Mobile Payments Close in on $100 Trillion Market Value and a Cashless FutureMar12

Daily Intelligence Briefing

Identifying Change-Driven Investment Themes

Monday, March 11, 2019

Payments

Japanese Banks Launch Digital Currency Without a Blockchain

Sixty leading banks in Japan, under the leadership of Mizuho Bank, have launched a new digital currency called J Coin. The digital cash system will be integrated with J Coin Pay to work across the country.

Contrary to initial reports, J Coin will not bear resemblance to a traditional cryptocurrency — in spite of its suggestive name. J Coin will not utilize blockchain technology or a distributed ledger. It is simply a form of digital cash that can be used for payments.

Mizuho will develop J Coin Pay, a QR code-based application to send and receive tokens to other users or merchants. This application will be similar to existing payment applications in the Asian market such as Alipay and WeChat Pay.

In Japan, cash transactions account for almost 20 percent of the GDP. The nation has the highest cash to GDP ratio among all major economies of the world.

Read the full article +

Payments

Latin America: Driving Instant Payments

This year could be a tricky one for treasurers operating in Latin America. Brazil, Cuba and Mexico have all elected new political leaders in the past 12 months. Venezuela is mired in a presidential stalemate and Argentina is preparing for fresh elections.

Steve Donovan, head of Treasury & Trade Solutions for Citi in Latin America, says the entire financial services landscape is evolving at a rapid pace, resulting in new payment systems and emerging technologies, which have the potential to transform treasury operations.

“Digital technologies are proving to be the catalyst for new forms of client engagement and business management, as new channels and technologies allow for greater visibility and access to various ecosystems,” he explains. “Speed, agility, accuracy, reliability, security and transparency are at the center of this effort.”

A key development in Latin America is the race toward instant payments, with instant-payment schemes already live in Argentina, Chile, Costa Rica and Mexico. Real-time payment schemes are also being developed in Brazil, Colombia, the Dominican Republic, Ecuador, El Salvador, Honduras, Panama, Peru and Uruguay, prompting Donovan to say the region is headed toward a full instant-payment environment in the next 18 to 24 months.

Read the full article +

Payments

Cashless trend becoming a crisis debate in UK, US

The rise in mobile payments technology and the related pressure being placed on legacy banking systems is threatening the financial stability of millions of people in the U.K. and the U.S., experts say, as bank branches and ATM’s begin to pull back from unprofitable areas and retailers increasingly move away from cash.

A report in the U.K. issued a stark warning, saying that if current trends continued in that country, more than eight million people, or 17 percent of the population, would struggle to cope with the lack of cash availability.

The report, called the Access to Cash Review, indicates that working class and low-income families as well as residents of more rural areas, are being underserved by a financial system that is moving fast to embrace digital payments, however local merchants are often not equipped to process these transactions and residents have access to fewer and fewer ATM machines.

“There is a perception that older people and those living in rural areas area more reliant on cash, however the biggest indicatorwhether you are reliant on cash is income,” said a spokesman for the Access to Cash Review. “Those in debt and on low incomes are more reliant on cash than any other group.” He added that researchers found that people with disabilities, mental health issues, newcomers and vulnerable groups, for example victims of domestic violence, are forced to rely on cash as an economic necessity.

Read the full article +

Payments

As More Cities Ban Cashless Businesses, New York Wants to Follow

In February, New York City Councilmember Ritchie Torres introduced legislation that would prohibit retail establishments from refusing to accept payments in cash. The council hasn’t made a decision on the bill yet, but Torres is confident that it will pass by mid-year. If it does, cashless businesses could face fines of up to $500 for every violation.

The legislation protects consumer choice of payment, but the conversation surrounding the bill echoes that of many nationwide challenges to the movement toward a cashless economy: A cashless business discriminates against low-income people, and often they are people of color and undocumented immigrants.

In New York City, the majority of the nearly 12 percent of unbanked and 25 percent underbanked residents are people of color. Close to 17 percent of black New Yorkers and 14 percent of Latinx New Yorkers are unbanked, compared to just 3 percent of white New Yorkers.

