Category: Banking & Finance

Covid-19: Bankers favour a flexible loan revamp plan to help small borrowers

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With economic uncertainty looming amidst surging coronavirus cases and lockdowns put in place by several States, many banks are understood to favour a flexible loan restructuring package, especially to help small borrowers and entrepreneurs.

“Banks don’t want customers to feel like delinquents or get NPA tags just because of the pandemic and economic situation. A flexible restructuring programme for banks to help out customers at this point in the crisis would be helpful,” said a source familiar with the development.

The proposal of a flexible loan restructuring scheme is understood to have also been discussed at recent meetings of the Reserve Bank of India with bankers.

While the first 15 days of April saw normal collections for most banks and non-banking financial companies, there are worries going ahead.

“No one is sure how the month of May will pan out,” said the source.

Amitabh Chaudhry, Managing Director and CEO, Axis Bank had said at the fourth-quarter results that he expects collections to be impacted in coming weeks due to the local lockdowns though they have been strong in the initial weeks of the fiscal year.

Yes Bank MD and CEO Prashant Kumar also said that till April 15, collection efficiency for the lender was at 96 per cent, but there would be some impact after that though data is not available.

The Finance Industry Development Council recently requested the RBI for restructuring stressed retail and individual borrowers of NBFCs whether or not they had sought it earlier.

Needed an umbrella policy

“We need an umbrella policy offering options for restructuring including permission to undertake simple process for business restructuring, inducting new investor, restoring finance or any assistance to rebuild operations of SMEs, MSMEs, start-ups, retail borrowers ignoring their previous defaults, if any. The second and third wave could be more lethal and we need more human policy then regulatory flexibility,” said Nitin Potdar, Partner, J Sagar Associates.

While industry and bankers are hoping that the government and RBI will announce a fresh set of relief measures, some lenders believe that a fresh round of loan restructuring may not be the best way forward.

“It is still early days and more data may be needed on collection trends. We should not use restructuring to postpone the problem,” said a banker, who did not wish to be named.

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As Covid rises, RBI sharpens risk tools to gauge banks, NBFCs, BFSI News, ET BFSI

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The Reserve Bank has decided to review and strengthen the Risk Based Supervision (RBS) of the banking sector to enable financial sector players to address the emerging challenges.

The RBI uses the RBS model, including both qualitative and quantitative elements, to supervise banks, urban cooperatives banks, non-banking financial companies and all India financial institutions.

More robust

It is now intended to review the supervisory processes and mechanism in order to make the extant RBS model more robust and capable of addressing emerging challenges, while removing inconsistencies, if any,” the RBI said while inviting bids from technical experts/consultants to carry forward the process for banks.

In case of UCBs and NBFCs, the Expression of Interest (EOI) for ‘Consultant for Review of Supervisory Models’ said the supervisory functions pertaining to commercial banks, UCBs and NBFCs are now integrated, with the objective of harmonising the supervisory approach based on the activities/size of the supervised entities (SEs).

It is intended to review the existing supervisory rating models under CAMELS approach for improved risk capture in forward looking manner and for harmonising the supervisory approach across all SEs,” it said.

RBI monitoring

Annual financial inspection of UCBs and NBFCs is largely based on CAMELS model (Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, and Systems & Control).

The RBI undertakes supervision of SEs with the objective of assessing their financial soundness, solvency, asset quality, governance framework, liquidity, and operational viability, so as to protect depositors’ interests and financial stability.

The Reserve Bank conducts supervision of the banks through offsite monitoring of the banks and an annual inspection of the banks, where applicable.

NPA threat

As per the Financial Stability Report of RBI, the NPAs of the banking sector were projected to surge to 13.5 per cent of advances by September 2021, from 7.5 per cent in September 2020, under the baseline scenario.

The report had warned that if the macroeconomic environment worsens into a severe stress scenario, the NPA ratio may escalate to 14.8 per cent.

