Discover Money20/20 Europe 2022 by Fintech Finance

7-9 JUNE 2022, AMSTERDAM

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TIME FOR A NEW MODEL

Banks have the means, but do they have the vision to choose the right business vehicle? We ask Brett King and Mobiquity

SMALL BUSINESS,, BIG PROBLEMS

Why supply chain finance is such a hot issue – and a burning opportunity for Trade Ledger and Barclays

'ELLO,, 'ELLO,, 'ELLO

Struggling to keep on the right side of compliance? These data police can help...

PUSHING THE PAYMENTS ENVELOPE

Vitesse and G+D explore a world of possibilities

BANKING CIRCLE GROUP’S ANDERS LA COUR AND YOULEND’S MIKKEL VELIN ON WHY NOW IS THE TIME FOR EMBEDDED PARTNERSHIPS

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W E L C O M E

f you want to run fast, run alone. If you want to run far, run together. We want to run far. And thus, the stage is set for this year’s Money20/20 Europe. It’s a theme very much reflected among interviews in this special show supplement; the power not just of technology collaborations, but of strategic partnerships that are assigning new roles to key players. We’re in the second stage of transformation now – the shock and awe that accompanied the first wave of challenge to existing institutions’ hegemony is long past. The ‘command and control’ banker is getting used to the idea of ambiguity and fluidity, and the bravest thinkers are reframing the business model altogether. Our cover star, Banking Circle Group, is building a satellite of embedded finance providers around a licensed entity; Finastra believes banking-as-service is the only blueprint for the future; Temenos and Vodeno agree. It’s time to lengthen your stride. EXECUTIVE EDITOR Ali Paterson GENERAL MANAGER Chloe Butler EDITOR Sue Scott ART DIRECTOR Chris Swales

US CORRESPONDENT Jacob Bouer PHOTOGRAPHER Jordan “Dusty” Drew ONLINE EDITORS Eleanor Hazelton Lauren Towner ONLINE TEAM Lewis Johnson-Pitt Elvey Mensah-Afram

One for all Banking Circle Group CEO Anders la Cour believes 2022 will be ‘the year of the ecosystem strategy’ – a strategy that’s seen the Group expand to include a range of complementary providers, including YouLend

Gold BaaS During the first wave of fintech disruption, banks feared they would be condemned to irrelevance. Now, that’s very far from the case, says Finastra’s Angus Ross

Risk & reward In an increasingly unpredictable compliance environment, Trulioo is giving companies confidence and control of their IDV. Hal Lonas says it’s creating new business opportunities

Chain reaction Lack of trade finance for SMEs threatened to bring supply chains to a halt in 2020. Martin McCann from Trade Ledger and Barclays Bank’s James Binns consider how a more collaborative approach could keep them moving in future

Joined-up thinking Edward Vaughan explains how the acquisition of TruNarrative by global risk

HEAD OF CONTENT Douglas Mackenzie CONTENT TEAM Bobby Suman Aniqah Majid Joe Butler PRODUCTION Taylor Griffin Sophia Matambo

SALES TEAM Tom Dickinson Shaun Routledge Nicole Efthymiou VIDEO TEAM Lewis Averillo-Singh Lea Jakobiak Oliver Chapman

SUB EDITORS Frank Tennyson Tracy Fletcher FEATURE WRITERS Tracy Fletcher Martin Heminway Alex King Martin Morris

intelligence firm LexisNexis Risk Solutions, has created a new force to tackle financial crime, but not at the cost of innovation

Jalopy or a beamer? Mobiquity’s Matt Williamson, fintech consultant Ruby Walia and fintech thought leader Brett King discuss how banks might not be the vehicle of choice for future financial transactions, – but they can manifest a shiny new model for themselves

Service with a smile Tom Bentley from platform player Vodeno and Martin Häring of banking technology provider Temenos on how the next megatrend is likely to shape up

Small world, big possibilities Vitesse PSP’s Phillip McGriskin and Mauro Di Buono on why payments drive financial innovation and connectivity

Above and beyond Peter Larsson of Volante Technologies and Kasper Mortensen from Nordea describe how the forward-thinking Nordics are looking beyond P27

Payments pledge Alex Gatiragas describes how G+D is aiming to save the world, one payment at a time

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FintechFinancePresents–

: THE GREAT RE-BUNDLING

Strength in numbers: Banking Circle Group CEO Anders la Cour, left, and YouLend founder and CEO Mikkel Velin

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One for all

Banking Circle Group CEO Anders la Cour believes that 2022 will be ‘the year of the ecosystem strategy’ – a strategy that’s seen the Group expand to include a range of complementary providers, including Mikkel Velin’s embedded finance platform YouLend

In the wake of the 2008 financial crisis, and with the advent of the revised Payments Services Directive (PSD2), fintech businesses focussed on tackling a single part of the value chain, asking ‘what one problem can we fix by doing things differently from how the incumbents have always done it?’. More than a decade later – and following unprecedented COVID-driven digital acceleration – what we’re now seeing is businesses recognising the value of delivering not one, but multiple solutions over a single online platform. By expanding their proposition, fintechs can address several problems for their clients, enabling those clients to better serve their end customers. For fintechs, a multi-solution platform is great for giving their clients ‘customer stickiness’, by addressing the complete lifecycle of financial services that an individual or business might need. However, to achieve that, fintechs need to offer a range of financial services their clients’ customers want – as well as those they may not yet realise they need – without dissipating their brand values or service mission. Re-bundling of financial services achieves this, not only delivering competitive advantage but elevating fintechs’ value as a whole. Recent research from McKinsey found that capital markets are anticipating a ‘great divergence’, in which the gap between the valuations of the banking industry’s leaders and followers widens significantly in the next two to three years. According to its Global Banking Annual Review 2021: The Great europe.money2020.com

Divergence report, fintechs are pivoting their value propositions and staying on the right side of the divergence by either doubling down on key value propositions and core markets, or diversifying and collaborating to build a platform of curated, re-bundled services, generally working with a licensed partner who can deliver the regulated financial products. This is true for players of all sizes – re-bundling financial services, creating platform businesses with a wide range of curated services for growth through services rather than products, enabling them to expand into emerging and untapped industries. And, according to law firm Hogan Lovells, consolidation of financial services will likely increase further in the coming months as businesses seek to deliver a wider range of solutions to an ever-growing customer base. A number of high-profile acquisitions underlines the value that re-bundling is expected to deliver. For example, Visa has made a number of acquisitions in the last 12 months, including Tink, the open banking platform that enables financial institutions, fintechs and merchants to build financial products and services and move money; Earthport to expand its real-time payments network; and CurrencyCloud to provide foreign exchange solutions for cross-border payments. Buy now, pay later giant, Klarna, bought German payments fintech Stocard, enabling it to add the app for bundling multiple bank cards as well as deliver discount deals from a network of merchants. Rapyd acquired Icelandic payments solution company Valitor to extend its in-store and online payments acceptance solutions as well as card issuing for merchants.

All part of the journey Mikkel Velin, Founder and Co-CEO of YouLend explains why re-bundling through the Banking Circle ecosystem makes sense for his clients At YouLend, we enable our clients, such as e-commerce providers, payment service providers (PSPs), tech companies, banks, and other marketplaces, to extend their core service to SMEs by embedding flexible financing options into their existing product suite. This helps the underlying SMEs who have been shown to grow 25-36 per cent more in the six months after they obtain financing. It also creates a ‘stickier’ product experience: SMEs who are offered embedded finance are less than half as likely to switch to other providers. In the Banking Circle ecosystem, YouLend’s solutions greatly complement the payments offering of Banking Circle S.A., allowing our clients to quickly and easily offer their SMEs tailored financial products across several jurisdictions, including all of Europe. Our clients can immediately create value for their SMEs, without having to navigate the usual regulatory and technical hurdles in each individual country.

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: THE GREAT RE-BUNDLING

Central position: Banking Circle holds the ecosystem together with a technology-agnositc account infrastructure

In November 2021, UK-based Paysafe, the leading specialised payments platform, acquired German fintech, viafintech, to add digital banking apps that enable consumers to make deposits or withdraw cash from their digital bank accounts at a nearby retail store using a barcode. 2021 was the year for alternative providers to make their mark, disintermediating the incumbents where slow, complex and expensive processes had been the status quo. Now that culture of collaboration is inspiring and giving birth to a new ecosystem approach to deliver financial services that are fit for purpose for a marketplace that can’t afford for slow or high-cost processes to hold them back.

EVOLVING THE ECOSYSTEM STRATEGY No business that wants to stake a claim in the e-commerce marketplace can afford to allow legacy systems to undermine ambition. As a result, we expect the ecosystem strategy to really come into its own in 2022. Financial services will be re-bundled to deliver full-solution stacks that are not limited to the provision of one

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solution, but a whole suite of them, built in a collaborative ecosystem. And the key is to create a technology-agnostic platform that is the basis of the ecosystem, and underpinned by an account infrastructure from which all services can be delivered. That’s where Banking Circle comes in. As a next-generation financial technology platform for global commerce, we can enable payment companies, banks, global marketplaces and online merchants to accelerate the digitisation of their customer and supply-chain interactions, with modern financial solutions. At the centre of the Banking Circle ecosystem sits licensed bank, Banking Circle S.A., offering cross-border payments, accounts and liquidity management through a global hub for real-time clearing and settlement with direct API access. Launched in 2016 to address the time and cost challenges of B2B cross-border payments, Banking Circle has grown rapidly, committing significant investment to the integration of a vast network of local clearing and payments schemes to build a unique super-correspondent banking network. This allows it to do the ‘heavy lifting’ for its 250-plus clients.

