CBDCs fall out of favor; analysts slam Global Payments

September 25, 2024 3:23 PM

U.K. regulators are changing regulations to incentivize early B2B payments, and earned wage access DailyPay will look for clients outside of the U.S. Here's what's going on in the world of payments.

Photographer: Patrick Doyle/Bloomberg

Canada, Australia back away from CBDCs

Central bank digital currencies have developed slowly in large economies with mature payment systems. In at least two countries, work has been dramatically scaled back if not halted altogether. The Bank of Canada this week said it would discontinue work on a CBDC and would increase research and development on cross-border payment projects with other central banks, along with other ongoing initiatives to improve the country's payment infrastructure.

Canada has spent the past several years researching the potential structure and uses for a digital currency, focusing on a wholesale CBDC, a form that is primarily designed for large transactions between banks or other enterprises. "The Bank will continue to monitor global retail CBDC developments and publish some related research, but the focus will be on preparing for the evolution of payments both in Canada and around the world, through policy research and analysis," the Bank of Canada said in a release.

Canada's central bank made its announcement shortly after Australia's central bank made a similar statement, saying research has found that there is not a clear need for a CBDC and that Australia's existing payments infrastructure is adequate to ensure resilience and grow the country's payments and financial services industries. There are dozens of CBDC projects underway globally, though in most large countries with mature banking systems there has not been formal approval to move forward. In the U.S., work on CBDCs has been mostly experimental, with the banking industry expressing concern that a digital dollar would result in consumers draining their bank accounts. —John Adams

UK regulator to roll out new late payment guidance later this year

The Office of the Small Business Commissioner in the U.K. is looking to change its guidance for late payments and reward companies that pay small businesses and suppliers faster.

The new Fair Payment Code is expected to replace the Prompt Payment Code later this year, the OSBC said on Sept 20. The Prompt Payment Code is a voluntary code of practice for businesses that was first established in December 2008 and set standards for payment practices between companies and their suppliers with a particular emphasis on small businesses. Companies found to be noncompliant are removed from the list.

Currently, more than 5,000 companies have pledged to keep payment practices within the existing framework set out by the OSBC that requires payment to at least 95% of their suppliers within 60 days and to 95% of small suppliers within 30 days.

The Fair Payments Code will be "more ambitious in setting higher standards" and go "beyond the existing Code's requirements," according to the OSBC's website.

Additionally, new reward tiers will be rolled out based on how quickly payments are made. Gold tier will be awarded to companies that pay 95% of suppliers within 30 days; silver tier will go to companies that pay 95% of small-business suppliers within 30 days and all other suppliers within 60 days; and bronze tier will be awarded to businesses that pay 95% of all suppliers within 60 days. —Joey Pizzolato

Analysts ding Global Payments after investor event

Global Payments' stock fell more than 6% following Tuesday's investor presentation, with BTIG downgrading the company to neutral from buy, saying the stock is in "no man's land." Morgan Stanley also chimed in, saying the investor presentation "left something to be desired."

Global Payments has updated its strategy to boost technology in B2B payments, where it competes with fintechs like Stripe and Block that sell payment technology to small- and medium-size businesses.

This week, Global Payments told investors that it is unifying its merchant solutions business globally, placing its point of sale products under a common brand called Genius, and using its distribution channels to power global expansion. Its issuer solutions business will focus on cloud technology and cross-selling, and it will evaluate strategic objectives for its issuer division.

"We think the biggest point of concern for investors is the expected deceleration in the merchant segment growth to mid-single digits in 2025 (from 7% in the second half of 2024) driven largely by the newly defined core payments subsegment," Morgan Stanley said. "This compares to an expected acceleration in 2026-27 back to current trends. We think this could be in large part due to conservatism as management seeks to establish a beat and raise cadence for coming quarters by resetting expectations lower, but we think the cadence makes it hard for investors to explain what's driving the implied decel."

Global Payments did not reply to a request for comment. —John Adams

DailyPay plans to take earned wage access beyond the US

New York-based payroll automation firm DailyPay will offer earned wage access to clients with operations outside of the U.S. The launch is scheduled for later this fall, with DailyPay offering the product to clients that have operations in the U.K.

DailyPay has expanded its EWA business in the U.S. through bank partnerships, including BMO, PNC, Santander and TD Bank. DailyPay has additionally partnered with Visa and The Bancorp Bank to offer reloadable prepaid cards that are integrated with EWA, providing a way for workers to make transfers, locate no-fee ATMs and link to mobile wallets such as Apple Pay, Samsung Pay and Google Pay.

EWA is an older product that has grown during the pandemic and subsequent economic challenges such as higher prices, with advances totaling $22 billion in 2023, according to the Consumer Financial Protection Bureau. EWA is also driving growth in real-time payments, with DailyPay transactions accounting for more than 5% of all RTP network transactions, according to The Clearing House.

