FinTech Magazine - November 2023 by FinTech Magazine

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November 2023 | fintechmagazine.com

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How Fujitsu is leading on digital transformation in the fintech sector Fujitsu’s Krista Griggs discusses how the IT tech giant is driving digital innovation in banking, financial services and insurance FEATURING: CRYPTO WALLETS

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The FinTech Team EDITOR-IN-CHIEF

ALEX CLERE EDITOR

LOUIS THOMPSETT CHIEF CONTENT OFFICER

SCOTT BIRCH

MANAGING EDITOR

NEIL PERRY

CHIEF DESIGN OFFICER

MATT JOHNSON HEAD OF DESIGN

ANDY WOOLLACOTT LEAD DESIGNER

VICTORIA CASEY

SENIOR DESIGNERS

REBEKAH BIRLESON SAM HUBBARD FEATURE DESIGNERS

JULIA WAINWRIGHT EMMA WALLER ADVERT DESIGNERS

DANILO CARDOSO CALLUM HOOD ADRIAN SERBAN VIDEO PRODUCTION MANAGER

KIERAN WAITE

DIGITAL VIDEO PRODUCERS

ERNEST DE NEVE THOMAS EASTERFORD DREW HARDMAN SALLY MOUSTAFA PRODUCTION DIRECTORS

GEORGIA ALLEN DANIELA KIANICKOVÁ PRODUCTION MANAGERS

JANE ARNETA MARIA GONZALEZ YEVHENIIA SUBBOTINA KENDRA LAU MARKETING MANAGER

EVELYN HOWAT

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JAKE MEGEARY

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JAMES WHITE

MANAGING DIRECTOR

LEWIS VAUGHAN CEO

GLEN WHITE

FOREWORD

FINTECH IS FIRMLY A DRIVER OF CHANGE

“EMBEDDED LENDING ALLOWS SOFTWARE PROVIDERS, LIKE ACCOUNTING AND INVOICING PLATFORMS, TO OFFER WORKING CAPITAL AND CREDIT DIRECTLY TO THEIR USERS”

FINTECH MAGAZINE IS PUBLISHED BY

The rise of fintech has brought about a gear change in the delivery of financial services, allowing businesses and consumers to access services in new ways. Perhaps the clearest example of this lies in embedded finance. In this month’s issue of FinTech Magazine, we’ll be placing embedded lending under the microscope. This technology is allowing software providers, like accounting and invoicing platforms, to offer working capital and credit directly to their business users from within the app. This is providing a much-needed lifeline to many firms as other sources of funding, like venture capital, are drying up. The power of fintech is really all about evolution – and we have some changes of our own in this issue. Look out for two new features entitled ‘People Moves’ and ‘The Month that Was’ in the upfront section of this month’s issue. We’ll be returning to London for our hybrid event, FinTech LIVE, from 8-9 November 2023. We know many of you will be coming down to the QEII Centre in Westminster to be part of the action, but if you can’t make it in person, we very much hope you’ll dial in remotely. Just visit live.fintechmagazine.com to find out how. See you in London...

ALEX CLERE

alex.clere@bizclikmedia.com

fintechmagazine.com

CONTENTS UP FRONT

016

014 BIG PICTURE

African leaders assemble for monumental climate conference

016 LIFETIME OF ACHIEVEMENT

020

Jack Mangnall, Co-founder of payments startup Shape

020 THE FINTECH INTERVIEW

014

Daniel Marovitz, SVP of Fintech at Booking.com

026 PEOPLE MOVES The latest people moves in the world of fintech

028 THE MONTH THAT WAS

High-profile investment hits the headlines

032 000 8

November 2023

NOVEMBER 2023

052

FEATURES

044

032 TOP 10

Fintech hubs across the globe

044 BANKING

How quantum computing could transform the banking sector

052 FUJITSU

Leading digital transformation in fintech

072

072 DIGITAL PAYMENTS Embedded lending

080 NUVEI

On the future of artificial intelligence in payments

080 fintechmagazine.com

In Association with:

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Championing CSOs from global organisations, celebrate those who elevate the industry day in, day out.

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NOVEMBER 2023 094 CRYPTO

094

Roundtable: The future of crypto wallets

108 VIRGIN MEDIA O2 Virgin Media O2’s customer focus on the digital payment journey

122 SUSTAINABILITY Achieving net zero: A fintech priority

122

108 fintechmagazine.com

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BIG PICTURE

Credit: Paul Kagame | CC BY-NC-ND 2.0

November 2023

African leaders assemble for monumental climate conference Nairobi, Kenya António Guterres, Secretary-General of the United Nations, makes a keynote address at the start of the inaugural Africa Climate Summit in Nairobi. The event, convened jointly by the African Union and Kenyan President William Ruto, has been described as “Africa’s first climate summit” and attracted more than 13,000 delegates to the Kenyan capital. It has been widely praised for demonstrating that the continent is committed to protecting the natural environment and driving sustainable growth for all of Africa. The three-day summit resulted in a joint declaration that acknowledged climate change as “the single greatest challenge facing humanity”.

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LIFETIME OF ACHIEVEMENT

JACK MANGNALL CO-FOUNDER OF PAYMENTS STARTUP SHAPE

As one of two Co-founders of UK payments business Shape Technologies, Jack Mangnall is aiming to use his experience in startups to drive value for PSPs

fter almost a decade in sales and client account management roles, Jack Mangnall was appointed Head of Partner Growth at payments fintech Cardstream in August 2020. He spent nearly two years in the role, before joining Acquired.com as a Senior Partner Manager for ISV in May 2022. Now, the British entrepreneur is aiming to leverage that experience as he embarks on a totally new venture: the launch of his own payments business, Shape Technologies. “Our mission is to get payments businesses to market quicker,” he tells FinTech Magazine, “delivering a dynamic payments-platformas-a-service (PPaaS), which is fully customisable for PSPs the world over. “My experience in payments enabled me to identify gaps within the industry – for example, payfacs struggling to build technology, gateways with poor UI, acquirers with legacy platforms and processes. I don’t mean to demean what specific companies in those areas have 16

November 2023

achieved; in fact, in order to achieve success, these companies have had to neglect their merchant-facing interfaces in favour of building out core processing capability and global connectivity. “But that is where we saw our opportunity. I believe that Shape’s modules used in various combinations can add value for so many PSPs and enable them to provide their partners and merchants with a full merchant journey they’ll be proud of.” The founder experience in challenging times There is no easy time to start a business – but, perhaps, these last few months have been harder than most. In the UK, where Shape is based, the headline rate of inflation is – at the time of writing – hovering just below the 7% mark, three percentage points or so higher than in the US. The International Monetary Fund (IMF) predicts that the UK will have five more years of high interest rates, as well as the slowest growth of all G7 economies.

JACK MANGNALL TITLE: CO-FOUNDER COMPANY: SHAPE TECHNOLOGIES INDUSTRY: PAYMENTS LOCATION: UK Jack Mangnall is one of two co-founders at payments startup Shape Technologies. Along with business partner Nick Walpole, the former Cardstream and Acquired.com man is aiming to bring real value to PSPs and merchants by offering paymentsplatform-as-a-service (PPaaS).

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LIFETIME OF ACHIEVEMENT

Add to that a series of UK government U-turns – first, a delay to a planned ban on new diesel and petrol cars, which was expected to come in 2030 but will now be pushed back until at least 2035; then, the cancellation of a major leg of a national high-speed rail project – and business confidence in Mangnall’s home country is not at its highest. So what does he make of the founder experience in today’s volatile economy? Mangnall tells us that, were he trying to start a business in an industry with lots of competition and little differentiation, he wouldn’t have even attempted it. But he’s confident in the problems that Shape are aiming to resolve, and believes in his company’s ability to generate value for clients. “We’ve seen huge amounts of money raised, but that money carries a huge burden and sadly in many cases, large investment rounds have been followed by big detrimental impacts to businesses and the people within those businesses,” he tells us. “Thankfully, we’re uniquely positioned. Our technology, our approach and our route to market means that there isn’t a bad time to launch. We align with the vision of major card schemes and acquirers and are serving a part of the ecosystem that nobody else is – not to our extent, anyway. Therefore, we decided that the sooner we launch, the better. And so far, that decision is paying off.” The pressure is real in growth-stage businesses As Shape continues to scale, he will be able to draw on his time spent at growing businesses, which have taught 18

November 2023

him a thing or two: “In an early-stage startup, every single day you’re making what feels like huge, life-changing decisions,” Mangnall continues. “You’re reacting to events that could bring your mission to a halt, putting at risk many things including the welfare of your family. A little dramatic I know, but that’s how it feels. The highs are like no other, but the lows hurt and instantly remind you of the fragile position you’re in.” Those tentative first few weeks are now behind him at Shape, which has now been trading for six months, meaning Mangnall – and fellow Co-founder Nick Walpole – can focus on scaling the platform they have developed. And he intends to take no prisoners in the process.

WHAT INSPIRES YOU ABOUT THE SOFTWARE AND TECHNOLOGY INDUSTRIES TODAY? “A previous manager once told me I’m ruthlessly ambitious, and I took that as a huge compliment. Don’t get me wrong, I care about the people around me and will always do my utmost to help them, but nothing can ever stand in the way of Shape achieving its mission.” Mangnall is a family man at heart: he has young children and a partner whom he adores. As many founders will attest, having the right support network – including loving family around you – is vital to relieving the stresses of building a business from scratch. He also tries to keep fit, training before every working day – not just for the physical aspect of it, but to set him up mentally for the day ahead too.

I love the rate of change within technology, specifically fintech. No one person can ever know all there is to know and nothing ever stands still. I’m inspired by the calibre of people, the bright minds that forge the future of different industries. Be it software innovation in payments, advancements in healthtech, or disruption in proptech. It’s so clear to me that technology drives so many verticals forward. It’s the people that build things that have never been built before, that does genuine good or makes actual change that inspires me to go a little further, every day.

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THE FINTECH INTERVIEW

DANIEL MAROVITZ FinTech Magazine speaks to SVP of Fintech at Booking.com, Daniel Marovitz, about his career to date and journey to Booking.com Q. WHAT IS YOUR BIGGEST DAY-TO-DAY MOTIVATOR?

» Improving connectivity and

simplicity are my day-to-day motivators. At Booking.com we’re driven as a team to make it easier for everyone to experience the world. I believe in the power of travel to connect: travel, culture and language are areas that bring us all closer together. Payments are a big part of enabling the connective experiences of travel. So much of travel is subjected to complex financial friction. Travel is really hard from an ecommerce perspective because it’s crossborder and across currencies. There are unfamiliar payment methods. It’s just different from other categories of ecommerce and we’re talking bigger ticket items than simple merchandise too.

November 2023

There’s more emotion and anxiety around it as a topic. I’m driven by that challenge: to make payments easier and through this to make planning travel easier. Booking.com’s FinTech unit sits alongside the company’s two main units: trips and accommodation. We’re in the thick of the innovative solutions and investments that make it as easy as possible for our customers and partners to connect. As a truly global ecommerce company with business operations in nearly every country and city on the planet, the vision behind this business unit is to make buying and selling travel-related products and services through millions of cross-border, cross-currency transactions taking place daily, truly easier for everyone.

Q. HOW HAS YOUR CAREER PATH TAKEN YOU TO SVP OF FINTECH AT BOOKING.COM?

» Throughout my career, I’ve been

fortunate enough to work in technology businesses at every stage: from startup to mid-cap and Fortune 100. I’ve had the good fortune to be able to work in a large global bank, to work in embedded finance and ecommerce companies

as well as listed and known pure-play fintech companies. I think all of those experiences have helped me to understand the enormous scale of this industry and I’ve certainly learned many lessons along the way. I think sometimes we forget what the word ‘fintech’ means. Financial means the financial services world, regulation, banks. And tech is tech.

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THE FINTECH INTERVIEW

“ It’s critical to have the strongest, most powerful people you can around your table, even if they make you nervous. That’s key” We don’t always embrace the fact that it’s two vastly different worlds and different cultures. My experience has really enabled me to thread the needle to put the pieces together between financial services and technology. The Booking.com business is the most complex I’ve ever worked in by an order of magnitude. Booking travel may sound simple, but it’s devilishly complicated. A challenge I enjoy for all the reasons I’ve outlined above. I joined Booking.com in 2017, becoming Senior Vice President of Booking.com’s FinTech unit in 2021. Our 700+ strong cross-functional team operates in Amsterdam, London, and Bangalore and goes end-to-end 22

November 2023

from ERP to payment platforms, compliance, PSP relationships, FX, and payments experience for both sides of the global marketplace. We have plans to expand to around 900.