By accessing multiple solutions from a single ecosystem, clients will not only be able to respond more rapidly… gaining a first-to-market position; they’ll also see significant cost savings as well as that all-crucial ‘stickiness’ A rich set of complementary e-commerce solutions surround the bank in the ecosystem, including embedded finance from YouLend, business payments and card issuing with B4BPayments, B2B buy now, pay later services from Biller, and accountto-account payment methods through SEPAexpress. Each innovative, rapid-growth businesses, becoming part of the Banking Circle ecosystem enables them to offer their clients access to the total ‘bundle’ through one interface. The benefits for those clients are considerable. By accessing multiple solutions from a single ecosystem, they will not only be able to respond more rapidly to market opportunities, gaining a ‘first-to-market’ position, but they will see significant cost savings as well as that all-crucial ‘stickiness’. ffnews.com

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: EMBEDDED FINANCE

During the first wave of fintech disruption, banks feared they would be condemned to irrelevance. Now, that’s very far from the case, says Finastra’s Angus Ross. A tidal wave of ever-improving digital technology is constantly transforming the way the world lives, works and plays. Spotting which of these digital horses to back is the challenge. But, as the hurdles get higher and the pace faster, global financial services solutions specialist Finastra is betting on one to make all the running.

to grow by more than 50 per cent annually over the next five years. And, while those with BaaS offerings have, so far, primarily focussed on retail banking services – which will continue to grow, the report said – considerably more, green-field opportunities lie in corporate and SME-specific products. Key takeaways from the report include:

Banking-as-a-service (BaaS) is bringing huge new opportunities to sectors far beyond banking by creating an ecosystem of providers, enablers and distributors. And it’s as an enabler that Finastra plans to lead the field and bring its 8,500 or so banking clients along for the ride. The company recently conducted a study of the BaaS market, expected to be worth $7trillion by 2030, and established the first BaaS ‘maturity index’ to assess where the juiciest opportunities for banks lie. Interviews with 50 senior executives and surveys with a further 1,600 – who could be providers or distributors of such services – showed that 85 per cent are already implementing BaaS solutions, or plan to do so within the next 12-18 months. It also revealed that the main participants in the BaaS ecosystem also want to increase their investments and partnerships as they expect the market

■ Buy now, pay later (BNPL) is poised to be as ubiquitous a service as e-wallets, adopted across every single sector (although with the highest usage among e-commerce and fintechs) over the next three to five years ■ Virtual ledgers will be much in demand among automotive and fintech users ■ There will be increasing demand for trade/supply chain finance from retail, technology, e-commerce and banking ■ There will be high demand for FX services across e-commerce, healthcare, manufacturing and automotive ■ Expect growth in working capital, trade finance and SME lending in the banking, healthcare and retail sectors in particular

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Some of those findings are supported by separate research by accounting giant Deloitte, which also predicts there will be more change in the auto financing

industry in the next decade than in the last 30 years with customers wanting flexible usage packages as the progressive connectivity of vehicles make new pay-as-you-use services possible. Manufacturers have also realised that they can earn more in future from the use of the vehicle over its lifecycle than from the one-off sale of a new car. Healthcare is another area where companies have a distinct opportunity to create viable embedded finance business models, according to Deloitte. Good health is increasingly considered a key component of the employee experience and companies are starting to assess links between the wellness of their workforce and the company’s financial performance. Financial institutions can, therefore, not only be an active participant in the evolving ecosystems but, in some cases, be the lead orchestrator if they are able to act fast and now, Deloitte concludes. That call for banks to speedily join the BaaS revolution is echoed by Angus Ross, Finastra’s chief revenue officer for BaaS. “It’s quite easy to identify what the opportunity and threat [for banks] is from embedded finance,” he says. “As a bank, you’ve got existing customers for whom it may be more relevant to do what they do with you today through a third-party interface or a channel that you don’t own, ffnews.com

in the future. So, existing customers will increasingly engage with those touchpoints. Equally, the new customers that you’re wanting to onboard and attract, don’t come into your points of context or your channels anymore. They’re somewhere else that you don’t own. “So [this trend] is customer-led, it’s not fintech-led. Those customers are influencing where those demand points are, and, to be relevant as a bank, you’ve got to quickly get in front of those touchpoints or those channels.” While that may raise questions around agility, technology and mindset, BaaS isn’t the meteor that’s threatening to wipe banks off the map. Because to enable embedded finance – banking-like services offered by non-banks – you need a regulated licence holder with big capital reserves at the top of the food chain. Since challengers, by and large, don’t have the same capital deposits as the established banks, while big techs, who do have the capital aren’t and don’t want to be regulated, big banks could be said to be at something of an evolutionary advantage when it comes to exploiting this new moneyspinner called BaaS. In a blog last year, McKinsey’s Zac Townsend wrote: “Many banks are concerned that distributing their products through partners threatens their client relationships, but if end users begin adopting embedded finance in significant numbers, banks may have little choice but to launch BaaS business lines. “The good news is that enabling partners to distribute banking products can be a low-margin, high-volume business for banks. Banks often struggle with their cost structures, which are frequently based on legacy technology and enabled through manual processes and operations. To offer BaaS, banks must undergo digital transformations, but many already have.” So, they may well have to revise their business models to stay a) relevant and b) continue to have a relationship with the end customer, if, indeed, they still need that relationship. Ross addresses that head on: “To be relevant in three or five years’ time as a bank, you need to follow your customer, and prioritise your products and services in that point of context. At Finastra, our customers are the banks that are wanting to follow their customers, so how can europe.money2020.com

we, as an enabler, help them do that? Equally – and increasingly – a number of our customers are those endpoints of distribution/consumption of the product. And they want to know how we can help serve their existing customers by embedding financial services that are relevant and valuable for those customers. “If I’m a large retailer, for example, and my customers are saying to me, ‘it’s far more relevant that I do some financial transactions – payments, or lending, or forecasting – within your point of context, and I’m prepared to pay you for that’, then, of course, as a retailer, I’m going to start to think about it. “For Finastra, it’s about brokering that relationship, and, more importantly, bringing fintech partners – whether they’re big tech, fintech, or new tech – to the partnership, so that we jointly solve it.” For Ross, the collaborative imperative of BaaS should skewer the perception that fintechs are hostile predators of incumbent providers. “I lived the fintech disruption hype of the last eight years or so where it was thought fintech was going to completely cannibalise most of the business that the banks dealt with, and that didn’t manifest,” he says.

There are incumbents across all sectors that are very aware of the opportunity, they are hungry for it and for partnering with different organisations that can help them “They [fintechs] took a bit of the clip around payments, they’ve done things around home improvement lending, there are different spots where they’ve encroached on. But, if you look at where we are today, the opportunity is more around partnering with those organisations because I don’t think you can talk about pace and embedded finance adoption based on just the new market entrants. "There are incumbents across all sectors that are very aware of the opportunity, they are very hungry for it, and for partnering with different organisations that help them fill the

gaps, whether that’s commercialising a partnership deal, providing a capability, or providing a channel.” Finastra’s vision, Ross says, is to be ‘the ‘orchestrator of open finance in context’, dynamically connecting its 8,500 or so banking customers to distributors in an open-API-based ecosystem, so they can readily consume banking products, rather than have them sitting on a shelf in a digital BaaS warehouse that no one visits. “The last thing we want to build is a banking-as-a-service marketplace that has all the best and variable products and services in it that no-one consumes, or no-one connects to, whether it’s a fintech, bank or distributor,” says Ross. “Neither do we want to focus solely on getting our existing banks’ products and services into a marketplace without any view as to who’s going to consume them. So, we’re working concurrently with end users for very specific consumption points, and with a select number of our [bank] customers to be the anchor providers for those.” One of its most interesting projects, says Ross, involves a large telco and a large bank looking at machine-to-machine payments and lending. “It’s early days, but machine-to-machine is a whole new world for embedded finance,” says Ross. “If I’m a large freight company, for example, with a chip in different parts of my value chain that tracks when payments get made, based on where a container is, or if I want to pay a unit price for an electronic vehicle charging station – anywhere humans aren’t involved in handing over or asking for money, embedded finance will enable all of it.” The modus operandi for Finastra is ‘about small partnerships, with the intent to go after a business opportunity in discreet or MVP steps – to experiment, to see what works on what scale’. “It’s that approach which, I think, is the secret sauce,” says Ross. His prediction is that most financial transactions will, eventually, occur in channels that banks don’t own. “It may be big enterprise resource planners, accommodation platforms, it may be telcos,” he says. “But the bulk of financial service transactions will happen in those new touchpoints.”

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In an increasing unpredictable compliance environment, Trulioo is giving companies confidence and control of their IDV. It’s creating new business opportunities in an uncertain world, says Hal Lonas Whether you’re a financial institution, big corporate or SME, staying on the right side of compliance when it comes to screening new and existing clients and suppliers is becoming increasingly hazardous, especially if you operate in multiple jurisdictions. It’s not helped that since the sanctions curtain came down on Russia, governments opposed to its invasion of Ukraine have been moving the regulatory pieces at different speeds across the geopolitical board. What looks like a legitimate business relationship one minute could prove a toxic mistake the next. At last count (May), there were, for instance, 148 Russian-linked entities and 1,255 individuals whom the UK government alone had made subject of asset freezes. That included manufacturing companies, research institutes, banks and insurers, among others. Breaching financial sanctions in relation to any one of those carries a maximum prison sentence of seven years or a fine (or both) – not to mention the reputational damage of being publicly excoriated for indirectly supporting ‘Putin’s war’. With the economic thumbscrews

being applied to major international companies and smaller entities alike, banks could perhaps be forgiven for taking a low/no-risk approach to onboarding SMEs, especially as they have historically been more expensive to service, anyway. Hal Lonas, chief technology officer for global identity verification (IDV) platform Trulioo says that needn’t be the case if they let a third-party specialist pipe in the technology that ensures real-time and comprehensive know your customer and know your business verification – in its case, drawing from both structured and unstructured data way beyond the reach of most internal compliance teams. Trulioo’s data comes from 450-plus data sources in around 195 countries, and, thanks to the company’s recent acquisition of HelloFlow, it can now be offered to customers with a no-code tool so they can bespoke how that information is used in-house, further reducing the cost of customer acquisition. HelloFlow’s no-code, drag-and-drop solution for customer onboarding, will dovetail with Trulioo’s existing proprietary tools – GlobalGateway, eIDV, KYB and DocV – to assist in both individual and business ID verification to provide a single, holistic IDV platform aimed at saving financial institutions time, money and, potentially, penalties. So, far from retreating from sections of the business community that might have been seen as too difficult to serve because of KYB limitations, the technology can unlock opportunities, says Lonas.

“More and more, the smallest company looks the same as the biggest company; you need to know where they’re doing business, the problems that they’re solving,” he says. If financial institutions can overcome the onboarding hurdle, then digital enablement will drive the conversion of that business to them. “A lot of financial institutions looked at SMEs before and said ‘do I want to do business with a smaller company? Is it worth the investment to get them on board?’,” says Lonas. “Now, with that particular friction point going away, they can look at SMEs as the new greenspace opportunity. With onboarding costs lower, they can afford to really serve SMEs with a much wider range of solutions.”

