Tag: BNPL

Kiffmeister’s #Fintech Daily Digest (20250129)

~ kiffmeister

Digital tenge project second phase results (NBK)

The National Bank of Kazakhstan (NBK) published an update on the second phase of the Digital Tenge (DT) project, including reporting on testing of five government use case scenarios involving programmable payments. They involved controlling and monitoring the use of funds paid out or lent by the government to support various programs. Two involved payments out of the National Fund for infrastructure projects, and another, investment subsidies for the purchase of agricultural machinery and equipment. Another involved a government microlending program to support farmer livestock purchases, and the fifth one the collection of value-added taxes (VAT). No specific potential full launch dates were given, but 2025 will be the last year in terms of the DT’s phased implementation. [Read more at the NBK]

Digital Turkish Lira: benefits and opportunities (CBRT)

The Central Bank of the Republic of Türkiye (CBRT) published an update on its central bank digital currency (CBDC) project launched in 2020 with proof-of-concept studies. The first phase, culminating in a pilot, was completed at the end of 2023. During Phase-2, beyond ongoing R&D activities, the legal, economic and security dimensions of the digital lira are being comprehensively addressed. [Read more at the CBRT]

Stablecoins in cross-border remittances and the role of digital and financial literacy (TAI)

Telematics and Informatics (TAI) published a paper on the adoption and continuance intentions of blockchain-based stablecoins for cross-border remittances. Relying on survey data from 866 U.S.-based adults engaged in remittance activities, its findings reveal that digital and financial literacy independently increase the likelihood of stablecoin adoption, while their interaction synergistically enhances predictive accuracy. Demographic analysis indicates that stablecoin remittance users tend to be younger, more educated, and involved in higher-value transactions. Among the 26% of remittance users who adopted stablecoins, continuance intentions are primarily driven by satisfaction and perceived usefulness. This points to a cyclical dynamic, where meeting user expectations leads to greater satisfaction, which in turn reinforces the perceived usefulness of stablecoins. The results underscore the importance of promoting both digital and financial literacy, improving user experience, and effectively communicating tangible benefits to encourage the continued adoption of stablecoins for remittance transactions. [Read more at TAI]

Madagascar’s central bank preparing for potential CBDC pilot (eCurrency)

[September 11, 2024] eCurrency was selected by Banky Foiben’i Madagasikara (BFM) to provide consulting services for the e-Ariary central bank digital currency (CBDC) project. BFM plans to move on to a potential pilot phase of the e-Ariary project, once the preparation is successfully completed. [Read more at Consumer World Report]

Australian BNPL providers must apply for credit licenses (The Paypers)

The Australian National Credit Code has been extended to buy now pay later (BNPL) contracts, following royal assent of the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 on December 10, 2024. From June 10, 2025, the Australian Securities & Investments Commission (ASIC) will require BNPL contract providers to hold a credit licence that authorizes them to engage in credit activities as a credit provider. Providers who do not have their application accepted for lodgement by ASIC by then may be engaging in unlicensed conduct if they continue to operate. [Read more at ASIC]

Sponsored Content:

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Upcoming Speaking Engagements:

  • The Central Bank Payments Conference (Paris, February 17–19) will explore the latest issues and developments confronting central banks and their evolving role as operators, overseers, and catalysts within the payments landscape. The focus will be on cross-border payments, CBDC and tokenization, open finance, instant payments, and financial inclusion, among other topics. When you register get 15% off by using the Kiffmeister15 code. [register here]
  • The Global Payments Summit (Paris, February 19–21), the second half of Currency Research Payments Week, will explore emerging payments trends and innovations, positioning the ecosystem’s commercial players — banks, PSPs, solution providers — at the center of the discussions. When you register get 15% off by using the Kiffmeister15 code. [register here]
  • The Crypto Assets Conference (Frankfurt, March 26) will explore the latest innovations and emerging industry trends in DLT, blockchain, and crypto assets, through insightful talks, interactive debates, and presentations by industry thought leaders. [Register here]
  • The Digital Euro Conference 2025 (Frankfurt, March 27) will explore the future of money with a focus on CBDCs, stablecoins, tokenized deposits, and the intersection of AI and digital ID. When you register, get 20% off the regular ticket price by using the Kiffmeister20 code! [register here]

