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The rapid growth of digital platforms is prevalent across the EU, where a variety of national and supranational regulators are having to pay much closer attention to the financial sector in which this new technology is being deployed.

by Manoj Mistry, Managing Director, IBOS Association

Digitalised banking networks are proliferating as traditional banking services are replaced by high levels of process automation and web-based services. Although such technological innovation in finance is not new, investment in new technologies has substantially increased in recent years and the pace of innovation is exponential.

Among the most notable areas of recent growth, there has been a significant rise in wealth management apps and digital platforms in Europe. Initially driven by younger users, who are more likely to be engaged with wealth apps, the enormous surge in interest has seen more than services for family wealth management as the profile of FinTech users gets older.

Typically, these apps are regulated by the Financial Conduct Authority (FCA) in the UK, and its counterparts in different EU member states. They use Open Banking: the sharing of financial information electronically, securely, and only under conditions to which the customers agree and approve. But inevitably, this surge in FinTech and digital platforms across the EU means that their future use will be driven as much by regulation as by technology.

In March 2018, the European Commission (EC) adopted an action plan on FinTech to ‘foster a more competitive and innovative European financial sector’. The action plan set out 19 steps that the EC intended to take to enable innovative business models to scale up at EU level, to support the uptake of new technologies such as blockchain, artificial intelligence and cloud services in the financial sector, and to increase cybersecurity and the integrity of the financial system.

This was followed by a digital finance package, which the EC adopted in September 2020. This includes a digital finance strategy, legislative proposals on crypto-assets and digital resilience, and a renewed retail payments strategy. Its overall goal is to create a competitive EU financial sector that ‘gives consumers access to innovative financial products, while ensuring consumer protection and financial stability’.

However, the digital finance strategy is only a staging post on the road to further regulation. In September 2021, the European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in EU.  Although the report outlined steps to enhance the monitoring of market developments, it stopped short of identifying any immediate need for specific legislative changes to be introduced.

But as EU regulators, such as the EBA, become far more active in identifying potential systemic risks posed to financial institutions and individual risks posed to their customers and clients, as well as to financial stability, they will have to regulate accordingly. In drafting legislation at an EU-wide level, and at a national level in each member state, consideration needs to go beyond affording consumers access and ensuring their protection, as well as maintaining financial stability. Regulators will also need to strike a careful balance between regulatory intervention and technological freedom.

In practice, this will of course necessitate creating regulations that are designed to increase transparency, mitigate risks and to guarantee sufficient protection. But while consumer protection must remain paramount, regulators must also ensure that new regulations do not frustrate or impede the pace of technological evolution.

The use of technology in financial services is highly competitive. Just as the EC’s proposed legislative initiatives to govern digital services and content in the EU, namely the Digital Services Act (DSA) and the Digital Markets Act (DMA), aim ‘to establish a level playing field to foster innovation, growth, and competitiveness, both in the European Single Market and globally’, the same must also apply in financial services regulation. The EBA must therefore ensure that new regulations do not hinder the capacity of digital platforms operating in the EU to compete effectively in global markets.

The sale of a kinetic 3-D video sculpture called HUMAN ONE earlier this month at Christie’s in New York was a milestone in the art world and not a bad day for the artist, Mike Winkelmann, better known as Beeple. The artwork sold for $29 million to a buyer in Switzerland, $14 million above the guide price.

by Adi Ben-Ari, Founder and CEO, Applied Blockchain 

What makes this piece different is that the video sculpture combines physical and digital technology. It came with an accompanying non-fungible token (NFT) representing the underlying digital assets. The artwork of an astronaut-type figure walking through an ever-changing backdrop draws on videos with an NFT on the Ethereum blockchain. The work was available for purchase using Ethereum.

The sale marks a coming of age of sorts for NFTs. To illustrate the speed at which this phenomenon has developed, even Beeple said he was unaware of NFTs a year ago. Since then, he’s sold around $100 million of digital NFT artworks – in March he sold a work entitled “Everydays: The First 5000 Days” for $69 million, the first of its kind.