A tricky balance: If they can reduce the cost of compliance, banks might look more favourably on SMEs

Risk&reward europe.money2020.com

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: ID&V The Russia-Ukraine conflict has added to the pressure that Trulioo had already seen building on banks following revelations contained in the Panama Papers and, later, the Pandora Papers, which exposed the criminal and tax-evading practices of some of the world’s richest, most famous and powerful individuals. Originally released in 2021, further investigation of the Pandora Papers by the International Consortium of Investigative Journalists, recently revealed that eight executives at five of Russia’s biggest financial institutions – Sberbank, Alfa Bank, VTB, Gazprombank and VEB – had already taken advantage of the opaque nature of the offshore financial system to store their wealth. “Many businesses underestimate the task of ensuring that those they are onboarding aren’t fraudsters, money launderers,

No place to hide: The technology is closing in on beneficial owners

terrorist financiers – or, now, linked to Russia,” observes Lonas. “They think they can do it themselves, then find out it’s much more sophisticated than they thought, in large part due to the shifting nature of the regulations. “Even if they understand it this year, next year it’s a whole new game, as it’s a very rapidly evolving space. With the political landscape these days, and the additional scrutiny on who you’re doing business with, there’s just that much more. “The identity and verification (ID&V) problem gets exponentially more difficult, the broader the geographic area a firm wants to do business in. If they’re confined to one region or country, it’s bad enough. But as soon as they tackle two, three countries, or several regions, it becomes much more complicated because regulations and sources of information change, country-by-country. “They have to become expert at pulling this information from these different

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jurisdictions. And, given the current scrutiny around who the ultimate beneficial owners of businesses are, they must also combine knowing whether a business is legitimate with identifying the people behind it, whether they are legitimate operators and where they are located.” Outlining how HelloFlow can help in this scenario, Lonas says: “Previously, we brought powerful intelligence to our customers, but had to leave them to piece components together and build specific workflows and actions around them. HelloFlow allows us to build very simple to very complex workflows, to automate those checks on businesses and individuals. “We’ve given some early demos because, as an agile development shop, we want to get feedback from customers and prospects so that, by the time of the

writing new code. That’s pretty revolutionary,” says Lonas. The strong pre-release interest that Trulioo has seen in the product would indicate that companies are both increasingly aware of how worldwide developments will impact ID&V, and of the need to ensure that, by outsourcing the data piece, compliance doesn’t distract them from delivering new products and services for customers. “We’ve discovered there are a tonne of use cases, even among the biggest customers for tweaking and fine-tuning their onboarding steps,” says Lonas. “Customers are interested in an automated workflow for things like A/B testing to refine their solutions in terms of forms, order of events, etc. Instead of having to assign a whole development team to take four months to develop that, it might take them an afternoon to get it live. “It’s a question of companies asking ‘where do we want to spend our time as a business?’. When businesses look at how competitive the environment is, do they want to spend developer time and resources to get to market with a product in a couple of months because they’re building something compliance-related? Or would they rather get there sooner by outsourcing it? I think the decision is pretty clear.”

A lot of financial institutions looked at SMEs before and said ‘do I want to do business with a smaller company? Is it worth the investment to get them onboard?‘ Now, they can look on SMEs as the new greenspace opportunity general release, we’ll know we’ve built the right thing and that customers will love it.” The new workflow tool will let companies build bespoke solutions with very little or no code, via a drag-and-drop interface that allows them to choose from data sources using specific criteria. “Once they’ve discovered the individuals behind a business, they can also then conduct an identity verification – again, simply by dragging and dropping that component – and then overlay the whole thing with their risk tolerance, setting up flags or parameters to alert them in certain situations. It will also enable clients to flow that data into other tasks they want to complete downstream, like linking into a CRM system, but without

For Trulioo, too, the added heft of HelloFlow could be a game-changer. “We’ve been very mature in the identity verification (IDV) market for several years now,” says Lonas. “Our GlobalGateway KYB product is in very high demand and improving by leaps and bounds. [But] HelloFlow brings higher-level orchestration to the platform for the first time.” And it comes at just the right moment as regulators react to recent events. However, as Lonas points out, the rules will never be static; the quest for control and visibility never complete. “Banks either have to deal with all this themselves or find trusted partners like us to work with,” says Lonas. “It’s a case of building that bridge to the future.” ffnews.com

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Liquidity oils the wheels: Supply trade finance is essential to SMEs

Lack of trade finance for SMEs threatened to bring supply chains to a halt in 2020. Martin McCann from Trade Ledger and Barclays Bank’s James Binns consider how a more collaborative approach could keep them moving in future “You need to get out of the way of the juggernaut or you’re going to get flattened by it.” That’s how Martin McCann, CEO and founder of lendtech platform Trade Ledger, would suggest banks view the fast-approaching epoch of ‘non-linear banking models’: a collaborative ecosystem of organisations delivering financial and other related services in a variety of circumstances and using multiple digital mechanisms to do it. Follow the silk thread that binds this web together, and it leads back to banking. McCann therefore suggests banks exercise imagination in ‘thinking about what the next three years could look like’. And nowhere is creativity needed more than in re-imagining working capital flows for SMEs. Ponder this: SMEs play a critical role in trade – responsible for between 20 and 40 per cent of exports from OECD countries. And yet, when it comes to affordable trade finance, they face the biggest barriers, with europe.money2020.com

more than half of trade finance requests by SMEs rejected, compared with seven per cent of multinational corporations’, according to the WTO. The prejudices against extending credit to SMEs by less forward-thinking banks – the kind, perhaps, who aren’t actively looking at banking-as-a-service models as a way of correcting this imbalance – has been exposed by recent events. The OECD, reflecting on the experience of SMEs in the international supply chain during 2020, said short-term trade finance in all its forms (intra-firm financing, inter-firm financing, or more dedicated tools such as letters of credit, advance payment guarantees, performance bonds, and export credit insurance or guarantees) was critically hard to come by – but not because the cost to banks of providing that liquidity had increased. Rather, the International Chamber of Commerce reported a retrenchment of bank lending because they simply deemed

this segment ‘high risk’, even when the cash to oil the wheels of trade was never more desperately needed. That forced SMEs to fall back on government agencies to stay in business: the Export-Import Bank of the United States, one of the largest providers of short-term government export support, for example, reported a 112 per cent increase in working capital guarantees and a 12 per cent increase in short-term export credit insurance during 2020. According to an OECD survey, 64 per cent of export credit agencies took measures that year to increase working capital support because private liquidity simply wasn’t forthcoming. So, you can understand why McCann is excited by the prospect of open finance creating what he calls a ‘digital CFO’ for SMEs, which isn't an individual but rather a community of providers that exchange data on an SME and can work together to present the business with financing options that weren’t available to it in the past.

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: TRADE FINANCE “I’ve a concept in mind, where, as a business owner, I can go and run my business, and get the capital I need to make an impact on the world just by letting the ecosystem of partners recommend how my business can be optimised. I trust them and have consented for them to use my data,” says McCann. “I think there are too many people who have a passion for things that they want to do, but, because they’re in creative industries, perhaps, or they’re from backgrounds where they haven’t had access to financial education or capital, they don’t have that on-ramp.” As global head of trade and working capital for Barclays Bank, James Binns deals with a wide range of organisations, from SMEs to the largest international companies. Big supply chains are multilateral, often with thousands of small businesses in the different supply chain tiers. And, as we saw during the pandemic, if there is an impact to funding which restricts the liquidity SMEs need, orders can go unfulfilled, causing wider disruption and empty shelves.

Ultimately, I think the way this is going to go is supply chains will start to compete against each other on the basis of how efficient their funding is from end to end James Binns, Barclays Bank

For Binns, partnering with providers in an open finance network allows banks to keep trade moving by gathering business intelligence on parts of the supply chain that banks have had no transparency on before, thereby reducing their risk exposure while better facilitating trade between those smaller enterprises. “We can also look at different purposes, different types of services that we couldn’t imagine three years ago,” he says. “We’ll be able to offer a more simplified, more focussed solution set and processes, which will enable much faster decision-making.” And that isn’t just within the banks, but also among client businesses themselves, an obvious case in point being how quickly they can approve invoices and make

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payment decisions. Faster decision-making will drive quicker time to money, which will drive down the cost of funding in supply chains and help close the financing gaps within them, says Binns. McCann sees strong signs of change happening. “In our business, we’ve seen a huge increase, across the board, in demand for the solutions we provide,” he says. In September 2020, for instance, Trade Ledger helped ScotPac, Australia and New Zealand’s largest non-bank SME lender, to create a market-leading origination and underwriting experience for business funding. ScotPac is using Trade Ledger’s data-driven lending platform to unlock all types of working capital and business lending products for SMEs, and, according to the two companies, it’s slashed application turnaround time by 90 per cent, which has driven an increase in new business volume of 300 per cent. Data-driven lending takes a lot of the friction out of the process, and creates significantly more automation – a development already being seen with the proliferation of APIs impacting both business and banking systems. It’s not necessarily about adopting bleeding edge technology, though, says McCann. It’s more about connecting existing technology intelligently. “What we're seeing is the adoption of best-practice technologies, patterns, architectures, and use of digital data sources that we’ve seen developed in other industries,” he says. It means moving workloads to the Cloud, making core systems more modular, and having the flexibility to make new use cases. It also means ongoing development of APIs. “Pretty much every banker in the world now knows about APIs, and expects any solution/change they’re driving to be based around the availability or the development of some type of API, and, a Cloud-based architecture,” says McCann. Binns agrees that it’s all about ease of connectivity. “Once you’ve got the connectivity, then you can start adding the different data feeds you need to make decisions,” he says. There’s an irony that, in adding more and more complex data sources – examples in a trade and working capital context being not just invoice and payment data, but also logistics and shipping data associated with the movement of goods and services – the

trade finance process is simplified, giving a better picture of how funding can be earmarked for working capital cycles of supply chains. “When you start to optimise the working capital cycle at a supply chain level, you can really drive significant benefits in terms of the cost of delivering product to end users, because every product requires funding and financing, which is part of the cost of that product,” says Binns. “Ultimately, I think the way this is going to go is supply chains will start to compete against each other on the basis of how efficient their funding is, from end to end, because that will become a substantial cost driver of that funding, particularly if we move back to a higher interest rate environment.”

