Your gateway to the world of fintech and payments
Inside this issue:
China’s CBDC Startup Spotlight: Trilo Nexway on Ecommerce and Covid NordicAPI: Breaking the Monopoly
Volume 6, Issue 2 July 2020
The team behind the PCN Magazine: Andre Van der Westhuizen: Editor Mark Manzi: CD & Graphic Design Zsofia Bodnar: Marketing Andrea Antersijn: Business Development
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Contents 06
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04
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02 Letter from the Editor 04 News 06 Thought Leader: Richard Turin 12 Expert Interview: Nexway 18 Startup Spotlight: Trilo 20 Fintech Watchlist 23 Industry Events 24 Thought Leader: Nordic API Gateway 26 Unfiltered Opinions 1
by Andries Van Der Westhuizen
Letter from the Editor: In this edition, guest writer Richard Turin delivers key considerations on the broad, and potentially far-reaching effects of China’s Central Bank Digital Currency (CBDC) Will the Dollar keep its hegemony? With China and the USA entering another phase of disputes and sanctions, the vision of a decoupled and re-aligned globalized market is showing signs of impending disruption. Following on from the CBDC discussion, there is undoubtedly the need for entities specializing in these fields to further the uplifting potential of our widening industry verticals. Here the Global Impact FinTech foundation (GIFT) enters the fray, an NPO striving for inclusion and socio-economic upliftment through the power of technology, specifically through fintech globally. In the news, the European Fintech Association (EFA) is off the ground and headed by Marc Roberts, the head of compliance at Raisin. The EFA will give a representative voice for European fintech within the EU for an open dialogue between the industry and regulatory bodies, something which is sorely needed. NordicAPI and their research showcase PSD2’s standardizing effect concerning open-banking openness, and the positive impacts thereof in the Nordic regions, find the full report here.
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In the world of startup’s, Trilo is breaking free of app-exhaustion and high merchant fees with a browser-based payment method and 1% flat fee. Such an offering during a time where cutting costs is on the minds of many, Trilo is undoubtedly addressing a pressing concern. Nexway’s expert interview on restructuring and service refinement during these troubling times can be a comforting account for many. Furthermore, Nexway is taking this a step further by putting their ear to the ground for their customer’s sake with this survey on Covid’s effect on E-commerce to even further streamline their solutions. Events are making a return with M2020 EU in Amsterdam being PCN’s first outing this year, if you’re attending keep an eye out for our print edition and please say hi! In closing, I’d like to address a vital movement and topic, #BlackLivesMatter (BLM), and the awareness of systemic discrimination and racism has surfaced across the globe. It’s our responsibility to cut this out of our society like the malignant tumour it is and to educate, listen, and be reflective of our actions. Let’s all be the person who speaks out and challenges these sometimes subtle occurrences we may come across in our daily lives. Be the person to educate and challenge preconceptions and assumptions surrounding racial inequality. Racism has become ingrained into our everyday existence and actively manifests and moves against those of colour in many ways - through finance, culture, employment, housing, justice, healthcare, and education. With the above covering every sector of our existence within society, how can we, as those not impacted, and living in privilege, leave this unchecked? Stand up and challenge, be a voice for change!
Eric Garner Michael Brown Tamir Rice Walter Scott Alton Sterling Ezell Ford Bettie Jones Dominique Clayton Jordan Edwards John Crawford III Michael Brown Dante Parker Laquan Mcdonald George Mann Akai Gurley Rumain Brisbon Jerame Reid Mathew Ajibade Frank Smart Natasha Mckenna Tony Robinson Anthony Hill Mya Hall Phillip White Eric Harris Walter Scott William Chapman II Alexia Christian Brendon Glenn Victor Manuel Larosa Jonathan Sanders Freddie Blue Joseph Mann Salvado Ellswood Sandra Bland Albert Joseph Davis Darrius Stewart Billy Ray Davis Philando Castile Botham Jean Atatiana Jefferson Eric Reason Michelle Cusseaux Tanisha Anderson Stephon Clark Breonna Taylor Natasha McKenna George Floyd Remember their names.
blacklivesmatter.com 3
LATEST NEWS: Important developments in fintech which have a far-reaching and significant impact.
Velo and Mastercard partner up: In an attempt to revolutionise business payments, Velo can now operate as a buyer and supplier of Mastercards Track Business Payments Service. This service allows for the exchange of payments-related data between buyers and sellers, all while being integrated with Velo, thereby providing a promising solution to outdated B2B transacting.
