Rojin Nair, Advisor
June 1st, 2021
At Incyub8 Inc, Rojin is focusing on nurturing and guiding various national and international start-[...]
Category Archives: Payments, Transfers, Rewards
Solution to Consumer-Centric Payments Innovation in America
Morning Consult | , & | Oct 13, 2021
In recent years, there have been several debates over how best to regulate and facilitate financial technology innovation in the United States. These debates frequently pit federal regulations against state-based regulation, and banks against nonbanks, in unfortunate zero-sum contests, resulting in legal challenges and increasingly tense congressional hearings that risk losing the forest for the trees in terms of what’s best for the country. At the same time, the Federal Reserve is considering whether certain kinds of banks — but only banks — can directly access federal payment systems.
When it comes to consumer-centric payments innovation, there is a way to preserve state-based regulation of payments companies and allow them to participate directly in our national payments systems, without requiring that they have full banking powers.
Our idea for a hybrid federal/state payments oversight model is rooted in the “unbundling” of financial services brought about by financial technology companies competing in discrete markets. These entities do not resemble the full-service, brick-and-mortar banks of decades past. Some payments innovators, for example, are focused on using modern technology to provide faster, lower-cost, transparent and more convenient payments for their customers — not on taking deposits or making loans.
Read: 2021 McKinsey Global Payments Report
In recognition of this changing industry landscape, many other high-income countries have recently implemented modern regulatory frameworks that account for the new business models. Companies focused narrowly on payments can access critical payments infrastructure and are subject to tailored regulation focused on their unique risks.
That hasn’t happened in the United States, where licensing regimes are decades — and, in some cases, centuries — old, and largely limit access to payment rails to “banks” as traditionally understood. Bank regulation, however, is designed for banks that collect deposits and lend them out — not for payments companies. Payment providers are regulated by each of the 50 states under money transmission frameworks and cannot directly access payment systems.
As a result, some companies have increasingly sought out regulatory regimes that would enable them to operate nationwide and to access central bank services. These applications prompted the Federal Reserve Board to propose guidelines for deciding which banks can obtain Federal Reserve accounts and thereby access Federal Reserve payments systems.
These applications will likely increase in the months and years ahead. Why? There’s still a cohort of payments companies that are not able to compete on a level playing field, because they must use banks as middlemen to access critical financial infrastructure such as Federal Reserve payments systems. Unlike in many other countries, only banks — as traditionally defined — can originate and settle payments directly on behalf of their customers.
It is important to ensure that companies permitted to directly access critical payment systems are well-regulated, but it makes little sense to require a payments company to become a full-service bank, or to be regulated like one. They have entirely different business models and present different risks. Traditional banks raise deposits and lend them out, engaging in maturity transformation and taking on interest rate and credit risk, as well as operational and liquidity risk. Payments companies, on the other hand, move money between end users and pose principally liquidity and operational risk.
See: Fintech regulation: how to achieve a level playing field
There’s a gaping square peg/round hole problem.
They have entirely different business models and present different risks.
A solution may be found in a hybrid of the U.S. state-based regulatory regime for “money transmitters” and the regulatory frameworks implemented or in the works in the United Kingdom, Canada, European Union, and Singapore. Congress could create a national “payments passport” by allowing money transmitters with at least 40 state licenses to obtain limited access to the payments system, provided they are subject to Federal Reserve regulatory standards and supervision tailored to payments services.
Continue to the full article --> here
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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2021 McKinsey Global Payments Report
McKinsey & Company | Philip Bruno, Olivier Denecker, and Marc Niederkorn | Oct 7, 2021
Undoubtedly, 2020 was a tumultuous year on many levels. Payments was no exception—the sector experienced its first revenue contraction in 11 years, a consequence of the economic slowdown that accompanied the global health crisis of COVID-19. Still, government and regulatory measures such as fiscal and monetary stimulus held the decline below the 7 percent we projected in last year’s report. 1 At the same time, the continued digitization of commercial and consumer transactions contributed even greater upward momentum than expected.