NFTs are unique, digital certificates stored on a blockchain. They are a powerful tool to establish and demonstrate a type of ownership, particularly for digital assets which can be so readily copied. The non-fungible element reflects the uniqueness of each digital asset and the different values of each. Fungible assets include pounds, dollars, Bitcoin and other similar instruments that are identical and interchangeable. NFTs are generated using a “smart contract”, which is basically coding stored on a blockchain.

Digital art fuels public awareness of NFTs

What’s clear is that since NFTs entered public consciousness early in the year, they have seen a meteoric rise. Trading volume in the third quarter exceeded $10 billion, up 38,000% on the previous year. What’s more, artists, athletes and gaming developers are increasingly investing in blockchain technology to provide their audiences with unique digital assets, meaning that numerous NFT marketplaces are opening every month.

Cryptocurrencies have been around for over a decade – borne of the 2008 financial crisis – but only in the past three or four years have they started to become more mainstream. The NFT market has piggy-backed on that luring those investors who are seeking out the next new thing – the next big alternative asset class offering the potential for big returns. Blockchain is the engine for both instruments.

Blockchain records all transactions in a way that is indelible – records that are much harder to change or hack. As well, it is decentralised, meaning that control of security moves from a centralized entity, such as an individual or organisation, to a distributed network of people or entities. The technology demands transparency, accountability and puts the power into the hands of its users. That’s one of the appeals of NFTs.

One of the features of Ethereum is that it allows developers to implement so-called smart contracts. These smart contracts are essentially packets of code that may also define a digital asset and confirm that the asset as individually unique, traceable and verifiable. All NFTs have smart contracts attached to them.

Iron-clad indestructible proof of ownership

To date, NFTs have generally been linked with the art world. The value lies in the ability of the technology to prove its origin with absolute technical certainly. NFTs feature iron-clad, indestructible proof of ownership along with provenance that will last as long as the blockchain itself (forever?). In the future, every digital artwork is likely to have an associated NFT. The liquidity of an NFT certainty adds value – in the art world, that can be worth tens of millions.

An additional attraction of NFT marketplaces for artists is that they are cheaper. In the traditional art world, a gallery could easily take 30% or more of the takings on an art sale. NFT marketplaces typically charge less. This enables the artists to earn more, in particular on multiple and frequent secondary market sales, which matters because most are not as commercially successful as Beeple. NFTs also enable artists to connect directly with their customers as each purchase is documented on the blockchain and the creator is clear.

Collectors and investors are now scrambling to add such digital collectables to their portfolios, which is having a significant impact on the wider token and digital asset market. Digital collectables have driven many headlines, but the real-world application of NFT technology is even broader, extending across multiple sectors. Businesses, regulators, governments and authorities all, in different ways, stand to benefit if they are able to harness the potential of NFTs. In short, NFTs are not a fad.

So where next? The security and efficiency of smart contracts enable NFTs to be used as tickets for concerts, safeguards for digital identities or digitally tradeable representations of physical collectables and luxury items while those are in custody.

In the music industry, with the decline of physical sales and digital downloads, music artists often rely on income from streaming, which tends to reward intermediaries, such as the streaming platforms, and record labels disproportionately. NFT’s enable fans to engage directly with the artist through asset and financial transactions.

With collectable NFTs, artists gain the opportunity to establish a direct relationship with listeners and fans, enabling them to benefit financially. They also enable the payment of royalties to the original content creators – regardless of where or how the sale of NFT items occurs.

Other NFT applications are where the interest lies

One particularly valuable feature of NFTs is that they bring liquidity to previously illiquid assets. This happens through enabling ownership to change via digital platforms, especially those with global reach. Trading can be extremely efficient, requiring fewer intermediaries than traditional markets as a result of using digital guarantees. Innovative and efficient blockchain-based financing options in the form of DeFi (decentralised finance) are beginning to accept NFT’s as collateral for lending.

NFTs could also allow fractional ownership in assets such as property. This would mean property owners could unlock value from their properties and then raise funds without the assistance of multiple parties. Indeed, this approach could apply to the sale and exchange of businesses, or investments in sports star equity, whether in part or in their entirety.

Looking forward, blockchains need to become more interoperable with one another, so that an NFT minted on one blockchain is transferable to another blockchain. This is of growing importance, in a similar way that global mobile phone connectivity and then mobile app interoperability was such a big issue a few decades ago.