Findr: To help startups and their founders find partners in the early stages. Majority of startups, 9 out of ten, fail in year one due to the lack of established partnerships. Through the use of AI, findr can match with commercial partnerships covering retail, financial institutions, and investors and through a few clicks, a couple of hours for due process, and finalised in days instead of the industry average of 12-18 months.
JP Morgan extends Tpay Mobile acquirers banking services to Payguru: Cryptocurrency exchanges: Coinbase and Gemini have for the first time been accepted as clients by the largest bank in the USA. JP Morgan will handle cash-management and dollar-based transactions for the exchanges’ US-based customers. 4
One of the leading merchant acquirers and mobile payment enablers in the Middle-East and Africa announced the 100% acquisition of one of Turkey’s leading payment service providers. Tpay will now leverage the established partnerships with banks and telecoms in the region to further expand its services and geographic reach.
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Anyfin raises World Economic Forum; $30mil Series B: Green Growth: The Swedish fintech allows customers to refinance their loans, battling the high-interest rates on loans and credit cards. The new round of funding is for EU expansion to bring fair and increased financial wellness to more markets.
The full title of the report is “Bridging the gap in European scale-up funding: The Green Imperative in an unprecedented time�. The report (access it here) settles on EU streamlining and reforming in key areas such as; applying blended finance models, increased ease of access for new companies in public and private procurement, improving the voice of EU growth companies in policy-making and standardisation.
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European Fintech Association (EFA): The EFA aims to unite unheard voices in the fintech industry. The non-profit combines EFAlliance and FinTechs4Europue into one entity to provide a clear approach to developing European Union policy. The board is led by Marc Roberts, who is also the general council at a Germany-based fintech Raisin.
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France protecting homegrown technology companies: To protect startups from takeovers, the finance ministry has put together a fund of up to 500 million to bail out companies under threat of foreign takeover. The initial fund is 150 million and state-backed by BPI France and is squarely aimed at protecting the industry as investors try to warm their cold feet amid the global pandemic. 5
Richard Turrin Rich Turrin is the author of the best-seller “Innovation Lab Excellence” and the soon to be published “China’s Digital Currency Revolution.” He previously headed IBM’s Fintech Innovation Lab in Singapore and IBM’s banking risk technology team in China after a 20-year career in investment banking. Connect on Linkedin or Twitter for more, and sign-up for notification of his coming book on China’s CBDC here.
C Thought Leadership: China’s CBDC
Will It Steal the Dollar’s Place in the Sun? With some 60% of the world’s currency reserves and 80% of international trade denominated in US dollars, it’s easy to take for granted that the dollar will be the currency of choice for years to come. But will its domination last? China’s Central Bank Digital Currency
(CBDC) is almost ready for launch. With talk of US-China decoupling making the front-page every day, the novel currency has caught the eye of many. What role will China’s digital RMB have in this new world? Most importantly, what it means for the dollar (if anything)? One thing is indisputable: in a decoupled world, there will be a higher demand for the RMB than ever before. Whether China’s e-RMB becomes a game-changer and tests the dollar’s rank as apex currency, remains to be seen. The odds of success, however, are raised considerably, given that China is the world’s largest exporter. China’s CBDC is a new form of payment that is under test in four Chinese cities right now. It is essentially a second generation of digital payment. The first were the wildly successful mobile payment apps Alipay and WeChat pay. Between them, these two giants now control some 90% of mobile payments in China, and 85% or all payments in the country. It’s hard for many to envision a cash-free society or one without credit cards. In China, for most residents’ daily lives, this has already arrived. 6
I call these mobile-payment apps “first-generation” technology because they rely on debit cards and traditional banks accounts for real-time payment. Payments are carried by the mobile payment company’s network and made when account balances in the two accounts are updated. In second-generation CBDC based technology, digital money will move directly from person to person. No bank, no Visa, no Mastercard, no mobile payment company required. CBDCs aren’t a representation of account balances, (as is also the case with Google and Apple Pay), so much as actual digital money stored on one’s phone. If this sounds like a revolution, it is. CBDCs match the convenience of their close cousins cryptocurrency, but have the added benefit of being “real money.” This will prove wholly disruptive to card companies, whose money-transport services will no longer be needed. While China’s CBDC will be applied first for domestic payments as a substitute for cash, its future use in international trade payments is what is causing concern among observers overseas. China’s CBDC is the first government-controlled digital challenge to the SWIFT funds transfer system. With China’s CBDC, there will be no need to use SWIFT. China’s digital payments will be out of sight from the US, sanctions, and the banking system. It is a change in paradigm, amid accusations that recent US policy has effectively “weaponized” SWIFT.