Risk based internal audit

RBI earlier this year issued guidelines on risk-based internal audit (RBIA) system for select non-bank lenders and urban co-operative banks (UCBs)

to strengthen the quality and effectiveness of the internal audit system. While NBFCs and UCBs have grown in size and become systemically important, prevalence of different audit systems/approaches in such entities has created certain inconsistencies, risks and gaps, RBI said. The entities have to implement the RBIA framework by March 31, 2022, and have been asked to constitute a committee of senior executives, to be entrusted with the responsibility of formulating a suitable action plan



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May look at raising capital on economic recovery, credit offtake: Yes Bank chief

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Optimistic about economic prospects despite the second wave of Covid-19, Prashant Kumar, Managing Director and CEO, Yes Bank, said the bank’s elevated stressed asset pool should be seen as an opportunity to add to the capital post-recovery. In an interview with BusinessLine, he also said the bank may look at capital raise if the economy does well and indicated interest in Citi’s Indian consumer banking operations. Edited excerpts:

Does the bank have any plans to raise capital this fiscal?

As of now, I don’t see any fund requirement. But if there is a lot of improvement in the economy and credit growth occurs, there may be some need. Since all approvals are in place and depending on the situation, we will take a call. We had taken an overarching approval of ₹10,000 crore, but the requirement will not be so much.

How is your credit card business doing? Are you interested in opportunities like Citi’s consumer banking business?

The credit card business is doing very well. We are not very aggressive and cautious in expanding and are being selective in terms of customer acquisition. As a result, our book has increased by 40 per cent, and the spend has increased by 36 per cent.

Citi is running a profit. We will see the opportunity and cost. Their business offers a good potential, not only credit card but wealth and retail as well. Once they come out with the exact EoI, we will examine it.

Did you apply for a license for a new umbrella entity for retail payments?

We did not apply for the NUE. We were interested if we could bring out our expertise in innovation. If one has a significant stake, then you can influence the strategy. We do not want to be a minority partner.

What is the status of the proposal of an asset reconstruction company?

We had applied to RBI, and we wanted an ARC where we would have a controlling stake. The RBI is not comfortable giving a controlling stake to a bank as it would be a moral hazard. Since they have set up a committee to look at the ARC framework, we will wait for the report and then approach the RBI based on the proposal.

Are the elevated stressed assets a concern for the bank?

A stressed asset is an opportunity. No other bank would have a pool of stressed assets of almost ₹45,000 crore, which you can recover and add to your capital. Once we have made the adequate provisions of almost 80 per cent and even the ₹17,000 crore book, which we have technically written off, which means 100 per cent provision. Any recovery would directly add to our profits.

How will the earnings be this fiscal with the accelerated provisioning already made?

There will be no need to make further provision in the existing book as it is adequately provided. There may be some slippage, which will be taken care of by the recovery. For Covid, no more provisioning is required. We have not made any provisions for the second wave as our SMA 1, and SMA 2 book has come down and since we have accelerated provisioning on the existing book.

What is your outlook on the economy given the Covid surge? Will it further impact the bank’s book?

Sectors that have been impacted by Covid first wave are affected by the second wave also. Those accounts have already been recognised as NPAs. This time, things are much better as this time there is not a complete lockdown but restrictions. Economic activities, trading, taking place. Once we come down from the peak and focus on vaccination, the overall improvement would happen much faster. There is a concern as many people have been infected. It has an impact but the first quarter is a lazy quarter for banks. If we can cross the hurdle in the next 15 to 20 days, the effect would be lower.

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Merchants payments is next battleground for SBI, HDFC Bank and ICICI Bank, BFSI News, ET BFSI

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State Bank of India, HDFC Bank and ICICI Bank have lined up a slew of plans to capture the payments and settlement market as they ramp up their digitisation initiatives.

ICICI Bank, India’s second-largest private sector lender by assets is eyeing a large share of the potential Rs 31 lakh crore of payments and settlement market to more than 2 crores small, big, offline and online businesses by fiscal 2022 by offering these wholesalers and retailers payment systems bundled with cash management and credit facilities.

The bank is targeting income from fee, credit and savings due to use of technology by offering these services to these large and small establishments spread across the country. As per RBI data the market for merchant services is Rs 2.32 lakh crore or about Rs 24 lakh to Rs 25 lakh crore in fiscal 2020 and is expected to increase 45% to Rs 31 lakh crore by fiscal 2022.

The merchant stack will provide “seamless banking services” to over 2 crore retail merchants in the country.

The bank also expects to extend other services like short term loans of tenure between six months to 1 year.

