Timing & trends

Visa and MasterCard’s duopoly is under threat

 

In the fast-changing world of payments, Visa is beginning to feel as left out as those of us who didn’t get invited to a Friendsgiving.

Last week, Amazon said it would stop accepting Visa-branded credit cards from UK customers beginning next year. That move follows another snipe in Australia and Singapore, where Amazon slapped a small fee on customers who pay using Visa credit cards there. And to put a cherry on top, Amazon also said it was considering switching its own co-branded card from Visa to Mastercard.

Why is Amazon doing this? The company cited Visa’s high processing fees, though data shows that Mastercard’s and Visa’s fees are pretty much the same in the UK. “I find it quite odd that they’re claiming they did this because of the high cost of acceptance of these in the UK,” Visa CEO Al Kelly told the FT.

Payments analysts say Amazon’s ditching of Visa is a negotiating tactic to secure lower processing fees from the company. And they don’t expect it to hurt Visa’s bottom line in any tangible way.

But it’s definitely a worrying sign for credit card networks

Visa and Mastercard have worked for decades to build the “railways” upon which global payments travel, and they’ve been extremely successful. Both Visa and Mastercard are among the companies with the highest margins in the S&P 500, at 65.6% and 53.3%, respectively.

But retailers have never been happy with an arrangement that forces them to pay a fee every time you swipe a credit card at the counter. Merchants forked over $110 billion in credit card processing fees just last year.

And thanks to fintech innovations, there are more options available than ever to bypass these credit card railroads for hyperloops. Buy now, pay later services like Affirm are surging in popularity, as are direct bank-to-bank transfers.

Bottom line: Growth in digital payments and alternative payment methods is threatening to disrupt the Visa–Mastercard duopoly.

 

Looks like the start of a U-Turn on inflation. 2-year and 10-year yields jump.

 

The White House announced today that President Biden, eager to get something through the Senate without a long bruising fight, will re-nominate Republican Jerome Powell for a second term as chair of the Federal Reserve’s Board of Governors and will elevate Democrat Lael Brainard to vice chair. Powell is opposed by some prominent Senate Democrats, but supported by many Republicans. And Brainard doesn’t seem to face opposition from Democrats. Both will likely win Senate confirmation.

As you would expect, both Powell and Brainard released thank-you statements about their nomination.

But as you would not expect, fighting inflation was suddenly the number one priority in both their statements – after they’d driven inflation to a three-decade high through record gigantic money printing and interest rate repression, and then had stubbornly brushed off this inflation as something that would quickly go away on its own.

There wasn’t a word in their statements about this inflation being “temporary” or “transitory,” and about the Fed needing to be “patient,” and waiting for it to go away on its own. But inflation was suddenly a real problem that needed to be dealt with.

Powell’s first priority is now to “prevent higher inflation from becoming entrenched,” he said: “The unprecedented reopening of the economy, along with the continuing effects of the pandemic, led to supply and demand imbalances, bottlenecks, and a burst of inflation. We know that high inflation takes a toll on families, especially those less able to meet the higher costs of essentials like food, housing, and transportation. We will use our tools both to support the economy and a strong labor market, and to prevent higher inflation from becoming entrenched,” he wrote in his statement.

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Hunter Biden’s Private Equity Firm Facilitated $3.8 Billion Chinese Purchase Of American-Owned Cobalt Mine

An investment firm founded by Hunter Biden facilitated a $3.8 billion purchase of an American-owned cobalt mine by a Chinese conglomerate, placing a key resource used in the manufacture of electric car batteries under foreign control, according to the New York Times.

The mine, formerly owned by Freeport-McMoRan and located in the Democratic Republic of Congo, was purchased in 2016 after Chinese mining outfit China Molybdenum announced a partnership with the Biden-founded Bohai Harvest RST (BHR) – with the Chinese contributing $2.65 billion and BHR contributing $1.14 billion to buy out a minority stakeholder, Lundin Mining of Canada. The money for Bohai’s share came “entirely from Chinese state-backed companies,” according to the report.

China Molybdenum lined up about $700 million of that total as loans from Chinese state-backed banks, including China Construction Bank. BHR raised the remaining amount from obscure entities with names like Design Time Limited, an offshore company controlled by China Construction’s investment bank, according to the Hong Kong filings.

Before the deal was done, BHR also signed an agreement that allowed China Molybdenum to buy BHR’s share of the mine, which the company did two years later, the filings show. That purchase gave China Molybdenum 80 percent ownership of the mine. (Congo’s state mining enterprise kept a stake for itself.) – NYT

In 2019, when Hunter controlled 10% of the firm through Washington-based Skaneateles, LLC, BHR sold its stake. As the Times notes, Chinese corporate records show Skaneateles is still part owner of BHR, however Biden attorney Chris Clark said that Hunter “no longer holds any interest, directly or indirectly, in either BHR or Skaneateles.”…read more.

Grocers, feds vow to keep B.C.’s food supply-chain strong

Grocers and governments are vowing that B.C.’s food supply chain will stay strong, in the wake of landslides and highway collapses that have strained the province’s supply chain.

Canada’s Minister of Transport Omar Alghabra told media at an afternoon news conference that the federal and provincial governments have a plan to ensure food security.

“It is a priority for us to ensure that Canadians who are currently stuck, or in the middle of this affected region, don’t have [food] shortages,” Alghabra said.

Highway 7 is partly cleared. That route has so far been open westbound for essential travel, and to assist people stranded in Hope to get to the Lower Mainland. Highway 1, between Hope and Boston Bar, is also open for emergency access. Travel north of Boston Bar remains closed.

Crews are working to remove debris on Highway 3, with that corridor expected to open at some point this weekend, for essential travel only.

Highway 99, between Pemberton and Lillooet, remains closed.

Significant damage has closed Highway 5 – better known as the Coquihalla Highway – and there is no official estimate for when that route could reopen.

Alghabra said that he hopes highways, and rail lines, reopen soon…read more.

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