This is the only way we’re going to solve the significant supply and demand gap at the smaller end of the market Martin McCann, Trade Ledger

Self-evidently, all this means greater ecosystem collaboration. “In my view," says McCann, “this is the only way we’re going to solve the significant supply and demand gap at the smaller end of the market.” Banks shouldn’t feel threatened by that, says Binns. Rather, it’s an opportunity. “A large buyer may have 6,000 different suppliers. There’s absolutely no way that one supply chain finance solution fits all of those; it’s probably going to be six or seven solutions. In future, they could all, potentially, be delivered through a single platform by multiple providers. When you think about the access that gives suppliers, in terms of more efficient, more consistent, quicker funding, that’s really powerful.” As Binns says ‘we'll end up with a far more open technology structure, far more connectable’, the bank taking its place among a host of different players, adding value for each other and for the end user’. “For me, banks only have two choices at this point; disrupt or be disrupted,” says McCann. “And we’re already seeing banks who are making brave choices, ahead of the tsunami that’s coming at us.” ffnews.com

: IDENTITY & VERIFICATION Challenger banks have changed the face of financial services over the past decade – renowned for their unencumbered ability to run with innovation while their incumbent counterparts have been weighed down by legacy systems and assiduous observance of risk and compliance requirements. It was, perhaps, inevitable, though, that the former would trip up. And several have done exactly that. The Financial Crime Controls At Challenger Banks report, issued by the UK’s Financial Conduct Authority (FCA) in April, gave neobanks a stern resume of what they must now do to

bring themselves in line, although it refused to single out challengers by name. The findings largely centre on the inefficiency of transaction monitoring and due diligence – increasingly hot topics in the burgeoning digital transaction space where the challengers have helped drive the dramatic shift to ‘frictionless’ online payments. It’s not all bad news, according to Edward Vaughan, head of banking for specialist data analysis regtech TruNarrative. And that’s principally because, by their nature, challenger banks are nimble enough to embed the changes they’ve been told to make, and

Joined-up thinking

still maintain their impressive stride. The report’s specific findings included the fact some challengers were not consistently applying enhanced due diligence (EDD) for assessing the risks posed by customers at onboarding and throughout the transaction life cycle, or documenting it as a formal procedure to apply in higher risk circumstances, such as managing politically exposed persons (PEPs). The FCA also discovered instances of ineffective transaction monitoring alert management – for example, using inconsistent or inadequate rationales for discounting alerts – as well as a

The acquisition of TruNarrative by global risk intelligence firm LexisNexis Risk Solutions has created a new force to help ensure tackling financial crime doesn’t come at the expense of payments innovation, says Edward Vaughan

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substantial increase in the volume of suspicious activity reports (SARs) logged by challenger banks as they exited customer relationships for financial crime reasons. This again called into question the adequacy of their customer and enhanced due diligence checks when onboarding and managing the ongoing risk of their customers, the FCA said. Crucially, some of the challengers’ financial crime change programmes were not overseen adequately, nor were they able to keep pace with their fast-moving business models. The report’s authors concluded that ‘more needs to be done by the challenger banks sector as a whole in light of the areas of improvement we identified. The weaknesses… create an environment for more significant risks of financial crime to occur both when customers are onboarded and throughout the customer lifecycle’. The current sanctions regime against Russia is only increasing the focus on transaction security, including know your customer (KYC), know your business (KYB) and anti-money laundering (AML) checks. “The findings were not particularly surprising,” says Vaughan. “The issue of applying EDD, in particular, serves as a good reminder to banks that swift onboarding and ongoing monitoring shouldn’t come at the expense of robust risk assessment, and it doesn’t have to. Like the FCA, we encourage challenger banks to review and enhance their firm’s financial crime frameworks with a focus on ensuring customer risk assessments and EDD measures adapt to the heightened risk of sanctions evasion, in particular. Applying a risk-based approach to AML controls and continuously making sure financial crime controls remain fit for purpose should be a top priority for all banks.” Sophisticated tools developed by the newly-merged companies, like their new LexisNexis® RiskNarrative™ platform, can help firms get their systems up-to-speed in a relatively painless way, with its plug-and-play ability to quickly update data sources, as well as changing rules as a result of a development in risk appetite or regulation changes. On the plus side, the FCA report did find evidence of good practice, in terms of innovative use of tech, indicating that ‘firms don’t need to sacrifice speed for

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assurance’ and can actually harness the things they already do best to overcome the regulatory hurdles. “The challengers have been incredibly important, over the past 10 years, in changing the ecosystem of financial services and how products and services are now delivered through digital channels and in real time to customers,” says Vaughan. “They have fundamentally altered the landscape and challenged the status quo of the traditional banks. “And, while the FCA has found weaknesses in some challenger banks’ financial crime controls, it’s my belief and experience that the same challenges extend across traditional banks, too. “The advantage the challenger banks have is that, following these findings, they are probably better positioned to pivot and start using platform technology like ours, which will help overcome them, because they’re more agile in adapting to change. So, it could it be easier for them to close these gaps and weaknesses than it is for traditional banks that move at a far slower pace due to having far more governance and control processes.

Applying a risk-based approach to AML controls and continuously making sure financial crime controls remain fit for purpose should be a top priority for all banks going forward in 2022 “For example, we can help them dynamically risk assess their customers, from a transactional monitoring perspective, and instigate things like behavioural profiling and standard deviations across peer groups, to reduce inefficient processes and improve the management of false positives around transactional monitoring alerts.” He continues: “And this is where we see the opportunity for challenger banks, in particular, when they’re looking at remediation plans for these weaknesses. In some cases, they’ve built their own controls around preventing and detecting financial crime, which are very resource intensive

and, because they don’t always get it right, that’s leading to some of these findings. “They need to concentrate on disrupting and delivering fantastic services, while back-end compliance and financial crime management is best served by complementary technology platforms like ours.”

STRENGTH IN NUMBERS It was recognising this need and opportunity that led UK-based fraud prevention solutions provider LexisNexis Risk Solutions to acquire TruNarrative last August, and add the fintech’s Cloud-based data orchestration for detecting and preventing financial crime to its suite of services. Now integrated into LexisNexis Risk Solutions’ Business Services offering, at the time of the acquisition the bigger player said this would enable it to help a variety of businesses select ready-made financial crime prevention components. TruNarrative enables organisations to manage the entire financial crime life cycle within a unified platform that allows for automated onboarding, dynamic riskscoring, real-time financial crime decisioning and transaction monitoring; all with no-code configuration and rapid integration through a single API for holistic oversight of customer risk. This complements LexisNexis Risk Solutions’ existing financial crime management offering, which helps companies keep pace with regulation, achieve compliance and mitigate their risk of fines and reputational damage with its fraud and identity authentication solutions. The new alliance marks the latest step in its strategy of expanding data sets for global financial crime compliance, coupled with technology to ‘transform the ways in which financial crime compliance is achieved’. It follows its merger, in 2021, with transaction compliance software specialist Accuity, and the three combined now represent one of the largest worldwide providers of risk and compliance solutions. Among them, LexisNexis Risk Solutions’ new Financial Crime Digital Intelligence solution, enabling compliance teams to keep pace with, and mitigate, escalating sanctions risks associated with, accelerated digital transaction adoption.

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: IDENTITY & VERIFICATION The combined portfolio has applications across insurance, financial services, healthcare and government, and, according to Vaughan, it now means compliance needn’t hamper the innovations challengers seek to bring to user experience, nor impede a quick and easy application process, followed by fast and convenient access to products and services without compromising on security and protection. The RiskNarrative™ solution, for example, offers a dynamic risk rating as part of an underlying, integrated, risk management workflow, allowing firms to assess risk at every stage of the customer journey. Changes to the risk rating are triggered by customer actions, with authentication stepped up only where required. So, with fewer false positives, genuine customers get the user journey they deserve and are protected every step of the way. From the provider’s point of view, it brings all areas of risk together in one workflow – including onboarding, ongoing screening and transaction monitoring – instead of myriad technology siloes, and without the need to individually interrogate different tools and amalgamate results across identity, fraud and compliance. It is adaptable too. “The market isn’t static and neither is an organisation,” says Vaughan. “They need a dynamic risk framework that can grow with them and adapt quickly to changes in business model, risk policy and regulation, as well as adapting to shifting criminal methodologies. They also need to be able to rapidly integrate the very latest tools and capabilities, to manage risk most effectively and meet their evolving business needs – a risk framework that is fit for purpose today and scalable and adaptable for the future.” The RiskNarrative platform is also solution-agnostic, he explains, combining TruNarrative/LexisNexis Risk Solutions’ own data sources with those of third parties.

FAST-PACED FINANCIAL CRIME Russian sanctions and recent exposés, such as the Pandora and Panama Papers, have highlighted the urgency of KYB and KYC checks on ultimate beneficial owners of assets to prevent criminal activity and tax avoidance. But Merchant Savvy, in 2020, estimated the global size of financial crime losses at $32.39billion, triple that of 2011. So, what other trends are TruNarrative and LexisNexis Risk Solutions witnessing?

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“Fraud for financial gain and impersonation fraud were always the predominant types we saw within the industry,” says Vaughan. “What we’ve seen emerge more recently, is more advanced ways of committing financial crime, things involving authorised push payments (APPs), which in many ways is an unintended consequence of trying to make the payments process as seamless as possible for customers. These often involve phishing, where someone might impersonate someone else, like a family member or their bank, and persuade them to authorise a payment using their own credentials, and it is very difficult to detect.”

STAYING IN CONTROL These crimes are often vanguards for ones with more sinister intent, says Vaughan. “When we talk about financial crime prevention at LexisNexis Risk Solutions, we see fraud as a predicate offence to money laundering and the most serious types of financial crime. So, the ability of organisations, be they challenger banks or established banks, but more so those digital players, to detect that fraud, doesn't just rely upon one thing.

The challengers have fundamentally altered the landscape and challenged the status quo of the traditional banks, and they have been extremely successful in doing that “We talk about the control environment, the strategy for detecting fraud that enables an organisation to look at multiple different vectors around how its customers are interacting in that digital channel. As well as looking at the type, time of day and value of a payment, and where it’s going, a range of different vectors, applied together, can identify something that’s out of the ordinary or abnormal.” And having the sophisticated data and systems to sift out the normal from the abnormal, is paramount, to avoid wasted time for banks and unnecessary interruptions for customers. “It’s important to understand what’s

normal, because there’s a far larger population of normal things occurring. Then abnormal alerts target the outliers. But customer behaviour changes and, therefore, all the capability that sits within the technology, such as transactional monitoring, needs to be able to learn too. “What we’ve also seen is a huge rise in money mules – individuals who could themselves be vulnerable and are being exploited to launder funds through their account for a third party, using a range of financial instruments, from cash and traditional fiat currencies, to financial instruments like Bitcoin.” The challenge for banks in identifying mules is that they don’t always pop up on the radar, applying for a new account. Often, they are existing customers. “The FCA findings could suggest challenger banks are more susceptible to mules, because of the way they deliver their services,” says Vaughan. “This means their control environments need to be far more digitally focussed and consider a range of factors in risk assessing their customers. This is where transactional and behaviour monitoring becomes really important – the ability to look at the patterns of behaviour of a customer who sits in a certain segment or peer group, against others in that same group. “It’s also about asking customers the right questions and validating what they’re saying by monitoring their behaviour against what they have disclosed. For example, thinking about mules, if someone says they work in a factory earning £15,000 per year, but their transactional volume far exceeds that, risk profiling against the segment in which they sit will show that they represent a complete exception. “Those types of more sophisticated transactional monitoring capabilities are necessary to deliver the best chance of the right outcomes, because traditional transaction monitoring just exists on binary rules, and leads to huge amounts of false positives. “It’s got to get more and more sophisticated to keep up with this challenge and enable straight-through processing by eradicating those false positives.” “There is no one silver bullet to solve this problem,” adds Vaughan, “but technology and systems like ours, which create the right control environment, can greatly assist organisations in preventing financial crime.” ffnews.com