HDFC Bank

HDFC Bank, the country’s largest private sector lender, has set an ambitious target to expand its merchant base by ten-fold

in the next three years, eyeing a sizable share of India’s rapidly growing digital payments market.

The lender is planning to reach out to more than 20 million small and medium merchants and also professional services like doctors,

pharmacies, salons and laundry services across metro, semi urban and rural India in the next 3 years. HDFC Bank has about two

million merchants on its network as of FY20. The lender on Wednesday launched a new banking and payment solution for its merchant called SmartHub Merchant Solution 3.0. This will allow merchants and self-employed professionals to instantly open a current account and start accepting payments both through physical and digital channels.

It has tied up with global card network Visa to enable some of the payment solutions. The features would also be digitizing Khata, enabling collection reminders, inventory management, billing software and lending to merchants’ basis their banking history.

HDFC Bank processes about 48% of the overall card transactions at the merchant level in terms of volumes and about a fourth of the Unified Payments Interface (UPI) volumes.

State Bank of India

SBI Payments, a subsidiary of India’s largest lender State Bank of India, will launch YONO Merchant App to provide low-cost digital payments infrastructure to merchants.

YONO Merchant App will expand digitization of merchant payments in the country, SBI said in a release.

Aiming to enable millions of merchants through mobile-led technology to accept digital payments, SBI plan to deploy low-cost acceptance infrastructure across India over the next two years targeting 20 million potential merchants across India in retail and enterprise segment. This will help boost digital payments acceptance infrastructure in tier 3, 4 as well as north eastern cities.

YONO SBI Merchant will act as a soft PoS (point of sale) solution for which it has partnered with global payments technology major Visa to enable Tap to Phone feature. The partnerships aim to give the necessary boost to scale up acceptance infrastructure across the country,

Bank launched YONO Platform three years ago, YONO, has 35.8 million registered users.

In the next 2-3 years, SBI is aiming to digitize millions of merchants by upgrading their mobile phones into a PoS device accepting all form factors, accessing Value Added Services such as loyalty, GST invoicing, inventory management, among others and connecting into an interface to avail other banking products at a click of a button. The bank is aiming to grow our merchant touch points multi-fold crossing 5-10 million within 2-3 years.



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SBI chief, BFSI News, ET BFSI

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State Bank of India (SBI) will try to keep the interest rates benign as long as possible with a view to supporting the economic growth, its chairman Dinesh Kumar Khara has said.

On the impact of the second wave of COVID-19 on non-performing assets of the bank, the SBI chief said that as the lockdown was not pan-India, one will have to wait and watch to assess its impact on the banking sector.

Observing that multiple variables including inflation have a bearing on the interest rates, he said, “our effort is to support the growth initiatives. To really ensure that happens, we will try to keep the soft interest rate regime for as long as possible.”

In an interview to PTI, Khara said it is too early to give any colour to likely scenario of NPAs because of local restrictions.

The impact of lockdown differ from states to states as it is not uniform, he said, adding, “so, probably we can wait and watch for some more time before making any comment on impact on economy and NPA situation.”

Speaking about various initiatives of the country’s largest lender, Khara said, SBI has decided to set up makeshift hospitals with ICU facilities for COVID-19 patients in some of the worst affected states.

The bank has already earmarked Rs 30 crore and is engaging with non-governmental organisations (NGOs) and hospital management for setting up medical facilities on an emergency basis for the treatment of COVID-19 patients.

He said the bank intends to put in place 1,000 beds with 50 ICU facilities in the states that are the worst affected.

SBI is also collaborating with hospitals and NGOs to provide oxygen concentrators for patients.

“We have put in place an action plan. We have earmarked Rs 70 crore plus out of which we are giving Rs 21 crore to 17 circles for COVID-19 related initiatives,” he said.

For the safety of employees and their families, he said, the bank has tied up with hospitals across the country to facilitate treatment of those who have fallen sick on a priority basis.

About 70,000 employees out of 2.5 lakh strong staff strength have already got vaccinated. The bank has decided to bear the cost of vaccination for its employees and their dependent family members.



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RBI to strengthen risk-based supervision of banks, NBFCs, BFSI News, ET BFSI

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The Reserve Bank has decided to review and strengthen the Risk Based Supervision (RBS) of the banking sector with a view to enable financial sector players to address the emerging challenges.

