January

The first release of the API specifications for Open Banking was five years ago. At the time, I recall that many people in the banking sector didn’t see much value in it. In fact, many saw it as a potential impediment to their job.

by Martin Gaffney, Vice President EMEA, Yugabyte

Five years on, it is clear that those fears were unfounded. In May 2022 alone, UK businesses and consumers made five million open banking-driven payments. The UK open banking community made a record 1 billion API calls in the same month.

So, Open Banking ended up being a pleasant surprise rather than a restrictive move by the regulators. It opened up opportunities and showed that having to work with APIs is not a constraint but in fact, quite the opposite.

It’s taken the market a while to see that. 20 years ago, every management consultant in the sector was recommending disintermediation—the idea that you needed to own and run your own supply chain to reduce complexity.

That was still the driver when big banks started to go online: they built their own websites, their own banking applications, their own mobile solutions—all with the aim of owning everything from cell phone banking to the back end.

In practice, this actually added complexity. It meant that when a bank decided to write a web page, it had to be set to talk to an application server, which talked to its internal database, which was deployed on its on-prem server farm. It was all the bank’s responsibility, from start to finish. As a result, the organisation may have needed multiple developers with various overlapping skill sets working on this full tech stack.

But now, thanks to Open Banking and APIs, to be a serious player in banking, you must be adept at exposing and consuming APIs. To do this, you need to have the right architectures, skills, and tools in place to support this modern approach to software development.

I’d go so far as to say that we are now entering the era of ‘de-disintermediation’—as what Open Banking really means is that the bank is no longer permitted to lock anybody out, and we all need to work in a different and ‘more open’ way.

Welcome to the new de-disintermediated financial services IT world

Consumers see this on their mobile banking app, which is now full of friendly questions about whether you want to hook in another of your accounts and bring them all together in one place. Personally, I love this: it makes sense to me as a digital citizen, as a capitalist, and as a shopper.

I also like all the new businesses that Open Banking and de-disintermediation have allowed to flourish. Embedded banking is why Klarna can exist, where Buy Now, Pay Later comes in; it’s how many new payment brands work and has contributed to the major upsurge in innovative FinTech companies.

I am also seeing extremely positive moves at the tech and architecture end of the ecosystem. To do Open Banking, you must build your app in a way that allows somebody else to come in at the application server layer. You must also allow that other party’s application server to talk to other application servers, all of which have databases at the back end.

This is where the API has come into its own. IT people in progressive financial services companies welcome the fact that application programming interfaces (a technology in search of a business case for too long) make it so easy for two pieces of software to talk to each other by a contract.

Even better, the contract obliges everyone in the chain to play fair. For example, if I’m building an application that allows someone to access their bank account and returns their statements or their latest transactions, I have to publish what the API call is to get them. You must give me live session credentials, you must give me what I need, and this all happens in one agreed format–(typically) JSON, JavaScript Object Notation.

App modernisation + liberalisation = good times ahead

The reality is that the people who will succeed in an Open Banking/de-disintermediated/API-centric world are the people who build their processes, skill sets, tools, and architectures in a way that embraces this way of working. Delivering on this new approach will unlock business value.

This also means the end of huge monolithic banking applications. Now, developers can break the front off and replace the proprietary apps with APIs. This means you can more effectively outsource the value that your back end supplies, even if that’s still some monolithic mainframe app in your data centre. APIs allow you to expose it to the web and give chosen partners access to it, adding value for you.

This way of working is possibly better known to you as microservices architectures on the Cloud. Two separate tech and business development threads mesh here: one is app modernisation and the other is the general acceptance that microservices architectures are good for exploiting cloud architecture. A drive to allow more competition in the market in the shape of Open Banking has shown the API to be the best way to both comply with the regulations and to embrace that great new architecture.

There is also a database aspect here because as soon as you start the road to de-disintermediation by breaking your big banking systems up, you’re also breaking your data up. You can’t just stick with your tried and true (if rather expensive) monolithic database on the back end. Even if you did, you’d still have the ongoing problem that on-prem monolithic proprietary databases never match well with cloud-based microservices, which aim to bring everything data processing as close to the customer as possible around the world.

Given this, you can’t really have all your data sitting in a great data barn somewhere outside London. You’ll need to move to the modern data layer, an intrinsic part of this microservices architecture.

How about ending the banking IT ‘technical debt’ issue

It’s time, then, to thank the inventors of Open Banking, who weren’t (as feared) awkward people who wanted to stop you from doing stuff. You should see them instead as benefactors who’ve unlocked the door for you as a banking CIO to access a massive amount of innovation and business value in a supply chain you no longer need to 100% own.

If you embrace this, much of your day-to-day work, which is really just technical debt and patching up the work your predecessor did when John Major was PM, can go away. You can rip it up and rewrite it, turn it into an API, and let somebody else put a front end on it.

