Revolut gets more tools to compete with banks; Westpac brings debit to kids

Published July 31, 2024 2:20 PM

Updated July 31, 2024 3:30 PM

1 Min Read

U.K. regulators call out large banks such as HSBC and Lloyds for a lack of consumer disclosure, while also putting pressure on banks to protect cash access. Israel is working on a CBDC and Mastercard increased its investment in Africa. This and more in our weekly global roundup.

Here's what's going on in the world of payments.

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Revolut's banking ambitions get a boost in the U.K.

London-based fintech Revolut's move to compete more directly with banks is making progress via a banking license from the U.K.'s Prudential Regulation Authority and the launch of cash deposits for consumers in the country.

The accounts enable customers to deposit funds directly with Revolut, which says that 71% of its consumers in the U.K. use another bank or financial institution for savings. Revolut is partnering with payments technology firm Paysafe to support the deposit product, which will gradually become available in markets outside of the U.K. in the coming months.

To use the service, consumers open their Revolut app, click "add money" and select "deposit cash" as an option. The app then generates a barcode that the consumer can scan at a network of 12,000 merchants to make deposits.

The deposit service comes as Revolut, which has its roots as a digital payments company, receives a banking license, which will make it easier to add lending and other financial services in competition with Monzo, other U.K. challenger banks and traditional financial institutions. Revolut's U.K. license will be limited for about 12 months, during which it cannot hold more than about $70,000 in deposits for each consumer.

The U.K. is Revolut's largest market, with more than 9 million clients out of the firm's 45 million customers globally. While Revolut has a 6-year-old banking license in Lithuania that it uses to offer financial services such as loans and credit cards in the E.U., it has been trying to get a banking license in the U.K. for three years.

In the U.S., Revolut is attempting to build a financial "super app" through a series of consumer and merchant-focused services that it has added over the past three years in an attempt to compete with Block and PayPal.

The firm's other recent rollouts include Revolut Shops, which enables consumers to buy from a network of thousands of brands and receive cash back incentives. Another product, Revolut Pay, provides a single-click option at checkout for e-commerce sellers, providing an additional option alongside Apple Pay, Google Pay and cards. —John Adams

Lloyds, Nationwide make a bet on bank and payments-focused AI

Lloyds Banking Group and Nationwide are part of a $15 million funding round in Aveni, a Scotland-based technology firm that develops generative artificial intelligence tailored for payments and financial services.

Aveni's technology reviews documents, meeting notes and workplace data to generate suggestions for changes in workflow and human capital deployment.

Lloyds and Nationwide's investment will include funding and a partnership to develop a large language model called FinLLM that is specifically focused on banking, payment processing and other financial tasks.

Aveni contends that most prevailing generative AI technology and AI developers are focused more broadly than just financial services and payments. That has led financial institutions to repurpose general forms of new generative AI programs, according to Aveni. —John Adams

Swiss regulators set banking rules for stablecoins

The Swiss Financial Market Supervisory Authority on Monday issued guidance for the banks that support stablecoin issuers. FINMA's rules govern how stablecoin users can redeem their funds in the event that the stablecoin issuer encounters financial difficulty. For example, if a stablecoin issuer declares bankruptcy, each customer must have their own guaranteed claim against the Swiss bank that supported the stablecoin. And that default guarantee must cover all of the aggregate deposits in that stablecoin plus interest.

"In the event of irregularities at the stablecoin issuer, the bank providing the default guarantee may suffer reputational damage due to its contractual relationship with the issuer and may also be exposed to legal risks," FINMA said in its guidance document.

Stablecoins are backed by a reserve of traditional currency to guard against the volatility of other digital currencies such as crypto. Politicians and regulators have expressed concerns over the reserves that back stablecoins, contending that those reserves often include risky assets such as commercial paper, or the amount of the reserve does not provide 1:1 coverage for consumers that are holding the stablecoin.

In the U.S., stablecoin regulations have moved slowly as elected officials from the Democratic and Republican parties have been at odds over the level of federal oversight into how stablecoins are issued and how the risk of stablecoins is managed. —John Adams

U.K. slams big banks for a consumer disclosure violations

The Competition and Markets Authority has cited HSBC, Lloyds, TSB and AIB for breaking rules covering transaction fees, as well as a lack of proper communication about branch and ATM availability.

The regulator says HSBC, for example, has not kept up to date with information on branch closures, a key factor in providing access for consumers that rely on cash over other digital payment methods. The bank lists 167 branches as open that are closed, and has two open branches that the bank does not list on its website, according to the CMA. HSBC also did not update some rates for business loans and overdraft fees, the regulator said.

The CMA reports TSB did not disclose its maximum overdraft fee, AIB did not disclose the accurate interest annual rates for some loans and Lloyds did not make the locations of 363 ATMs available.