Recently, cities across the country have been issuing legislation to stymie the growing number of cashless businesses, and some locales have decades-old laws preventing cashless retail.

Read the full article +

Payments

America Lurches Toward a Cashless Future

According to a recent Pew Research Center survey, nearly 30% of Americans say they make no cash purchases during a typical week. How does the use of electronic payments in the U.S. compare with other countries? The U.S. is moving quickly toward more cashless transactions, but it still lags some European countries, such as Sweden, Denmark and Norway.

Sweden has reached a tipping point at which only about 2% of transactions are conducted in cash. In part, that’s because the Swedes are technologically savvy, they have a relatively small market, and the government encourages electronic payments of its currency.

Chinese cities are also embracing the cashless life, with a mobile-phone system that uses encrypted codes for transactions. In India, some 255 million people are making everyday purchases using the Paytm virtual wallet system, backed by China’s Alibaba.

Read the full article +

Payments

Baby boomers and Gen Xers fuel Zelle

Peer-to-peer (P2P) payments service Zelle, published its second Digital Payment Adoption study, which surveyed over 1,500 US consumers in Q4 2018. The study found that 82% percent of consumers have tried a digital P2P service, making the payment type nearly ubiquitous in the US.

In 2018, millennials were early adopters of Zelle, but now first-time trials are primarily coming from older generation consumers. The study found that 50% of first-time P2P users are now aged 45 and older.

Zelle’s average transaction amount in Q4 2018 was $250 once a month compared with competitor Venmo’s $50 multiple times a week per-transaction average. Zelle’s higher transaction amount could suggest that baby boomers, who typically send transactions less frequently but in higher amounts than millennial P2P users, are a large audience for the firm.

Zelle processed 135 million transactions totaling $35 billion, marking an 81% year-over-year (YoY) increase in transaction volume from Q4 2017 and a 61% annual increase in volume from $22 billion in Q4 2017. And Zelle is working to add more partners onto its current network of 60 financial institutions — with 169 more slated to join.

Read the full article +

Payments

Ant Financial is building out Alipay’s network and launching a banking platform

Alipay is partnering with SnapPay, a cross-border payment gateway, to become a payment option at FoodyMart, a Chinese grocery store chain in Canada. The partnership enables Chinese users to pay in currencies they’re familiar with, while allowing merchants to receive payments in their respective currencies.

Alipay also recently partnered with food tech startup ClickDishes in Canada and expanded acceptance to all US Walgreens locations.

AlipayHK, Alipay’s Hong-Kong based mobile wallet, reached 2 million users and 50,000 merchants since its launch in the region a year ago. Alipay also announced EasyGo, a new feature that enables users to pay for public transit by scanning a QR code.

Chinese tourists paid for 32% of transactions overseas with their phones in 2018, overtaking cash for the first time overseas. Alipay’s expansion can allow it capture more volume from Chinese tourists — 93% of whom would increase their spending if mobile payments were more widely available overseas — and cater to its massive global user base, which recently hit 1 billion users.

Read the full article +

SHORT

Autos

LONG

Electric Utilities

LONG

Lithium

LONG

Obesity

LONG

Solar

SHORT

U.S. Housing

LONG

Video Gaming

LONG

CRISPR

LONG

Gold & Gold Miners

SHORT

Long-Dated U.S. Treasuries

LONG

Oil & U.S. Energy

LONG

Steel

SHORT

U.S. Pharmaceuticals

LONG

3D Printing

US Labor: Economy Adds 20K Jobs in February, Well Below Forecasts; Jobless Rate Falls More than Expected

Nonfarm payrolls in the US increased by 20 thousand in February of 2019, following an upwardly revised 311 thousand rise in January and well below market expectations of 180 thousand. It is the lowest reading since February of 2017.

Click here to access the data +

The US unemployment rate fell to 3.8 percent in February 2019 from 4 percent in the previous month and below market expectations of 3.9 percent. The number of unemployed persons decreased by 300,000 to 6.2 million.