To me, the benefit of Open Banking is very clear. However, if you don’t see this as an opportunity, and consider it just another IT burden, maybe you need to ask how much of a contribution to the business you’re really making.

The complexity involved in trade processing has, for years, put market participants under considerable strain. Navigating this landscape has proved increasingly difficult due to the number of overlapping requirements introduced in the past decade, forcing firms to constantly recalibrate their workflows.

by Leo Labeis, CEO, REGnosys

The Common Domain Model (CDM) has emerged as one of the leading technologies designed to tackle this problem. The CDM is an open-source, human-readable and machine-executable data model for trade products and processes. It creates a digital representation of contracts and events across the lifecycle of financial transactions while supporting the conversion to and from existing messaging standards. This allows market participants to achieve consistency in the interpretation and implementation of post-trade requirements.

Despite emerging as an important tool in achieving greater cohesiveness in trade processing, one of the most frequently levelled criticisms against the CDM is that it is a solution looking for a problem.

This criticism, however, misunderstands the very purpose that the CDM was created to serve. The CDM has always been the analysis of a problem before being the outline of a solution. Not making the CDM a solution to a specific problem is precisely what allows it to tackle the inefficiencies it was designed to unlock.

The CDM is not – and shouldn’t be – a solution

Solutions exist at every point of the trade lifecycle, from matching to reporting to collateral management. Some of these solutions are widely adopted by the industry, and in most cases, organisations can choose between multiple available solutions.

The problem that persists across the post-trade landscape is not about a lack of solutions – it’s about a lack of interoperability. New mandates introduced after the 2008 global financial crisis, such as clearing, reporting or margin requirements, have led to a proliferation of new processes and fragmented approaches globally. ISDA itself has recognised that the “industry’s limited resources are not always focussed on developing and delivering common solutions.”

So, the need is not for another solution – the industry already has many of these. This is exactly why the CDM is not a solution and never should be. In this scenario – if the CDM was crafted to be a solution to a specific pain point in the trade lifecycle – the model would be customised to that specific use case rather than promoting consistency and robustness.

The industry’s current approach to trade confirmation illustrates this pitfall. This process usually classifies products upfront. As a result, most downstream trade processes, for instance, clearing or reporting, are engineered based on product types, even though they may not be the relevant classification for those processes.

Before we know it, the CDM would have perpetuated the very problem that current solutions suffer from – a lack of interoperability at different points in the trade lifecycle.

If the CDM isn’t a solution, then what is it?

What post-trade infrastructure needs is the development of common foundations for the processes, behaviours and data elements of the trade lifecycle. The CDM was created to meet this demand.

That the CDM is “coded” explains why it is often mistaken for a solution, based on the assumption that code equates to a solution. It is more accurate to think of the CDM as a library distributed in multiple languages and accompanied by visual representations. That code library is directly usable in solution implementations but critically remains independent of any particular solution or system.

Digital Regulatory Reporting (DRR) – an initiative initially championed by ISDA – provides the best illustration of this separation in action. DRR delivers a standardised, coded interpretation of the trade reporting rules using CDM-based data to represent the transaction inputs.

Importantly, DRR is only an application of the CDM. It does not directly interfere with the CDM, so the latter remains free of any reporting perspective. For instance, the processing of transaction inputs with static referential data, often jurisdiction-specific, is part of DRR but not of the CDM.

Keeping the CDM as a genuine common denominator is key to ensuring its status as a pivot between different trade processes without being encumbered by any particular one.

Looking ahead

The CDM has enormous potential to foster greater standardisation across the post-trade landscape. It can work in a complementary way to any other data standards – including FIX, FpML or ISO 20022 – and can be integrated into the internal systems of market participants, enabling data to be interpreted consistently across the board.

To realise this potential, it is vital for the industry to fully understand that not making the CDM a solution to a specific problem is what allows it to achieve this harmonisation. In doing so, firms can begin to implement more innovative and strategic approaches to data management.

Imagine life without access to a bank account. If you’re able to earn a living without one -and it’s a big if – the only choice you have when buying goods and services is to pay cash in physical stores. As a result, you are limited to the stores you can travel to cost-effectively, giving you no access to deals on the web, which automatically means your money is working less hard for you. If you want to save – well, you have your mattress –  and if you need to borrow,  good luck with your local loan shark.

by Alessandro Hatami, Managing Director, Pacemakers.io

Digital banking, e-commerce and card payments have led to a dramatic reduction in the use of cash in our everyday lives. In 2019 only 23% of all payments were made using cash, down from close to 60% a decade earlier – a trend that the covid pandemic has accelerated. This move to digital financial services means those of us with bank accounts can store our money more safely;  if we lose our wallets, we block our cards and ask the bank to reissue them. If we have surplus money, we can protect it by searching online to find the most effective way to invest or save. And if we are low on funds, we generally have myriad affordable credit options available.

