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Category Archives: Fintech Opinions

Trading and the Power of Expectations (including your own)

For Bitvo by Tristram Waye | Sep 22, 2022

Power of expectations - Trading and the Power of Expectations (including your own)Power of expectations and some broad elements that may impact your trading

The deeper you get into the trading arena, the more you will notice the power of expectations.  Expectations shape pricing and the moves in response to news and events.  They shape how market participants reflexively respond and reposition which further influences prices and policies.  And that means that expectations affect your trading decisions.

The Fed and the economic data:  We will be focused on the US because the Federal Reserve can be considered the world’s central bank.   These reports give some insight into the economic conditions taking place. Some of these have a lag. Others are more recent. And there are other reports that give more granular insights into business conditions and numerous other metrics. 

See:  Should You Be Hedging Your Crypto Trading?

  • These data points have varying relevance and importance based on circumstances in the real world. So one data point might be a focal point in one period and of little relevance in another. And, of course, there are seasonal trends in many data points.
  • Right now, there is a focus on inflation. Inflation management falls to the Federal Reserve through its labor and price stability mandate. The Fed has various monetary tools at its disposal to do this. The most obvious is the use of interest rates.
  • The Fed relies on various data points to make decisions around the level of rates. And they have models and theories to make predictions about what they see happening.
  • Professional investors attempt to anticipate what the Fed will do by reading the economic tea leaves. These predictions by investors form a consensus number, AKA, what is expected. Outliers from this consensus or expected number are sometimes called whisper numbers.
  • If you go to Finviz.com and scroll down the page about halfway, you will see the economic releases for the day. Here you can see the prior number, the expected number, and the actual number for the data points.

Consume Price Index (CPI)   The CPI number comes from the US Bureau of Labor Statistics.

  • The CPI number represents a basket of goods and services that a typical consumer buys. The report is like a poll of goods and services. Each month the CPI is measured for these various goods, and the report is compiled and released.
  • The changes in prices are considered a measure of inflation in the economy. And when you put several reports together, you can see trends and changes in trends.

See:  Visual Capitalist: Inflation Rates and Interest Rate Hikes by Country

  • One of the criticisms of the report is that the methodologies have been changed previously, so it doesn’t represent the real change taking place.
  • Another is that it isn’t a realistic gauge of prices real people experience. It is often believed that prices are typically much higher than reported.
  • Inflationary environment
    • Over the last two years, previously unimaginable levels of liquidity were created. I believe the figure is a 65% YoY increase in money supply in two years. The St. Louis Fed has a chart to show you just how dramatic this has been.
    • One explanation for this liquidity change is the pandemic conditions.  Now the increase in M1 also accompanies gargantuan spending by congress. The result is an explosion of money in the system. This liquidity is widely believed to be the primary driver of inflation.
    • The other driver of inflation is supply chain issues, particularly in energy.
    • And then there was a conflict in Eurasia that took this supply chain problem in energy and made it worse.
    • Add to this a nuanced labor problem. Recent actuarial reports for group life policyholders and the recent uptick in disability seem to suggest something is happening to working-age people. The NFIB small business survey indicates a labor problem in terms of quality for many businesses. And that’s in spite of numerous layoffs. Put it all together, and the competition for skilled labor is fierce.

Labour and Energy:  Now, this isn’t the only number that matters. There is also the producer Price Index (PPI) which measures input prices for businesses.  There are unemployment claims, continuing claims, and the “jobs number” to measure employment trends. There are also various reports from each Federal Reserve banking region. And there are weekly EIA oil numbers that come out every Wednesday that shape energy prices.

See:  Manage Your Way Through The Labyrinth Of Cryptocurrencies By Following These 6 Tips

  • For most businesses, their two biggest inputs are labor and energy. Changes in labor and energy prices eventually flow through to the consumer in the form of higher prices.
  • It can also appear through shrinkflation, where the thing you usually buy is the same price, but you get less of it.
  • For consumers, there are a variety of demands on their income, many of which are included in the CPI.
  • And all of this is part of a system where the Fed has an inflation target of 2%. Why 2%? Part of the target is that 2% encourages capital flows. Meaning, that with an ongoing loss of purchasing power, the system is designed to encourage investment to overcome this deficit.

Understand expectations (including your own)

The path ahead requires an understanding of the role bitcoin and different parts of crypto play in the current worldwide asset mix. And that means understanding how trading is being influenced by other forces in the wider economic matrix.  One of these forces is expectations and how they are shaped.

