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Home » Daily Briefing » Daily briefing - 20 February 2019

Daily briefing - 20 February 2019

A Revolut payment card
A Revolut payment card

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.'"

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