Plus, Europe Issues the Same Financial Warning as the U.S.
Welcome to your Sunday digest…my weekly breakdown of the things we’re thinking about and talking about in the Global Intelligence world.
First up this week, Amazon goes to war with Visa.
This week, the online retail giant announced that it would stop accepting payments from U.K.-issued Visa credit cards amid a dispute over fees. This new policy is set to go into effect from January 19 next year.
Explaining the move, Amazon said the costs of accepting card payments should be declining due to advances in technology, “but instead they continue to stay high or even rise.” Shares of Visa fell almost 5% on the news.
This move happened in part because of Brexit. Since Britain left the European Union, an EU rule capping fees charged by credit card issuers is no longer in place, meaning Visa was free to charge what it wanted. It appears the company may have pushed too far…although this is just the latest front in an ongoing battle between Visa and Amazon.
Earlier in the year, the ecommerce giant introduced surcharges for Visa credit card users in Singapore and Australia. And the company is also reportedly thinking about dropping Visa as a partner on its co-branded credit cards in the U.S.
My take: This dispute feels like the beginning of a wider battle that will permeate the online world.
When Amazon and other online retailers first emerged, they desperately needed payment providers like Visa, Mastercard, PayPal, etc.
Now, the power has shifted.
Today, people care way more about having access to Amazon than about which payment provider’s logo is on their credit card. And Amazon knows this.
Basically, Jeff Bezos holds all the cards now and he’s tired of sharing his profits with Visa.
I’m betting Visa climbs down and accedes to Amazon’s demands. What choice does it have?
But the more interesting question is where the battle moves from here.
According to analysts, on average credit card processing fees range from 1.5% to 3.5% of each transaction. Imagine the kind of money that costs Amazon each year.
Would the company perhaps be willing to share some of those funds with customers and/or providers if they used a low-fee crypto-payments solution instead? And hasn’t PayPal been moving into crypto…and what about the rumors Apple could be doing the same?
I’ll let you draw your own conclusions.
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Next up…a word on safety when investing in crypto.
In recent weeks and months, I’ve seen several mainstream media reports about crypto investors who’ve had their accounts drained by hackers.
So, I wanted to offer some words of advice on how to prevent this from happening.
One of the most common ways that hackers gain access to crypto accounts is through something called SIM swapping.
Here’s how this scam works. A fraudster finds some of your personal information online, like your birthdate, Social Security number, address, etc. This may be available online through no fault of your own, such as if you were a victim of the Facebook data breach earlier this year.
Using this information, they call your cellphone provider pretending to be you and say your phone is lost or stolen. Then they ask for your phone number to be ported to another device. Once this process is complete, the fraudster will receive all your messages on their device, including any password resets sent by text message or two-factor authentication using text message.
This could give them access to your crypto investment accounts and they could transfer out all your funds.
That’s why I always advise that you use an authenticator app. I use Google Authenticator, but there are several to choose from.
These apps provide a one-time code every time you log into your account. Because it is a one-time code generated inside an app, this prevents a hacker from using SIM swapping to drain your funds.
You can set up an authenticator app in your Coinbase account by going to “Profile,” then “Settings,” and then “Security”.
On Binance.US, you need to log in, head to “Security,” and there you will see “2FA”—two-factor authentication.
The cryptoconomy is an emerging space. It’s important to be diligent.
And never ever—EVER!—click on any link in any email you receive from any crypto firm, no matter how innocuous it might seem. If you receive an email highlighting some supposed issue, go to a separate web page or to your phone and log in as you normally do, and check for yourself whether there is an issue.
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Finally, Europe follows America in issuing a big financial warning.
You might recall that earlier this week, I wrote to you about the Federal Reserve’s Financial Stability Report. (You can read that column here.)
In that document, the Fed offered a stark warning: “Asset prices remain vulnerable to significant declines should investor risk sentiment deteriorate, progress on containing [COVID] disappoint, or the economic recovery stall.”
Well, the day after I wrote to you, the European Central Bank released essentially the exact same warning.
In its biannual stability report, the ECB warned of stretched valuations in many areas, including financial markets and real estate. It added that “risk-taking by non-banks and elevated sovereign and corporate debt are building up.”
Translation: The stock and property markets are sitting at extreme valuations, governments have taken on far too much debt, and the slightest decline in investor confidence could topple this house of cards.
When the two most important central banks in the Western world issue basically the same warning within days of each other, it makes sense to heed what they’re saying.
The risk of a market correction, or more accurately a crash, is growing.
So, I’ll repeat my advice from earlier this week: Lighten your stock market load, particularly of high-flying tech stocks, and move into commodities, cash, and crash-resistant plays such as those in our Global Intelligence Portfolio.
That brings us to the end of this week’s digest. Many thanks for being a subscriber. And if you have any feedback or questions, please reach out through the contact form on the Global Intelligence website. I’d love to hear from you.
Enjoy the rest of your Sunday.