See:  What Millennials Want From Their Wealth Management Firm

  • And as you look around, you will see that every article, every piece of news, content, narrative, and evaluation of market action shapes expectations. Which is why this is so important to consider.
  • Moving ahead the narratives will be changing. There are many catalysts ahead that are much more significant than the CPI number. And in each case, lots of pundits, journalists, influences, and chatterers will be working hard to shape expectations.
  • And knowing what the expectations are, and when the catalysts are due, can help you manage risk effectively in a chaotic environment.
  • All of which will create significant trading opportunities.

Continue to the full article --> here


NCFA Jan 2018 resize - Trading and the Power of Expectations (including your own)The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Canada’s Open Banking Journey: Interview with EY’s Dr. Francesco Pisani and Dr. Alexander Christoph

NCFA Canada | Mahi Sall | Sep 20, 2022

NCFA OB thought leadership series EY  - Canada’s Open Banking Journey: Interview with EY’s Dr. Francesco Pisani and Dr. Alexander Christoph

Thought Leadership Series of Expert interviews and insights related to a made-in-Canada open banking regime

The National Crowdfunding & Fintech Association of Canada (NCFA), true to its mission of providing education, industry stewardship, networking, growth, and funding opportunities for innovative financial technologies and related sectors, is pleased to launch a brand new thought leadership series on Open Banking led by Berlin-based NCFA ambassador and independent expert in Fintech-Bank Partnerships Mahi Sall.

NCFA is proudly contributing this thought leadership series to help shape a system that will bring profound changes in how financial services will be created, distributed, and consumed in Canada over decades to come.  Our hope is that Canada’s Open Banking system will improve economic outcomes, improve market efficiencies and competitiveness, and enable consumers to access new and innovative financial services in a way that is secure, efficient, and consumer-centric.

The series is called ‘Canada’s Open Banking Journey’ and aims to aggregate international and domestic perspectives of Open Banking/Finance expert practitioners from around the globe to advance dialogues, key considerations, and explore potential solutions for the development of a made in Canada open banking regime with the following timeline:

  • Sep 2018:  Canada’s Open Banking journey officially began when the government established a multi-stakeholder Advisory Committee tasked to conduct a review into the merits of Open Banking
  • Apr 2021:  Advisory committee publishes final recommendations
  • Mar 2022:  Government appoints Abraham Tachjian – PwC Canada as Canada’s Open Banking lead responsible for convening industry, government and consumers in designing the foundation of the system of Open Banking for a launch in 2023.
  • Oct 2023:  Phase 1 implementation expected

NCFA Canada's Open Banking Journey Series:


 


 

Interview Begins

 

“Banks should not try to circumvent the intended opening-up of formerly closed banking landscapes and data to the competition”

-- EY’s Dr. Francesco Pisani and Dr. Alexander Christoph

 

Mahi Sall: Please introduce yourselves and organization and highlight how you relate to Open Banking.

Dr. Francesco Pisani/ Dr. Alexander Christoph:  We are Dr. Francesco Pisani, Senior Manager Strategy and Transactions | EMEIA Deputy Startup Leader and Dr. Alexander Christoph, Partner |Transaction Strategy & Execution at EY Germany.

EY is a leading advisor in the financial services sector with years of experience in working with  incumbents and fintechs on topics related to Open Banking and alike. Digital and fintech are the  core of our work. Thanks to our deep expertise and the possibility to offer end to end services,  we provide advisory services that help our clients make reasoned strategic decisions. We  frequently publish thought leadership articles on topics related to fintech and digital banking ecosystems in books, industry magazines and more. We constantly foster the exchange within the financial service community at the local as well as the international level by hosting podcasts,  organizing events and meetings among the relevant parties in the ecosystem, engaging in working groups, supporting innovation hubs, and directly working with the most inspiring  personalities in the field. Over time, we have contributed to the success of multiple  organizations and empowered various policy makers with the right knowledge to continue  enhancing the development of open banking.

 

Mahi Sall:  Common Rules represent a key component of Open Banking System Design, with the premise that they create a level playing field which eliminates the need for bilateral arrangements between Open Banking participants.  

What situations would call for bilateral arrangements in an Open Banking environment that thrives on common rules?

Dr. Francesco Pisani/ Dr. Alexander Christoph:  Open Banking typically builds on the notion that banking and transaction data belongs to  the customer who should have unrestricted access to it. Standardized interfaces should facilitate typical use cases for customers and Small and Medium Enterprises (SMEs) to  allow for them to access their data and automate simple use cases.

However, besides standardized access it might be viable for two parties to align on specific user experiences, use cases and integrations that rely on additional functionality  – not data. Examples include embedded finance use cases, e. g. in-car payments.

