Future of Payments Telegraph 2018 by Lyonsdown

SHARE DEAL How to get a fair deal in the sharing economy

PAYBACK TIME Why blockchain could make life easier for zero-hours employees

WHY PAYMENTS ARE PAYING OUT After an £8bn valuation for one fintech IPO, we look at what’s behind the sudden growth in the payments sector

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AWARD-WINNING BUSINESS JOURNALISM • SEPTEMBER 2018

Kicking down the payments barriers

FUTURE OF PAYMENTS How banks and fintechs are teaming up to open the doors to a better payments landscape INSIDE: Will cryptocurrencies ever truly go mainstream? Business Reporter investigates DISTRIBUTED WITHIN THE SUNDAY TELEGRAPH, PRODUCED AND PUBLISHED BY LYONSDOWN WHICH TAKES SOLE RESPONSIBILITY FOR THE CONTENTS

The future of payments – rise to the challenges with Serrala!

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News clippings Balancing the ethics of a successful business Ethics and morality in the workplace are important subjects CFOs need to address. We take a look at the latest articles on the matter

Financial data is worse off than a decade ago Forbes With the rise of smartphones and social media, much has changed since the 2008 financial crisis – we are now far more reliant on instant information than we ever were. But Roger Aitken’s Forbes article cautions that financial data is “worse off” than it was a decade ago. Citing a study by Comprend and Lundquist, which tracks how transparent communication is between large European companies and their shareholders, Aitken demonstrates that the transparency of financial information is far inferior to what it was in 2007. The article asks what this lack of transparency means for society in an era dominated by scandals such as the Panama and Paradise papers, where executive pay has gone up while average salaries have fallen. Joakim Lundquist, founder and managing director of Comprend and Lundquist, thinks this lack of transparency “should be an

element of greater concern” and believes not enough is being done. “The credibility of the financial markets goes hand in hand with the commitment of companies to provide high-quality and transparent first-hand information to regain trust in the market place,” he says. Although the study showed 90 per cent of financial stakeholders wanted companies to present their financial targets online, only 25 per cent of companies did so. bit.ly/2BZUvxw

Have executives lost their sense of purpose? Blackrock

“Where governments have failed, the private sector is increasingly being relied upon to deal with the challenges facing society”

Examining whether companies and governments are preparing properly for the future, BlackRock CEO Larry Fink thinks what is missing is a sense of purpose. Many governments, Fink writes in his annual letter, are failing to prepare for the future in nearly every area, from retirement and infrastructure to automation and worker retraining. Where

governments have failed, the private sector is increasingly being relied upon to take up the slack and deal with the challenges that face society. There is also a general demand for companies as well as governments serve a social purpose. “To prosper over time,” writes Fink, “every company must not only deliver financial performance, but also show how it makes a positive contribution to society.” Fink warns that both the public and private sectors have a big responsibility to deal with the issues that society faces, from inequality to climate change. Besides, he stresses, without this sense of purpose, companies will not achieve their full potential anyway. bit.ly/2p26QI3

Should businesses care if they are considered ethical or moral? Forbes Bruce Weinstein writes about whether there is a difference between ethics and morality in business, asking people on LinkedIn

for their reactions. The majority (76 per cent) said there was, the general consensus being that ethics were a set of rules and guidelines imposed as a code of conduct, whereas morals came from within. “In practical terms, if you use both ‘ethics’ and ‘morality’ in conversation, the people you are speaking with will probably take issue with how you are using these terms, even if they believe they are distinct in some way,” Weinstein says. He avoids using the word “ethics” in speeches, claiming the word can “strike fear into the heart of the listener, because it is usually linked with the word violation.” So should businesses be ethical or moral? Weinstein suggests that instead of wasting time worrying about what the words themselves mean, businesses would be better off thinking about what their meanings have in common and act positively on them – actions, as the saying goes, speaking louder than words. bit.ly/2wApLxd

Don’t encourage your customers to check out before paying

HE ONLINE payments landscape has evolved at a remarkable rate, with so many payment options and methods available for today’s businesses and consumers. The payment experience today is faster and better than ever before. But what is different now is that change is taking place because of consumers’ desire for convenience. Payment businesses need to ensure that advancements in technology are primarily improving the online payment experience for customers. They need to make it effortless, or they will not succeed. There are always new payment technologies and companies joining the market, but I would argue that the key to longevity comes through focusing on the seamlessness and invisibility of your technology for the end-user. Customers may consciously choose a certain payment method over another, but more often than not they will choose the option that enables the easiest and quickest payment. Companies such as PayPal, Mastercard and Visa have finessed this integration with websites of all sizes, always appearing as an invisible extension of a business’s

“Abandoning a difficult or tiresome transaction is just a swipe away” – Kevin Salaman, Elavon

e-commerce offering. Newer payment brands, such as Klarna, are also playing on customers’ desire for ease by offering a period of try-before-you-buy for items, as well as the option to pay for products in instalments. Undoubtedly there is a considerable amount of choice available in the online payments market, but the possibilities for improvements are endless. The biggest challenge for e-commerce sites is tailoring the best payment options to improve the customer experience, depending on the type of purchase they are making. Offering

more than four or five payment options at check-out will appear overwhelming for the customer and will serve only to confuse them and encourage them to check-out elsewhere. There is also a responsibility to ensure that these payment options best represent the country the customer is buying from, especially if the retailer is a multinational e-commerce retailer such as Amazon or ASOS. Ultimately customers have full control over their purchases online, from adding items to the cart all the way through to processing payment. Businesses must ensure

that their e-commerce sites are fully optimised for the best customer experience possible to reduce the rate of cart abandonment. This is a real issue facing e-commerce sites – the current rate of cart drop-off stands at about two-thirds of all online transactions. Multiple factors can discourage potential buyers, such as a poor browsing experience, web pages that are too slow to load and sites that ask you to repeatedly re-enter your details or open another window for payment. This is against a backdrop of increasingly distracted shoppers, as more consumers choose to browse and buy on the move and abandoning a difficult or tiresome transaction is often just a swipe away. By ensuring that customers’ online payments experience runs as smoothly as possible, businesses have a better chance of keeping shoppers on their website, and more importantly, ensuring they check-out and return. INDUSTRY VIEW

Kevin Salaman is SVP, head of global omnicommerce for Elavon www.elavon.co.uk/our-services/smallbusiness/accept-payments-online.html

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How to get a fair deal in the sharing economy

Is the sharing economy taking over the old rental business model? PwC estimates that during the next decade, shared assets will gradually replace more traditional business models (such as car and tool rental and hotels)

“Blockchain has the potential to shake up society and shift the balance of power from big institutions to the everyday consumer, as there is no need for a middleman”

£250bn

£200bn £175bn £150bn £125bn £100bn £75bn £50bn £25bn

2013 Sharing

SOURCE: PWC ANALYSIS

Buying something directly from someone else is now easier than ever – but how do we know we are getting what we paid for? transparent and traceable. Nothing can be changed unless all of the computers in the network agree. People can then buy and sell items with each other through a smart contract which sits on the blockchain. The contract outlines all the conditions that need to be met for the purchase to take place. There is no need to use a middleman, cutting out the fees associated with these. “The big question is, is it better or worse than the current set up?” Semple says. “A lot of people are becoming interested in it as a value exchange as it can trace back the origins of ownership. “At the higher end a number of people have talked to me ab out h ig h -net-wor t h individuals buying artefacts or work s of a r t t h rough

£275bn

£225bn

Traditional model

HE SHARING economy has grown rapidly over the past number of years. Whether it’s looking for accommodation in someone else’s home via Airbnb or catching a ride in another person’s car through Uber, paying people rather than companies for goods and services is now commonplace. Indeed, a recent study conducted by Warwick University showed that the sharing economy grew by 60 per cent in the past 18 months, while PwC forecasts peer-to-peer transactions will hit £140bill i o n b y 2 02 5, u p f r o m £13billion in 2016. But if the whole success of the sharing economy is based on trust, how do we know who to trust? “The whole trust issue is an interesting one,” says Euan Semple, author of Organisations Don’t Tweet People Do. “It is a question of who we trust to make it up on our behalf. Is it the guys in the suits, the banks, or could we cut the middleman out and trust each other?” What Semple thinks will help with this issue of trust is blockchain – the distributed ledger system where everything is permanently recorded,