Click here to access the data +

Average hourly earnings for all employees on US private nonfarm payrolls increased by 11 cents, or 0.4 percent from the previous month to USD 27.66 in February 2019, following a 0.1 percent gain in January and beating market estimates of a 0.3 percent rise. That left the annual increase in wages at 3.4 percent compared to a downwardly revised 3.1 percent gain in January and above market expectations of a 3.3 percent rise. Meanwhile, average hourly earnings of private-sector production and nonsupervisory employees went up by 8 cents, or 0.4 percent, to USD 23.18 in February.

Click here to access the data +

US Housing Starts Rebound in January

Housing starts in the United States jumped 18.6 percent from a month earlier to an annualized rate of 1,230 thousand in January 2019, recovering from an upwardly revised 14 percent fall in December and beating market expectations of a 9.9 percent gain.

Click here to access the data +

US Building Permits Unexpectedly Rise to 9-Month High

US building permits increased 1.4 percent from a month earlier to a seasonally adjusted annual rate of 1,345 thousand in January of 2019, the highest level since April of 2018 while markets were expecting a 2.9 percent drop to 1,289 thousand.

Click here to access the data +

US 10Y Bond Yield Hits 9-week Low

United States 10 Year Government Bond Yield decreased to a 9-week low of 2.6249%.

Click here to access the data +

Oil Falls More Than 3%

Oil prices fell more than 3 percent on Friday on a worsening global economic outlook after data showed US jobs growth almost stalled in February, Chinese imports and exports declined last month and the ECB warned of continued weakness in the European economy.

Click here to access the data +

China New Car Sales Tumble 13.8% YoY in February

Vehicle sales in China slumped 13.8 percent from a year earlier to 1.48 million in February 2019, following a 16 percent decline in the previous month. It was the eighth consecutive annual decrease in vehicle sales in the world’s largest auto market amid slowing economic growth. Meanwhile, sales of new energy vehicles, such as electric cars, jumped 53.6 percent.

Click here to access the data +

Markets

Cryptocurrencies

SoFi to enable crypto trading through Coinbase partnership

Cryptocurrency continues its move into the mainstream. CNBC reports that SoFi plans to begin letting users purchase digital currencies through a partnership with Coinbase in the second quarter of this year.

“Our target audience wants to see what the price of cryptocurrency is, and to buy it,” SoFi CEO Anthony Noto recently told a group of reporters at the firm’s New York offices. “We put the member at the center of what we are doing and what they want to do to achieve their financial independence. That is why we are doing it. It is 100% because we know that it is something they want to do. And they are already doing, quite frankly.”

Noto did not say exactly which digital coins would be on the platform. Trading would be made possible through Coinbase, which also has a similar partnership with Fidelity, according to the outlet.

SoFi Invest, where cryptocurrency trading will take place, went live last month, along with SoFi Money, a no-fee cash account with an attractive APY.

Read the full article +

Stocks

Norway’s $1 trillion sovereign wealth fund is dumping billions’ worth of stock in oil and gas companies

Norway’s $1 trillion sovereign wealth fund is divesting from oil and gas explorers and producers to protect itself from oil price declines. The fund will no longer invest in 134 companies, with Bloomberg saying it will divest $7.5 billion in stocks including Anadarko Petroleum, Chesapeake Energy and Tullow Oil. It will retain its stakes in Exxon, Shell, BP and other oil majors as they fall into a different category.

The fund won’t sell its shares in the State’s Direct Financial interest (SDFI), a portfolio of Norway’s exploration and production licenses. The government will also retain its majority stake in Equinor, a Norwegian multinational oil and wind energy company.

Still, other stocks could be on the chopping block soon. The Ministry of Finance will ask Norges Bank to review the fund’s climate risk, which could lead to it culling non eco-friendly companies.

Read the full article +

Economics & Trade

China

China growth to slow to 2 per cent over next decade as structural issues take hold, research firm says

China’s economic growth will slow to 2 per cent in the coming decade, well below the level forecast by major global institutions, according to research from Capital Economics, as the country becomes “another normal emerging economy.”

“Growth has halved over this past 10 years, and our projection is if they continue with this policy set-up [and structural issues], growth will halve again over the next 10 years,” Mark Williams, chief Asia economist for the research firm, said at a conference in Hong Kong this week. The figure undercuts the forecasts of major international institutions.