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Banks might not be the vehicle of choice for future financial transactions, but they can manifest a shiny new model for themselves Avid readers of letters from bank CEOs to their shareholders will have noticed a significant shift in their content in recent years. The financial jargon and traditional banking performance metrics have been largely consigned to the margins, replaced by the kind of language you’d usually associate with Hacker Way, not Wall Street. Such is the growing primacy of technology in banking that Jamie Dimon, CEO of JP Morgan Chase, admitted in his April 2022 letter that ‘decentralised finance and blockchain are real’. That’s quite the U-turn from the man who previously stated that he’d fire any employee ‘stupid’ enough to trade in cryptocurrencies. Dimon’s far from the only big-bank CEO to be working his way through a large helping of humble pie. Yet his is a telling admission. DeFi and blockchain – as well as tokens, e-wallets and the metaverse – all herald the next generation of banking services. And it’s one

that poses a whole new threat – or opportunity, depending on your mindset – to traditional banks. Contextual finance, as it’s increasingly being labelled, will see embedded finance supplemented by the granular behavioural data we’d normally associate with the likes of Google and Facebook. The result, as futurist and renowned fintech thought leader Brett King explains, will be something quite different from anything banks have traditionally offered to their customers. “In the future, instead of selling a mortgage, you’ll be supporting a ‘home-buying experience’. If you walk into a grocery store, your smart wallet will tell you ‘hey, you don’t have enough cash to buy your groceries today’, and give you options of how to [deal with] that.” Clearly, that would rely on a platform that tracks geolocation and behavioural data. That’s not data banks currently collect. And mobile wallets, which King notes overtook plastic cards in terms of day-to-day payments back in 2017, are delivered by tech intermediaries Apple and Android, not the likes of Citibank and HSBC. Crucially, it looks unlikely that bank brands will be front and centre of contextual finance services. Often

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maligned for moving too slowly, it’s a frequent refrain that incumbent banks will soon be sidelined by tech giants, fintechs, and the all-in-one apps they’re set to build. Ruby Walia, formerly HSBC’s head of digital banking in North America and now a digital technology advisor to Mobiquity, believes that’s possible. “Banks have always prided themselves on the trust their customers have in them,” he explains. “But with contextual finance, banks might actually be relegated to becoming more of a background player, while other organisations become more prominent in customers’ minds. Over time, that familiarity morphs into trust. It’s an amazingly important phenomenon. I think leading banks recognise that, and are trying to step up their digital game.” King agrees. “That’s exactly what happened in the Chinese market with Alipay and WeChat Pay,” he says. “The utility of those mobile wallets led to a shift in trust, where those organisations were more trusted than the traditional banks, because the utility factor was so high.” Trust is a major asset for traditional banks, which consistently rank as the most trusted institutions in surveys.

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: EMBEDDED FINANCE That trust is built on their regulatory alignment, centuries of experience and their healthy aversion to risk. Unfortunately, the rise of contextual finance calls for banks to conduct risky experiments outside of traditional regulatory red lines. Meanwhile, they’re losing market share (although not as quickly as some predicted) to challengers, which are far more comfortable conducting such experiments. “The fastest-growing financial institutions in the world are all digital,” points out King. “If you look at the UK market now, about 38 per cent of salaries are paid into challenger bank accounts. We have a number of fintech banks that are now the largest banks in their respective markets, or on track for that. Nubank is the largest bank in Latin America, with a $50billion market cap. You’ve got WeBank, in China, with 240 million customers. There’s Rakuten in Japan, and N26, which just overtook Commerzbank in Germany as the second largest bank in the market.”

Fintechs and tech giants will start to compete with embedded finance offers. All of the emphasis they’ll be bringing to the table will be things that aren’t related to bank products and services Brett King, Author and Fintech Thought Leader

While incumbents have fought back admirably to keep pace with the challengers, the rise of the metaverse looks to be yet another phenomenon that could siphon customers towards alternative, future-facing financial institutions. “If you think about what’s happened with fintech, that’s going to replicate itself with a whole bunch of new businesses that will start in the metaverse around digital, decentralised finance,” predicts King. Matthew Williamson, VP of global financial services at digital transformation experts Mobiquity, is sceptical about banks’ engagement with the metaverse to date. “If you look at JP Morgan, they’ve recently announced their metaverse

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entrance with the Onyx Lounge, launching in Decentraland. They even have a head of crypto and the metaverse now. But the question is: what are they actually going to do with this? Are they going to partner with those that are investing heavily in Web 3.0 – and will all of this make a difference to the consumer’s desires and experiences?” In essence, do banks even know where they should spend the billions they’ve earmarked for digital innovation? Do they understand how consumer behaviour is set to change? With the challenger sharks circling, gestures of innovative intent may simply be made to placate shareholders anxious about the buoyancy of their assets. “Big bank statements often say ‘we’re worried, we’re concerned, let’s just throw some really big, interesting numbers out there, that appear to demonstrate we’re taking this really seriously and we’re on top of it’, when, actually, it’s not necessarily the case,” confirms Williamson. Add to that the reluctance of banks to be found to have financed a failure. “Remember, a challenger will build something, knowing it may only last for two years,” explains Williamson. “It’ll spend $10million, then throw it out the window and probably spend $100million to get to the next level. You take that thought process into a bank and they’ll say ‘what do you mean you’re going to spend $10million on something that’s obsolete in two years?’. So, unless we see a change in digital thought leadership, internally in the banks, they are going to struggle.” So, banks have a cultural issue to overcome. But they also have a technological one, with mobile wallets set to become fundamental for our future financial lives, inside and outside of the metaverse. “The wallet is an interesting focus point,” says Walia. “If you look at who is investing in wallets right now, it’s the platform players like Apple and Android. Apple’s done so much with its wallet – you can store not just credit and debit cards, but, in the US, I can store my health insurance card and my driver’s licence. I can add loyalty cards, tickets to events, even train and plane tickets. It’s developing an ecosystem around the wallet and doing much more to make it central to people’s lives than any of the banks are in a position to do, frankly.” So, wallets are another field of battle upon which non-bank institutions enjoy a significant advantage.

“I refer to this period as the smart wallet wars, or the smart bank account wars,” says King. “Fintechs and tech giants will start to compete with embedded finance offers. All of the emphasis will be things that aren’t related to bank products and services. It’s more about managing your financial health and wellness, giving you access to credit when and where you need it, and helping you achieve what you want to in life.” King.

Unless we see a change in digital thought leadership, internally in the banks, they are going to struggle Matt Williamson, Mobiquity

“That’s the big bet that the big techs are taking,” adds Williamson, “that society is going to shift and evolve in this direction.” He’s of the belief that banks need to reimagine and reinvent themselves entirely if they’re to thrive in an increasingly virtual world of contextual finance. “Banking has an opportunity to reframe itself, and I’m going to use the example of Tesla,” he explains. “Most people say Tesla is an electric car company. Actually, it’s not. It’s a transport company – that’s how it sees itself. It just so happens that the thing it currently transports is people. In the future there will be extra vehicles, autonomous trucks, and it’ll move on, and on.” Banks, according to Williamson, must similarly start expanding their remit. If they stick to banking alone, they’ll be swamped by competitors which are geared up to provide so much more. By imagining themselves instead as lifestyle-enabling companies, they’ll stand a chance of seizing new opportunities presented by the metaverse and contextual banking. In his letter to shareholders, JP Morgan’s CEO asked them to return to one key question: “Do we have real wins against some tough competitors, both in the banking world and in fintech companies?” That might be dictated by choosing the right moment to jump into the contextual banking fast car. Too soon and banks will risk costly failures; too late and they’ll be left like old jalopies in the dust. A bank branch in the metaverse is a start, but Williamson, King and Walia believe it’s not nearly radical enough. ffnews.com

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An Uber driver wishes his fare goodnight, taps his smartphone, and finds first gear. Before he’s up to second, his app has passed his latest fee into a back-end bristling with financial plug-ins. By the time he’s cruising in fifth, his tax dues are recalculated, his monthly earnings forecast is adjusted, and the cash he’s setting aside for his children has found its way into his savings account. Across town, a weary video editor presses send on a project, closes her laptop, and picks up her smartphone. It’s already shining with a notification: her invoice, automatically generated, has been sent. She scrolls down to see which bar her friends are at. Another ping: her work platform is running a discount with a popular ride-hailing firm. She’ll just need to pay using the platform’s in-house current account – which is perfect, because that’s where part of her day’s payment will shortly be split between pots labelled ‘savings’ and ‘nights out’. Digital innovation is often presented to us in terms of a future full of seamless experiences such as these. But with the rise of so-called ‘embedded banking’, we might finally be on the cusp of finding out what that world will look like. It’s the next generation of banking – the new revolution in the fintech space.

The R-word was once a source of much hand-wringing for incumbent banks, who have spent a decade outmanoeuvred and outpaced by an emergent fintech vanguard. But this revolution’s different. Coalescing around the term banking-as-a-service (BaaS), it’s a trend that takes the best of the new fintech ecosystem, and fuses it with the one quality that has sustained the traditional bank up until now: their banking licence, and all the regulation and trust imbued with it.

We’re only just starting to dip our toe into the water of what this [BaaS] world could look like Tom Bentley, Vodeno

This exciting financial fusion is exemplified by Vodeno, the cutting-edge, Cloud-native BaaS provider. Via a partnership with Aion Bank, which has a banking licence spanning the EU, Vodeno’s banking and non-banking customers not only have access to the usual array of retail and business banking solutions – they can also plug in to sophisticated, regulated banking services. It’s via brand partnerships with firms like Vodeno that our taxi driver and video editor will soon be able to access essential

banking services through the platforms and brands they love – without ever touching an established bank. That doesn’t mean banks are set to fade into irrelevancy. On the contrary, banks reap the benefits of cheap access to many more customers. Research from the VC firm Andreessen ‘software is eating the world’ Horowitz has already found that early adopter banks enjoy up to three times above-market return on equity after embracing BaaS. “We’re only just starting to dip our toe into the water of what this world could look like,” explains Vodeno’s CCO, Tom Bentley. Martin Häring, chief marketing officer at composable banking provider Temenos, agrees we’re approaching an inflection point in a game-changing model. “I think BaaS is the mega-trend in the next decade to come,” he says, citing some gigantic figures. “Cornerstone estimates $25billion in annual revenue by 2026; Bain is even going further, at $3.6trillion by 2030.” Finastra recently estimated a $7trillion market by 2030, and, while the variance in valuations suggests a trend in its undefined infancy, it’s clear that institutions across the board ought to sit up and take notice. But first, what exactly sets banking-as-a-service apart?