Q. HOW CAN YOU SEE THE PAYMENTS INDUSTRY FOR TRAVEL BOOKING EVOLVE OVER THE NEXT FEW YEARS?

» Across the travel industry as

a whole, there will be a bigger focus than ever on customer experience. All kinds of policies and flexibilities are built into the travel industry, which affects both the supply side and the traveller.

Improved customer experience sits at the heart of Booking.com’s vision for future travel. Many of the things that we can do help add more flexibility, decrease risk and add more comfort. Our objective in payments is to help both sides of the marketplace with financial products and our vision of the ‘connected trip’ – enabling our customers to book every aspect of their travel experience – from package trips to flights and attractions – stress-free through our familiar, easy-to-use website or mobile app. Becoming a one-stop shop for all travel needs and reducing financial friction is one of the key elements

to make this a reality. Every day we explore ways to make it easier for travellers to pay the way they want, at the time they want, and for partners to grow their businesses.

Q. WHAT IS THE BIGGEST WORKPLACE CHALLENGE YOU HAVE TO FACE REGULARLY?

» I think the biggest challenge

that we face is probably competing priorities. We are fortunate to have an incredible amount of resources across Booking.com however we’re always forced into the position of having to make difficult choices about what we do and don’t do as we focus, prioritise and re-prioritise. fintechmagazine.com

THE FINTECH INTERVIEW

That can be very painful – particularly in an area that is scaling fast. It’s also about getting the balance right between operational excellence and resilience topics which can be expensive and time-consuming. The benefit is invisible to customers until the moment that they need it, right? It’s an insurance policy so I think getting that balance right is tricky.

Q. WHAT IS THE BEST PIECE OF ADVICE YOU HAVE EVER RECEIVED?

» Early on in my career, I ended up

becoming a manager in my first 100 days. My boss at the time was an interesting guy and said to me: “There are two characteristics of people that you want reporting to you. Someone who wants your job, and probably somebody capable of taking your job.” So I’ve learned that when building a leadership team, it’s important to have people who are smart, challenging, creative, and have no obvious power gap. You have more robust conversations. It’s critical to have the strongest, most powerful people you can around your table, even if they make you nervous. That’s key.

Q. IF YOU WERE STRANDED ON A DESERT ISLAND WITH 3 OTHER PEOPLE, WHO WOULD THEY BE AND WHY?

» That’s tough. In a sticky situation, it’s about who are the people you want on your team to help you deal with something, so really about characteristics. 24

November 2023

Q. DESCRIBE YOURSELF IN THREE WORDS Energetic, inventive, forwardthinking – is that three words?!

I would want people who are clever and creative and think on their feet. And people who have an exceptional understanding of science because they are practical and crafty. I would also want a spectacular artist to keep everyone inspired and entertained.

Q. WHAT WAS YOUR DREAM JOB AS A CHILD? HOW FAR AWAY IS WHAT YOU DO NOW FROM THAT INITIAL CHILDHOOD DREAM?

» It was very clear to me when I

was five years old that I wanted to become an ambulance driver. I grew up in New York City. And of course, traffic is terrible in Manhattan. Ambulance drivers could turn on the sirens, turn on the lights, and then they got to go speeding through the streets of Manhattan. And everybody moved out of their way. Nobody moved out of the way for anybody else. And I just thought that was just so cool. It was like they had superpowers. So, when I was five years old, my Halloween costume was an ambulance driver!

Q. WHAT WOULD YOUR LAST MEAL BE IF YOU HAD TO CHOOSE?

» Something Indian, spicy,

and vegetarian. Tarka Dahl?

700+

Booking.com has a 700+ strong cross-functional team that operates in Amsterdam, London, and Bangalore

43 languages Booking.com is available in 43 languages and offers more than 28 million total reported accommodation listings

“ Every day we explore ways to make it easier for travellers to pay the way they want, at the time they want, and for partners to grow their businesses” fintechmagazine.com

PEOPLE MOVES

THE LATEST PEOPLE MOVES IN THE WORLD OF FINTECH When it comes to fintech, we tend to talk more about mass layoffs rather than celebrate noteworthy appointments. But these movers and shakers are the latest recruits to the industry

“ Everyone here is highly focused and energised on making Vodeno a major BaaS player” 26

November 2023

PHILIP MCHUGH JOB FROM: N /A JOB TO: C HAIRMAN - VODENO Philip McHugh has been appointed Chairman as part of an executive shake-up at the Polish-based banking-as-a-service (BaaS) provider Vodeno. McHugh was CEO at Paysafe for three years and, before that, spent 20 years working for two of the world’s largest banking groups – Barclays and Citi. He arrives at the same time as a new CEO in the form of Noah Sharp, who also used to work at Paysafe. It comes after British bank NatWest paid over €50m to acquire a minority stake in Vodeno’s parent company, which also owns Belgium’s Aion Bank. The business had been led since January by Interim CEO Helen Smith. Speaking about his appointment, McHugh said: “I look forward to building on the team’s great progress to date and working together to achieve Vodeno’s growth ambitions.”

NOAH SHARP JOB FROM: D EPUTY CEO BCB GROUP JOB TO: C EO - VODENO At the same time as Philip McHugh was made Chairman at Vodeno, the fintech welcomed a new CEO as well. Noah Sharp joins from BCB Group, where he was previously Deputy CEO. He is also the former Chief Banking Officer

of Paysafe, responsible for global financial partnerships and operations across multiple sectors. Sharp boasts a career in fintech and banking, having held senior roles within global banks such as Standard Chartered, where he was responsible for advising the bank’s fintech client franchise in Europe and North America; and Deutsche Bank, where he spent more than a decade in total.

January, and was previously CCO at Salary Finance for four years. An Oxford University graduate, she has worked for numerous financial institutions including Goldman Sachs.

SARAH WHIPP JOB FROM: C MO - CALLSIGN JOB TO: C MO - SPENDESK

DANIEL KELLER JOB FROM: CTO - VISABLE LABS JOB TO: C TO - ONFIDO ID verification company Onfido has appointed Daniel Keller as Chief Technology Officer. Over the last 20 years, he has held executive positions at Visable Group, Scout24, Ciao!, Axel Springer, and was an engineering manager at Microsoft. He also has experience working with various startups, including Berlin-based Solarisbank.

Business spend management platform Spendesk has hired Sarah Whipp as its new Chief Marketing Officer. She brings with her extensive experience at both Fortune 500 companies and startups alike, spanning B2B and B2C channels. This includes spells at tech industry leaders such as S&P Global Ratings, Symantec, and McAfee.

BE’ERI MART JOB FROM: G LOBAL HEAD OF BANKING - EARNIX JOB TO: C PO - EARNIX

RIDHIMA DURHAM JOB FROM: C CO - SALARY FINANCE JOB TO: C CO - COINCOVER Blockchain protection company CoinCover has made Ridhima Durham its new Chief Commercial Officer. She joins at a critical time for the firm, which raised funds in

Earnix, which provides modular SaaS solutions to insurers and banks, has hired Be’eri Mart as Chief Product Officer. A 20-year veteran of financial services, he previously served as Vice President and General Manager for the Fraud Line of Business at NICE Actimize. Earnix says he “has many years of product experience” under his belt.

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THE MONTH THAT WAS

HIGH-PROFILE INVESTMENT HITS THE HEADLINES There’s a nine-figure investment and backing from some high-profile players in our roundup of the month’s biggest headlines from the fintech industry

BANKS FOCUSING LESS ON METAVERSE, RESEARCH SAYS (UK)

FINTECH RAMP RAISES US$300M IN FUNDING (NEW YORK, US) US spend management fintech Ramp has raised US$300m at a valuation of almost US$6bn. The Series D round was co-led by Thrive Capital and Sands Capital, and comes after the company increased its transaction volume by a factor of six since its last funding round in December 2021. READ NOW

The number of banks investing in the metaverse has dropped by nearly a third in the last year, according to research from Hexaware Mobiquity. The findings suggest that banks are shifting their focus away from the metaverse and towards other technologies like open banking and the cloud. READ NOW

CITI INVESTS IN FX FINTECH REXTIE (PERU) Citigroup has made an undisclosed ‘strategic investment’ in Peruvian foreign exchange fintech Rextie. Based in Lima, the startup gives more than 180,000 registered users access to commissionfree trade. According to Citi, it becomes the first FX fintech in Latin America to get investment from a global bank. READ NOW

ZOPA GETS £75M TO ACCELERATE GROWTH (LONDON, UK) Digital bank Zopa has raised £75m in fresh funding, which will be used to fuel expansion. It means the fintech bank has raised over £500m in total, including £130m this calendar year. Zopa recently secured its millionth customer and has lent £8bn in personal loans to date, underlining its success. READ NOW

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TOP 10

FINTECH MAGAZINE’S TOP 10 FINTECH HUBS ACROSS THE GLOBE We rank our Top 10 fintech hubs across the globe, from tech haven San Francisco to South America, Asia and Europe. See our Top 10 below… WRITTEN BY: LOUIS THOMPSETT

TOP 10

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TOP 10

Hong Kong

10 Sydney

Fintechs continue to proliferate the market in Sydney, with the likes of Athena Home Loans, Afterpay, ZipCo and Brighte hitting the market in recent years. Heralded for its supportive regulatory environment for fintechs, Sydney makes it easier for businesses to test the market and engage in preliminary Asia-Pacific market expansion programmes. Sydney’s financial capabilities are built on Australia’s US$2.3tn superannuation pension savings pool, the fifth largest in the world – enabling New South Wales (NSW) regulators to offer a supportive environment for fintech startups looking to secure growth in the region.

November 2023

Hong Kong has long been one of the world’s premier financial centres. Now, the city is transforming its proposition to incorporate fintechs – supporting startups while the region’s legacy banks have begun integrating fintech applications across the financial services spectrum. In fact, a 2020 study by HKMA found that 86% of incumbent banks are integrating fintechs into their operations across Hong Kong. It also launched the Fintech Antiepidemic Scheme for Talent Development (FAST) in recent years – a job subsidy plan of US$15.5m to enrich Hong Kong’s talent pool at the height of the COVID-19 pandemic.

Bengaluru

08 Toronto

Toronto is well and truly the fintech capital of Canada, with over 600 fintech firms and 12,000 financial services companies in the region. Of Toronto’s 380,000+ financial services professionals, over half are women – making it a leader in equality among Western fintech hubs. The region is also home to a large concentration of AI startups, and AI is one of the key technologies leading digital transformations at financial services institutions. Toronto has been hailed for its ability to develop talent and new services. Promoting innovation, fintechs operating in the region are big on consumer protection.

The Silicon Valley of India, Bengaluru is the home of fintech startups in India. The city saw 89 fintech startup deals struck in 2022 alone, beating major Indian cities Delhi and Mumbai per fintech deal count and funds raised. The city ranked as India’s most concentrated region of high-growth tech startups and one of the highest in all of Southeast Asia. In the Financial Times’ list of High Growth Companies in Asia-Pacific, 14 were from Bengaluru. The city is also attracting significant foreign direct investment (FDI), capturing US$17bn funding for startups between October 2019 and December 2021 alone.

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TOP 10

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06 Dubai

Dubai is fast becoming one of the world’s most prominent fintech hubs. The Dubai International Financial Centre (DIFC) is the largest financial ecosystem in the Middle East, Africa and South Asia (MEASA) region. 2023 has seen new fintech company registrations in the region surpass 1,000 for the first time. Today, there are 4,377 active registered fintechs in Dubai, a mammoth amount compared to even some of the most established fintech hubs worldwide. The Dubai Fintech Summit was especially popular in 2023, attracting over 5,000 industry members through its doors.

São Paulo São Paulo has a huge growing potential as the world’s next significant fintech hub. There are over 1,000 fintechs based throughout Brazil, and São Paulo is becoming dubbed the ‘Silicon Bairro’ of South America. Home of the Brazilian Association of Fintechs, São Paulo is fast becoming a place for fintechs to thrive. This is further evidenced by the growing number of accelerators and startups in the city, with programmes like Cubo Itau and Darwin Startups gaining recognition. The city is already home to Nubank, one of the most recognised and well-funded neobanks anywhere in the world.

