Weekly 10-Q: Is BNPL picking up steam while consumers struggle with credit card payments?

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Last week we covered: Robinhood posts August 2022 operating metrics -- disappointing or somewhat hopeful?

Is Buy Now, Pay Later picking up steam while consumers struggle with credit card payments?

The pandemic-driven lockdowns, wars, and rising cost of living have pulled the plug on economic balance. This is particularly challenging for the consumers of 2022, who are feeling the squeeze. Though good habits have been born as well – 63% of consumers surveyed globally are more aware of budgeting in the last 1 year, according to a new report by Marqeta.

The research also showed people are struggling more with meeting the minimum payments on their credit cards than last year, globally up from 27% in 2021 to 37% in 2022. It's worse when you look at the US -- 55% of people among US survey respondents had trouble meeting minimum payments.

Younger consumers’ rising preference for debit and growing BNPL schemes are vying for credit card market share. Other than approval and eligibility criteria that continue to be a hurdle for younger generations, if credit card providers want to compete with BNPL’s popularity, they would need to modernize their customer satisfaction strategies.

While increased spending can be a windfall for merchants, it can come at a cost to consumers. US regulators worry costs can quickly pile up, leaving shoppers with mounting debt. CFPB's recent report on the BNPL sector found that there were inconsistent consumer protections compared with credit cards, and that the sector "is engineered to encourage consumers to purchase more and borrow more".

In light of this, regulators have flashed signals to rein in the BNPL sector, concerned that the service can negatively impact consumers’ financial health in the long run.

Top stories of the week

AFFIRM
Affirm offers BNPL payments to Amazon consumers in Canada
Affirm has strengthened its alliance with Amazon to serve consumers and merchants in Canada. As part of the partnership, consumers shopping on Amazon.ca will be able to select Affirm’s BNPL option during checkout. The option is expected to be available in both English and French by next month. (Finextra)

AMAZON
Amazon and Lendistry partner to fuel SMB growth with the Amazon Community Lending Program
Amazon is rolling out a small-business lending platform in partnership with Lendistry, an SMB lender, with plans to lend more than $150 million in the next three years to support urban and rural small businesses. The formal launch follows a one-year pilot of the Amazon Community Lending program. (PYMNTS)

APPLE
What's going on with Apple Pay Later?
Earlier this year, Apple unveiled its own buy now, pay later option — Apple Pay Later — citing it would be available with iOS 16 in September. However, when Apple released its update last month, Apple Pay Later was nowhere to be seen. It is reportedly being delayed until 2023 due to technical engineering challenges. (PaymentsJournal)

BARCLAYS
Barclays gets fined $361 million over an “unprecedented” quantity of unregistered securities
Barclays has agreed to pay $361 million to settle costs after a clerical error led the FI to supply the market with billions of dollars worth of structured products that it hadn't registered. The error dated from 2019 to March this year, when Barclays offered a $17.7 billion product that had not been registered with the SEC. (FT)

FED
Fed plans climate scenario exercise with 6 big banks
Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo have taken part in the Federal Reserve Board's pilot program on climate change commencing early 2023. During the pilot, which is expected to close around the end of 2023, the megabanks will gauge the impact of climate-related moves on specific portfolios and business strategies as part of the Fed's efforts to measure the level of financial risks regarding climate. The Fed will then review those findings and assist the firms to build and manage climate-related financial risks. (WSJ)

JPMORGAN CHASE
JPMorgan Chase intends to hire 2,000 tech workers globally
JPMorgan Chase plans to hire about 2,000 engineers worldwide within this year regardless of a deteriorating economy and at a time when technology giants have halted hiring or are slashing jobs. Tech workers comprise about 20% of the bank's nearly 278,000 global staff and it further eyes to hire more. (Seeking Alpha)

Chase UK has 1 million customers
Since its launch last September, JPMorgan has attracted one million customers and more than 10 billion pounds ($10.8 billion) of deposits to its UK mobile app bank. The bank is further planning to double the size of its workforce at its British retail wing to at least 2,000 by 2024, despite losses and some investor skepticism. (Reuters)

Chase, DoorDash, and Mastercard partner to launch a credit card
Chase and DoorDash, the local commerce platform, plan to launch the first-ever DoorDash credit card, with Mastercard as the payments network. The DoorDash Rewards Mastercard will allow cardmembers to unlock benefits and earn rewards on purchases both on and off the DoorDash platform. The move comes as JPMorgan is pushing to further increase its market share. (Yahoo)

MONEYLION
MoneyLion gets sued for unlawful practices by CFPB
The CFPB has filed a lawsuit against MoneyLion alleging that it charged military service members excessive fees for loans and often refused to cancel paid memberships. By doing so, MoneyLion is accused of violating the Military Lending Act by charging above a 36% rate cap on loans to service members and their families, through a combination of interest rates and monthly membership fees. (MarketWatch)

ROBINHOOD
Now earn 3% interest with Robinhood Gold
Robinhood is introducing a new Robinhood Gold benefit that enables members to earn 3% interest on their brokerage cash, up from 1.5% for non-Gold members. With the new interest rate, Gold customers can now earn more income on their un-invested cash and collect 23 times more in interest compared to the national average savings rate. (PYMNTS)

REGIONS FINANCIAL
CFPB penalizes Regions Bank for surprise overdraft fees
The CFPB has ordered Regions Bank to refund at least $141 million to customers harmed by its illegal surprise overdraft fees and pay $50 million into the CFPB’s victims relief fund. From August 2018 through July 2021, Regions charged customers surprise overdraft fees on certain ATM withdrawals and debit card purchases. (Banking Dive)

SEC
WhatsApp, Signal may end up costing Wall Street an arm and a leg
Bank of America, Citi, and Goldman Sachs were among the 11 banks that got hit with over $2 billion in penalties by the US regulators -- the SEC smacked a $1.1 billion fine, while the Commodity Futures Trading Commission ordered them to pay over $710 million -- for violating recordkeeping provisions outlined in federal securities laws and failing to sufficiently monitor their employees' use of unauthorized messaging apps. (Bloomberg)

SQUARE
Square launches support for Apple's Tap to Pay
Square now supports Apple's Tap to Pay service on iPhone to sellers across the U.S., enabling small merchants and independent retailers to use their ‌iPhone‌ as a payment terminal. The service allows sellers to accept contactless payments directly using an ‌iPhone‌, with no additional hardware or dongles required. (TechCrunch)

Tweets of the week

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What's trending

• JPMorgan and Goldman retain top two spots in global investment banking table (Seeking Alpha)
• Buffett-backed Nubank, the most valuable digital neobank listed on the NYSE, reaches 70 million clients (Reuters)
• HSBC invests $10 million in Nova Credit (AltFi)
• Afterpay and Sephora Canada partner on flexible payments for Canadian beauty shoppers (Yahoo)

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