And just a reminder that I produce a monthly digest of central bank digital currency (CBDC) developments exclusively for the official sector. So (only) if you work at a central bank, ministry of finance or international financial institution (e.g., the BIS, IMF, OECD, World Bank) and who would like to receive it by email on the first business day of every month, please DM me on LinkedIn or email me at john@kiffmeister.com.

Kiffmeister’s #Fintech Daily Digest (20250122)

~ kiffmeister

FYI I contributed a few quotes to a recent Cointelegraph article on the likely “dead” status of a U.S. central bank digital currency (CBDC) under the new Administration. As usual, it doesn’t differentiate “retail” and “wholesale” CBDC, but what can you do? [Read more at Cointelegraph]

US SEC creates Crypto Task Force (Ledger Insights)

Acting Chair of the Securities and Exchange Commission (SEC) Mark Uyeda created a Crypto Task Force to be led by Commissioner Hester “Crypto Mom” Peirce. The Task Force’s focus will be to help draw clear regulatory lines, provide realistic paths to registration, craft sensible disclosure frameworks, and deploy enforcement resources judiciously. “The SEC [under previous Chair Gensler] relied primarily on enforcement actions to regulate crypto retroactively and reactively, often adopting novel and untested legal interpretations along the way. Clarity regarding who must register, and practical solutions for those seeking to register, have been elusive. The result has been confusion about what is legal, which creates an environment hostile to innovation and conducive to fraud.” [Read more at the SEC]

Circle buys largest tokenized MMF issuer, Hashnote (Ledger Insights)

USDC stablecoin issuer Circle has acquired Hashnote, the issuer of the largest tokenized money market fund (TMMF), USYC. Circle intends to fully integrate USYC with USDC, offering seamless 24/7/365 access between TMMF collateral and USDC. The deal is bolstered by a strategic partnership with institutional crypto trader DRW via its subsidiary Cumberland, which incubated Hashnote. Cumberland will expand its institutional-grade liquidity and settlement capabilities in USDC and USYC, where permitted. [Read more at Circle]

When buy-now-pay-later meets credit reporting (BIS)

The Bank for International Settlements (BIS) published a paper on the impact of reporting requirements on buy-now-pay-later (BNPL) credit usage. Using a dataset of BNPL users from a large digital platform and exploiting a credit reporting policy change, it documents that consumers significantly reduce BNPL usage when the BNPL lender becomes subject to credit reporting regulation. This reduction is particularly pronounced among borrowers with default histories, who also show improved repayment behaviors compared to those without such records. The decrease in BNPL usage also leads to a reduction in online consumption, supporting the financial constraint hypothesis. These findings indicate that information sharing can help mitigate overborrowing and overspending, with stronger effects seen among younger borrowers, those who previously spent more, or those with credit cards. [Read more at the BIS]

Sponsored Content:

Supercharge your CBDC research and deployment strategy with Chavanette’s Alpha Knowledge Platform (⍺LP)—the ultimate resource for deep insights into CBDCs and the ecosystem of CBDC technology providers and solutions. Get insider access to the top 20 CBDC platforms through the GALACTIC GRID, dissected by Chavanette’s expert framework. Lead the digital central banking revolution with the tools necessary to deploy Central Banking 4.0—stay informed, stay bold, stay transformative. Be the leader. Register for access here and get a 10% discount on the first year with the kiffmeister10 code.

