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Covid nudges US bank customers into digital era



America’s top banks have decided not to let a good crisis go to waste. During the pandemic, they have capitalised on their customers’ increased willingness to use digital financial services.

For a country with global tech hubs like Silicon Valley and Austin in Texas, US banks had offered bafflingly archaic financial services, even by the start of the year.

Cheques were commonplace and mostly deposited in bank branches. Card payments often required a customer’s signature, and “tap-and-go” technology such as Apple Pay was unusual, especially when compared with levels of use for similar services in other developed economies. 

Bank branches remained open and well-used, with 30 of them per 100,000 people versus 16 in Sweden and 11 in Germany, according to 2019 World Bank data — which does not include the many brokerage offices Americans frequented for routine wealth-management services. 

Then came the Covid-19 pandemic. Banks had closed branches by mid-March, leaving customers with no choice but to use technology if they wanted transactions done.

Bar chart of Number of domestic branches as of September 30 2020 ('000s) showing Top 5 US banks by branches

By May, more than 45 per cent of Americans had changed the way they dealt with their bank, a survey of 1,000 people by consultancy FIS found. 

Mary Mack, who runs consumer and small business banking for Wells Fargo, says the pandemic has driven a 35 per cent increase in the number of cheques deposited digitally, a more than 50 per cent rise in online wire transactions, and a surge of mobile sign-ups by customers who had previously stuck to bricks and mortar and call centres. 

Wells Fargo, America’s third-largest bank by assets, developed the trend with on-the-hoof innovations such as increasing the value of cheques that could be lodged via mobile devices, and increasing the limit for withdrawals at ATMs, so people could do more without using a branch. 

The effort continues, even now that 85 per cent of Wells’ branches have reopened (many of them in limited capacity).

Wells Fargo increased the limit on ATM withdrawals
Wells Fargo increased the limit on ATM withdrawals so customers could do more without using a branch © Daniel Tepper/Bloomberg

When customers visit branches, the bank contacts them to tell them if they could have completed their transactions online, saving themselves a trip. “They relate to it,” says Ms Mack, who believes that the changes in customer behaviour will endure because “this thing is going on for so long”.

“It takes three weeks for somebody to develop a new exercise routine. We’re eight months into this pandemic,” she adds.

Such behavioural change would be welcome news for Wells, which has promised investors it will cut $10bn in costs. It can serve customers more cheaply through digital channels — the bank’s strategic plan already includes significant cuts to America’s largest bank branch network. 

“We’ll be directed by what our customers tell us,” Ms Mack says of its future branch strategy. “If what they are telling us is we won’t be using branches any more because we have gotten really comfortable with great digital tools, then we will respond accordingly.” 

Bar chart of Commercial branches per 100,000 adults showing Americans are well served in face-to-face banking

Bank of America, the second-biggest bank by assets in the US, has experienced trend.

Almost 40 per cent of BofA’s cheque deposits are now done online, as are around 50 per cent of this year’s sales — almost double the 27 per cent of the bank’s sales that were digital in 2019.

In mortgages, traditionally a paperwork-heavy activity, digital sales have accounted for 60 per cent of 2020’s activity. Erica, the bank’s artificial intelligence chatbot, is handling 400,000 client interactions a day — twice as many as a year ago. 

“We do not expect that if and when the world gets back to a place that’s more normalised, [digital adoption] is going to drop,” says David Tyrie, BofA’s head of digital banking. Even as branches reopen, the bank is testing new services, such as video consultations with customers.

Truist, a bank forged by the 2019 merger of domestic lenders BB&T and SunTrust, has also been rolling out new technology, partly to ease the pressure its customers were under throughout the pandemic.

Dan Massey, Truist’s digital banking head, says it created “virtual payment-relief assistance”, allowing customers to submit forbearance applications online and receive answers to frequently asked questions from a chatbot. 

“These solutions made a real impact,” he says, describing how they were able to deal with 50 per cent more applications at one stage, while halving the volume of queries to its call centres and reducing callers’ average hold times by nearly 60 per cent. 

Andy Saperstein, head of wealth management at Morgan Stanley, says he has seen big improvements in efficiency as clients turned to digital tools. 

Before the pandemic, clients came into Morgan Stanley’s brokerages for everything from annual portfolio reviews to having someone look over financial documents. In the pandemic era, much of this activity has taken place on Zoom.

“Once things go back to normal, of course, advisers are going to go back to meeting with clients in person [for some things],” Mr Saperstein says. “But it’s pretty efficient, if you want to review a document or analysis, to jump on a Zoom call and do it together.” 

He says there is “no question” that digital adoption is here to stay. “Once you try something digitally, you realise that it is a lot easier,” he says. “You are going to keep doing it.”

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Iranian TV action thriller delivers warning to Zarif




It is hardly surprising that Mohammad Javad Zarif, Iran’s foreign minister and nuclear negotiator, is not a fan of Gando, a popular television drama that depicts an incompetent minister who scuppers nuclear talks with world powers by hiring dual nationals who turn out to be spies for MI6.

