UK, Sweden plan to protect cash; Canada loves contactless pay

September 18, 2024 3:18 PM

Barclays is having a hard time selling parts of its U.K. payments business, while BBVA expands its stablecoin business in Switzerland. Here's what's going on in the world of payments.

Swift is attempting to encourage interoperability for central bank digital currencies.

Swift builds global system for multiple CBDCs

The global payment messaging service Swift is developing connections for central bank digital currencies and several other emerging digital payment options in an effort to build cross-border interoperability.

Swift will test different distributed-ledger models to vet their ability to process international transactions, initially using traditional currency and then moving to digital assets. It will then develop messaging standards for digital assets and determine what is necessary to provide scale for a large volume of payments.

The organization will initially focus on CBDCs, which are in development or testing in dozens of countries. Since most of these projects are focused on domestic payments, getting different CBDCs to work together is a challenge that is among the factors holding up CBDC projects. This has created what are called "digital islands" that are fragmenting digital currencies based on different technology and local regulations.

Swift in 2023 opened a sandbox that enables developers, commercial banks, central banks and technology firms to build technology that enables CBDCs to work across borders.—John Adams

Simon Dawson/Bloomberg

Lloyds plans more branch closures

Lloyds Banking Group will close 292 branches in 2025, following an earlier announcement it would close 60 branches in 2024.

The closures will be spread among the holding company's brands, including 128 Lloyds branches, 119 at Halifax and 45 Bank of Scotland branches, according to Yahoo UK and other local news sources.

Branch closures are a controversial subject in the U.K., with politicians and government agencies regularly pressuring banks to maintain in-person access for cash-dependent consumers and small businesses.

In the U.K., the Financial Conduct Authority is requiring banks to ensure cash access and to "understand" if cash services need to be expanded when other changes are made to local services. Banks are also required to respond to local residents and consumer groups inquiring about cash access.

"Three million people continue to rely on cash, even as digital payments become more popular. And many small businesses still need somewhere to safely deposit their takings each day," said Sheldon Mills, executive director of consumers and competition at the FCA, in a release.

The FCA has also issued guidance that requires banks and building societies to assess how closing branches or reducing hours will impact service. To maintain access to cash, the U.K.'s Link ATM network has developed a model called pooling that enables machines to accept deposits from multiple banks. —John Adams

Jason Alden/Bloomberg

Barclays' UK payments sale going slow

Barclays is having difficulty selling its merchant payments business in the U.K. amid a broader selloff in the European payments industry.

Brookfield Asset Management pulled out of a potential sale, according to Reuters, citing difficulties in negotiating a price. There are also complications due to Global Payments' takeover of U.K.-based Takepayments, a Barclays partner, which raised concerns that the Takepayments deal would reduce Barclays' payments revenue. Barclays did not return a request for comment.

Payment companies have struggled in Europe over the past two years, due to high inflation, slower economic growth and geopolitical concerns. While U.S. payment companies have reported slower growth in the same period, the stock selloffs and lower earnings have not been as severe as in Europe. —John Adams

Revolut CEO sells $300 million of company stock

Revolut founder and CEO Nik Storonsky sold $300 million in company stock last week following a secondary share sale last month that put the company's valuation at $45 billion.

The U.K.-based challenger bank has its roots in mobile payments but in recent years has added financial products such as investments and advisory services, savings accounts and payment cards.

It has also expanded internationally, building a financial super app in competition with other challenger banks and fintechs such as Monzo, Block, Stripe and PayPal. —Joey Pizzolato, John Adams

BBVA boosts stablecoin support in Switzerland

BBVA is enabling institutional and private banking customers to manage USDC funds in the same app as other more traditional investments.

Users can buy, sell or convert USDC to euros, U.S. dollars and other currencies. The bank hopes the move will speed trading by using the blockchain that backs USDC, which is Circle's stablecoin. BBVA also supports ether and bitcoin in Switzerland.

As a stablecoin backed by reserves of traditional currency, USDC hedges the volatility of other cryptocurrencies. Stablecoins are also considered a better option for payments among digital currencies given this backing.Among payment companies, PayPal has introduced its own stablecoin. Visa and Mastercard have both expressed support for stablecoin payments. —John Adams

Church of England reports progress in digital giving

Contactless payments for charitable donations are gaining ground in the U.K. with the Church of England reporting the technology has spurred more than $6 million in donations over the past three years.

The Church has deployed contactless payment terminals at more than 2,200 churches and has worked with charitable organizations such as Give A Little, CollectTin and others. The Church made the move in response to declining cash usage in the U.K.

Fundraising has emerged as a way to grow digital payments adoption, given the traditional method of collecting cash for donations. Since people do not carry cash as much as in the past, philanthropic organizations are using digital channels to raise funds. —John Adams

Sweden floats constitutional cash protection

Elsewhere in the region, Sweden's central bank has proposed adding cash access to the country's constitution.

The move would strengthen the government's ability to pass laws requiring merchants to provide a cash payment option and banks to accommodate cash protection in case of branch closures. Swiss bank regulations already protect cash as a payment method and the Swiss franc as the national currency.

Sweden is one of the world's most digital economies, with widespread adoption of digital banking and mobile wallets. That has led banks to de-emphasize cash services, which are largely outsourced to cash-handling firms such as Loomis.

The Riksbank contends this is not enough to ensure cash as a payment option, leaving businesses and banks inadequately prepared to use cash as a contingency and to provide service to people who choose or require cash.

In the U.S., states such as New Jersey and municipalities have passed laws requiring businesses to accept cash, a move that resulted in the checkout-free Amazon Go stores to enable in-store cash payments. —John Adams

Contactless payments take over in Canada

Sixty-three percent of in-store payments in Canada are contactless, according to the 2024 Canadian Payments Forecast. Contactless payments totaled 80 billion Canadian dollars in 2023, up 20% over 2022, reported the study, published by Technology Strategies International.

Contactless cards make up 75% of contactless payments, through the penetration of smartphones will boost mobile contactless payments in the future. Seventy-four percent of smartphones in Canada are equipped with Near Field Communication, the technology that supports mobile contactless payments.

"Almost all debit and credit payment cards can now be used for contactless payments, and the penetration of contactless payment terminals is high among merchants," said Christie Christelis, President of Technology Strategies International, in a release. —John Adams