Applied Blockchain has built major NFT marketplaces for some of the world’s leading artists for both digital and physical art, as well as numerous other blockchain applications. NFTs offer a way to release inherent value and in doing so they create liquidity. It should be no wonder NFTs are generating such excitement across so many markets.

In today’s globalized environment, with regulatory demands and competition from FinTechs and others, institutions that cannot meet these challenges may not be viable in the long term.

by Nacho González, Blockchain Research Line Expert, Atos

Regulatory demands and competition from FinTechs, disruptors and others, especially in today’s globalized environment, are posing a long-term viability challenge to those institutions that cannot match these agile digitally focused organizations.

With the emergence of blockchain technology, a new revolution is underway: the industry is embarking on transformation, from operational processes to different business markets such as payment services, real estate, insurance, asset management, crowdfunding and lending to leverage the advantages it offers.

Blockchain is the first technology that offers a way to fully manage digital assets in a trusted, traceable, automated and predictable way. What distinguishes blockchain is that each ‘block’ is linked and secured using cryptography. Trust is distributed along the chain and relies on cryptography eliminating the need for a trusted third party to facilitate digital relationships and ledgers.

Enhancing digital finance processes

In the financial services ecosystem, the most significant business areas are clearing and settlement, trade finance, cross-border payments, insurance and anti-money laundering. This is where the Distributed Ledger Technologies (DLT) aspect of blockchain can be applied. In particular, we can point to the Australian Stock Exchange, which has since moved all of its financial asset management to a DLT platform.

Within clearing and settlement, we don’t currently have a common way forward regarding which stages of the lifecycle of a transaction (pre to post-trade, execution to settlement) can be encompassed by the blockchain. Looking at this practically, we continue to see holes such as information sharing with pre-existing legacy systems, compliance and regulatory concerns, along assets segregations. We need to address these issues before we can scale blockchain for such processes.

Yet in the financial processing industry, DLTs provide a compelling set of benefits:

• Traceability. Products and assets can be followed and scrutinized in live time. Once held in a ledger, the data is then immutable; access can be given by those who participate in the system/network, whilst preventing private information from being disseminated to any other sides. In addition, any additional asset data can be provided for use in various manners going with or going from the new owner.
• Clarity. Clear, easy to understand information regarding a transaction will help to encourage customer trust. Balancing transparency and privacy are integral features of blockchain. Identity is hidden within cryptography in the blockchain, therefore the connection of public key identities with individuals who use it is a hard connection to make. Combining this with the means of the data structure within a blockchain (in which a transaction is linked to a public key identity), allows for an unmatched level of transparency with privacy.
• Accountability. Within the chain of blocks, transactions are kept in sequence and indeterminably. This allows for accountability and auditability at every stage, not needing any outside players.
• Security. Every single transaction is verified by the network using cryptographic algorithms, assuring the authenticity and immutability of the information. The users have control over their own assets and transactions also using cryptography. Blockchain is therefore innately secure. Of course, there are theoretical scenarios where a blockchain can be counterfeit, for example modifying one single transaction in more than 51% of the network, but technical limitations make this scenario hypothetical, rather than a real threat to data integrity and immutability.
• Collaboration. DLTs enable each party to easily and securely share finance-related trade data. The level of collaboration (which information each party can share and who can access what) is determined by the configuration of the network/system, so this is a highly customizable solution easily adaptable to any regulatory, technical or functional requirement.
• Efficiency. Transactions are completed between involved parties with no intermediaries. Features like smart contracts provide automation of commercial actions, for example, cutting-edge initiatives such as Etch, an automated smart-contract based platform for wage management.

The beginning of the end of traditional banking?

Most key players in the industry have reacted to blockchain and are deploying DLT applications in their day-to-day operational processes and applying them to different services provided by institutions. These include JP Morgan Chase in the US (with its Blockchain Center of Excellence), Banco Santander in Spain (supporting initiatives such as RippleNet and Hyperledger or with We.trade trading platform deployment) or Mitsubishi UFJ in Japan (with the launch of a blockchain-based payments network).

The implementation and deployment of fully operational trusted and authorized interaction networks among corporations, B2B networks, service providers and financial institutions will be highly disruptive. This does not herald the end of the banking industry as we know it but blockchain, as part of widescale digital transformation, will add significant value. The question is whether traditional players are going to lead this transformation or new players will emerge.

