Weekly Fintech Focus

  • BIS provides additional guidance to central banks to encourage flexibility in responding to COVID‑19 challenges.
  • SoFi buys Galileo for $1.2 billion.
  • Visa and Fold co-brand a debit card that offers Bitcoin rewards.
  • Card networks are delaying planned interchange fee changes in light of COVID‑19 challenges.
  • Sweden joins the ECB instant payments platform.

BIS Issues Guidance Providing Flexibility to Central Banks Responding to COVID‑19

The Bank for International Settlements (BIS) is an organization owned by 62 central banks representing countries that account for about 95% of the world’s GDP. The BIS’s mission is to foster international cooperation among central banks to promote financial stability. On April 3, 2020, the BIS announced additional measures to alleviate the impact of COVID‑19 on the global banking system. The measures back governments’ efforts to support the banking system and complement prior guidance provided by the BIS’s oversight body, the Group of Central Bank Governors and Heads of Supervision.

The measures announced, include:

  • Technical clarifications to guide central banks in setting capital requirements in response to COVID‑19 related to loans subject to government guarantees or payment deferrals. The BIS intends for these clarifications to ensure that banks continue to lend during these times by not counting past due or defaulting loans relating to COVID‑19 in the same way as other credit risks.
  • Reiterating that expected credit loss accounting frameworks are still important during this time, but that such frameworks are not to be applied mechanistically. Rather, the BIS supports banks using flexibility in these frameworks to account for the updated capital requirements.
  • The deferral for one year of the final two implementation phases of the framework for margin requirements for non-centrally cleared derivatives.
  • A statement that the BIS will conduct its 2020 global systemically important bank (G‑SIB) assessment exercised as planned and based on 2019 data, but will postpone the implementation of the revised G‑SIB framework by a year to 2022 to give banks additional operational capacity during this time.

SoFi Buys Galileo for $1.2 Billion

SoFi has agreed to purchase the payments software company, Galileo, for $1.2 billion in a cash-and-stock deal. Galileo, a Utah-based software company, connects payment processors to banks through application programming interfaces. Initially, the companies will operate independently.

The two companies have worked together for roughly a year, as SoFi Money uses Galileo as its payment processor. SoFi believes that the deal will benefit Galileo customers by helping them expand to offer lending products, among other things.

Despite deal conversations beginning before the onset of COVID‑19, SoFi CEO, Anthony Noto, said that this was “the right time to do something like this – we’re on the precipice of a transition to digital from physical finance.”

Visa and Fold Co-Brand a Debit Card that Offers Customers Bitcoin Rewards.

Visa has teamed up with Fold to co-brand a debit card that offers cash back in the form of Bitcoin. Fold CEO, Will Reeves, said he expects the first debit cards to be issued in July 2020, but refrained from mentioning the banks involved.

This partnership stemmed from Fold’s participation in the Visa Fintech Fast Track program, which encourages fintechs to work with Visa on developing new consumer offerings. With typical rewards of 1% to 2% (up to as much as 10%) back in Bitcoin, Fold believes that it will bring a new wave of consumers to the most valuable digital asset.

In addition to saving and transferring their Bitcoin rewards, Fold intends to enable its customers to spend Bitcoin within the company’s system to buy U.S. dollar-denominated gift cards from certain major companies.

Credit Card Interchange Fee Changes Delayed Due to COVID‑19

In February we discussed Visa’s announcement that it was planning to make significant changes to interchange rates in April and October 2020. The first changes were scheduled to go into effect on April 18.  Now that it’s April, we wanted to provide the update that these changes are reported to be delayed in light of COVID‑19 pressures on merchants. To date, there have been no formal announcements by any card network about when changes to interchange rates, as well as other card network system updates, will be rescheduled.

International Developments

Sweden Joins the ECB Instant Payments Platform

European Central Bank (ECB) has agreed to offer Sweden access to the Eurosystem’s TARGET Instant Payment Settlement (TIPS) platform using the Swedish krona to ease electronic payments.

The agreement will take effect in 2022 and will allow payment services providers to transfer and settle their customers’ funds in real time and at all hours. Currently, Sweden maintains one of the most advanced and largest instant payment infrastructure, handling roughly 1.5 million instant payments each day.