PREMIUM – #Cannabis businesses, even when they are legal, have difficulty securing bank accounts, and therefore often deal in cash. But as regulators across the world consider legalizing this market, it may be time for #banks to take note of this new customer. Most recently, Canada announced plans in October to legalize the sale, production, […]
Bank Innovation
“In any one minute, we’ve more people in our mobile app, than in our entire branch network in a week. The only problem – the average user stays for just 17 #seconds,” said one CIO at a leading European retail bank. This is quite the statement. It highlights perfectly the monumental change in #consumer #behavior […]
Bank Innovation
Major changes are underway in Europe’s payments landscape. In the UK, the Competition & Markets Authority (CMA) has triggered a fundamental reshaping of the UK’s digital financial #industry ecosystem through the #Open #Banking regulation. And in the EU, the #PSD2 (Revised Payment Services Directive) regulations—coming into force on 13 January 2018—require #banks to open their systems to third parties, and provide interfaces for them to initiate payments and retrieve account information.
However, PSD2 leaves open the details of the application programming interfaces (#APIs) that third parties will use to connect with banks. While the CMA has required British banks to set up an independent implementation entity called Open Banking Limited, the European Banking Authority’s (EBA’s) draft Regulatory Technical #Standards (RTS) for PSD2 specifies only technical framework conditions and no interface standard.
As a result, cross-bank or pan-European API standards have yet to be clarified. Creating these standards is #vital: PSD2 aims to develop a unified, innovative, pan-European digital ecosystem for financial products—and uniform interfaces and processes are essential for achieving this goal. So the lack of an implementation entity for the EU is a significant gap.
To help fill it, the Berlin Group—consisting of almost 40 banks, associations and Payment Service Providers (PSPs) from across the EU—has defined a common API standard called “NextGenPSD2” for the use cases specified in PSD2. Initiatives are also being launched in Poland, Slovenia and France. However, given that the standardisation initiatives of the Berlin Group and Open Banking are the most advanced, it makes sense to compare these two frameworks to identify their main differences. Here they are:
USE CASES COVERED: Open Banking supports the use cases &8220;Payment Initiation&8221; (PSD2 article 66) and &8220;Account Information&8221; (PSD2 article 67). The Berlin Group covers all PSD2 use cases by adding &8220;Fund Confirmation&8221; (PSD2 Article 65).
DATA FIELDS: Working with numerous EU banks, the Berlin Group analysed various online banking masks to create a minimum standard set of data fields which all banks must offer via their APIs. In contrast, the Open Banking standard was negotiated only among the CMA9 banks and a UK third-party advisory group, and provides more extensive information, including on balances and available balance types that are particularly relevant to fintechs.
CONSENT MODEL: Open Banking allows the customer to allow specific data clusters for use by third parties – for example, only account balances, deposits or direct debit transactions. This approach is close to the data minimisation requirements in the EU General Data Protection Regulation (GDPR). The Berlin Group provides for consent only for account balances and transaction histories for a certain period.
MESSAGE FORMATS: The Open Banking Standard uses only the JSON (JavaScript Object Notation) format with field names based on ISO 20022, while the Berlin Group offers alternative industry-standard formats. On top of JSON, Berlin Group supports JSON with encapsulated ISO 20022-based pain.00x for payments and camt.05x and MT94x for account information.
AUTHENTICATION: Open Banking supports strong customer authentication (SCA) through the &8220;redirect&8221; approach, while the Berlin Group offers two more approaches: “decoupled” (using a dedicated bank app), and “embedded” (the name of the customer is carried directly through the bank API).
USER EXPERIENCE: In addition to the API specifications, Open Banking standardises the user experience and text modules in the click route, unifying consent issuing, authentication (2FA) and account information/payment authorisation. The Berlin Group allows each bank to devise its own user experience.
TRANSACTION RISK ANALYSIS: The Transaction Risk Analysis defined in the RTS is supplied differently, with Open Banking offering more parameters via the API.
While these are the main differences at this time, the gap may narrow. For example, the Berlin Group is expected to incorporate #fintech requirements in the final version of its proposals, scheduled for publication by the end of 2017. It’s also important to remember that implementing a standard does not automatically make a bank PSD2-compliant, since it still needs to comply with other aspects of the RTS like authentication methods, exemptions from SCA and API testing systems.
The EBA’s RTS is expected to be ratified by the European Parliament at the end of February 2018, after which banks and other PSPs will have 18 months to implement it—including providing APIs. In choosing between the available standards, banks should make their evaluation as early as possible and take strategic and technical aspects into account so they can hit the ground running. Time is short—and having the optimal APIs in place will be critical to success in the PSD2 world.
For additional information, see our report, PSD2: Defining new customer journeys
My thanks to Hakan Eroglu for his research and analysis for this blog.
The post Why PSD2 and Open Banking make it vital to establish industry standards for APIs appeared first on Accenture Banking Blog.
