2 RevenueCompression Thesecondmajorshort-termimpactofCOVID-19ontheretailandcommercialbanking industrywillberevenuecompressionfrommultiplesources. DecliningNIMs Emergencyinterestratecutstostimulatetheeconomymayleadtonetnewlending,asin the mortgage example above, but will also compress banks’ net interest margin in many markets. Stock market volatility may create a flight to safety to insured deposit accounts, butthepricingonthesedepositsneedstobeaddressedquicklytopreventtheimpactof falling rates from being amplified. Our partners at Nomis have plenty of suggestionsfor tacklingtheshort-termchallengesofdepositpricinginthismarket. PaymentsRevenue Youshouldanticipateashort-termdropinpaymentsrevenuescausedbythecollapse in demand across sectors like retail, entertainment and travel. However, data from China indicatesthatwhiledomesticdemandcertainlyplummeted,alargeshareofexpenditure movedtoe-commerceplatforms,asaresultofwhichdigitalandonlinepaymentvolumes spiked. A key driver of payments revenue is therefore likely to be a mix shift, with those marketsthathaveless-developede-commercesectorsbeinghardesthit. What is clear is that, even though some domestic demand will move online, tourism revenueswillevaporate.ChinesetouristspendinghasexceededthatoftheUSsince2013 andwas$300billionlastyearoutofaglobaltotalof$1.5trillion.Withclosedbordersand littletravel,muchofthisspendwilldisappear;duetolocalrestrictions,onlyasmallportion will reappear as domestic spend. This will certainly impact Chinese payment processors, but all major tourist economies will be affected. The total revenue impact is likely to be in thehundredsofbillionsofdollars,whichatnormalinterchangeratescouldeasilytranslate intoadropinpaymentsrevenueofmorethan$10billionfromtourismalone. 15 COVID-19: Open letter to retail and commercial banking CEOs