The RBI uses the RBS model, including both qualitative and quantitative elements, to supervise banks, urban cooperatives banks, non-banking financial companies and all India financial institutions.

“It is now intended to review the supervisory processes and mechanism in order to make the extant RBS model more robust and capable of addressing emerging challenges, while removing inconsistencies, if any,” the RBI said while inviting bids from technical experts/consultants to carry forward the process for banks.

In case of UCBs and NBFCs, the Expression of Interest (EOI) for ‘Consultant for Review of Supervisory Models’ said the supervisory functions pertaining to commercial banks, UCBs and NBFCs are now integrated, with the objective of harmonising the supervisory approach based on the activities/size of the supervised entities (SEs).

“It is intended to review the existing supervisory rating models under CAMELS approach for improved risk capture in forward looking manner and for harmonising the supervisory approach across all SEs,” it said.

Annual financial inspection of UCBs and NBFCs is largely based on CAMELS model (Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, and Systems & Control).

The RBI undertakes supervision of SEs with the objective of assessing their financial soundness, solvency, asset quality, governance framework, liquidity, and operational viability, so as to protect depositors’ interests and financial stability.

The Reserve Bank conducts supervision of the banks through offsite monitoring of the banks and an annual inspection of the banks, where applicable.

In case of Urban Cooperative Banks (UCBs) and NBFCs, it conducts the supervision through a mix offsite monitoring and on-site inspection, where applicable.

A technical advisory group consisting of senior officers of the RBI would examine the documents submitted by the applicants in connection with EOI.

EOI said the consultant would be required to work in close co-ordination with officers of RBI’s Department of Supervision in Mumbai.



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ICAI to move RBI for tweaking of bank auditor appointment norms

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The Reserve Bank of India’s new rules on statutory auditor appointments for banks and NBFCs has not come as any jolt for the audit profession, but the CA Institute plans to approach the central bank for certain inclusions in order to improve overall bank audit and get a better outcome for the fraternity, Nihar N Jambusaria, President, ICAI, said.

The missing points in the new guidelines as regards the cooling-off period for auditors, the need to give higher weightage for experienced firms compared to new firms, and fixing the minimum number of Statutory Central Auditors while leaving the decision of the maximum number to the banks are some of points the ICAI would like to see in the new guidelines and will pitch for them, Jambusaria told BusinessLine.

The RBI had, on April 27, brought in new set of rules — without sharing them with the ICAI for its views — for appointment of statutory auditors of banks and non-bank finance companies (NBFCs), including housing finance firms.

Joint audit

The central bank has now made joint audit mandatory for entities with asset size of ₹15,000 crore and above, capped the number of audits a firm can perform in a year (four banks, and eight NBFCs and urban cooperative nanks) and reduced the tenure of auditors to three years from four. It has also done away with the concept of cooling period that was part of the previous set of guidelines. Approval of the central bank is mandatory for the appointment of statutory auditors of commercial banks.

Currently, if one firm has done audit of a bank for three years, there has to be a cooling period for three years. “There are many capable firms that are getting a chance to do audit. Now what they (the RBI) have decided is that after completion of the tenure of three years, the same firm can be appointed by another bank without any rest. Continuing with the cooling period concept will be better as more firms will be able to do audits. Many capable firms are there. They will all get a chance, too. The concept of cooling period should be retained and we will pitch for it,” Jambusaria said.

Instead of leaving it to banks to decide on the minimum number of Statutory Central Auditors (SCAs), it should be set by the RBI. The maximum number can be decided by the banks and this would enable smooth conduct of audits, he said.

Experienced vs new firms

The ICAI President said the new guidelines do not distinguish between the experienced and the new firms. Previously, the old guidelines had a ratio — 60 per cent for experienced firms and 40 per cent for new firms — in the appointment of auditors.

“…the 60:40 ratio should be there. Its removal may help big firms and banks will be at liberty to appoint all new or all experienced auditors. The balance will be lost. It needs to be retained,” he said.

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We will be aggressive in loan growth, recoveries: YES Bank CEO and MD

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One year after YES Bank and the private sector lender believes it’s now on a firmer footing and plans to focus on loan growth and recoveries.

“After one year, we have been able to achieve some very good numbers. Deposits have been taken care of, capital has been raised. Even the gross non-performing assets have started coming down and the bank has made decent recoveries. Going forward, we will be aggressive in loan growth and also in terms of recoveries,” said Prashant Kumar, Managing Director and CEO of Yes Bank.