In short, there is every incentive to open a bank account these days. Yet, according to the most recent figures,  over one million individuals in the UK do not have bank accounts. One of the most common reasons for this is that they cannot identify themselves.

Here in the UK, national ID cards have long been controversial, with both sides of the political divide claiming they interfere with civil liberties. In more analogue times, they may have had a point. In today’s connected world, each of us leaves a trail of data across the web that third parties can exploit. What’s more, the UK has more surveillance cameras per resident than any other country except China.

After successive administrations tried and failed to address the issue, the government recently announced new legislation to make it easier, faster and safer for citizens to obtain a digital identity. Under these measures, UK citizens will be able to create a digital identity by providing their name and date of birth to a range of digital identity organisations certified as trustworthy by the Office for Digital Identities and Attributes. The government’s digital ID measures stop short of national ID cards as they believe that “there is no public support” for such a system.

This new legislation is supposed to be an attempt to balance civil liberties concerns with the urgent need for a trustworthy means of authenticating our digital selves. Yet what we have ended up with is a “digital identity souk”, where the task of authenticating citizens’ digital identities is delegated to many different organisations instead of to one trusted centralised body. It’s a bit like trying to get a passport from lots of privatised passport offices instead of from the government passport office. Under this incoming legislation, depending on why they need it, citizens could end up hosting their digital identities at multiple providers – hardly a solution that puts a stop to the propagation of personal data.

By contrast, creating a national, centralised, encrypted, trusted digital identity database which stores and allows citizens access to and control over their identity, health, finance, education, permits, and residence records, would have huge benefits. Such a system is potentially a tool for empowering consumers and preventing any abuse of their data by intrusive institutions. To address civil liberty concerns, it could be overseen by a trusted body which is completely independent of the government.

There would also need to be safeguards and guarantees provided by proper regulation and enforcement.  The EU’s GDPR (General Data Protection Regulation) has taken the first (clumsy) step in making sure that citizens are aware when their data is being used by a third party, and for the time being, the UK is still adhering to this regulation.

This proposal may well raise concerns about cybersecurity.  It’s true that all databases are at risk of being hacked. Organisations including the NHS, British Airways, TSB Bank and TalkTalk that store personal data have all experienced data breaches. By contrast, a national, centralised, encrypted, digital identity database could allow the public and private sectors to pool anti-hacking resources, making it harder for criminals to access citizens’ private data.

Importantly,  such a system would help prevent people on the edge of society from becoming isolated and allow them to benefit from services many of us take for granted. Unbanked consumers currently pay a “banking poverty premium” of £485 a year. A well-designed national digital identity database would allow less wealthy individuals to establish their identity quickly and securely.

The rest of us would also benefit from a national, digital identity database because it would allow us to prove who we are much more quickly and easily. This will facilitate our search for better financial products, allow access to fairer pricing, and help ensure we find out quickly if a product or service is unsuitable or unaffordable.

Personal data is one of our most valuable assets. A national, digital identity database that is fit-for-purpose, modern, secure and most importantly, regulated would allow us to own our information, taking back control of who we are.

Many of fintech’s success stories are built upon businesses that would have traditionally been competitors coming together as collaborators to fix a specific problem, which has benefitted the industry and consumers alike. In today’s fast-paced environment, a ‘do-it-alone’ strategy does not always cut it.

by David Reiss, Programme Director, Strategic Partnerships, Currencycloud

Historically a key trend that has underpinned the growth of the industry has been traditional organisations such as big banks and government agencies partnering with tech-driven newcomers. Encouraging regulations and policy changes like Open Banking have helped the sector harness an ever-expanding range of technological possibilities.

Collaboration has not just been limited to fintechs partnering with large incumbents, however. Growing numbers of fintechs are partnering with one another to drive innovation and provide customers with an ecosystem of partners that know how to work and integrate together, while most importantly, meeting customers’ needs. This trend should be encouraged as it delivers multiple benefits including allowing businesses to harness smart thinking from across the fintech industry while avoiding the clashes of perspective and culture they might encounter with more traditional organisations. This isn’t just limited to the financial services sector either, with companies such as food delivery applications or mobility solutions partnering with fintechs via embedded finance solutions to offer their customers a winning product.

Two, three, or perhaps no heads at all?

Fintechs who want to partner with players from the same industry needs to make sure the partnership is aligned with their needs. While the rewards of partnerships are high, strategic collaboration requires thoughtful consideration. Depending on the product, the size of the business, or the expected outcome of their venture, there are three principal options that they should consider.

They can decide to not partner at all and build the entire product or proposition themselves. While you’ll be able to design exactly what you want, this can take a long time and a lot of money to develop and implement. Then there’s the ongoing resource required to maintain, develop and remain compliant.

Fintechs can also decide to outsource some of their needs to a single partner. This is something scaling fintechs often do to plug gaps in existing capabilities, improve user experience, and increase their go-to-market time by relying on one, often more-established generalist with a ‘broad brush’ approach.