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“China is aiming to use fintech to change the nature of how we conduct international trade.” SWIFT-evading financial systems like Russia’s SPFS and China’s CIPS have been around for a while, without making much of a dent. The difference here is China’s new digital technology is launching into a decoupling world. China isn’t just initiating a new currency platform but an entire digital trade system. The e-RMB is only one part of a much bigger program to digitize all aspects of trade with China. Digital trade platforms will handle everything from financing to delivery and will be used to entice trade counterparties to switch to the e-RMB. Digital RMB purchases will make international purchases as easy as buying on Amazon.
In a recent article in “Foreign Affairs,” former US Treasury Secretary Hank Paulson stated: “China’s much-touted successes in the realm of fintech—including its rapid deployment of mobile payment systems and the recent pilot project by the People’s Bank of China to test a digital RMB— will not change that [dollar dominance]. A central bank-backed digital currency does not alter the fundamental nature of the RMB.” Paulson is right that the nature of the RMB won’t change, but China never claimed it would. Instead, China is aiming to use fintech to change the nature of how we conduct international trade. China’s e-RMB integrated trade finance and shipping platforms are going to entice users to increase RMB adoption through ease of use and discounts that make it impossible to say no. 7
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Countries that are heavily involved in China’s Belt and Road program will be early adopters, followed closely by companies looking to benefit from savings in financing or shipping costs. Already, digital trade finance systems put in place by several banks in China that allow for end-to-end digital trade payments are showing significant increases in use. Right now, transacting on these digital platforms can save weeks for trade companies, but these are just the beginning. Alibaba owned Ant Financial, the world’s largest fintech, is working with China’s largest port operator to build a blockchainbased platform to carry out completely digital import-export transactions. When China’s digital trade systems are complete, the preferential terms for e-RMB users and access to fast-track customs and delivery will make it hard for many to say no. A meteor may be about to strike the global currency market and its hierarchy of players. China’s CBDC ushers in not just a currency, but an entirely new ecosystem. Let’s look at the size of the RMB market for merchandise trade alone, to see how China can drive e-RMB and what its relevance could be. According to the WTO, world merchandise exports totalled US$ 19.48 trillion in 2018, with China’s contribution as the world’s leading exporter of US$2.5 trillion at roughly 13% of this total. According to SWIFT, only 16% 8
of China’s trade settled in RMB in 2017. So how much of this trade can be revalued into e-RMB? Let’s assume that in the coming decade, China can use e-RMB to lift the percentage of RMB settled exports from 16% to 50%. A reasonable amount, given that China tripled RMB use in trade over the past five years. Roughly doubling RMB use through the e-RMB would create a US$0.85 trillion trade market. For comparison, this is big enough to exceed Japan’s 4th place in total exports globally. Japan, however, only uses the Yen in about 40% of exports, meaning that the e-RMB would exceed the use of Yen in international trade by a factor of almost three. Is that big enough to supplant the dollar? No. The dollar has been dominant for 75 years, and its payment volumes are so massive that it isn’t going anywhere in the near future. The real question, though, is a bit more subtle. Can the use of the e-RMB --in China trade alone--provide an alternative to the dollar? The answer is that it can. Japan’s Yen is in fourth place on the SWIFT global payment table based mainly on its use in trade. If the e-RMB were to achieve volumes that were roughly triple that of the Yen, China’s e-RMB would be in third place on the SWIFT table behind the Euro and ahead of the Pound. An example of digital disruption at its finest.
“China’s CBDC ushers in not just a currency, but an entirely new ecosystem.”
China building an e-RMB based trade ecosystem that compels users to the e-RMB is a bold move by China and a potential disruptor to currency markets. China is using its fintech prowess to change the rules of an environment that it believes is widely stacked against it. The e-RMB will foster the internationalization of the RMB and do so without having to make the RMB fully convertible and dependent on Western financial markets. Fintech, while often derided in the West as nothing more than a toy, has a real role to play in the geopolitical game. China recognizes this, while the US largely does not. The e-RMB won’t be about replacing the dollar so much as elbowing it out of the way to land a solid – and perhaps even increasingly dominant—niche in an evolving world.
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GIFT Foundation
GIFT or Global Impact Fintech is an international non-profit organisation created as a representative and the collaborative umbrella body for fintech and Financial Inclusion. Originally organised as a fintech thought leadership forum, GIFT represented a broad spectrum of over 200 Fintech thought leaders from more than 35 countries across the globe.