In an interaction with BusinessLine after the bank’s Q4 results, Kumar outlined plans for the bank’s lending growth. It expects to grow the loan book by 15 per cent in 2021-22, including 10 per cent growth in corporate and 20 per cent in retail and MSME.

Comfortable on liquidity

“We have relationships with a large number of corporates; we are managing their cash flows. We are comfortable on the liquidity front and we intend to participate in their working-capital requirement. It would give us two benefits — increase the loan book and if you are a working-capital lender, you can also manage current account as per the new RBI regulation,” Kumar said.

The bank also wants to participate in infrastructure funding with another lender and may look at funding ₹250 crore to ₹300 crore for each such loan.

Also read: YES Bank posts net loss of ₹3,788 crore in Q4

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Distraught depositors want PMC Bank revived soon

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Distraught depositors of the scam-hit Punjab and Maharashtra Co-operative (PMC) Bank want the Reserve Bank of India (RBI) to speed up revival/reconstruction of the bank as they are in dire need of money to meet exigencies arising from the second wave of the Covid-19 pandemic.

Some of the depositors, especially the elderly, are barely able to get by despite having lakhs and crores of rupees locked up in the bank, as the RBI clamped down on deposit withdrawal since September 24, 2019, capping it at ₹1 lakh per depositor for the entire period that the bank is under Directions.

With RBI extending its Directions against the bank for the fourth time from April 1 to June 30, 2021, depositors are wringing their hands in despair that even after 19 months no solution to their woes is in sight.

RBI extends ‘directions’ against PMC Bank by 3 months

They pointed out that while depositors of other troubled banks such as YES Bank and Lakshmi Vilas Bank were rescued in double-quick time, when it comes to their bank, the rescue process has been drawn out.

Complex process, says RBI

Chander Purswani, President, PMC Depositors’ Forum, said: “The Bank should be revived/ reconstructed on SOS basis…Depositors are losing their lives amid the raging pandemic. These are testing times for all of us. The authorities should have some mercy on us.”

PMC Bank revival: Phased deposit withdrawal likely for customers

In a statement issued on March 26, 2021, the RBI observed that PMC Bank had received binding offers from certain investors for its reconstruction, in response to the Expression of Interest (EOI) floated by the bank in November 2020.

“RBI and PMC Bank are presently engaging with prospective investors in order to secure best possible terms for the depositors and other stakeholders while ensuring long-term viability of the reconstructed entity,” the central bank said.

The RBI also emphasised that given the financial condition of PMC Bank, the process is complex and is likely to take some more time.

Depositors’ angst: tweets say it all

Vasu Chhabria (@vasuchhabria) tweeted: “Reqst PMCBank Reconstruction/Resolution on war footing. Depositors losing lives. Pls don’t punish innocent citizens tax payers.

“Delay is costing lives. 19 months passed 118 depositors dead. What is their fault? It’s their hard earned money…”

Prem Kodnani (@drkodnani) tweeted: “If corona virus symptoms 1: difficult to get tested 2: difficult to get ambulance 3: difficult to get bed 4: difficult to get oxygen 5: difficult to get Remedesivir 6: to get all this, we require money…”

Srikanth Iyer (@SrikanthIyer10) tweeted: “Pls have humanity towards us v r also citizens of India rescue us by merging Pmc Bank with nationalised bank immediately it’s need of the hour…We can’t have access to our own hard-earned money.”

PMC bank was placed under RBI Directions with effect from the close of business on September 23, 2021, due to a huge fraud perpetrated by the promoter of a real estate group and some bank officials.

The Centrum-BharatPe combine is believed to be the front-runner in the race to buy PMC Bank.

As per the EOI floated by PMC Bank in November 2020, subsequent to commencement of the normal day-to-day operations, it will be open for the investor(s) to convert the bank into a Small Finance Bank (SFB) by making an application to RBI, subject to compliance with the RBI guidelines on Voluntary Transition of Primary (Urban) Co-operative Banks (UCBs) into SFBs.

