Santander expands instant payments, Australia advances digital ID

May 22, 2024 9:26 AM

Santander joins Iberpay as the first supporters of the European Payment Council's instant account-to-account network, Australian lawmakers approved bills to create a federated digital identity system, and more.

Here's what's happening around the world.

Susana Gonzalez/Bloomberg

Instant European payments advance beyond the continent

Spanish digital payments company Iberpay and Santander are the first to register for the European Payment Council's instant payment network for international account-to-account payments.

Called Allied OCT Inst, the network is designed to support payments where one of the parties is outside of the Single Euro Payments Area's umbrella. Iberpay will act as a clearing and settlement mechanism for instant payments while Santander will act as a processor. The scheme is designed to enable interoperability for real-time payments between SEPA countries and other parts of the world.

Real-time payments interoperability is a challenge, often for real-time networks that operate within the same country. "We believe [the real-time scheme] aligns well with market needs and policy objectives and it has the potential to revolutionize international instant payments, making a multilateral scheme-based approach available to a multilateral world," said Giorgio Andreoli, director general of the European Payments Commission, in a release.

SEPA includes 36 nations in the European Union, and nations outside of the EU such as Sweden, Iceland and the United Kingdom. The scheme standardizes how payments are processed inside its network, and supports direct payments between bank accounts for member banks, a method designed to add speed and lower expense. —John Adams

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Western Union extends its reach in the Caribbean

Western Union has enabled access to GKOne and Lynk, the two largest mobile wallets in Jamaica, reaching more than 200 retail locations. GraceKennedy, the Jamaican financial institution that operates GKOne, is a service provider for Western Union in nine countries in the Caribbean. "GraceKennedy has been pivotal in our global digital expansion strategy, both through the launch of the GKOne app and allowing us to welcome Lynk and their mobile wallet to our network," said Rodrigo Garcia Estebarena, president of Western Union North America and Latin America, in a release. Lynk said the wallet support would help extend financial services to remote areas of Jamaica. Western Union also recently resumed remittances in Cuba after a January suspension that followed a cybersecurity incident. —John Adams

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Australian politicians lend support to digital payments ID

The Australian House of Representatives has passed a bill approving a federated digital identity system, following passage of a similar bill in the Australian Senate in March. The bills are scheduled to go into effect in November and will expand a voluntary accreditation system that is currently in place. The strengthened law will place the Australian Competition and Consumer Commission in charge of the digital ID system and the Australian Information Commissioner will supervise privacy controls. Firms that provide services in Australia, such as financial institutions, payment fintechs and e-commerce companies, will be able to apply for accreditation to the national ID system, which will serve as a sort of government seal of approval for authentication and fraud protection for payments and other forms of online finance. —John Adams

MercadoLibre kicks off talks to apply for Mexico banking license

Latin American e-commerce and fintech giant MercadoLibre is beginning conversations with Mexico's authorities to apply for a banking license that will allow it to expand the breadth of products it offers in the country.

The company is in talks with the central bank, the banking regulator and the Finance Ministry as it seeks the license, said Osvaldo Gimenez, president of Mercado Pago, the company's fintech unit. The formal process will begin in the coming months.

"The opportunity is phenomenal. We see in Mexico what happened in Brazil over the last decade, where there was a huge increase in access to banking, electronic payments and credit," Gimenez said in an interview. "We want to be protagonists on this, and this will allow us to launch more products."

The process is expected to take 12 to 24 months, he added. The company weighed purchasing a banking license but ultimately decided against it.

Mexico has emerged as a key battleground for financial services startups given that less than 50% of the population has a bank account. A growing number of the fintech firms are seeking banking licenses to offer a full menu of options.

Argentina's Ualá acquired a license by buying ABC Capital, UK fintech giant Revolut received a license in April while Brazil's Nubank has formally applied for one. Four other local companies are in the process, according to local newspaper El Financiero.

MercadoLibre has been operating in Mexico under a fintech license known as IFPE, which allows it to provide a series of services including the company's wallet app. A banking license would open the door to receive payroll deposits and remove a cap on the amounts held. The process to approve and issue credit cards would also be faster.

