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Daily briefing - 20 February 2019

Lafferty News has written about Lithuania a lot in the last year, noting the pro-active approach of the country's central bankers, who are in attendance at many fintech events. It's what other central bankers disparagingly called a competitive central bank. Now a story about competitive central banks has jumped to the front page. Last week, the Lithuanian parliamentarian Stasy Jakeliunas suggested that Revolut is concealing secret links to the Kremlin. (Founder Nikolay Storonsky is Russian, and his father is a director at gas business Promgaz). The FT notes that "the Bank of Lithuania, which is responsible for prudential regulation and day-to-day supervision of companies, has less than 10 per cent of the combined workforce of the Bank of England and Financial Conduct Authority, which carry out the equivalent roles in the UK." It's not hard to unpack what is going on here. As we've shown in the Banking 500 research, British banks are far from the great institutions they imagine themselves to be. Neither are their regulators world class. And while Britain prepares to crash out of the EU and banks scramble for safety, former satellite states of the Soviet Union are "stealing" the best of British fintech — and in the Eurozone, no less. The Conversation carries a piece on the sensitivities at work on both sides. Revolut, meanwhile, will continue to rub people the wrong way. That has always been part of fintech's DNA.2019 starts with a definite sense that some central banks in emerging economies are making smart decisions about building interoperable payments systems. In Mexico, the newly elected socialist government is looking at mobile payments as a route to supercharging the economy. The central bank is about to launch a mobile payments system in March that will try to draw on best practice in place such as Kenya. "In the future, it will no longer be necessary to have a bank in the sense of a traditional, established bank," said Arturo Herrera, Mexico's deputy finance minister. "Mobile phones will become banks." However, the route is not uncomplicated. Banks that watched the evolution of M-Pesa have little intention of letting telcos get a march into financial services. So to get access to the government's free mobile payments system, "[customers] at least initially, they would have to open accounts with banks that many do not want to join or cannot afford in the first place," reports Reuters. "Adolfo Babatz, CEO of payments startup Clip, said Mexico's government should be looking to fintech entrepreneurs to bring true innovation to the financial system, not banks that have benefited from high barriers to entry. His Mexico City-based company has created a low-cost mobile credit card reader that fits on smartphones." Of course there's another player who can't be forgotten: Mexican billionaire Carlos Slim continue to maintain control over the country's telecoms industry.In Nigeria, government treasuries are a boon to banks as they lower their exposure as lower oil prices take their toll. "Steep inflation, a lack of foreign exchange and high levels of unpaid loans are also weighing on banks' risk appetite. That's making the allure of parking cash in state securities with interest rates of up 17.6 percent almost irresistible," writes Bloomberg. It's also pushing more banks into the retail banking market as a way to diversify away from oil, with Lagos-based Zenith Bank the latest entrant. "The Lagos-based bank is expecting to expand retail loans as a percentage of total credit to about 4 percent this year from less than 1 percent in 2018, Chief Executive Officer Peter Amangbo said in interview at the bank's headquarters. It will achieve this by making a bigger push into personal loans, car financing and mortgages, he said. 'There is a lot we're doing on revenue,' Amangbo said. 'We expect our retail franchise to grow. Our electronic business, our digital banking is growing.'"

Gerrie-Fourie
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Daily briefing - 19 February 2019

One upshot of the focus on surveillance capitalism was the dawning realisation that the major investors in bro-tastic Silicon Valley are illiberal Saudi Arabia and UAE investment funds. With the cancellation of massive Airbus orders in recent days, the UAE is signalling that all is not well with the economy. But how will this impact on Silicon Valley? Saudi Arabia's Public Investment Fund and Abu Dhabi's Mubadala fund are the two major investors in Softbank's $100 billion Vision Fund, and are raising queries about the high valuations of some of its acquisitions. Readers will recall a recent mooted $16 billion investment in WeWork by Softbank was abruptly scaled back to $2 billion. "One person familiar with the Middle East investors' thinking expressed concerns about whether SoftBank was taking advantage of high tech valuations to crystallize gains at the expense of PIF and Mubadala," the Wall Street Journal reports. "SoftBank has transferred, sold or is planning to sell to the Vision Fund at least $26.3 billion worth of stakes in companies that it originally purchased for around $24.9 billion during the past few years, according to company filings." Consider some other recent news: Softbank-backed Didi Chuxing is letting go 15 percent of its workforce. So it the tail wagging the dog? Last year, Mubadala announced a new European investment fund, and now Softbank is announcing that it will invest $200 million in its major backer. Perhaps some of our more expert readers can explain to us what's going on here. Where is Capitec headed in the long term? There's always been a sense that its branch network is just a way of getting people in the door. With its unique retail network, Capitec has gathered spectacular customer numbers and financial results, but now it's clearly nudging those customers towards digital banking, and dropping fees to make it more attractive. Capitec says it gained over a quarter of a million customers in January 2019, bringing its total customer numbers using its app passed the four million mark. It also announced a slight drop in banking fees for 2019. "This will trigger urgent discussions in other banking boardrooms," tweeted former FNB chief executive Michael Jordaan, who is himself about to launch a new digital bank. "Notably, the banking group is lower its Global One monthly admin fee from R5.80 to R5.00, bringing it in line with competing entry-level accounts from the other big banks," writes BusinessTech. "The fee for immediate payments will decrease to R8 (from R10), and electronic payments on the banking app and internet banking will decrease to R1 (from R1.60) per transaction."Turkey Cuts the Amount of Cash Banks Need to Hold