As an umbrella organisation, GIFT caters to a broad set of stakeholder groups which include Fintech Startups, Financial Institutions like Banks, Exchanges, Developmental Institutions, Governments, Semi-Government and Regulatory organisations, as well as Finance Professionals from Academic Institutions and Students of Finance.
Founded by Jeff Frey, Simon Wilson, Bettina Quimson, Sebastian Resano, and Malik Khan Kotadia - this forum engages with policymakers and Fintech, Tech, Blockchain, and Digital ecosystem leaders for knowledge sharing and community building.
Socio-economic upliftment through leveraging disruptive tech can be a significant force in the world today. As technology improves and expands its reach into peripheral industries, it will lead to greater accessibility and thereby increased opportunities for individuals looking towards the new age of the gig economy and beyond.
“Our goal is to work with stakeholders to help collectively find solutions to humanity’s biggest challenges and problem statements by leveraging disruptive tech� - Malik Khan Kotadia. 10
As the world economy recovers, we re-enter a globalised postpandemic world, which needs collaboration and reformation for not only a sustainable future but also the active upliftment through the use of technology. This is a genuinely collaborative approach for the decentralised era.
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Expert Interview: Victor Lezuitov President and CEO, Nexway With extensive international experience in finance and management, Victor has worked as a board member, CEO, CFO and Senior Analyst in various industries including financial services, private banking and investment funds. Fluent in five languages, Victor brings a wealth of multinational experience and capabilities that perfectly match the ambitions of his latest challenge: leading Nexway in its next phase of growth.
Image sourced: Nexway 2020
About Nexway: Nexway is a software and service company for e-commerce and payment. We expand the sales potential of software, retail, and services companies across 140 countries. Our customers rely on Nexway to power their subscription models, manage local payment methods, prevent fraud, engage resellers, deliver key customer insights, and beyond.
www.nexway.com
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Image sourced: Nexway 2020
Q: As a relatively new CEO at Nexway, joining in July of 2019, please tell us about yourself and your recent experiences?
Q: That’s a lot of change for one company, especially in light of the global pandemic. How are you navigating through this?
A: Before joining Nexway, I served as CFO and general management in many different sectors of the finance industry. This background in complex businesses taught me that successful companies are built on a solid foundation of capital flow and profitability. You must deliver value to shareholders to ensure ongoing investment in the growth plan.
A: As we’ve communicated to our employees, we recognize that it’s a lot of change all at once. We are all going through a period of unprecedented change. Above all, we hope that everyone is making it a priority to stay safe and healthy.
When I first started working with Nexway as a board member, eventually being named President and CEO, we focused on stabilizing this foundation - This culminated in the transfer of ownership to a new single shareholder and long-term strategy. I am excited about this new chapter in Nexway history.
Q: Will these structural changes cause Nexway to refine its service and solution offering? How comprehensive will these changes be? A: Our core business as an e-commerce platform and secure payments provider will remain our highest priority. In addition, we have identified a few strategic vertical markets where we see real opportunity. Nexway already services some of these verticals, but others are new for us. You know, every day I am struck by the influential entrepreneurial culture at Nexway. Innovation is in our DNA. That’s so important in a young industry like e-commerce that is growing so rapidly. It requires change. Nexway has always proven itself to be highly adaptable, and that will continue to be the key to our leadership position.
In terms of our business, we know that being in control of a few key assets and making smart bets is the way forward. Nexway’s new strategic plan will keep us focused on the areas we can control and the areas that will deliver the best results. Our product roadmap outlines those smart bets.
“...everyday I am struck by the strong entrepreneurial culture at Nexway. Innovation is in our DNA.”
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Image sourced: Nexway 2020
Q: Nexway is recognised as one of the key payment industry players, not just for E-commerce solutions, but also for market insights and development. What does this comprehensive view mean for Nexway?
That’s why we are currently conducting bespoke research into the topic. We are surveying our current and potential customers to understand where their priorities for e-commerce and payments stand given the current circumstances. We’ll use this data to help improve our offering and make sure we are responding to the evolving market needs. We’ll also be sharing key findings with the market, so decision-makers can learn from their peers.
A: We are proud that over the years we have been successful in blending exceptional technology with amazing people to provide the highest quality service. The people part cannot be underestimated.
One consequence of the events of 2020 will undoubtedly be an acceleration in many different types of businesses moving to more of an online sales model. Consumers have had to evolve their purchase habits very quickly. Many of the old biases are falling away.
