Mastercard’s biggest acquisition; GreenSky puts up for-sale sign

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Big bet
Mastercard agreed to pay €2.85 billion ($3.19 billion) to buy the majority of the corporate-services businesses of Danish payment-services provider Nets A/S, its largest acquisition ever and “its latest bet that the real-time payments market could be poised for significant growth. It is part of the company’s broader strategy to diversify its payments capabilities in the consumer sector and to grab a bigger share of cash and check-based transactions occurring between businesses.”

“The main driver for the purchase is the rising risk that consumer payments that have traditionally been made with cards could move away to other payment modes,” the Wall Street Journal said. “The company is also trying to dig further into the massive market of company payments in which businesses move cash between themselves.”

The deal “gives the card network the infrastructure for real-time payments between bank accounts in Europe, as well as a suite of associated applications and services,” the Financial Times said. The purchase is “part of the company’s shift from being a pure card payments company to a ‘multi-rail’ payments group serving merchants, banks and governments.”

Separately, Swedish payments company Klarna “has become the largest private fintech start-up in Europe” following its latest funding round of $460 million that values the company at $5.5 billion. That’s more the double the company’s valuation of $2.5 billion at the beginning of the year and up from $3.5 billion in April. CEO Sebastian Siemiatkowski said the firm is moving closer to going public.

Wall Street Journal

Darkening sky
Shares in online lender GreenSky, which arranges loans for home-improvement projects and medical procedures, plunged nearly 40% Tuesday after its second quarter earnings missed analysts’ estimates and the company said it was exploring a sale or merger. The stock is down about two-thirds since it went public in May 2018.

The drop in GreenSky’s stock “comes one week after On Deck Capital fell 23% the day it disclosed that JPMorgan Chase was winding down an online small-business lending partnership with the company that had been in place for more than three years. It is a humbling turn for a sector that had recently been on the upswing. Rising loan defaults and concerns over future growth opportunities have prompted investors to rethink valuations for a class of companies that uses better technology to determine creditworthiness and offer loans over the internet and mobile phones.”

Under pressure
Japanese banks are being pushed to the limit “after almost three decades of near-zero, zero, and now negative interest-rate policies. The country’s smaller lenders in particular are facing an existential threat to their business models. Located in aging and shrinking prefectures, they lack the ability to increase fee-related incomes that major banks can raise.”

The problem is that “Japan has too many banks, and consolidating them into larger players will buy time. But without a wholesale shift in the way it approaches its economic stimulus policies, the banking system will remain under constant pressure.”

Financial Times

Justice upheld
A decision released Tuesday by the U.S. appeals court in Washington “bolsters the power of federal prosecutors to grab records from foreign banks even if the transactions at issue did not pass through U.S. accounts.” The court sided with the Department of Justice against three Chinese banks that allegedly tried to assist North Korea evade U.S. sanctions. “The judges found that the Patriot Act allows access to records held by foreign banks that use U.S. correspondent accounts, including ‘records of transactions that do not themselves pass through a correspondent account.’”

Course correction
HSBC’s dumping of CEO John Flint after just 18 months gives the bank “the opportunity to correct course, break with tradition and look for a candidate who can change the bank’s culture and articulate a new strategy for the Chinese mainland,” the FT says.

Washington Post

Never say die
Debt collectors are making “an accelerating effort” to collect on debt “that the financial industry once wrote off” that is “past the statute of limitations.” “The efforts to collect on old debts often focus on getting consumers to reset the statute of limitations through a variety of means, including sending them credit cards that let them pay off their old debts or by allowing a them to make a small payment to halt debt collection calls. The efforts have contributed to the flood of debt-collection lawsuits clogging courts across the country, consumer advocates say.”

Elsewhere

Virtual card
Goldman Sachs and Apple began rolling out a virtual credit card Tuesday. “With the card, Apple aims to draw in iPhone owners with 2% cash back on purchases with the Apple Pay service, no fees and an app to manage related finances. For Goldman, the card will enhance the bank’s focus on its Marcus consumer banking brand, which it started in 2015 to even out volatile results from businesses such as trading and investment banking.”

Quotable

“To be a truly relevant one-stop shop…we can’t just offer card solutions.” — Michael Miebach, Mastercard’s chief product and innovation officer, commenting on the company’s purchase of the corporate-services businesses of Danish payment-services provider Nets A/S.

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