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TOP 10

New York

Singapore Singapore’s fintech market is valued at a significant US$7.8bn and is expected to register a compound annual growth rate (CAGR) of 7% over the next year. The city has some of the most well-funded fintechs in the world based in its (metaphorical) walls. These include Coda Payments (valued at US$715m), Atome Financial (valued at US$545 m) and Advance Intelligence Group (valued at US$536m). Singapore has the highest number of fintech firms in the ASEAN-6 (Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam), with 1,580 fintech organisations registered as of November 2022.

November 2023

Rounding out our Top 3 fintech hubs in the world is New York. The city that never sleeps, New York has 1,629 fintech organisations headquartered in its perimeter. Fintechs in New York have seen US$48.1bn invested in them across 2,399 rounds. Recent funding in New York-based fintechs includes Seed rounds for Parallax and Pop Social and venture rounds for N5 Now and Tassat Group. Ramp and Teamshares have also seen Series D investment in recent months. Recent investment groups pumping their funds into New York-based fintechs include Greycroft, Endeavor and Rethink Impact.

02 London

London has fast become one of the largest hubs for fintech investment. In 2022, the UK city overtook San Francisco and New York as the world’s biggest centre for fintech investment, attracting £7.8bn (US$9.69bn) in fintech investment for 2022 – more significant than the US$7.8bn raised for New York fintechs and US$7.4bn raised for those in San Francisco. Throughout last year (2022), 27 London-founded unicorns produced the most new ventures (168); most of these

unicorns were fintechs. According to the London Stock Exchange Group (LSEG), a total of 2,500 fintechs are active across the UK – the majority in London – making the city one of the biggest in terms of fintech organisations operating in the region. London is also home to over 20 fintech accelerators and incubators, including Barclays Accelerator, Citi Innovation Labs, Accenture’s FinTech Innovation Lab and the Bank of England Accelerator.

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TOP 10

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The Origins of Silicon Valley: Why and How It Happened WATCH NOW

San Francisco (Silicon Valley) Top of our list of the world’s top fintech hubs is San Francisco, namely Silicon Valley. There are (at the time of writing) a whopping 506 fintech organisations based in the area, which have seen a total investment of US$32bn across 828 funding rounds. The most recent funding of note is a postIPO debt for Intuit, a Series C round for CLARA Analytics, a Seed round in Firstcard and a Series C round for BitGo. The

area is also home to some leading start-up accelerators and incubators, including Y Combinator, which has led investment in fintechs based in San Francisco. Other investors have flocked to offer funds to fintech startups in the area, Techstars, MassChallenge and 500 Global all included. At the time of writing, there are 11,506 investments in Silicon Valley/ San Francisco-based fintechs and 2,614 lead investments.

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HOW QUANTUM COMPUTING COULD TRANSFORM THE BANKING SECTOR It’s an emerging technology often overlooked in favour of en vogue innovations like AI and cloud. How might quantum banking change the financial system? WRITTEN BY: ALEX CLERE

BANKING

uantum banking is, perhaps, one of the least championed trends within financial services today – yet it still has the potential to have a significant impact on the financial system. It revolves around quantum computing and blockchain to build a faster payments mechanism that is also cheaper to operate, because it removes the so-called middlemen who have often been needed in traditional peer-to-peer payments. What is quantum computing and how does it work? Suhail Bin Tarraf, Group Chief Operations Officer at First Abu Dhabi Bank, says: “Computers today use bits to run operations, however a quantum computer uses qubits to perform multidimensional algorithms in real time. Just like classical bits, a quantum bit must have two separate states: one representing 0 and one representing 1. “However, a quantum bit can also exist in states of superposition, be subjected to incompatible measurements, and be intertwined with other quantum bits – creating a multitude of unique combinations. The recent developments in harnessing these unique traits makes qubits much more powerful than classical bits.” Duke Munoz, Sales Representative at TechEniac, continues: “In quantum computing, 0 and 1 can coexist, or even intertwine, leading to a multitude of calculations even with the same input. “This revolutionary technology has enabled a more secure, efficient, and counterfeit-resistant financial system, making it a promising development in the world of finance.” Indeed, so promising is it that MarketsandMarkets forecasts the global quantum computing market to reach fintechmagazine.com

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“ Quantum supercomputing will lead to a range of banking capabilities, such as analysing large areas of unstructured data to make financial predictions or simulate investment portfolios” SUHAIL BIN TARRAF

GROUP CHIEF OPERATIONS OFFICER, FIRST ABU DHABI BANK

US$1.77bn by 2026, up significantly from US$472m in 2021, recording a compound annual growth rate in excess of 30%. If adopted correctly, financial services could be one of the biggest proponents of quantum computing, benefitting from this value creation in the process.

Speed a considerable advantage of quantum banking One of the most considerable advantages that quantum banking provides over alternative methods of banking and moving money is the increased speed. Quantum computing can process data 10 million times faster even than supercomputers, highlighting the astounding capacity that this emerging technology possesses. The authors of an IBM report into quantum banking explain the technical advantages that lurk beneath the hood: “The solution space of a quantum computer is orders of magnitude larger than traditional computers – even immensely powerful ones. That’s because doubling the power fintechmagazine.com

of a classical computer requires about double the number of transistors working on a problem. The power of a quantum computer can be approximately doubled each time only one qubit is added.” This system in turn provides powerful advantages to financial institutions and other players within the banking space – and it’s not going unnoticed by the industry. A recent report published by Temenos surveyed 300 executives across retail, commercial and private banking around the world. Among other things, it found that 63% of executives thought new technologies – including quantum computing – would have the biggest impact 48

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“ Quantum computing has enabled a more secure, efficient, and counterfeit-resistant financial system, making it a promising development in the world of finance” DUKE MUNOZ

SALES REPRESENTATIVE, TECHNENIAC

BANKING

$1.77bn Market to reach $1.77bn by 2026

10m

Up to 10m times faster than supercomputers

30%

Forecast CAGR in excess of 30%

Qubits

Uses qubits to perform operations

on banks in the next five years, compared to just 34% for the next most popularly cited trend: changing customer behaviours. This figure is a couple of percentage points lower than it was two years ago, suggesting a slight COVID-19 tempering of expectations, but significantly higher than it was in 2019 – the last full year unaffected by the pandemic – with just 42% of executives surveyed as part of Temenos’ 2019 research saying that these technologies would be the biggest driver of change. Speaking at the time the research was released, Jonathan Birdwell, Global Head of Policy and Insights for Economist Impact, which conducted

this survey on behalf of Temenos, claimed that banks were aware of the onus that these expectations placed upon them: “New technology and customer demands are the top two trends expected to impact banking in the next five years. To maintain their direct connection with the consumer, banks are recognising that they must become true digital ecosystems.” Risk management among other quantum use-cases Another significant use-case for quantum banking lies around risk, which continues to be an operational tug-of-war for banks fintechmagazine.com

BANKING

“Financial services firms should be considering how they prepare for the quantum computing technology that looks certain to transform the market” UK FINANCE

of all sizes. Quantum computing can perform operations magnitudes quicker, meaning complex financial information – such as the data that goes into assessing credit risk, for example – can be analysed quickly and with more accuracy. A study published earlier this year by Ernest & Young (EY) highlights the complex risk landscape that banks are operating in: it claims that CROs face an extraordinary volume and variety of risks, both traditional and emerging, which all seem to be growing in urgency. Yet their biggest challenge lies in understanding how these risks intersect with each other to create potential points of failure within their organisation, even when traditional risk management metrics look stable. “Cyber risk is the top risk priority for the next 12 months, according to CROs,” the study says. “But credit risk may soon become more of a focal point if economic conditions worsen.” Clearly, then, this necessitates improved technology to help financial institutions manage the plethora of risks they face on a daily basis. Could quantum banking be a solution? First-movers will secure an early advantage Authors of a report from UK Finance previously wrote: “Quantum computing will have applications across financial services, transforming the way we 50

November 2023

approach investment, risk, AI and security and offering financial services firms that seize the opportunities an early advantage. “Financial services firms should be considering how they prepare for the quantum computing technology that looks certain to transform the market. Failing to do so risks others developing the ability to move faster in the short term and to attract the resources that will be essential for long-term success.” Suhail Bin Tarraf, Group Chief Operations Officer at First Abu Dhabi Bank, continues: “Outside of risk management, quantum supercomputing will lead to a range of banking capabilities, such as analysing large areas of unstructured data to make financial predictions or simulate investment portfolios. It will lead to a greater understanding of financial markets and economic booms or busts as well as management of asset allocation. “Experts believe that the commercialised use of quantum computing is still about a decade away. Scalability, cost, maintenance, legacy technology, and regulatory scrutiny are a few of the challenges in store for banks. However, early movers are likely to have an advantage and the chance for gaining a competitive foothold will not be free for long.”

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fintechmagazine.com

LEADING DIGIT TRANSFORMAT IN FINTECH WRITTEN BY: LOUIS THOMPSETT PRODUCED BY: JACK MITCHELL

November 2023

FUJITSU

TAL TION

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FUJITSU

Fujitsu’s Krista Griggs discusses how the IT tech giant is driving digital innovation in the banking, financial services and insurance sectors

rista Griggs is the Head of Banking, Financial Services and Insurance Sector for Fujitsu UK. As her title implies, Griggs’ role comes with big responsibilities; she is charged with leading revenue, profit and the growth of the sector. Managing executive customer relationships, Griggs sets the vision and strategy for her department, leading a team of industry specialists and account executives and orchestrating from the wider organisation to bring the best of Fujitsu to its customers. An influential leader in the makeup of Fujitsu’s UK division, it’s no wonder Griggs made FinTech Magazine’s Top 100 Women of 2022. “Phenomenally proud and honoured to be featured,” Griggs takes inspiration from the women represented working to disrupt “what is still a male-dominated industry.” As a pioneering woman in the predominantly male fintech industry, how did Krista carve out her own path to leadership? Krista Griggs: The making of Admitting she never had a clear ambition to take up a particular role, the position she finds herself at now ‘is well beyond’ a point in her career she imagined after graduating as a software developer in her native Netherlands. 54

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“ Fujitsu has the expertise in all those deep pockets to help with the complex integration of fintech systems at banks and other financial organisations” KRISTA GRIGGS

HEAD OF BANKING, FINANCIAL SERVICES & INSURANCE, FUJITSU UK

Krista Griggs of Fujitsu UK

FUJITSU

“By constantly striving for more and being entrepreneurial, we will achieve further growth and success in the future”

Not that she back into financial didn’t have an idea services because it of what she wanted, is a hugely dynamic it’s more that roles domain, where rapid in the technology change is the norm.” space have grown Fujitsu was more and evolved so of an infrastructuremuch over the years managed services – the professional company when capabilities she has Griggs joined, with a now exceed what mission to become a her formative career digital transformation could ever teach her. company – KRISTA GRIGGS “I started out in something Griggs HEAD OF BANKING, FINANCIAL financial services; I implemented the SERVICES & INSURANCE, studied banking and strategy for in the FUJITSU UK finance,” says Griggs. “So it’s finance division. not a surprise I’ve come back to that.” It was the success of this strategy that saw Griggs has returned to her roots after Griggs become head of the sector just two previously working in identity management, years after joining Fujitsu. “I’m really proud which saw her take up roles in government of what I’ve achieved there,” adds Griggs. and defence sectors. “When I joined Fujitsu we were not But working in a vast array of industries progressing in the finance sector. We are now and sectors has only served to sharpen her growing rapidly and doing really well. We’ve skills today. “Working across different sectors got a great team now that is connecting with has given me a real understanding of what our customers and building partnerships – impacts those business domains, what helping clients to navigate industry change challenges there are and how technology and deliver better outcomes for them.” can help to make that better,” Griggs says. It is this success that has seen Griggs fall “From software developer to enterprise back in love with the industry she started out architect, I’ve always been leading on how in. “I love being able to have a real ambitious you design that change. How does digital vision for the future – to try and break the transformation actually work and what’s the boundaries of what can be done. That is impact it can have on user journeys across where the industry is really exciting and the ecosystem?” Fujitsu is firmly behind that,” she reflects. These skills enabled Griggs to make an “Change is always challenging, though. immediate impact when she joined Fujitsu It has been quite a big culture shift for Fujitsu UK five years ago, becoming Chief Architect and our customers, particularly larger banks. for its Financial Services sector. There can be real inertia and complications in Frustrated with the constraints working terms of getting things done when it comes in defence entailed, Griggs explains: “I came to fintech innovation. 56

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KRISTA GRIGGS TITLE: HEAD OF BANKING, FINANCIAL SERVICES & INSURANCE COMPANY: FUJITSU UK

“So keeping pace with the rate of innovation can be a challenge. In many ways, my job isn’t necessarily delivering that change, but rather moving blockers out of the way.” Fujitsu: A tech giant ready to run Constantly striving to overcome these challenges, Griggs has helped awaken the sleeping giant of Fujitsu’s Financial Services division and get it to run. But, just as Griggs touches on, Fujitsu is far more than financial technology alone. Today, Fujitsu’s reach extends to five core technology areas: computing, network, AI, data & security and converging technologies.

