From sex to free speech, what goes online is increasingly up to financial companies
Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Payments, Transfers, Rewards
Paying for coffee with crypto? Get ready, the future of payments is already here
CoinPayments | Jason Butcher | Nov 2, 2021
As the world emerges from a year or more of uncertainty to find it’s new normal, the aftershocks of the pandemic will leave some indelible marks particularly on the payments industry. Consumers that were forced to shop online triggered warp-speed developments in the eCommerce space, as merchants (big and small) jostled to convert shopping carts. Add to this a growing popular sentiment to protect personal wealth, the current evolution of the payments space seems almost obvious. As a long-time payments and blockchain entrepreneur, I believe that we have reached a watershed moment in the adoption of digital currencies, with new data proving that cryptocurrencies are increasingly part of our everyday transactions.
Crypto finally breaks into the mainstream
With large corporations, banks, governments, and retail investors alike holding crypto assets, digital money as an effective investment vehicle has been a reality on Wall Street – and in the public psyche – for a while. But, only recently are we seeing the real tipping point for mass adoption of crypto into the everyday lives of consumers, as it moves from purely an investment vehicle into the realm of value exchange. To everyday shoppers, crypto has now become a viable alternative to fiat currencies.
See: Updated FATF Virtual Asset and VASP Guidance includes DeFi for crypto service providers
Triggered by changing buying behaviours and escalated by pandemic-fuelled digital innovation, I believe this evolutionary tipping point in crypto adoption has been realized because people have the choice to pay with a wide array of cryptocurrencies and have the desire to exercise this choice. That’s why we’re seeing more merchants partnering with payments experts to enable crypto payments for customers, and this is empowering them to spend gains on real-world goods. From vacations and cars to professional services and groceries, consumers are being given the choice to step outside the more traditional payment methods, and this trend doesn’t seem to be losing steam, especially as more merchants jump on board.
In May, I participated in the FFCON21 panel entitled “Mainstream Adoption of Digital Currencies and Investing in Alternative Assets,” where I said that clear regulatory controls are required to maximize crypto adoption.
Consumers also have much to benefit from the greater transparency and control afforded by blockchain-enabled payments. Merchants also benefit from embracing crypto, avoiding higher fees associated with credit card payments (especially for cross-border transactions), and by gaining access to an entirely new, tech-savvy customer base. The immutability of the blockchain also helps merchants circumnavigate the rising challenge of so-called friendly fraud claims, as it eliminates chargebacks. Put simply, accepting crypto payments can help businesses of all sizes break down barriers to entry when it comes to securing profitable sales.
Our crypto data tells a compelling story
At CoinPayments.net, we are seeing a rise of crypto payments across industries, even with our eCommerce merchants. According to our data for the first half of 2021, overall merchant transaction volumes exploded by more than 200% to almost $3 billion year-on-year.
See: Payments without banks goes mainstream with Twitter on Bitcoin Lightning Network
Diving deeper into industry indicators, you can see rising consumer confidence in crypto payments as they are willing to spend more per purchase, with transaction sizes growing to $300 on average. In the last year, CoinPaymants has seen 10X transaction volume growth for Shopify merchants alone. These numbers would have been unheard of just three years ago as widespread adoption was in its infancy, and offer clear proof that people are using crypto for everyday transactions.
Regulation is the crypto final frontier
Despite the change being evident, it’s worth noting that this is not, by any means, universal yet. CoinPayments.net data also shows that some geographic regions are streaks ahead when it comes to mainstream adoption. Europe, for example, has a much more established crypto community, with higher levels of acceptance among businesses and readiness among consumers. Conversely, North America is only just getting off the blocks and has massive growth potential.
Why is Europe so ahead, you ask? To put it simply: regulation.
In May, I participated in the FFCON21 panel entitled “Mainstream Adoption of Digital Currencies and Investing in Alternative Assets,” where I said that clear regulatory controls are required to maximize crypto adoption. Some might argue that the notion of governance for the blockchain goes against the defining core of decentralization, but I strongly believe that regulation is the key to truly unlocking digital money for the masses. And, further, it is exactly this divide in opinion among industry players that is preventing us from achieving greater adoption through collaboration.