 

Mahi Sall: Another key component of Open Banking System Design is the Accreditation Process. Canada’s Advisory Committee on Open Banking recommended to exempt federally regulated banks from the accreditation process, and similar consideration for provincially regulated financial institutions to be discussed.

What major frustration points relative to the accreditation process can be anticipated and how to address them?

Dr. Francesco Pisani/ Dr. Alexander Christoph:  Accreditation should be based on clearly defined criteria that should be designed in a way to facilitate easy access for fintechs and startups and yet provide for the necessary protection for customer data, while not precluding the possibility to generate value for  the final users. If requirements are too strict, they will prevent competition and finally slow down innovation. It might make sense to set up “sandboxes” to facilitate fast innovations without requiring strict regulatory requirements.

“When too strict, accreditation requirements will prevent competition and slow down innovation.”

 

Mahi Sall:  The third key component of Open Banking System Design are Technical Specifications & Standards with two approaches currently dominating the landscape: single standard approach (e.g. UK, Australia) and multiple standards (e.g. US, EU). Canada’s Advisory Committee left both approaches open for exploration. 

Can you speak to the advantages and shortcomings of these approaches?

Dr. Francesco Pisani/ Dr. Alexander Christoph: While the UK model defines data structures and functionalities in great detail for the TPPs and banks to implement, the EU model relies on industry standards to establish a  set of commonly used standards.

The advantages of the EU model are clearly the opportunity for large players to reuse  existing implementations and use that as a basis for a new standard. On the other hand,  it leads to a heterogenous landscape of “standardized interfaces” and makes it hard to establish “pan-European” value propositions.

The UK model on the other hand defines a common starting ground for everybody with clearly defined data structures and functionalities. However, it might be limiting  innovative forces.

 

Mahi Sall: In the early days of Open Banking some European banks provided in addition to APIS a Modified Customer Interface (MCI) as alternative means for third party providers (TPPs) to get access to customer data. Would you foresee the need for Canadian banks to deploy fallback options to existing APIs?

Dr. Francesco Pisani/ Dr. Alexander Christoph: API technology is well established today, so we would see no need for fallback solutions such as  “screen scraping” or other means of access.

FFCON22: REGEN - Speaker applications now open

 

Mahi Sall: Please speak about lessons learned in terms of Open Banking test designs and implementation.

Dr. Francesco Pisani/ Dr. Alexander Christoph: Every situation if seen in detail is somehow special and should be treated as such. However, some general principles still apply. Having an open and constructive discussion among the parties  involved that is supported by a good documentation has revealed to be a principle that could be applied to almost every similar circumstance. Furthermore, the right planning of resources and an agreed as well as feasible roadmap are paramount for the achievement of major milestones.

 

Mahi Sall: As in other jurisdictions, financial inclusion is high on Canada’s Open Banking agenda. Please share examples where Open Banking failed to deliver on this metric. What are some of the key lessons learned that Canada could benefit from?

Dr. Francesco Pisani/ Dr. Alexander Christoph: Open Banking alone should not be seen as the key to financial inclusion, but more as an enabler.  While Open Banking might help to tear down some of the barriers that prevent access to financial services to part of the population, there are other structural as well as societal  problems that might need to be addressed as well to achieve financial inclusion, especially in developed countries.

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Mahi Sall: Chief among the factors affecting the take-off of Open Banking is low adoption by consumers.  What could Canada do differently than other jurisdictions in order to pre-empt this risk?

Dr. Francesco Pisani/ Dr. Alexander Christoph: Adoption comes with convincing use cases for customers. Open Banking can hardly be promoted  on its own. In order to promote Open Banking as technologies, regulation and communication  should be straightforward and clear. Use cases should be developed that demonstrate to the future users how it makes their lives more convenient and better.

 

Mahi Sall: Drawing upon your observations, what are some of the quick wins in terms of Open Banking use cases that banks and fintechs should prioritize rolling out?

Dr. Francesco Pisani/ Dr. Alexander Christoph: Most successful use cases that immediately show a convincing value proposition to customers are account aggregation and personal financial management (PFM). In addition, financial planning and wealth management will be attractive for customers.

On the SME side, integrations with accounting apps/ packages and tax apps/ packages can be  attractive as well.

 

Mahi Sall: What role does talent play in developing a thriving Open Banking system?

Dr. Francesco Pisani/ Dr. Alexander Christoph: Talent has a significant impact on the success of Open Banking – especially on the fintech side.  On the tech side this is obvious, but also on the product side, Canada needs visionaries that can develop and sell value propositions to the customers.