Krista Griggs is Head of Banking, Financial Services and Insurance at Fujitsu UK. With over 20 years’ of experience in designing and implementing digital transformations across various business domains, Krista is changing the way Fujitsu helps its customers transform their business. She’s built a strong team of consultants who bring deep business and technical expertise. With their support, Krista is constantly looking for innovative ways to help Fujitsu’s customers succeed and grow. In recognition of her ongoing commitment to financial services and technology, she was a finalist for Role Model of the Year in the Women in Tech Excellence Awards 2022, Top 100 Women in FinTech 2022 and Transformation Leader of the Year in the Women in Tech Excellence Awards 2021.

Griggs expands: “Our computing division focuses on quantum and high-performance computing. Today, we have one of the fastest supercomputers in the world with the most intricate networks, so we do a lot of work around 6G and look at what that could bring to society. AI is a big part of that too, as is data & security which is a fundamental necessity both in financial services and in our public sector space. Converging technologies is where all of this comes together to deliver new capabilities.” These core pillars of technological innovation run alongside the company’s 60

November 2023

ambition to make the world more sustainable by building trust in society through innovation. Admitting this is a lofty goal, Griggs explains that “fundamentally, this goal comes down to the fact that we (Fujitsu) embed sustainability into everything we do.” Fujitsu: Building an entrepreneurial culture The company is in the midst of a transition from an infrastructure-managed services company to a digital transformation company. This transition hasn’t just required a change of strategy, but a change in culture too.

FUJITSU

“Keeping pace with the rate of innovation can be a challenge… my job isn’t necessarily delivering that change, but rather moving blockers out of the way” KRISTA GRIGGS

HEAD OF BANKING, FINANCIAL SERVICES & INSURANCE, FUJITSU UK

Today, the company is working towards building an entrepreneurial culture to fuel its shift to a digital transformation proposition. Griggs says: “That’s very much a change we are continuing to go through, focusing on the verticals we serve rather than just on our technology capabilities. “As an infrastructure-managed service company, culture was built around risk and was focused on the public sector. Now we are pivoting to achieve strategic growth in the private sector, which means we need to be much more entrepreneurial. We have to understand the business imperatives that

our customers are dealing with. Now it’s very much about co-creation, working with our customers in lockstep to create some of those innovative solutions.” This culture shift is perhaps most pertinent in Grigg’s division – innovation in financial services. This is because “financial services is often the early adopter of new technologies and disruptive innovations. The pace of change is really difficult to navigate for financial services providers,” notes Griggs. “We have to be at the forefront of entrepreneurialism and we are making fintechmagazine.com

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progress, helping customers solve some of the biggest challenges they face. Overcoming those challenges is paying off for our customers and it’s paying off for our business.” Fujitsu: Leveraging data, AI & machine learning the right way Building an entrepreneurial culture is also vital in driving the development of new financial products for the financial services sector. Innovation is ripe – and the ability

to implement cloud systems and leverage data pools through AI & machine learning is at the forefront of growth plans for many financial players. Griggs says: “Ever since the pandemic, we’ve seen rapid acceleration in the adoption of digital services across industries, particularly financial services and insurance. “There’s cloud services, third-party SaaS services and open data sources, which in financial services are really big drivers for change. Open finance too has come to the fintechmagazine.com

FUJITSU

Krista Griggs of Fujitsu: Driving Digital Innovation in Banking, Financial Services, and Insurance WATCH NOW

“ At Fujitsu, we embed sustainability into everything we do” KRISTA GRIGGS

HEAD OF BANKING, FINANCIAL SERVICES & INSURANCE, FUJITSU UK

November 2023

fore and all these new technologies are exacerbated by a diverse set of infrastructure in use. “People connect from home, the office, they are on mobile devices – they can be on the other side of the world – and you still have to maintain those services and manage things correctly.” Of course, with new technologies comes an increase in the rate of innovation, something Griggs feels complicates service continuity management. She adds: “Customers expect a personalised, safe and

convenient service. The last thing a company wants is to be in the newspapers about a data leak which can damage its reputation. Furthermore, transparency is demanded by the regulators especially around sustainability commitments but also around data privacy. “From the comprehensive datasets you’ve collated, it’s essential to distill actionable insights. So, what’s the next step you need to take? What do your customers need? What do your colleagues need? What do the regulators need?

It is important to leverage abundant ecosystems to gain insights into making better and faster decisions to deliver desired outcomes.” One area Griggs feels financial services providers and banks must take caution is in their application of Generative AI, to meet all the above requirements. While its potential is evident, “a lot of banks have clamped down on it because it’s really difficult to maintain trust in the data if you don’t know where or how it’s being used.” fintechmagazine.com

FUJITSU

For Griggs, banks need to put the right controls in place before taking steps toward AI adoption or risk losing client trust. This is even truer for data because if data quality coming into the fabric of operations is poor, utilising this data with AI & machine learning is bound to be ineffective. “The key is to embed the right data fabric,” says Griggs. “Make sure that the data is curated in the right way so that you can trust it. “It is so important to any bank or financial institution so that they can generate those insights to make decisions quickly, allowing business leaders to have confidence in the insights when they prioritise where they spend their resources.” Fujitsu: Mitigating fraud, promoting decarbonisation While open data, or third-party data sharing, is reaping many benefits for banks and associated partners in an ecosystem – it has also led to a rise in data breaches and consequently, fraud. This is something Griggs calls “a real concern for the industry and for governments.” She adds: “Cyber criminals have access to new technology as well, and we are seeing an increase in fraud and cybercrime in the industry.” “The key is to make sure that we keep up with that pace of change, that we embrace that technology in a responsible way so that we can counteract those malicious actors. “Social reach is important here. Having reach through open data allows banks and financial services to see what’s happening with vulnerable customers. It has multiple other benefits, including 68

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helping organisations like banks enable the decarbonisation of finance too. “That’s where we’re seeing partnerships in other industries deliver value to shift financial services from the role of the financier alone, to deliver better outcomes and boost sustainability, like we do with Landmark.” Fujitsu: Partnerships taking fintech to the next generation The partnerships Fujitsu strikes also help it boost the offerings it provides to its clients. Just as the industry at large is doing, Fujitsu is embracing the impact and benefits of fintechs by integrating these platforms and services into its broader ecosystem.

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FUJITSU: LEVERAGING TECH TO IMPROVE WORKPLACE WELLBEING

Griggs says: “We don’t just need collaboration with fintechs, but we also need big tech and other tech vendors. For example, we work with cyber companies like Thales and CrowdStrike to support data management companies. “To manage data and workloads efficiently and effectively, we work with Delphix, Suse and Nuix. Even for AI ethics, we work with a company called 2021.AI, which looks at AI governance and how you make sure that you embed that in the way that you work. “We also work with workplace technology partners like Riverbed, which understands how the services we provide our colleagues can be used to best effect. With Riverbed, we can identify where things aren’t working

The returns on implementing technology to maximum effect don’t just extend to operations and boosting customer experiences, they can have a significant impact on employee wellbeing. This is all the more important in financial services, with research conducted by Solidatus revealing that 71% of global data leaders in financial services are on the brink of quitting. It doesn’t need to be this way, though and Fujitsu’s workforce is starting to see the benefits of using tech to improve workplace wellbeing. As put by Griggs: “We are seeing some of these AI-driven technologies taking a lot of the mundane, repeatable tasks out of workers’ intrays. “These technologies provide the right information at the right time and at Fujitsu, help our team to deliver the right personalised service to our customers. This in turn helps our customers to provide a better service to their consumers. “Of course, privacy should be taken seriously here and it’s important to find the right balance between consumer data and respecting privacy laws.”

fintechmagazine.com

FUJITSU: SUSTAINABILITY FRONT OF MIND Amid Fujitsu’s cultural shift, sustainability has become a key pillar in Fujitsu’s financial services sector when looking at providing the best new fintech innovations to its clients. “We are now seeing a new pillar when weighing our business growth and that is around sustainability and the continued drive to net zero. “Managing our carbon footprint is one thing, but our ESG strategies and considerations are much broader than that. Today, our entire product portfolio is aligned with the United Nations Sustainable Development Goals.” “So we ensure the technology that we’re providing to our customers is contributing to delivering a better society and is achieving some of those Sustainable Development Goals. “We hold our partners to quite high standards around that as well, and it’s very much part of our onboarding process. If we are representing certain ethics and standards, we must demand the same from them, and this has helped us to develop a great ecosystem.”

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and correct them even before they go wrong sometimes. “Whilst banks have real technology capability in these areas, as a technology company with multiple partners, Fujitsu has the expertise in all those deep pockets to help with the complex integration of fintech systems at banks and other financial organisations.” The future of Fujitsu Armed with a history of innovation and technological insight, a true consultative perspective and strategic partners, Fujitsu is truly primed to complete its shift from an

FUJITSU

infrastructure-managed services company to a digital transformation company. This shift is already in full swing, and it’s reshaping the company with unstoppable momentum. Griggs concludes: “I’m very much behind and passionate about the changes that we are making. We need to continue what we are doing to move faster at bringing in the right people and technology to grow the partnerships we have with our customers. “That represents our path to growth and certainty for me, I’m very happy to grow as my sector grows.

“We must continue to ask ourselves the pertinent questions: How can we be even more data-driven? How can we integrate our systems more? How can we use intelligent solutions in the way that we bring products and services to our market? How can we align the full global force of our business to help our customers achieve their outcomes? “By constantly striving for more and being entrepreneurial, we will achieve further growth and success in the future. That is our path forward.”

fintechmagazine.com

DIGITAL PAYMENTS

EMBEDDED LENDING: HELPING CONSUMERS THROUGH A ROUGH ECONOMY Does embedded lending – which allows non-finance firms to offer credit at the point of sale – offer a beacon of hope in turbulent economic times? WRITTEN BY: ALEX CLERE 72

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mbedded financial services have proven to be a game-changer for the industry, allowing non-financial operators to bring financial products and experiences directly to consumers in the places where they already interact online. It’s the technology that allows car rental or holiday booking sites to offer insurance at the point of sale, or merchants to offer instalments at checkout. Indeed, embedded financial services on the whole are expected to reach a market valuation of US$83bn this year – up from US$65bn last year – according to Grand View Research. The runaway leader in this category, says Ernest & Young (EY), is embedded payments.

