The ways businesses, consumers, and even #banks make #payments are changing, as technologies like realtime payments and APIs make it easier to send money across the globe. But one #technology seems curiously absent from recent payment innovation, and that’s #blockchain. “We think blockchain technology will streamline payments, but in practice there are very few open […]
Bank Innovation
Over the last several years, the payments ecosystem has experienced a surge of new entrants that seek to capitalize on the continued shift to electronic payments. Most are non-traditional financial services #providers (such as fintechs, #payment specialists, consumer product companies and media firms), introducing innovative products and services to enhance existing payment processes, address underserved areas or improve customer experiences. However, many of these entrants have faced challenges implementing solutions in the US due to the need to rely on third-party partnerships to bring their offerings to market.
In the US, card network rules require an entity to be a financial institution and have FDIC insurance to become a principal member and issue general purpose payment #cards. These rules have presented challenges for some payment providers in quickly launching card-based products. The investment and scale needed to be a self-issuer in the US are significant and partnering with traditional financial institutions can add additional infrastructure, regulations, compliance oversight and costs.
In Europe, however, the Financial Conduct Authority has made it #easier for non-traditional financial services providers to self-issue products and services by offering e-money licenses. E-money licenses provide a “bank lite” charter that allows companies to store monetary value electronically; customers can then use their stored electronic funds to make payments without necessarily involving a bank account. In parallel, the payment networks have granted full principal membership to companies holding e-money licenses, enabling them to issue physical cards tied to e-money funds. As a result, several companies have obtained both e-money licenses and principal network membership to eliminate the reliance on third-party partnerships, reduce costs and increase speed to market. Recent examples include FairFX, WEX and Facebook (Figure 1).
While this strategy is relatively recent, the implications are far-reaching. With less regulatory burden and compliance oversight, the barrier to enter the payment ecosystem is significantly lower. Many of the companies exploring e-money #strategies are more agile than traditional financial institutions, and their reliance on partnerships will no longer impede their speed to market.
The creation of e-money licenses coupled with principal network membership may be advantageous for card networks. The model expands the number of network participants and potential payments volume, while providing consumers and businesses with enhanced products and services not offered by legacy players. There are risks associated with expanding the base of market participants, however, and data security is a primary concern. Protecting cardholder data is paramount given the systemic and business risks involved. Traditional financial institutions invest significant resources to maintain necessary information/data security policies and procedures; the security standards for companies with e-money licenses may not always be as robust, as illustrated by some notable public examples.
It’s unclear whether the US will follow Europe and make it easier for non-traditional payment providers to self-issue cards. Fintechs have been eager to obtain bank charters as a means of offering a broader scope of products and services directly to consumers and businesses without reliance on third parties. The U.S. Office of the Controller of the Currency and FDIC continue to evaluate requests but have yet to approve applications.4 However, banking regulators of seven US states have agreed to simplify the way #fintech companies can apply for licenses in a bid to make it easier for businesses to offer their services nationwide.5 Key to all of these trends will be balancing promotion of payments innovation for consumers and businesses with ensuring continued safety and soundness for the payments systems.
1Finextra.com, FairFX gains e-money licence through acquisition of Q Money, 1/20/2017
2Wex Press Release, WEX Virtual Payments Secures E-Money License and Becomes Principal Member of Mastercard in Europe, 8/30/2017
3TechCrunch, Facebook just secured an e-money license in Ireland, paving the way for Messenger payments in Europe, 12/7/2016
4Reuters, U.S. banking regulator not ready for fintech charter applications, 9/13/2017
5The Wall Street Journal, Seven States Team Up on Fintech Licenses, 2/6/2018
The post E-money strategies make it easier for novel payment providers to self-issue cards appeared first on Accenture Banking Blog.