Alternatively, fintechs could partner with multiple, best-in-class specialists, leveraging their varied skills to fuel growth. For example, a company could partner with one provider for cross-border payment solutions, another for card issuing, and a separate one for compliance.

From competition to collaboration

Whichever approach fintechs decide to pursue, in our experience there are benefits to bringing together different expertise, technology, and purpose. Here collaboration trumps competition, and as opposed to the wider world of commerce where businesses often fall victim to fierce competition, fintechs are achieving success by working towards common goals.

Further, many of the most successful fintechs are fast-moving, agile, and able to rapidly respond to change and the ecosystem’s disruptive characteristics. This flexible approach means many are pragmatic and access the pool’s diverse capabilities to meet a specific challenge when it arises.

Fintechs are also often distinct from traditional financial institutions in that their culture is inherently different. They can choose best practices and styles to create something new and compelling, which gives them an ‘open-mindedness’ towards partners and an appreciation that diverse perspectives yield positive results. Problems are easier to solve when they are looked at from multiple angles.

A good example of an effective fintech partnership is the recent collaboration between global payments platform Currencycloud, Transact Payments Limited (TPL) – principal Scheme member for Visa & Mastercard and BIN sponsor, and financial infrastructure platform Integrated Finance (IF) to deliver a unique solution for sync., the all-in-one money aggregation app. In this case sync. had a vision of creating a super app that would allow users to instantly access, manage, and view all their accounts across different banks within a single app.

Integrated Finance provided sync. with the ability to open customer accounts and move funds between multiple banks and institutions by automating its workflows and enabling sync. to connect easily to other institutions. Transact Payments Limited enabled them to issue their card via a new settlement system which allowed them to hold multiple currencies and offer them to customers. Currencycloud, meanwhile, allowed sync. to offer their customers different currencies within the app and the ability to access a global market and remain compliant. This collective know-how provided the framework for sync. to build a truly unique application and get to market in less than three months.

Alliances like these are synonymous with innovation and improved offerings for customers. For fintechs, the right choice might not always be to align themselves with legacy banks and consultancies first but to instead look to their counterparts. In an industry that offers novel solutions to customers, a partnership model can generate the energy that fuels growth, innovation, and creativity.

In e-commerce, everyone wants to sell more. You can do this in many ways: via social media, through user testimonials, by offering discounts and displaying how many items are left in your inventory. The list goes on.

by Attila Doğan, VP of Product Management, PPRO

The thing is, though, if you want people to click the buy button, they need to first check out. And the checkout is very important for conversion.

In fact, the likelihood of a conversion increases the farther along customers are in the buying journey. It goes to over 45% when customers get to the checkout page and tops 80% on the payment page. This means that if your checkout is good, customers will most likely buy.

So, let’s dive into some key tips on how to make your checkout more consumer-friendly to increase your conversion.

Keep it simple

The more trouble your customers have in navigating your website, the less likely they are to buy. This goes especially for checkouts. For example, the more fields and steps a checkout has, the less likely you are going to see a conversion.

So, make it simple and streamlined by reducing the number of fields or pages available. For fields, only ask for information that is absolutely necessary to complete the transaction. Want customers to sign in to buy? Then create a guest checkout to make things easier for those who do not want to register.

Similarly, if you are keen on having a multiple-page checkout, show your customers where they are in the checkout process. In other words, the design of your checkout should be straightforward, easy to navigate, and clear.

This clarity also goes for the language you use in your checkout. As well as using clear, everyday language, the language of your checkout page should be the same as the rest of your website. So, if your site is in German, then the checkout should be in German.

Be honest

By now, one key rule for checkout improvement should be obvious: make buying easy on your customers when it comes to your checkout’s setup and language.

Going a level deeper, this also means that you need to be honest. Pricing should be transparent at all times so there aren’t any surprises at checkout. 48% of shoppers abandon carts because of extra costs such as shipping, taxes, and higher fees than expected.

The solution? Let customers know of any estimated fees, early on. And offering free shipping is always a good idea.

Make it secure

Shoppers do not only want simple and honest checkouts that are easy to navigate. They want to feel safe when shopping online.

On the merchant side, estimates say online fraud can cost merchants over $12 billion per year. So, it is extremely important that your checkout is secure. Artificial intelligence can be used to put off fraudsters without getting in the way of discouraging real customers.

It also helps to make customers feel safer if you show a security designation, such as an SSL certificate, which means your website is authentic and connections to it are encrypted.

Diversify your devices

We live in an age where people shop on phones, tablets, and desktops. Worldwide, there are around 15 billion mobile devices, which include tablets and smartphones. From that mix, about 4 billion people across the globe own smartphones, and their shopping experiences have to run smoothly on all devices, including when it comes to checking out. This means ensuring your checkout works well on multiple devices and operating systems.