£300bn

smart contracts because they can offer proof of past ownership. They know it is a genuine piece.” But on the other hand, Semple points out, not everyone would feel comfortable with a degree of transparency that made it common knowledge that – for example – they owned an expensive piece of artwork. “At the moment it is a bit like the Wild West, or like the early days of the internet,” he says. Ultimately, Semple believes, it w ill have more potential than we realise, but things will depend on how the current incumbents wish to adopt the technology, and the problems it can solve for them. “As with any technology it has to solve a problem,”

Semple says. And the area in which he thinks blockchain will turn out to be particularly useful is where goods have to pass through multiple national boundaries, perhaps in developing countries with little infrastructure. It removes the friction in transfer. According to Semple, blockchain has the potential to shake up society and shift the balance of power from big institutions to the everyday consumer, as there is no need for the middleman. “There are a lot of interesting prospects in the sharing economy, and as people get less willing to put up with the siphoning of vast amounts of money into small groups of people’s pockets something is going to have to change,” Semple concludes.

2025

(estimated)

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The future lies in a new universe of payments D

IGITISATION, FAST payments, fraud, blockchain and regulations such as PSD2 are key developments that significantly influence how companies and banks manage payments today and in the future. It is essential for companies to manage their payments as efficiently and transparently as possible. Efficient payments processes help maintain full control over cash flows and costs, prevent the ever increasing risk of fraud, and ensure compliance with legal requirements as well as internal policies. Digitising and automating processes and adopting new technology are, therefore, high priorities for many companies, as revealed by a recent survey on the future of finance by global fintech provider Serrala. Companies are open to innovation, with 77 per cent of global finance leaders surveyed saying they expected financial departments to be fully digitised within the next five years. A whopping 98 per cent of respondents named increasing automation as the top priority for finance processes in scope of this digitisation. But where are they at and how can they improve? For banks, the key challenge today is to respond to growing competition from fintech companies, such as PayPal or Google Pay, offering new payment technologies. These companies have already lured consumers away from banks, and banks must find a way to compete if they want to maintain their leading position in the global payments ecosystem. Today’s CFOs and treasurers are looking for alternative payment channels that are faster, more secure and more efficient. The EU’s PSD2 regulation, which came into effect in January, has delivered a further blow by requiring banks to provide open application programming interfaces (API) and open up their previously proprietary technology. Now banks will need to share banking data with third parties, provided the customer has given permission. As banking becomes more open, new actors will emerge in the global payment ecosystem, creating an entirely different interaction between companies, banks and third parties. So what role will banks play in this future? “Companies and banks will need to rise to their respective challenges. Familiar connections of many years of undisturbed global transaction banking and often slow payment processes will be a thing of the past,” says Sven Lindemann, CEO of Serrala. “Instead, companies, banks and third parties will form new networks in which connectivity and efficient portals will play a key role in everyday business.” He continues: “Realising this early on, Serrala has established a unique offering

“Companies, banks and other stakeholders form part of a global network and a universe of payments. They all need solutions that help them connect easily and securely with each other”

to optimise global inbound and outbound payments processes in an integrated manner. As an experienced financial technology company supporting more than 2,500 organisations globally, we understand the whole payment ecosystem and the implications of new trends for managing global payment and related finance processes. We pick up on trends and provide the software solutions to address them.” Digitisation offers the chance to make a great leap forwards, yet few organisations have fully digitised and automated their processing of inbound and outbound payments and related transactions. According to Serrala’s survey, only 9 per cent of respondents have fully automated their processes. This explains why many inefficiencies still remain. The World Payments Report 2017 of BNP Paribas and Capgemini indicates these inefficiencies include a lack of standardisation of messages and data capture, and lack of synchronisation between receivables and payables, manual processes,

lack of integration between multi-ERP systems and in-house ERP systems. Lindemann agrees. “Serrala’s uniquely comprehensive portfolio of financial process solutions helps organisations benefit from digitisation so they can achieve their goals of greater efficiency, transparency, compliance and fraud prevention,” he says. “Our solutions offer intelligent automation that is based on the logic of AI and machine learning. These technologies take away a lot of the manual burden from the finance departments so they can automate 98 per cent of their inbound payment processing and 100 per cent of their invoice data capture. Our end-to-end solution models mean companies can achieve a fully automated, no-touch process all the way through, from the receipt of an invoice to validating, compliance checking, processing, approving and executing the correspondent payment. Our solutions are diverse, just like our customers. They are modular and can be tailored to unique business requirements.

They also support all types of enterprise systems – from on-premises systems to cloud and hybrid solutions. We also have a new managed services’ offering which provides companies with the possibility to outsource several operational tasks around payments – a unique offering in the global market.” Banks continue to be the sole provider of financial transaction services for many companies, but are challenged by new players, new regulations such as PDS2 and other developments. Plus, companies are increasingly looking to centralise the management and oversight of multiple bank accounts, reduce transaction fees, simplify bank communications, and support blockchain initiatives. However, they are also looking for broader solutions that will provide them with greater control and visibility across inbound and outbound payments and their cash. While many banks are responding to these demands by modernising their corporate banking services, the process can be challenging and slow thanks to legacy IT infrastructures and complex organisational structures. This is where fintech companies come into play – not just as a competitor, but as a supporter for banks. In fact, they can provide banks with the technology and capabilities they need to provide faster, more convenient services in a matter of weeks. Bank can quickly implement proven cloud-based banking solutions with a wide range of banking services and roll them out to corporations and individuals, faster than they could build a custom solution with in-house resources. Serrala has worked closely with banks for many years and has developed BCrest, a set of cloud solutions that help banks expand their customer offerings. Our innovative solutions help banks keep the cost of innovation low, and maintain their existing customer relationships and their established role as trusted advisors. With such a strong extended technology offering that customers are willing to pay for, banks are even able to generate an additional revenue stream and transform their cost centers into profit centres. Companies, banks and other stakeholders form part of a global network and a universe of payments. They all need solutions that help them connect easily and securely with each other and automate their processes to enhance efficiency, transparency, and compliance. And as Serrala’s survey has shown, global financial leaders embrace change and expect their payments and related finance processes to be fully digitised in the next five years. INDUSTRY VIEW

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In June payment platform Adyen became Europe’s largest technology IPO, valued at $8billion. Joanne Frearson finds out what’s behind such sudden growth in the payments sector

Inside the big payments payout AY M E N T PL AT FOR M Adyen was founded in 2006 to modernise outdated systems, giv ing both consumers greater flexibility in how they pay and merchants insight into how their customers like to shop. Since then the company has boomed, catering to demands in the retail sector to provide customers with an omnichannel experience as new regulations allow greater competition in the marketplace. “The market is ripe for disruption,” Myles Dawson, UK country manager at Adyen tells Business Reporter. “There is so much change and so much disruption going on that there is a lot of opportunity to be a part of that.” Regulations such as the Payment Services Directive have given new players opportunities to provide services to consumers in a sector which was previously dominated by the banks. Over recent years a new breed of fintechs has emerged. Money transfer service TransferWise, the digital banking alternative Revolut and mobile-only bank Monzo have all raised millions from investors wanting to capitalise on the new products and services they offer. What these new entrants are doing is improving the payment experience for customers. “It is all about removing friction,” Dawson says. “You want to capture someone’s card details as quickly and efficiently as possible and then never ask them again.” A couple of years ago, Dawson explains, video streaming giant Netflix had poor results because customers were leaving when their payment card expired, as updating the card numbers was too much of a hassle. Now Visa and Mastercard have invented products which allow the card details held by subscription services such as Netflix to automatically update if the customer gets a new one, thus side-stepping the problem. Dawson looks to Uber, however, as the perfect example of a frictionless payment experience. “You don’t even know you are paying,” he says. “You book a taxi