See: ‘Last year we saw about a 300% increase in transactions just using cryptocurrency’: Coinpayments CEO
By lacking transparency in our practices, it is us - industry leaders - who are going against the nature of the blockchain and holding it back. We are creating barriers to successful mainstream adoption of crypto.
Questions from regulators will undoubtedly make the industry ask questions of itself; which is only a positive thing as more conversation leads to greater education, awareness and, in turn, greater adoption. If industry leaders like CoinPayments can collaborate to help design the best path forward, the crypto industry can gain the credibility required to earn the trust of the consumers and businesses we are trying to reach; those that so evidently are ready to use digital money to exchange value.
Authored by:
Jason Butcher, CEO, CoinPayments (Linkedin)
Jason is an entrepreneur with nearly 3 decades of experience building global businesses across diverse industries and ever-changing financial markets. His daily role involves being an active player in a number of global Fintech, payment processing, crowdfunding and blockchain technology projects. His in-depth knowledge and experience from within the Fintech and payment processing industry have allowed him to hone the ability to accurately identify the different challenges from country to country to ensure all projects are successfully completed in line with compliance regulations. Jason is the CEO of the CoinPayments.net, the founder of HODLtech.eu, Parallel Payments, Clear Payments, and a board member and advisor for a number of payments, fintech businesses and associations such the Emerging Payments Association, the National Crowdfunding and Fintech Association (NCFA Canada) and many others.
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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Liquid Avatar Technologies and Optimize Financial Technology Partner to Launch Fintech and Neobanking Solutions for US Markets
Liquid Avatar Technologies | Cara Buckspan | Oct 28, 2021
Toronto, Canada - TheNewswire - October 28, 2021 -Liquid Avatar Technologies Inc. (CNSX:LQID)(OTC:LQAVF)(FRA:4T51) a global blockchain, digital identity and fintech solutions company announce that it has signed an agreement with California based Optimize Fintech Technology (“OptimizeFT”) to launch a fintech and neobanking solution for the Liquid Avatar Mobile App initially for US markets and consumers. The program is expected to begin rollout sometime in the first two quarters of 2022.
The new Liquid Avatar payment card account will be powered by the OptimizeFT’s Engage360 payment card and digital banking solutions platform. The Engage360 platform contains a robust library of financial technology features and services that enable a wide range of financial solutions including a prepaid card and neobank accounts. Liquid Avatar will be well positioned with its security-conscious user base, to expand beyond its initial US Card offering to launch financial solutions targeting multiple demographics within its consumer base.
See: Liquid Avatar Technologies Partners with the Ontario Convenience Stores Association (OCSA) to Provide Digital Age-Verification Solutions to Over 8,000 Stores
The neobank and alternative banking market is experiencing explosive growth. According to KBV Research, the global neobank market is expected to grow from a baseline of $34 billion in 2019 to an expected US$333 billion by 2026. The number one factor for consumers selecting a digital or alternative bank, is security and increased risk. With users having to create their Liquid Avatar Digitally secured ID as the first step to getting an account, Liquid Avatar provides an extremely high level of security to launch and generate significant opportunities from neobank and other alternative financial solutions.
“We are very excited to enter into an agreement with Liquid Avatar Technologies to develop and launch industry-leading payment card and digital bank (neobank) solutions,” said Jim Collas, CEO of OptimizeFT. “The Liquid Avatar mobile app is in a unique position to offer security conscious consumers financial solutions aligned with its Verifiable Credentials Ecosystem, which elevates account security to the next level.
In our experience, a perception of enhanced account security can drive account use by consumers, which in-turn generates increased account revenues. We anticipate working with Liquid Avatar Technologies to develop and launch an array of uniquely branded financial solutions that will strongly resonate with their user base.”