 

Mahi Sall: Speak about Open Banking limitations and the most common misconceptions people have about it? 

Dr. Francesco Pisani/ Dr. Alexander Christoph: Customers might develop a view where with Open Banking in place, everybody can see their bank data. This might prevent them from accepting modified T&Cs that come with OB  regulations and adopt the new use cases that will be developed on that basis.

 

“API technology is well-established today, so no need for fallback options”

 

Mahi Sall: What does Open Banking mean to banks and fintechs, and how does it affect the relationship between the two?

Dr. Francesco Pisani/ Dr. Alexander Christoph: In the early days of Open Banking, banks would be afraid that with APIs being in place, fintechs would be able to lure people away from bank web sites and apps to their own apps and finally take over the client relationship. However, experience shows that this is not the case. Banks today use fintechs to integrate their financial products into other value chains and use cases they were not able to address earlier.

 

See:  So what is financial exclusion in the era of Open Finance?

 

Mahi Sall: How could banks and TPPs best prepare for Open Banking and extract the most value out of it?

Dr. Francesco Pisani/ Dr. Alexander Christoph: Banks should not try to circumvent the intended opening-up of formerly closed banking landscapes and data to the competition. Instead, they should try to formulate their own value  statement and strategy around OB – what use cases are they foreseeing for their customers,  what apps and integrations will they be delivering to keep customers and SMEs happy?

 

Mahi Sall:  Given the very tight schedule of Canada’s Open Banking roadmap, where do you think the balance must be struck to meet deadlines without significant trade-offs? 

Dr. Francesco Pisani/ Dr. Alexander Christoph: It might help to go back to the main motivations that pushed such agenda and use them as guiding principles to prioritize based on the value of each achievement while still considering the overall picture and the circumstance. For instance, it is almost impossible to think about relaxing  security standards in banking, and there are good reasons for that, but what if the environment allows that and the objectives to be met are not related to security matters?

 

Mahi Sall: What must be thought of and accounted for at this early stage of Open Banking in Canada in order to ensure compatibility and interoperability at regional/international level?

Dr. Francesco Pisani/ Dr. Alexander Christoph: The API should be planned to support multiple currencies and languages. In addition, it should  be able to accept digital certificates from multiple Certificate Authorities.

# # #

Links you may be interested in:

About EY
Dr. Francesco Pisani
Dr. Alexander Christoph

 

Mahi Sall bubble - Canada’s Open Banking Journey: Interview with EY’s Dr. Francesco Pisani and Dr. Alexander Christoph

Mahi Sall is an Ambassador of the National Crowdfunding & Fintech Association of Canada “NCFA”, and an Expert on Fintech-Bank Partnerships. He is based in Berlin, Germany.

 


NCFA Jan 2018 resize - Canada’s Open Banking Journey: Interview with EY’s Dr. Francesco Pisani and Dr. Alexander ChristophThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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World Bank Report: Critiques FATFs Work on National Risk Assessments

The Compliance Lady | Sep 9, 2022

World Bank vs FATF NRA - World Bank Report:  Critiques FATFs Work on National Risk Assessments𝗪𝗢𝗥𝗟𝗗 𝗕𝗔𝗡𝗞 𝘃. 𝗙𝗔𝗧𝗙: It is always interesting to come across a study that critiques FATF’s work. In a recent report the World Bank takes a closer look at National Risk Assessments (NRAs). For those not familiar with NRAs, the Financial Action Task Force (FATF) requires nations to demonstrate an understanding of the money laundering risks they face in the country by conducting National Risk Assessments.

See:  Opinion: Rising cost of compliance may lead to consolidation

  • World Bank researchers examined eight of the most advanced nations’ (Canada, Italy, Japan, the Netherlands, Singapore, Switzerland, the UK, and the US) NRAs in order to test their knowledge of those fundamental concepts and to draw lessons from them for national governments.
  • A deeply flawed methodology is what they found. The eight NRAs show very different conceptualizations, analytic approaches, and products. Each raises serious issues regarding the risk assessment methodology.
    • For example, most relied largely on expert opinion, which they solicited in ways that are inconsistent with the well-developed methodology for making use of expert opinion.
    • They misinterpreted data from suspicious activity reports and failed to provide risk assessments relevant for policy makers.
    • The report concludes with a set of recommendations for policymakers and NRAs regarding improving risk assessments.