See:
Swift launches ‘Go’ moves into low value cross-border payments
Interac and many of Canada’s leading financial institutions enhance Interac e-Transfer to introduce instant digital payments for businesses
Global payment revenues totaled $1.9 trillion in 2020, a 5 percent decline from 2019 (Exhibit 1), as compared to the 7 percent growth rate observed between 2014 and 2019. This result seems fairly intuitive on the surface; a granular analysis, however, reveals a series of often offsetting trends. Overall, the payments industry proved remarkably resilient to drastic economic changes even as many economies spent significant portions of the year in lockdown.
Looking forward, we see a handful of primary drivers influencing the payments revenue trajectory. On the one hand, continued cash displacement and a return to global economic growth will accelerate existing upward trends in the share and number of electronic transactions. On the other, interest margins will likely remain muted. Sustained softness in this key topline contributor will create greater incentive for payments players to pursue new fee-driven revenue sources and to expand beyond their traditional focus to adjacent areas such as commerce facilitation and identity services.
Given the above assumptions we expect global payments revenues to quickly return to their long-term 6 to 7 percent growth trajectory, recouping 2020’s declines in 2021 and reaching roughly $2.5 trillion by 2025. More importantly, however, as “payments” become further absorbed into commercial and consumer commerce journeys, established payments providers will gain access to adjacent opportunities as large as the core payments revenue pool. Of course, an opportunity of this magnitude draws attention—tech firms and ecosystem competitors are already focusing on these attractive (and often less regulated) elements of the payments value chain, rather than traditional interchange, acquiring, and transaction fees linked to payment flows.
See:
Amazon Responds To Rumors That It Is Integrating Bitcoin Payments On Its Platform
65% of Global banking executives see branch-based models dead in 5 years
Payments without banks goes mainstream with Twitter on Bitcoin Lightning Network
Select Highlights:
- Asia-Pacific dominates the global payments revenue pool
- Cross-border payments, a natural casualty of reduced travel and global supply chain challenges, accounted for the remainder of the revenue decline. By contrast, the explosion in e-commerce and reduction in cash usage helped minimize the decline in domestic transaction fee income.
- The pandemic reinforced major shifts in payments behavior: declining cash usage, migration from in-store to online commerce, adoption of instant payments.
- Cash payments declined by 16 percent globally in 2020
- Digital-wallet usage surged, as consumer preferences evolved even within contactless forms. In Australia, an early success story in “tap to pay” adoption, digital-wallet transactions grew 90 percent from March 2020 to March 2021—by which point 40 percent of combined debit/credit contactless volume originated via digital wallets. In Indonesia, the value of e-money transactions grew by nearly 39 percent between 2019 and 2020, fueled primarily by an increase in digital adoption.
- Real-time payments are playing an increasingly important role in the global payments ecosystem, with the number of such transactions soaring by 41 percent in 2020 alone, often in support of contactless/wallets and e-commerce. 4 Over the last year growth in instant payments varied widely across countries—from Singapore at 58 percent to the United Kingdom at 17 percent.
- The push for digital identity verification systems gained momentum during the pandemic, both as a facilitator for expanding e-commerce volumes and as a means for governments to rapidly disburse welfare and other social payments.
Continue to the full article --> here
Download the McKinsey 2021 Global Payments Report --> here
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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Plastic Policemen: Credit-card firms are becoming reluctant regulators of the web
The Economist | Oct 10, 2021
From sex to free speech, what goes online is increasingly up to financial companies
WHO SHOULD police the internet? For some time now the question has tied companies, regulators and campaigners in knots. Social networks spend billions moderating content posted on their platforms, but are still criticised either for not removing enough toxic material or for stifling free speech. They are not the only ones to grapple with the problem. Banks and credit-card companies too are finding themselves playing a bigger role in what is said and done in the public square—to their, and their customers’, discomfort.