According to EY’s research, embedded payments are worth US$2.5tn a year and could reach a volume of US$6.5tn by as soon as 2025. Embedded payments, and the data underlying them, help consumer brands to launch new propositions, increase loyalty, and boost customer retention. “As brands integrate the payment flow, it becomes easier to add other products to that payment flow, like lending or insurance,” explains Aaron Byrne, EY-Parthenon Financial Services Leader. Growth of embedded banking should prompt banks to act The promise being shown by embedded lending is something that PwC concurs with. fintechmagazine.com

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“ When financial offerings are integrated into apps and websites people use daily, lenders can use more data to understand a person’s creditworthiness, beyond just traditional credit scores” MIKE SMITH

BANKING AND FINANCE EXPERT

The authors of PwC research – which itself predicts that embedded finance applications will increase five-fold between now and 2032 – believe that “embedded lending is showing great appeal” for non-financial institutions entering the marketplace for the first time. “Software providers, in particular, are offering embedded finance services by leveraging external customer data, nextgeneration decisioning models and API-enabled technology,” they say. “For example, financial software provider Intuit has expanded from providing accounting tools to offering small business loans through a subsidiary with a commercial banking licence, using financial information and credit histories inputted into the accounting software.” The growth of embedded lending should cause incumbent institutions to worry, PwC says. “Incumbent banks risk losing market share in the credit space to new entrants, particularly as lending becomes more fintechmagazine.com

DIGITAL PAYMENTS

“ A blurred line between financial services and nonfinancial platforms might make it harder for consumers to differentiate or choose between legitimate services and potentially predatory ones” MIKE SMITH

BANKING AND FINANCE EXPERT

embedded into consumer sales journeys or small and midsized business operations. Many of these non-traditional players, especially from the technology industry, are upending conventions about how to determine who gets credit, by drawing on data rather than credit reports. They’re also offering clear value to customers and helping them grow.” The consultancy group believes that banks will need to do more than simply launch copycat versions of buy-now-paylater (BNPL) products in order to survive, and fend off plucky newcomers. This is particularly true, as lending products are some of the most profitable lines of business for banks and financial institutions. 76

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Until now, there has been a misconception that regulatory hurdles and concerns around risk would be enough to put off new players, but trailblazing examples from the worlds of big tech and retail have already shown that non-finance brands can compete toeto-toe with legacy institutions – and they must either learn to adapt, or risk losing market share. Economic headwinds waning, but consumers still struggling With concerns about the state of the economy continuing, embedded lending

has an opportunity to seize its moment. Mollie’s latest European Ecommerce Report, published in September, shows that consumers are still concerned about the state of the economy. A staggering 99% of respondents say they have modified their buying behaviour in the last 12 months. In addition, roughly half of consumers (51%) feel negatively about the state of the economy, although a similar percentage (47%) are optimistic about the chance of it improving in the short term. “Although we don’t face quite the headwinds we did last year, economies

across Europe remain in a precarious position,” Ken Serdons, Mollie’s Chief Commercial Officer, said at the time. These economic conditions could necessitate consumers needing access to smaller amounts of credit more frequently – and, with businesses still struggling too, extending credit lifelines to smaller firms could help them ride out day-to-day turbulence and remain resilient. This could include independents having access to credit through their POS app, or companies enjoying more favourable repayment terms through the AR/AP software they use. fintechmagazine.com

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“ Software providers, in particular, are offering embedded finance services by leveraging external customer data, next-generation decisioning models and API-enabled technology” PWC REPORT

DIGITAL PAYMENTS

Nonetheless, despite the abundant positives that embedded lending can bring, banking and finance expert Mike Smith says there are still things we need to be wary of: “Embedding financial services in commonly used digital platforms can make it easier for consumers to access credit,” he explains. “When financial offerings are integrated into apps and websites people use daily, lenders can use more data to understand a person’s creditworthiness, beyond just traditional credit scores. “This is great for those who might not have a strong conventional credit history but are responsible in other financial areas. The convenience of accessing credit within familiar platforms can make the process less intimidating and more user-friendly. “By reducing these barriers, many consumers, especially those often overlooked by traditional banks, can find it easier to secure the credit they need.” Despite the positives, embedded lending still raises concerns “To add a bit of nuance, embedded lending also raises concerns,” Smith says. “The use of alternative data to gauge creditworthiness might inadvertently penalise those unfamiliar with certain platforms or technologies. “There’s also an increased risk of consumers accessing credit impulsively due to the seamlessness of the process. Data privacy is a significant worry, as collecting more information can make users vulnerable if there’s a data breach or misuse. “Finally, a blurred line between financial services and non-financial platforms might make it harder for consumers to differentiate or choose between legitimate services and potentially predatory ones.” fintechmagazine.com

ON THE FUTURE OF ARTIFICIAL INTELLIGENCE IN PAYMENTS WRITTEN BY: ALEX CLERE PRODUCED BY: MICHAEL BANYARD

November 2023

NUVEI

fintechmagazine.com

NUVEI

Netanel Kabala, Chief Data and Analytics Officer at Nuvei, discusses the value that artificial intelligence (AI) will bring to the payments industry

here comes a point during my discussion with Netanel Kabala, Chief Data and Analytics Officer at Nuvei, when he neatly summarises the importance of the payments industry in people’s everyday lives. “What inspires me the most is the fact that payment companies are not usually very well-known, yet they touch the lives of so many people,” he tells us. “We actually affect their lives more than they could possibly understand.” Kabala himself is well-versed in the richness that the payments sector brings to customers’ lives, having taken the lessertrodden path to senior management. Indeed, he joined Nuvei not through recruitment – but by acquisition. A graduate from the MBA programme at Tel Aviv University, Kabala spent almost five years at PayPal before co-founding Simplex, which designed a fiat payments infrastructure for the cryptocurrency industry, in 2014. Simplex was duly bought out by Nuvei in May 2021, with Kabala becoming Chief Data and Analytics Officer – a post he was able to take up when Nuvei’s acquisition completed a few months later. In his new role, he finds himself at the crossroads of many fascinating technologies which are helping to define not just the payments industry, but Nuvei as a company. Not least among these is artificial intelligence, both traditional and generative, which dominates our discussion on this particular occasion.

November 2023

NUVEI

“ Fraud prevention is the perfect storm for AI use cases. It’s immediate, and it has a lot of variables” NETANEL KABALA

CHIEF DATA AND ANALYTICS OFFICER, NUVEI

Difference in AI scope for B2B versus B2C Kabala is clear that, as much as we like to discuss artificial intelligence (AI) as if it were a single technology, it is instead complex and varied. It delivers significant value for those 84

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who embrace it – but what the value entails is very different, depending on whether it is deployed in a business-to-business (B2B) or business-to-consumer (B2C) setting. “Generative AI for B2B companies mostly revolves around productivity and efficiency, while for B2C companies it could actually offer more personalised and tailored services directly to the customer,” he says. “Nuvei prides itself in our relationship management capabilities and the fact that merchants could just pick up the phone or send an email and get a human response at any given time. Automating these underlying processes could enhance the productivity of the people answering those calls, but it’s

NETANEL KABALA TITLE: CHIEF DATA AND ANALYTICS OFFICER COMPANY: NUVEI INDUSTRY: FINANCIAL SERVICES LOCATION: ISRAEL

different from a scalable B2C business that actually serves millions of users and could offer a seamless, automated experience using generative AI.” This level of personalisation can prove vital in a consumer-facing context. Despite the progress that Generative AI has made in particular, it still scans like ‘robot speech’ far too often. This has been reaffirmed in recent months by the continuing popularity of mainstream Gen AI offerings like Google Bard and Open AI’s ChatGPT. Even though they’re surrounded by automation, consumers generally still want to feel the personal touch. Recent research from McKinsey shows that – despite their proclivity

Netanel Kabala is an accomplished leader in data and analytics, serving as Chief Data & Analytics Officer at Nuvei since January 2022. In this role, he spearheads the company’s data and analytics, risk scoring and modelling initiatives as the firm advances its dataled services utilising leading-edge technology, particularly catering to evolving real-time payment necessities. Kabala was previously Co-Founder and Chief Analytics Officer at SimplexCC, which made it easier for cryptocurrency merchants to accept card transactions globally. Simplex was acquired by Nuvei in September 2021, and Kabala joined as a high-ranking executive. He holds an undergraduate degree and a Master of Business Administration (MBA) from Tel Aviv University. He has also been a lecturer at the university’s Coller School of Management, where he helped foster the next generation.

NUVEI

Netanel Kabala, Nuvei’s Chief Data and Analytics Officer, on AI’s Value in the Payments Industry WATCH NOW

“ Here at Nuvei, and in the industry as a whole, we are investing in building safeguards for AI and making sure that everything is done in a reliable manner” NETANEL KABALA

CHIEF DATA AND ANALYTICS OFFICER, NUVEI

November 2023

for all things digital – over 70% of consumers still expect brands to deliver personalised interactions. Indeed, it’s a revenue driver as well as a vote-winner; three-quarters of those surveyed by McKinsey claim to get frustrated when they encounter interactions that aren’t particularly personal, and companies that excel at personalisation can realise up to 40% more revenue than the industry average. Fraud prevention continues to dominate AI use-cases The most pre-eminent use-case for AI continues to be in fraud prevention, thanks to the technology’s ability to analyse large datasets quickly and identify patterns of behaviour. In the payment space in particular, fraud prevention represents the “perfect storm” for AI, Kabala explains.

“Fraud prevention requires looking at many different variables and data types, and giving a real-time response. AI excels at that,” he says. “Some of them are given by the user, some of them are actually behind the scenes and are passively collected. All of this needs to be calculated very quickly with a decision made before money is lost. That’s especially true in digital payments and in digital goods. AI is very useful at that, and I think it’s still the dominant way to tackle fraud scenarios right now.” Kabala believes that compliance has some catching up to do as an AI usecase, particularly when compared to fraud prevention. “For compliance, it’s still a work in progress,” he tells us. “Because regulators typically require companies audited to provide a ‘show-of-work’,

outlining every step of the way in coming to a particular conclusion, it makes the usecase a bit different to fraud prevention. The timeframes are longer, and the required detail is greater. But AI is getting there.” It’s important to distinguish between these traditional applications of AI, which learn from patterns of data and act upon them, from Generative AI, which has stolen a lot of the recent attention and dominated public discourse. They are two separate channels, although that doesn’t mean that Gen AI has no role in financial services or payments; in fact, the future for Gen AI looks very promising indeed. Gen AI is set to become a US$1.3tn industry by 2032 – an increase of more than 3,000% compared with 2022 – according to research from Bloomberg Intelligence. fintechmagazine.com

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Indeed, Bloomberg believes that “rising demand for generative AI products” could add US$280bn in software revenue alone, driven by technologies like specialised assistants, new infrastructure products and co-pilots that accelerate coding. “Gen AI is better for anything that involves conversations, large bodies of text, or content creation,” Kabala adds. “This content could take the form of marketing materials, sales pitches and emails, even code. That’s what we’re already trying to do at Nuvei. Everything related to productivity within the company could be greatly enhanced using Generative AI and all these new capabilities.

“I hope that regulators will help by providing a framework that balances both the innovation that comes from AI with protecting customers and their data” NETANEL KABALA

CHIEF DATA AND ANALYTICS OFFICER, NUVEI

“Mundane and often rigorous tasks could be automated using these new tools that didn’t exist about a year ago – so things like either customer support, text summarisation, knowledge sharing within the company, writing everything from compliance papers to marketing materials. All of these processes could be greatly enhanced using Gen AI.” Building an AI economy fit for everyone In a turbulent economy, where many small businesses are struggling to pay their fintechmagazine.com

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commercial rates, talking about AI might seem like a flight of fancy. Can independent businesses and everyday firms really afford to invest in this technology, or will it continue to be the preserve of large multinationals and enterprises who have the resources to invest? Well, no matter how new Generative AI might seem, we’ve been through this process before. There have been predecessor technologies, like coding and web development for instance, that required companies to recruit skilled talent to succeed. However, what we saw with coding was an emerging wave of technology innovators who found ways to democratise access by rolling out drag-and-drop lowcode editors. Not only did this lower the barrier to entry for firms with fewer resources, it made the entire end-to-end process much simpler and quicker for large companies already invested in the coding economy. We may, in time, see something similar from the AI industry. Currently, those with the deepest pockets are most actively engaged with the technology. But, as AI becomes more mainstream, those early adopters will start creating ways to bring smaller firms into the fold – perhaps with easy-to-use applications or interfaces that leverage their own AI expertise. The advantages of this would be two-fold: first, it will make it easier for everybody to benefit from the power of AI; but secondly, it would ensure that anyone building on artificial intelligence is doing so from a sound base, with all the requisite safeguards in place. “Everything related to data privacy, compliance, explainability and so on is super important in the financial sector. Here at Nuvei, and in the industry as a whole, we are investing in building those safeguards and making sure that everything is done in a reliable manner,” Kabala says. 90

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He continues: “AI has existed for some time in different forms, so it’s not a brandnew concept. What’s different in Generative AI is the fact that only a few companies dominate in the space – typically those that provide large language models. Building infrastructure involving these language models will require businesses to choose whether they’re doing it in-house; using an open-source model; or using a vendor, and if so what are the capabilities of this vendor and their safeguards? “In terms of data privacy, we need to get prepared for new regulations due to the rise of Gen AI. The first one, which is obvious, is explainability. We need to be able to explain why the model made such a decision, why the model offered one payment method over another, or in other cases declined payment. This will be a major shift, I think, for any company using AI. Aside from that, I believe that we’ll see more regulations around Generative AI, how to

“ Payment companies should embrace AI and understand the value we can provide our merchants, and eventually their customers” NETANEL KABALA

CHIEF DATA AND ANALYTICS OFFICER, NUVEI

tell the difference between automatically generated content and human content – not necessarily for payment companies, but in general. And I think that all the conversation around fake news will be heightened in the coming years.”