The right payment methods

This one may seem obvious, but you have to have the right payment methods in your checkout. The “right” payment options are the ones your customers use and want. Since the preferred methods change depending on where you are in the world, you need to know how people like to pay wherever you are selling.

In fact, 77% of online purchases in 2021 were made with local payment methods (LPMs). For example, popular LPMs in Belgium are Payconiq and Bancontact whereas if you are in Denmark, Dankort, Trustly, and Klarna are favoured options that belong to the payments mix.

The mix, or variety of payment options you offer, is important. No matter where you are selling, your customers like to pay in multiple different ways when checking out. So, if they see their preferred method at checkout, the more likely they will hit the buy button.

How to know you have nailed conversion

Ideally, you would do all of the above and sales would shoot up. But, as we all know, e-commerce is complex and things are rarely so simple.

This means that you should have a good handle on your checkout data, including where people are getting stuck. And you should also consider A/B testing to fine-tune your checkout process.

Considering all of the above, putting yourself in your customers’ shoes and making their online shopping experience as seamless and easy as possible will eventually lead to the increased conversion rates you’re seeking.

Recently we have seen unprecedented movements in the financial markets. With the crypto crash and the recent stagnation of the stock markets, some have been left scrambling to recoup their losses.

by Roger James Hamilton, Founder and CEO of Genius Group 

Globally, Governments have been spending big on stimulus packages, and inflation has hit record numbers. We are living in unprecedented times, and we are heading into what experts agree is a highly unpredictable future for investors and businesses.

Yet, in times of the greatest crises lie major opportunities. Now is not the time to continue with the same investment strategies you had been doing prior to 2022. Here, we look at 10 key investment trends that every investor should know. 

Dollar destruction

Due to the recent pandemic, 35% of all U.S. Dollars in existence have been printed in the last 10 months. But endlessly printing money does not help economies and creates further divide in the wealth gap.

With inflation soaring and money being worth less and less, banks around the world are predicting a recession towards the end of 2023 and early 2024. This recession is said to be worse than we have previously seen with things getting worse before we start to see any recovery.

To combat inflation there is actually very little a country can do other than printing more to make the physical currency more expensive to store and move. But by doing this interest rates increase, which can then in turn lower growth. These economic trends are currently playing out, with Deutsche Bank recently informing investors that they are expecting the worst recession in history to hit in late 2023.

The Age of Exponentials

At the beginning of Society 5.0, the imagination society is coming into play, where digital transformation and creativity from a diverse population will accelerate technological growth and adoption. Big data harvested by IoT and converted into a new type of intelligence by AI, will impact every corner of society and change our infrastructure for the better. People will see their lives become more comfortable and sustainable as they are provided with the products and services in real-time, as they need them. Investments will be focused on the future with any disruptive or innovative technology being lucrative.

The Meme Generation

As individuals using memes became viral it was then realised this pathway could lead to becoming an influencer which can be a lucrative job with some people becoming multi-millionaires from it. Meme investments using products or brands do a similar thing and are created to attract retail investors to invest in the company stocks and shares. This idea that a simple meme can create huge visibility for a brand is one that takes skill but can be worth the investment as it’s a quick way to get brands in front of a huge audience.

The DeFi economy

Historically we’ve used various different devices for different uses, think video cameras, cameras, CD players and the radio. Now we have just one device – our phones to do everything. The same is happening with services, think taxi ranks that are now being replaced with Uber or Google replacing libraries. Everything is becoming streamlined and minimised. The same is happening with financial services where the decentralised system has fewer transaction points and middlemen. Ethereum could displace many traditional financial services and its native token Ether could compete as global money.

Stocks & Crypto Trading

Traditional currency is being taken away from the individual at source via taxes, bank charges, the rising costs of goods and currency debasement. Investing in stocks and crypto can give you returns of around 5% to even 15% if you just have the strategies to invest wisely. When you then add money each month you may well see your profits grow via the power of compounding.

Marcus De Maria, Founder and Chairman of Investment Mastery, comments: “The recent crypto crash has been difficult for the industry and the death of crypto has been bandied around so many times, but we have never seen it actually fail. Many investors will see this as a huge opportunity if you buy it low; you stand to see a massive % increase as it goes back up. This is the fundamental strategy we use when investing – we invest when prices are low and aim to have a really low average value across our portfolio.”

The Digital Decade

Everything that we do is being digitised and will encompass society 5.0.; in the digital decade, this will be apparent through a digital overlay on your day-to-day experience. The revenue from the virtual world could approach $400 Billion by 2025. Global gaming and AR and VR markets will drive this growth. Investing in these areas or companies that are implementing these technologies is a good idea as they are likely to see huge growth over the next few years.

The Rise of Robots

Automation will empower humans and increase productivity and wage growth. It has the potential to shift unpaid labour to paid labour and Cathie Wood, CEO of Ark Invest believes that automation will add 5% or $1.2 trillion to US GDP over the next 5 years. The metaverse and the gaming industry are driving the change of automation. AI and ML will help this change happen as we will see automation get smarter and take on volumes of information that would take humans much longer. We will see companies using AIs as their CEOs and they will be making better and smarter decisions.

