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Withdrawing From Russia – Industry roundup: 25 April

UK creditors to lower interest rates for consumers sharing open banking data

Shawbrook Bank, a privately held bank and specialist lender in UK, announced they will offer discounts on loans to applicants who share open banking data, according to UK-based news outlet AltFi. Shawbrook is partnering with ClearScore, a credit service provider, to assess applicants' creditworthiness through their open banking technology.

According to reports, Shawbrook provides loans and savings products to individuals and small and medium-sized enterprises (SMEs) who are unable to obtain finance from major commercial banks, while ClearScore, launched in 2015, was noted as the first UK service to enable consumers access to credit scores and reports. Additionally, ClearScore offers a credit-checking app and financial quotes based on users’ credit files.

The report explained that Shawbrook will integrate its open banking data from ClearScore with its decision-making technology, enabling them to collect income and spending data information at the point of application in real time. Additionally, customers who provide open banking data through ClearScore at the time of application and are eligible for a personal loan with Shawbrook Bank will receive a 1% APR discount on the loan rate. Shawbrook will only have a one-time access to the applicant's information to make a credit decision; the data will not be accessible on a continuous basis.

The transaction-level data is only available to franchise banks that own customer relationships. However, the basic principle of open banking is that consumers own their personal financial data and have the right to use or share the data, with requirements for data privacy, data permissions and secure exchange. This effectively makes that data another asset (collateral) that consumers can trade. In this exchange, Shawbrook receives more comprehensive and detailed information for credit decisions, while consumers receive discounts.

Digital commerce payments to grow in Latin America with Citi and EBANX alliance

Citi's Treasury and Trade Solutions (TTS) announced that it has signed an agreement with EBANX, an international payment processor connecting over 35,000 global and regional companies, to provide end-to-end digital collection (e-commerce) solutions for its institutional clients in Latin America. Additionally, Citi’s customers should be able to accept over 100 online consumer payment methods in 11 countries.

According to a study by EBANX's Beyond Borders, as digital commerce continues to increase in Latin America (expected to grow by more than 30% in 2022), this alliance should enable Citi's institutional clients in the region to increase payments acceptance, enhance local card processing and improve their position in an increasingly competitive economy.

The EBANX platform is said to give Citi’s institutional merchants the capability to collect payments from a variety of payment methods, including credit cards, electronic wallets, immediate and local payments. On the consumer side, customers will be able to access their preferred payment method effortlessly through the robust structure of EBANX operations.

Rapid “neobank” growth leads to progressively weak fraud prevention measures, cautions the FCA

Due to the increase in the number of new financial institutions created in the last ten years, a more in-depth assessment of financial crime risk is imperative, according to the Financial Conduct Authority (FCA). Additionally, the FCA has warned that some UK challenger banks (“neobanks”) have failed to protect themselves from financial crimes. The FCA stated that it is their duty to protect consumers and contribute to the stability of financial markets and systems. However, some challenger banks are not properly verifying their customers' income and occupation, in addition to a lack of financial crime risk assessment procedures that should be established for their customers.

The FCA commented that it had identified an increase in the number of suspicious activity reports (alerts to the National Crime Agency) regarding potential money laundering or terrorist financing cases.

Sarah Pritchard, executive director for Markets, FCA, said that challenger banks are an important part of the UK’s retail banking services. However, Pritchard further stated that there can be no compromise between quick and easy account opening and strong financial crime management controls. In efforts to improve reduction and prevention of financial crimes, the FCA recently launched a three-year strategy and hired 80 new staff members for this task.

Binance cuts Russian services, conforming to European Union sanctions

Binance, the world's largest crypto exchange, announced that it has deactivated the accounts of its top Russian clients, limiting domestic services in line with European Union sanctions. Binance commented that users (including Russian citizens and residents and companies based in Russia) who hold cryptocurrencies in excess of € 10,000 (US $10,900) will be banned from initiating new deposits and trading. However, it said that affected customers could withdraw funds.

Binance explained that accounts for Russia-linked users who have completed address verification and maintained crypto less than € $10,000 will remain active. Binance also stated in March that it would ensure compliance with sanctions and would not unilaterally freeze the accounts of millions of innocent users.

China's largest credit card brand, UnionPay, looks to withdraw services to Russia

As giants Visa and Mastercard suspended services throughout Russia due to the conflict, Moscow expected to rely on China's UnionPay to fill the gap in its domestic banking system. However, UnionPay announced that it will not expand its presence in Russia for fear that it could become the next target of catastrophic sanctions, such as being barred from doing business with an American individual or company as well as importing goods from or exporting goods to the US. UnionPay stated that the sanctions could separate them from the global financial system.

According to a global news outlet, Nilson Report, UnionPay – a state-owned financial services network operated by People's Bank of China (China’s central bank founded in 2002) – is the second largest card brand in the world, with a market share of 32%. UnionPay’s hesitancy to enter the Russian market is said to be due to major Chinese companies’ caution regarding doing business in Russia, even though China has not officially joined Western leaders to impose sanctions on Russia.

Reports indicate that China's three largest state-owned oil companies have reportedly been warned by Beijing to avoid new investments in Russia. Last month, state-owned oil producer Sinopek said it suspended negotiations on a major joint venture with Sibur, Russia's largest petrochemical company. Bloomberg reports that the Bank of China and the Industrial and Commercial Bank of China, two of China's largest lending banks, have also stopped offering financing options to clients for purchasing Russian commodities.

Officially, China has refused to participate in Western sanctions against Russia. However, Bruce Pan, Head of Macro and Strategy Research, China Renaissance Securities, stated that China is seeking to balance its ongoing economic ties with Russia while maintaining ties with Western nations.

NRF urges Visa and Mastercard to rescind merchant swipe price increases amid rising inflation

The National Retail Federation (NRF), the country's largest retail group, is requesting that Visa and Mastercard cancel their swipe fee increases as consumers fight rising inflation. According to reports, the two companies are raising swipe fees, or fees charged to merchants each time a consumer makes a purchase using a credit or debit card, this month. According to the NRF, these surges push up consumer prices, leading to over US $700 a year for the average family in the US.

Leon Buck, Vice President of Government Relations, Banking and Financial Services, NRF, commented that if swipe fee increases are implemented, retailers will be forced to raise prices on consumers to justify loss ramifications. Buck further added that these bank cards, with an inflation rate of 8.5%, could potentially generate 8.5% more swipe revenue this year. The report indicated that the companies’ estimated $1.2 billion hike was actually scheduled to take effect in April 2021, but was postponed due to the economic impact of the pandemic.

Electronic payments play an important role every day and have proven to be even more valuable since the pandemic began, Mastercard told news reporters.  Additionally, Mastercard stated that the changes that will be made to a select group of credit interchange rates have not been implemented in more than a decade. They are said to be lowering costs for merchants with transactions that are less than $5.

The US Congress has submitted a letter to Visa and Mastercard urging them to withdraw plans to implement the fees, as raising the interchange fee rates would increase the current high costs US consumers are facing during these inflationary times, stated reports.

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