A few years ago, it was fashionable to talk about ’emotional banking’, but this concept seems to have been quietly dropped. Perhaps we need to rethink the idea—the key is embedded payments and their role in ‘emotional finance’. Fintech has made the staid financial services industry infinitely more exciting, at least for those who watch the sector. But has this excitement filtered down to consumers?

By Alex Reddish, MD, Tribe Payments

People are driven by emotions, even when they don’t realise it. As consumers, gut instinct and personal preferences can play a huge part in our purchasing decisions.

The power of a brand can have far more influence on purchasing decisions than many other factors. If people feel warmly towards a brand, they are happier to engage with it. There are many reasons why Apple is one of the most successful companies in the world, but it’s undeniable that the brand is a big part of it. People see the Apple logo as a sign of quality and innovation and are happy to pay a premium for their goods. The iPod was not the first mp3 player, yet it became synonymous with the technology. Consumers (in general) love Apple. Who else could they learn to love?

Can people learn to love financial services?

A few fintech brands have made a particular effort to engage with their customers. Zopa posts regularly to Instagram with easy-to-follow, friendly advice on money matters. Business provider ANNA has developed a range of child-like illustrations and Klarna churns out a combination of zany creativity in its adverts and a steady stream of helpful tips in social media.

For all this, including the slick apps, welcoming graphic design and friendly customer service, financial service providers are still going to struggle to be as beloved as, say, Nintendo or Nike. People need to trust these providers. They need to know that they can have faith in their systems and services. Once this trust is built, can it really be developed into genuine brand affection…?

Embedded payments and the rebirth of emotional finance

Embedding payments means more convenience for customers. By making payments ultra-convenient and invisible, consumers are happier because everything happens with zero fuss or effort, and businesses get to reap the benefits. There’s also the opportunity for businesses to offer financial services that reinforce the relationship between the business and consumer, as well as delivering potential new revenue streams.

Embedded payments link merchants directly with their customers, enabling them to be part of that transaction or moment. These payments allow providers to build customer relationships at that point of need, helping build trust and develop a meaningful relationship.

But we shouldn’t see embedded payments as the endgame. It’s tempting to think that, once the payment is invisible, there is nothing more that can be done. There is the potential to create better links with customers—and perhaps even create the sort of emotional connection that other brands enjoy. This is emotional finance.

Creating better relationships is contingent on having a better understanding of the customer journey… but not the customer journey as we usually mean it. Rather than the customer’s journey through a payments system, we mean their journey through life. Priorities shift and change, and even minor decisions can mean big changes in spending. A new child, a new home, or even a new hobby can mean an abrupt shift in priorities–understanding these changing preferences and reacting to them can open the door to building better loyalty.

Right now, certain music streaming services offer deals for two people at the same address – but consumers have to proactively adopt these and link their accounts. What if a service could do this with a certain level of automation? What about other services that would be helpful to adapt without changing needs? The most common embedded payments example is paying automatically when taking an Uber or another taxi… but what about the other journeys (real and metaphorical) we take in our lives?

The key to this is, of course, data. Data means that we can create better services – more personalised, more convenient. But it’s not just about making sure we tap into the broadest range of data available. Timing is very much a factor, perhaps the most important. Instant access to data is required to make the fairest, most accurate decisions.

When we consider how much change we’ve all gone through in the last year or two, financial data that is 18 months old is likely to be very outdated, and the quality of customer data will degrade quickly over time. We need to work with the freshest data to make sure the end product is one that consumers will want.

Ultimately, consumers will pull us in the direction they want to go, no matter how much we think we can ‘push’ new products and services to them, adoption is down to the customer. Creating emotional finance – a connection through loyalty and context is key – embedding finance to make things convenient is not, on its own, enough.

The rise of innovative technologies has made it possible for challenger banks to shake up the market in the last decade. With customer needs changing and expectations increasing, there is a growing trend for smartphone banking; branchless, mobile-only banks with centralised services, ready to compete with established institutions.

by Vince Graziani, CEO, IDEX Biometrics ASA

The term challenger bank is used to describe any banking service provider looking to take on and win customers from the big corporate, or traditional banks. And now banks such as Monzo, Revolut, Chime and Papara, established in 2015, are maturing garnering praise and followers, putting established banks under increased pressure as they battle for the next generation of customers.

