across its funds.

($1 = 0.8282 euros)

($1 = 0.7153 pounds)

(Reporting by Tom Sims and Patricia Uhlig in FRANKFURT and Tom Bergin in LONDON; Additional reporting by Brenna Hughes Neghaiwi and Oliver Hirt in ZURICH; Editing by Alexander Smith)

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Britain to review surcharge on bank profits



Britain to review surcharge on bank profits 3

LONDON (Reuters) – Britain’s finance minister Rishi Sunak has said the government will review the surcharge levied on bank profits, in a bid to keep the UK competitive with rival financial centres in the United States and the European Union.

Sunak said in his Budget statement on Wednesday he was launching the review so that the combined tax burden on banks did not rise significantly after planned increases to corporation tax.

Leaving the surcharge unchanged would make UK taxation of banks “uncompetitive and damage one of the UK’s key exports”, the government said in its Budget document.

Changes will be laid out in the autumn and legislated for in the forthcoming Finance Bill 2021-22, the document said.

The surcharge on bank profits raised 1.5 billion pounds for the government in 2020, the document showed.

It is separate to the more lucrative bank levy on bank balance sheets, which raised 2.5 billion pounds.

(Reporting by Iain Withers, Editing by Huw Jones)

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