Continue to the full article --> here

Download the 45 page PDF report --> here


NCFA Jan 2018 resize - World Bank Report:  Critiques FATFs Work on National Risk AssessmentsThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Lyn Alden Analysis: A Look at the Lightening Network

Lyn Alden | August 2022

lightening network visual - Lyn Alden Analysis:  A Look at the Lightening NetworkThis article examines the relationship between a monetary asset being a store of value vs being a medium of exchange.  Specifically, it focuses on the scaling method of the Bitcoin network as its main example, but also takes a broad look at the history of trade-offs in the cryptocurrency space as well to see why a layered approach makes the most sense.

The primary goal of this article is to examine the topic of how bitcoin has evolved as a medium of exchange, and more broadly to analyze the order in which new monetary assets can be accepted as a store of value and a medium of exchange.  As a big part of that, I’ll include an analysis of the Lightning network, which is a small but fast-growing payments layer that is interwoven into the Bitcoin network.  Here are the sections of this article:

Intro

This article is long, so I’ll summarize the main points up front here, and then spend the rest of the article diving into the details.

-A truly decentralized and permissionless payment network requires its own underlying self-custodial digital bearer asset. If instead it runs on top of the fiat currency system or relies on external custodial arrangements at its foundation, then it is neither decentralized nor permissionless.

See:  The Most Efficient Payment System In The World: Bitcoin And The Lightning Network

-In order to create a truly new digital bearer asset that is useful for payments in the long run, it must also be an attractive store of value, so that a meaningful percentage of the population begins to persistently hold it as some percentage of their liquid net worth and be willing to accept it for goods and services.

-In other words, in order to create a decentralized version of Visa, beneath that you must first create a decentralized version of Fedwire, and along with that you must first create a decentralized version of digital gold. It’s hard to envision any other path succeeding.

Continue to the full article --> here


NCFA Jan 2018 resize - Lyn Alden Analysis:  A Look at the Lightening NetworkThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Canada’s Open Banking Journey: Interview with Francois Lasne, advisory board member of The Berlin Group

NCFA Canada | Mahi Sall | Sep 12, 2022

NCFA OB series Francois Lasna The Berlin Group 800 - Canada’s Open Banking Journey: Interview with Francois Lasne, advisory board member of The Berlin Group

Thought Leadership Series of Expert interviews and insights related to a made-in-Canada open banking regime

The National Crowdfunding & Fintech Association of Canada (NCFA), true to its mission of providing education, industry stewardship, networking, growth, and funding opportunities for innovative financial technologies and related sectors, is pleased to launch a brand new thought leadership series on Open Banking led by Berlin-based NCFA ambassador and independent expert in Fintech-Bank Partnerships Mahi Sall.

NCFA is proudly contributing this thought leadership series to help shape a system that will bring profound changes in how financial services will be created, distributed, and consumed in Canada over decades to come.  Our hope is that Canada’s Open Banking system will improve economic outcomes, improve market efficiencies and competitiveness, and enable consumers to access new and innovative financial services in a way that is secure, efficient, and consumer-centric.

The series is called ‘Canada’s Open Banking Journey’ and aims to aggregate international and domestic perspectives of Open Banking/Finance expert practitioners from around the globe to advance dialogues, key considerations, and explore potential solutions for the development of a made in Canada open banking regime with the following timeline:

  • Sep 2018:  Canada’s Open Banking journey officially began when the government established a multi-stakeholder Advisory Committee tasked to conduct a review into the merits of Open Banking
  • Apr 2021:  Advisory committee publishes final recommendations
  • Mar 2022:  Government appoints Abraham Tachjian – PwC Canada as Canada’s Open Banking lead responsible for convening industry, government and consumers in designing the foundation of the system of Open Banking for a launch in 2023.
  • Oct 2023:  Phase 1 implementation expected

NCFA Canada's Open Banking Journey Series:


 

Interview Begins

 

The future of Finance is Open.

-- Francois Lasne, Advisory Board Member of The Berlin Group

 

Mahi Sall: Who is Francois Lasne?

Francois Lasne: I am an advisory board member of The Berlin Group, the largest Open Banking framework in Europe (NextGenPSD2) implemented by more than 75% of European banks. I am also a member of the French API Thinking Collective where I head the API Governance workstream. Currently working at Ingenico to launch a disruptive Payment Platform as a Service (PpaaS) for instore and online merchants. Prior to that I was director of Open API and Open Banking at Finastra.

 

Mahi Sall: Common Rules represent a key component of Open Banking System Design, with the premise that they create a level playing field which eliminates the need for bilateral arrangements between Open Banking participants.  

What situations would call for bilateral arrangements in an Open Banking environment that thrives on common rules?

Francois Lasne:  Innovation runs fast, faster than regulation.   Setting up a regulatory framework that rests on a solid foundation helps stimulate the creation of an ecosystem. That allows fintechs to invest as they will be able to connect / address a larger set of actors.

