Snippings

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In the United States, A2A payments have been slow to catch on. One reason is that, in the absence of a regulatory framework, banks have been at a competitive disadvantage in staking out a strong presence in the payments marketplace. Also, Americans love their credit cards and the rewards that come with them, so dislodging the popularity of cards is perhaps the biggest challenge to US adoption of A2A.

From: The role of US open banking in catalyzing the adoption of A2A payments | McKinsey.

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Durbin argues that the European Union limits payment networks from charging more than 0.3% in transaction fees, and that hasn’t eliminated rewards programs. But those rewards are sharply reduced in the EU. To take one example, the Revolut Metal cashback card, offered by a London-based bank, offers 1% for purchases outside Europe, but only 0.1% for purchases inside the EU.

From: Is the Credit Card Competition Act Really Going to Destroy Rewards Programs?.

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What it does show, though, is that there are clear subsidies at play. Someone, somewhere is subsidizing my points habit – no longer the merchant, it is now other BA or Amex customers. Indeed, such subsidies are the most controversial aspect to the model. A 2022 Federal Reserve paper estimates that in the US, credit card rewards induce an aggregate annual redistribution of $15.1 billion “from less to more educated, poorer to richer, and high to low minority areas.” Cardholders with superprime scores typically earn money with the use of reward cards while subprime and near-prime cardholders lose out.

From: The Points Guy – by Marc Rubinstein – Net Interest.

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If the bank has filed a SAR, it isn’t legally allowed to tell you, and the federal government prosecutes only a small fraction of the people whom the banks document in their SARs.

From: Why Banks Are Suddenly Closing Down Customer Accounts – The New York Times.

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By law, banks must file a “suspicious activity report” when they see transactions or behavior that might violate the law, like unexpectedly large cash transactions or wire transfers with banks in high-risk countries. According to Thomson Reuters, banks filed over 1.8 million SARs in 2022, a 50 percent increase in just two years. This year, the figure is on track to hit nearly two million.

From: Why Banks Are Suddenly Closing Down Customer Accounts – The New York Times.

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I’d argue the biggest competitive landscape shift came from creating a new path to banking licenses and giving central bank payment system access.

From: Fintech 🧠 Food – 1033: Open Banking Endgame.

Simon is totally right about this. Open banking did not, by itself, lead to more competition. Instead it led to a pointless bidding war where banks were forced to provide incentives.

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Traders are demanding increased competition with simple and transparent pricing models. This is because the payment market is characterised by a few dominant actors, which affects the price picture: “Payments are quite simply expensive”. The payment methods that traders choose are governed by what customers want to use. Traders prefer faster payments with fewer steps for the customer and that payments can be made in real time. Furthermore, traders are positive to an e-krona that can contribute to increased competition.

From: E-krona study on behaviour and driving forces in the payment market | Sveriges Riksbank.

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I many parts of the world,

The Isle of Man has become the first part of the British Isles to encourage businesses to round prices to the nearest five pence amid the declining use of coppers.

From: The end of the one and two pence coin? The Isle of Man becomes the first place in Britain to encourage businesses to round their prices to the nearest five pence amid declining use of coppers | Daily Mail Online.

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But now Mark Carney, the Governor of the Bank of England, has suggested that the 1,200-year-old British penny could be scrapped.

From After 1,200 years, could it really be time for the penny to be dropped?

Actually, I’ve suggested it more than once but just because he’s the Governor of the Bank of England his plagiarised proposal gets all the attention.

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Some 126 million coins have been taken out of circulation since a scheme was introduced to round shoppers’ bills up or down.

From 126 million coins taken out of circulation since rounding scheme introduced – BelfastTelegraph.co.uk

Ireland can do it, why can’t we?

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If you are interested in the subject of rounding, there is a very good paper on rounding written by Robert Whaples called “Time to Eliminate the Penny from the U.S. Coinage System: New Evidence” that was published in the Eastern Economic Journal way back in 2007. This confirms the European experience that dumping low-value coins and rounding prices is economically neuter. Rounding is not that complicated! Whaples wrote that a detailed study of convenience stores found the final digit of purchases, which usually involves multiple products and sales tax, was pretty much random so that “if you round it to the nearest nickel, the customer wouldn’t get gouged”. Sometime you’d round up, sometimes you’d round down. It balances out. (Here is how they do it in Belgium where total amount payable in cash has been rounded up or down to the nearest five cents since December 2019: if the total amount payable in cash ends in one or two cents, it is rounded down to zero,  if it ends in three, four, six or seven cents then it is rounded to five cents and if it ends in eight or nine cents then it is rounded up to one euro. As far as I know, Belgian civil society has not collapsed and shops are operating normally under the circumstances.) Pennies and nickels are scrap metal and a private coin industry would not be able to waste taxpayer cash on subsidising miners to keep producing them.

From: Who needs a digital currency when you have a Coin Task Force?.

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HSBC Labs is prototyping a DID solution for internal account opening powered by Polygon ID. When a customer opens an HSBC account, the bank conducts KYC and creates a verified credential that later can be used for a number of transactions, including logging into an HSBC account, purchases, applying for a loan, carbon credits, and much more.

From: Why HSBC is Building a Decentralized Identity Solution With Polygon ID.

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TBD and Circle have launched a partnership centered around open source adoption of decentralized identity.

The collaboration, announced Monday (Oct. 23), will also culminate in a non-profit founded by TBD — Block’s decentralized finance (DeFi) company — and USDC-issuer Circle, the companies said in a news release provided to PYMNTS.

From: Circle and TBD Aim to Launch DeFi-Focused Foundation.

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The group’s concerns over the amendments largely centre on Article 45 of the reformed eIDAS, where it says the text “radically expands the ability of governments to surveil both their own citizens and residents across the EU by providing them with the technical means to intercept encrypted web traffic, as well as undermining the existing oversight mechanisms relied on by European citizens”.

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A group of 309 cyber security experts, researchers and scientists hailing from 31 countries around the world has called on the European Union (EU) to rethink proposals to reform the electronic identification, authentication and trust services (eIDAS) Regulations, saying that “as proposed in its current form, this legislation will not result in adequate technological safeguards for citizens and businesses, as intended. In fact, it will very likely result in less security for all”.

From: EU digital ID reforms should be ‘actively resisted’, say experts | Computer Weekly.

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I’d argue the biggest competitive landscape shift came from creating a new path to banking licenses and giving central bank payment system access.

From: Fintech 🧠 Food – 1033: Open Banking Endgame.

Simon is totally right about this. Open banking did not, by itself, lead to more competition. Instead it led to a pointless bidding war where banks were forced to provide incentives.