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Industry roundup: 25 March

Oxxo retail chain in Mexico outpaces fintechs to be a superbank

The race to establish innovative fintechs in competitive times continues. According to a recent report, Spin by Oxxo, a ready-to-use Visa debit card and app, is the company's latest attempt to integrate large retail infrastructure across Mexico with financial services. This month, the company announced that 1.6 million people had signed up for Spin. This surge in sign-ups has made Oxxo, a traditional chain of convenience stores, one of Mexico's fastest growing debit card companies. Oxxo has more users than established banks like Banco Azteca and most fintechs .

Oxxo stated that customers can sign up for Spin at any of Oxxo's approximately 20,000 stores in Mexico. Customers’ accounts are accompanied by an app enabling them to initiate digital payments, transfer money, and access a points program. René Lankenau, former head of digital innovation, Mexican bank BanRegio, commented that launching a financial product can be costly, but companies like Oxxo have the scale and resources to subsidize the cost and expand faster than any fintech.

FEMSA, parent company of Oxxo, was founded in 1978 as a retail experiment. The report states that thirteen million people shop at Oxxo every day. In addition to selling basic groceries, SIM cards, inexpensive phones and prepaid Netflix cards, Oxxo described their cashiers as bank tellers, enabling customers to pay utility bills, initiate bank transactions, purchase data for their phones, transfer funds and pay taxes.

Reports indicate that Oxxo is not affiliated with other traditional banks to launch Spin. Oxxo paired themselves with ComproPago, a Mexican fintech start-up that enables cash payments and transfers on its platform.

Christine Chang, a partner at venture capital firm Rally Cap Ventures, commented that Oxxo's advantage over other fintech products on the market is that users in Mexico still want a physical presence when choosing a financial product. Chang further stated the brand is much more recognizable than new fintechs because Oxxo has such a large presence. Lankenau commented that FEMSA has built a fortune by owning banks and believes Oxxo will become a “super bank".

The US FED lists four CBDC credentials for a US CBDC, according to Chair Powell

US Federal Reserve Chair Jerome Powell at a panel discussion hosted by the Bank for International Settlements (BIS) stated that a US CBDC needs to ensure user privacy, be "identity verifiable", "intermediated", and widely accepted as a means of payment. According to the Wall Street Journal, the US Federal Reserve Board (Fed) has not yet decided whether to issue digital dollars, adding that this "is just the beginning of this journey” despite listing these four qualifiers.

Powell further commented that the Fed supports innovation in digital financial products, but warned that there are risks inherent in some technologies like cryptocurrencies and how they react to economic pressures. Powell also accentuated the need for regulators to curb the use of crypto assets to control fraudulent activity and ensure that a CBDC is "identity verifiable" (similar to the way US bank accounts are identifiable). This should help combat money laundering and distinguish it from other digital assets.

Australian banks to adopt stablecoin and abandon anti-crypto stance

Australia and New Zealand Banking Group (ANZ) announced Australia’s first Ethereum-based, AUD-denominated stablecoin A$DC, following years of uncertainty towards crypto. Today, Commonwealth Bank enabled 2000 retail customers to trade ten digital assets through the app as part of its pilot program. The bank stated that this move was based on internal data signifying half a million customers currently trading crypto assets.

ANZ previously refused to lend to businesses using crypto in 2018. Local stablecoin issuer, Chrono Bank, stated the country's four largest institutions were not willing to provide such banking services to the company in 2020, even though the project secured the required regulatory licenses.

The report indicated that Australian dollars are held in a trust to fully back A$DC at a 1:1 ratio. According to Nigel Dobson, head of ANZ's banking services, ANZ anticipates the token will be able to pave the way for more of its customers to explore digital assets. Additionally, ANZ hopes the A$DC would be listed on a local cryptocurrency exchange in the future.

Transaction trading on Ethereum's mainnet is associated with high fees. ANZ plans to explore launching stablecoins on other blockchains, including Hedera Hashgraph.

Australia’s federal government has committed to complete discussions on cryptocurrency custody, policy responses to digital asset, and the incorporation of DAOs into national legal and tax systems by year-end 2022. The Reserve Bank of Australia is also considering whether to introduce CBDC for both wholesale and retail.