The series — made by an institute believed to be affiliated to the elite and hardline Revolutionary Guards — “is a lie from the beginning to the end” that “damages foreign policy more than me” by fuelling public mistrust, Zarif said.

By focusing on the nuclear talks, the Guards’ motive goes beyond creating compelling drama, reformist analysts say. Iran is in discussion with western powers about reviving the nuclear deal, a key reformist achievement, and hardliners want to deter the popular foreign minister from declaring his interest in the presidency in what is a crucial election year.

“I’ll be grateful to Gando-makers to let us continue our current job,” Zarif said this month, and commented that he would not run for the presidency.

The possibility of nuclear talks with the US and other powers has complicated an already fraught Iranian political scene ahead of the June election. Many reformists are pinning their hopes on Iran’s top diplomat to reinvigorate the nuclear deal and boost support at the ballot box. Hardliners might prefer to negotiate the deal themselves after the election. The polls are also seen as particularly crucial in case supreme leader Ayatollah Ali Khamenei, 81, dies during the next president’s term.

Pendar Akbari, left, and Ashkan Delavari, right, in a scene from ‘Gando’
Pendar Akbari, left, and Ashkan Delavari, right, in a scene from an episode of ‘Gando’. The series title refers to an Iranian crocodile able to distinguish its friends from its enemies © Bahar Asgari/Shahid Avini Cultural and Artistic Institute via AP

The purpose of Gando, which refers to an Iranian crocodile able to distinguish its friends from its enemies, “is to tell Zarif that should he dare to announce his candidacy, he will be destroyed immediately,” said one reformist analyst. “When the intelligence service of the Guards truly believes in the Gando plot lines, it means even if Zarif decides to defy such warnings, he will not be allowed to run.”

Centrist president Hassan Rouhani is due to step down this year after two terms and it is not yet clear who the presidential candidates will be. Politicians register as late as May and then have to be vetted by the Guardian Council, the hardline constitutional watchdog, which can disqualify nominees. Potential hardline candidates include Mohammad Bagher Ghalibaf, the parliament speaker and a former guards commander; Ebrahim Raisi, the judiciary chief; and Ali Larijani, a former speaker of parliament. On the reformist side, speculation has centred on Es’haq Jahangiri, first vice-president, Hassan Khomeini, a grandson of the founder of the Islamic republic, and Zarif.

A US-educated career diplomat widely respected in the west for his pragmatism, Zarif was instrumental in the historic deal in 2015, under which Iran curbed its nuclear activity in exchange for the lifting of sanctions. But Donald Trump abandoned the accord in 2018, imposed sanctions, including on Zarif, and said he would pursue a new accord to contain Iran’s regional and military policies. The US move emboldened hardliners, confirming to them the untrustworthiness of the US.

Zarif’s background in the US both as a university student and as Iran’s head of mission at the UN — during which he met US politicians including then senator Joe Biden — has long made him a source of suspicion for hardliners.

This wariness of both Zarif and the west is evident to viewers of Gando, as is the heroism of the Revolutionary Guards. Mohammad, the action hero protagonist, warns that western negotiators may sabotage refineries as part of nuclear talks. Mohammad works out of elaborate facilities akin to those in a James Bond film. The fictional foreign minister is advised by a media adviser, the main culprit, “to enter into direct talks with the US and accept the conditions of the leader of the global village”.

Vahid Rahbani in a scene from an episode of ‘Gando’
Vahid Rahbani in a scene from an episode of ‘Gando’. State TV abruptly stopped broadcasting the series that was less than halfway through its 30-episode run © Hassan Hendi/Shahid Avini Cultural and Artistic Institute via AP

The dramatic scenes reflect, in part, the worldview of some of Zarif’s critics. “Reformists, Mr Zarif and his lobby group in Washington [Iranian dual nationals] should be wiped out from Iran’s politics,” said an aide to a senior hardline politician who is a potential presidential candidate. “We have to get rid of this cancerous tumour once for good.”

Gholamali Jafarzadeh, a former conservative member of parliament, said Zarif “is not a good statesman and should not run for president” while “reformists should know that their choices have no chance to be allowed to run”. 

This month, state TV abruptly stopped broadcasting the series that was less than halfway through its 30-episode run. Local media said broadcasts would resume when the presidential race was over. Iran’s centrist president Hassan Rouhani, whose signature achievement is the nuclear deal — alluded to the show on Wednesday and said “people’s money” should not be spent on “fabrication of the truth” and “distortion of facts”.

After three years of sanctions, many voters are disillusioned by the infighting and the prospect of real change, whatever the outcome of the election. “Whether Zarif or a figure more senior than him runs or not, I’m not going to vote,” said Hamid, a 40-year-old engineer. “Let the Guards win the election as they are the ones who are running the country anyway. Why shall I make a fool of myself?” 