That said, innovation should not be blocked. If a fintech and a bank have a great idea that goes beyond the scope of regulation, why stop it? A new business idea or new use cases should not be stopped because others are not involved.  Fair enough, it gives a competitive advantage, then up to the bank to negotiate if this feature would be exclusive or not, offered for free or not.

It is also important to learn by doing, and once a learning has been ‘validated’, integrate it back into the regulatory framework. Between the UK and the EU there are a lot of differences like Product Information, Branch Locator (mandatory in the UK, not required in France), etc. Shouldn’t a Branch Locator API be allowed in France?

In Europe you have the PSD2 regulatory scope with some value-added services not yet regulated like loan account support. Up to the bank and fintech to propose those services for free or paid. Here the market will make the difference.

 

Mahi Sall: Another key component of Open Banking System Design is the Accreditation Process. Canada’s Advisory Committee on Open Banking recommended to exempt federally regulated banks from the accreditation process, and similar consideration for provincially regulated financial institutions to be discussed. 

What major frustration points relative to the accreditation process can be anticipated and how to address them? 

Francois Lasne:  Accreditation provides trust and limits fraud. The counterpart of trust is validation, and the usual pitfall of validation is process and bureaucracy.

In the EU, the European Central Bank (ECB) delegated the accreditation process to National Competent Authorities (NCA) i.e the national Central Banks of member countries. The process is enforced by eIDAS certificates and requires NCAs to have the capability to warn for revocation of certification.

The process flow is summarized below (Saltedge illustration):

EU accreditation process - Canada’s Open Banking Journey: Interview with Francois Lasne, advisory board member of The Berlin Group

  • TPP to push ask for an authorization and present legal documents and insurance (especially for payment)
  • NCA to issue authorization
  • TPP to ask for an eIDAS Certificate to regulated entities QTSP (qualified trust service providers)
  • QTSP to validate the authorization and issue dedicated eIDAS certificate
  • TPP to send eIDAS certificate to bank
  • Bank to validate eIDAS certificate

In this process we can see that several parties are involved, and so it requires a proper alignment of the stars. It is also very important to be able to distribute Test Certificates and define happy flow as well as negative flow (wrong certificate, revocation scenario).

Frustration usually happens due to unavailability of the actors, the test environment, or/and a lack of fluidity of the process.

 

Mahi Sall: The third key component of Open Banking System Design are Technical Specifications & Standards with two approaches currently dominating the landscape: single standard approach (e.g. UK, Australia) and multiple standards (e.g. US, EU). Canada’s Advisory Committee left both approaches open for exploration. 

Can you speak to the advantages and shortcomings of these approaches?

Francois Lasne:  A single standard looks like a much simpler option. But this standard needs to be smart. Open Banking UK is very smart, with good coverage, good documentation. Having a single standard makes things clearer for TPPs, the road is paved and we have directions. It also simplifies the implementation.

Best is when beyond the standard there is a reference implementation or at least a TCK (Test Compliance Kit) as you have for instance for OpenIdConnect. This guarantees less interpretation.

On the other hand, having a single standard puts a lot of pressure on the regulator to provide good API, good documentation and so on. Open Banking UK quality has a cost.

The EU approach was focused on the legal aspects. This led to multiple standard implementations with a fragmentation of the API framework (STET, Berlin Group , Polish API ) and interpretation of the laws (just looking at the number of questions to the EBA - European Banking Authority).

Canada needs to learn from this. There is no point in creating yet another standard. I would encourage Canada to leverage what exists either FDX, Berlin Group or Australia API. Berlin Group being an open-source standard looks more straightforward, so I would recommend a fork (aka a copy), better a collaboration.

 

Mahi Sall: In the early days of Open Banking some European banks provided in addition to APIs a Modified Customer Interface (MCI) as alternative means for third party providers (TPPs) to get access to customer data. Would you foresee the need for Canadian banks to deploy fallback options to existing APIs? 

Francois Lasne:  Master Yoda says: “Do or Do not, there is no try”. Fallback is not a good option, meaning that it is complexifying integration and entering into a gray zone. As a regulator I don’t want to evaluate the quality of fallback options, as it would be a case-by-case study. This will be  breaking the fluidity and adoption of API. You might end up with everyone doing fallback, which in a way would be defeating the purpose of regulation.

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Mahi Sall: What are some of the lessons you’ve learned in terms of Open Banking test designs and implementation.

