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Home » Daily Briefing » Daily briefing - 12 Jan 2017

Daily briefing - 12 Jan 2017

Amazon is nothing if not ambitious. It's building bricks-and-mortar bookshops, has just announced a grocery store with no checkouts, and for $100 a year, Amazon Prime customers in some US cities get access to free one-hour delivery service. Prime members spend 2.5 times as much as non-Prime customers, and the former group is not small: half of US households are Prime members. So Amazon has just pitched them a new credit card with the elaborate name of Amazon Prime Rewards Visa Signature Card. It's made of metal, like the Chase Sapphire card, with a five percent cashback offer on any items purchased through Amazon's site — but the card also offers a series of lesser cashback rewards for non-Amazon purchases. The card carries no foreign transaction fee, unlike previous Amazon cards, and is offered free to Prime members, who are already paying an annual fee. Read Yahoo's take on it here. More on Amazon in today's Cards, Payments and Mobile Intelligence newsletter, due out this afternoon.

Wells Fargo may have held on to most of its customers following the fake account scandal of 2016, but it appears to have loss the trust of regulators and lawmakers. A Financial Times story on 2 January noted that income from overdraft fees at Wells Fargo had surged by 7.5 percent, while growth at other American banks was 1.3 percent. The story suggested that the US consumer finance regulator would take an interest in these figures, but the challenge was met instead by a group of Democratic senators, who wrote to the bank for an explanation. From the FT: "Even if these overdraft revenue increases are not directly related to the fraudulent account openings, we are concerned that they may reflect similar troubling consumer sales practices," the senators wrote, citing Wells Fargo's "aggressive" cross-selling strategy, compensation incentives, and "abusive" sales tactics. The senators said it would be "particularly distressing" to discover that Wells Fargo was chasing overdraft fees in an effort to compensate for losing customers over the fake accounts scandals.

Bank of England governor Mark Carney indicated that the bank's Financial Policy Committee would raise the countercyclical capital buffer in the summer if the UK economy remains steady one year after the Brexit vote. Mr Carney was among those who cautioned that a Leave victory would damage the economy. The buffer was cut in the aftermath of the referendum, with the goal of freeing up lending capital of £150 billion to boost the economy. Bloomberg reports FPC external member and former Barclays CEO Martin Taylor as saying: "We certainly won't sit here wringing our hands and saying 'this is terrible, the Brexit negotiations create uncertainty, we can't touch the buffer. I'm sure the banks can see how the economy is performing, can see their unsecured loan books and draw the same conclusions that we might."

Mobile banking is having a moment in the sun in India, as banks experience a ten percent rise in transactions month-on-month and a 20 percent rise in the value transacted. "The government's demonetisation drive has compelled consumers to adopt digital payments, but except for mobile banking, other digital options such as credit cards and mobile wallets failed to grow in value in November compared to their October numbers due to the fall in consumption post demonetisation," according to India's Economic Times. Axis Bank, which has a 13 percent share of the mobile banking market, recorded a 37 percent rise in mobile banking registration in West Bengal and 97 percent in the North-East. While observers expected the demonetisation experiment to reward digital wallets, the success of mobile banking has come as something of a surprise and should hearten banks.

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  • Garry Marsh

    I am not a huge fan or user of Amazon but its hard to see how this card will fail; its a great deal for consumers. But what are the commercials I wonder? On the face of it margins must be significantly hit and they will need a combination of a high levels of borrowers (revolvers) and increased sales volumes to make this worthwhile. Visa will benefit from greater volumes and Chase will want their share of income. I wouldn't be surprised to see the benefits "detuned" significantly over the next year or two.

    Editor's comment: Thanks Garry — I think you may be right, that it's more worthwhile for Amazon to continue drawing consumers into their ecosystem and make money from sales than to make money from the card.

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