Payment News from Around the World

Africa M-Pesa increases reach in Tanzania M-Pesa’s 8 million customers in Tanzania can now carry out international money transfers to 200 countries. This service is added to their ability to access e-payments, savings and loans, overdrafts and its virtual debit card function through their mobile phones and the 106,000 agents in the country. The Bank of Tanzania announced at the same time that it is increasing limits on digital transactions and received balances of mobile wallets in order to provide relief and ensure continuity of service during the COVID-19 pandemic. Zambia supports digital payments Dr Denny Kalyalya, Governor of the Bank of Zambia, recently made a speech where he outlined measures taken to support digital payments. As part of the Bank’s pandemic response it has, like the Bank of Tanzania, increased transaction and balance limits on Asia A new report from S&P Global Market International says that mobile payments increased 163% in India in 2019 while debit and credit card payments only increased 24%. Google Pay and India’s PhonePe achieved 7 billion transactions on the Unified Payment Interface, approximately two thirds of the total. Despite these advances, the report estimates that card and mobile payments still only accounted for 21% of India’s $781 billion spent in stores. Europe Acquisition brings new phone payment option to Turkey The European Bank for Reconstruction and Development (EBRD) has provided a loan to the Dubai-based TPAY Mobile so that they can acquire Turkey’s payment platform Payguru. TPAY Mobile’s solution allows users to make purchases by charging payments to their mobile phone carrier bills or pre-paid airtime balance, as well as wallet stored value. e-wallet and money transfers. In addition, it has waived fees on P2P transfers up to a value of K150, capped the Merchant Discount Rate for transactions on POS to a maximum of 2% of the value of the transaction, and reduced transaction fees on Real Time Gross Settlement and Electronic Fund Transfer (EFT). Zambia is keen to increase usage of digital channels as part of its journey to being a digital economy. The World Bank has recently issued its Digital Economy Diagnostic Report for 2019 looking at the impact of technology on the economy. Over the last four years, mobile money payments have increased by 126% in value on average each year to K49.45 billion, POS transactions have increased by 560% to K20.09 billion and EFT has averaged growth of 35% from K21.83 billion in 2015 to K67.81 billion in 2019. Payment change and innovation in Vietnam The State Bank of Vietnam reported that in the first four months of 2020 there has been a 26.2% increase in domestic banking transactions. Compared with 2019 there has been a clear move to mobile payments with volumes increasing 189% but the value increasing by slightly less at 166%. A Consumer Payment Attitude survey by VISA found that 37% of those surveyed used a contactless card and 42% used a mobile payment app to pay. Three banks – TPBank, Vietinbank and Sacombank – installed technology to allow account holders to withdraw cash from ATMs by scanning a QR code, while Eximbank and Vietbank have ATMs and offices that let people withdraw cash from ATMs using their fingerprint for authentication. As part of the deal, TPAY Mobile took over an electronic money transfer platform which allows banks card-free transfers, deposits and withdrawals through a network of 30,000 ATMs or 75% of the cash machines in Turkey. TPAY Mobile is already active in 24 countries in the Middle East and North Africa, working with 54 telecoms and e-wallet providers. Kenya supports non-cash payments In a 90-day agreement that was a response to the pandemic, mobile money transaction fees were waived on transaction values of Sh 1,000 or less. In addition, banks did not charge consumers to move money electronically from their banks to mobile money wallets. Effectively Safaricom, with its M-Pesa product, which is reported to have 99.9% of these transactions, is the sole provider. Safaricom reports that this cost them Sh1.7 billion. This agreement was intended to encourage people to pay electronically rather than with cash. The Central Bank of Kenya reports that between 20 April and 10 May, daily average mobile transaction values for payments of Sh 1,000 or less increased by 83% to Sh 1.98 billion compared with before the fee waiver. For payments with a value of more than Sh 1,000, transactions

Card and mobile payments advance in India, but have a long way to go

fell 18.4%. Changing payment practices in Asia Mastercard has carried out an Impact Study in Asia to understand how payment practices are changing. They surveyed 10,000 people in Malaysia, the Philippines, Thailand and Singapore and the results are consistent with the impact of the COVID-19 pandemic around the world, namely cash usage has dropped and card and mobile payments are up. While reported cash payments have dropped between 59% (the Philippines) and 67% (Singapore), cashless payments of all types only increased by 15-18%, indicating a significant drop in economic activity. Mobile wallet usage has increased by more than contactless card usage; for example, in Malaysia wallets increased 40% while debit cards increased by 26% and credit

cards by 22%. Apple faces anti-trust investigations by the European Commission The European Commissioner (EC) has concerns that Apple may be distorting competition and reducing choice, quality and innovation in payments due to its terms and conditions and because it does not allow proprietary bank payment apps to work with its near field communication system.