Genius Generation

Entrepreneurship will become a vocation and will be taught in school and as a preferred option for employment by 2025. This is what Genius Group believes and is forecasting for the industry.  Edtech will continue to improve people’s skills, wealth, and life chances with more education available to a wider demographic. The UN sustainable development goals will be met by people and companies who have invested in themselves and in the future.

Wholesale Investing

By teaming up with other like-minded groups or collaborators, investors can access a vast new area of wholesale investing. As with purchasing wholesale, the price is usually cheaper as you are buying in bulk, and you are able to find market opportunities that wouldn’t usually be open to an individual.

If you take the idea of retail or the stock market, you are buying at price, whereas when you team up with others there are new offers that are available to you. Using the power of the crowd you become an insider rather than an outsider.

Time for Impact

Buying property has always been a popular investment and given that the population is growing, and property won’t ever go to zero, banks are happy to lend. When growing a property portfolio, you can make infinite ROI by releasing money as the property increases in value, which leads to a tax-free cash-back to invest in the next property.

Simon Zutshi, CEO of CrowdProperty, says: “For those that can’t afford a whole house, it is still possible to invest in property via a group scheme or crowdfunding. The members of property investors network (pin) have benefitted from this form of investment and have even said that investing in this way can see better returns.”

Like many places, Latin America has seen the dramatic rise of e-commerce, accelerated by the pandemic and subsequent lockdown measures. This has been accompanied by the increasing use of alternative payment methods (APMs), such as eCash, digital wallets, and bank transfers. All of this makes Latin America an attractive market for merchants. But a key question is whether these changes in consumer habits will endure in the long term?

by Gustavo Ruiz Moya, CEO of eCash for Latin America and Global Head of Open Banking, Paysafe

With a view to better understanding consumers’ payment habits in the region, Paysafe commissioned a survey of 3,000 consumers across Brazil, Chile, and Peru in April 2022.

Our survey paints a positive picture when it comes to how long-term this opportunity really is, with 74% of respondents in the Lost in Transaction survey saying their payment habits have changed permanently since the start of the pandemic.

This means it’s an exciting time for consumers and merchants. Access to the internet and e-commerce through mobile phones is growing, and different ways to pay are driving greater choice and inclusivity for consumers. Merchants can now look slightly differently at a region that might have seemed prohibitive in the past due to a lack of local knowledge and partnering opportunities, as well as payment hurdles and difficulties of cross-border transactions.

Latin American countries’ increased digitalization its support of instant payments against the backdrop of a population which is keen to adopt APMs (63% had used a digital or mobile wallet, eCash, or crypto in the last month) has made this a market with huge potential.

Driving greater inclusion through e-cash

Although there are many differences between one Latin American country and another, demographics, banking environments and regulations, and payment preferences, to name but a few, there are also some common characteristics. This includes a general tendency toward an informal economy with a large unbanked population – 45% according to the World Bank. Also, a preference for cash over debit or credit cards, largely driven by the turbulent economic climate over the last decade, access to credit, an air of mistrust of the economic system, and high fees and interest rates of debit and credit cards.

In this environment, alternative payment options are drivers of financial inclusion. Consumers avoid high fees, they conveniently pay in their neighbourhood merchants, no need to go through complex application processes, there are no credit checks, and they don’t have to share a load of sensitive information online. It’s just a better overall experience for the cash-preferred customers.

So there’s no surprise that the use of e-cash is on the rise in Latin America. Our findings tell us that 20% of respondents use e-cash more frequently than they did a year ago, with 17% saying they use it about the same amount as a year ago. Our survey also gathered responses from 8,000 consumers across the UK, US, Canada, Germany, Austria, Bulgaria, and Italy, and it highlighted more use of eCash in Latin America with 15% saying they used eCash in the last month compared to 9% across Europe and North America.

Security ranks top for consumer concerns

Alternative payment methods such as e-cash, Pix, and QR-code-based services have been increasingly popular over the last couple of years in Latin America. Although reasons such as convenience, simplicity, and speed are good indications of why we have seen this uptake, it also highlights concerns around the security of financial information.

In our survey, 45% of consumers said security is the most important factor when choosing how to pay for online purchases. Further, 66% don’t feel comfortable entering financial details online and 78% are more comfortable using a payment method that doesn’t require them to share their details with merchants.

Payment methods such as eCash remove the need to enter financial or personal details online, giving people access to e-commerce in a way that makes them feel secure. We can also see that 38% of Latin Americans feel they don’t know enough about e-cash, while 21% would use it in the next 2 years if it becomes more widely available. So the key to wider acceptance and uptake is at least in part about understanding alternative payment options as well as how they work. With greater awareness, combined with increasing smartphone adoption (81% by 2025, as mentioned above), e-cash is likely to become a more everyday payment choice across the region.