Upcoming Speaking Engagements:

  • The Central Bank Payments Conference (Paris, February 17–19) will explore the latest issues and developments confronting central banks and their evolving role as operators, overseers, and catalysts within the payments landscape. The focus will be on cross-border payments, CBDC and tokenization, open finance, instant payments, and financial inclusion, among other topics. When you register get 15% off by using the Kiffmeister15 code. [register here]
  • The Global Payments Summit (Paris, February 19–21), the second half of Currency Research Payments Week, will explore emerging payments trends and innovations, positioning the ecosystem’s commercial players — banks, PSPs, solution providers — at the center of the discussions. When you register get 15% off by using the Kiffmeister15 code. [register here]
  • The Digital Euro Conference 2025 (Frankfurt, March 27) will explore the future of money with a focus on CBDCs, stablecoins, tokenized deposits, and the intersection of AI and digital ID. When you register, get 20% off the regular ticket price by using the Kiffmeister20 code! [register here]

And just a reminder that I produce a monthly digest of central bank digital currency (CBDC) developments exclusively for the official sector. So (only) if you work at a central bank, ministry of finance or international financial institution (e.g., the BIS, IMF, OECD, World Bank) and who would like to receive it by email on the first business day of every month, please DM me on LinkedIn or email me at john@kiffmeister.com.

Kiffmeister’s #Fintech Daily Digest (20240531)

~ kiffmeister

India’s wholesale and retail CBDC pilots show tiny figures

According to the latest Reserve Bank of India (RBI) data, there was just 800,000 rupees (less than $10,000) wholesale central bank digital currency (CBDC) outstanding at end-March 2024. The RBI has been piloting wholesale CBDC since November 2022, including for settling government bond secondary market transactions, and interbank lending in call money markets. However, the small numbers could be attributable to banks converting CBDC to central bank reserves to earn interest, or the central bank may be automatically converting them at the end of the day, which is what the Swiss National Bank (SNB) did in the earlier phases of its Project Helvetia experiments. [Read more at Ledger Insights]

The digital rupee retail CBDC isn’t catching fire either, with only 2.34 billion rupees ($28 million) outstanding at end-March 2024, versus 34,778.05 billion rupees of banknotes in circulation. [Read more at the RBI]

Next generation correspondent banking

The Bank for International Settlements (BIS) published a paper that explores how tokenization through the application of the unified ledger concept could enhance the functioning of correspondent banking by harnessing new technology to address key pain points in cross-border payment chains. It could unlock streamlined pre-screening and atomic settlement, and pave the way for superior customer verification and anti-money laundering (AML) procedures. Also, tokenization could substantially reduce duplication and miscoordination, thereby revitalizing cross-border payments by fostering a robust network of correspondents and corridors. [Read more at the BIS]

BNPL surges in usage amongst US consumers

According to Nerdwallet’s “2024 State of Consumer Credit Report” buy now, pay later (BNPL) plans are the second-most used form of credit payment among US consumers, with nearly 25% recently using it. BNPL allows people to enter payment agreements at the point of sale, generally without the credit requirements of a credit card or traditional loan, and most often without interest. Among the 2,061 US adults polled in April 2024, 37% of parents of minor children have used BNPL in the past 12 months, compared with 20% of nonparents of minors. And 40% of Gen Z (ages 18-27) and 36% of millennials (ages 28-43) have used BNPL during that time, compared with just 20% of Gen X (ages 44-59) and 12% of baby boomers (ages 60-78). [Read more at Nerd Wallet]

How do SEC-approved ETH ETFs impact staking

CoinMetrics has published an analysis of the potential Ethereum (ETH) network impact of the U.S. Securities & Exchange Commission (SEC) May 23, 2024 approval of spot ETH exchange traded funds (ETFs). An important condition of the approval was that such ETFs will not be able to stake the tokens, which could shrink circulating supply, and improve the health of Ethereum’s consensus layer and the staking ecosystem as a whole. [Read more at CoinMetrics]

Upcoming Speaking Engagements:

  • CBDC Conference, Istanbul, September 10-12. The conference will offer representatives of central banks, commercial banks, technology providers, policy makers and academics the perfect platform to learn about the latest CBDC developments, exchange ideas with experts and peers. [Find out more and register here][Central bank delegates may be eligible for free registration (email registration@cbdc-conference.com to find out more)]
  • Digital Currency Conference, London, September 23-24. The conference will bring together policymakers, regulators, and technology and innovation experts to network and discuss all aspects of digital currencies. And enter the KiffmeisterDCC code at registration to get a 20% discount! [Find out more and register here]

And just a reminder that I produce a monthly digest of central bank digital currency (CBDC) developments exclusively for the official sector. So (only) if you work at a central bank, ministry of finance or international financial institution (e.g., the BIS, IMF, OECD, World Bank) and who would like to receive it by email on the first business day of every month, please DM me on LinkedIn or email me at john@kiffmeister.com.