"The banking license will make a lot of things easier, from how we offer credit to users to how we can offer investment products," Gimenez said. "With the scale we already have and the ambition we have to be the largest digital bank in Latin America, this move is going in the right direction." —Carolina Millan, Bloomberg News

Stripe opens City of London office to step up U.K. expansion

Stripe is opening a new office in the City of London as it looks expand its U.K. operations and roll out lending to small businesses.

The new location will house 250 staffers from engineering, sales, partnerships, financial compliance, and operations, John Collison, Stripe's president and co-founder, said in an interview.

"When you zoom out, it's just the largest city for us in terms of businesses starting with us," Collison said. "We're still expanding quite a bit. We may need a new office later." The firm has about 30 open roles in the capital, he added.

San Francisco-based Stripe opened its first U.K. office in the Shoreditch neighborhood, just north of the City of London, in 2014. The U.K. is the fintech company's second largest market and more Stripe users are based in London than any other city in the world.

Meanwhile, Stripe is also adding new payment tools in the U.K. including a small-business financing service called Stripe Capital. It will also allow U.K. businesses to accept so-called pay by bank options, which are cheaper because they bypass traditional card networks. —Aisha S Gani, Bloomberg News

Paytm signals job cuts, asset sales after India probe hit

Paytm warned of job cuts and said it would trim non-core assets after reporting its first sales decline on record, reflecting fallout from a regulatory probe that curtailed much of the Indian fintech pioneer's business.

Once a role model for India's nascent startup economy, Paytm's net losses swelled several-fold to 5.5 billion rupees ($66.1 million) for the three months through March. The company known as One 97 Communications reported a 2.6% slide in revenue to 22.7 billion rupees — the first drop since its 2021 stock-market debut. But it said it now aimed to streamline the organization, cut employee costs and "prune" non-core businesses. The company's shares climbed as much as 2.8%, reversing earlier losses.

Paytm, founded by then-celebrated Indian entrepreneur Vijay Shekhar Sharma in 2010, is struggling to recover after a finance watchdog in January ordered a key banking affiliate to wind down. The restrictions dealt a blow to Paytm's reputation and prompted speculation that customers could defect to rivals such as Walmart Inc.'s PhonePe.

On Wednesday, Paytm said it was profitable before interest, taxes, depreciation and amortization, and before taking employee incentives into account. It warned that revenues should slide further to 15 billion to 16 billion rupees in the June quarter, though it expected "meaningful improvement" thereafter.

Paytm, which also competes with financial services offered by Amazon, Google and billionaire Mukesh Ambani's Jio Financial Services, is trying to put its regulatory issues behind it.

Its shares have lost half of their value since the government ordered Paytm Payments Bank, which processed transactions for Paytm, to halt its key operations, citing non-compliance. The banking affiliate known as PPBL isn't controlled by Paytm, though it is part of founder and Chief Executive Officer Sharma's fintech empire.

Sharma has since moved swiftly to steady the ship by forging new partnerships with some of India's top lenders including Axis Bank Ltd., HDFC Bank Ltd. and State Bank of India Ltd. The alliances will help Paytm power instant money transfers for customers by linking banks with its fintech app. Paytm previously used its bank affiliate to run its digital wallets and payments traffic.

The firm is also using partner banks for clearing merchant transactions. —Sankalp Phartiyal, Bloomberg News

Virgin turns to Synchrony, Mastercard to launch U.S. travel card

Virgin Group is partnering with Synchrony Financial and Mastercard to issue a new U.S. travel-focused credit card, launching later this year.

The Virgin Red Rewards Mastercard will allow consumers to earn "Virgin Points" on hotels, flights, cruises or experiences, as well as purchases outside Virgin Group-affiliated companies. The multi-year agreement will make Synchrony the exclusive issuer and Mastercard the exclusive payments network for the card, which will launch in the second half of this year, according to a Wednesday statement.

Lucrative for both merchants and their bank partners, co-brand credit-card partnerships are a highly competitive space. Travel is seen as particularly appealing after steadily bouncing back after the pandemic. Synchrony and Mastercard teamed up with J. Crew Group last year to roll out a new card for the retail company. —Paige Smith, Bloomberg News