US-based start-up Chime is now valued at $14.5 billion and is IPO-ready. In the UK, Revolut— which has more than 14 million customers—is worth more than long-standing high street bank NatWest. Meanwhile Papara, a Turkish banking challenger has grown to eight million users, and is gearing up for European expansion in 2021, with Germany as its first growth market. Also in Europe, Swedish financial service challenger Rocker has received €48 million in equity funding just 18 months after launching. This presents some serious competition to traditional banks around the world.

 Monumental changes in consumer payment habits

Meanwhile, the pandemic has impacted the world’s financial habits. Today consumers are using less cash, making more contactless payments and want to keep a closer eye on spending patterns. As more people move their lives online, digital challengers have been well placed to take advantage of this trend.

According to Ipsos Mori’s personal banking report, challenger banks are cementing their position ahead of some of the biggest financial brands in customer service, showing that innovation and modern ideas are revolutionising the market.

For a new generation of tech-savvy customers, challenger banks also offer something a little more fashionable, with strong branding and messaging, meeting banking needs with a customer-friendly service that fits around them, not the other way round.

Can big banks catch up?

 Big banks have been playing catch up over the past few years. They were late to the game and have retroactively started backfilling their account offerings with spending trackers and notifications. But chasing the features of more agile, mobile-focused competitors isn’t enough to help them thrive in a changing banking world.

In particular, these challengers gain competitive advantage by creating new payment options that reflect customer demand for additional security and convenience. As studies show that payment cards will dominate the banking scene for at least the next decade, bank players need to revolutionise their own payment card offerings to respond to consumer needs.

New and emerging payment options

With consumers concerned about security, convenience and speedy payment options in an increasingly cashless world, big banks must embrace new biometric technology if they are to win their business.

A smart fingerprint authentication payment card already far exceeds the security of PIN authentication. This new generation of on-card fingerprint recognition technology has shown to be more than twice as secure[1] as traditional card payment transactions requiring a four-digit PIN.

Fingerprint data is held securely on the card, not in a shared database, meaning personal biometric data never leaves the card and cannot be hacked, recreated or breached. By linking the user to their card via the unique properties of their fingerprint, banks and retailers can create a payment process that is safe, speedy and highly secure –while demonstrating innovative thinking and future proofing themselves.

Fingerprint authentication is also more inclusive. It removes barriers for those with literacy challenges or memory difficulties because biometric payment cards simply allow consumers to be their own authentication. They can be used in any corner of the world, even in the most remote locations with limited cloud connection.

Biometric cards can also be used to provide direct and unequivocal identification to help the financially excluded open bank accounts and improve their credit scores.

Why embracing new biometric innovation can help gain top-of-wallet status

With the economy slowly bouncing back to pre-Covid levels, fingerprint biometric payment cards offer a safe, secure, hygienic method of payment authentication, providing an additional layer of security and trust in a cashless world. The rising wave of fintech’s and challenger banks is forcing traditional banks to focus on product and service differentiation as they try to compete against more agile entities and retain brand loyalty. Therefore, it’s important now more than ever for banks to embrace new biometric technology to provide their customers with an enhanced customer experience and deliver essential security to their payments.

Biometric payment cards enable challengers as well as incumbents to compete for and gain top-of-wallet status, protect users from fraud and build trust with the consumers of tomorrow. With technology evolving at lightning speed, now is the time for the banking sector to embrace cutting edge innovation and win the fintech play.

[1] Independent field trials commissioned by IDEX Biometrics in 2021 demonstrate the likelihood that a fingerprint biometric payment card incorrectly accepts an unauthorized user was less than one in 20,000, compared to a one in 10,000 chance of correctly guessing a user’s four-digit PIN.

The rise of Banking-as-a-Service (BaaS) is a logical next step in fuelling efficiency across existing customer journeys. Rather than diverting buyers to separate channels to complete online purchases, for instance, brands that have already built strong brand recognition can instead cross-sell financial services like credit to already engaged consumers.

by Paddy Vishani, Strategic Partnerships Manager, Yobota

As a result of innovation and growth in embedded finance business models, non-financial brands can now extend credit and other banking services to their customers without having to obtain a regulatory licence – while offering the same protections that come with being a fully regulated bank.