While #fintech has made headway in consumer banking, #commercial applications have remained a little behind the curve. However, #more #professionals in finance are #looking to fintech #providers for technological #innovation, a survey by TD Bank released yesterday found. About a third of the 340 #financial professionals polled, or 31% of respondents, said they were looking […]
Bank Innovation
Image source Aforacare does not present like a tech startup. There is no Crunchbase profile with lists of rounds by VCs. Nor do we read about any of the hot technologies that are like catnip for investors. Yet, if you look at Aforacare with fresh eyes, you may see theRead More
Bank Innovation
Nexright driving #Banking & #Fintech innovation leveraging API Economy
The millennials will soon constitute up to half the global workforce by 2020 and it is only natural for public serving organizations like #banks to pay heed to their concerns. Banking–according to a study by Viacom, a media network–faces the highest risk of disruption.
Leaders of banking managements are often weighed down by the gravity of having to serve their customers, with mass transactions, at the same time, offering personalized content to their banking needs.
Unlike banks that are born digital, traditional banks cannot afford the luxury of starting with a clean slate, and they must build the newfangled architecture on top of the legacy foundation. In an effort to ease down the process of transformation, Nexright bids a continuous-delivery approach of new functionalities.
“We have developed an API management #solution for banks that allows digital innovation running alongside the slow-speed, transaction focused legacy systems,” explains Dilip Mohapatra, Director, Nexright.
Nexright’s solution provides for a digital customer ecosystem with digital customers–complementing and enhancing existing capabilities to collect, analyze, and utilize financial data. The Melbourne, Australia headquartered banking solution provider allows CIOs of banks to redefine banking and drive innovation, leveraging digital data and API as core foundation.
“Application Programming Interface (API) is the secret sauce of the digital economy that allows banks to open up banking services and data via APIs,
and offer a broader range of products and services to their customers,” Mohapatra adds. Holding their steadfast campaigns towards unravelling the concept of contextual banking via data analytics, Nexright channels harmless, but prospective banking information to invoke potential banking businesses through secure pluggable interfaces–APIs.
For instance, a mortgage API holds relevant mortgage data as assets and the points of interest and impact for banks.
Nexright’s banking product, which is essentially a set of simplified service and API models, allows transformation of banks in core banking and
digital banking in parallel. Some of these solutions leverage banking industry standards like IBM IFW (Information FrameWork). Mohapatra cites an example of Nexright assisting one of Australia’s topmost banks in establishing an API center of Excellence to fuel the API economy and drive digital disruption. Through IBM IFW and BIAN, the provider created a modern platform based on open architecture with integration and straight-through processing capabilities.
“Application Programming Interface (API) is the secret sauce of the digital economy that allows banks to open up banking services and data via APIs”
On top of that, Nexright also has a dedicated wealth management practice, providing Fintech (financial #technology) strategy and solutions to banks. For example, it includes client engagement platform and adviser support tools addressing cashflow management, long-term financial support services, and scalable advisory solutions to simplify existing complex advisory process.
“The Fintech strategy essentially allows banks to expand their existing banking products into various fintech areas e.g. financial advisory services into #robo-advisory,” states Mohapatra.
With a consulting team that comprises of both banking and technology domain experts, Nexright stays ahead of peers in the banking arena, by thrusting itself forward in the direction of business strategy and outcomes rather than just getting the technical infrastructure in place.
By entrusting their success on their customer’s success, Mohapatra points out, “Nexright assigns a Customer Program Success Manager (CPSM), which once the program is live, assesses the customer’s achievement against expected levels.”
Nexright’s innovation lab functions as an idea incubator and accelerator, where there is a constant endeavor to develop newer products and better services and solutions, collaborating with customers, partners, and industry experts.
With his rich experience in product development and consulting services across several multinational IT and consulting firms, Mohapatra drives Nexright’s growth globally and is very passionate and committed in making a substantial difference in customer’s business. “Considering banking and Fintech demand for API, integration and cloud services, Nexright is investing further in open banking and Fintech initiatives,” assures Mohapatra.
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