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Rising inflation complicates Brazil’s Covid-19 crisis




After seven months in lockdown, Michele Marques received some unwelcome news when she returned to work: while she was away the prices of almost all the products she uses as a hairdresser had soared.

“A box of gloves rose 200 per cent. Colouring products increased at least 100 per cent,” said the 37-year-old from São Paulo, underlining how costs were rising while her revenue had collapsed. “I had to raise the price of my services, too.”

It is a dynamic that is playing out across Brazil, adding an extra layer of complexity to the country’s coronavirus crisis, which has already claimed the lives of almost 350,000 individuals and pushed hospital services to the brink.

With much of Latin America’s largest economy being shuttered, inflation is surging to its highest level in years, fuelling a silent scourge of hunger among poorer citizens that has run in parallel to the Covid-19 pandemic.

“The high price of staple foods — rice and beans, for example — has led to the disappearance of these items from the table of millions of Brazilians,” said Ana Maria Segall, a researcher at the Brazilian Research Network on Food and Nutritional Sovereignty and Security. In the 12 months to the end of March, the price of rice increased 64 per cent and black beans 51 per cent.

“In Brazil currently food inflation has penalised the very poorest, preventing them from having adequate access to food and in many situations leading to hunger,” she said, adding that rising unemployment and the curtailment of social programmes were also contributing factors.

Volunteers hand out food in São Paulo © Alexandre Schneider/Getty Images

Less than half of Brazil’s population of 212m now has access to adequate food all the time, with 19m people, or 9 per cent of its inhabitants, facing hunger, according to a recent report by Segall’s group.

“I’m doing some odd jobs, but it’s not enough to keep us going,” said Jonathan, a 28-year-old who lost his job in the kitchen of a Chinese restaurant in São Paulo when the pandemic began. He said he now struggles to provide enough food for his three young children and pregnant wife.

On a 12-month basis, inflation in June is expected to surpass 8 per cent, far above earlier estimates. In the 12 months to March, food prices jumped 18.5 per cent, while the price of agricultural commodities in local currency surged 55 per cent and the cost of fuel increased almost 92 per cent.

Line chart of Percentage increase over past 12 months showing The price of rice in Brazil is soaring

The developments pose a fresh challenge to President Jair Bolsonaro, who is already under fire for his handling of the Covid-19 pandemic. Across Brazil’s biggest cities, graffiti has sprung up labelling the populist leader “Bolsocaro” — a portmanteau of his name and the Portuguese word for expensive.

The rising prices are also likely to provide useful ammunition to leftist former president Luiz Inácio Lula da Silva, who returned to the political fray last month and may challenge Bolsonaro in elections next year.

“Bolsonaro is to blame for the increase in food prices, he is to blame for everything. They have to remove this guy,” said Maria Izabel de Jesus, a retiree from São Paulo.

Armando Castelar, a researcher at the Brazilian Institute of Economics, said the government had underestimated inflation both in terms of the numbers and also “how much a concern it should be”.

He attributed the rising prices to the devaluation of the Brazilian currency, triggered in part by the stimulus packages passed by the US government — which helped to bolster the dollar and led to higher Treasury yields — and the brighter economic outlook outside Latin America.

“You have a situation where commodity prices are going up because the global economy is going to grow a lot this year. With the growth in the US, interest rates are going up and the dollar is strengthening. This puts a lot of pressure on the exchange rate in Brazil and emerging markets in general,” he said.

As the spectre of inflation loomed last month, the Brazilian central bank raised its key interest rate by 75 basis points, higher than the half-percentage point many economists had expected. A further rate rise is expected next month.

“The central bank acted correctly, but it cannot stop there. It is important not to be too lenient in dealing with this,” said Castelar.

Silvia Matos, a co-ordinator at the Brazilian Economy Institute, also pointed to Brazil’s weakening currency as a contributing factor to inflation. But she said the slide in the real was triggered by investor concerns over Brazil’s deteriorating public finances.

Following the creation of two separate stimulus packages to mitigate the impact of Covid-19, government debt has risen to about 90 per cent of gross domestic product, a high level for an emerging market economy.

The rollout of the second of these packages began this month, with 45m Brazilians set to receive $50 a month for four months.

Critics said, however, these stipends were not nearly enough to keep people both fed and at home in lockdown.

“It is essential that the emergency aid is of a greater value, so that people do not leave the house but no one also stays at home starving,” said Marcelo Freixo, a federal lawmaker with the leftwing PSOL party.

“We need to reduce the circulation of the disease. Brazil is already experiencing 4,000 deaths per day. We will reach 500,000 total deaths by the middle of the year.”

Matos says that inflation had hit poorer citizens much harder than middle-class and rich Brazilians because a larger portion of their income was dedicated to food, the price of which has increased substantially.

“The only thing that could help right now is to get out of this pandemic,” she said.

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Can CVC pull off a $20bn ‘deal of the century’ at Toshiba?




Proposed management buyout looks like an improbable win for the Japanese conglomerate’s embattled CEO

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