Service with a smile Tom Bentley from platform player Vodeno and Martin Häring of banking technology provider Temenos on how the next megatrend in banking is likely to shape up

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: THE NEXT REVOLUTION? “I think there’s a load of misinformation out there around banking-as-a-service, embedded finance – all these industry buzzwords,” says Bentley. “For Vodeno, which has a fully regulated banking licence as part of our unique makeup, it’s about providing what’s traditionally been only available through very large banking entities, through agency banking.” Häring explains what that’s going to look like. “I compare BaaS to a utility model. When you plug your laptop into a socket, you don’t care where the energy is coming from. When you switch on your phone, you don’t care which carrier you’re served by. Using any kind of banking services in the future won’t be dependent on banks anymore. You just want them integrated into your daily workflow – made invisible.”

that we offer. On the other side, you have smaller banks, credit unions, community banks, tier three, tier four banks. They want to build the full bank out of Lego bricks, and they want to ramp that up in a matter of weeks.” Bentley completely agrees. “It’s all about speed,” he says. “People want to rapidly adopt services. They know there are hard yards when it comes to getting a banking licence, so BaaS is the perfect solution for them. And then, of course, you have the non-banks,” continues Häring. “They are just integrating all of these services – with a regulated entity that they can use in the background. Because of that, BaaS is moving into e-commerce, retail, telco, travel – wherever, at a certain point,

with work opportunities. With Vodeno’s help, Talenthouse launched its own money management platform in January, called ElloU. It currently offers fairly rudimentary payment services – a current account and a card – but with Aion’s banking licence squatting in the background, there’s no limit, in theory, to the list of financial and related products that ElloU could add. “When you look at super-apps like WeChat, they take care of a person’s life – that’s their purpose,” says Häring. “And that’s how banks should think in the future: how can I take care of my customer’s whole life, from the morning when they wake up, through to the evening?” The kind of product bundling needed to answer that will suit banks who’ve already

COMPOSABLE SOLUTIONS For years, Temenos has been helping players in the financial sector invisibly integrate with one another to compose new features and product lines. Through a Cloud-native, API-first platform, Temenos connects its marketplace of more than 100 fintechs with the world’s leading financial institutions. The firm’s client list is comprehensively spread: Temenos works with 41 of the world’s top 50 banks, and 3,000 banks overall in 150 countries. And as of September last year, Temenos enjoys a banking service is a strategic partnership needed, whether with Vodeno, and by that’s onboarding, extension Aion Bank, origination, party which is aimed at rolling management, loans, out BaaS across Europe. or payments.” So Temenos is now So, banks get bringing its unmatched access to more ‘composable banking’ customers, fintechs architecture – represented finally have a means on its website by to play in regulated thousands of Lego bricks banking spaces, and – to the BaaS space. brands from Uber to Martin Häring, Temenos The Lego analogy helps Adidas can provide us understand the implications of BaaS for their communities with a far wider range of institutions large and small. financial services. “Large, tier one banks don’t want to “I think what’s really interesting is the replace any core functionality – they want creativity that those brands are going to to attach new functionality, or they want bring,” adds Bentley. “I think we’re really to leverage a functionality from someone about to test the boundaries of what those else,” explains Häring. “They connect to financial products can look like.” BaaS services, through APIs, opening up A case in point is a recent project their monolithic software and attaching between Vodeno and Talenthouse, a whatever they want from the Lego bricks platform that connects creative freelancers

When you look at super-apps like WeChat, they take care of a person’s life – that’s their purpose. That’s how banks should think in the future: how can I take care of my customer from when they wake up, through to the evening?

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A seamless experience: From dawn… ’til dusk

unpicked their monolithic software to usher in partnered fintechs, which Häring sees as inevitable as banks move towards a platform-based model. “Banks are thinking about their future business model,” he says. “Do they want to be an aggregator? Do they want to be a platform provider? Do they want to work with specialised BaaS providers? “All of these business models have one thing in common: they’re platform-based. I think that trend is not reversible. BaaS is the dominant banking model, going forward. But you’ve got to be ready, from a technology point of view,” adds Bentley. “The clock is ticking.” BaaS is generating a new wave of creativity that’s set to ride over the financial industry. But, unlike the rise of the fintechs, which seemed to shut out incumbents, this one carries them with it: a win for ambitious neobanks, a win for larger banks seeking new customers, and a win for our Uber driver as he connects to his next fare. ffnews.com

: PAYMENTS

Small world,

BIG possibilities Payments are driving never-before-seen levels of global innovation and connectivity, say Vitesse PSP’s Phillip McGriskin and Mauro Di Buono The global insurance market stands at a pivotal point as digitisation hurtles an industry dating back 600-plus years into previously uncharted waters. Opportunities abound as financial technology specialists use the building blocks of open banking regulations to offer their insurance company clients new solutions such as embedded finance products and real-time parametric cover. But, underpinning all of this, is the need for ease of payments – the very ethos of London-based Vitesse PSP, the global payments, liquidity and treasury management platform that is at the vanguard of the charge to change. Vitesse was founded in 2014 by Phillip McGriskin and Paul Townsend, who had previously co-founded collection payments provider Envoy Services which, itself, was snapped up by payments giant Worldpay in 2011. Since then, Vitesse has amassed some impressive statistics. Operating in 172 countries or territories, it annually processes payments totalling £5billion. As well as counting many established blue-chip insurers among its

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clients, it provides its services – which include payroll solutions – to over 70 per cent of companies in the London market. And, in February, the fintech announced that it had secured $26million in Series B funding to support and accelerate its growth in Europe and the US, as part of its vision of becoming the payment partner of choice for the insurance industry. The size of that prize is vividly demonstrated by the fact that, globally, more than $4trillion of claims are settled annually. Announcing the Series B funding, which was led by venture capital firm Prime Ventures, supported by Octopus Ventures and Hannover Digital Investors, Vitesse CEO McGrisken said: “The sector is only now adapting to more digitised ways of working, demonstrating an opportunity for Vitesse to support those looking for more integrated and efficient ways of managing liquidity while simultaneously achieving greater capital efficiency. “In just over a year, we have increased the payments value processed by over 100 per cent and the client funds under management by 127 per cent, secured several significant new contracts and now,

with the support of our new backers, we have even greater ambitions.” So, what have been the drivers for digitisation of the payments industry, including, increasingly, in insurance, and what does the future hold? Here, McGriskin and Mauro Di Buono, who is responsible for relationship management and business development for Vitesse’s corporate division, give their views. FINTECH FINANCE: Why has the payments industry been a catalyst for finance innovation? MAURO DI BUONO: From a B2B perspective, I think the fact that organisations want to do more business ffnews.com

From a consumer perspective, we also saw a rapid acceleration of digital trends, in the last 12-to-24 months. Consumers had little choice but to embrace e-commerce as social distancing measures and lockdowns were limiting access to physical stores, so that has inevitably affected spending. And regulation has also played a role, when you think of open banking and the adoption of the revised Payments Services Directive (PSD2), which is making big waves in the UK and Europe, and, to some extent, also in Latin America. That has pushed the fintech and banking industry to try to deliver better and faster ways to make payments and create more financial inclusion. PHILLIP McGRISKIN: Digitisation is pulling the changes through, but the big underlying ground shift making them possible was when technology providers were allowed to start playing in financial services, around PSD2. The Payment Services Directive and the e-money regulations, I think, were the biggest enablers of all the innovation that’s come through, because they’ve enabled businesses that are not banks to focus on technology and payments-as-a-service, which means that they can approach the problem in an entirely different, free-thinking way. Fintech players are the ones that have driven the change, and, in my opinion, it was a change in regulation that has enabled those fintechs into the market. World of difference: Payments have transformed how finance is done round the globe

globally, and also embracing what we have seen with remote working and a global workforce, has driven organisations to want to access different markets and jurisdictions. They didn’t really have that, historically, but it’s been accelerated in the past couple of years. At the same time, organisations want a seamless payments experience, regardless of the country they are operating in or where their employees are based. europe.money2020.com

FF: Have the expectations of businesses and consumers around payments been permanently changed by the impact of the COVID-19 pandemic? MDB: The demand for instantaneous results goes beyond expectations of products or services, it also applies to how customers expect their payments to be handled. Everyone wants to make a payment and have the money arrive at its destination right now, and everybody wants to receive a payment as soon as possible. So today’s customers have expectations for, let’s say, a smooth payment process, and, therefore, trying to create a more frictionless payment environment for your customer has become the key to making them happy. They don’t want

things to be complicated, they don’t want to jump through hoops in order to make a payment or access different systems. On the other side, it’s also important – and Vitesse is doing this – to adopt what I call a geolocal strategy, where you’re able to offer payment solutions in different markets or countries, based on what the requirements are in specific places. I think that is what business customers are demanding, from a payment perspective. FF: What are the biggest hurdles facing businesses and what solutions is Vitesse using to overcome them? MDB: Businesses are still recovering from the pandemic to a certain extent and there are other topics, such as environmental, social and governance (ESG) issues and sustainability. But one theme coming through increasingly, recently, is access to the right talent and people.

Digitisation is what’s pulling the changes through, but the big underlying ground shift to make these changes possible was when technology providers were allowed to start playing in financial services, around PSD2 Phillip McGriskin, Vitesse

Organisations need to start to look outside their borders to access the best resources to grow. Most of the time, those individuals sit outside the country where the business operates, and they need to ensure they can smoothly hire and pay them. So having, for example, access to a network of local domestic payment rails, such as the one Vitesse has, for paying them, is a huge advantage to enable them to grow their business globally. At the same time, it ensures they pay them and any vendors they have in compliance within the local regulation and currency requirements.