Do people need to understand AI to embrace it? If operators can successfully navigate this delicate regulatory landscape, there is potentially an AI utopia that awaits them: a perfectly blended outcome where risks are minimised, opportunities are fully reaped, and we get a prosperous AI economy as a result. What would this look like? Kabala has a few thoughts. “First of all, payment companies should embrace AI and understand the value it can provide to merchants, and eventually their customers,” he says. “Even if the value is not immediately apparent and not immediately revenue-generating, improving the internal processes and improving the efficiency will lead to fintechmagazine.com

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greater customer satisfaction and quicker, more accurate decision-making. “That’s where I anticipate the payments sector, and more generally our entire work culture, will get to. I hope that regulators will help by providing a framework that balances both the innovation that comes from AI with protecting customers and their data, all while ensuring that the AI reaches reasonable decisions on their payments.” There continues to be a debate about whether or not customers need to understand AI in order to embrace it. It would certainly help with adoption, but it probably isn’t vital to the continued growth of the sector. Nonetheless, the level of general understanding about AI might surprise us; according to a survey conducted by Ipsos, almost two-thirds of consumers (64%) report having a “good understanding”

of AI. Reassuringly, most people now feel comfortable using products or services that rely on AI, with only 39% of respondents saying they feel “nervous” around AI. But you can compare it with your car. Even as we press on with electrification, cars are still as popular today as they have ever been. Most drivers don’t understand the inner workings of a combustion engine – or even the electric motor that drives new electric cars. Yet they understand how to operate it, and that it gets them to where they need to be. They know where to refill it, or where to recharge it, and what to do when something goes wrong. “Customers care about the value that we provide them, they care about whether they’ve got a solution to their problem,” Kabala says, raising a different analogy of his own. “If you’re standing in line and the cashier doesn’t work because there was an issue with the software, and the merchant couldn’t get their payment company on the line, they don’t really care whether it happened with or without AI. They just want the problem fixed.” Having a detailed understanding of the underlying technology is not so critical when it comes to mainstream adoption, and that is a good omen for the future of AI in payments. “Here at Nuvei, we are looking at different opportunities to enhance everything that we do within the company, using all available tools, from machine learning to Generative AI. That could involve either preventing fraud, improving approval rates, enhancing internal processes and customer support – anything of that nature, while eventually bringing value to the customer.”

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ROUNDTABLE: THE FUTURE OF CRYPTO WALLETS FinTech Magazine gets the lowdown on why the crypto wallets market is set to boom, and how regulatory changes can spur its growth WRITTEN BY: LOUIS THOMPSETT

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Riccardo Tordera

Kate Leaman

In this exclusive roundtable, we speak to Riccardo Tordera, Head of Policy and Government Relations for The Payments Association; Chief Market Analyst at AvaTrade, Kate Leaman; Senior Product Manager of Blockchain and Crypto at Lab49, Martin Masser; and CEO of IOV Labs, Daniel Fogg, about an anticipated boom in the crypto wallets market and how regulatory change could help fuel its expansion.

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Future Markets Insights (FMI) suggests the crypto wallets market is set to soar by reaching US$3.675bn in size by 2033, a CAGR of 9.3%. Why is the crypto wallet market set to grow?

Riccardo Tordera: As more continue to use crypto for everything from investment to day-to-day payments more people will need wallets. In addition, with greater use of stablecoins and CBDCs by then, there will be wider use of digital currencies and hence greater uptake for digital wallets. Kate Leaman: The crypto wallet market is set to skyrocket in the next few years. It’s all thanks to the growing popularity of cryptocurrencies as a preferred way to invest and make payments. As more and more people jump on the crypto bandwagon, they need trustworthy and secure digital wallets to handle their digital assets. On top of that, businesses are starting to accept cryptocurrencies as a form of payment, which means there’s a real need for user-friendly wallets that make these transactions smooth and hassle-free. Crypto wallets in Asian markets, namely India (CAGR 12.3% by 2033) and China (CAGR 8.3% by 2033), are expected to grow substantially. Martin Masser: A major driver is the increase in the acceptance and use of cryptocurrencies. As awareness and understanding of digital currencies rise, more people are embracing the use of crypto wallets for transactions. Secondly, the global use of cryptocurrencies is propelling demand

for the key functionalities crypto wallets offer, such as convenience and security. This, in turn, is attracting more users to the digital wallet market as customers seek to find reliable and suitable methods of transaction. Daniel Fogg: Wallets are the gateway to blockchains and assets, so as the adoption of blockchain technology continues to grow, the wallet market will follow. Wallets are currently the heart of the crypto experience: everything individuals do to interact with crypto happens through them. I’d say that the figure of US$3.675bn feels quite low, considering the amount of development taking place in the space right now. Many wallets are making revenue from the on-ramp and off-ramp fees, integrating dApps, or even receiving fees for listing certain tokens. There’s also an increasing number of multi-signature wallet solutions designed for enterprise crypto treasury management gaining adoption. Another interesting area of wallet growth is solutions built for traditional fintechs looking to create new products on crypto rails. These include paid subscription products such as Alpha Wallet and free open-source modular solutions like RIF Wallet. With all this going on I’m surprised the figures aren’t predicted to be bigger by 2033. fintechmagazine.com

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Crypto wallets in Asian markets, namely India (CAGR 12.3% by 2033) and China (CAGR 8.3% by 2033), are expected to grow substantially. Why these markets in particular?

Riccardo Tordera: China is growing due to the growth of the digital yuan project where in a very short period of time, over 300 million wallets were set up. In India, we have seen a greater push towards the CBDC digital rupee which could have an equal take up on growth. Kate Leaman: Asia, particularly India and China, is playing a vital role in driving the growth of the crypto industry. With their massive populations and increasing internet and smartphone usage, these regions have become hotspots for crypto wallet adoption. Adding to the momentum, the governments in India and China have put in place supportive policies and initiatives that encourage the use of digital currencies and promote financial inclusion. This favourable environment is fuelling the market for crypto wallets, making it a promising landscape for both users and companies. Martin Masser: Both India and China have large populations with a growing interest in cryptocurrencies and their wide range of use cases. We have

seen a huge surge in crypto gaming as one example from countries including the Philippines. Moreover, increasing internet penetration and smartphone usage in these regions provide an ideal environment for the adoption of crypto wallets. This, coupled with a rising young, tech-savvy demographic that is more inclined towards exploring innovative technologies such as cryptocurrencies, is driving demand for crypto wallets. Additionally, Asian markets have many untapped resources, such as India’s renowned developer community. More and more crypto companies are looking to these countries to help scale up and drive substantial growth in their crypto wallet services. Alongside this, governments are becoming more open to crypto activities as they realise the potential economic gains from welcoming the industry. For example, the Hong Kong government has made its desire to turn the country into a crypto hub well-known. Daniel Fogg: Crypto assets in China and India have been heavily regulated, and the market in China has been suppressed for some time. That said, the demand for crypto assets and decentralised finance solutions, such as accessing the US dollar, equitable lending and borrowing, borderless payments, and remittances, is definitely increasing across Asia. The use cases for these DeFi solutions are more common in Asia, as access to a broad range of financial services often isn’t available within these emerging markets. Obviously, as crypto wallet technology continues to grow, so too will the demand in these nations. fintechmagazine.com

What needs to change in crypto to ensure this growth is possible, and possibly beaten; is there still a lack of consumer trust?

Riccardo Tordera: Stablecoins will be going to ensure that growth will be possible and the addition of CBDCs will give the possibility of beating these targets. The growth of GenZ and the growth of web3 will drive even greater growth. Kate Leaman: In order for the crypto industry to keep growing and exceed expectations, it has a few challenges to tackle. One of the main challenges is building trust among consumers. Many people are hesitant to fully embrace cryptocurrencies due to concerns about fluctuations in value, security risks, and uncertainty around regulations. 100

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To address these concerns, it’s important for the industry to prioritise implementing stronger security measures, educating users about the benefits and risks, and establishing clear and dependable regulations. By doing so, we can build trust and encourage more individuals to confidently use crypto wallets. Martin Masser: Building consumer trust is critical. Strengthening security measures, implementing robust regulations and promoting transparency will all help to instil confidence in consumers.

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In addition, as the crypto wallet market grows, competition will intensify. This will hopefully lead to providers making crypto wallets more advanced, secure and userfriendly as they battle to win customers, which will lead to a market saturated by high-quality wallets – all helping to further instil consumer trust. Daniel Fogg: Yes, unfortunately, there is still a lack of consumer trust, which can partially be attributed to misleading social media marketing campaigns that promote tokens that aren’t the premium assets we know store value, like Bitcoin or USDC, often resulting in scams.

These products have little to no tokenomics, and it almost becomes a game to those behind the scenes. I think educating consumers and introducing levels of regulation will definitely help matters, but responsible players in the crypto market also have to do everything in their power to protect customers as best they can in order to build trust. It’s also important to recognise that building trust will take time, and it’s unlikely that we’ll see global adoption of a radical new technology before people become comfortable with it. fintechmagazine.com

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We’ve seen MiCA in the EU; do regulations need to be more widespread, can you see other markets adopting similar regulations?

Riccardo Tordera: MiCA is now set to come into force but may in fact reduce the market in Europe rather than letting it grow, due to the restrictions that this regulation has imposed. The UK on the other side has seen how the approval of the Financial Services and Markets Act in July 2024 has enabled a faster path toward the design of the future regulatory framework for crypto assets and we can see how the government is steering the wheel towards the ambition of making this country the global hub for crypto assets technology. The Payments Association welcomes this and is constantly talking to key stakeholders to support a dynamic and agile approach to regulation in this sector with the aim of making UK plc the place to be. Kate Leaman: Yes, the regulatory landscape in the crypto industry is evolving, and we can expect to see more widespread regulations in the future. The recent introduction of MiCA (Markets in Crypto Assets) in the EU is a significant step towards creating a framework for the regulation of cryptocurrencies. As other markets observe the developments in the EU, it’s quite 102

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possible that they will adopt similar regulations to ensure consumer protection, enhance market integrity, and promote innovation in the crypto industry. By adopting regulations that strike the right balance, countries around the world can create a safer and more conducive environment for the growth of cryptocurrencies and related services. Martin Masser: Regulation plays a pivotal role in the growth and stability of the crypto market,

and the introduction of MiCA in the EU is a good example. It provides a legal framework for crypto assets, enhancing investor protection and market integrity, and facilitating growth by providing clear rules and reducing risks. As the crypto industry matures, more countries will introduce regulatory measures to protect investors and foster market stability. Daniel Fogg: Balanced regulations are a good thing, as they provide clarity around the types

of businesses and products that can be built and run, whilst also offering consumers protection from bad actors and fraudulent activities. However, without balance, these regulations have the potential to constrain technological innovation, often prohibiting the growth of small businesses building on the blockchain. With the right regulations in place, consumers and businesses would be protected, whilst promoting economic growth through innovation. However, it’s a fine balance to strike. fintechmagazine.com

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What does the competitive landscape in crypto look like today?