See: Bank of Canada to become new regulator of fintech companies doing payments processing
Now the boundary of censorship is being extended further, into the pornography business. From October 15th adult websites worldwide will have to verify the age and identity of anyone featured in a picture or video, as well as the ID of the person uploading it. They will need to operate a fast complaints process, and will have to review all content before publication. These requirements are being imposed not by regulators but by Mastercard, a credit-card giant.
Websites can always choose not to work with Mastercard. But given that the company handles about 30% of all card payments made outside China, to do so would be costly. Visa, which manages a further 60% of payments, is also taking a firmer line on adult sites. And the trend goes beyond porn. In the shadier corners of the web, and in industries where the law is unclear or out of date, financial firms are finding themselves acting as de facto regulators.
Payments have become a tool of domestic and international policy,” says Aaron Klein of the Brookings Institution
Since the turn of the century, “payments have become a tool of domestic and international policy,” says Aaron Klein of the Brookings Institution, a think-tank. After the 9/11 attacks of 2001 America introduced new anti-money-laundering rules and more targeted sanctions. This system—a “21st-century precision-guided munition”, as a former head of the CIA called it—obliges financial firms to block payments to the individuals on a list which today runs to 1,604 pages.
See: Payments without banks goes mainstream with Twitter on Bitcoin Lightning Network
Handing enforcement duties to companies relieves the taxpayer of some of the cost. Compliance departments at firms, meanwhile, have ballooned. It is not unusual for big banks, such as HSBC or JPMorgan Chase, to employ 3,000-5,000 specialists focused on fighting financial crime, and more than 20,000 overall in risk and compliance. In 2017 Accenture, a consultancy, reckoned that tech firms employed around 100,000 content moderators.
Payment companies in particular face a philosophical dilemma.
“On one hand they try to be very open, accepting, willing to facilitate payments for whomever. They’re not taking any sort of political or moral stance,” says Lisa Ellis of MoffettNathanson, a research firm. “But on the other hand, they also feel like they have a very strong responsibility in making sure that they’re not aiding and abetting any sort of crime.”
Continue to the full article --> here
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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Is the fintech policy agenda overrated? It depends on who’s asking
PayTechs of Canada | Alex Vronces | Oct 7, 2021
Overrated or underrated?
It’s a question Tyler Cowen, one of my favourite public intellectuals, poses to guests on his podcast. The question turns simple conversation into meta-conversation. It moves you from discussing something to discussing the discussion of something. The question is almost magical, like a spell that makes you disappear only to reappear on a new cognitive plane.
So let’s pop the question: is the fintech policy agenda overrated or underrated? The answer depends on who’s asking.
Currently, the federal government is reviewing Canada’s approach to financial sector policy to put fintechs on a level playing with banks. Open banking is supposed to let fintechs access Canadians’ financial information, giving fintechs the means to offer better products and services. The government is also exploring whether to give fintechs access to the payments infrastructure our economy runs on — a privilege exclusively afforded to financial institutions, such as banks. Let’s call these two initiatives the fintech policy agenda.
See: Reflections on Canada’s open banking report
If the median voter is asking whether the agenda is overrated or underrated, then it’s grossly underrated.
The median voter likely doesn’t even know what the fintech agenda is. Is open banking about keeping my bank branch open longer? I make payments whenever I tap my card at the point of sale, so what’s the problem? In fact, the median voter likely doesn’t know what a fintech is, let alone what problems the fintech agenda is meant to solve and how it would solve them.
But if a fintech advocate is asking? Then the agenda is overrated.
It’s not that payments modernization and open banking don’t belong on the fintech policy agenda. They do, but they’re not the only things that do.
For example, how future proofed is the fintech policy policy agenda when payments modernization and open banking are at risk of having a short shelf life? Consider DeFi, or decentralized finance, a contender for crypto’s killer app. DeFi refers to the distribution of financial services on the blockchain. As Stephanie Choo, a partner at Portage Ventures, recently wrote, DeFi “has the potential to become for financial services what the Internet has been for media production and distribution.”