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The coolest digital banks around the world, BFSI News, ET BFSI

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– By Varun Mittal, Global Emerging Markets, FinTechs Leader, EY Singapore

Digital banks can be thought of as the Netflix and Spotify of banking. It has radically disrupted existing financial institutions by democratising banking services whereby they run on a subscription model like Netflix, and brought down the cost of servicing for both the low and high income users. With most if not all services brought on a digital platform, traditional banking service such as refreshments at branches or private lounges for premiere banking have been rendered irrelevant. The cost advantage can be significant, with the average operating cost per customer at £20 to £50, compared to over £170 for an incumbent bank.

Consumers also value speed and convenience more, which can be enabled with mobile technology, bringing features such as managing credit card and e-KYC all within the mobile banking app. With the improvement in customer experience, they gain an average Net Promoter Score of 62 compared to just 19 for incumbent banks. The only disparity in services are different tiers offered, which are not exclusive to anyone. Any consumer can simply upgrade their subscription for special perks and benefits offered by the digital banks.

On one hand, incumbent banks are threatened to retain market share and investible assets. On the other, they are partnering with these fintechs and adopting their culture of innovation in order to boost their internal digitalisation. One of the biggest bottlenecks that incumbent banks are facing is that they require credit scores, and a large proportion of youths and underserved customer segments who are still paying for loans or taking irregular income do not qualify.

When it comes to the youth segment, more than 46% of the younger population are choosing digital assistance over human interaction approach when it comes to financial services and products. That means that incremental and continuous innovation such as a mobile banking app to check balances and transfer money would not be enough. This would require radical innovation including end-to-end digitalisation on the backend with APIs. Given how many of us in emerging economies are already accustomed to e-wallets and scanning QR codes, it may not be long till more people keep branch visits to the minimum and adopt these digital banks.

However, digital banks can be kept as a supplementary account because of the inherent risk of tech integration. Several digital banks stalled its services because of failure from third-party tech integration or face difficulty in financing and keeping up its operations. Monzo faced a downround while Chime service outage of more than 24h left their 5 million customers without access to their accounts. Given such risks, it may be wise to distribute our savings across incumbent banks and digital banks.

Here are a list of notable digital banks, followed by cases of digital bank crisis:

N26

Countries offered: Europe, U.S.

Who would love it: Globetrotters

Year founded: 2016

Number of users: 5 mil

Known for: Subscription plans with free ATM withdrawals and insurance.

  • Offers no foreign exchange fees and a handy feature to help users save for a specific dream purchase, like a luxurious vacation! Users can start banking with the app before the Mastercard arrives.
  • Statistics, which automatically categorizes expenses into categories to gain better insights into users spending habits, so saving up for a trip would not be as painful as it seems.
  • N26 also rounds up card purchases to the nearest euro and transfers the difference to a different ‘space’ for passive saving.

Security: Fingerprint identification (available in most smartphones now) and advanced 3D Secure technology, and the money protected up to €100,000.

Cons: N26 is discontinuing operations in the UK after failing to attract and monetise customers with their premium products.

Latest updates: N26 just launched a mid-tier subscription plan, N26 Smart, at €4.90 which excludes travel insurance and travel perks that the lowest and highest tier subscription plans come with. This is unsurprising given how travellers will not be able to use the free overseas ATM withdrawals or currency exchange soon.

Nubank

The coolest digital banks around the worldCountries offered: Latin America

Who would love it: Fun-loving Gen Z and millennials

Year founded: 2013

Number of users: 25 million

Known for: The first fully mobile digital bank that allows users to have full control over the credit card with the app. Nubank is also known for creating access to a large unbanked population in South America who do not qualify for the major banks.

  • Reduced complexity by empowering users with their signature purple credit card, that has no annuity fees, and can be used to pay off utility bills.
  • Cool feature #2: Users can add on Nubank Rewards, where the points accumulated from spending can be used for discounts for flight tickets, meals and accommodation.

Cons: There is not much to dislike about Nubank except for the fact that the apps have a lot of bugs and the frequent updates impede the user experience.

Latest Updates: Chubb partners with Nubank with the launch of a fully digital life insurance in Brazil.

Chime

The coolest digital banks around the worldCountries offered: United States

Who would love it: Young employees

Year founded: 2013

Number of users: 8 million

Known for: Overdrawing account by up to $100 on debit card purchases without a fee or minimum balance required.