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: PAYMENTS PM: We’re a Financial Conduct Authority (FCA)-regulated business in the UK, so we’ve been through the wringer in terms of making sure our processes, people, approaches, etc, are all gold standard. By using the banks and our FCA regulation, plus our global banking network, we’re able to provide our customers with a very flexible solution, which still gives them the strength of the banks but with a much more configurable treasury platform, to enable them to make payments globally, in the most efficient way possible. That’s not just limited to what the banks are doing but also involving things like Visa, Mastercard and other e-wallets, to give our customers and their customers absolute choice around how the money moves. It’s about using a layer of technology and regulation, and treasury capability, on top of the big banks’ balance sheets, to make a much more effective payment service for our customers. FF: If we look at salaried employees and gig economy workers, as well, what is Vitesse doing to make this new payroll system work for them? MDB: Companies are trying to innovate in that space. By innovate, I mean that employees are demanding alternative ways of getting paid, which can be real-time payments, or pay-to-card, or on-demand wage, and treasurers need to find the right tools to deliver on these expectations and meet those needs, to be competitive in the market and, above all, retain those employees. For those employees, it means they are sure to receive their salary on time and the full amount, or they can access their salary whenever they want, which has become a more and more sought-after way of receiving pay. In that way, they can better plan their finances. They know they have flexibility around the way they get paid, and they can make more informed decisions. It’s all about making the employee experience the best possible, so that firms can retain their best talent. FF: Open banking is the adjuvant that has allowed technology companies to be so effective in the financial sector. How is Vitesse taking advantage of embedded finance to drive innovation, including in the insurance industry? As we see more of these embedded finance technologies come through,

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Vitesse is using its payment platform, and its regulation, to help develop those solutions, giving some of the more legacy verticals payments and treasury access to these new-style channels. There are some incredible technologies coming out. Anansi, for example, is a business that’s working on a parametric insurance cover – cover that pays out automatically, based on a predefined event. Anansi’s use case is around the fact that lots of people are sending parcels all around the world, using Shopify, Parcelforce, etc, so, to make this easier, they can just click a box when they buy their postage and the price of the insurance is related to the value of the parcel, and where they are sending it to in the world. Then the whole thing, after that, is automated. They know exactly where the parcel is, because it’s with a courier service. If the parcel is delayed, or if it gets too hot or too cold, or is broken in transit, the courier reports that as part of its standard logistics processes. And that reporting is what businesses like Anansi take back, so that they know when a claim has happened, and they can make the payment back to the customer in a seamless fashion.

Embedded finance has the flexibility to be applied to any company or industry which has a transactional element in it Mauro Di Buono, Vitesse

It’s a great experience for a customer to be able to pay, say £1, and know their parcel’s going to get there and, if it isn’t, somebody will automatically send the £15 or £20 they’ve lost back to them. We’ll see a lot more of that coming through on all sorts of different finance-related products. MDB: Embedded finance has the flexibility to be applied to any company or industry which has a transactional element to it. What’s brilliant about it is that financial and non-financial organisations can work together and offer consumers a bundled service, as a one-stop-shop for their spending.

Obviously, you can apply this to different industries. Let’s say I want to buy a big purchase on Amazon, but I don’t want to pay for it up front, I want to apply for a loan and have the ability to do that through the Amazon platform as well. But what if I need to make that purchase in a different currency? Having a company like Vitesse embedded into the process could deliver that seamless payment experience and allow everything to be done through one system, rather than three separate systems. That’s just one idea, but I think it shows the possibilities are endless for embedded finance. FF: And, finally, continuing on the theme of innovations, what can you tell us about Vitesse’s partnership with Mastercard? PM: Part of Vitesse’s aim is to provide our customers with as much payment choice and capability as possible. Mastercard is a truly global brand, and it’s got many billions of cards that are able to receive funds across the Mastercard network, through the Mastercard Send service, so it’s logical that our global insurance customers offer Mastercard Send to their customers as a way of being paid instantly when an insurance claim occurs. This is one of the multiple payment choices we’ve put out to our customers, but we are working very closely with Mastercard on making sure its Mastercard Send service is optimised for the insurance industry. And by that I mean it isn’t just a case of making a payment from a pot of funds that somebody has lying around somewhere; in insurance, the funds need to be in a secure environment, they need to be held in a client assets and money-type structure, in accordance with requirements of the industry from the Financial Conduct Authority and other regulatory bodies. Vitesse, being a FCA-regulated business, is able to hold those funds on behalf of, and with the agents of, the insurers, to make these payments out within the right regulatory framework and keep everybody in line with global rules and regulations. Mastercard already had a Send product, and what we’ve been doing with them is really helping them to optimise it, and then get it into a platform state that’s deliverable to the insurance industry in the most efficient way possible. ffnews.com

Above and beyond

Peter Larsson of Volante Technologies and Kasper Mortensen from Nordea describe how the forward-thinking Nordics are starting to look beyond P27 – towards the next innovations and the rest of the world The mercurial Nordics region has long been recognised for financial services innovation. In 2017, six top regional banks and other financial sector players got together to from what would become a new Nordic payments platform called Project 27 (P27) – the world’s first real-time, cross-border payment system in multiple currencies. It set out to connect the close-knit countries of Denmark, Sweden, Finland and Norway to give the region’s 27 million inhabitants and its businesses a more seamless payments experience – but the spin-offs will go much further than that. With the first stage of implementation now imminent in Denmark, Finland and Sweden, the Nordic Payments Council (NPC) is looking beyond P27 going live, to how its members can ‘innovate on top’. The bar has been raised on creating an even better user experience, more commercial opportunities for local banks and, ultimately, interconnectivity with Europe and the rest of the globe. We asked Peter Larsson, business development director of Swedish

payments-as-a-service provider Volante Technologies and member of the NPC and European Payments Council (EPC), and Kasper Mortensen from Nordic bank Nordea and a founding member of the P27 advisory board, what happens next. FINTECH FINANCE: You’re now very close to sending card payments over the P27 network, but what are the opportunities for future innovation? PETER LARSSON: Bill payments represent a real game-changer for the industry. In Sweden, we’re also aiming to move batch services from existing banks into P27, for invoicing, pensions, salaries, consumer account-to-account transfers, and for merchants and corporates, too. Confirmation-of-payee will secure payments by ensuring, before we make them, that the beneficiary represents an actual person or company, to reduce fraud. In the Nordics, we do a lot of business between our countries. We live in Malmö, in Sweden, and work in Copenhagen, for instance, and Norwegians, Swedes and Danes invest in properties in each

others’ countries. Where we are commuting and sharing investments, we need to do those transfers cheaply and simply. We don’t need to open extra bank accounts in the country we choose to live in; it should be very simple to pay for everything. KASPER MORTENSEN: Even before P27 goes live, there are many innovations going on in the market. There are bill payments, on the back of Request to Pay (RTP), and many other big opportunities for us, as a Nordic bank, to improve our product offering and to commercialise on top of the infrastructure. For many years, banks have not really developed many advanced payment products, and, if we take MobilePay and Swish out of the equation, there is a lot that can be done differently.

Just the start: Corporates and international banks could all benefit from what P27 represents

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: THE NORDICS While bill payments will be one of the first commercial products that will be built on top of P27, I am completely convinced that all banks are already looking at opportunities to enhance or add to their existing customer value propositions. PL: There is a growing interest in how corporates can benefit from this, too, with opportunities for any bank to offer services around reconciliation, so that you get richer information in the payments. Using that reconciliation, corporates can forecast much better, because they get payment advice or status updates. Once I select who I have to pay, the bank can update the corporate, saying ‘Peter Larsson has accepted a payment and he will pay on Saturday or early Monday’. That is good for forecasting and allows a corporate or a merchant to make the most use of their liquidity, going forward. FF: What are the developmental imperatives of P27 for the Nordic region? KM: One of the most critical objectives surrounds the fact Nordic banks have been sitting on a tremendously big legacy infrastructure, built over many years, in Norway, Sweden, Denmark and Finland. One of P27’s core objectives is to modernise, to ensure we can build new components on top of product offerings and compete with the ever-changing competitive landscape, which is not just incumbent banks anymore. There is also competition from fintechs and new kinds of businesses that are bringing new models to market. It has been extremely costly to run and do maintenance on a significant number of legacy infrastructures, for a long time. For us, as a Nordic bank, to stay competitive and ensure we can offer our customers the best solutions, we need to modernise and take costs down. In fact, cost is a major topic for a lot of banks. Interoperability is also important, so that our infrastructures can communicate with one another and be able to bridge not only the Nordic area but the entire world, via P27. PL: The business case is not unique to P27, because we have seen initiatives like the United Payments Interface (UPI) in India, PayNet in Malaysia, and Pay.UK in the UK. But I get a lot of interest from international banks that are monitoring and viewing how we are succeeding on this. It’s a market for them, of course, but it’s also a FintechFinancePresents– 3838

blueprint for making European payments more efficient. Immediate payments were introduced very early in Sweden and also in the UK, but, from a European perspective, we are fragmented in many ways. P27 could act as a payments integration blueprint for wider Europe.

European based. So, with ISO 20022 becoming more dominant and harmonising payments, taking a step into the European region is not that big, following the same trends as the rest of the world.

FF: What steps will Nordic players, of any size, need to take in order to FF: So, how do you see P27 dovetailing prepare for this wider compatibility? with the wider world for payments, PL: We’re used to building solutions and how does the universal adoption in-house and learning from those of ISO 20022 play into that? lessons. Given the commoditisation of payments, outsourcing infrastructure is one KM: All the Nordic banks behind way of reducing the risk, or learning from P27 are very aware that bringing the experiences of others out there, too. more interoperability, as well as making Our main focus is lowering the threshold to life easier for us and enabling more make it simpler for banks to take that step opportunities for our customers, will lower [into other markets. the barriers to entry for our European and international competitors. Today, if you are KM: By harmonising and ensuring an international bank that wants to do core we have one infrastructure, with the business in the Nordic area, if you want same methodology, P27 members create to be a clearing partner, new products on top to there is significant commercialise, and only investment in not only have to ‘think Nordic’. running and maintaining That is completely your operation, but you different to how we’ve also need to do it in four built products for the last different countries. That 25 years, because almost will be harmonised. all of them now relate to So, it’s a major change each and every country. in terms of how we deal That will definitely be with competition. We a game-changer. It will have to ensure we have also take the operational value propositions that cost down, giving customers understand organisations other and welcome. than banks, access to the infrastructure, PL: Getting an changing the understanding of competitive landscape. ISO 20022, and the We’ve created an interoperability cases, infrastructure, in P27, not only among our tier Kasper Mortensen, Nordea which is modern and one banks but smaller flexible enough to enable organisations to players too, is important so that they consume new standards like ISO 20022, can create payments and offer them giving them a bigger tool to define their into the European market more flexibly. own products and services, and tailor them It is complex to get to that level, because for bigger audiences or new markets. many are indirect today, but with I think it is extremely valuable for us, as harmonisation and the ISO development, a bank, to first of all understand whether it’s something some of our banks can we are a big creditor bank, or would like to leverage, and are investing in now to reach increase our consumer flow. Europe and even the US. We now need to agree, as a complete The great thing with the NPC is that we Nordic industry, and negotiate on new bring four different countries, with their terms for some of the Nordic products, different rule books, into one. That’s massive, and also mirrors European Payments Council where some are seen as sector products, and some will, of course, be owned and requirements. We use different account developed by each and every bank, structures and have some additional fields or any other competitor that’s out there. and attributes, but the rest is 99 per cent

All the Nordic banks behind P27 are very aware that bringing more interoperability, as well as making life easier for us and enabling more opportunities for our customers, will lower the barriers to entry for our European and international competitors

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Automate the w*rk out of it. Integrate everything. Automate anything.