In the U.K., more than 16 million workers missed payments on household bills, according to the U.K.'s Money and Pensions Service, which creates an addressable market for EWA, DailyPay contends.

"Many of our clients and partners are multinational, and they have increasingly expressed the need to offer this valuable benefit to their employees beyond the U.S.," said Josh Durodola, vice president of international at DailyPay, in a release. —John Adams

Visa, Singapore tech firm plan crypto push

Visa and digital payments fintech dtcpay will partner to launch a payment card that enables users to convert cryptocurrencies into traditional currency with rates set in real time. The traditional currency can then fund the card, which will include future payment products designed for ultra-high-net-worth consumers and businesses.

Singapore-based dtcpay's digital payments technology will integrate with Visa's network, including more than 130 million merchants in about 200 countries and territories. Visa is attempting to address a major hurdle to cryptocurrency payments by enabling fast conversion between crypto and traditional currency before transactions reach merchants, which usually refuse crypto payments.

"We are empowering consumers and businesses who use dtcpay to convert their digital currencies into fiat and make digital payments seamlessly," said Adeline Kim, country manager for Singapore at Visa, in a release. "We continue to redefine the payments experience for businesses and consumers, offering them greater choice, security, and convenience when they make contactless payments. More importantly, we empower them with a seamless payment experience and ensure it is easy for them to pay and be paid."

Mastercard, Visa and other payment companies with large consumer and merchant networks such as Block and PayPal are adding services that cater to crypto investors and traders by providing a scalable method to store and then spend their investments.—John Adams

Mastercard, African telco push to expand cross-border payments

Mastercard and the Nairobi-based mobile network operator Safaricom have signed an agreement to expand acceptance of remittances and mobile money service.

Safaricom operates the M-Pesa system, which has driven financial inclusion in Africa and other regions for years by enabling mobile phone accounts to fund payments. More than 636,000 merchants support M-Pesa, a roster that will grow by accessing Mastercard's global retail network.

The partnership will also enable more remittance corridors and faster transaction processing by accessing Mastercard's payment processing technology.

"This collaboration with Mastercard unlocks new opportunities for M-Pesa merchants. By combining our expertise with Mastercard's global acceptance network, we are enabling businesses to provide more efficient and frictionless payment solutions to their customers, both in Kenya and beyond," said Esther Waititu, chief financial services officer for Safaricom, in a release.—John Adams

India B2B payment firm plans expansion to Indonesia

PayMate, an India-based business-to-business payment firm, is expanding into Indonesia through a $400 million acquisition of a subsidiary of fintech-as-a-service company DigiAsia.

The subsidiary, DigiAsia Bios, provides B2B payments, B2C payments, remittance, POS lending and buy now/pay later, among other services, to enterprise clients. PayMate plans to invest $25 million in cash and will eye a public listing in India for the combined company if the deal is finalized, according to the company.

PayMate digitizes B2B payment processes, including accounts payable and receivable, embedded finance and invoice discounting. The company has secured $40.5 million in funding through five rounds, including investments from Visa and Lightbox.—Joey Pizzolato

Lithuanian payments fintech Kevin goes bankrupt

Kevin, a Lithuania-based payments startup, was declared insolvent late last week by the Vilnius District Court following allegations that the fintech was unable to meet its financial obligations.

"This marks a sad end for a company many had once considered to be the next Lithuanian unicorn," said Lukas Jukabonis, chief business development officer at Lithuania's central bank, in a LinkedIn post.

"The innovative idea of disrupting card schemes and facilitating account-to-account payments at POS terminals is now gone. It seems that, for now, the card schemes will remain undisturbed," Jukabonis said. "According to public records, the company owes [about $600,000] to the state social insurance alone, not to mention delays in payments to employees and partners."

The company first secured a payments license from the Bank of Lithuania in 2018 and followed in 2021 with a $10 million seed funding round led by OTB Ventures and Speedinvest. In 2022, it introduced its technology that allowed A2A payments at point-of-sale terminals, and in 2023 secured another $65 million in series A funding. Last year, the company expanded to the UAE.

Lithuania has been hailed as the European Union's new fintech capital thanks to regulation that allows fintechs to operate across the EU once they secure a license from the central bank.—Joey Pizzolato

Credit card rewards fintech Yonder secures $31.4M in funding

London-based credit card rewards startup Yonder has secured 23.4 million pounds ($31.4 million) in fresh capital the company will use in continued growth efforts.

The fintech will use the capital to increase its headcount, which currently sits at 45 team members, and fund its product development.

Yonder leverages open banking data to provide Mastercard-branded credit cards to immigrants, expats and other thin- and no-file consumers in the U.K., according to the company. Since its founding in 2020, it has raised nearly $150 million through six funding rounds.

The company focuses on travel and dining experiences for its rewards, which consumers can redeem through the company's app.—Joey Pizzolato