Walmart plans fintech startup; Aussie banks launch no-interest credit cards

Receiving Wide Coverage ...

Hot commodities

Intercontinental Exchange “will take its cryptocurrency venture public by merging it with a special-purpose acquisition company, a deal that will further its goal of launching a consumer app for trading and making payments with digital assets,” the Wall Street Journal reported. “The venture, called Bakkt, is expected to have a valuation of $2.1 billion after completing the merger with VPC Impact Acquisition Holdings.”

“The deal brings together two of the hottest plays in today’s markets: crypto and SPACs.”

“Bakkt is planning to launch an app in March that will let users buy and sell cryptocurrencies and manage other digital assets such as loyalty points and gift cards,” the Financial Times said. “Its ambition is to reach more than 30 million customers by 2025, from none last year, it says in its regulatory filing. The app, currently accessible only by invitation, had garnered interest from about 400,000 people seeking early access, Bakkt said.”

Separately, “a planned new U.S. Treasury rule aimed at stamping out illicit cryptocurrency transactions has drawn strong opposition from the industry, setting up a battle that threatens to cast a shadow over the recent digital currency boom,” the FT reported. “The proposal would require custodians and exchanges to collect and report identifying information about large transactions involving unhosted wallets — cryptocurrency accounts held outside financial institutions.”

“The Financial Crimes Enforcement Network, a division of the Treasury, said the rule would protect national security and prevent crime. But more than 7,000 cryptocurrency groups and advocates have filed public comments on the rule citing concerns about privacy rights and accusing Treasury of engaging in ‘midnight rulemaking.’”

Lost keys

Meanwhile, owners of about 20% “of the existing 18.5 million Bitcoin— currently worth around $140 billion—are locked out of their Bitcoin fortunes as a result of lost or forgotten keys,” the New York Times reports. “They have been forced to watch, helpless, as the price has risen and fallen dramatically, unable to cash in on their digital wealth.”

Wall Street Journal

Joining with fintech

Walmart “has joined with investment firm Ribbit Capital to create a new fintech startup to further expand its financial-services offerings. The new company will be majority-owned by Walmart,” and the board will include the retailer’s CEO and CFO as well as Meyer Malka, managing partner of Ribbit Capital. “Ribbit has backed several well-known fintech startups, including digital brokerage firm Robinhood, buy-now-pay-later lender Affirm and personal-finance website Credit Karma.”

“Walmart said that it anticipates growth for the new venture may come through partnerships and acquisitions with leading fintech companies. Walmart’s existing financial-services offerings, which it says it will continue to offer, include its credit card, a reloadable debit card, cash transfers and check cashing.” John Furner, Walmart U.S. CEO, said customers have “made it clear they want more from us in the financial services arena.”

No-interest credit cards

“Worried about dwindling credit-card usage during the coronavirus pandemic and the rapid rise of startups that allow consumers to pay for goods in installments,” two of Australia’s largest banks have launched credit cards that don’t charge interest. “National Australia Bank launched a no-interest credit card in September. Users get a fixed line of credit and the bank levies a monthly fee, which is refunded if the customer maintains a zero balance and doesn’t use the card. Commonwealth Bank of Australia, the country’s largest lender by market value, also unveiled a no-interest card last year.”

“The banks are betting that consumers will like the products for their simplicity. No-interest cards are designed to give customers more control over their spending via a product that is easy to understand. The experiment isn’t being replicated in the U.S. where most credit-card issuers charge interest when cardholders carry balances. But if they prove to be successful, Australian banks’ no-interest cards could drive change in other markets.”

Financial Times

Home, sweet home

“Why has going global proved so hard for the big banks?” an FT op-ed asks. “The contrast with other more global industries, from software to cars, remains striking. Banking remains persistently local. Why? The first answer bankers give, and probably the most important one, is regulation. Governments like their banking industries to be thoroughly under local control. But this cannot be the whole story.”

“The history of big European banks trying to enter the big, profitable U.S. market, on the retail or investment banking side, is a tale of disappointment and retreat. Heading in the opposite direction, from the U.S. to the world, Citigroup has bought and invested in big retail operations in both Mexico and across Asia. But the U.S. group has never been able to demonstrate that having them as part of Citi contributes something to the larger enterprise. Citi’s returns and stock valuation stubbornly trail behind peers.”

“Banks will always look abroad for growth. But those that succeed will note the pitfalls and ask: how well do we really understand this new market? Will we keep investing in it during the tough times? And are we willing to send our very best and most trusted leaders there?”

New York Times

Chump change

About 300 businesses that got loans through the Paycheck Protection Program “received loans of $99 or less, yet another illustration of how the relief program’s hastily constructed rules sometimes led to absurd outcomes. And they’re poised to be repeated: In last month’s stimulus package, Congress allocated $284 billion to restart the loan program. Lending is scheduled to begin this week.”

“The tiny sums were equally frustrating for the banks and other lenders that made the government-backed loans. For each, they were paid 5% of the value — meaning they collected just pennies on the smallest loans, far less than they cost to make.” One loan “netted Bank of America a fee of 65 cents, paid by the government.”

Washington Post

Boom times to continue

“Experts are predicting another strong housing market in 2021. They are forecasting increased demand from buyers who delayed purchasing homes because of the pandemic. The ability to tour homes and close on purchases virtually will make buying a home simpler in 2021.”

“But first-time buyers are likely to face head winds in 2021. Buyers need more money than ever before to buy a home. According to the National Association of Realtors, the median household income of first-time buyers in 2020 was $80,000, up from $68,703 in 2019. The median household income of repeat buyers was $106,700.”