and the payment happens behind Below: Adyen’s Myles Dawson that.” Uber is one of Adyen’s customers. Adyen has also been working with retailers such as footwear outlet Schuh to make payments easier for customers. At Schuh the focus has been on mobile point of sale (mPOS) to let shoppers pay anywhere on the shop floor – now 80 per cent of sales at their busiest London store are made this way. A recent survey by the payment company found that an estimated £12billion of potential sales was lost in the UK due to long queues at checkouts. Dawson points out a lot of retailers are struggling to make things convenient for their customers to pay quickly when they feel like it. “A lot of retailers are failing at the moment,” he says. “It is a common thing. There is no real experience for customers. You go into their stores and they are quite stale. We are seeing a lot of retailers look at how they can differentiate the store experience.” Retailers want to know everything about their customer through the one platform, he explains. They want technology that can provide them with data about their customer’s preferences as well as software that can give them information about stock and a system. At Schuh the shop assistants have an app which can tell a customer if they have their shoe

size in stock immediately – if not, they can order it for the next day. “It is very clear that the retailers delivering a very seamless omnichannel experience are the ones that are winning,” Dawson says. For example, Brompton Bikes has been working with Adyen to pair payment data with other types of data to better understand its customers. Adyen is using this insight to make better internal strategic decisions and give better ser v ice to Brompton’s customers. Another big thing companies want from a payment company, explains Dawson, is one that can support them internationally. He says: “What we increasingly see is retailers going global. They want to give their customers a seamless, consistent experience wherever they shop. Most tech companies or retailers now are born with global ambitions. They don’t want to be on a few high streets. They really want to think about how they can expand into Europe or the US or Asia.” Each country has its preferred methods of paying – Alipay and WeChat Pay in Asia, while contactless is a big thing in the UK – and Adyen is ensuring retailers are equipped to adapt to the local market. In the UK luxury sector, Dawson has been seeing interest in Chinese payment methods. They have been popular for buying luxury goods in China and UK

retailers now also want to integrate Alipay and WeChat Pay in their systems to cater for customers who want to buy this way. Dawson believes one of the reasons Adyen has done so well is because of this customer-centric approach and its culture of innovation. “We listen to what our customers are looking for and where they want to go next,” Dawson says. “We build in line with that.” Dawson thinks future growth in the industry will remain focused towards making things seamless. “We will continue to see the friction disappear from the payment landscape in whatever format it takes,” Dawson says. He sees an eventual end to clunky card terminals in stores and a move towards using mobile tablets as payment devices. Shoppers will be able to pay for things when they want and how they want. “It has got to end up like you feel like you are shoplifting,” Dawson says. “You pick up the five things you want. You walk out. The technology knows you and you get charged. It de-tags the security element.” In the future Dawson believes radio-frequency identification (RFID) will enable this to happen. “The payment capabilities are already there,” he says. “It is just about retailers pulling all of those capabilities together to enable you to do that.”

ROM 27 to 29 November, professionals across the digital trust technologies industry will again be taking centre stage at the Palais des Festivals convention centre in Cannes. TRUSTECH encompasses all the secure technologies and applications being developed and deployed, including new, emerging and disruptive trends. This covers digital identity and credentials, new payment mechanisms, biometrics and the greater adoption of AI, which is increasingly being employed in automated threat detection, big data and analytics and many other cyber-security fields, from banking and financial services, to retail, enterprise and smart homes. More than 300 exhibitors and 250 international speakers – young and talented entrepreneurs as well as opinion leaders from the payments, financial services, retail, identification and data privacy industries – will share their insights into digital trust. The Keynote Stage brings together top industry leaders who explain how their companies are embracing innovation and share their vision on the future of the industry. Participants who have already confirmed their keynote address include the government of Estonia, Qwant, HSBC, Amazon, the European Women Payments Network (EWPN), African Women in Fintech & Payments (AWFP), Ford Motor Company, The Linux Foundation and Visa. At the heart of the event, the worldwide community of innovators and disruptors present ideas, product launches and solutions on the innovation stage. TRUSTECH also helps enterprises develop their business internationally, organising free-of-charge business meetings for all its attendees, whether exhibitors, sponsors, visitors or delegates. INDUYSTRY VIEW

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Payback time for gig economy workers Not everyone has a bank account or works a regular job – and paying these people can be tough. But blockchain could be about to change all that. Joanne Frearson reports

Better opportunities in three numbers Are alternative payment and financing methods only about technology, or can they really bring about change? Online retailers can offer on average 34 per cent lower prices. Small firms can manage their cash flow easier as alternative financing methods offer them more flexible terms than traditional bank loans.

ETTING PAID as a worker in the gig economy or a newly arrived migrant is never easy to begin with – and outdated payment systems or the lack of a bank account can make the process even slower and clunkier. “Everybody is frustrated,” says Andrzej Horoszczak, CEO and founder of blockchain fintech Billon. “There is nobody happy with this system – the sales guys are frustrated, the workers are frustrated, even the accountant is frustrated.” According to Horoszczak the problem is the lack of any customer-centric, centralised approach to payments. Data has to be retyped over and over again into different systems, and there are a multitude of intermediaries involved. “Every single middleman creates cost and complexity,” says Horoszczak. “Businesses want to interact directly with the end-customer and every single intermediary is a data filter.” He describes it as a “dinosaur” way of doing business, adding layers to create a pointlessly complex system. Billon has been using blockchain to cut these processes out and simplify the direct payment of people working in the gig economy. Billon’s blockchain technology works by replacing all the different back-office processes with one IT system. The company ran a pilot using its technology, with an insurance company that employed independent agents. For three months, 3,000 agents were paid using the new system, while another 3,000 were paid via the normal method of bank transfers. The group paid via blockchain

“Every single middleman creates cost and complexity. Businesses want to interact directly with the end-customer” – Andrzej Horoszczak, Billon

€700m

Peer-to-peer lending, sharing and other innovations have led financial institutions to restructure their propositions, leading to SME bankruptcies in OECD countries dropping by 6.9 per cent in 2016.

were rewarded immediately, while the bank transfers were much slower. “The difference was a 16 per cent sales increase when the reward came immediately after the job,” he says. “People were happier and less frustrated.” Horoszczak points out that, like the insurance agents, no one wants to wait longer than they have to to get paid for the work they’ve done. “It is about getting the right amount of money to the right person as quickly as possible,” he says. He sees a huge market for this type of payment. In the European Union, he points out, there are about 70 million people working odd jobs, and huge numbers working in irregular employment. All of them are suffering from these kinds of delays. Another case study by Billon – this in conjunction with tobacco company Philip Morris – showed there was a 30 per cent cost improvement because some of the operations involved were no longer necessary.

Gig economy and migrant workers are not well catered for in the payments sphere, says Billon CEO Andrzej Horoszczak

34% Setting up an online store and processing payments offers new businesses the opportunity to easily sell their products. For example, EU27 consumers spent €700m on mobile apps in 2017.

6.9%

It makes settlement and clearing – the parts of the process that make it slow and expensive – redundant, points out Horoszczak. According to Horoszczak, to maintain a retail business customer costs banks about £300 per year. They have to recoup this money through fees. “The only way strategically to move forward is to change the technology backbone,” he says. Billon is also working on a new platform to make people who don’t always have access to bank accounts – such as migrant workers – become more financially inclusive. It works through a virtual IBAN account, which allows employees to have their money redirected to a physical bank account elsewhere. The scheme is being piloted with a mid-sized bank. “For migrant workers to open a bank account it is a hassle,” says Horoszczak. “It is not easy and expensive because everybody knows they will be here for a few months and they will pay huge fees. We are essentially allowing them to get their salary and pay a few bills.”