According to PwC, the new revenue potential generated through open banking-enabled SME business and retail customer propositions in the UK was £500 million in 2018. By 2024, Insider Intelligence predicts that this figure will reach £1.9 billion.

Even though the opportunity is compelling, however, there are a few nuances to navigate as banks, BaaS providers and businesses consider forging long-term partnerships.

A winning BaaS partnership

White labelling in financial services is not a new concept; branded credit cards, for instance, have been used by businesses for many years to build customer loyalty. Yet the role of white labelling in the BaaS space is far more involved.

Through flexible plug-and-play application programming interfaces (APIs), banking platform services allow brands to directly tap into the infrastructure of their chosen bank. This means that core elements like risk management, compliance and servicing are all supported.

Importantly, leading BaaS providers will enable businesses to create differentiated offerings, giving businesses the ability not just to implement off-the-shelf banking solutions, but also to curate novel products. Beyond customising the user interface to reflect their brand, the modular architecture of banking platform services empowers businesses to customise, adjust and replace the core components they need at any given point in time. The importance of choosing the right provider thereby becomes apparent.

A BaaS platform must be able to do a number of things. Firstly, it must protect the bank by demonstrating that it can reliably ringfence the clients, their data, and all the processes which will be utilised by different businesses. Core banking vendors should have a proven track record in supporting regulated products, and ideally a leadership team consisting of both technology and banking specialists that are well-versed in regulatory requirements.

The platform must also be designed in a way that offers easy access to all the critical functions provided by the bank: the entry points (usually in the form of an API) must be optimally designed to give businesses the tools they need to realise their vision. The design and flexibility of the architecture are key: BaaS platforms must be extensible and scalable to meet future use cases as customer expectations evolve.

A key component of this is that the representation of financial products should be unbounded. Whether businesses are looking to introduce a variable APR that is dynamically linked to an individual’s credit score, or a savings account that pays interest into an environmental fund, an agile solution is needed to support the long-term evolution of banking products.

Embracing the art of the possible

Embedded banking is increasing the appetite for innovative, tech-driven solutions to solve common pain points across the customer journey. By solving the technical hurdles, BaaS providers like Yobota empower businesses to spin out user-centric offerings that they can run independently.

Sophisticated BaaS solutions should also be able to deliver granular insights into how end customers are interacting with products. Reporting APIs that generate real-time data will enable businesses to continually assess and adapt to industry trends and customer behaviours. Equipped with this knowledge, brands can curate experiences that are truly relevant to their customers’ needs.

The rise of BaaS will no doubt serve to inspire new products and fill unexplored niches in the market. The importance of strategic partnerships, however, cannot be overlooked as banks, providers and businesses set their sights on the new realm of possibilities.

The overall progress of a region depends on equal opportunities for everyone without any discrimination or preference. When women of a country are empowered, it drives economic growth and development and creates life lessons for young female entrepreneurs to drive their business ideas. Even though the government has come up with many initiatives to promote entrepreneurship in the country, there are a few hurdles for people (especially women) to put their ideas into action.

bu of Abhinav Sinha, Co-Founder, Eko

Lack of finance options is one of the most crucial roadblocks women entrepreneurs face in India. As the role of FinTech companies has expanded significantly in the past few years, one can expect that these firms will drive entrepreneurship among women in the country. There are different ways through which FinTech firms would enable young women entrepreneurs in their entrepreneurship journey.

Understanding the constraints in access to financial institutions

Financial inclusion is crucial for the entrepreneurship journey of any individual. The concept of financial inclusion refers to the accumulation of savings, accessing financial institutions to invest, and availing various services provided by such organizations. In respect of entrepreneurship, it is crucial to understand that having a business idea and executing the same on any level is a key to this process. Rather than thinking about being a start-up or a unicorn, the most crucial aspect is to get the idea going by initiating a business. However, despite having many ideas, women entrepreneurs fail to execute them at the micro-levels.