: EMPOWERING THE CONSUMER

Alex Gatiragas describes how G+D is aiming to save the world, one payment at a time When it comes to payments, Giesecke + Devrient (G+D) has seen it all. Back in the 1800s, it helped banks to print cash; now, it supports not only banks, but fintechs and an increasing number of non-financial providers, too, with everything from physical cards to mobile wallets and other digital payments. Most recently, it’s helped in the modelling of central bank digital currencies, including a project with Bank of Ghana. Whatever the payment type, its solutions provide a safe transaction environment in which customers remain in control. One of its most recent innovations, Token Cockpit, for example, is a way for account providers to remove the frustration consumers often experience in trying to keep track of card-on-file and subscription commitments. It monitors their payments so that they don’t pay unnecessary and unfair repeat charges. This same solution enabled the tokenisation of those cards-onfile, for increased online checkout security. Now, the company is addressing another of their key concerns – helping to minimise the environmental impact of their payments.

WALKING THE WALK The company signalled its commitment to protecting the planet by becoming one of 24 German businesses to participate in the United Nations’ Sustainable Development Goals Ambition Initiative in late 2020. As well as committing to reducing its own direct and indirect CO2 emissions by 25 per

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Green promise: Environmentally friendly payments make sense for providers and the planet

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cent by 2022, it committed to helping its customers and end-consumers achieve their sustainability goals. To this end, G+D has recently announced two new partnerships. It teamed up with sustainable digital solutions provider Doconomy, which makes visible the environmental impact that purchases have, thereby enabling consumers to make positive choices. And, in April, it announced it would be working with Patch.io, an API-based solution for climate action that enables customers to influence the environmental outcomes of those payments by, for example, making carbon offsetting donations. G+D is now also working with Parley for the Oceans, a non-profit environmental group which is campaigning for greater awareness of plastic contamination of sea water. This partnership allows G+D to offer reclaimed plastic cards as well as giving clients the opportunity to support and encourage direct environmental action. All these initiatives are not just testament to how conscious consumerism is influencing financial innovation. They also play into the other urgent priority that payments organisations face, which is the need to demonstrate their corporate commitment to higher environmental, social and governance (ESG) standards. It’s not just a case of keeping consumers happy, but also all the other stakeholders in G+D’s business. “It comes down to looking at the role of payments as a lifestyle enabler, a gateway for people to live their lives the way they want to and make a difference,” says Alex Gatiragas, europe.money2020.com

director, solution experience for G+D. Explaining how the new relationship with Doconomy supports this new mission, he says: “Doconomy is one of the league-leading organisations when it comes to providing data on environmental impact. Together, we can help consumers make informed decisions like ‘do I use this ride-share company or that one whose green energy rating is better?’. It will help them take stock of their environmental impact.” Armed with that information, they can then choose to take positive action courtesy of Patch.io’s API-based solution, which has been integrated into G+D’s Convego Beyond sustainable payments facilitation platform. The plug-in enables G+D’s clients to let their customers seamlessly make offsetting payments to global carbon removal projects. These include natural and human-engineered solutions, all verified by third parties, with the added benefit that companies offering this service can also use it to quantify their own environmental impacts through corporate responsibility reporting cycles. Illustrating how the two digital services dovetail, Gatiragas says: “A consumer might have purchased some goods and had them delivered because there was no other option, and this therefore had an environmental or carbon impact. Doconomy helps them see exactly what that impact is and Patch.io then gives them the option to make a small investment to offset it and, effectively, remove it from the environment. “That’s on the digital side, where we’re looking at how we can integrate these with some of our wallet technologies. On the physical side, our partnership with Parley for the Oceans, means we can provide programmes for issuers where they can offer physical products, like payment cards produced from ocean-recovered plastics. “Five grams of reclaimed plastic for each card doesn’t sound like a lot,” says Gatiragas, “but it’s really symbolic of the owner’s commitment to the oceans agenda – as is belonging to an organisation that is committed to doing other things to improve the health of those sea waters.”

One G+D customer which has taken advantage of that already is fintech startup WLTH in Australia; it’s already organising beach clean-up days for customers off the back of it. “I’m Australian, although I live in Helsinki now,” says Gatiragas. “With Australia being surrounded by water, the majority of the population is living reasonably close to the shore, so we are very concerned about the health of our oceans.” WLTH is among the next generation of fintechs for which the environmental agenda is part of their DNA. But enquiries aren’t just coming from startups. “We’ve had conversations with Mastercard in relation to its eco Innovation Lab opening in Stockholm, looking at ways in which we can tie their payments together with improving the environment. So, we’re expecting this area to grow,” says Gatiragas. “Most of the interest at this stage has been around our physical products, because there’s an immediate impact in removing plastics from payments. Our physical product guys have done a great job in producing payment products that have a positive eco outcome,”he adds. Gatiragas believes that, if they want to future-proof their businesses, payment providers should be focussed, above all, on offering customers choice – ideally, a blend of the physical and digital – but that should be closely followed by empowerment. “In terms of consumer trends, we’re seeing global growth in the acceptance of digital wallets and, of course, a willingness to do a lot more online purchases,” he says. “Having said that, what we’re seeing is that getting rid of the physical payment instrument isn’t as common as people might think. Digital wallets are definitely growing but the physical card is becoming a companion to the digital wallet and vice versa, because consumers want everything available to them in order to quickly select what payment instrument they want to use for whatever they want to do at a particular time.”

It comes down to looking at the role of payments as a lifestyle enabler, a gateway for people to live their lives the way they want to and make a difference

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: EMPOWERING THE CONSUMER Gatiragas acknowledges the heavy investment the industry has made to support digital, ‘[because] post-pandemic, a lot more people are comfortable using it’. “But card rails have been a common way of accepting payments in the past so, for merchants and payment services providers (PSPs), it’s now about offering multiple choices. “The conversations we’re having with PSPs and some of the large merchants, are about how they need to be prepared for what this might look like in the not-too-distant future, because they don’t want to lose out on opportunities to sell their goods and services. Being able to offer alternatives like e-payments, account-based payments, or whatever else, is something we’ll see continue to grow.” As the range of payments becomes ever more extensive, Gatiragas believes G+D’s innovative Token Cockpit dashboard will become increasingly instrumental in helping consumers take control of their financial lives and make appropriate selections, by increasing visibility around their transactions, including the environmental impact they’re having. “Token Cockpit is an example of how we’re moving away from securing digital payments being a back-end processing concern – something that lives in a server room, that’s somewhat invisible to a consumer. Token Cockpit is the start of being able to put payment control back in the consumer‘s hands through greater visibility of, and control over, their payment instruments,” says Gatiragas. “That means everything from environmental impact awareness to avoiding that painful realisation that the card they’ve had on file at a merchant’s store, that card they’ve forgotten about, has just automatically renewed their two-year subscription and their money’s gone. “Improving the customer’s experience to increase their trust in payments is definitely an area of focus for us at the moment,” he adds.

MULTIVERSE OF USES Reluctant to back any one horse in an eclectic payments race where the competition has been hotting up now for some time, G+D is continuing to lead on innovative solutions for everything from embedded, internet of things (IoT) payments – including those to support the

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practicalities of increasing electric car use – to the potential development of e-currencies and digital currency-based solutions. It’s balancing security with the seamlessness that consumers demand, while ensuring cost efficiency for organisations struggling to maintain their bottom lines amidst the explosion in high-volume, low-value transactions. “With the introduction of 5G technologies and the reduction in costs for IoT devices, the need to try to keep the cost of doing increasing volumes of micro-payments down is really coming to the fore,” says Gatiragas. “One example of how we’re dealing with that is we’re looking at helping electric vehicle users pay for tolls, road taxes and charging stations via in-built, invisible payment methods. “We have a long history of making sure everything we do is secure, but then not overburdening the consumer experience with that security to make sure payments are also seamless. We’re seeing a lot of interest at the moment, from both the merchant and the PSP side, in simple payment solutions such as Click to Pay for guest checkout. We’re trying to make it as easy as possible for our clients to onboard solutions like that for their customers. “We’re seeing big growth in Click to Pay and also in e-payments, because of the way we’re all starting to live our lives and the small things we need to do, just to get by from day to day. Companies have to service that cost-effectively.” He continues: “We’re also seeing a lot of interest in single-click payments, with our customers and the industry generally wanting to be able to support multiple payment methods is this area. But there are pain points to overcome for businesses looking to enable such things. The infrastructure investment needed is the main thing, as well as being able to balance risk with having that seamless customer experience. That’s particularly so on the merchant side, where the aim is to improve the checkout experience to increase sales,” he says.

CONTINUOUS INNOVATION A conflagration of circumstances created by the COVID-induced switch to digital, geopolitical events, changes in consumer behaviour and the different regulations and infrastructure being introduced to help manage and control all of this – including Europay, Mastercard and Visa (EMV) tokenisation and the imminent universal introduction of the ISO 20022 payments messaging standard – is creating a burning platform like never seen before. Providers need to invest in getting this right. “It’s a great time to be in the payments industry because there is so much happening,” says Gatiragas. “Digital payments, digital currencies, instant payments, peer-to-peer payments, IoT, all these things are more than just buzzwords these days, and we’re seeing a lot of activity globally. Our role is to help our customers navigate through all these different options. “I’m a technologist at heart and I’m loving all this, but I’d hate to predict which payment form is going to win out in the end,” he adds. “Certainly, in the near- to mid-term, I think providers need to be able to support multiple payment methods, because, ultimately, choice is key to consumers. And for providers, it’s about being able to offer that in a way which also reduces the cost of doing business.” For Gatiragas, G+D is perfectly positioned to help them do just that. “We've been around for 170 years-plus, so it makes sense for an organisation like ours to continue to innovate, lead trends where we can, and work with the industry and our customers to continue that innovation cycle,” he says. It’s perhaps apt that this established organisation, which was originally focussed on helping banks to print cash, is now working with them to help manage the migration from physical to digital payment methods – including a new kind of currency which is more appropriate to today’s needs. It’s also reassuring that, although we won’t be able to hold that token of currency in our hands, G+D is committed to it being no less secure.

Improving the customer’s experience to increase their trust in payments is definitely an area of focus for us at the moment

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