Kiffmeister’s #Fintech Daily Digest (20240523)

~ kiffmeister

Ether ETF applicants drop staking provisions in amended SEC filings

Almost all of the firms that have submitted spot Ethereum (ETH) exchange-traded fund (ETF) applications with the U.S. Securities and Exchange Commission (SEC) have amended the applications to remove the possibility of staking. Staking allows ETH holders to earn yield on their holdings, a feature of proof-of-stake (POS) cryptocurrencies. ETH holders need to lock in their holdings for a set period to support the blockchain operations in exchange for the reward. However, the SEC sees staking as an illegal offering by crypto platforms, as it can be seen as the offering of unregistered securities. This is fueling optimism that the SEC will soon approve most of the applications. [Read more at Finance Magnates]

CFPB to treat buy now, pay later lenders as credit card providers

The U.S. Consumer Financial Protection Bureau (CFPB) issued an interpretive rule that confirms that buy now, pay later (BNPL) lenders are credit card providers. Accordingly, BNPL lenders must provide consumers some key legal protections and rights that apply to conventional credit cards. These include a right to dispute charges and demand a refund from the lender after returning a product purchased with a BNPL loan. (BNPL allows customers to spread out payments into equal installments over time, and tends to be interest free. Unlike credit cards, however, consumers don’t need a certain credit score to use BNPL.) [Read more at the CFPB]

US House passes FIT21 but uncertain future awaits in Senate, White House

The U.S. House of Representatives voted 279-136 in favor of the Financial Innovation and Technology for the 21st Century Act (H.R. 4763), which aims to clarify which government agencies will have responsibility for overseeing specific tokens and digital asset platforms. FIT21 will significantly boost the oversight role of the Commodity Futures Trading Commission (CFTC) while significantly hobbling the Securities and Exchange Commission (SEC). FIT21 will now go to the Senate, and even if it did pass that hurdle, it would likely be by a margin sufficient to ward off a possible Biden veto of the bill as currently written. [Read more at Coingeek]

Upcoming Speaking Engagements:

  • CBDC Conference, Istanbul, September 10-12. The conference will offer representatives of central banks, commercial banks, technology providers, policy makers and academics the perfect platform to learn about the latest CBDC developments, exchange ideas with experts and peers. [Find out more and register here][Central bank delegates may be eligible for free registration (email registration@cbdc-conference.com to find out more)]
  • Digital Currency Conference, London, September 23-24. The conference will bring together policymakers, regulators, and technology and innovation experts to network and discuss all aspects of digital currencies. And enter the KiffmeisterDCC code at registration to get a 20% discount! [Find out more and register here]

And just a reminder that I produce a monthly digest of central bank digital currency (CBDC) developments exclusively for the official sector. So (only) if you work at a central bank, ministry of finance or international financial institution (e.g., the BIS, IMF, OECD, World Bank) and who would like to receive it by email on the first business day of every month, please DM me on LinkedIn or email me at john@kiffmeister.com.

