Community

While talking about low value cross border payments, I find it useful to distinguish between P2P, C2B, B2C payments on the one side and B2B payments on the other. 

IMO, the former market segment has been well served for over a decade with a plethora of solutions like PayPal, Remitly, Xoom, TransferWise, WesternUnion, MoneyGram - not to mention traditional banks.

I'd agree that B2B cross border payments is still not solved. While PayPal works, it's very expensive (8-10%) and, worse still, arbitrarily freezes merchant accounts. The traditional interbank channel is not widely usable if the originating business is in USA since many companies there have bank accounts in credit unions and community banks, whose systems are not geared up to process cross-border electronic fund transfers to business payees outside USA. In one extreme case, the customer’s community bank in Chicago didn’t know what SWIFT BIC code meant. We exhausted all other digital payment options and finally asked customer to FedEx a paper check to my company in India. Although it took a couple of weeks to clear, this option worked. 

This was 10 years ago. But, TBH, if the same customer were to initiate the payment even today, I'd still bet only on cheque.

Even if the payor bank is geared up to handle cross border payments, there are other issues like field length limitations for entering full payee name, as I highlighted in my latest Finextra post entitled ISO 20022: Waiting For Godot Moment In Finance.

We've seen some banks selling mobile phones, white goods, books and grocery. McKinsey even advocates to banks to sell flowers. 

Nice to see Klarna joining what I call "Embedded Retail" bandwagon from the side of fintech (although IIRC Klarna Affirm and other BNPLs repositioned themselves as shopping apps, just with readymade payment and installment facility, a year or two ago.)

SEC now insinuates that Coinbase's business model is illegal. Then why did it approve Coinbase's IPO for the same business model a few years ago?

FTX before, Voyager now... Binance seems to be getting a big kick out of rushing in as White Knight when the chips are down and bailing out later. 

The founding principle of BNPL was supposed to be, go ye forth and democratize credit by lending to all and sundry who don't qualify for credit card, obviously incur losses, use VC to absorb losses, rinse and repeat. It was surely a ZIRP but it worked for 5-7 years until liquidity dried up.

If BNPL providers have to now jump through all these hoops, how will they be any different from banks underwriting credit card?

IMO the best strategy for BNPLs is to hunker down, wait for 12-18 months for the funding winter to pass, and then go back to merry old days enabled by ZIRP. It will be suicidal for them to close the credit spigot by using ML and all those nice things.

MNOs have an unenviable track record in financial services in markets where banks have a high penetration e.g. T-Mobile ISIS mobile wallet in USA, Boku Zong Carrier Billing in USA, Vodafone M-PESA in India, Airtel Payments Bank in India.

Maybe it's different this time but a smart move for MNOs would be to direct their finserv efforts at Africa and other markets that are underserved by banks.

The thing about banking industry is that burying your head in the sand like an ostrich and kicking the can down the road DOES work!

Assuming, for a moment, that Revolut took its auditor's objections at face value and reduced its revenues by the questioned figure of £477M, it's not like its shareholders are going to say, "Kudos, good job done, we're happy with our investment" - they're anyway going to downgrade the value of their investments, probably by even more than half as it has happened now.

After reading an interesting piece by Matt Levine about when SVB recognized MTM loss in its HTM portfolio and what it did about it, I've inclined to believe that banking is one industry where, if you're unlucky / incompetent / fraudulent enough to enter the damnation zone, you're damned if you do, and damned if you don't.

SVB did hedge interest rate risk but terminated its swaps and decided to mitigate asset liability duration mismatch risk by fostering customer loyalty. Unfo, when push came to shove, its customers - startups and VCs alike - proved disloyal. (Source).

The lesson from SVB to other banks is that they should not fall for startup ecosystem puffery or believe finsurgents' threats that they will die if they don't prioritize CX over everything else.

SVB is one bank that fell and paid heed and look what happened to it. Loyalty doesn't exist in banking and CX is not even a Top 3 factor in this industry.

IMO ISO 20022 is at best the biggest Waiting For Godot Moment or at worst the biggest hoax in finance. Not having heard about LEI for a long time, I thought it was dead and gone. Now I wonder whether its association with ISO 20022 will add / subtract the Godot / Hoax factor. 

WTF is happening in France?

How on earth did the judge sign the search warrant?? (assuming prosecutors who conducted the bank raids bothered to follow due process.)

Whatever is happening in the epitome of Liberty, Equality and Fraternity???