The EC commissioner Margrethe Vestager said that Apple ‘sets conditions on how Apple Pay should be used in merchants’ apps and websites. It also reserves the tap and go functionality of iPhone to Apple Pay’. Lithuania’s digital coin The Central Bank in Lithuania is carrying out an experiment to test a state backed digital currency based on blockchain technology accessible by the public. Although not legal tender, the digital tokens, known as LBCOINs, are exchangeable between members of the public on private blockchain networks or with the central bank. 4,000 sets of six digital tokens have been created. Each set costs €99 and the design of the six tokens are random with an attached portrait of one of the 20 people who signed Lithuania’s declaration of independence in 1918.

Latin America Central Bank of Brazil suspends WhatsApp payment service Facebook’s WhatsApp has been trialling its payment service in India since 2018 with 400 million users involved. Mid-June it launched its payment service in Brazil where it has 120 million WhatsApp users. Payments to businesses and person to person (P2P) are free for the user although businesses have to pay a processing fee. The payment is initiated within WhatsApp, requiring either a six figure PIN or a fingerprint to allow payment. VISA and Mastercard debit cards and Banco do Brasil, Nubank and Sicredi credit cards could be used, with Cielo providing the back office processing. Ten days after launch the Central Bank of Brazil suspended the service. The reason given was to ‘preserve an adequate competitive environment’ and to ensure ‘functioning of a payment system that is interchangeable, fast, secure, transparent, open and cheap.’ It also said that it had not analysed the P2P managing system.

North America Coin drought in the US In April 2020 there were $47.8 billion worth of coins in circulation in the US, up from $47.4 billion a year earlier. Despite that, from 15 June the Federal Reserve, which distributes coins on behalf of the Mint, has started to allocate coins based on historic order volumes by denomination and the depository institution endpoint. In July it created a task force to address a problem with the availability of coins in the cash cycle. The individual tokens can be traded to create a specific set and these can be exchanged for credit card size physical silver coins with a nominal value of €19.18. The coins are not legal tender. A new round of innovation hubs has been announced by BIS The Bank for International Settlements (BIS) will open innovation laboratories with the Bank of Canada in Toronto, the Bank of England in London, the European Central Bank in Frankfurt and in Paris and in Stockholm with the central banks of Denmark, Iceland, Norway and Sweden. The BIS is looking to identify and develop insights in financial technology relevant to central banks. The aim is to enhance how global financial systems function and to create a focal point for a network of central bank experts on innovation. Gaining regulatory approval in Brazil has now been added to Facebook’s regulatory approval problems in India. Mobile Payment platform has a slow start in Mexico The Central Bank of Mexico launched its mobile payment system, known as Cobros Digitales (CoDi), last autumn with the aim of signing up 18.1 million users in the first year (see CPN September 2019). By June, although 3 million people had downloaded the app, only 167,424 people had made payments and 140,000 people have received a payment using the app. CoDi was created to allow people to make fast and safe payments or receive money using an app, QR codes, and near field communication, as in NFC technology. Unlike electronic solutions offered by some startups, CoDi charges no commission for its services. The reasons for this low uptake are unclear, particularly since it would have been logical to assume the COVID-19 pandemic would have increased the uptake. The Chairman of the Federal Reserve, Jerome Powell, was asked about coin shortages when testifying to the House Financial Committee in Congress, and said that ‘with the partial closure of the economy, the flow of coins through the economy has gotten…. It’s kind of stopped’ It is not a shortage but the slow pace of circulation. People have not been paying with cash to the same extent and the Federal Reserve’s system of producing and distributing cons has been disrupted. This means banks have been holding fewer coins and the Mint’s production has reduced. The BIS already has innovation laboratories in Hong Kong, Singapore and Switzerland along with a strategic partnership with the Federal Reserve System in New York. Reality of less cash affects the UK G4S, one of the four main cash handling companies in the UK, will cut a quarter of its workforce in the UK and Ireland, 1,150 people, with the job losses mainly amongst its cash handling staff. The reduction in cash usage and cash handling was blamed. The UK’s Financial Conduct Authority has issued draft guidance for financial institutions considering closing branches or ATMs, or converting free to use ATMs to be pay to use ATMs. Firms will need to put in place alternative access arrangements such as sharing services with other providers, providing mobile banking hubs or commissioning free to use ATMs, albeit

where this is reasonable to do. The initial survey, two months after launch, showed public awareness was low, 76.6% did not know about it, and there appeared to be little appetite to use it: of the 23.3% that did know, 40.6% said they had no intention of using the solution. It will be interesting to see how the central bank responds and how the uptake changes. The Central Bank of Brazil will launch something similar in November. Cash usage grows strongly in Mexico despite the pandemic The largest increase in the monetary base this year was in May, the second month of confinement by the COVD-19 pandemic. The Bank of Mexico reported that in the week ending 22 May banknotes and coins in circulation, and current account bank deposits in its vaults, increased by over 5 billion pesos, reaching a balance of 1,839 billion pesos for May. Compared with a year earlier, banknotes and coins had increased by 17.8%, or 278 billion pesos. The equivalent increase

between 2018 and 2019 was 4.3%.