If there is one way to describe Umpqua Bank’s innovation plans it would be “#digital human,” according to the bank’s new CEO, Cort O’Haver. Digital human, as O’Haver explained, is the marriage of digital innovation with the physical retail banking experience. (Coincidentally, it’s also the title of a Chris Skinner book.) O’Haver is not talking […]
Bank Innovation
On March 29, 2017, Britain decided to leave the European Union (EU) and invoked Article 50—following the referendum held on June 23, 2016, in which 51.9 percent of the participating UK electorate voted to leave the EU. Though the UK will officially leave the EU by March 29, 2019, followed by a transition period of 21 months, the exit decision itself triggered exchange rates so volatile that it became difficult for businesses to maintain clear visibility on their international transfers. #Brexit will eventually have an #impact on business, payment service providers, and consumers—but it will largely depend on how the UK’s future trading relationship is going to be with the EU.
In the absence of clarity of the eventual shape of Brexit, certain financial institutions are planning for the “hard” Brexit scenario and making decisions about locations, hiring and #technology changes. From a #payments perspective, #banks are reviewing their solutions across Liquidity (notional pooling, cash concentration), payments (SCT, SDD, high-value payments, FX), cash management services (virtual accounts, receivables management) and Euro-denominated products to continue to operate across borders.
Post the transition period, the UK might also lose direct access to Euro Clearing & Settlement Mechanisms (CSMs) such as TARGET2, EBA EURO1 and EBA STEP2. UK banks may need to build Euro-clearing propositions in Europe to handle affiliates and third party/correspondent bank high-value clearing, which would involve rerouting transactions, indirect memberships via Europe branches, Nostro setups, reviewing charging models, etc.
Non-EU financial institutions will not be able to use their UK branches to pay and collect funds after Brexit takes place, and would need to consider transferring SEPA access sponsorship from the UK to European branches. However, if they remain part of the European Economic Area (EEA) and the European Free Trade Association (EFTA), they can continue to take advantage of SEPA.
Acquiring players may have to move their headquarters to other European markets and take new contracts to operate in the EU. Split of acquiring entities means a significant overhead by splitting scheme submissions across multiple BINs. Card machine providers would need to reclassify their machines as international or inter-regional so that customers and merchants are aware of all the changes while making card payments. The interchange classification of the UK will significantly affect merchant pricing with open questions such as the UK’s registration as part of the EEA post Brexit having significant impact on interchange base costs. Also, unknown regulatory position post Brexit on key issues such as interchange caps and card surcharges.
PSD2 is applicable to UK banks since it came into effect in January 2018. Banks have already spent more than GBP750 million in preparation for the regulation, but once UK has officially left the EU, the UK Open Banking initiative is more likely to replace PSD2 and potentially have limited impact on a practical level.
The UK startup ecosystem massively supported the “Remain” vote as it provides them easy access to the Single Market, which is an important asset for startups’ business development potential. Now, they are quickly adapting to the fast-changing environment—and developing cross-border business is anyway part of the tech entrepreneur’s DNA.
While negotiating exit from the EU, it is important from a payments perspective that there is no detriment for customers or businesses, and that the UK economy continues to operate smoothly. Without any solid evidence on the changes to current legislation, firms need to ensure that compliance and change teams are on the front foot to meet the requirements of the new ecosystem.
The post Brexit impact on payments appeared first on Accenture Banking Blog.
Social payments platform #Venmo is phasing out certain #functionality on its #website, venmo.com, including allowing people to make payments there. Wait, what? “Over time you may see less functionality on the website – this is just the start….venmo.com website may be limited,” Venmo notified some of its customers through email today. The change might seem [&8230;]
Bank Innovation
The EU’s Second Payment Services Directive (#PSD2)—and the #European Banking Authority’s related Regulatory Technical Standards (RTS) on Strong Customer Authentication (SCA) and Secure Open Standards of Communication—represent a turning point for existing business models in #payments in Europe. PSD2 and RTS open up #banks’ systems to third-party payments services providers (TPPs) for account information, payment initiation and confirmation of funds via an access interface such as application programming interfaces (#APIs).