Besides being discriminated against gender, financial institutions often do not take women entrepreneurs seriously, and they fail to secure adequate funding to sustain their business ventures. This not only puts brakes on their operations but also poses a significant hurdle in their entrepreneurial journey. Here, FinTech companies can play a significant role in reaching the end-users without the need to have a comprehensive infrastructure (physical).

Hence, from availing of finance to getting investment tips, women entrepreneurs can connect with a FinTech company and start their journeys. Aside from motivating more women to jumpstart their entrepreneurial stints, closing the gender gap will increase 35% of GDP (approximately) and benefit the macroeconomics gains of a country in a significant manner.

Integration of FinTech, financial inclusion, and government initiatives

The government’s efforts in promoting entrepreneurship through easing finance availability are often underappreciated. Several initiatives have started with the introduction of UPI (Unified Payment Interface) along with PMJDY and the Direct Benefit Transfer scheme, due to which FinTech firms have reached almost all parts of the country. Apart from them, the government has set up INR 10,000 crore fund (as a VC) for the MSME sector, allocated INR 20,000 crore to launch a specialized bank (Mudra Bank) for the SME sector, and earmarked INR 1000 crore to empower the financial dreams of start-ups.

These initiatives remove the middleman and facilities person-to-merchant transactions (offline & digital), promoting financial inclusion. With the increased volumes of digital payments and easing the due diligence requirements, FinTech companies have ensured that women will be educated about government initiatives, and becoming a beneficiary of such schemes would no longer be a bureaucratic process.

Improved financial inclusion for women entrepreneurs

Different studies have suggested that the overall trend of savings and investments among women in India has improved with increased usage of mobile apps, wallets, and platforms. With a friendly regional interface, FinTech firms work closely with women entrepreneurs to reduce their reliance on text and western iconography.

Voice-based and banking-plus solutions like savings and health insurance allow people without technical competency to operate businesses (like Kirana stores) more effortlessly. In a way, FinTech companies are promoting micro-entrepreneurship by facilitating small and microfinance, more accessible credit, and quick resolution of their financial requirements and queries. The overall time required to avail such services has reduced considerably, and with UIDAI-supported platforms, women entrepreneurs can use mobile banking solutions (MFS) if integrated with microfinance institutions (MFIs).

Summing up

FinTech companies in India have a significant role in promoting women entrepreneurship at micro and macro levels. These firms understand the challenges female business owners face in executing their ideas. Hence, by providing finance and supporting government initiatives, these FinTech companies will ensure better financial inclusion and address the core business issues that women are often deprived of.

Cryptocurrencies are one of the biggest Ponzi schemes in history. More stringent regulation and the rise of state-backed digital currencies look set to cause the speculative market for cryptocurrencies to crash. Within a few years, all non-state backed cryptocurrencies could reach their true monetary value: zero.

by Bambos Tsiattalou, Partner at Stokoe Partnership Solicitors

Although cryptocurrencies are still involved in white collar crime, the writing is on the wall for them. Dedicated regulatory regimes for cryptocurrencies are now being developed worldwide. The European Commission has launched a proposed regulatory regime for cryptoassets. The US Senate looks set to require cryptocurrency exchanges to report the details of each transaction. This is expected to be in force by 2023. In the meantime, regulators are making greater use of their existing powers to regulate cryptocurrencies. For example, the UK’s the Financial Conduct Authority (FCA) was appointed as the major regulator of the cryptocurrency market in January 2021.

Perhaps the greatest long-term threat to cryptocurrencies is the creation of state-backed digital currencies. China is now trialling its digital Yuan. The EU is considering a digital euro.  The chair of the Federal Reserve calls its proposed digital dollar a “high priority project”. These will have both the security of blockchain and a stable value.

Despite these developments, for now, cryptocurrencies continue to provide opportunities for criminal activity, including white collar crime. The global cryptocurrency market is now worth some US$1.5 trillion annually. New types of cryptoassets and cryptocurrency exchanges launch regularly.

The determination of global leaders to regulate cryptocurrencies should not be underestimated.  Ransomware attacks are now a geopolitical issue, with many linked to Russia. Russia has been accused of involvement in attacks such as the 2020 SolarWinds attack. The 2021 G7 meeting issued a final communique that promised that the G7 nations would collaborate “to urgently address the escalating shared threat” of ransomware attacks. The greater anonymity of cryptocurrencies facilitates ransomware attacks.