We benefit from working with customers in a true partnership. We listen closely so we really understand their business goals. We want to help them be as successful as possible. We have the data and market intelligence to back up our recommendations. Our customers trust our expertise to tell them how to get where they want to go. For example, for a few key clients, we are an integral part of helping them expand their geographic footprint and addressable customer base.
Q: In times of a global pandemic, where E-commerce has in many ways seen an influx of activity and in others a sharp decrease, has Nexway observed any of these trends? A: We have seen immediate impact in online sales for most businesses - sometimes resulting in an uptick in online sales, sometimes in a drop. However, we are still in the midst of this pandemic, so it’s too soon to say what the lasting effect will be. 14
Q: What is Nexway planning in its roadmap for the next 12 months? A: We’re not going to give away all our secrets, but let’s just say we have a few tricks up our sleeve. Our new offerings will not only allow our customers to greatly differentiate their customer acquisition paths from their competitors, but also allow Nexway to dramatically grow its addressable market.
“Consumers have had to evolve their purchase habits very quickly.”
Nexway would like to hear from you! Take the survey: 2020 E-Commerce and Payment Priorities
Take the survey
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Introducing: Trilo Redefining Payments Hamish Blythe, a founder at Trilo, became increasingly frustrated by the complexity, high costs, and fraud risks which the traditional card rails provide. After losing 3.4% of their revenue, and incurring several instances of fraud personally, they set out on a mission to change the payments landscape altogether, creating an efficient, rewarding and secure way to pay. Trilo is a whole new way to pay, combining loyalty and payments in one simple platform. Merchants receive their money in minutes for only 0.2%, while engaging with their customers all in one platform. Merchants invest cashback instantly in their customers through Trilo, improving their experience, while increasing their average transaction value and converting visitors into customers. Merchants and their customers are at the core of Trilo. Ensuring merchants no longer need to deal with an unending list of middlemen and expensive card schemes. Where many incumbents and upcoming payments providers are focusing purely on the merchant’s experience, Trilo has built an end to end payments network. Through Trilo, merchants engage directly with their customers. With Trilo’s focus on consumers, we ensure your customer’s payment experience is frictionless and rewarding. Wherever consumers pay, they’ll instantly receive 1% cashback on everything, paying easily with their Trilo account. Consumers sign up and create their Trilo account once, at any of the merchants in the Trilo network. After this, they can 18
pay in seconds with a few taps. Everything happens on their phone, with no download needed, something which enables seamless payments for both in-person and online purchases. Trilo has recently received their FCA authorisation for both AIS and PIS activities, giving them the ability to unlock even more potential for merchants and consumers who have joined.
Ultra-Efficient Payments Your money arrives in a few minutes, all for just 0.2%. For enterprise partners, Trilo has wiped out transaction fees altogether, replacing with a bespoke subscription model.
Built-in Loyalty Invest cashback in your customers, instantly and effortlessly. Improving their experience, unlocking your revenue.
Omnichannel Platform Trilo has solved both online and offline payments. You can accept payments from your customers regardless of connection status.
Simplicity is one of Trilo’s key goals. You can add Trilo to your business in minutes...
Unlimited Contactless All offline payments are fueled through QR codes, with this Trilo can provide unlimited contactless payments - Enabling customers to pay without the risk of touching a pin pad.
Consumer-Centric Trilo works with merchants to convert their customers away from cards, giving them a rewarding reason to switch. The more customers who convert, the more efficient the network becomes for all parties.
Trilo’s mission Why should businesses be charged 1%, 2%, 3% whenever they get paid? Why should they wait for days before receiving their money while running the risk of fraud and chargebacks? Trilo’s mission is to redefine payments, connecting merchants and their customers in a never before seen way. In doing this, Trilo has built a new payments network using Open Banking, which completely cuts out the middlemen and cards from the old world. Trilo is building a seamless payment experience, making your customers’ lives more comfortable and increasingly rewarding - All the while integrating loyalty and payments in one simple platform for you and your business. Whether you’re operating online or offline, Trilo is redefining and improving the way you engage with your customers, putting you and them at the heart of of the network.
...Your customers pay in seconds, all through their phone. No download required!
Trilo has launched their Early Bird programme recently, join them now to earn exclusive rewards!
get.trilo.io 19
The Fintech Watchlist: Companies making waves in our industry with unique and disruptive solutions.