The Faster Payments Task Force received 16 proposals for faster payment solutions using different #technology approaches to increase the speed of payment in the United States. Some of the proposed solutions work similarly to traditional payment systems, while others involve significant changes to the way we think about cash and the roles that #banks play in the payments ecosystem.
Among the less traditional entries were proposals submitted by WingCash and nanoPay, which suggest creating #digital #currencies that would enable consumers to conduct digital transactions without the need for a bank account or payment card. While both involve the introduction of digital currency, one would replace the existing fiat currency for digital payments, while the other would be a digital exchange of value tied to the existing currency.
WingCash proposes creating a digital fiat currency. Under its proposal, the Federal Reserve would own the Faster Payments Network (FPN) and issue Digital Fed Notes, similarly to its issuance of cash notes today. Each Digital Fed Note would be a unique and unchangeable URL with a single monetary value, and it would include the issuer’s URL, the current holder’s URL, a currency code and unique identifier (like a serial number). Payments would be conducted by changing the owner of the URL.
The Faster Payments Network could be used for both in-person payments and remote payments (for example, using “digital cash” to pay for online purchases). The exchange of digital notes would occur without transfer fees, with funds immediately available, similarly to how physical notes are exchanged today.
As with cash notes, Digital Fed Notes would not require a bank account or credit card. One of the advantages WingCash highlights in its proposal is that a digital currency solution could increase access to the electronic payments system, opening the door for users who may have been excluded from the traditional banking system. However, potential barriers to implementation include regulatory changes that would allow the Federal Reserve to issue a digital fiat currency.
nanoPay also proposes a digital currency, but the system of value would operate outside of the Federal Reserve. nanoPay proposes a good-funds, collateralized bearer-asset transfer system in which users would exchange fiat currency (collateral) for nanoPay’s MintChip (asset). The fiat currency would be stored in a pooled account, while the equivalent MintChip amount would be stored in a Secured Asset Store (SAS). Transactions completed in the MintChip ecosystem would be a transfer of value between two SASs using Value Transfer Messages.
In the MintChip model, an Asset Manager would protect the pooled funds of fiat currency and invest the funds in instruments where the principle is guaranteed. Depository institutions would act as brokers that pre-purchase MintChip “coins” and use APIs to provide end users access to the MintChip platform. Regulated non-bank providers and larger retailers could also participate as Brokers.
nanoPay’s proposal does not depend on the Federal Reserve’s willingness to create new monetary policy or serve as the originator of digital currency. As a non-fiat currency, however, nanoPay could face challenges of perceived trust and security, particularly regarding the management of the pooled funds that serve as collateral for the digital currency.
As highlighted in the two proposals, digital currency solutions could increase the speed of payments while decreasing payments system costs and expanding financial inclusion. However, WingCash and nanoPay acknowledge that their proposals could pose a threat to traditional payment card revenue streams. Despite these challenges, central banks in other countries like China, Canada and the Netherlands are exploring digital currencies, and the US may follow suit.
Whether replacing fiat currencies, creating a digital exchange tied to existing currency or another idea yet unknown, payments solutions built on the faster, more efficient digital form will transform payments and banking. #Industry players need to prepare for the pending change and their role in it. To discover more about how other digital currency forms will #disrupt the industry, read our report on The (R)evolution of Money.
The post Digital currencies to disrupt the payments industry appeared first on Accenture Banking Blog.
The #National #Bank of #Australia (NAB) will create 600 new #technology jobs. This announcement comes just a few weeks after the bank said it was cutting 4,000 jobs. The new job additions will help the bank build its #tech presence in order to efficiently #compete with the burgeoning #fintech #industry, NAB said. According to reports, […]
Bank Innovation
Many countries have joined the rush to go cashless by promoting wider adoption of digital #payments and legalizing cryptocurrencies. Still, it’s European countries like #Sweden that continue to be the models for cashless societies. The Riksbank, Sweden’s central bank, predicts that cash transactions will just be a mere 0.5 percent of all transactions by 2020. […]
Bank Innovation
In our constant pursuit of encouraging #industry #innovation, we are always on the lookout for new and inspiring players, and are eager to share our findings with our readers. To do this, #Bank Innovation has launched the #Watchlist. The Watchlist monitors startups from around the world, highlighting those that could transform financial services. Here, you’ll find some of […]
Bank Innovation
Professionals in the financial services #industry are focusing their energy on #regulation and #data #management, according to a survey from consulting firm and #technology services provider Synechron. Financial regulation remains the top concern for the new year among those in the financial industry, with 38% of the firms surveyed markingRead More
Bank Innovation
Patent filings for #blockchain #technology have more than tripled since 2014; this spike includes patents filed by #cryptocurrency exchanges such as Coinbase, payment processors like Mastercard, and #banks like Goldman Sachs and the Bank of America. According to a report conducted by law firm Reed Smith, the most popular areasRead More
Bank Innovation
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