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Daily briefing - 14 February 2019

The lack of urgency in the Irish government as a no-deal Brexit deadline looms suggests one thing: it is content to suffer in some areas — such as the huge beef and agricultural export sector into the UK — as long as replacements appear. Those include Bank of America, headed by the Irish-American duo of chief executive John Moynihan and vice-chair Anne Finucane. At a conference in Dublin on Monday, she spoke about the bank's re-location to Dublin from London, noting that Bank of America spent $400 million moving its London operations to Dublin. She said the bank would not reverse the decision even if the UK decides to renounce Brexit and stated that many other banks are spending or will spend similar amounts. "Dublin is our headquarters for our European bank now full stop," she said. "There isn't a return. That bridge has been pulled up. From a trading perspective, likewise Paris would be the European trading arm." It now dawning in the UK now that these decisions are irrevocable, with many banks and payments businesses have long since decided on their options, Brexit or no Brexit. The trust factor has been fatally damaged, and that's not a good starting point for post-Brexit negotiations. Astonishingly, though, many in Brexit process on both sides have hidden detail from the public, or at least kept schtum about the fact that a no-deal could easily happen. Both sides had flagged this as a virtual impossibility, yet British banks were yesterday complaining about a lack of response from the UK government on Brexit issues. "We have had next to no engagement which we think is odd given the critical situation we're in," one senior banker tells Reuters. "We have not had detailed discussion on the business support side. We need an understanding of what package the government has put together — stimulus or otherwise ... It's critical politics but it does seem there's no capacity to do it." Too late for that now. Raypd is a new player, around since 2017, that has attracted recent investment as it puts together a network-like offering. It's different from the classic fintech model to date, which is a focus on one product. "Today, in order to build worldwide solutions in finance, you need to 6 or 7 suppliers in every country and link up with them in order to conduct operations such as collecting money from customers, paying out the money, verifying identities and the like," says Rapyd chief executive Arik Shtilman. "We have succeeded in creating a situation in which we have one solution with one interface and which provides this solution to customers in all the countries that they want to work, and with one contract. We let them build payment applications that fit their needs through one API." Rapyd, which serves e-commerce players and digital platforms, recently raised $40 million through a Series B financing round. Stripe shows up among the investors. "We have also defined a new way of working in the world of fintech, which derives from the software sector and is similar to SaaS, and it is in effect a fintech-as-a-service platform, with our customers paying for the service and not for the technology." Bank of Valetta under cyberattackBank mergers continue in the Middle East, this time in Qatar Starling raises another round of funding, thought likely to apply for EU licence in Dublin

Featured Articles

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Wednesday 13th February @ 10:30am

Through our Brexit Council, Lafferty News keeps current with the mystifying developments otherwise known as Britain Exiting the European Union. Those of you on the conference circuit won't have failed to notice the ubiquitous presence of the Lithuanian Central Bank, which appears to have taken on a competitive mandate, as if it sensed that Britain's Brexit campaign would not end well. "'We expect to receive around 100 applications from fintech companies this...MORE

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Tuesday 12th February @ 10:02am

Morgan Stanley has acquired Solium, the stock plan manager. One commenter described the acquisition as a good plug-in for the existing business. Morgan Stanley is paying $900 million for the business, at a 43 percent premium to the closing price last Friday, and, in the words of one Canadian newspaper, "shrinking the field of billion dollar tech companies" in Canada. Solium Capital manages equity plans for employees and its clients include Stripe, Instacart and...MORE

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Monday 28th January @ 11:00am

Davos looks less relevant with each passing year. Can we agree that re-thinking the terminology around the global economy is instructive? Recent research by Niti Bhan suggests that the definitions of formal and informal need serious re-invention, and it's borne out by the continuing success of mobile money in Kenya. As we're fond of pointing out, the idea for M-Pesa emerged from traders who work in the informal economy, and it continues to live and thrive there. So, how...MORE

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Thursday 24th January @ 10:28am

Microsoft is planning to quietly kill off the Microsoft Wallet in February. The Redmond business took over Nokia's phone business a few years back, but only a small proportion of US users took to the Microsoft mobile ecosystem. Researcher Jordan McKee noted that Microsoft's OS was used by less than three percent of the population in the US, with most people favouring Android or iOS. "With iOS and Android operating systems dominating the smart-phone industry, the...MORE

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Friday 18th January @ 10:11am

Safaricom is becoming a serious digital lender with the recent launch of its new service Fuliza, which it operates with bank partners KCB and CBA. The service began on 7 January, and has exceeded expectations, according to Safaricom chief executive Bob Collymore. "We got a million (customers) by day eight and by day eight we had lent US$10 million. Now we are probably at https://uk.reuters.com/article/kenya-safaricom/kenyas-safaricoms-overdraft-service-e...MORE

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Monday 14th January @ 9:56am

Is this how the West ends? Indifferent? When even hanging on in quiet desperation is too much effort? Tomorrow the UK government will try to get the Brexit withdrawal agreement approved by Parliament. UK Labour leader Jeremy Corbyn is making noises about a no confidence vote leading to an election and then on to a second referendum. The issue of reconciling trade agreements and maintaining open borders has sunk the British attempt to exit the European Union. Now the best that...MORE

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