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United States: Bad Day For Tech Giants As PayPal and Facebook Share Prices Tank
PayPal’s share price fell by nearly a quarter on Wednesday's (February 2) trading following the release of its fourth-quarter and annual earnings report. Although its total payments volume (TPV) and net revenues increased by 31 percent and 17 percent respectively, the company's forecasts paint a slightly gloomier picture which appears to have spooked investors.
According to PayPal, Q1 2022 revenues are expected to grow just 6 percent year-on-year, suggesting the bounce the company received following the pandemic’s digital shift is potentially slowing. For the full year 2022, PayPal said it expects revenues to grow 15 percent, just slightly below 2021 rates.
PayPal’s share price dip represents the latest slide in a tough six or seven months for the company. In July 2021, PayPal's share price reached a peak of $308.53 following years of sustained growth. Since the start of the pandemic in particular, its share price grew an impressive 3.5 times up to this peak point. Since then, however, a period of rationalisation appears to have taken place, with its share prices having more than halved to its current value of $132.57.
Nevertheless, there are some glimmers of hope. The big disparity between TPV and revenue growth for PayPal is largely due to strong growth in non-revenue generating P2P transfers, such as through the company’s popular Venmo service. Strong growth in P2P can be a good indication of future performance for the company, offering potential revenue opportunities further down the line.
For example, a strong and active P2P customer base makes Venmo a potentially attractive option for merchants. In recent years, Venmo has gradually expanded its service to support revenue-generating acceptance at merchants. In 2020, delivery service DoorDash added Pay with Venmo as a checkout option and the list of new merchants continues to grow.
While PayPal’s tanking share price wiped off $50nn of value, we should also spare a thought for Facebook. The social media giant’s share fell 20 percent on the same day, wiping an eye watering $200bn from its value. This followed the announcements that its global daily active user base declined in the previous quarter — the first time this had happened in the company's history.
Germany: PayPal Launches Pay In 30 Days
In other PayPal news, the company has launched a new "Pay in 30 days" service in Germany.
The service allows customers to defer any payment under €1,000 made online through PayPal for 30 days. Similar to a charge card, the amount will automatically be debited by direct debit after 30 days.
According to PayPal: “The due date and the outstanding amount can be viewed clearly and transparently in the PayPal account at any time and PayPal informs about upcoming debits by e-mail.”
Customers can also choose to pay off the balance in full at any time during this 30-day period at no cost.
PayPal said it does not charge a fee for its service; however, it notes that “customers will soon have the opportunity to postpone the due date once - before the end of the 30 days — for a small fee”.
Alongside the UK, Germans are the largest users of PayPal in Europe.
European Union: MONEYVAL Identifies Weakness In AML Frameworks Of Poland, Croatia
The Council of Europe’s MONEYVAL Committee has published two separate reports finding that Croatian and Polish authorities should improve their anti-money laundering and counter0terrorism financing (AML/CTF) regulatory frameworks.
The reports aim to assess EU states compliance with the Financial Action Task Force’s (FATF) 40 recommendations regarding AML/CTF.
In its report, MONEYVAL acknowledges that most legal requirements and practical actions put in place by Polish authorities “ensure a satisfactory level of transparency of legal persons, arrangements, and their beneficial ownership”.
It also mentions the important role the private sector played in the effective application of money laundering (ML) and terrorist financing (TF) preventive measures and Poland’s growing capacity to co-operate internationally.
However, the report specified a number of weaknesses in the country’s regulatory framework and the practical application of the measures.
For instance, Polish authorities did not have a comprehensive view of the factual and potential amounts of criminal proceeds and MONEYVAL urges the country to put more efforts into ensuring a uniform and comprehensive understanding of ML/TF vulnerabilities and appropriate identification and reliable assessment of TF risks.
In addition, analysis of the country’s Financial Intelligence Unit is not sufficiently used in investigations and the agency said “fundamental improvements are needed regarding the seizure and confiscation of proceeds of crime from ML and associated predicate offences”.
The report also urges Poland to clarify that terrorism financing is a “stand-alone crime” and not a “by-product” of terrorism in terms of risk and criminalisation.
In a separate report, MONEYVAL found that Croatia should make a series of further improvements in its AML/CTF regime.
These include steps to ensure a uniform and comprehensive understanding of ML, and especially TF risks, improvements on existing activities aimed at ensuring transparency of legal persons, arrangements and their beneficial ownership, improving supervisory efforts, and strengthening implementation of ML/TF preventive measures by the private sector.
Croatia should also strengthen the process for the confiscation of proceeds of crime and establish a national framework for implementation of TF-related United Nations targeted financial sanctions, including strengthening the attention and capacities of the designated state authority.
Poland is fully compliant with two FATF recommendations, largely compliant with 21 recommendations and partially compliant with 17 measures.
Croatia is fully compliant with four, largely compliant with 17 and partially compliant with 19 recommendations.
Thailand: BOT Opens Consultation On How To Level Up Thailand’s Financial Sector
The Bank of Thailand (BOT) is seeking public input on a range of policy directions in an effort to reform the country’s financial landscape.
In a public consultation titled “Repositioning Thailand’s Financial Sector for a Sustainable Digital Economy”, the BOT lays out its principles and policy directions that will support the country’s new financial landscape.
As part of this vision, the BOT proposes a “more flexible” regulatory framework that “bares minimum regulatory burdens” to financial service providers.
Meanwhile, it expects the financial sector to drive innovation by leveraging technological advancement and to provide inclusive financial services and consumer protection in a level playing field and competitive environment.
In the new financial landscape, financial institutions should also facilitate the adoption of the digital economy while they effectively manage environmental risks.
It would also see financial institutions be resilient to significant and emerging risks, without transmitting them to the system or consumers at large.
“The repositioning of the financial sector needs to strike the right balance between promoting innovation and managing risks as well as allowing for flexibility in dealing with abrupt changes,” the BOT said in the release.
The consultation runs between February 1 and 28.
China: Country Begins Three-Year Crackdown On Money Laundering
The China Securities Regulatory Commission, along with ten other Chinese authorities, have begun a combined three-year nationwide campaign starting January 2022 through to December 2024 to counter money laundering. This campaign will include a nationwide crackdown on money laundering activities, as well as strengthening internal procedures such as stronger organisational leadership, more training, assisting with cases and strengthening money laundering analysis and research.
The notice also refers to doubling investigation of cases and strengthening the punishment of money laundering crimes, which suggests that the authorities are looking to achieve publishable results. This comes after an increasingly strict position taken towards money laundering and other illegal activities, particularly cryptocurrency in 2020 and 2021.
The crackdown also fits more generally with the increased use of national campaigns by the authorities to deliver policy goals, such as a crackdown in 2021 on private tutoring and an internet purification campaign launched earlier this year. It is unknown whether the campaign will be enforced for the full three years. Future regulatory action is likely to emerge via a targeted national campaign.