See: How open-source software shapes AI policy
The promise of DeFi comes from innovation in governance. It erodes the power that rent-seeking intermediaries, such as banks and legacy payment networks, have long had, while circumventing the barrier to entry-laden oversight that governments have long had.
The risk of obsolescence DeFi brings to payments modernization is easy to see.
An endangered intermediary, Payments Canada is building a real-time payment system called the real-time rail, while the government consults on giving fintechs access to it. Fintechs support both initiatives — and for good reason — but DeFi could obliterate the need for both if it matures into something more ubiquitous. It’s no wonder someone once told me that Canada is building railroads while the world is building airplanes.
The risk of obsolescence DeFi brings to open banking is also easy to see.
Another intermediary-centric initiative, open banking compels banks to open their data-loaded vaults to financial-app developers. What I said of payments modernization is also true of open banking: fintechs support open banking, and for good reason. But open banking does little good in a world where financial services have been disintermediated and user data is on the blockchain.
See: WEF: Decentralized Finance: (DeFi) Policy-Maker Toolkit
Jon Stokes, who co-founded Ars Technica, recently described the status quo of data governance as a “decentralized network of siloed (user data) tables connected by access-controlled APIs.” Stokes thinks we could see the de-siloing and aggregation of user data on the blockchain. If open banking promotes competition, then blockchain-based data portability promotes competition on steroids.
If you think such visions are speculative, you’re not alone. No one knows what the future of financial services has in store, just like no one knew what the future of media distribution before the Internet had in store.
DeFi is going to be tricky
It’s too early to tell which way DeFi will go, which is why experimentation is so important. But DeFi experimentation is going to be tricky, as it’s prone to undermining itself.
The government’s response to DeFi has so far been an ambiguous combination of supportive and fearful — the latter state being one from which little good has ever come. For example, although the Ontario Securities Commission is allowing for some experimentation with crypto, the experimentation is limited and controlled. Moreover, the Bank of Canada announced it’s exploring how it could issue its own digital currency to crowd out the privately-issued competition, should it ever mature.
See: Decentralized Finance—Risks, Regulation, and the Road Ahead
It’s not hard to see the risk that the government extinguishes too many future possibilities, killing DeFi before its potential is even meaningfully tested. This is why DeFi deserves more space on the fintech policy agenda.
Then again, perhaps you’re a DeFi bear and think DeFi deserves no more attention than it’s getting.
If that’s you, then substitute for DeFi for another idea you think is underrated. Maybe your underrated idea is sandboxing under the Bank Act, making it easier for fintechs to become banks, or maybe it’s better coordination and alignment between the provincial regulators on modernizing consumer protection and market conduct regulation. Alternatively, maybe Canada’s competition laws need to be reformed and authorities better equipped to level the playing field between incumbents and challengers.
The point is, no matter what you pick, we get to the same place: the fintech policy agenda is overrated because it’s not inclusive of what’s underrated.
If you’ve gotten this far, rest assured that there’s a way to make the fintech policy agenda appropriately rated — not overrated, not underrated, and just right. In fact, it ought to be obvious by now. Take a cue from Tyler Cowen: gather your smartest friends and play a few rounds of “overrated versus underrated” with them.
Authored by Alexander Vronces, Executive Director of PayTechs of Canada, representing the diverse community of payment technology companies operating in Canada. Using his payments and policy knowledge and network, Alex leads the push for a more competitive and innovative Canadian payments ecosystem.
This article is featured in NCFA's digital magazine, Fintech Confidential (Issue 4 Oct 2021). Click to read the latest thought leadership, insights and trends about Fintech in Canada:
Checkout NCFA's digital magazine, Fintech Confidential (Issue 4) --> here
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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Payments without banks goes mainstream with Twitter on Bitcoin Lightning Network
LinkedIn Pulse| Chris Venter | Sep 24, 2021
The Bitcoin lightning network
You can read all about it here: https://lightning.network/ but I will explain it simply.
The Lightning is built on top of Bitcoin’s blockchain. It was designed with small micro payments in mind. The lightning network is known as a layer 2 payments system because it sits on top of the Bitcoin blockchain which can be thought of as the underlying 1st layer.