Cost of living, credit, and crypto

In terms of more general payment trends, the cost of living has had a significant impact on Latin American consumers’ choice of payment method for online purchases, with 63% saying they’ve changed the way they use certain payment methods, compared to 36% in Europe and 39% in North America.

This indicates a willingness to adapt payment habits to circumstances, whether that’s trying to avoid high fees or interest rates – of those who have said they’ve changed their habits, 63% are avoiding using pay-by-instalment plans. Or opt for a method that doesn’t involve credit – 58% are using their debit cards more often, while 45% are using direct bank transfers more regularly. Digital wallets have also seen fast adoption: 35% of consumers say they use them more often as a result of the rising cost of living. And 27% are using e-cash more often for the same reason.

Finally, crypto is starting to gain traction with 8% using it more frequently as a payment method compared to a year ago.

In summary, what once might have seemed a difficult and complex market to enter now presents a rich opportunity for businesses outside Latin America, especially for online merchants with virtual deliverables. It really can be as simple as choosing the right provider with a well-established presence ‘on the ground’ and the regulatory requirements in place to get instant access to local payment networks.

The overdraft landscape in the US is at a watershed moment, with banks and credit unions alike taking action to lessen customer impact from overdraft and NSF penalty fees. For a long time, overdraft fees have been ‘in the shadows,’ often perceived as a penalty fee disproportionately applied to those who can least afford to pay.

by Jody Bhagat, President of Americas, Personetics

Market forces and regulatory pressure are moving the industry in a positive direction, and it’s encouraging to see the industry’s rapid response to lessen penalty fee impact with a range of customer-friendly approaches to overdraft response.  The range of response thus far can be characterized by the 4P’s:

Policy: Eliminate overdraft fees (Capital One, Ally, Alliant)
Price:  Reducing or eliminating overdraft or NSF fees (B of A, WFC)
Process: Changes to accommodate grace period or negative buffer (PNC Low Cash Mode)
Product: Creative enhancements to address the majority of situations (Truist One, Huntington Stand By Cash)

The next breakthrough in overdrafts for the industry is to address the 5t P: Proactive.  Proactive cash flow management helps anticipate and resolve overdraft situations prior to occurrence and allows for tailored customer treatments.  Rather than determining which fees to reverse, banks can focus on what tailored treatment can help this customer address a future overdraft condition and improve their financial wellbeing in the process. What if overdraft response was something that your institution was excited to promote to customers, in a way that puts the customer at the centre of the conversation?

Rather than simply a defensive move, forward-looking institutions can use this moment as an opportunity to reinforce a customer advocacy approach, where the institution becomes a trusted advisor. With inflation at a 40-year high and many families struggling with cost-of-living pressures, it’s more important than ever for banks to support customers and improve their financial wellbeing.

Here are a few reasons why overdraft response can become a bigger source of differentiation and competitive advantage for financial institutions.

Data is king: A new opportunity to understand your customer

Before you can solve overdraft conditions, it’s important to understand which customers are vulnerable to overdrafts, and what is the root cause. Overdraft conditions can become a moment of opportunity to take a closer look at what is happening in that customer’s life, and engage with the customer in a meaningful, personalized way.

Financial institutions are taking a closer look at which customers are most likely to overdraft, and why. By leveraging advanced data and analytics, banks can proactively engage the 4-6% of customers who overdraft on a monthly basis.

From our analysis, we found four common personas experiencing overdraft situations:

1. Paycheck to Paycheck: Jim is experiencing multiple cash flow crunch situations every quarter and overdrafts repeatedly. Jim’s income may be volatile or barely enough to cover expenses.
2. Hardship: Martha has experienced a recent hardship (e.g. income loss or significant medical expense) that is likely to create a near-term overdraft situation and a running up of credit lines.
3. Mismanaged Timing: Tom has mismanaged the timing of their deposits and payments for a given month, resulting in an overdraft condition.
4. Affluent Mistake: Jen has plenty of deposits with the bank but unwittingly got caught in an overdraft condition with an account.

Identifying your customer profiles and the context of each overdraft situation can help banks provide the right solution and support for each customer’s financial circumstances. By cleansing and analyzing transaction data, banks can readily understand the context of the overdraft situation. With advanced data and analytics, the bank can identify customers who are at risk for overdraft conditions, and proactively provide treatment options to support the customer’s financial needs, such as an overdraft protection solution with a connected savings account, or a short-term line of credit.

Context is queen: providing tailored treatments for overdraft at scale

Instead of just a penalty fee, overdrafts can be a way to better understand the individual customer and improve their financial well-being. By proactively engaging customers on cash flow issues, banks can reduce the number of overdrafts and negative balance situations and build stronger relationships, leading to higher customer satisfaction and loyalty.