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Will cryptocurrencies ever truly go mainstream? D “In the long run, the banks will come round to blockchain”

ESPITE THEIR popularity, banks have so far failed to embrace cryptocurrencies. Why is this? Ever since Bitcoin was created in 2009, new cryptocurrencies have been appearing on the market with no signs of slowing down. Exchanges have been created and billions of dollars invested in them. The banks, however, have been reluctant to get involved. Banks traditionally act as a middle-man when money is exchanged. When someone buys goods or services, the money is passed through a bank before it goes to the seller. But cryptocurrencies work through blockchain technology. Each transaction is recorded on the system, and any change must be confirmed by all the users on the network to be considered legitimate. It gives a transparent view of how everything has been exchanged and cuts out the need for any middleman.

JOANNE FREARSON

“The huge problem is that most banks are taking a mediation role right now,” says Alexander Novozhenov, head of the Sibcoin Foundation, the R&D arm of the Sibcoin peer-to-peer cryptocurrency. “Regular banks are trying to step back from these new technologies because of the fear of being eliminated.”

Is blockchain going to change the world? Novozhenov believes, in the long run, banks will come round to blockchain, and will benefit from not needing to go through a middleman as it will mean faster payments at lower costs and cheaper rates in the credit industry. “Crypto has better technology than old-fashioned money,” Novozhenov says. “It is more transparent and better to track. Real money, which we have right now, can’t give us that kind of transparency.”

Digital campaigns from May 2018

Disruptive technologies

Workforce sustainability

Future of transport

Supply chains

Blockchain

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How start-ups are making life easier for the big banks Once upon a time small, agile fintechs were poised to pose a major disruptive threat to the traditional banking industry. So what happened?

SPECIAL REPORT JOANNE FREARSON

P UNTIL recently, the big banks were the undisputed kings of the payments jungle – until a few plucky upstart start-ups emerged to defy the traditional order, creating new products to make buying things quicker and more convenient for consumers. From mobile banking apps to lending platforms, these new disruptors have been shaking up the market to the shock of the big beasts grown complacent on their own dominance. Or at least, that was the official narrative. But instead of seeing these new entrants as unwelcome competition, the banks have been turning towards these new players, collaborating with them and absorb their new approaches.

Breaking new grounds Barclays has been at the forefront of these new-found partnerships, launching its own fintech start-up hub, Rise, which already has offices worldwide, from London, New York and Tel Aviv to Mumbai, Vilnius and Cape Town. “We are very positive about working with startups,” Nick Kerigan, managing director of future of payments at Barclaycard, tells Business Reporter over the phone from the Rise Shoreditch office in London. “The incumbent’s attitudes towards start-ups are changing. “If you back track 24, 36 months ago the narrative was [fintechs were] going to disrupt all of the established banks [who felt they didn’t] need to work with these fintechs. The narrative is very different now. Banks have acknowledged that fintechs are able to spot opportunity and create solutions quickly with new technology. “They are able to explore things that sometimes a bank does not have the bandwidth to do. Equally, fintechs have acknowledged and identified an opportunity to work with established banks because they have a trusted brand.”

But figuring out what to bet on can be quite challenging, cautions Kerigan. Its Rise accelerator programme is a method for Barclays to identify startups that understand that the business model in payments is two-sided. Kerigan says: “If you are creating innovation then you need to figure out a benefit for the consumer, but also figure one for the merchant because it is usually the retailer that will be paying for that service. “They need to be able to see the commercial benefit in adopting a new way of taking payments [and] if it is going to increase the volume of sales they make or improve their efficiency. “That means there has to be a winwin on both sides. There also needs to be a win for whoever is providing that service, otherwise the service can’t be sustainable. Without that it is hard to scale a solution in payments, with payments being essentially a highly scaled business.”

Fintechs have also been benefitting from the sheer scale of the traditional players, Kerigan explains. They have millions of customers which start-ups can gain access to through partnerships. Banks also know the compliance and regulatory landscape very well. Payments have been a big focus for start-ups as customer’s expectations have evolved. Kerigan estimates that about two-thirds of venture capital funding over the past two years invested in fintechs has gone into payments. “We have seen dramatic changes,” he explains. “I have seen more changes in payments – certainly in the UK – in the last 10 years that we have seen in the previous thousand,” Kerigan says.

In Flux

Left: Barclaycard’s Nick Kerigan; above: Costa is one company trialling new digital receipt technology

One start-up which Barclays thinks can deliver this business model is digital receipt firm Flux. Barclays sponsored Flux, which was founded by the early employees of digital banking alternative Revolut, bringing into the Rise accelerator programme last year. The bank also funded a proof of concept with sandwich company Eat which ran through the later parts

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Fintechs vs banks: the digested read Are fintechs really a force for disruption in the payments sector, or are we now seeing a more collaborative shift in the dynamic between the new boys and the establishment banks? Here are the main talking points… Fintechs and banks: rivals or teammates? Banks have been working with fintechs as they have realised they can spot opportunity and innovate quickly through technology. Fintechs, meanwhile, have been benefitting from banks through their large customer bases. So the new symbiotic relationship is a no-brainer. What is behind all these changes? New regulations such as the Payment Services Directive have opened up opportunities for new entrants in the market. Expectations have changed, too – consumers want a seamless payment experience, not hamstrung bureaucracy and form-filling. Payment is a two-sided business model For payments to be a good investment, there needs to be a benefit for the merchant and the consumer. The retailer must see a commercial benefit of adopting a new method of payments. of last year and early this year, where customers buying a sandwich at Eat receive a digital receipt that appears in their banking app. “There are many benefits to that from the consumer side as there is no paper – you don’t have to carry around the receipts,” Kerigan says. “If something goes wrong you don’t have to find that receipt you got six months ago. It is much easier to digitise. “Equally for the merchant – they hate having all this paper in terms of receipt roll and reconciling. At the end of day it is a pain – and when you think about the environment […] and the number of trees used in receipts that are just thrown away. “We got quite excited by Flux – the proof of concept we ran was successful. We are now rolling out a much larger commercial pilot in partnership with them.” The start-up receipt service is now part of Barclays Launchpad, an app that has 20,000 customers who volunteer to test out new services. Flux has also recently announced a new partnership with Costa Coffee.

The mobile consumer Kerigan sees demand for mobile payments only increasing. “Consumers like the fact that they are able to make payments through using their smart phones,” he says. “Around 85 per cent of us now have a smartphone – and we are more likely to take it out of the house than our wallet. “[That makes it] convenient to make payments through your mobile phone. Mobile offers a benefit over those contactless cards, for example – the ability to identify where you are when you are making a payment. That

What is popular? Mobile payments are becoming increasing popular. Around 85 per cent of us have a smartphone and we are more likely to take it with us than an actual wallet… What is the future? The future of payments is ultimately in making things convenient and invisible. The aim is to be able to walk into a shop and out again, having paid for your goods without having to take even a smartphone or card, never mind cash, out of your pocket.

“Start-ups and banks are not just taking their inspiration from the payments space. They are also building products based on how other industries are digitally transforming”

is a useful piece of information that you can pull into your app.” Dawson forsees a world where payments will run in the background, with consumers only being notified when the payments happen. There will be no need for customers to struggle with credit cards or cash and payments will occur automatically. Barclaycard has been building invisible payment solutions Dine & Dash and launched partnerships with restaurants such as Prezzo, where diners can pay for meals with mobile apps, with payments automatically deducted from the customer’s bank account when they leave. These changes are in response to recognised consumer demand for easier payment methods. “The main thing that is driving this is the consumer and their expectations around the services experience,” Kerigan says. “Consumers increasingly expect experiences that are convenient.” Start-ups and banks are not just taking their inspiration from the payment space. They are also building products based on how other industries are digitally transforming to improve the customer experience. “What we have noticed is that when consumers have expectations for one service they transfer that expectation to another service,” Kerigan says. “For example, if electricity companies can deliver bills electronically and let [consumers] control the heating remotely, they’ll start to take those expectations into financial services. “You have this virtuous circle of payment innovation. It is about giving the consumer choice and new ways to pay.”