See: Twitter to allow Bitcoin tipping to their favourite creators
It uses built in smart contracts to open up direct payment channels between individuals. It’s fast, efficient and has very low transaction costs that enable very tiny micropayments.
Andreas M. Antonopoulos explains the Lightning Network in this awesome video here
Mainstream adoption
On Thursday 23 September 2021, Twitter announced that their Tip Jar feature would support payment using Bitcoin via Strike’s API. Strike https://strike.me/ allows you to send and receive payments in Bitcoin. It uses the Lightning network we just spoke about.
Once this feature rolls out, any Twitter user can send money to another Twitter user using Bitcoin. The payments is immediate, fast and free.
Here comes the so what…
No Bank was involved.
No Swift payments network..
No Visa payments processing fee…
No Currency conversion and exchange rate fee….
See it in action…
Continue to the full article --> here
See:
Amazon Responds To Rumors That It Is Integrating Bitcoin Payments On Its Platform
‘Last year we saw about a 300% increase in transactions just using cryptocurrency’: Coinpayments CEO
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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Support NCFA by Following us on Twitter!Follow @NCFACanada For more information about FFCON21: BREAKING BARRIERS, on-demand videos and ways to participate |
Upcoming Meeting: Retail Payments Advisory Committee
BoC | Aug 11, 2021
The Interim Retail Payments Advisory Committee (RPAC) is a forum set up by the Bank of Canada to gather industry expertise about the retail payment services landscape. The Bank is designing and getting ready to implement the Retail Payments Supervisory Framework.
See: Bank of Canada (Aug 13 Deadline): Retail Payment Advisory Committee is Seeking New Members
The interim committee provides advice and expertise to support the Bank of Canada’s understanding in the following areas:
- framework structure: helping the Bank of Canada understand the retail payments segment of the financial ecosystem and providing input on the Bank of Canada’s risk assessment, oversight and enforcement procedures
- operational design: offering suggestions on the framework’s overall design, including the creation of registration and reporting processes, the IT system and the website
- industry developments: raising relevant issues for discussion, identifying areas of research and considering how the Bank of Canada can best meet its proposed mandate
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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Swift launches ‘Go’ moves into low value cross-border payments
Finextra | Jul 27, 2021
Banking co-operative Swift is moving into the low value remittance market with the launch of Swift Go, a service that enables consumers and small businesses to send near real-time payments anywhere in the world direct from their bank accounts.
Seven global banks - BBVA; Bank of New York Mellon; DNB; MYBank; Sberbank; Société Générale, and UniCredit - which collectively handle 33 million low-value cross-border payments per year, are already live with the service.
Using tighter service level agreements between institutions and pre-validation of data, Swift Go enables banks to provide their end customers a fast and predictable payments experience with upfront visibility on processing times and costs.
Stephen Gilderdale, chief product officer, at Swift, says:
“Swift Go is a direct response to the needs of small businesses and consumers for fast, easy, predictable, secure and competitively priced cross-border payments. Our new service will allow banks to compete effectively in one of the fastest growing segments of the payments market, delivering a seamless experience for their customers.”
See: How decentralized finance will transform business financial services – especially for SMEs
Swift is promising competitive pricing, with processing fees agreed between financial institutions upfront in order to provide customers with full transparency on costs. Pricing will be key if the correspondent banking industry is to snatch back business lost to a host of non-bank money transmitters, many of whom rely on Ripple's alternative payment rails to disburse funds.
Isabel Schmidt, head of direct clearing and asset account services products, Bank of New York Mellon, comments:
“It’s no secret that for many years consumers and small businesses have been running into varying pain points when transacting international payments. These challenges have included opaque costs and lack of certainty on how quickly funds are delivered to the final beneficiary.
Continue to the full article --> here
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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Support NCFA by Following us on Twitter!Follow @NCFACanada For more information about FFCON21: BREAKING BARRIERS, on-demand videos and ways to participate |