The final RTS published on 13 March 2018 specifies only the technical framework conditions and not interface standards. To help fill this gap, the Berlin Group—consisting of almost 40 banks, associations and PSPs from across the EU—has defined a common API framework called “NextGenPSD2” (current version 1.1) for the use cases specified in PSD2.
Payment initiation opens up: For payment initiation, the NextGenPSD2 framework offers, amongst others, SEPA #Instant Payments (SCTInst) as a payment instrument. The combination of PSD2 and SCTInst has huge potential to disrupt existing business models, depending on the level of API standardization and penetration of SCTinst in the EU.
Impacts on the cards business: TPPs such as merchants, #technology giants and PSPs could use the PSD2 APIs to make instant payments directly from customer accounts to the TPP bank account, bypassing card schemes and fees.
Frictionless instant payments with PSD2: Customer experience is key in payments. Friction and slowness can reduce acceptance of the payment instrument on both the customer and merchant sides, leading to higher cancellation rates in eCommerce checkout processes and longer queues in the store.
But there are issues with SCA—PSD2 APIs require banks to perform SCA on every transaction. This could lead to friction in the user experience at the point of sale (POS) and in eCommerce. PSD2 provides a convenient way to solve the issue of SCA through inherence and biometrics-based SCA methods. As innovation in this area continues, there will be a huge push towards creating RTS-compliant biometrics authentication methods.
TPPs such as tech giants and fintechs are not the only ones that could profit from PSD2 and instant payments—banks could also play an important role. Access to accounts and instant payments become commodity services with low or almost no margin for banks. New revenue opportunities will be in the value-added services and the platform ecosystems around these commodity services. “Going beyond PSD2” will include opportunities to monetize additional data and services combined with instant payments.
Read my complete article at InstaPay for more insights and share your views.
The post Will PSD2 APIs and instant payments change the game in European payments? appeared first on Accenture Banking Blog.
The word “#innovation” get thrown around a lot in banking these days (ah-hem!), but Lara Druyan, managing director, head of innovation, west coast, for the Royal Bank of Canada warned that without metrics, it is easy for innovation efforts to get &8220;squishy.&8221; Druyan described the metrics that helped give structure to innovation efforts. &8220;I don’t …Read More
Bank Innovation
Even the most hidebound, incurious, old-school banker has heard the word “#bitcoin” many times by now, whether from curious customers, well-meaning relatives, or the morning paper (print edition). But bitcoin’s continued association with the unsavory, from drug purchases on the dark web in days past to the seemingly endless string of hacks and breaches today, …Read More
Bank Innovation
As if reports of #Amazon’s #bank hasn’t shaken up the financial industry enough, a new report by Bain & Company shows that the “Bank of Amazon” #could amass more than 70 million customers within the next five years, directly rivaling Wells Fargo bank, which currently has about that number of customers. The reports lead authors …Read More
Bank Innovation
The Securities and Exchange Commission is telling investors to ask their #cryptocurrency platforms 13 #questions to weed out the “”potentially unlawful&8221; ones. In a statement released yesterday, the SEC released 13 questions for investors to ask as a means of identifying crypto trading platforms that could be illegal and thus dangerous to investors. See the …Read More
Bank Innovation
EXCLUSIVE – With a new role at Vice President of #USAA #Labs at USAA #Bank, #fintech veteran #Scarlett #Sieber #joins Bank #Innovation #2018. Bank Innovation 2018 will take place March 5-6 in San Francisco. Meet Sieber at our Innovation Bar, where she will be joined by fellow innovation “bartenders” Ryan Gilbert, General Partner at Propel Venture …Read More
Bank Innovation
It’s almost a truism in banking to say, “We&8217;re really a #technology company,” but few can substantiate the claim. #Green Dot has a good argument for that: it was a technology company that bought a bank. Its banking-as-a-service model reflects that. Chief Revenue Officer Brett Narlinger explains on this #podcast that Green Dot worries less about […]
Bank Innovation
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