“Two per cent [growth] for an emerging economy is about normal, particularly if you think about China’s demographics and other problems,” Williams added. “What we are saying is China’s just going to become another normal emerging economy.”

Read the full article +

Politics & Policy

Antitrust Legislation

Elizabeth Warren outlines plans to break up ‘Big Tech’

Elizabeth Warren, the U.S. senator running for president, on Friday outlined her plans to break up what she calls “Big Tech” in what could be considered the most sweeping salvo against the industry. Warren said in an article on Medium that companies like Facebook (FB), Amazon (AMZN), and Alphabet’s Google (GOOGL) have used mergers and proprietary marketplaces to limit competition.

Her plan would designate any online marketplace, exchange or platform for connecting third parties that is held by a company with global revenue of at least $25 billion a year as “platform utilities,” where companies would prohibiting from owning participants on that platforms, meet a standard of dealing with users and not be allowed to transfer or share data with third parties. Smaller companies would also face those same standards but wouldn’t have to structurally separate.

Amazon Marketplace, Google’s ad exchange, and Google Search would be platform utilities under this law.

She also would appoint regulators who would unwind completed acquisitions such as Amazon’s acquisition of Whole Foods Market, Facebook’s purchase of WhatsApp and Google’s acquisition of Waze.

Read the full article +

Finance

Payments

Japanese Banks Launch Digital Currency Without a Blockchain

Sixty leading banks in Japan, under the leadership of Mizuho Bank, have launched a new digital currency called J Coin. The digital cash system will be integrated with J Coin Pay to work across the country.

Contrary to initial reports, J Coin will not bear resemblance to a traditional cryptocurrency — in spite of its suggestive name. J Coin will not utilize blockchain technology or a distributed ledger. It is simply a form of digital cash that can be used for payments.

Mizuho will develop J Coin Pay, a QR code-based application to send and receive tokens to other users or merchants. This application will be similar to existing payment applications in the Asian market such as Alipay and WeChat Pay.

In Japan, cash transactions account for almost 20 percent of the GDP. The nation has the highest cash to GDP ratio among all major economies of the world.

Read the full article +

Payments

Latin America: Driving Instant Payments

This year could be a tricky one for treasurers operating in Latin America. Brazil, Cuba and Mexico have all elected new political leaders in the past 12 months. Venezuela is mired in a presidential stalemate and Argentina is preparing for fresh elections.

Steve Donovan, head of Treasury & Trade Solutions for Citi in Latin America, says the entire financial services landscape is evolving at a rapid pace, resulting in new payment systems and emerging technologies, which have the potential to transform treasury operations.

“Digital technologies are proving to be the catalyst for new forms of client engagement and business management, as new channels and technologies allow for greater visibility and access to various ecosystems,” he explains. “Speed, agility, accuracy, reliability, security and transparency are at the center of this effort.”

A key development in Latin America is the race toward instant payments, with instant-payment schemes already live in Argentina, Chile, Costa Rica and Mexico. Real-time payment schemes are also being developed in Brazil, Colombia, the Dominican Republic, Ecuador, El Salvador, Honduras, Panama, Peru and Uruguay, prompting Donovan to say the region is headed toward a full instant-payment environment in the next 18 to 24 months.

Read the full article +

Payments

Cashless trend becoming a crisis debate in UK, US

The rise in mobile payments technology and the related pressure being placed on legacy banking systems is threatening the financial stability of millions of people in the U.K. and the U.S., experts say, as bank branches and ATM’s begin to pull back from unprofitable areas and retailers increasingly move away from cash.

A report in the U.K. issued a stark warning, saying that if current trends continued in that country, more than eight million people, or 17 percent of the population, would struggle to cope with the lack of cash availability.

The report, called the Access to Cash Review, indicates that working class and low-income families as well as residents of more rural areas, are being underserved by a financial system that is moving fast to embrace digital payments, however local merchants are often not equipped to process these transactions and residents have access to fewer and fewer ATM machines.

