Citigroup Launches New Digital Payments Unit
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What is the main topic discussed in this episode?
With your Money Briefing, I'm J.R. Whelan at the Wall Street Journal in New York.
What is Citigroup’s new digital payments unit and why does it matter?
Citigroup wants in on the action when it comes to digital payments and to make it easier for consumers to move money from point A to point B when paying for goods. We'll have more on that in a moment. First, these money and market stories you should know. Good news for homebuyers.
How are current housing and mortgage trends setting the scene for consumer payments?
Home price growth slowed for the 10th straight month in January. Prices of homes in major metropolitan areas across the nation rose 4.3% in the year ending in January. That's down from 4.6% the prior month. Slower price growth along with lower mortgage rates and a growing inventory of homes for sale are all potentially good news for home buyers this spring. Now, alongside that data, construction on new homes, what's known as housing starts, fell almost 9% in February. They're below averages from a year ago, but falling interest rates could spark home buying and in turn more construction. After approaching 5% last month, the average rate for a 30-year mortgage has since fallen to 4.28% as of last week.
Meanwhile, consumers might not have as rosy an outlook as those in the housing market. The conference board on Tuesday said its index of U.S. consumer confidence declined in March. More specifically, consumers who described business conditions as good fell to 33.4 percent in March from about 40 percent yesterday. in February, but there is a silver lining. Consumers slightly raised their expectations of short-term income prospects, suggesting the tight labor market could lead to higher wages, about 21% said they expected higher incomes.
What evidence shows consumer confidence and income expectations shifting?
That's just slightly up from 20.6% in February.
The era of digital payments and the ability of customers to quickly move money to pay for goods is not in its infancy anymore. It is here to stay, and big banks want a piece of the action. Wall Street Journal reporter Telus Demos is here with some details. So Telus, it's Citigroup that's the latest bank that wants in on this fast-growing area of the banking sector, or as you put it in your story, the hottest area of the banking sector, and that is linking merchants to customers.
That's right. For a long time, it was totally commoditized, the business of essentially accepting credit card payments on behalf of a merchant. It was pretty simple.
How did payments evolve from card swipes to a complex digital ecosystem?
People wanted to swipe their cards. They'd go to a terminal. They'd walk into the store, go to a terminal, swipe their card. Somebody needed to do all that processing work. banks had years ago outsourced all that, basically. First, you saw the creation of the networks, Visa and MasterCard. And then you saw these sort of processing businesses that were set up to work with retailers and other merchants in order to get them to accept those. In fact, banks used to own some of those companies. They'd spun them off years ago or in the process of doing so. And because it just wasn't that great of a business, it was all about volume. Each transaction would make fractions of a cent. This just wasn't something where the banks really saw a lot of
room for them to add value.
And we can trace this to last year when banks lined up to be a part of the real-time payments network to move money instantly between customer accounts.
Well, that's right. So what's happened over the last few years is that the business has gone from a pretty basic accepting card swipes at terminals type thing, which was the vast majority of activity, to this... explosion of payment options and types and things like that. I mean, think about all the shopping that you do online. Think about all of the wallet options you have now. Are you using Apple Pay? Are you using PayPal? If you're in another country, are you using Alipay? Are you using Paytm? There are all these new and different ways to to to pay some of them involve credit cards but in a new way some of them involve entirely new types of payments where you're spending money within an ecosystem and merchants are trying to get in on that uh plus you have just an exp you know with with the advent of more online comments you see an explosion of fraud and so now merchants are having all these problems with accepting credit card payments that aren't real
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:05–0:09
2
What is Citigroup’s new digital payments unit and why does it matter?
0:09–0:24
3
How are current housing and mortgage trends setting the scene for consumer payments?
0:24–1:44
4
What evidence shows consumer confidence and income expectations shifting?
1:44–2:30
5
How did payments evolve from card swipes to a complex digital ecosystem?
2:30–5:04
6
Why are banks re-entering the merchant payments business now?
5:04–7:19
7
How can banks use data and speed to reduce fraud and improve payments?
7:19–8:21
8
How will banks compete with fintechs like Stripe and Adyen in payments?
8:21–9:23
Speakers
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