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Sink or swim: why the financial services sector needs technology to tackle money laundering “By using real-time search technology, AML investigators can uncover all adverse information on new and existing customers”

LOBAL REGULATORS are cracking down hard on failures by financial services companies to meet their anti-money laundering obligations. The UK is no exception – its Financial Conduct Authority (FCA) had more than 500 investigations open in April 2018, a fivefold increase since 2016. In addition to fining companies and even key staff that are non-compliant, the FCA has the power to restrict a financial services company from onboarding new customers in the UK for many months. Such penalties are vital to stifle the £90billion being laundered through the UK every year. Nevertheless, it can also have grave implications for a bank’s business and profits, which will last long after the restriction has been lifted.

Learning lessons This highlights the need for the financial sector to fully understand the importance of compliance with AML regulations, particularly when it comes to “knowing your customer” (KYC) and “knowing your business” (KYB). This legislation is vital to protect both the economy and the public from organised crime and terrorist financing. A key part of compliance with KYC and KYB regulations is searching for “negative

deploys artificial intelligence (AI) to replicate the performance of the very best due diligence analyst. The technology uses more than 500 search terms in multiple languages to perform real-time searches of the surface and deep web, as well as key global databases for information on customers worldwide. AI technology can perform multiple KYC checks simultaneously and search 24 hours a day, seven days a week, flagging any adverse media to human compliance managers the instant it appears, without delay. news” or “adverse information” on new and existing customers. This means not just searching for publicly available online media, but a range of other sources too. These include sanctions and watch-lists, business registrations, regulatory filings and databases and the “deep web” not indexed by search engines.

Breached defences Despite the importance of this due diligence, too many companies haven’t updated their search processes. Many are using data from third-party providers which, as noted in a recent FATF report on the concealment of beneficial ownership, can be out of date or incomplete. Others, meanwhile, are

searching manually using search engines such as Google. In doing so they aren’t using the right technology for KYC checks. This wastes time and resources, and means they risk missing key information on customers, leaving gaps in defences that money launderers can exploit. It’s unsurprising, then, that the FCA encourages the use of appropriate innovative technologies to support risk-assessment processes.

A better way Advances in regulatory technology (RegTech) mean there are now solutions capable of optimising adverse information searches. Kompli-Global’s kompli-IQ, for example,

Why the future of payments will no longer just be about payments $503bn In-store mobile payments are predicted to reach $503billion by 2020

HEN WE talk about the future of payments, we usually focus on the forms of the payments themselves – whether they are cash, card, different types of mobile payments or even crypto-payments. But a key question constantly overlooked in the industry is: will the future of payment solutions still serve the same purpose as we understand it today, a solution with the sole purpose of paying someone? Payment as a standalone industry has existed for centuries. It started with cash, then cheques, and now card payment being the mainstream. We have seen a recent upward trend in mobile payments, with providers such as Apple Pay and Google Pay competing for millennial adoption. Although offering a variety of ways to pay, current payment solutions are almost entirely isolated from other financial solutions. As banking solutions and investment solutions move towards mobile, we are now living in an age in which we see the three financial industries merge into the mobile platform.

Currently, there are certain common mindsets in Europe – for example, people who use cards to pay but manage their money in a bank, or those who set aside money in a bank account for daily spending, as their investment funds are illiquid and volatile. In fact, your payment tool can also be your money transfer and financial budgeting tool, and your daily expenses could in fact be coming from your investment funds, investments which don’t have to be high volatility or low liquidity. After all, if we have payment, banking and investment apps all on the same mobile platform, what stops them from integrating into one? Haven’t Alipay and Wechat Pay in Asia already led the way for this integrated trend?

What does this mean for the future of payments? The inevitable trend is that payments will no longer remain isolated from other financial activities, such as banking and investing. To enable consumers to get returns from their daily spending money, financial players will have to

work together to lay the foundation for such an ecosystem. The future of the payment industry inevitably overlaps with the future of the banking industry and the investment industry, spheres that will collaborate within one ecosystem for every customer. Motivated by the prospect of making returns on their savings, as well as the ease of daily use, 21st century consumers will favour only an integrated p a y m e n t- b a n k i n g- i n v e s t m e n t solution. By combining daily expense and investment money together, this will create a reciprocal effect: while your investment money will serve your everyday spending, the easy access to investment funds for daily use will in return drive more demand in investment funds. The future of payments will no longer be just payments themselves. It will be a solution that integrates all financial services into one. INDUSTRY VIEW

frank.zhou@zeux.com www.zeux.com

Time to act With such RegTech tools, there is no excuse for banking firms not to identify customers with links to criminal activity. By using real-time search technology, AML investigators can uncover all adverse information on new and existing customers. In doing so, they can not only save resources, they can protect their profits and brand, all while safeguarding the wider European economy and the public from the worst financial crime. INDUSTRY VIEW

+44 (0)20 3199 7115 martin.pashley@kompli-global.com

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Inspector

Dogberry FT Hard Currency podcast www.ft.com/hard-currencypodcast

Katie Martin from the Financial Times discusses the recent surge of sterling against the dollar at the end of August with Eoin Murray, head of investment at Hermes. Murray believes that when Michel Barnier, the EU’s chief Brexit negotiator, suggested that Europe was ready to offer an unprecedented partnership to the UK, leading to the 1.2 per cent rise.

Payments Spotlight podcast Unikey’s new card marries biometrics and cryptocurrency technologies An email address, a phone number and a few seconds – that’s all the customers of a few Australian, Chinese, Thai or Singaporean banks need if they want to send and receive money. SWIFT, the secure financial messaging network, has launched a GPI-empowered pilot project that it hopes to implement with 10,000 banks around the globe by 2020. The technology does not only speed up the transactions but makes it available even after standard banking hours. The banks participating in the pilot project are ANZ bank, the Commonwealth Bank of Australia, the National Australia

Bank, Bangkok Bank, Bank of China, China Construction Bank, DBS, ICBC, KASIKORNBANK, Siam Commercial Bank, Standard Chartered Bank, and United Overseas Bank. Financial technology disruption does not need to be revolutionary for the sake of it – sometimes combining two or more existing technologies can result in a superior solution. In this spirit, Unikey has teamed up with Hong Kong-based MeReal Biometrics and married fingerprint sensor technology with cryptocurrencies. Unikey’s new plastic card can store Bitcoin, Bitcoin Cash, Ether, and Litecoin

tokens, but can be activated only using the owner’s fingerprint. While the financial authorities of the Western hemisphere promote digital payments, China’s Central Bank has sent an unambiguous message to retailers that they must accept cash. The Hefei department of the People’s Bank of China reiterated its July announcement which clarified that merchants who have refused to take cash had “infringed upon the legal status of renminbi and hurt the rights of consumers.” There have been other signs of increased caution about mobile payments. Authorities

plan to reduce the number of the licensed market players from the current 270. China has one of the most dynamic increases in the number of mobile payment users, with 70 per cent of Shanghai consumers using only digital payments.

player.fm/series/ payments-spotlight

Tony DeSilva, supervisor at the US Federal Reserve, lists the deadly weaknesses of financial institutions in a this bite-sized podcast. DeSilva says that organisations fail to implement fresh risk management procedures to protect the security of retail payments for multiple reasons, including: the procedures are informal,

Facebook Messenger Payments

It’s been available in the US for a while, but now Facebook’s hugely popular Messenger app payment add-on is available in the UK and France.

Google Pay

Google’s answer to Apple Pay is an essential tool for Android smartphone users, letting you make oneclick payments online and in stores everywhere.

decentralised or missing, organisations have a passive oversight of third parties, the board is hardly ever involved, and the staff do not get the necessary training.

Mobile Payments Today

www.mobilepaymentstoday. com

Biometrics is not a one-sizefits-all solution, warns identity management and security expert Andrew Jamieson. Lots of attention is dedicated to the “falsification of the biometric trait”, such as fingerprint or facial metrics, but often we forget that after capturing these individual traits they are turned into zeros and ones – data that infiltrators are willing to steal.