Francois Lasne:  As we deal with API and testing, both parties i.e. producers (Banks) and consumers (TPPs) need to be ready on time. What we’ve learned is that testing needs to be prepared in advance, especially the security infrastructure like certificates as well as the business domain. There were also huge differences between “Sandbox” and production data. Testing in production with a real production system is always better. What is the point of code against a sandbox replying to a static response? Better having an agreed scenario on dedicated test users and accounts, and then no surprise when doing the production. It is so frustrating to have everything working with a sandbox, only to have to redo all the testing campaigns against the production environment.

 

Mahi Sall:  Drawing upon your observations, what are some of the quick wins in terms of Open Banking use cases that banks and fintechs should prioritize rolling out?

Francois Lasne:  Let’s learn to walk before running, so starting with the basics i.e. account information data (all kinds of accounts, no need to restrict) will enable a lot of use cases e.g. cashback , account aggregation, scoring and so on. Then payments, both immediate and cross border targeting for sure reduction of cost. Having basic static data like product information is great as well.

 

Mahi Sall:  Speak about Open Banking limitations and the most common misconceptions people have about it?

Francois Lasne:  One of the biggest misconceptions about Open Banking  is that people believe that their data will be shared and resold as Google is doing whether or not they consent. Open Banking is more about users taking back ownership of their data that banks hold. With Open Banking users are the legitimate owners of their data, and it is only with their consent that it gets shared with providers of their choice.

Also people do not see the benefits of Open Banking because they are used to paying with credit cards. Despite the prefix  ‘open’, Open Banking is actually much more secure than credit cards for making payments online.

Lastly, people fail to see an economic incentive. Here merchants should promote Open Banking by offering discounts, a way of passing on to customers the savings on the fees they’ve made, which otherwise would have been paid to card network providers.

Open Banking enables banks to externalize their innovation labs to fintechs for free, at zero risk!

 

Mahi Sall:  What does Open Banking mean to banks and fintechs, and how does it affect the relationship between the two?

Francois Lasne:  Banks might see Open Banking as a threat, as they need to provide ‘their’ data for free. But what we have seen in the EU is that Open Banking was a fabulous driver for innovation. All banks now in the EU provide  account aggregation as part of their mobile apps. Most of them are pushing new services like cashback based on Open Banking, statement categorization while some are pushing green indicators and so on.

Also a lot of corporate flow goes to API for ERP connection. API has to be seen by banks as a new vector of distribution of their services. It has become the new virtual branch, the same way as mobile.

For TPPs we can see 2 approaches:

  1. Those wanting to partner as much as possible and get integrated inside a bank’s mobile app. Those are on the bank side, hence not a threat, rather an opportunity for banks! It is a bit like a way for banks to externalize their innovation labs to fintechs without cost!
  2. On the other side are fintechs that are more on the consumer side targeting for instance corporates with ERP integration.

Sitting in the middle are the aggregators. These are playing a very important role because as a TPP I would rather go to an aggregator who has set up all the plumbing instead of trying to connect directly with all banks on my own.

See:  Fintech Reports and Research

 

Mahi Sall:  How could banks and TPPs best prepare for Open Banking and extract the most value out of it?

Francois Lasne:  Banks need to have an API framework in place, run tests and provide support. Launching an API is like launching a new product. We all know that adaptation (so called bug) is required at the beginning, so be ready for some support activity. The same goes with onboarding as the onboarding might not be fully standardized.

TPPs being usually smaller are more agile and able to adapt, they will chase banks. Do not focus on a particular one, instead target multiple Banks as one might get stuck for a while. Starting several threads would be a safe path.

Do not reinvent the wheel, leverage previous experiences.

 

Mahi Sall:  Given the very tight schedule of Canada’s Open Banking roadmap, where do you think the balance must be struck to meet deadlines without significant trade-offs?

Francois Lasne:  One key big accelerator would be to adopt or partner with an already existing big standard i.e. Berlin Group, OB UK or FDX. This would significantly reduce the design phase, although a bit of adaptation will be required, but the basis and documentation is solid.

 

Mahi Sall:  What must be thought of and accounted for at this early stage of Open Banking in Canada in order to ensure compatibility and interoperability at regional/international level?

Francois Lasne:  Think big!

Do not focus only on regional payment schemes but make the framework flexible enough so that it can be extended. Then you may provide a discovery mechanism so that by code the TPP can discover whether or not this bank supports this feature.

 

Fintech Fridays podcast - Canada’s Open Banking Journey: Interview with Francois Lasne, advisory board member of The Berlin Group

# # #

Links you may be interested in:

Mahi Sall bubble - Canada’s Open Banking Journey: Interview with Francois Lasne, advisory board member of The Berlin Group

Mahi Sall is an Ambassador of the National Crowdfunding & Fintech Association of Canada “NCFA”, and an Expert on Fintech-Bank Partnerships. He is based in Berlin, Germany.

