BNPL debt accumulates in the U.K., Ripple expands cross-border tech

November 1, 2023 12:40 PM

The U.K.'s Financial Conduct Authority released data that shows buy now/pay later lending on the rise, Ripple is working with Uphold to improve crypto liquidity, and more.

Here's what's happening around the world.

Chris Ratcliffe/Bloomberg

U.K. consumers lean more on BNPL

Twenty-seven percent of U.K. residents have used buy now/pay later lending in the six months between July and December 2022, according to the Financial Conduct Authority, which released this data on Tuesday. That is up from the 17% of U.K. residents who used BNPL in the 12 months before July 2022. The FCA also reports that people who have used BNPL more than ten times in the past 12 months — dating to November 2022 — also have at least one other high-cost credit product. And 51% of consumers who have used BNPL more than 10 times in the past year have added to their overall debt, versus 27% of consumers who have used BNPL fewer than 10 times. The FCA does not have regulatory oversight over BNPL lending, but it has issued guidance for firms to clarify lending terms over the past year. The regulator also said it has used its power under consumer protection laws to secure changes from lenders. "Our research shows a significant increase in the use of BNPL over the past year," said Sheldon Mills, executive director of consumers and competition at the FCA, in a release. "When used appropriately the product provides valuable benefits, but we want to ensure that consumers, particularly those in vulnerable circumstances, have adequate protections and are given sufficient information." —John Adams

Jack Taylor/Photographer: Jack Taylor/Getty

Ripple adds Web3 partnership to boost cross-border payments

Ripple has entered into a collaboration with Uphold, a global Web3 company that features a trading platform that handles transfers between cryptocurrency and traditional currency. Ripple hopes the partnership will make it easier for its partners to improve crypto liquidity to support international payments. Ripple has used its blockchain technology for years to enable parties to pay across borders while reducing reliance on intermediaries such as correspondent banks. More recently, Ripple has worked on a cross-border network for digital assets, including cryptocurrencies, stablecoins and central bank digital currencies. Ripple is also part of a number of stablecoin and CBDC projects, and earlier this fall received a payments license in Singapore to expand its presence in Asia Pacific. —John Adams

Deutsche, Standard Chartered test crypto interoperability

Deutsche Bank and Standard Chartered have piloted digital currency transfers on the Universal Digital Payments Network, a messaging system designed to enable stablecoins and central bank digital currencies to operate outside of their countries of origin. The process is meant to serve as an alternative to Swift, which is also working on a messaging product to make CBDCs and stablecoins interoperable. Deutsche Bank used an application programming interface and transferred funds to digital currency accounts at Standard Chartered's venture capital unit. While dozens of CBDC projects are in various stages of development globally, one challenge is ensuring that cross-border transactions can be securely executed. There are several initiatives underway to address this problem, including a test involving the New York Fed and the Monetary Authority of Singapore. —John Adams

Visa, partner plot fintech projects in Africa and surrounding markets

Visa has entered a collaboration with fintech technology company Direct Transact to develop digital financial services for banks, fintechs and businesses in the Central Europe, the Middle East and Africa (CEMEA) region. Visa has long used Direct Transact as a processor in the region, and the partnership is designed to develop tools for virtual cards, tokenized products, core banking and merchant acquiring. Direct Transact also offers embedded finance technology, enabling banks and other institutions to offer a wide range of products through a user's payment credentials. Vivere, a cross-border payments brand that is part of Direct Transact, will also be part of the collaboration. "Now businesses in the region will have more cross-border payment opportunities at their fingertips than ever before," said Neil Capazorio, global executive for product development at Vivere, in a release. Visa has pledged to invest $1 billion in Africa by 2027, focusing on technology such as Tap to Pay, virtual cards and partnerships with local fintechs and financial institutions in the region. —John Adams

Australian students test CBDC

Australia's Southern Cross University and ANZ Bank are using a test version of a central bank digital currency to make payments at vendors on campus. The two-month pilot will determine how a CBDC could work if the internet were not available. The students are using NFC smart cards loaded with digital Australian dollars that can be used at specified stores at the university's Gold Coast and Northern Rivers campuses. The university's participation follows floods near the campus in 2022, which disconnected ATMs and web-connected point-of-sale terminals for more than a month. CBDC programs are in testing or development in most countries, though it is expected to be several years before most countries have live digital currencies. In Australia, it may be more than a year before the government makes a final decision on whether to move forward with a CBDC. —John Adams

BMO plans to expand installment payments

Bank of Montreal will partner with Visa to offer installment payments to cardholders, with an expected launch in 2024. Consumers can convert qualifying purchases into smaller payments over a period of time. The installment option will carry Visa's brand and will be an additional choice beyond BMO PaySmart, the bank's existing credit card-based installment plan. The bank is positioning the expanded installment option as a way for consumers to manage their finances during a potential economic downturn. BMO also recently partnered with DailyPay to offer earned wage access, another product designed for consumers to manage higher or unexpected expenses. —John Adams

Intesa agrees to buy Romania’s First Bank from JC Flowers

Italy's Intesa Sanpaolo agreed to buy Romania's First Bank from its private equity owner JC Flowers as part of a plan to expand in European countries where it's already active. The Milan-based lender has now wrapped up months of talks and signed an accord to purchase First Bank, Intesa said in a statement, confirming an earlier Bloomberg report. The lender declined to disclose terms of the transaction.

The Italian lender paid about €130 million ($138 million) for First Bank, below its book value, according to people with knowledge of the matter, who asked not to be identified discussing confidential information. Intesa, Italy's biggest bank, has been scouting for bolt-on acquisitions in key European and Mediterranean rim countries to strengthen some core activities, Marco Elio Rottigni, head of its International Subsidiary Banks Division, said in an interview with Bloomberg in August. —Sonia Sirletti and Andra Timu, Bloomberg News

Scotiabank sells Canadian Tire unit stake for $647 million

Canadian Tire bought back a 20% stake in its financial-services business from Bank of Nova Scotia in a CA$895 million ($647 million) all-cash transaction. The Toronto-based retailer also said it will work next year with Goldman Sachs to evaluate strategic options for Canadian Tire Financial Services, which it said is now the seventh-largest credit card issuer in Canada, with 2.3 million cardholders. The business generates CA$442 million of income before taxes, Canadian Tire said.

The transaction with Scotiabank will allow Canadian Tire to "stay relevant to customers' changing needs and expand our credit-card program to unlock even greater value for shareholders," said Chief Executive Officer Greg Hicks in a statement Tuesday. Scotiabank, which acquired the stake in 2014 for CA$500 million, said it will record an after-tax gain of about CA$319 million in the fiscal fourth quarter as a result of the deal, and that the sale would boost its Common Equity Tier 1 ratio by roughly 16 basis points. Scotiabank will continue to provide a committed credit facility of $1.1 billion to Canadian Tire Financial Services for the next 18 months. —Christine Dobby, Bloomberg News