Instapay

www.instapay.today/blog

Guest blogger Patricia Hines, visits the NACHA Payments Conference and analyses the slow adoption of realtime payment solutions. She says that “only 42 per cent of treasurers are looking for instant payments” and that in some industries, like insurance, the financial relationship among the interested parties is too complex.

The next generation of mission-critical banking services

OUNDED IN 2013, Banking Circle is a next-generation provider of mission-critical banking services – from payments to lending. Award-winning solutions from Banking Circle are underpinning a growing swathe of fintechs which are disrupting traditional banking solutions. Banking Circle is also helping the incumbents catch up with the new generation of innovators, helping them overcome the delays in being able to innovate because of having to work with legacy systems. Today, Banking Circle is leading the rise of a super-correspondent banking network, helping fintechs and banks provide their customers with better cross-border banking solutions, without the need to build their own infrastructure and correspondent banking partner network. The ever-evolving global marketplace is driven by an increasing need for faster and less costly payments, compliance and transparency,

resulting in one of the fastest-growing segments within the banking ecosystem. Banking Circle believes that the future of payments is cohesive – there will be no differentiation between local and cross-border payments. All payments will occur quickly, at low cost and, eventually, without any cost implications. Payments will simply be payments. Banking Circle is working to make this future a reality as soon as possible. It is not an easy task to build solutions that create value and are sustainable in the long term – a challenge faced by traditional banks and the new generation of fintechs. But, through Banking Circle solutions, the infrastructure to support better banking services is being delivered. For example, as a multi-currency, multi-jurisdictional banking solution, Banking Circle Virtual IBAN negates the need to have several banking relationships and enables FX and

businesses of any size. Banking Circle Lending tackles these challenges with low fees, a quick application process and flexible repayment options to suit the ebb and flow of an small or medium-sized business.

Solutions to meet changing market needs

payments businesses, and marketplaces, to give their customers their own virtual IBANs, helping them overcome their payments acceptance, settlement, and reconciliation challenges. In June 2018, Banking Circle launched its latest proposition, Banking Circle Lending, to help fintechs support their customers through the provision of business loans. Slow cashflow and difficulties in accessing additional finance can have serious, even fatal, implications for

The evolution of the financial utility is giving banks and fintechs the opportunity to benefit from the investment made by specialists in back-office functionality, without having to commit significant time and resources in-house. By creating an ecosystem of connected services, financial utilities such as Banking Circle are delivering a genuine advantage for the banking sector. INDUSTRY VIEW

To find out more about Banking Circle visit www.bankingcircle.com

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Business Zone

Four pages of analysis and expert comment

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Making customer insight pay is the future for retailers T HE CUSTOMER is always right, as the old adage goes. But the real challenge for retailers is not simply in serving the customer – the difficulty lies in finding out what they are thinking in the first place. Consumer expectation is the highest it has ever been and the way consumers act, how they think and what they expect from a brand changes by the day. Despite the great pressure that retailers are under to meet these evolving demands, this should not be seen as a burden. In fact, the opposite is true: there is a great opportunity for brands that deliver on the promise of customer-centricity. A critical factor in getting this right will be perfecting the experience of buying and selling goods. If a consumer has a brilliant customer journey but then can’t buy what they want, the investment will be wasted. A commitment to delivering the future of payments therefore has to match the enthusiasm with which businesses approach the rest of the customer experience. As Gartner has stated, uncertainty in the customer experience is the main reason for the frustration and disappointment consumers feel towards brands. This has

to be eradicated. The prize at stake is customer satisfaction and loyalty, an increasingly fragile concept in a competitive market. The question is, how does this manifest itself on the frontline of retail?

From tactical to strategic Nowhere is the customercentric approach more important than when deploying a common strategic play in retail – omni-channel payments. According to 87 per cent of mid-large retailers surveyed by Context Consulting on behalf of Valitor, omni-channel payment solutions play either a “critical” or “important” role in improving customer experience. Yet the impact

this offering has on a business goes far beyond the individual customer touchpoint. Technology that allows customers to buy online and return in store taps into the convenience that consumers crave and expect. Yet if this is not matched by slick supply-chain management to meet the demand, operations can quickly unravel and the customer’s payment experience will suffer. The same principle applies to taking payments in-store. When a retailer equips staff with mobile POS terminals, if they are not trained to use them, if they are not regularly charged or if they aren’t easy to use for customers, the retailer

instantly loses the value of that technology investment.

Staying focused In the rush to position themselves as innovators delivering the future of payments, it can be difficult for retailers to remain focused when selecting new technology. The bottom line is that any deployment has to meet the customer’s needs. For instance, people using a discount warehouse outlet won’t necessarily expect a digital concierge service in the same way that someone browsing a premium department store would. Too regularly, attempts to create a cutting-edge experience can actually leave the customer

behind. If technology is to deliver changes that offer real strategic value, such decisions have to be based on reliable market and customer insight. This is non-negotiable. More than ever, if retailers are to make the strategic decisions that make a significant impact on customer satisfaction, they have to be directly in tune with what their customers expect and how these demands can be met by the business. Customer insight holds the key to the future of payments – now there has to be action behind the rhetoric. INDUSTRY VIEW

enquiries@valitor.com www.valitor.com

Cryptocurrency and the future of cash

ANY ECONOMISTS believe the world will someday be cashless. They point to India, which recently banned lower-demonination notes. How long before the UK follows suit, asks Henley Business School professor Dr Benjamin Laker. Consumers are embracing a wide array of payment options in today’s increasingly complex marketplaces. Cryptocurrency evangelists believe cash is a relic of the past, but Mark Ridley, partner at global advisory firm Transform Performance International, believes it is “a symbol of the nation state. It will always be king.” He’s right. Contrary to widely held beliefs, cash is not dying out, despite the increasing use of mobile phones

and contactless payment for purchases. The Bank for International Settlements said in its latest report that the amount of cash in circulation rose from 7 per cent of global GDP in 2000 to 9 per cent in 2016. A cashless society remains an elusive myth — both today and for the foreseeable future, with 79 per cent of US consumers in Cardtronics’ recent research claiming they can’t imagine a world without cash. A full 83 per cent of respondents said they would miss cash if it went away, and 85 per cent believe it will never go out of style. And while digital and mobile payment adoption is rising, a moderate pace of adoption indicates that consumers are complementing

• Cash is widely used in a variety of circumstances • Cash dominates small-value transactions

the use of cards and cash rather than replacing them large-scale. A separate study conducted by the Federal Reserve Bank of San Francisco reached three similar conclusions… • Cash continues to be the most frequently used consumer payment instrument

The third point is particularly troublesome for those pushing digital payments. For consumers to embrace these in all settings and situations, they not only need to be as fast and as simple as cash, but consumers have to perceive them as such. Until this happens, cash will remain king. It isn’t going away. Not now, nor any time soon. INDUSTRY VIEW

@DrBenLaker www.transformperformance.com

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Flagship service celebrates five years and five million switches