Kiffmeister’s #Fintech Daily Digest (20231206)*

~ kiffmeister

Coinbase rolls out crypto transfers via links sent on WhatsApp, Telegram

Coinbase Wallet now allows for the transfer of crypto through a link that can be sent through popular social media sites and messaging apps apps like iMessage, Telegram, WhatsApp, Facebook, Instagram and TikTok. And there are no payment fee when sending USD Coin (USDC). Clicking the link will take the recipient to their device’s app store to download Coinbase Wallet — if not already downloaded — where they can create a wallet in one click. If the funds aren’t claimed within two weeks, they will be returned to the sender. [Read more at Coinbase]

Stablecoin proof of reserves proposals seek more details

The American Institute of Certified Public Accountants (AICPA) published proposed criteria for stablecoin issuers when they disclose their proof of reserves. It asks for more details than any stablecoin issuers currently provide in their disclosures. For example, the call for issuers to disclose the banks where they hold cash, the amount of redeemable stablecoins on each blockchain, and details about tokens that are not redeemable, either temporarily or permanently (e.g., pre-minted or blacklisted tokens). Plus proof of reserves will need to disclose the conditions required to redeem the stablecoin directly. [Read more at the AICPA]

State of stablecoins: Signs of returning liquidity

Coin Metrics published an update on stablecoin market developments, concluding that the expanding supply of stablecoins serves as a clear indicator of rising activity and usage within the digital asset ecosystem, with Tether on Tron leading the charge. Despite challenges in the U.S. regulatory environment and a complex political landscape, stablecoin liquidity has shown impressive resilience. The update attributes this to the wide utility of stablecoins, through avenues such as decentralized finance (DeFi) pools to exchanges and in diverse yield generating products. These trends also evidence the central role stablecoins play in the crypto-economy. [Read more at Coin Metrics]

Buy now, pay later: a cross-country analysis

The Bank for International Settlements (BIS) reviewed buy now, pay later (BNPL) payment schemes. It found that, BNPL is more widespread in countries with greater e-commerce penetration, higher inflation, more inefficient banking systems, and looser financial and consumer protection regulation. Versus traditional consumer credit, BNPL users are typically younger, with less education, more debt, lower credit scores and higher delinquency rates. BNPL schemes are accessible even to consumers without a credit history or stable income and do not typically affect their credit scores. Customers pay interest-free instalments, which are typically not reported to credit bureaus, while merchants pay fees to increase sales and shift credit risk to BNPL platforms. Relying primarily on those fee revenues, BNPL platforms have faced profitability challenges due to high operating costs and rising credit losses. [Read more at the BIS]

How AI is supercharging the CBDC world

Chavanette Advisor’s Hubert Knapp ran through some of the applications of artificial intelligence (AI) to central bank digital currencies (CBDCs). These include liquidity management at the micro and macro level, cross-border payments, and fraud detection. [Read more on LinkedIn]

FYI here are some of my upcoming speaking engagements:

– Digital Euro Conference 2024 (Frankfurt on February 29)[Register here]

*For those interested in intra-day updates, check out my searchable Diigo Fintech developments database, which is also a good place to go to query for past developments: https://www.diigo.com/user/kiffmeister/ART.

Kiffmeister’s central bank digital currency monthly monitor

Just a reminder that I produce a monthly digest of central bank digital currency (CBDC) developments exclusively for the official sector. So (only) if you work at a central bank, ministry of finance or international financial institution (e.g., the BIS, IMF, OECD, World Bank) and who would like to receive it by email on the first business day of every month, please DM me on LinkedIn or email me at chronicles@kiffmeister.com

The Sovereign Official Digital Association (SODA) is a technology-agnostic firm offering advisory services at the intersection of central banking, digital finance and the web3 industry, aiming to make public digital money a reality. SODA believes institutions in the existing financial ecosystem should have access to the tools and resources they need to move from discussion to action. SODA offers ‘real life’ use cases to help test digital money and drive adoption as central banks and other public institutions explore the future of a more financially inclusive world powered by interoperable blockchain-based networks. SODA would love you to join us on this journey – please get in touch (chris@sodapublicmoney.org).

