Receiving Wide Coverage ...
Backwater no longer: Payment systems have long been a backwater of finance, but all that is changing, the Financial Times says in a special report on "The Payments Revolution." While the expansion of online shopping and mobile payment devices has spurred massive growth, "the industry is entering a period of extreme disruption. The dominant players — the banks and credit card companies — face an uncertain future. A fast-growing group of upstart financial technology, or 'fintech,' companies are lining up to challenge the incumbent payment providers by offering to meet customer demand for faster, cheaper and easier-to-use services — many of them using the blockchain." At the same time, regulators are increasing pressure on banks to reduce their fees, while traditional payment services "are facing an onslaught of cyber attacks from an army of increasingly sophisticated hackers and digital criminals."
Competing new mobile payment technologies from the top financial services and technology companies all want to transform how consumers pay for their purchases, but "so far their efforts are failing to inspire people to adopt the new methods," the FT says. Consumers have largely been apathetic about these efforts, either because they fail to differentiate between the various offerings "or simply do not see the point." "It is a really crowded space and there are so many players coming from different angles that everyone is holding back to see who the winners and losers will be," one expert says.
Blockchain supporters believe the technology could cut billions of dollars of hidden costs in the financial system by eliminating inefficiencies while speeding up global payments and other transactions. "But the technology is overshadowed by questions about how it can be made both secure and fast enough for large financial institutions," the FT reports. "Banks still need to comply with rules about verifying the identity of customers and preventing money laundering."
A group of leading tech and internet companies, including Google, Facebook and Apple, are getting closer to creating a global standard for online payments. "The standard," according to the New York Times, "will provide a uniform way for users to input their credit cards and payment systems to any web browser so that they can be used for any purchase on the web."
While this sounds nifty and long overdue, it's important to remember that "numerous efforts to modernize the payment system have failed to take off. And this one could fizzle, too, if online merchants, web browsers or consumers fail to adopt the new standard. The new standard will also face competition from the Amazons and PayPals of the world, as well as from the credit card networks, all of which want to be the primary destination for payments, rather than just one option."
Japan's Financial Services Agency has repealed a law that limits the nation's banks from owning more than 5% in non-financial companies "if their purpose is to apply information technology to finance." That could open the door to banks putting "hundreds of millions of dollars into fintech start-ups," the Financial Times reports. The change means "that Japan could become a big new source of funding for start-ups, especially in Asia, that are experimenting with technologies such as blockchain or artificial intelligence." The FSA is also considering making it easier for fintech companies to engage in regulated financial activities.
Banks risk losing market share in global payments to fintech providers, American Banker reports.
Existing technology systems at big banks are failing to keep up with new regulations. The Wall Street Journal reports the Commodity Futures Trading Commission has fined Deutsche Bank, JPMorgan Chase and Barclays over the past several months for failing to report derivatives trades in a timely and accurate way. The reason: the banks' back-office systems aren't capable of accurately or rapidly reporting swap trades. "This underscores the challenge of creating real-time views of opaque parts of financial markets as called for by the post financial-crisis regulatory overhaul," the paper said.
Asia retreat: Goldman Sachs plans to lay off up to 30% of its investment bankers in Asia as deal activity slows in the region. The layoffs, affecting about 90 people, will be concentrated in Hong Kong and Singapore but not affect its business in Japan. "It is a notable retreat for Goldman, which has made a big push in Asia in recent decades," the Wall Street Journal noted. "The cuts also mean that the New York-based bank is partially unstitching the Asian network it built up over the past 15 years, in the belief that having big teams of bankers on the ground in markets such as China and India would unlock opportunities," the Financial Times said.
Wall Street Journal
Demands for clawback: Wells Fargo is starting to feel the heat from some of its public-sector investors. Last Friday, CtW Investment Group, a union-affiliated investment group, and some public pension funds sent letters to the bank's board calling for clawbacks of executive pay following the phony accounts scandal. CtW also called for the appointment of two new board directors and an independent review to discover how things went wrong. Separately, Scott M. Stringer, the New York City comptroller, asked the board's human-resources committee to consider taking back incentive pay "from those ultimately responsible for the systemic misconduct" at the bank, including CEO John Stumpf and former retail-banking head Carrie Tolstedt.
Wells Fargo's board hired Shearman & Sterling to advise it on whether it should claw back pay the pay of some of its most senior executives, including Stumpf, COO and President Timothy J. Sloan, and Tolstedt, for their alleged roles in the scandal. Wells will be advised by Robert Mundheim, the attorney at Shearman who represented JPMorgan Chase during its "London whale" scandal a few years ago.
More rules: The Federal Reserve proposed new rules that would require commercial banks to hold more capital against their holdings of physical commodities, such as oil and aluminum. The move would make it a lot more expensive for banks to trade in those markets as well as deter them from potentially manipulating prices. The proposed rules are likely to hit Goldman Sachs the hardest.