I Don’t show me the money: How apps revolutionised the payments sector

HE FUTURE of payments is changing. From alternative payment methods (the ways in which we pay) to the internet of things (the channels we pay through), innovation is rife. But what’s driving this innovation? It’s expected that by 2020, $1.5trillion of commerce will be transacted via mobile devices in the US and Europe alone. Payment processors such as Stripe, Judopay, Adyen and Braintree have moved the dial in terms of customer journey, and now the expectation is high. Cast your mind back a few years to the beginning of m-commerce. To when Uber was born, for example. Uber changed the way we think about transportation. It didn’t invent the taxi ride, but it did simplify it. No longer do people stand on a street corner and wave their arms in the hope that a black cab will stop. Nor do they phone the local taxi company, book in advance and hope that the cab turns up on time, in the right place. Instead, a taxi is available where you are, when you want it. You get in, you travel, you get out, and the payment is dealt with for you instantly. Similarly, Starbucks created an app that shifted the coffee experience. Very few people like queuing, particularly first thing in the morning, pre-coffee. Starbucks understood the customer need and created an experience where you can decide if you want a coffee on the way to work and pick it up without much of a detour in your commute. Soy, decaf, double-shot, hot cappuccino… whatever your tipple, you could order, pick up and continue your journey. The payment is dealt with without a thought. Starbucks didn’t invent coffee, but it did simplify the coffee-buying process. The introduction of Amazon enabled you to purchase anything you could think of in one place. A quick search, two clicks, enter

your password, one last click and boom, the item is on it’s way to you (with next-day delivery, if you fancy). Amazon didn’t invent shopping, but it did simplify it. Just using those three businesses as examples, it’s clear that a simple, convenient, frictionless customer journey has become the norm. Where once you would enter a store sheepishly, cashless but with a card in your hand in the hope that they would accept card payments, now you don’t even need to leave your bedroom or find your purse to make a purchase. These experiences are possible because of payment providers such as Stripe, Adyen, Judopay and others. Payment providers are able to move faster, be more nimble and better adapt to the needs of huge corporations such as Amazon to create an “automagic” experience for the end consumer. If you’ve been to Asia recently, you’ll have seen simple, convenient, frictionless transactions working to their full potential, and connected commerce at the forefront of the consumer’s daily behaviour – from chatting with a friend and mentioning a restaurant, to having it booked and the food pre-ordered. When you walk in, the app tells the restaurant you have arrived. Your food arrives, you eat and review your meal in the app. Then you leave. There’s no table service, no bill, no menu, even. The payment is done without fuss and the receipt is sent to you via the app – at no point have you had to transact outside of it. And this is just the beginning. Connected devices, voice commands, bots, social networks – everywhere and everything is a potential payment gateway, provided the right payment provider can link you in. INDUSTRY VIEW

lucy@judopayments.com www.judopay.com

T’S BEEN a busy five years since the Current Account Switch Service launched into the marketplace, making moving bank accounts a walk in the park for individuals, small businesses and charities. During that time, we’ve facilitated more than five million switches with more than 90 per cent of switchers fully satisfied with the experience. We have also redirected tens of millions of payments mistakenly applied to old bank accounts, with a safety net in place to ensure any stray payment is scooped up and sent to the right account. That redirection provides peace of mind for anyone switching, but it particularly levels the playing field for businesses formerly tied to their old bank because they feared disruption to supplier and client relationships should payments go missing during the switch. To help us better understand switching behaviours and barriers, we’ve invested in research, collaborated in major academic projects, and created targeted awareness campaigns to get messaging to the right people at the right time. As a result of this work, we hit an all-time high of 84 per cent awareness of the service in October last year, and have used our findings to inspire dedicated advertising specifically aimed at informing and educating 18 to 24-year-olds. We are close to unveiling a new campaign to help those facing financial challenges. We have worked hard at building a service that puts the needs of individuals and businesses front and centre, always focusing on delivering better outcomes for those who would benefit most from changing their bank.

All of our efforts, all of the industry support, has resulted in a premier service – the flagship switching service in the UK. But that doesn’t mean we’re resting on our laurels. We are determined not to stand still. We have big plans for the future, just as our payments industry undergoes its biggest overhaul in decades – the New Payment System Operator (NPSO) is now the single voice for retail payments in the UK, and the Current Account Switch Service has joined the NPSO family. We have learned a great deal about switching behaviour over the past five years, and many of the factors that contribute to why people switch in the current account market are applicable in other sectors. This is something we will continue to explore as part of our financial inclusion agenda, so that all consumers can benefit from the knowledge we have gained and ultimately get a better deal. As the team behind the Current Account Switch Service, we will also ensure that we are fully inclusive and that we encourage and promote diversity in all of its forms. After all, if our team is truly reflective of the population we serve, our decisions will better meet their needs. And that will make for a better future for all those we touch. INDUSTRY VIEW

Anne Pieckielon (inset) is director of product and strategy, and diversity champion, at Bacs Payment Schemes Limited, which owns and runs the Current Account Switch Service, and which is now part of leading retail payments authority the New Payment System Operator www.currentaccountswitch.co.uk

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Revitalising and democratising economies with blockchain mobile B2B payment systems “By providing a platform where businesses can directly connect with one another, TraDove aims to make forming business relationships a whole lot easier”

$76tn The total value of the potential marketplace available to businesses using faster blockchain technology Source: TraDove

OR EVERY business, finding the right partners to collaborate with is crucial. TraDove helps simplify the search. In little more than a decade, social media has led to an incredible transformation of the way people and businesses interact with each other and the world at large. Although it has become integral to social lives, it shouldn’t be underestimated how much it has also revolutionised the way business is conducted, with a number of platforms encouraging business networking and collaboration. TraDove is one example – the first social network designed solely for B2B buyers and sellers worldwide. By providing a platform where businesses can directly connect with one another, it aims to make forming the business relationships that are essential for success a whole lot easier. Credibility is one of the foremost values TraDove was founded on. All potential business members interested in joining the network must go through a vetting process before they’re allowed to sign up, in which

TraDove’s B2B social network offers a trusted platform for buyers and sellers to connect and trade business details are certified by TraDove. This ensures all buyers and sellers are genuine and have signed up for the same purpose. Unlike less selective social media platforms, this makes for an uncluttered business experience where members can identify partners to help their business more quickly. A democratic rating system lets users offer feedback on each other’s goods and services, adding a further layer of trustworthiness. Another fundamental problem with global trade is financial systems that have not been revolutionised, and which block trade for small and medium business. TraDove is breaking down these barriers by creating a world where businesses can reach global markets and trade freely with

one another, by creating the world’s first B2B mobile blockchain payment system. Blockchain networks, applications and crypto-markets have only just started to impact the way we conduct business, but TraDove enables companies everywhere, from small businesses to global corporations, to profit from this technological globalisation. Once buyers and sellers have connected with each other, TraDove’s innovative transaction feature removes many of the barriers which currently exist within international trade. TraDove is developing a next-generation blockchainbased B2B payment network that is super-light, fast, and the first blockchain for mobile platforms. The business process is made even more transparent through the use of smart contracts to reflect B2B contracts in the new world of blockchain, letting partners trade instantaneouly around the world in complete security. The long-term aim is that this will open a $76trillion global market to new business opportunities, revitalise sluggish economies and free up

several hundred billions of dollars that are blocked by traditional slow and cumbersome payment methods. So far, the platform has attracted more than 250,000 corporate users from more than 100,000 companies in 80 countries. Many clients are from the upper echelons of business, with more than 200 Fortune 1000 companies choosing TraDove to carry out global business. Despite such impressive figures, we are looking to expand even further, especially when it comes to giving SMEs access to the global marketplace. By guaranteeing user credibility and removing common obstacles to international trade, TraDove is changing the way companies do business, one connection at a time. INDUYSTRY VIEW

TraDove makes finding and trading with the right business partners easier than ever +41 78 606 36 15 parvis.hanson@tradoveb2b.com www.tradove.com

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What is the biggest challenge facing the payments industry? Jane Jee

Sven Lindemann

CEO Kompli-Global

ITH US$2TRILLION laundered annually, money laundering is the biggest challenge in the payment industry. Payments are a key target for money launderers. A growing number run websites which accept card payments to disguise their illegal income by routing these payments through a genuine merchant account. To tackle this, companies need to fully know the people they do business with, by performing in-depth KYC checks. This means searching the web, deep web, watchlists, databases and media for adverse information on ultimate beneficial owners of corporate entities. It isn’t enough to use Google for this – search engines aren’t designed for KYC. But with advanced regulatory technology, incorporating AI, companies can perform multiple real-time KYC searches of global data sources quickly and efficiently, ensuring legislative compliance and safeguarding against financial crime. Businesses must arm themselves with these latest solutions to tackle the threat. Failure to do so will have negative ramifications not just for their reputation, but for wider society as well.

