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Daily briefing - 25 July 2019


We've been flagging for 18 months that the big new market opportunity in retail banking is as part of the growing ecosystem serving the small and medium business community, with several interesting announcements in the UK in the past few days. It's all about the ecosystem.

ClearBank yesterday announced a new partnership with Nationwide Building Society, which bills itself as the world's largest building society. From early 2020, Nationwide plans to offer a new business banking account which is aimed at the 5.6 million small and medium businesses in the UK, which will benefit from ClearBank's infrastructure. Separately, Nationwide announced a new deal with Mastercard to supply cards for the new business current account. "We are aiming to disrupt the business current account market and these partnerships will help us do just that," said Simon Hamilton, managing director at Nationwide for Business. "The combination of our mutual ethos, national branch network, UK based call centres and these partnerships, will ensure we are truly able to meet the needs of small businesses across the country and set new standards in business banking."

Mastercard will also join forces with SumUp, the mobile card reader that recently raised $370 million in funding from backers including Bain and Goldman Sachs. As Marcel Schneider, CCO & EVP Europe at SumUp commented: "There is a card acceptance gap that exists due to smaller businesses historically not being well-served by traditional payment providers. 10% of any population should be able to accept card payments but only around 1% does. It's this gap that SumUp and Mastercard are looking to fill through the partnership."

A big question around SME lending is the state of credit reporting on small businesses, which is pretty much non-existent even in the USA. US consumers are well served, with three major credit bureaus. Citizens are entitled to a free report each year from the bureaus, and are encouraged to compare and contrast the information. They'll be getting extra from Equifax, which is now required to issue free reports six times a year for seven years, as part of its $800 million settlement with the Federal Trade Commission. Articles are now appearing in the US press suggesting that citizens affected by the Equifax data breach could apply for settlements of up to $20,000. However, as noted by officials in the industry, Equifax has been incredibly lucky that lawmakers, in their wisdom, have elected not to prosecute a single individual as part of the settlement. Lawmakers also chose not to prosecute the business for stock fraud due to the delay in announcing the settlement.

Russia's largest bank is to launch a joint venture with Russia's equivalent of Gmail in an effort to stay ahead of digital players intent on providing banking and payments services. Sberbank will invest Rbs38 billion along with its stake in delivery app Foodplex while Mail.ru will pitch in Rbs7.8 billion along with its stake in taxi app Citymobil and its restaurant app Delivery Club. "Sberbank's investment is the latest in a series of plays designed to help it move away from traditional banking -- which chief executive Herman Gref fears will be disrupted by online payment services --to an 'ecosystem'involving everything from e-commerce to doctor's appointments. Food and transportation purchases account for more than half of Russian household spending, according to the companies." The Mail.ru chief executive Boris Dobrodeyev said that consumer habits were changing quickly, and the companies needed to move with them.

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