  • Cool feature #1: Users can get paid 2 days earlier with direct deposit.
  • Cool feature #2: 1% yield saving account, and users can choose to save by automatically rounding up the differences of purchases to go into savings or save 10% of each incoming payment.

Cons: Chime only allows one spending and one saving account.

Latest Updates: Chime experienced their third power outage since July, leaving 5 million customers stranded outside restaurants and stores without access to the mobile app and website. This was due to a technical issue with the third party payment processor Galileo.

Liv. Bank (by Emirates NBD)

The coolest digital banks around the worldCountries offered: UAE

Who would love it: Fun-loving Gen Z and millennials

Year founded: 2017

Number of users: 200,000

Known for: Lifestyle perks such as access and discounts to concerts and events, and exclusive benefits at Careem, Burger King and more.

  • Split bills with friends with social media.
  • Cool feature #2: Track spending and Emirates miles accumulated, and even raise disputes digitally.

Cons: Liv. Credit Card is only available for customers with 5000+ of salary and are above 21.

Latest updates: Liv. renewed their partnership with Visa to launch more co-branded offerings.

Jenius

Countries offered: Indonesia

Who would love it: Young entrepreneurs and Self-employed

Year founded: 2016

Number of users: 2.4 million

Known as: Bank BTPN financial product for younger audience.

  • $Cashtag feature enables customers to use their names as their account identifier without having to remember long strings of numbers.
  • Cool feature #2: Jenius for Business for SMEs to manage their finance.
  • Cool feature #3: KYC video call is used for new account creators to be verified anywhere

Cons: Jenius’ billing option is not as robust as other banking apps.

Latest Updates: Jenius will be rolling out an investment product in the near future.

HMBradley

Countries: U.S.

Who would love it: Newcomers

Year founded: 2019

No. of users: N.A.

Known for: Encouraging new credit card users to save

  • HMBradley rewards users with 1% to 3% cashback on their top spending categories. You know it’s meant for youths when their site shows Alcohol and Bars as the top category demo.
  • Cool feature #2: Encourage saving with Savings Tier calculated every quarter, where users can save more to be upgraded and earn up to 3% APY

Cons: HMBradley Credit Card charges $60 annual fee.

Latest updates: The savings-focused baking platform raised $18.25 million at the last week of November.

These digital banks are winning the hearts of the youths by offering lifestyle perks, easy application and low or no fees. Incumbent banks are soon to join the digital bank race, but whether they can appeal to the youths with great mobile banking experience as well as the fintech startups remains to be seen.

The coolest digital banks around the worldSource: Bain

Digital Bank Crisis

Monzo Down Round and Salary Cuts

The UK-based neobank Monzo reported losses of GBP 115.4 million for its FY 2019/20, more than two times higher than in the previous year, stating a significant impact on its revenue due to Covid and the related uncertainty as one of the reasons. Their loan volume was GBP 143.9 million and expected credit losses was GBP 20.3 mil. The fast-growing FinTech has implemented salary cuts for executives and reduced working hours for its workforce in an effort to cut costs. The company warned that “there are material uncertainties that cast significant doubt upon the Group’s ability to continue” in light of these developments and current market environment.

At the end of 2020 Q2, it was set to close its funding round at £1.25bn, raising £70-80m at around a 40% discount from the £2bn valuation it raised at last June. This round came about from regulatory pressure to maintain minimum capital requirements at least 8% of its risk-weighted assets in liquid cash.

Chime Bank Service Outage

Chime, the leading branchless bank in the U.S., was in the midst of a service outage that left millions of customers without access to their accounts. Card transactions and ATM withdrawals have since been restored, but the main touchpoint for Chime’s 5 million users – its mobile app and website – is still down after more than 24 hours. The outage was caused by an issue with the database of payment processor Galileo, a company that connects banks to credit card processors through APIs, and counts Robinhood, Monzo, Revolut, Varo and TransferWise as customers.

Many challenger banks lean on third parties to connect to a payment network. It reduces the complexity of integrating directly with a company like Visa or Mastercard. But that can come with issues around downtime and outages. After similar outages faced by Monzo and Revolut Bank, many challenger banks have shifted payment processes in house.

The outage, reportedly Chime’s third since July, comes at a sensitive time for the San Francisco start-up. Chime was in the process of raising new funding from investors at a valuation of at least $5 billion.

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