 

 


NCFA Jan 2018 resize - Canada’s Open Banking Journey: Interview with Francois Lasne, advisory board member of The Berlin GroupThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Consumer Protection: Fintech Complaints Have Been Rising

Protocol | Ryan Deffenbaugh and Fintech team | Aug 29, 2022

consumer complaints - Consumer Protection:  Fintech Complaints Have Been Rising

Image: Unsplash/Gabriel Gonzalez

The CFPB received 20,900 complaints last year involving money transfer services (including mobile and digital wallets) and virtual currency companies, the category most closely associated with fintech. That marked a 63% increase from a year earlier, even if they amount to just a small part of the nearly 1 million complaints to the agency, the majority of which involve credit-reporting companies.

  • In response to complaints of fraud on peer-to-peer money-transfer services, the CFPB has promised new guidance "ensuring that financial institutions are living up to their investigation and error-resolution obligations," a CFPB spokesperson told the Wall Street Journal last month. That could include requiring refunds for fraudulent transfers, according to the Journal, which the industry warns could lead to higher costs or even encourage more fraud.

See:  Some New Banking Rules Implemented to Protect Consumers in Canada

  • The guidance could address a common complaint flagged by the CFPB’s 2021 annual report. Customers trying to report issues such as fraudulent activity to money-transfer services "described no response to support tickets — and no way of contacting the company by phone.”
  • Some fintechs have promised to improve their responsiveness to customers. Both Coinbase and Robinhood added live phone support last fall. Block offers a phone line for Cash App and told Bloomberg in March that it is committed to “expanding our customer support and operations infrastructure.”

California is building its own mini CFPB

  • The state's Department of Financial Protection and Innovation is reviewing comments on a rule-making proposal that would dictate how some of the financial and fintech companies under its jurisdiction, such as lenders and debt collectors, respond to customer complaints.
  • While acknowledging the importance that companies respond to complaints, some within the industry have called out requirements such as quarterly reporting and responding to telephone-based complaints within 24 hours as particularly onerous, and beyond what is required by other regulators.

See:  Penrose Report: Power to the People: Stronger Consumer Choice and Competition

  • Documents published about the rule noted that the DFPI was required to set new rules for companies to handle complaints and disputes as part of new authority granted under the 2020 California Consumer Financial Protection Law.

Continue to the full article --> here


NCFA Jan 2018 resize - Consumer Protection:  Fintech Complaints Have Been RisingThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Canada’s Open Banking Working Committees Flag ‘Governance’ as the Latest Gap

Betakit | | Sep 6, 2022

Canadas OB lead Abraham Tachjian - Canada's Open Banking Working Committees Flag 'Governance' as the Latest GapConcerns over competing interests between FinTech startups and financial incumbents have existed since the start of the process. Governance is the latest battlefront

  • Working group participants from the FinTech community and those familiar with the talks expressed concern that delaying governance decisions could hamstring the system, leaving Canadians without recourse if their data or accounts are compromised. FinTech participants are also concerned they would be left without recourse in disputes with other financial institutions.
  • Canada’s future open banking system will need some form of governance entity to handle dispute resolution between participants, ensure compliance with accreditation requirements, respond to security incidents and assign responsibility for remunerating consumers who’ve been harmed by possible data breaches or stolen funds, according to the advisory committee’s final report, released in August 2021.

NCFA Canada's Open Banking Journey Series:

 

  • In response, Two FinTech industry associations (FDATA and PayTechs) have moved to address those concerns by developing or submitting their own reports on future governance options, BetaKit has learned.
  • Another working group participant from the FinTech space said the fact that the technical standards for APIs and governance options have been missing from the discussions so far “candidly was concerning.” They noted that there are several options Tachjian and the finance ministry are considering regarding API standards, but “we don’t have a clear indication of what that answer is going to be.”
  • Concerns over competing interests and competitive advantages regarding access and authority between FinTech startups and financial incumbents have existed prior to the release of the open banking report. The most recent flare-up came over frustrations with an early draft version of the CIO Strategy Council’s (CIOSC) minimum viable framework for consumer-directed finance, which some feared would give banks a competitive advantage over startups regarding authentication, consent and data transfer methods. Governance seems to be the latest battlefront.

Continue to the full article --> here


NCFA Jan 2018 resize - Canada's Open Banking Working Committees Flag 'Governance' as the Latest GapThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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