Greetings from Lafferty News for 2019, and let's start out this year's briefings by wishing you all a great new year.
Regulate that float! (Or should that be: Regulate that wallet?) We welcome Izabella Kaminska's return to the FT blog Alphaville, whose first thoughts in 2019 concern new rules governing fintech's customer floats, or as she puts it: "[Regulatory] arbitrage is actually at the heart of most fintech models". The UK is set to learn a great deal about regulatory arbitrage in the coming year, and not just in finance. A widely circulated story in the UK over the last days expressed astonishment that the UK government has recently awarded money to a new ferry service that has no ferries. However it comes as no surprise to those of us familiar with the 'Uber has no cars' (aka regulatory arbitrage) marketing presentation beloved of startups. However, Uber itself is long since past looking like a world-beating business, with thousands of mobile wallet providers now going after customers globally. Indeed, new rules from China on customer float will take a bite out of WeChatPay and Alipay's dominance, so in will step other providers such as Uber's Chinese competitor, Didi Chuxing (in which Uber now has a share, in exchange for abandoning China). It is set to launch financial services for its customers — something we have been tracking as mobile wallets take on more critical functions. Uber's best attribute has always been the effortless of payment. In China, and across Asia, Didi will take on Alipay and WeChatPay, two of China's most successful businesses. "Didi this morning announced the rollout of personal insurance, wealth management, mutual protection, crowdfunding products for critical illnesses, car loans, and other forms of credit services, all available within its app," Techinasia.com reported.
The headlines suggest good news: India's state-owned Bank of Baroda is soon to become even bigger than ICICI, currently the country's leading private bank by assets. The Indian government has approved the merger of three state-owned Indian banks: Bank of Baroda, Vijaya Bank and Dena Bank. In our 2018 ratings project, Baroda scored two stars, with Vijaya and Dena rating three stars. So why the merger? Officially, the reason is to lower the non-performating loans across all three, but we suspect that part of the reason lies in the unravelling of the Gupta state-capture story of 2018. Readers of Lafferty News will recall a report in 2018 by the US-based Organized Crime and Corruption Project and The Hindu newspaper that found the South African branch of the Bank of Baroda operated essentially as an offshore branch for the Zuma-linked Gupta family. Several established South African banks ceased doing business with the Gupta family, which began to rely heavily on the Bank of Baroda. The creation of a state-sponsored giant out of Baroda is unlikely to end well.
LAFFERTY BENCHMARKING: Bank of Baroda scored three stars, with Vijaya Bank and Dena Bank earning two stars in the 2018 Banking 500 report.
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