Aspiration
Clim8
Conscious consumerism and investing. Users can “shop for impact” with a tree planted per card swipe, carbon offsets on fuel purchases, and much more. The recent $135 Million Series C raise allows for further expansion of its banking services - which has already seen about $4 billion in transactions. — aspiration.com
A green investment platform aimed at tackling climate change with a targeted portfolio of publicly listed companies which are already making an impact. The platform is currently in early access and recently raised a €2 million for the build and launch.
FeatureSpace
Aqua security
The machine learning platform analyses complex behavioural data in real-time for anomaly detection. Adaptive behavioural analytics software designed to prevent financial crime and fraud. FeatureSpace raised €25 Million in venture funding in May 2020. — featurespace.com
Cloud-native security solutions provider. In May Aqua raised $30 Million series D, bringing the total funding to more than $130 million. The cloud-native platform promotes agility and thereby accelerates digital transformation. — aquasec.com
— clim8invest.com
Primer Consolidate your payments stack with a unified API. After recently exiting stealth mode, and sporting an initial raise €3.2 million in May, Primer has tasked itself with solving long-standing merchant woes. — primer.io
Alpian The Switzerland based fintech, founded recently in 2019, has its sights set on the under catered mass-affluent Swiss market, with the intention to expand across Europe. Services likened to that of private banking; the fintech will offer tailored products and suggestions per user through the application of artificial intelligence. — alpian.com
86 400 An Australian neobank with zero fees and the ambition to “strip the waste” out of banking - providing precise tracking and view of spending, saving, and bills for their users throughout the 86 400 seconds they have in a day. With recent partnerships covering mortgages with FMS, and payment solution providers like ZipPay, and with a first-round raise of around €30 million, 86 400 is one to watch. — 86400.com.au
Wave Money To further financial inclusion in Myanmar, Wave Money was recently injected with $73.5 million by Ant financial for a minority stake. With over 21 million users since launch in 2018, WavePay’s monthly active users have been steadily increasing by 14% per month. — wavemoney.com.mm
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The best payments and eCommerce Jobs across the globe
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Rune Mai Rune Mai is the CEO and Co-Founder of the fast-growing open banking platform Nordic API Gateway and the leading money app, Spiir, which has more than 380,000 users in the Nordics. With more than 10 years of experience in the fintech field, Rune is one of the most influential voices in Nordic fintech. His vision is to create frictionless financial futures for millions of European consumers and businesses with seamless access to financial data and instant payments. With a purposeful drive of making money easier for everyone, Nordic API Gateway was developed to standardise the format of financial data and payments.
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Thought Leadership: Nordic API Gateway
Breaking The Monopoly On Payments About Nordic API Gateway Launched in 2018 and headquartered in Copenhagen, Nordic API Gateway is one of the leading open banking platforms in the Nordics, enabling major financial institutions, accounting system providers, the payments industry and other fintechs to transform the future of financial services. Through one API, Nordic API Gateway has simplified access to aggregated financial data with the most extensive coverage of both personal and business bank accounts in the Nordics. Nordic API Gateway currently empowers the financial innovation of industry-leading companies, such as Danske Bank, DNB, Jyske Bank, OP Financial Group, Pleo and others. nordicapigateway.com
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A recent report published by Nordic API Gateway found that over two-thirds of the decision-makers surveyed have already implemented changes into their organisation due to PSD2. At the top of the list of these changes: low-friction payment options being made available through third-party providers. In an interview regarding PSD2 and the new opportunities the EU has helped generate due to the directive, the European Commissioner for Competition, Danish politician Margrethe Vestager, was quoted as saying:
“The opportunities for innovative companies in smaller member states would not have been so far-reaching without the EU. PSD2 brings a fragmented market back together and, as such, opens for great possibilities for all. I think it’s so exciting that the monopoly on payments has been broken. I want to see even more innovative solutions in the market.”
PSD2 - The rallying call. As the commissioner points out, PSD2 is in the business of healing a fragmented market, while at the same time breaking monopolies and opening up for new players, new business models and new types of cooperation. This cooperation pertains to, not least, the dynamic between banks and fintechs, which is, in no small degree, what open banking revolves around today. Since PSD2 allows all third party providers (TPPs) to initiate direct account-to-account (A2A) payments, businesses and consumers have also been empowered with the option to opt-in for lower-cost and more secure payments. This, combined with a high level of trust in the digital space has led to a boom in digital payments and online shopping in the Nordics. Findings released in March of this year predicted that in Denmark alone e-commerce would increase by 10% to €21.45 billion by the end of 2020.2 One can only surmise that this number will be significantly affected by the coronavirus pandemic, and will most likely increase even more as a result.