According to Allied Market Research, prepaid cards have taken the place of cash, cheques, and other payment cards where consumers or businesses want to use an electronic means of payment, without linking the payment to a credit or debit account. The global prepaid card market size was valued at $1.73 trillion in 2019, and Allied predicts that it is projected to reach $6.87 trillion by 2030, growing at a CAGR of 18.2% from 2021 to 2030. The prepaid card market is expected to exhibit high growth during the forecast period, owing to the convenience offered being similar to that of a credit or debit card with the ability to allow the end user to set the spending limit according to the budget.
See:
Digital IDs Help Open Banking Reach Its Fullest Potential
Liquid Avatar Releases Major Update to their Digital Identity Mobile App
Liquid Avatar Technologies has developed the Liquid Avatar Verifiable Credential Ecosystem (LAVCE) and a digital wallet that supports digital credentials for multiple forms of verification. The LAVCE platform has been developed to allow users to leverage their government issued and other digital ID, as they become available to verify who they are at healthcare facilities, testing labs, government agencies, financial institutions, schools, sports arenas, transportation, trade shows, age-restriction programs, and workplaces.
Available to consumers at no cost, the Liquid Avatar Mobile App is available in the Apple App Store and on Google Play and allows users to hold, manage and control digital credentials using the LAVCE. Additionally, Liquid Avatar users can benefit from a wide range of discounts and cash back offers from over 600 brand named merchants across North America.
“We are very excited to have formalized this partnership with OptimizeFT,” said Michael Konikoff, Chief Revenue Officer - Liquid Avatar Technologies. “We believe that the OptimizeFT solution is ideal for our emerging US audience, and we believe that we can jointly provide value to Liquid Avatar Mobile App users and provide them with neobanking, engagement and loyalty solutions as we continue to accelerate our programs.”
The Liquid Avatar Wallet mobile app is now available to everyone via Google Play and the App Store.
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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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Legaltech startup Clio launches Fintech payment product and investment fund
Betakit | Josh Scott | Oct 26, 2021
Legaltech startup Clio has announced the launch of Clio Payments and a new fund, as the Burnaby-based unicorn joins a growing group of companies spicing up their SaaS offerings with a pinch of FinTech.
In an interview with BetaKit, Clio co-founder and CEO Jack Newton called Clio Payments “one of the most significant engineering and product investments” the startup has made to date. The CEO also referred to Clio’s move into FinTech as “a natural progression” towards its goal of building an “operating system” for legal clients.
See: Solution to Consumer-Centric Payments Innovation in America
To further accelerate that goal is Clio Ventures, a new investment fund through which the company plans to back early-stage partner companies working on integrations with Clio. Newton said the aim is in part to help make Clio’s offering a more “tailor-made solution” for various legal practice areas.
On the payments side, Clio previously offered Clio Payments powered by a third-party processor, Austin-based LawPay. But according to Newton, this offering was limited, and Clio saw an opportunity to build its own payments platform “from the ground up” and imbue it with more capabilities and a better customer experience.
Clio unveiled Clio Payments and Clio Ventures as part of its 2021 Clio Cloud Conference, alongside a slew of other product announcements, including the launch of a mobile and desktop communication app for clients and cloud-based document management app.
These moves are the latest in what has been a busy year for Clio, which has acquired Lawyaw and CalendarRules, and raised a $136 million CAD ($110 million USD) Series E round led by T. Rowe Price Investment Management and OMERS Growth Equity, at a reported $1.6 billion USD valuation. According to the startup, this financing established Clio as the first legal practice management company globally to reach unicorn status.
See: The Growth of Vancouver as an Innovation Hub: Challenges and Opportunities
According to Newton, payments are “at the heart of [Clio’s] operating system,” and “a really natural thing for us to own and to develop ourselves. It’s often the very end of the legal interaction, the end of the journey that orbits around payments, that is actually filled with a lot of friction for both consumers and for lawyers,” said Newton.
According to the CEO, many lawyers face difficulty billing and getting paid due to the use of outdated paper invoice and payment processes, while clients sometimes struggle to pay in a lump sum and have a hard time understanding fees, especially within the existing legal payment provider landscape.
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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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
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