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Daily briefing - 18 July 2019


The big US banks produced strong earnings this week but there's a sense that the playing field is starting to tilt against them, reports Reuters. "There was good news in the earnings reports as well. The consumer business remained buoyant, offsetting weakness in other areas. At JPMorgan Chase, average loans increased 2% on the back of an 8% rise in credit-card loans. Debit and credit card purchase volumes each rose 6% at Wells Fargo showing consumers are still feeling confident and spending more. And even as investors have been concerned over the impact of the U.S.-China trade spat on global growth, JPMorgan Chief Executive Officer Jamie Dimon remained bullish about the economy. The bank's performance is often considered a bellwether for the health of the U.S. economy. 'We continue to see positive momentum with the U.S. consumer -- healthy confidence levels, solid job creation and rising wages -- which are reflected in our Consumer & Community Banking results,' Dimon said in a statement."

Warren Buffet's investments in mainstream financial services are broad and vast and include big chunks in the top US banks along with Mastercard and American Express. While Buffett has been famously reluctant on technology businesses, his biggest opponent Masa Son is a fervent believer. In Asia, where Son has deep ambitions, the existing services are finally feeling a squeeze. "Visa and MasterCard have long been the dominant providers of payment networks for credit and debit card services, collecting licensing fees from retailers and banks as well as from users in some cases," writes Nikkei Asian Review. "But now they are being challenged even in the Asian market where their foothold seemed most secure: Japan. One of those challengers is PayPay, a mobile payment platform backed by Yahoo Japan and its parent, SoftBank Group's mobile unit." The article goes on to tell the story of 59-year-old Seiei Takase, 59, who runs a restaurant in a small city north of Tokyo, and started PayPay in April as the shop's only cashless payment option.

The UK fintech SumUp is raising new funds for expansion. The mobile-driven card reader aimed at small and medium businesses has already absorbed competitor Payleven back in 2016. "SumUp, the payments firm for SMEs, has raised a 330 million Euro facility from Bain Capital Credit, Goldman Sachs Private Capital, HPS Investment Partners, and TPG Sixth Street Partners." The company plans to acquire new merchants in its 31 markets, according to Finextra. With added-value services playing an increasingly important role for small merchants, POS machines are now a way into lending. In addition, SumUp has been acquiring other businesses to broaden its service offering, including Shoplo, which helps merchants connect to online marketplaces, and Danish business Debitoor. "More broadly, BBVA-backed SumUp started out offering functionality akin to Silicon Valley's Square, and subsequently merged with Rocket Internet's Square clone Payleven. However, the full SumUp product suite today encompasses accepting payments on-the-go or online, managing business at the point of sale, invoicing and bookkeeping, third-party integrations of payments, and other services via SDKs and APIs." SumUp is backed by BBVA.

The FT has another comedy piece about N26 today, following its latest "valuation". The accompanying picture shows some N26 employees in a glass-walled office, with a scary bear painted on the wall, one person seated on the floor and the other raised off the floor courtesy of a bean bag. "N26 does not disclose the profitability of individual markets or have break-even targets for them," writes Laura Noonan. "'In all honesty, profitability is not one of our core metrics,' said Mr Tayenthal, a former consultant at professional services firms including CMS and Booz & Company." This is both true and stupid at the same time.

Goldman Sachs invests in European savings business Raisin

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