Wall Street Journal
We’re watching: The Office of the Comptroller of the Currency said it will be paying “close attention” over the next six months to the additional “strategic risks” banks may be taking on with new financial technologies. “Strategic risk is elevated, as banks make decisions to expand into new products or services, consider new delivery channels, or otherwise search for sustainable ways to generate returns,” acting comptroller Keith Noreika said Friday in the agency’s semiannual report on industry risks. Fintech startups may be forcing banks to take on more risk in order to stay competitive, while at the same time banks are creating partnerships with these firms in order to reach more customers. Wall Street Journal, American Banker here and here
It’s me: Banks are making increasing use of biometric data, such as fingerprints, images of eyes and faces, and voice recognition to replace personal identification numbers and passwords and having customers store the information in their smartphones. Over the past year, the paper reports, banks such as Wells Fargo, JPMorgan Chase and Bank of America “have started to roll out new ATMs that can link to customers’ mobile devices. Customers will sign in through their phones, potentially using a fingerprint, and then transmit a code to the ATM.”
On the company: More companies are giving employees corporate credit cards, rather than making them use their personal cards and file T&E forms, to make it easier to keep track of spending and savings from suppliers. Many employees can’t afford to wait for reimbursement.
Don’t be hasty: Global financial stability will be endangered if President Trump tries to unwind regulatory agreements made after the global financial crisis, according to Valdis Dombrovskis, the European Union’s financial services chief. “It is important all sides implement those international standards and are not starting to cherry pick,” he told the paper.
Pick a coin: A growing number of companies are raising money from investors through “Initial Coin Offerings,” in which investors purchase a coin similar to bitcoin or ether, or a digital token, which they can then use to buy a product or service that the company plans to offer. So far this year companies have raised more than $1 billion this way.
“The coins usually don’t confer any ownership in a company,” the paper notes. “Rather, investors hope they will rise in value over time if a company’s product or service is popular.”
Payments power: JPMorgan Chase’s interest in Worldpay — although it yielded after Vantiv offered more money for the British payments processor — “underlines how strategically important the payments business has become,” the paper says. “What you are seeing here is a move from cash, not just to cards, but to digital payments,” Philip Jansen, Worldpay’s CEO, said in his first interview after the deal with Vantiv was struck. “The macro trends of mobile and online commerce are huge and we are benefiting from them.”
Show us more: A leading representative of institutional investors wants banks to publish more information about nonfinancial issues, such as conduct and culture, in order to regain the trust of customers and investors. “We need banks to engage in a race to the top to change their culture,” said Andy Griffiths, executive director of the Investor Forum, which represents 35 of the biggest investors in British companies, including BlackRock and Fidelity International. “We want to encourage investors to ask more questions on these non-financial issues, like what do customers think about what banks are doing. And we want banks to compete to give more information around these issues.”
It ain’t broke: The paper wants to know why Federal Reserve Gov. Jerome Powell is “so hot and bothered” about reforming the American mortgage finance system. Last week, you may remember, Powell said the U.S. had reached a point of “now or never” to do something about Fannie Mae and Freddie Mac and to get more private capital involved in the market.
But “American housing finance has changed a lot since the bubble burst — for the better,” the paper says. “It could be worthwhile to change the current status of the GSEs as part of a broader effort to discourage household indebtedness, but it’s bizarre to suggest, as Powell seemed to, that you could make the housing market both more stable and less ‘rigid’ by privatizing a functional utility.”
Earnings forecast: Wall Street is expecting a mixed batch of earnings from the major U.S. banks due to a decline in trading revenue in the second quarter.
“If I steal your password, you make a new password. But how do you make a new fingerprint?” — George Avetisov, CEO of HYPR Corp., a fintech startup.