Satoshi Capital Advisors is a New York-based, global advisory firm that works with central banks, governments, and the private sector to architect, implement, and operate varying initiatives. Satoshi Capital Advisors’ central bank work revolves around CBDC architecture and implementation, providing advisory services from research phase through to growth phase. Utilizing a product-market fit and technology agnostic approach to CBDC architecture and implementation enables Satoshi Capital Advisors to build tailored solutions, bespoke to local financial system nuances. Satoshi Capital Advisors welcomes requests from central bank officials for virtual and in-person CBDC workshops. [Click here for more information]

WhisperCash offers the first fully offline digital currency platform that has the same properties as physical cash. It can perform secure consecutive offline payments without compromising on security, privacy or accessibility. WhisperCash allows direct person to person offline payments without any server infrastructure or internet connectivity. It comes in various form factors including the self-contained credit card-sized “Pro” that sports an eInk screen and capacitive keyboard, and lasts for two weeks between recharges assuming a few transactions per day. [Click here for more information]

Kiffmeister’s #Fintech Daily Digest (20220831)

~ kiffmeister

Ava Labs CEO denies CryptoLeaks’ claims as ‘conspiracy theory nonsense’

Ava Labs CEO Emin Gün Sirer has dismissed allegations from CryptoLeaks that the company formed a “secret pact” with U.S. law firm Roche Freedman LLP to use the American legal system “gangster style” to “attack and harm crypto organizations [i.e., Ava Labs competitors].” Ava Labs is the firm behind Avalanche (AVAX), an Ethereum (ETH) rival in the decentralized finance (DeFi) and customized blockchain space. Roche Freedman LLP was recently involved in separate high-profile lawsuits against Solana Labs and Binance, claiming that the firms were engaging in unlawful activities. [Read more at CoinTelegraph]

The Digital Dollar Project Launches Technical CBDC Sandbox Program

The Digital Dollar Project (DPP) launched its central bank digital currency (CBDC) Technical Sandbox Program, with the help of initial participants Digital Asset, EMTECH, Knox Networks, and Ripple. It will serve as a collaborative space for the DDP participants and financial service providers, offering a neutral environment for the evaluation of technological, business, and policy approaches to CBDCs. It is slated to begin in early October with the inaugural cohort focused on cross-border payments. [Read more at the DPP]

Klarna losses quadruple as costs rise

“Losses at Swedish [buy now, pay later] payments provider Klarna reported a net loss of SKr6.2 billion ($581 million) for the first half of 2022, compared with SKr1.4 billion a year earlier. (Buy now, pay later services allow consumers to defer or divide payments into instalments.) Klarna attributed the deepening losses to higher employee costs, investments in integrating newly acquired Swedish price comparison service PriceRunner and rising credit losses, reflecting the greater difficulty of underwriting new customers with limited credit histories.” [Read more at the Financial Times]

Discounted tickets available for CBDC Think Tank masterclass

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  Ticket prices are as low as $99 and you can save 30% by entering KIFFMEISTER where the registration page asks for a discount code. [Register here]

Also, the CBDC Think Tank, in partnership with Georgetown University and the DC FinTech Week, is hosting a FREE Digital Currency Lecture Series, a set of digital currency lightning talks delivered by subject matter experts, on October 14 in Washington DC. [Request an invite here]

Kiffmeister’s Global Central Bank Digital Currency Monthly Monitor

Just a reminder that I produce a monthly digest of central bank digital currency (CBDC) developments exclusively for the official sector. So for any of you out there who work for a central bank, ministry of finance or international financial institution who would like to receive it by email on the first business day of every month, please DM me on LinkedIn or email me at chronicles@kiffmeister.com.

Kiffmeister’s #Fintech Daily Digest (20220303)

~ kiffmeister

Monetary Authority of Singapore Sees No Need for a Retail Digital Sing Dollar

The Monetary Authority of Singapore (MAS) has assessed that the case for a retail CBDC in Singapore is not compelling. It has found that reasons typically offered for issuing retail CBDCs are not very relevant to MAS and Singapore at this juncture. “Some of the reasons usually offered are that CBDCs can ensure financial inclusion or enable cheaper and faster payments. Financial inclusion is not a significant problem in Singapore. Electronic payments in Singapore have also become pervasive, seamless, and efficient…  In short, [the MAS is] using improvements in payment technology and competition to achieve [its] objectives of cheap and fast payments for all, using existing forms of central bank-backed money… [However] the case for a CBDC could strengthen if foreign digital currencies become more widely used locally… [so the MAS] continues to build up its technological and institutional capabilities in the CBDC space…” [Read more]

