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Industry roundup: 4 April

Sberbank, locked out of the world’s financial markets, launches cryptocurrency

A series of restrictions have been imposed on Russia since the beginning of the conflict with Ukraine, separating Russia from most of its foreign currency reserves and the world's financial system. According to media reports, the Central Bank of Russia licensed Sberbank, Russia’s largest bank, to issue its own cryptocurrency on 17 March, resulting in the launch of Sbercoin. Furthermore, reports indicate that Russia is struggling to meet its dollar-denominated debt and has announced that it will demand payment of energy in the ruble, which declined substantially due to sanctions.

There has been speculation that Sbercoin could be an acceptable method for exchanging rubles for other currencies and circumventing restrictions. However, the feasibility is controversial, according to Asheesh Birla, general manager, RippleNet, a blockchain-based payment service provider. Birla stated that in order to gain traction with cryptocurrencies, Russia still needs a liquid exchange (moving cash in and out of the country) to accept the Russian ruble.

According to a Chainalysis study, ruble to crypto trading volume surged by more than 900%, surpassing $70 million in five days, the highest level since May 2021. Chainalysis also found that Russia was ranked high in the adoption of cryptocurrencies around the world in a 2021 research study, stating at the time that such a large number of ruble-denominated crypto transactions did not necessarily reflect attempts to circumvent sanctions.

M&T Bank Corporation acquires People's United Financial, creating a $200 billion banking franchise

M&T Bank Corporation (M&T) announced the successful completion of its US$8.3 billion acquisition of People's United Financial, Inc. (People's United). The merged company employs more than 22,000 people and a network of more than 1,000 branches and 2,200 ATMs across twelve states, from Maine to Virginia to Washington, D.C. People's United common stock ceased trading on NASDAQ after Friday, April 1, 2022.

According to the press release, M&T will build on People's United's complementary footprint (operating in the most populated and attractive banking markets in the US) to reach a wide range of customers and expand into new regions.

People's United’s customers will be serviced through their current branches, websites, mobile apps, financial advisors and relationship managers until the brand and system are fully migrated to M&T. This system conversion is expected during third quarter 2022. Customers should be able to withdraw cash from both M&T Bank or People's United Bank ATMs.

M&T Bank announced a five-year community growth plan developed in collaboration with the National Community Reinvestment Coalition (NCRC) and local community organizations as part of the merger agreement. This collaboration is said to provide low-to-moderate income (LMI) families with loans, investments and other financial support across the combined footprint of M&T and People's United.

The report stated that both M&T and People's United have been known for their participation in communities and support of public establishments. M&T and its charitable foundation have donated more than $279 million to more than 7,600 charities over the last ten years, and the People's United Community Foundations have donated more than $47 million to thousands of non-profits in the region.

India’s digital payments market to gain traction with UPI support via start-up Slice

India’s mobile bank-to-bank instant payments system, Unified Payments Interface (UPI), will enable users to perform UPI transactions via Slice, an India-based credit card start-up company, according to TechCrunch reports. Unlike traditional card issuers, Slice reported they use a unique underwriting technology to determine creditworthiness, enabling them to enter India’s massive credit market.

Slice stated that their free annual membership card offers attractive benefits such as two percent cash-back and bill pay instalments, which led them to issue approximately 400,000 cards per month. By comparison, HDFC Bank, one of India's largest banks, issued an average of about 316,600 cards per month during the last quarter of 2021.

Since UPI is almost global, it has become an important feature supported by digital payment players. Reports indicated that more than 300 banks are running on UPI, and more than 20 third-party apps are connected to the system as of February 2022.

According to the National Settlement Corporation of India, UPI recorded approximately 4.527 billion transactions in February 2022, an increase of almost 98% from February 2021. Supporting UPI growth are government-sponsored innovations such as UPI123Pay that enable users to make UPI payments using non-mobile devices.

 Slice’s UPI support would potentially increase growth and enable it to reach its goal of becoming a super app. While Slice’s main focus was on cards, reports show they are looking to expand their business and offer a wider range of payment options. UPI would benefit customers when a card cannot be used, such as with small retailers, and users would not need to switch to other payment apps to complete UPI transactions.

The Central Bank of Russia relaxed outgoing funds transfer restrictions exclusively to those who do not support sanctions

The Central Bank of Russia announced that it would ease restrictions on outgoing funds transfers for residents and non-residents from countries that do not support Western sanctions. The parameters state that individuals can transfer up to US$10,000 within a 30-day period, previously limited at $5,000.

It was also announced that transaction amounts would be calculated using the Bank of Russia’s official exchange rates, typically reflecting a stronger ruble than other rates, due to capital regulations enforced by the government. Foreign customers are currently not allowed to sell securities through Russian brokerages. In addition, the Central Bank of Russia limited the dollar amounts that Russians can withdraw from FX accounts.

Reports indicate that the ruble has rebounded in value from less than a cent to close to pre-invasion levels. This increase was mainly due to the continued foreign exchange inflows from energy sales that Western sanctions had largely avoided.

UK Payment Systems Regulator (PSR) investigating fees charged by credit card companies

With various innovative payment alternatives introduced in the financial landscape, the UK Payment Systems Regulator (PSR) reported they are researching credit card companies and analysing their fees to better assist merchants with their business finances and to promote alternative account-to-account (A2A) payments.

The PSR expressed concerns about the exorbitant card fees merchants pay to Visa and Mastercard. Details on the PSR’s budget plan is outlined here: Payment Systems Regulator Annual Plan and Budget 2022/23. In addition, the PSR stated they have sent requests for information on these fee structures and will act on the details received. The regulator also stated that short-term measures such as price caps on credit card fees and cross-border interchange fees may be introduced.

The PSR is also focused on removing any challenges posed by the acceptance of A2A retail payments, noting it may be a feasible alternative to the existing card system. Additionally, the regulators stated they are examining whether commercial incentives for banks, intermediaries and merchants are there to support and enable more use of A2A payments and their considerations to facilitate adoption and boost competition with cards.

The PSR states they are currently working with Competition and Markets Authority (CMA), Financial Conduct Authority (FCA) and the Treasury to work on the future of open banking policies that will play a key role in the adoption of A2A payments. Furthermore, the regulator also said they would work with other authorities to ensure consumers have access to cash; create policies and regulations on crypto assets, stablecoin, and Central Bank Digital Currency (CBDC); and address the rising risk of APP fraud.

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