The Monday Roundup: what we are watching this week | June 27th

By Gaia Lamperti

June 27, 2022

Bis
BNPL
Card fees

Monday

The Monday Roundup sets the scene for the week’s biggest news stories, industry deals, and upcoming events. For Prime subscribers only.

CBDCs projects continue…

In its Annual Economic Report 2022, The Bank for International Settlements (BIS) has drawn up a blueprint for a future monetary system grounded in stablecoins. The institution said that such a system could combine innovation with essential attributes such as safety, stability, accountability, openness and efficiency. The report also warns against the “deep structural inadequacies” and limitations of cryptocurrencies and decentralised finance (DeFi), outlining the inherent risks in their design. The BIS notes that recent market turmoil and the collapse in the prices of major stablecoins are reminders that “crypto is not sound money”.

In the meantime, the Bank of Israel is experimenting with technology to make some CBDC payments anonymously. The bank says that one of its main focuses has been on finding a balance between offering the privacy afforded by cash and ensuring a CBDC would not encourage tax avoidance and money laundering. The experiment followed a model developed by VMware, according to which citizens would be able to have a wallet that can hold “ordinary” digital shekels recorded in the ledger, and “private” digital shekels, not openly recorded, and where both sides of the transaction enjoy complete privacy as with cash payments.

The latest in payments

The UK’s Payments Systems Regulator (PSR) last week announced plans to carry out two market reviews focusing on card fees. One on scheme and processing fees, and the other on cross-border interchange fees. The reviews focus on Mastercard and Visa, who according to the PSR have raised fees more than fivefold on some cross-border transactions since Britain left the European Union, whilst on scheme and processing fees, fees paid by acquirers have increased significantly from 2014 to 2018.”Over the past several years, constant and significant increases in card fees are eating into merchants’ revenues, and these costs are passed on to consumers. The acceleration of cashless payments post-pandemic and with today’s cost-of-living concerns leads to bitter backlash from consumers,” commented Jordan Lawrence, Chief Business Development Officer at Volt. “Although card payments will continue to remain essential to the smooth running of the UK economy for the next few years, these new reviews are a welcome development in combatting the duopoly Mastercard and Visa currently have in the industry. Existing card payment processes were designed in the 1970s, but now they are inflexible, expensive, and simply do not fit with today’s consumer landscape.”

PayPal is the latest financial institution to enter the BNPL. The company’s new offering, Pay Monthly lets customers space payments over a long period of time, giving them “greater flexibility and even more choices to pay for the items they want and need.” Customers can divide the cost of purchases up to $10,000 into payments over a six-month to two-year period, with the first payment due one month after purchase.

Where is the buzz

Hackers have stolen $100 million in cryptocurrency from Horizon, a so-called blockchain bridge, in the latest major heist in the world of DeFi. Blockchain bridges offer users a way of transferring digital assets between blockchains in the DeFi space – in Horizon’s case, users can send tokens from the Ethereum network to Binance Smart Chain. Harmony said the attack did not affect a separate bridge for bitcoin. Bridges have become a prime target for hackers due to vulnerabilities in their underlying code.

June 27, 2022