“There is a perception that older people and those living in rural areas area more reliant on cash, however the biggest indicatorwhether you are reliant on cash is income,” said a spokesman for the Access to Cash Review. “Those in debt and on low incomes are more reliant on cash than any other group.” He added that researchers found that people with disabilities, mental health issues, newcomers and vulnerable groups, for example victims of domestic violence, are forced to rely on cash as an economic necessity.

Read the full article +

Payments

As More Cities Ban Cashless Businesses, New York Wants to Follow

In February, New York City Councilmember Ritchie Torres introduced legislation that would prohibit retail establishments from refusing to accept payments in cash. The council hasn’t made a decision on the bill yet, but Torres is confident that it will pass by mid-year. If it does, cashless businesses could face fines of up to $500 for every violation.

The legislation protects consumer choice of payment, but the conversation surrounding the bill echoes that of many nationwide challenges to the movement toward a cashless economy: A cashless business discriminates against low-income people, and often they are people of color and undocumented immigrants.

In New York City, the majority of the nearly 12 percent of unbanked and 25 percent underbanked residents are people of color. Close to 17 percent of black New Yorkers and 14 percent of Latinx New Yorkers are unbanked, compared to just 3 percent of white New Yorkers.

Recently, cities across the country have been issuing legislation to stymie the growing number of cashless businesses, and some locales have decades-old laws preventing cashless retail.

Read the full article +

Payments

America Lurches Toward a Cashless Future

According to a recent Pew Research Center survey, nearly 30% of Americans say they make no cash purchases during a typical week. How does the use of electronic payments in the U.S. compare with other countries? The U.S. is moving quickly toward more cashless transactions, but it still lags some European countries, such as Sweden, Denmark and Norway.

Sweden has reached a tipping point at which only about 2% of transactions are conducted in cash. In part, that’s because the Swedes are technologically savvy, they have a relatively small market, and the government encourages electronic payments of its currency.

Chinese cities are also embracing the cashless life, with a mobile-phone system that uses encrypted codes for transactions. In India, some 255 million people are making everyday purchases using the Paytm virtual wallet system, backed by China’s Alibaba.

Read the full article +

Payments

Baby boomers and Gen Xers fuel Zelle

Peer-to-peer (P2P) payments service Zelle, published its second Digital Payment Adoption study, which surveyed over 1,500 US consumers in Q4 2018. The study found that 82% percent of consumers have tried a digital P2P service, making the payment type nearly ubiquitous in the US.

In 2018, millennials were early adopters of Zelle, but now first-time trials are primarily coming from older generation consumers. The study found that 50% of first-time P2P users are now aged 45 and older.

Zelle’s average transaction amount in Q4 2018 was $250 once a month compared with competitor Venmo’s $50 multiple times a week per-transaction average. Zelle’s higher transaction amount could suggest that baby boomers, who typically send transactions less frequently but in higher amounts than millennial P2P users, are a large audience for the firm.

Zelle processed 135 million transactions totaling $35 billion, marking an 81% year-over-year (YoY) increase in transaction volume from Q4 2017 and a 61% annual increase in volume from $22 billion in Q4 2017. And Zelle is working to add more partners onto its current network of 60 financial institutions — with 169 more slated to join.

Read the full article +

Payments

Ant Financial is building out Alipay’s network and launching a banking platform

Alipay is partnering with SnapPay, a cross-border payment gateway, to become a payment option at FoodyMart, a Chinese grocery store chain in Canada. The partnership enables Chinese users to pay in currencies they’re familiar with, while allowing merchants to receive payments in their respective currencies.

Alipay also recently partnered with food tech startup ClickDishes in Canada and expanded acceptance to all US Walgreens locations.

AlipayHK, Alipay’s Hong-Kong based mobile wallet, reached 2 million users and 50,000 merchants since its launch in the region a year ago. Alipay also announced EasyGo, a new feature that enables users to pay for public transit by scanning a QR code.

Chinese tourists paid for 32% of transactions overseas with their phones in 2018, overtaking cash for the first time overseas. Alipay’s expansion can allow it capture more volume from Chinese tourists — 93% of whom would increase their spending if mobile payments were more widely available overseas — and cater to its massive global user base, which recently hit 1 billion users.

Read the full article +