The regulator's order also strengthens data-sharing requirements for open banking, which enables consumers to use a bank account to access products from other banks and third parties, often fintech or digital payment apps.

"People deserve banks they can trust to serve them well. Having correct information is essential when making important decisions about our finances. Banks handling our hard-earned money should have adequate processes in place to ensure this happens," said Dan Turnbull, senior director at the CMA, in a release. —John Adams

FCA toughens cash protections

Another U.K. regulator, the Financial Conduct Authority, has issued new guidance that may require banks to add branches and ATMs in underserved areas.

The guidance says banks must answer queries from consumer and community groups about availability of service. The rules also mandate an assessment and public disclosure of how consumers and businesses can access cash. If the FCA finds a gap in cash coverage, the bank or banks will be required to keep branches and ATMs open until an alternative becomes available.

As more payments and commerce migrate online, banks and retailers are challenged to manage the cost of paper-based payments such as cash and checks. While cash and checks are more expensive than digital methods, a critical mass of check and cash-reliant consumers remain, leading to regulatory moves to protect cash and disputes over banks' responsibility to maintain cash access. —John Adams

Airwallex makes a push for Canadian B2B payments share

Financial software firm Airwallex has signed a partnership agreement with Float, a Canadian company that sells technology to businesses, to support domestic Canadian and international corporate payments.

Float's core product supports bank transfers, wires and ACH payments, and Airwallex will be able to access Float's client portfolio of more than 100,000 small- to medium-size businesses. Float hopes to enable these businesses to reduce manual processing of accounts payable transactions via automated invoice collection, payments and reconciliation.

"Canadian consumers, SMBs, enterprises, and the economy at large stand to benefit from more integrated financial services," said Ravi Adusumilli, executive general manager of the Americas for Airwallex, in a release.

The Float deal expands Airwallex's footprint in North America. Airwallex recently acquired MexPago, a Mexico City-based payment firm that supports merchant payments in local markets. That deal gave Airwallex access to a Mexican Electronic Payment Funds license that enables shorter application processing, and to Mexico's national instant transfer system. —John Adams

Westpac lowers its debit card age

Australian bank Westpac is offering debit cards to kids 8 years old and up, lowering the previous minimum age for a debit card from 14.

The bank is attributing the move to an effort to increase financial literacy among the young as the use of cash declines.

Westpac's youth cards have several security protocols, such as parental controls, daily and weekly spending limits, online payment blocks and notifications for parents.

Seventy-five percent of Australian parents are teaching their children about money and other financial matters, according to research Westpac released in support of its youth card expansion. Twenty percent of parents want greater control over how their kids spend money and want greater protections for online abuse or scams, the bank says.

Banks are increasingly using digital payments to reach young consumers in an effort to create a lifelong brand relationship with new consumers as well as to expand existing relationships with parents and grandparents. U.S. Bank, for example, recently partnered with family-focused fintech Greenlight to support a debit card and other tools designed to encourage healthy spending habits. —John Adams

Mastercard Foundation to spend $4.7 billion on Africa’s youth

The Mastercard Foundation plans to commit $4.7 billion over the next decade to support education and employment in Africa.

Africa has the youngest population in the world and the money will be spent to improve skills, increase access to technology and entrepreneurship and to create opportunities for women and young people, according to the Toronto-based institution.

"The Foundation aims to support 30 million young people into dignified and fulfilling work by 2030," and assist 100,000 young people, of whom 70% will be women, to get education, Mastercard Foundation CEO Reeta Roy said in an interview. "These financial commitments cover a range of programs including education, entrepreneurship, work, health care and special programs."

Created in 2006 by Mastercard International, Roy said the foundation currently deploys about $1.3 billion a year on development programs. The money "goes overwhelmingly to work in Africa," Roy said, noting that two thirds of the foundation's partners are based on the continent. —Emele Onu and Anthony Osae-Brown, Bloomberg News

Russia races to legalize crypto as sanctions weigh on firms

Russia is moving to regulate the use of cryptocurrencies, as companies wrestle with increasing difficulties in foreign payments under the threat of U.S. sanctions over the war in Ukraine.

Lawmakers in the lower house of parliament, the State Duma, passed a cryptocurrency bill on Tuesday, as well as separate legislation regulating crypto mining. The legislation aims to open up cross-border payments with cryptocurrency under regulation by the central bank in what policymakers have called an experiment.

The draft laws are expected to gain quick approval from senators in the Federation Council before being signed into law by President Vladimir Putin to take effect on Sept. 1, according to Anatoly Aksakov, head of the Duma's financial market committee.

"Previously, there were fears that the legalization of cryptocurrency could create problems for the development of the domestic market," Aksakov said in a phone interview. While cryptocurrencies may help Russia to bypass Western sanctions, their use is "an objective phenomenon and cannot be ignored" by regulation, he said.—Bloomberg News

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