More than just your average bank. Banks have also come to realise the full potential of using PSD2 to build convenient and user-driven payment solutions. Instead of focusing on the compliance part, banks are starting to become TPPs themselves in order to innovate with financial data from other banks, as well as the ability to initiate payments from one single bank. With that, banks have the opportunity to own the customer interface. A front-runner in owning the customer interface is Norway’s largest bank, DNB, who has recently expanded its service by enabling their customers to perform instant A2A payments from any bank within DNB’s mobile bank. On the road to becoming the favoured mobile banking app for all Norwegians3, and explaining the advantage of owning the customer interface, Group Executive Vice President of Retail Banking at DNB, Ingjerd Blekeli Spiten, says: “This is an important step in the direction of becoming the mobile bank for all Norwegians. We’re giving our customers huge flexibility as they’re now able to make payments and transfers between their own accounts across several different banks. For us, it’s all about making it easier for customers to gain a full financial overview no matter how many banks they might have.”
Low-friction mobile payments are already leading the way. PSD2 has indeed become a disruptive force within the payments space, impacting over 300 million e-commerce shoppers in Europe alone.5 Critical advantages experienced include the ability to pay directly from a personal or business account more efficiently, protecting financial data through increased security in strong customer authentication (SCA), taking more ownership of one’s credentials, and the knowledge that login data is not stored after a payment is concluded. Speaking ahead of Europe’s largest payment conference, Merchant Payments Ecosystem 2020, CEO of Polymath Consulting, David Parker, forecasted that:
“Merchant payments will undergo radical changes in 2020... The key change will be driven by the introduction of [payment initiation service provider] payments, which in card-based online payment markets has been forecast to replace up to 30% of these transactions over the next five years.” In addition to the reduced costs associated with traditional credit card payments, one of the great benefits of A2A payments is the fact that consumers do not have to share sensitive payment information. And with the new payment landscape ripe for innovation, A2A payments can easily be built into any solution for added customer convenience. Thanks to the arrival of PSD2, the opportunities within open banking are leading to further conveniences for businesses and consumers with a more level playing field for payment providers. Consumers are ready to adopt and welcome new payment methods, and companies have been waiting for new opportunities to emerge. It’s time to remove the astronomical cost and friction of transaction fees and deliver a fairer, more enjoyable experience for all those involved.
Want to learn more about the valuable payment opportunities available through open banking? Download Nordic API Gateway’s free report today!
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Unfiltered Opinions: A place for those in the industry trenches to share their experiential knowledge on key topics prevalent in our industry today.
Fraud in Online Gaming The Need for Decentralized Identities The current way of validating identity (KYC & ID Fraud) within the online lending space is primarily done using “triangulation”. Application PII is validated against industrystandard databases that supply an aggregated view of public and credit records on file matching the PII. Confidence for this solution is developed based on database coverage and reputation. However, there are critical gaps to this approach; 1. High false positives, specifically for thin-file and new immigrants 2. Because of the subjectivity involved, it is still no fullproof way of answering the holy grail of all questions “Are You Who You Say You Are?”. This has given way to a plethora of fraud solutions that mostly use similar databases but augmented with more advanced machine learning...yet not solving for the root cause. A new way of authentications like bio-metrics or mobile verification is unproven and cumbersome to implement. All being said, the complexity in ID verification has added to the regulatory burden and higher costs of doing business for digital lending companies - running into billions of dollars. A blockchain-backed infrastructure for identity validation seems a promising solution, almost kindling the idea of an individual universal borderless identity. At a high level, it involves developing an identity consortium supported by blockchain to help companies accurately validate an applicant’s identity via a dynamic token, or private-public key, that will, in turn, return the pre-validated consumer information.