HE LAST year has seen at least four major trends in the payments sector that will have a lasting impact on the way corporations and banks will handle payments. Firstly, with the new European PSD2 regulation, banks now share their data with third parties – provided the customer has given permission. This “open banking” approach leads to a new level of interaction between companies, banks and fintechs. Secondly, payment innovations such as instant or faster payments, or same-day ACH, will reduce the use of paper cheques, support near-time treasury and spur new services around payments. Thirdly, fraud and cyber-crime attempts have significantly increased. Corporates desperately need powerful anti-fraud solutions, automated end-to-end processes and thorough user-rights management to protect themselves and their data. This leads to data protection: ensuring access and security plays an increasingly important role. Especially when GDPR regulations bring global implications for solutions, hosting and processes.

INDUSTRY VIEW

+44 (0)20 3199 7115 www.kompli-global.com

Frank Zhou

CEO Serrala

Anders la Cour

CEO and founder Zeux

VER THE past year we’ve seen tremendous innovation in the payment industry. The biggest change is perhaps the Open Banking Initiative on the back of the EU’s PSD2. It lays the foundations for transformation, posing huge opportunities for fintech start-ups. With account holders’ consent, third parties can now make payments on their behalf and can access their account information, opening up a world of data sharing in the payments space. Fintechs are agile and easily able to take advantage of these changes, providing consumers with what they want, not just today, but tomorrow too: convenience, choice and the ability to access and spend their money anywhere and anytime. Fintechs will continue to grow and own this space, forcing banks to reconsider their traditional role to keep up. This is when an integrated solution that combines payment, digital banking, money remittance and asset management will become possible. INDUSTRY VIEW

frank.zhou@zeux.com www.zeux.com

Chief Executive Officer Banking Circle

OR THE first time in generations, crossborder payments are shifting. New regulation is opening up the market, and new entrants changing expectations and demand. Large global banks are retreating from correspondent banking partnerships, leaving many businesses without access to affordable cross-border payments within their usual bank. New solutions can handle payments directly, reducing the cost and cutting transfer times. This market has remained essentially unchallenged since international trade first began, so many traditional banks have found it difficult to adapt and compete. It no longer makes sense for banks to handle “back-office” functions such as payments, as they can be handled more efficiently by a third party. We are already seeing an increasing number of banks and financial tech businesses moving into a partnership ecosystem. Working with third-party financial utilities such as Banking Circle, financial institutions can focus resources on the all-important customer relationship while still offering the latest and best solutions – without significant investment in infrastructure.

INDUSTRY VIEW

www.serrala.com

www.bankingcircle.com

The risks of standing still in digital payments “Get them right and payments can not only help you retain business but also acquire new business”

HE PAYMENT process has a direct impact on business success – research shows a direct correlation between the quality of the payment experience and the level of transactions the consumer is willing to undertake. It’s no surprise, then, that the payments industry is evolving fast in response to demand from consumers for an experience that is personalised and seamless, but also secure. Get them right and payments can not only help you retain business but also acquire new business, improving cashflow optimisation for all stakeholders in the payments chain. But if your technology isn’t as agile as your thinking, implementing your strategy will only lead to frustration.

Consumers want secure solutions, but they also want simple authentication, not lengthy passwords. They want personalised services that determine the best option for making payments, allowing them to pay for goods and services, knowing each payment is being processed in the most efficient manner for them.

Integrate once, benefit repeatedly

One payment size does not fit all Digital innovation has seen a decline in cash use and the near death of cheques. And some payment technology common today may also find itself on the path to extinction. This is good: we need to peel a lot of layers away and make the whole interface instant, secure and friendly, avoiding 16-digit number input, passwords and other painful experiences.

channels and/or services in a way that secures both the provider and the user. The data generated by payments can also be used to make better decisions – not just in risk management but also regulatory compliance and how services are marketed. E-commerce activity generates vast quantities of data, which can be used to determine a consumer’s credit risk to a far higher degree of accuracy, ensuring consumers are offered appropriate products and services.

Saying yes to opportunity Risk assessment is also evolving. Risk and compliance might traditionally be seen as saying no to everything, but technology has given it a new role as an enabler. It’s essential to consider the future needs of customers and ensure the company offers new functionality,

Single-click payments, biometrics and other new processes will enable faster and instant payments, providing the data is secure. Companies such as WeChat Pay, Uber and Revolut are leading examples of how to link payments into an ecosystem application or toolbox that will give the user secure and instant access to multiple services. We’ll also see peer-to-peer (P2P) payment services and more closed-loop solutions enter widespread use, thanks to cost optimisation. Don’t cut up your credit cards just yet though – they’re not disappearing overnight. They will just be

pushed towards the “back office” of digital apps, meeting the preferences of the next generation of users.

The opportunity of risk We’re already seeing behavioural data being used to make specific products available to individuals, based on how they use their mobile device. This will allow the industry to move away from risky card-based decisions. Artificial intelligence, too, is already being used to evaluate risk. It will become even more widely used, ultimately providing the two elements that every merchant needs to provide for their customers: security and convenience. More demanding consumers will be less tolerant of unwieldy payment processes. Find out more about how innovation in payments can optimise your business and become an enabler for growth, by visiting www.intrapay.com and downloading the Intrapay manifesto. INDUSTRY VIEW

Koen Vanpraet is CEO of Intrapay +43 650 99 12 999 www.intrapay.com

September 2018

AN INDEPENDENT REPORT FROM LYONSDOWN, DISTRIBUTED WITH THE SUNDAY TELEGRAPH

business-reporter.co.uk

Business Reporter UK

@biznessreporter

Are PSPs underserved by their banking partner? Now they don’t have to be…

INCE THE end of foreign exchange controls in the UK in 1979, there is no official mechanism for recording international monetary transactions. It is therefore difficult to obtain information on the numbers of international payments and the amounts that are sent from the UK. Information is generally gathered from numerous sources, and while these differ, they all consistently point to the UK as one of the top 10 remitting countries in the world. To support these payments there is a vibrant payments service provider (PSP) industry, also known as money service businesses, operating in the UK. It is estimated that there are four times the number of PSPs in the UK than France, Germany, Italy, Netherlands and Spain combined. They come in various shapes and sizes, ranging from niche start-ups to large enterprises with international footprints. They undertake payments for migrants sending money home to their families and communities and make payments for small businesses with lower sums who do not want to incur the large minimum charge made by the major banks. They also execute settlement remittances that relate to card transactions that provide shoppers and overseas visitors with a fast, convenient and increasingly seamless payments experience. These PSPs are motivated by delivering a faster, better user experience. But what about the banking partners that the PSPs use? In the process of de-risking after the financial crash, the UK’s high street banks left many PSPs and MSBs (money service businesses) without bank accounts to support their services from. Many of these

$20bn Some analysts estimate that migrant payments sent from the UK total more than $20billion every year

David Price, BFC Bank

companies were notified that they had just three months before their accounts would be closed. De-risking is the term given to the closure of bank accounts where the perceived financial and reputational risk of operating those accounts outweighs the overall benefits. De-risking has been used by some banks as an excuse not to serve this sector at all. The PSP and MSB market has been especially hard hit. BFC Bank, one of the latest banks to launch in the UK, has grasped the opportunity to offer services to these clients who remain underserved by the banking industry because of de-risking. “Banking is full of rules and regulations,” explains David Price, CEO of BFC Bank. “However, while BFC

“We are acutely aware of the issues companies in these markets have – issues made even more difficult when the banking industry withdraws its support” – David Price, BFC Bank

Bank operates to the same high level of compliance as every other regulated entity it will not hide behind these as a reason to avoid doing business.” BFC Bank, owned by BFC Group, which has a 100-year trading history, is an encouraging new specialist

provider that offers reliable, safe banking services to PSPs and MSBs. “We also operate our own PSP and have a long history in the money transfer and cash collections business. So we are acutely aware of the issues companies in these markets have – issues made even more difficult when the banking industry withdraws its support for these businesses,” continues Price. “It is our intention to partner with the companies in these sectors and offer not just a service, but also solutions to their everyday problems.” INDUSTRY VIEW

bfcbank.co.uk info@bfcbank.co.uk