By modelling customers’ cash flow patterns and applying a “robust” balance forecasting algorithm, banks can analyze customers’ historical, scheduled, and patterned activity to accurately identify when they are likely to have a low or negative balance prior to their next likely deposit. That way, banks can help anticipate a customer’s liquidity issues, determine why it is occurring, and proactively provide options to address the situation.  Through back testing of our model, we’ve found that we can accurately anticipate approximately 70% of overdraft conditions.  With this kind of knowledge, banks can unleash their creativity in offering treatment conditions based on the customer context and the likelihood of overdraft.

Building deeper customer relationships

Overdraft fees have represented a meaningful amount of net income for banks (6-7%) and some have been reluctant to forego that revenue. However, a customer-centric overdraft program could be an even more sizable opportunity for financial institutions by deepening customer relationships

Over the coming year, we’ll see more banks leaning into their overdraft response and seeking a more proactive solution along with reactive actions. Forward-leaning institutions will look at it not as a defensive move to avoid regulatory scrutiny, but as part of a broader proactive approach where the bank operates as a trusted advisor that helps people with their money management.

The time for banks to act is now. As inflation and the cost-of-living crisis rage on, the institutions that adapt their policies with customers front of mind will not only help to improve financial health, they’ll gain lifelong customers in return.

“UK FinTech is in a great place,” said John Glen; the Economic Secretary to the Treasury as he announced measures last month to make the UK a global hub for crypto.

by Joe Jowett, CEO and Co-founder, StrikeX

But the question is whether the actions promised by the UK Government will match the warm words he delivered to an audience of FinTech experts during the Innovate Finance Global Summit in London earlier this year.

If not, the UK’s leading position in crypto could be lost to more favourable jurisdictions.

Sentiment and perception

The UK is home to around 2,000 fintech companies; and London, a melting pot of entrepreneurial minds, financial expertise, investment capital, technology skills and regulators, is second only to the USA as the highest-ranked fintech ecosystem globally.

As part of that, the crypto sector is growing rapidly. One forecast suggests it will grow by more than 7% a year to be worth $2.2 billion by 2026. So, with a highly-skilled, tech-savvy workforce, attractive business and regulatory environments and a flexible labour market, the UK should be in a strong position to capitalise, with sophisticated jobs such as blockchain engineers and cryptocurrency developers.

But, so often in emerging sectors, sentiment can make an enormous difference in how people perceive things.  Crypto entrepreneurs and investors – and the decisions they make – will be influenced significantly by the policymakers of the countries in which they do business.

Last month, the Governor of the Bank of England said that cryptocurrencies were the new “front line” in criminal scams, saying the technology created an “opportunity for the downright criminal.”

Contrast that with countries which are bending over backwards to welcome crypto entrepreneurs. Switzerland has perhaps gone the furthest passing blockchain laws and licensing two crypto banks, while Dubai is racing to become a haven for the global crypto industry by offering virtual asset licenses.

The US is making surges too, with President Biden recently ordering the most wide-reaching effort by the federal government to study and potentially regulate cryptocurrencies – an initiative that could see regulators closer to permitting spot cryptocurrency ETFs on the US markets.

In this context then, it’s not surprising that some commentators have suggested the Government’s moves to keep the UK as a leading global crypto hub lag behind many other nations.

The UK’s position

To attract companies, entrepreneurs and investors keen on crypto, the UK needs to commit to investment in a regulatory framework that fosters the national crypto economy and safeguards it without hindering innovation.

The most eye-catching of the Government’s announcements last month, at least as far as the headline writers were concerned, was commissioning the Royal Mint to produce an NFT which will be available by the summer. The Government heralded it “an emblem of their forward-looking approach.”

But beyond that, there were actually some positive moves. This month, the first of several meetings between industry leaders and the FCA, called “crypto sprints” will allow the industry to work with regulators to drive the shape of future regulation. They will also work on a project looking at the legal status of decentralized autonomous organisations (DAOs).

There are moves to look at existing laws governing electronic money which will be adapted to include stablecoins, bringing them within the remit of the FCA and thus paving the way for them to be used as a form of payment.

Finally, blockchain technology, a sector growing so rapidly that the UK simply cannot afford to ignore it. The UK government has announced it will explore the use of Distributed Ledger Technologies (DLTs) in financial markets,  create a financial markets infrastructure sandbox and consider using DLTs for sovereign debt instruments.

Welcome steps

From the emergence of Silicon Roundabout in the early noughties to the UK being a global tech powerhouse today – recently valued at more than $1 trillion – entrepreneurs, investors and industry have demonstrated their appetite to use the UK’s attractiveness to international talent and finance to transform it into a hub where nascent technologies and ideas can be transformed into world-class tech businesses.

Crypto is the next step in the UK’s continued growth in digital and technology, it is essential that a world-class infrastructure is built with regulation proportionate to the risk, to boost the modern 21st-century economy and allow crypto to thrive.