A new #fintech startup is letting consumers make loans to peers and positioning itself as an alternative to the #payday #loan industry, and there’s something in it for #banks too. Since launching this past April, #SoLo #Funds, a P2P lending platform, has processed nearly $ 200,000 in small-dollar short-term loans. With small loan amounts and a default rate […]
Bank Innovation
Identification is a basic building block of e-commerce, finance, and also a key to help the right #victims after a disaster.
Financial Technology
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.
For a digital #bank, time to market is one of the most important innovation mandates. For Lasha Gurgenidze at Tbilisi, Georgia-based TBC Bank, this mandate combined with low operational costs were the two fundamentals he and his team followed in launching TBC’s digital-first #Space #Neobank. “We started only eights month ago,” Gurgenidze, who is currently […]
Bank Innovation
#Marcus, the #consumer #lending arm for #Goldman Sachs, wants to become the one-stop shop for many of your financial matters, except for one: #credit #cards — at least for now. “Our fundamental thinking on the credit card space is that there is a lot of innovation that is required. It is true that the industry has a […]
Bank Innovation
#Laurel #Road, a #bank that is selling #fintech products and services, has scored a sales win, securing #Country Bank as a client. Laurel Bank Road is hitting on a trend: more small #banks are considering #digital methods for loan underwriting. Larger banks like Bank of America and SunTrust Banks Inc. have recently added digital mortgage #lending, and that same […]
Bank Innovation
Bank of America has Erica, Capital One has Eno, Bank of Montreal has Bolt. Safe to say that most major #banks are at least exploring the possibility of a virtual assistant, if they don’t already have one. And there is more to this virtual assistant than just the cool factor, for banks these #chatbots improve […]
Bank Innovation
Let’s talk about #relevance. It’s a word that is cropping up again and again, and for good reason: personally relevant communications provide a better service experience for customers. But there is a problem, and it cannot be ignored. Put bluntly, there is a huge gap between brand and consumer expectations regarding it. Recent research shows […]
Bank Innovation
It’s no secret #distributed #ledger technologies (DLT) have been front-of-mind for financial institutions examining solutions to existing problems in institutional and retail #banking. While #blockchain #technology is still a greenhorn in the wilderness of capital markets, the underlying concept should be heralded as a catalyst for innovation. Blockchain has been the inspiration for solutions like […]
Bank Innovation
A lot gets published on a daily basis about the seemingly awesome, game-changing possibilities of #blockchain and other distributed ledger technologies (“DLT”) applied to smart contracts, optimising payments systems and other aspects of the financial markets. A growing number of financial entities are seriously investing in it, and we keep reading and hearing that this is the future of financial markets.
The message for financial entities being: get in the game now or risk irrelevance tomorrow.
So what are these distributed ledger technologies all about, and are they all they’re cracked up to be? DLT, in its various flavours, is the #technology behind #Bitcoin and every other #cryptocurrency. The blocks necessary to put together the puzzle to complete a transaction are distributed across a decentralised computer network of users, and DLT’s main selling point is that it’s self-authenticating and very difficult to tamper with.
Around 2016, #banks started to get very excited about DLT because they figured that it could be applied to efficiently and quickly settle payments and securities transactions, and even to develop smart contracts: algorithm-based programmes that use DLT to automatically detect when a party performs its obligations or fails to do so, and trigger payments or penalties accordingly. It’s easy to see why financial entities get so excited about DLT: it can significantly cut down the time required to settle transactions (a process that normally takes two or three days for securities), and automate verification procedures which are currently carried out manually.
Ever since that epiphany, financial entities’ investment in DLT has grown dramatically, whilst the rest of us wait with bated breath in anticipation of a brave new financial world any day now – only that it might not happen just yet.
The fact of the matter is that DLT was developed for the purpose of sustaining cryptocurrencies (and smart contracts, in the case of Ethereum), and it works well in that application. But just because DLT fits the bill for cryptocurrencies, does that mean that it will also do a good job when applied to the financial market infrastructures?
A few days ago, the Dutch Central Bank published a report with its conclusions on a series of blockchain trials conducted over the past three years to assess the actual usefulness of DLT in realistic financial market infrastructures scenarios. These trials are particularly insightful for a number of reasons:
When it comes to financial markets infrastructures, there are strict requirements in terms of authorisation, availability, capacity, costs, efficiency, legal certainty, reliability, scalability, security, sustainability and resilience, and each of them is a deal breaker. Current interbank payment systems, such as Target2 in the Eurosystem, meet all of the above requirements and, in the words of the Dutch Central Bank “are highly efficient, can handle large volumes and offer the legal certainty that a payment is completed.” It follows that any new technology must at the very least tick all boxes, and additionally show distinct advantages, if it is to replace existing systems.
So did DLT live up to the hype? Not quite, it seems. Again, quoting the Dutch Central Bank: “The blockchain solutions we tested proved to be inefficient – in terms of both costs and energy consumption – and unable to handle large numbers of transactions. Furthermore, several consensus algorithms we used will never achieve the full certainty of a transaction, so that it cannot be undone, which the central banks&39; Target2 system offers. Other algorithms are able to withstand parties with malicious intent and have the potential of raising the [financial market infrastructures’] cyber resilience, but they currently fail to meet other [financial market infrastructures] requirements. DLT may well offer enhanced efficiency in payments that involve multiple currencies, however”.
What does this all mean? It means that, though “the blockchain technology underlying bitcoin is interesting and promising, and future algorithms may well offer improved compliance with [financial market infrastructures] requirements” in its current form, DLT does not seem to cut the mustard.
Undeniably, DLT is an exciting technology and, in some form yet to be developed, it might be just the ticket to improve the efficiency of financial settlement systems. Just don’t expect that to happen next week.
[linkedinbadge URL=”https://www.linkedin.com/in/adolfo-pando-molina-5b4a7555″ connections=”off” mode=”icon” liname=”Adolfo Pando-Molina”] Adolfo Pando-Molina is CEO & General Counsel of RegBot®
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