Credit Suisse faces potential $500 million fine

Credit Suisse announced they could potentially pay approximately US $500 million after a Bermuda court ruling found that the bank mismanaged a Georgia Billionaire’s funds. Former Georgia Prime Minister Bidzina Ivanishvili has filed a lawsuit against Credit Suisse in Bermuda and Singapore for infringing trust and enduring an $800 million loss in fraudulent trade transactions by private banker Patrice Lescaudron.

Ivanishvili sought $400 million in damages in the Bermuda Supreme Court, a trial case that lasted five weeks, ending in December. According to reports, Credit Suisse issued a statement awaiting a court ruling against the bank relating to damages in excess of $500 million. The report also stated that Lescaudron was sentenced to five years prison time in Switzerland in 2018 for fraud and counterfeiting. Additionally, Lescaudron admitted he forged his customer's signatures and reallocated the funds by procuring stock without the customer's consent, causing a loss of over $150 million. Lescaudron apologized to his clients and Credit Suisse and was detained for two years. He was released in 2019 and committed suicide in 2020.

Evidence from the Bermuda court illustrated that many Credit Suisse executives and managers were aware Lescaudron was in breach of the rules, but chose to ignore this because he brought about $25 million in revenue to the bank each year.

Immediate cross border settlement solutions through RTGS.global and Temenos Exchange partnership

RTGS.global, a provider in settlement, liquidity management, financial market infrastructures, and cloud computing, announced that it has joined Temenos Exchange. This exchange is an open marketplace for fintech solutions to help create a digital-era financial market infrastructure (FMI) and to eliminate friction in cross-border payments.

According to the press release, the new partnership will offer Temenos banking clients easy access to RTGS.global’s liquidity settlement system, enabling real-time, inter-bank settlement for PvP-based wholesale FX in both developed and emerging market currencies. Additionally, RTGS.global described the liquidity settlement system as facilitating immediate transfers of liquidity (funds) in the traded currency pair enabled by point-to-point between banks, eliminating the need for an intermediary in the flow of funds. Banks of interest should be able to test the system by running proof-of-value in a dedicated staging environment before the system is officially tested and becomes a live participant, stated RTGS.global.

Temenos Exchange provides support to fintechs and software developers in the development, validation and monetization of new banking solutions. Joining the Temenos Exchange signifies that RTGS.global will be available to more than 3,000 customers in 150 countries, serving the needs of 1.2 billion banks around the world.

Cross-border settlements continue to be challenging, with excess costs and risks globally. Dave Sissens, CEO, RTGS.global, commented that RTGS.global aims to make international cross-border transactions quicker in a secure and efficient manner.

Apple's open banking acquisition could help boost payments

Apple acquired UK-based open banking fintech Credit Kudos, and the startup is reportedly worth about US$150 million. Credit Kudos' open banking technology is said to help lenders access consumer financial information such as spending data to assess credit decisions.

According to the report, Apple may look at several ways to boost their payments business. Tim Cook, CEO, Apple, announced that Apple will expand the Apple card, currently only available in the US, to more countries such as the UK. Apple considers the UK a good candidate due to its high penetration of credit cards.

With the Credit Kudos integration, Apple may use the open banking tech to add financial tools such as credit score checks and budget alerts to the Apple Wallet and Apple Card. Cornerstone Advisors stated in Forbes that approximately 6.4 million users were issued Apple Cards by Goldman Sachs in 2021. Additionally, Apple plans to expand credit underwriting using Credit Kudos’ open banking data by reaching more subprime borrowers in the US and potentially in the UK.

Over the past few months, Apple has been driving payments extensively, such as Tap to Pay (a mobile POS) on iPhone announced in February 2022. Apple Pay’s capabilities were also expanded to include driver’s licenses and health insurance cards in the wallet. The Boston Consulting Group stated that Apple may be looking to increase revenue in a high-growth market – global payment revenues are expected to rise from $1.5 trillion in 2021 to $2.9 trillion in 2030.

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