Riccardo Tordera: With the likely start of a fresh bull market season after the hacking of Bitcoin in 2024 we may assist in a consolidation of the best crypto products, more tokenisation of assets including real estate, the growth of Defit, web3 and a better harmonisation between traditional and digital finance. Kate Leaman: The competitive landscape in the crypto industry is dynamic and ever-evolving. Currently, there are numerous players in the market, including established financial institutions, fintech startups, and specialised wallet providers. With the growing popularity of cryptocurrencies, more companies are entering the market, increasing competition. This competition is driving innovation, offering users better services, enhanced security, and improved user 104

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experiences. However, regulatory compliance, brand reputation, and user trust will continue to be critical factors for success in this competitive landscape. Martin Masser: As for the competitive landscape in crypto today, it’s a dynamic and evolving space. Established players like Coinbase and Binance continue to dominate the market, but new entrants are constantly emerging. What’s more, traditional financial institutions are also recognising the potential of cryptocurrencies and looking to enter the market. This competition will continue to drive innovation and push the boundaries of what crypto wallets can offer. Daniel Fogg: The crypto landscape is often mistakenly viewed as monolithic. I find it helpful to look at the sector as either mainly centralised,

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custodial finance crypto (exchanges, ramps, institutional crypto actors), mainly decentralised, non-custodial tech crypto (Layer-1 protocols AKA blockchains, DeFi, developer tools), and then what you could broadly call the Metaverse (NFTs, GameFi, decentalised social networks). Broadly speaking, we have seen finance crypto retreat in capital allocated and we have seen a number of notable collapses, like Signature Bank, BlockFi, Celsius, and of course, FTX. Tech crypto is continuing to build but with a greater emphasis on finding product-market fit in the short term and without the scale and certainty of the venture capital support we saw during the 2020-22 bull market. The metaverse is still early, with exuberance for NFTs having declined dramatically, but still a lot of potential within the gaming, streaming, and cultural applications of blockchain

technology. And across the board, over the last 9-12 months, there has been a broad decline in transaction volume and total value locked across all platforms. This has been difficult for the industry, because many of the early-stage, small developer-led companies rely upon the venture investment streams to continue with their innovative projects. During the downturn, there’s also been a flight towards more stable, premium assets, such as Bitcoin, which has driven a period of experimentation on Bitcoin away from the main chain. Despite the down cycle, the IOV Labs developers launching projects on Rootstock remain focused on building Everyday DeFi solutions for those in emerging markets who need it most. The reason Rootstock is built on top of Bitcoin is that we believe that while many assets will come and go, Bitcoin will remain. fintechmagazine.com

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How do you think crypto wallets will look in 10 years, will there be increased competition?

Riccardo Tordera: Definitely. Furthermore, CBDCs wallets may well be separated by the ones from the general ones and they are likely to be verified or validated by regulated entities to ensure that the CBDCs are only distributed to the legitimate holder.

For example, currently, most wallets are via a browser plugin, I can imagine that in the next few years, providers will aim to create wallets that can be integrated within your browser, phone, desktop app and probably even with Google and Apple Pay.

Kate Leaman: Right now, there are loads of different players in the market, like big financial institutions, fintech startups, and specialised wallet providers. As cryptocurrencies become more popular, more and more companies are getting involved, which means there’s even more competition. This healthy competition is driving innovation, so users can enjoy better services, stronger security, and improved experiences. However, it’s important for companies to stay on top of regulations, maintain a good reputation, and build trust with their users if they want to succeed in this competitive landscape.

Daniel Fogg: The great thing about digital assets is that you can view and use them across various different wallets, so it will be interesting to see how they evolve over the next 10 years. It’s inevitable that competition will increase, and therefore many of the wallets that exist today will fall by the wayside, while well-designed, secure, popular wallets like Trust Wallet and Ledger should hopefully still be around. However, I imagine that in 10 years, crypto wallets won’t look like crypto wallets at all, rather they will be integrated into normal banking apps. The lines between crypto wallets and banking apps will start to blur, and financial products customers interact with on a daily basis will likely have crypto rails, but customers won’t be able to distinguish any difference in how they interact with both products. Going a little deeper, I think we should expect to see more identity verification tokens within wallets. These cryptographically verified digital copies of passports, driver’s licences, or ID cards could be the future of global identification.

Martin Masser: In the next ten years, crypto wallets could evolve significantly as we see advancements in technology. Wallets are still very difficult to understand if you are not familiar with crypto and increased competition among providers will mean everyone is striving to create wallets with more user-friendly interfaces, enhanced security features, and seamless integration with various platforms.

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VIRGIN MEDIA O2’S CUSTOMER FOCUS ON THE DIGITAL PAYMENT JOURNEY WRITTEN BY: TOM SWALLOW PRODUCED BY: JACK MITCHELL 108

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David Cox, Payment Strategy Lead at Virgin Media O2, advocates customer focus despite the disparity in digital literacy and consumer desire to transform

here’s no imagining what the world would look like without the media, connectivity, mobile devices, and the ability to stream anything, anywhere, at any time. Society now demands these modern forms of communication, meaning providers must endeavour to maintain 24/7 coverage online and on-air. This can also be translated into core business functions, of which payments is one of the hottest topics right now for a number of reasons. Businesses need to make money, which means they need to be able to acquire it from their customers effortlessly. This trend of ease must also be carried across to consumer engagement as they benefit from timely, seamless payments for their purchases; one-off payments and subscriptions. There’s also something to be said for offering customers more flexibility with their payments in today’s society, not only for the literal sense of the word, but also to ensure elements like contracts or subscription services are compatible with their financial needs. This is summed up by Virgin Media O2’s Payment Strategy Lead, a long-term advocate of the business, David Cox. Having worked at Virgin Media O2 for more than 20 years, Cox is well-positioned to be a leader in his domain but also a spokesperson for how the company approaches operations to ensure that the customer gets the most value for their commitment.

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David Cox, Payment Strategy Lead at Virgin Media O2

VIRGIN MEDIA O2

THE LEGACY OF VIRGIN MEDIA O2 Founded by its illustrious and outrageously committed leader Richard Branson, Virgin Media O2 has a legacy of its own and is an organisation that helped bridge the gap from analogue lifestyle to digital-first media and communications. What was first seen as luxury, the mobile phone is now a necessity globally, and Virgin Media O2 is incredibly influential — a name that can be seen across the UK. The company’s four core products include television, broadband, landline and mobile, which are some of the staples of today that a large portion of the population cannot imagine living without. The company’s objective across these four products is to grow continuously with trends around the world, across the industry, and throughout its network of customers, old or new.

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Supporting customers, digital or not According to Cox, network growth underpins everything that Virgin Media O2 does and the core mission for him is to amalgamate systems with technologies and partner services to provide the best possible experience for its customers. This is a response to the overwhelming number of bills received by customers, which can all be simplified into one single element. “Lots of businesses historically may have received a bill for their mobile service and a separate bill for broadband, so by amalgamating systems, customers can have more choice around how they are

billed, making things really clear and simple for the customer,” says Cox. “Customer experience and customer service are our key focuses. From an employee perspective, it’s about crossskilling — working together to ensure we provide the best customer experience and continue to grow the business.” Following this point, Cox also delves into the kind of industry that Virgin Media O2 contends with and boasts its ability to compete with oncoming technologies. “Apart from things moving faster, the business is very competitive and our industry is very fast-moving. We are more agile than

“ From an employee perspective, it’s about cross-skilling” DAVID COX

PAYMENT STRATEGY LEAD, VIRGIN MEDIA O2

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Virgin Media O2’s customer focus on the digital payment journey WATCH NOW

“ What we’ve done in the past year is replatformed with all of our payment service providers to their latest platforms, to mitigate any negative impacts on our customers” DAVID COX

PAYMENT STRATEGY LEAD, VIRGIN MEDIA O2

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we ever were. The thing that’s probably challenged us most over the past few years is the impact of Covid-19 and lockdown. It was a huge learning experience for all. I think what we saw during lockdown was a change in customer behaviour so customers who wouldn’t naturally be what we call ‘digital’ were forced to because they had no other option. A lot more customers use digital services now, and benefit from being able to self-serve at a time that suits their circumstances and lifestyle” This is seen everywhere in 2023: the rise of digital payment solutions and the gradual reduction in the use of cash, although there was a slight increase in 2023 due to the cost of living crisis. But, while it’s always fun to think about where payment technology will be in the future, we must not forget that some demographics could get left behind — which is all part of the Virgin Media O2 customer commitment.

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DAVID COX TITLE: PAYMENT STRATEGY LEAD COMPANY: VIRGIN MEDIA O2 LOCATION: UNITED KINGDOM David has 40 years payments experience having worked in Retail Banking for 18 years, Franchise Ben Sherman stores and then the newly amalgamated Virgin Media O2. He supports all payment methods both old and new across multiple channels and customer types. He also works closely with payment regulators, sponsor banks, payment service providers and merchant acquirers. He always puts the customer first when considering existing or new payment user flows and embraces new payment methods like Open Banking. He also presents 3 radio shows a week as part of a voluntary role which includes acting as Treasurer for a local community radio station.

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“It takes time for consumers to adapt, even to contactless,” says Cox. “I remember how long it was out there before people started to use that technology. In London they called it the ‘TFL moment’, but outside of London it was more the, dare I say, the latte moment when you could actually pay for your coffee without having minimum fees and minimum values attached. “Initially, when that first came out, consumers were very wary of what happens if they lose their card. ‘What happens? Someone else could use it’. So, with any new payment method, it just takes time for people to get familiar and to trust it, which is one of the challenges ahead of us.” Growth is the goal and is enabled by digital technology In such a rapid chain of events, the world has moved into a very autonomous way of working and the majority of consumers today are able to adopt changes much faster thanks to the generational increase in digital literacy. But Virgin Media O2 recognises that not everyone is that way inclined. Although the majority of new customers are open to digital, there remains a large enough population to warrant manual consumer engagements — and it’s something the company will offer until, and if, this way of customer service naturally phases out. In fact, being a major player in the industry puts Virgin Media O2 in a great position to influence the industry through supporting regulators to generally focus the trajectory of media and communications. Having worked with Pay UK, Cox explains how his work helps build a suitable regulatory structure to suit businesses and their loyal service users. “We flag anything that would negatively or positively impact a merchant. We work

with the regulators a lot to ensure that the end-state product delivers what our front-end consumers are looking for. The other thing we keep flagging, which just gets forgotten sometimes, is meeting the needs of all demographics. When I bring this up in meetings, some people within those meetings are still surprised that not everyone actually has a smartphone,” says Cox. It is always somewhat refreshing to see that Cox’s approach to customer service isn’t just about how they interact with the business, but he also likes to understand consumers’ desires from a much deeper perspective. “Some of our consumers still go to the local post office to pay their bill. Not always because they couldn’t pay by other means, it may because the cashier could be the only person they see, or it may literally be the only trip out in the week,” Cox explains. “We must remember to meet the needs of all customers, demographics and backgrounds rather than just assuming everyone’s got a smartphone, or that everyone wants to go digital.” He refers to this as a ‘balancing act’ as he also addresses the idea of digital disparity of those that actually use technology to make their payments to Virgin Media O2. “With the payment landscape ever changing, we must work with providers of digital wallets like Google Pay/Apple Pay/ Click To Pay or indeed, open banking — any of those. We should ensure that whatever we put in front of our consumers, close to 100% of our customers could, in principle, use that function and trust it; know it’s secure and know that we’ve done all we can to develop it from a consumer perspective,” Cox says. fintechmagazine.com

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“ They expect everything to be working 100% of the time, not to try and connect to the wifi at 7pm and find that it’s not working” DAVID COX

PAYMENT STRATEGY LEAD, VIRGIN MEDIA O2

Payment solutions that echo customer commitment When it comes to services, Cox explains, Virgin Media O2 leans on a number of providers to really enhance the experience for its customers. In his role, Cox is tasked with a strategic focus on those partners and their services as the company shifts towards organisations delivering more advanced projects. Open-banking being the key and evolving focus for the industry at the moment means that Virgin Media O2 steers itself away from legacy systems in order to remain current. “What we’ve done in the past year is replatformed with all of our payment service providers to their latest platforms, which gives us that agility to switch on and off certain payment methods — they’re robust, secure, up 100% of the time and that’s what our customers expect,” says Cox. “They expect everything to be working 100% of the time, not to try and connect to the wifi at 7pm and find that it’s not working. I think stabilisation of our platforms and services is something we’ve very much been fintechmagazine.com

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focused on. By having an agile platform, whether it’s payment service providers or internal, we then gain the ability to pilot different solutions to meet customer needs.” To deliver these agile, rapidly evolving, ‘always-on’ payment offerings, the company pays close attention to the approach of ebpSource, one of its main, strategic digital billing and payment partners, who are capable of meeting the needs of the business around the clock. Naturally, with customers expecting their services to be available 24/7, the company relies on a partner that is able to update and service its solutions in the least disruptive way possible while being at the forefront of the latest developments in digital payments. “ebpSource was founded back in 2006, by one of the most experienced teams in the

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“ We must remember to meet the needs of all customers, of all demographics and backgrounds” DAVID COX

PAYMENT STRATEGY LEAD, VIRGIN MEDIA O2

global electronic billing and payment industry. Our collaboration with ebpSource started from those early days and has evolved to support the extensive digitisation of the business across many areas of our digital domain; billing and payments being a key part of that journey strategically. They understand our business and how new technology needs to work within existing frameworks, business processes, technical processes and IT environments.