Opinion by: Subbu Narayanaswamy
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The fraud sphere has not been altered in the 15 years I have been a part of it. It has pivoted to different types of attack vectors but in principle remains the same. Obtain or steal an identity, monitor a system to find its flaws, and use said identity. The times of unsophisticated single person operations have evolved into elaborate networks that transcend borders in the pursuit of profit. Having multiple locations, varying identities and access to different cards which may or may not abide by OTP measures gives an advantage to the perpetrators to attack where the system is weakest and with a low-risk profile. Strategies have evolved into multi-pronged challenge points to counter the sophistication in an intricate game of cat and mouse. The pandemic has brought the industry of e-commerce to the forefront as a means to continue consumer consumption in a contactless environment, along with it fraud has followed... not deviating in the pattern but taking advantage of the volume needing to sifting. By learning the system and it’s prevention and monitoring procedures even the most elaborate fraud prevention system will see itself bypassed. It is clear that during the pandemic the rate of fraud didn’t increase, or we are led to think this due to the average volume of traffic increasing. The number of gamers was as it is normally, but the playtimes increased. This behaviour may allow for better system studies and procedure testing so future attacks may be more sophisticated and harder to detect. In parallel to non-accurate delivery times and system overloads, the playing field was in favour of fraud. The results of which we will start seeing within the following months and beyond. On the brighter side, this influx also gave companies to better prepare and tools to better evolve to meet the challenge as well as new tools to emerge. The shift to a more online economy will not come without its headaches, but it is for the foreseeable future quite the reality.
Opinion by: Alex Kamberos
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Europe’s crypto banks: regulations make neobanks safer It’s been over 11 years since the elusive Satoshi Nakamoto launched Bitcoin’s white paper - the very first cryptocurrency. The main idea behind it was to create a decentralized financial system that would allow anyone, anywhere in the world, to use one type of currency free from the mainstream banking system.
Receiving a banking licence for crypto banks can be complicated, as countries in Europe are still working on regulations that will prevent illegal financial activities. Some countries, like Malta, have a more focused regulation for crypto companies, while other countries are still lagging behind.
Some might argue that cryptocurrencies are the antithesis of the banking system, but some neobanks have embraced this new technology fully. Challenger and neobanks have come to challenge the traditional banking system by nature, a lot like cryptocurrencies do.
In Germany, crypto neobank Bitwala bypassed the need for a banking license by partnering up with SolarisBank. Bitwala’s strategy isn’t aimed at cutting corners as BaFin and Bundesbank, Germany’s financial regulatory bodies, require either a formal banking license or a partnership with an existing bank.
One of them is Ziglu, the creation of Mark Hipperson, cofounder and CTO of UK based Starling Bank. Following a £5.25 million seed round, Ziglu launched in the UK with the core focus to provide a seamless way for consumers to buy cryptocurrencies. Ziglu will allow users to exchange GBP for bitcoin, ethereum, litecoin, and bitcoin cash - with more fiat currencies to be added, and a Mastercard debit card coming soon. Ziglu is eyeing Millennials who desire easy access to crypto, in a recent interview, Hipperson added, “In 2020, we think the 25-45 [age] demographic will want easy, safe access to crypto,” he said. “Only about 1% of people go to the large platforms to buy crypto and we think we can do better, and perhaps get them better prices as well”. Hipperson claims Ziglu will be 1.5% cheaper than other major crypto exchanges, with the average being 1.25% of the transaction. Ziglu is still waiting for financial regulators to approve its banking licence, but in the meantime, users can buy and sell crypto and move fiat currencies in from their main bank account.
Bitwala operates like a traditional bank, but with the addition of a crypto wallet. All users receive an Iban number and a contactless debit card to buy and sell crypto. In this case, Bitwala has a thorough KYC (Know-your-customer) process, but it is limited to German residents. Even though the account only takes minutes to open, customers need an ID and video verification. Also, as with any bank account in Germany, all euro deposits up to €100,000 are protected by the German Deposit Guarantee Scheme (DGS). Still in Germany, not a crypto bank but a crypto banking app, newcomer Spot9 is a lot of innovative ideas to Germany’s crypto community. In addition to an innovative mobile banking app, Spot9 will introduce legally compliant Crypto ATMs and offer a white-label solution in partnership with Sutor Bank. Johannes Gorski, CEO of Spot9, when asked how Germany’s financial bodies are dealing with crypto banks, explained: “In comparison to other countries Germany does not provide a regulatory sandbox for fintechs and especially crypto banks. Thus the legal regulatory framework, mainly the banking act (KWG) is applicable. In addition, banks as credit institutes are obliged to conduct KYC and AML-procedures according to the German anti-money-laundering-law (GWG).“ He added that, on the supervisory level, the German regulator is acting with regard to GWG on the basis of its applicable notes. Furthermore, the regulator orientates itself with regard to crypto assets in particular to the regulations and recommendations of the FATF. Comparing Germany with other European countries regarding anti-money laundering regulations is difficult, but in practice, it has been shown that in Germany, the video identification procedure that is part of GWG, is regarded as standard in the case of identification of persons not present. As far as we know, this is more extensive than any other EU countries regulations. When will we reach standardization?
Opinion by: Marcel Van Oost
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