Taiwan to Debut Central Bank Digital Currency by September

Taiwan is reportedly looking to complete trials of its prototype central bank digital currency (CBDC) by the third quarter of 2022. Its most recent design is a two-tier system that allows consumers to exchange bank deposits with digital currency. In addition, the CBDC can also be linked to credit and debit cards and will be legal tender. [Read more]

Is the Bank of Mexico Ready to Launch its CBDC?

The Bank of Mexico reportedly plans to launch a two-tier (“intermediated”) CBDC by 2024. As part of the roll-out, commercial banks expect interoperability capacity to increase through the Interbank Electronic Payment System (SPEI), and that a CBDC should in principle seek greater inclusion and lower transaction costs. [Read more]

Rwanda’s central bank to pronounce itself on digital currency by December 2022

The National Bank of Rwanda will reportedly complete its CBDC research by the end of December 2022, according to central bank Deputy Governor, Soraya Hakuziyaremye, after which  it will have a clear policy on whether it will issue the CBDC or not. Financial inclusion will be the primary goal. [Read more]

Overhaul Needed for BNPL as Losses Mount up in APAC

Despite phenomenal growth, current buy now, pay later (BNPL) models are showing to be rather unprofitable. Quinlan and Associates estimates that in Asia-Pacific (APAC), the largest BNPL firms, including Australia’s Afterpay and Japan’s Paidy, are currently running average profit margins of -15% per annum (p.a.), while the more nascent players operating in emerging markets like the Philippines’ Cashalo and Indonesia’s Akulaku are suffering from profit margins of -100% p.a. According to the analysis, APAC BNPL providers are struggling to reach profitability as costs relating to sales, marketing, funding, staff, technology, and credit losses eat into all their profits. Losses are even more pronounced for emerging market BNPL providers because of their stronger focus on long tail, unbanked/underbanked consumers, leading to much larger credit losses and funding costs. Quinlan and Associates identified three key pathways for them to become commercially viable: optimization, vertical integration and expansion. [Read more]

Kiffmeister’s #Fintech Daily Digest (20220302)

~ kiffmeister

The potential effects on the Israeli banking system of issuing a digital shekel

The Bank of Israel published a paper on the potential impact of issuing a central bank digital currency (CBDC) on the stability of the banking system and its ability to continue fulfilling its financial intermediation function. It concludes that, under common assumptions regarding the substitution volume between the public’s deposits and the digital shekel, the negative impact to profitability is not expected to lead to a significant erosion in the banking system’s profitability, its stability, or its ability to provide credit and fulfill its classic functions in a modern economy. [Read more]

A Report Card on China’s Central Bank Digital Currency: the e-CNY

The People’s Bank of China’s Mu Changchun provided an update to the central bank’s CBDC pilot.  He reported that the e-CNY system completes transactions at higher speed than Visa, but it’s still way behind payment AliPay and TenPay. The pilot uses a centralized ledger to record retail transactions and, in parallel, implements a distributed ledger for day-end reconciliation. Wallets can be software based or hardware based, and Mr. Changcun presented a video showcasing how the hardware wallets work, including their offline functionality. [Read more]

Klarna losses swell to $748 million

Full year 2021 operating losses at Swedish “buy now, pay later” (BNPL) group Klarna soared to SKR7.1 billion (versus SKr1.4 billion reported in 2020), driven by expansion to fresh markets and the challenges of underwriting a massive inflow of new customers. Credit defaults of SKR4.6 billion (versus SKR2.5 billion in 2020) were a significant proportion of losses. On the other hand, net operating income was up 38% from 2020, with the U.S. market continuing to be Klarna’s fastest growing market (71% year-over-year growth). [Read more]