Additionally they bring us the value of their cross-industry experience, working not only in telecoms but also with utilities, financial services and payment processors” Cox says. This sets the company on the path towards further growth in the digital arena. Open banking is the key trend that Cox expects to see more involvement with in the future. Virgin Media O2 is continually evolving to bring its customers into the digital realm and remain up-to-date with the latest technological trends and discoveries. In doing so, open banking, he expects, will further streamline the payment process for digital customers, making it a more appealing concept for the majority.

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ACHIEVING NET ZERO: A FINTECH PRIORITY Achieving net zero is one of the most important considerations for corporations globally. We track the progress of fintechs in achieving sustainable goals WRITTEN BY: LOUIS THOMPSETT

he need to reach net zero has never been more pressing than it is today. COP19 laid the groundwork for achieving this aim across markets, but how difficult will corporations find reducing carbon emissions to nothing? How much more difficult still, is this for burgeoning industries like fintech? We look at the challenges the fintech industry faces in achieving this aim, its successes so far, and the impact of carbon tracking fintechs on supporting financial services providers and institutions in achieving the very same goal: net zero in finance. CEO and Co-Founder of HeavyFinance, Laimonas

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Noreika, believes that “achieving netzero carbon emissions is now at the top of the agenda for many fintechs”, with growing societal and regulatory pressure helping fintech recognise the importance of aligning their operations with sustainability goals. “As sustainability becomes a competitive advantage and regulatory necessity, fintechs are actively positioning themselves at the forefront of the net-zero movements in the financial industry”, adds Noreika. The industry’s commitment to achieving sustainable growth is a view upheld by Kris Sharma, Financial Services Sector Lead at Canonical, citing the UN-convened Net-Zero Banking Alliance. “This brings

together a global group of banks,” says Sharma, “currently representing over 40% of global banking assets, which are committed to aligning their lending and investment portfolios with net zero emissions by 2050. “These pledges signal the financial industry’s recognition of the importance of sustainability.” He adds: “In a world that is rapidly shifting to a net-zero economy, achieving net zero carbon emissions is high up on the agenda for a growing number of fintechs. “FinTech sits at the apex of two net-zero enablers – financial services and technology. Many fintech companies across the globe have already made commitments to

become carbon-neutral or achieve netzero emissions by specific target years.” Despite the wide-ranging belief that fintechs sit on a path to sustainability, it is not a ubiquitous point of view. CoFounder of SaaScada, Steve Round, feels that achieving sustainability “isn’t happening” right now. For Round, “sustainability and the measurement of environmental impacts must become a higher priority if FS firms want to move the needle and achieve net-zero emissions for themselves and their customers.” He adds: “It’s also important to consider our financial systems’ unique position in the world economy – they control which fintechmagazine.com

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“ Fintechs can enhance transparency by ensuring data accuracy and offering real-time updates on carbon emissions associated with financial activities” LAIMONAS NOREIKA

CEO AND CO-FOUNDER, HEAVYFINANCE

businesses receive funding, what services are offered that support growth, and they can provide carbon impact information on the purchases and investments of millions of customers. “Banks and FS institutions have the potential to drive meaningful change that extends beyond their own boundaries. Banks need to go beyond their own netzero ambitions and look at how they can help to drive the low carbon agenda more broadly.”

Net-zero in Fintech: Status report Despite not seeing a full drive toward net zero yet, Round admits to having seen “some incredible sustainability initiatives that move us closer to net-zero emissions” already put in place. Round adds: “The Bank of Palestine has been pursuing a Green Loans programme for individuals in rural areas for greater water and energy efficiency. “Meanwhile, Bank Australia has purchased a private conservation reserve to protect over 2000 hectares in Western Victoria from any future development. “Members of the GABV have implemented a wide range of initiatives, but a collective effort is required to achieve net zero and more action must be taken by all financial institutions. “Green initiatives are a positive step forward in the fight to reduce greenhouse fintechmagazine.com

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gas emissions, but unless all fintechs take the journey to net zero seriously, we won’t move the needle. “The next challenge for firms is how to prove the impact of these value-driven decisions. How do they measure the outcomes of net-zero initiatives? How do they show customers what it is really doing?” So, while proving the effectiveness of initiatives is a must for fintechs to prove they take net zero initiatives seriously, for Suresh Vaghjiani – CEO and Co-founder of Clowd9 – “having a plan and route to net zero is a big differentiator” to achieving net zero, particularly businesses that would struggle to change their business model to achieve net zero. Vaghjiani believes many fintechs have made a good start to embracing carbon 126

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offset, although feels the industry needs more than the “add-ons” so far seen to achieving net zero. A push to net zero is “perhaps not as systemic as it could be” according to Vaghjiani. Fintech: Closing the gap to net zero With Vaghjiani’s assessment in mind, what more can subsequently be done to systemise net-zero initiatives into the very fabric of a fintech’s operations? For Round, banks and fintechs need to do more than simply publish CSR reports expressing their commitment to net zero, but rather, “weave sustainability into product offerings and give customers a financial incentive to support the transition to net zero”.

SUSTAINABILITY

How fintechs are meeting consumers’ net-zero demands

“These might entail offering reduced loan rates for low emission cars or for energyefficient houses,” he adds, “or more flexible lending to support socially inclusive business initiatives that will have a knock-on effect for communities and ultimately the environment. “To achieve net zero, FS firms must take a data-driven approach, harnessing environmental data and embracing external partnerships to gain a comprehensive view into environmental impacts and help customers to make decisions on long-term sustainability.” However, while harnessing data to quantify the environmental impact of your organisation can be useful, the tools with which data is harnessed (not just for environmental causes) themselves pose significant drains on energy.

We speak to HeavyFinance CEO and Co-founder, Laimonas Noreika, about ways fintechs are meeting the netzero demands of consumers. Noreika says: “Fintechs are responding to the net-zero demands of consumers in several ways. Firstly, they’re creating userfriendly platforms and apps that allow consumers to easily track and manage their carbon footprint. “These platforms often provide insights into sustainable spending, offer green investment options, and enable carbon offsetting. “However, there are areas where consumers have unmet expectations. One aspect is transparency; consumers seek clear, verifiable information about the environmental impact of their financial choices. “Fintechs can enhance transparency by ensuring data accuracy and offering real-time updates on carbon emissions associated with financial activities. “Additionally, consumers are increasingly interested in fintechs that actively engage in sustainable practices themselves, such as using renewable energy or supporting ecofriendly initiatives. “Fintechs should not only enable consumer sustainability but also embody it in their own operations to meet the evolving demands of environmentallyconscious consumers fully.” fintechmagazine.com

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As Canonical’s Sharma notes: “One of the issues facing the tech industry in reaching net zero is the energy intensiveness of blockchain, artificial intelligence (AI), the cloud and big computing. “According to the Cambridge Bitcoin Electricity Consumption Index (CBECI), Bitcoin consumes nearly 100 TWh per year of electricity and data centres use 200 TWh per year. “Cloud computing and the powerful computing needs of AI are fueling much greater energy consumption.” Despite the energy consumption of fintechs to bring innovative solutions to the table, Sharma believes that “there is a huge opportunity for the fintech sector to bring innovative services and develop new business models that enable net zero and establish climate resilience.” But how can fintechs lead a drive to net zero given the energy-intensive means they employ to harness data and deliver solutions? Sharma boils it down to three categories of direct and indirect emissions: “Fintechs can help create a net zero world by adopting science-based Green House Gases (GHGs) reduction across their supply chain and operations. “They can then enable other businesses with tools and technologies to develop net-zero products and services and enable consumers to take action by aligning spending and investment with net zero. “Fintechs can help financial institutions to get better data on ESG and impact analytics around their portfolio companies, to enable greener investment and divestment decisions. 128

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“Fintechs can enable financial institutions’ compliance with climate risk regulations and embed net zero in capital markets.” The demand for climate changebased fintech firms is growing too, something Sharma feels is “evident from the flurry of investment seen from asset owners and financial institutions in the last couple of years.” The rise of climate change-based fintechs Investment in climate changebased fintechs is no shot in the dark. Noreika’s HeavyFinance facilitates sustainable investments through its Green Loans, “connecting individual investors with borrowers in need of equipment financing, enabling sustainable financing solutions that align with environmental objectives”, according to the CEO.

“Fintechs can enhance transparency by ensuring data accuracy and offering real-time updates on carbon emissions associated with financial activities” LAIMONAS NOREIKA

CEO AND CO-FOUNDER, HEAVYFINANCE

Noreika adds: “The platform not only helps farmers access essential machinery but also promotes the adoption of more energy-efficient and environmentally friendly practices. “By financing sustainable machinery, HeavyFinance plays a crucial role in reducing carbon emissions in sectors such as agriculture, which traditionally has a significant environmental footprint, contributing to around 20% of global carbon emissions.” HeavyFinance is but one example of a fintech supporting institutions in their bid to reach net zero. As far as Round is concerned, core banking engines have the capabilities to “equip financial institutions with the visibility needed to better assess net zero progress and

drive real change, bringing together real-time data from disparate sources.” But these companies can do more. “Measurement should not stop at calculating and offsetting carbon footprints”, adds Round, “it should deliver a more nuanced understanding of impact linked to social aspects, such as inclusivity and jobs. “To create such detailed impact assessments will require a 360degree view of business operations, which presents a problem if financial institutions are hampered by data silos. “With a core banking engine, FS firms can access data in a quick and costeffective way to support business decision-making and make rational choices to help achieve net zero.” fintechmagazine.com

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For Sharma, these fintechs will play a vital role in the future to predominantly help financial institutions achieve net zero goals, providing the “infrastructure and technology solutions to bring transparency on emissions across portfolios, assess and mitigate risk in individual transactions and support investment decisions. “Net zero-focused fintechs can also help financial institutions comply with regulatory requirements by providing tools for robust climate and transition risk disclosure and reporting, providing financial regulators with the tools to monitor and test compliance along with data analytics to support policy insights and decision making.” Perhaps most critically, it will be the demand from consumers that drives the proliferation of climate-based fintechs on the market. Sharma sees this as another opportunity for green fintechs to expand their services. “Fintechs can equip consumers with tools and insights”, he says, “helping them gain an understanding of how consumption affects climate change and support behaviour changes.” He adds: “For example, an open banking platform that enables consumers to see the carbon impact of their spending in real-time. Personal finance and wealth management tools can enable individuals to contribute to net zero by enabling them to invest their money in sustainable assets.” It is also another area where fintechs can “leapfrog” the challenges legacy institutions face, driving industry-wide adoption of sustainable services according to Clowd9’s Vaghjiani. Fintech: Will net zero truly be reached? The potential for growth in the climatebased fintech space is growing alongside 130

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its importance. So, looking ahead, we ask if net zero in fintech can truly be achieved. For Sharma, the key to achieving true net zero will depend on fintech’s ability to overcome a “lack of universal methodology to standardise productlevel climate impacts” something that will “require consistent methods for measuring and reporting carbon impacts across the life cycle of products and services”. He concludes: “This extends from scope one and two (direct and indirect) impacts to scope three impacts across the whole value chain. Often the largest product or service impacts are in scope three, requiring a much wider data set from across the value chain. “This can be hard to obtain given the fact that different stakeholders hold different data sets. “Several other factors including regulatory landscape, consumer demands, advances in technology and renewable energy sources, commitment and collaboration between fintechs, financial institutions, governments and other stakeholders will influence the timeline and feasibility of reaching net zero emissions.” This is true too for Round, who notes: “Fintechs and financial institutions may well achieve net zero for the purposes of their reporting, but it is also the impact they can make in the wider world that is key to making a meaningful difference. “We need to change the world with every single transaction - one transaction at a time.” And, for Vaghjiani: “Fintechs and banks need an example of someone truly working to net zero with clear plans showing the benefits and quickly everyone will follow suit. All it takes is one.” fintechmagazine.com

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