Frauds involving cryptocurrencies, such as the PlusToken Ponzi scheme, have cost billions internationally. The PlusToken fraud defrauded investors of an estimated $2.9 billion. Cryptocurrencies have facilitated money laundering on a global scale. Until serious regulatory regimes are put in place globally, the use of cryptocurrencies in white collar crime looks set to continue. In 2020, in the UK alone, around £113 million was lost in fraudulent cryptocurrency investments.

A great deal of white collar crime goes beyond money laundering and relates to the cryptoasset markets themselves. It involves misrepresentations regarding the value, stability and viability of cryptoassets and related financial instruments.

People are lured into investing online in cryptocurrencies or their derivatives. This is despite the clear warnings issued by regulators such as the FCA. The FCA’s clear advice is that “Cryptoassets are considered very high risk, speculative purchases. If you buy cryptoassets, you should be prepared to lose all your money.”

The appetite for cryptocurrencies is rarely dented by their remarkable volatility. Earlier this year, the cryptocurrency Ether dropped 22% in a single day while Bitcoin lost over 40% of its value in a single week. The FCA has thankfully now banned the sale of crypto derivatives to consumers on the basis of its “concerns surrounding the volatility and valuation of the underlying cryptoassets.” Yet UK consumers can still buy them internationally online.

The UK has no regulatory regime dedicated to cryptocurrencies as of yet. However, the FCA has become active in regulating the cryptocurrency market. Firms must now register with the FCA before operating in the UK. Cryptoasset platforms which registered with the FCA in December 2020 were able to continue to offer services in the UK under a Temporary Registrations Regime while the FCA assessed their application. However, many applicants have been abandoning their applications to the FCA, due to difficulties meeting the anti-money laundering requirements.

The FCA has not been sitting on its hands while it assesses applications. In June, it banned the cryptocurrency exchange Binance from conducting regulated activities in the UK. The FCA’s head of enforcement and market oversight, Mark Steward has admitted that 111 unregistered cryptocurrency providers were operating in Britain and that “they are dealing with someone: banks, payment services firm, consumers”. This is a pointed warning to those banks and other white collar service providers involved.

The British legal system has proven itself adaptable to the rise of cryptocurrencies. In 2019, the English High Court considered whether cryptoassets could be legally regarded as property. The case of AA v Persons Unknown [2020] 4 W.L.R. 35 involved an application for a proprietary injunction to recover Bitcoins, which had been extorted during a ransomware attack on a Canadian insurance company. The company’s British insurer paid q ransom of $950,000 in Bitcoin through an expert intermediary. At the time this amounted to 109.25 Bitcoins.

The consultants who had made the payment found the extorted Bitcoins at a cryptocurrency exchange.  They discovered that 96 of the 109.25 Bitcoins were still in an account and asked the High Court to grant a proprietary injunction to recover them. The English High Court held that Bitcoins were “property” under English law and granted the injunction.

The court favourably cited the UK Jurisdiction Task Force’s report entitled “Legal statement on cryptoassets and smart contracts”.  The report concluded that cryptoassets have the legal characteristics of property and that their novel technological features did not prevent them from legally being property. This judgment brings cryptoassets within the purview of the English courts.

Regulators and the courts are actively using existing laws to tackle cryptocurrencies and white collar crime. State-backed digital currencies look set to arrive in tandem with a coming wave of regulation which will tackle the misuse of crypto assets. These developments will create a perfect storm that will sweep away cryptocurrencies as we have known them.

People will be much more likely to place their trust in a digital dollar or a digital euro instead of a cryptocurrency like Dogecoin – which literally started off as a joke. It may well also end up as one.

A day in the crypto market is often the equivalent of a week in real life, due to its volatile, unpredictable nature. So what could a whole new year bring to the big table?

by Vlad Faraon, CBO and Co-founder, Coreto

Plenty of changes, we hope, as cryptocurrencies are now becoming mainstream. But their popularity doesn’t come without risks. The crypto market value blew past $3 trillion, according to CoinGecko pricing, but the scams are on the rise as well. In just 6 months, between October 2020 – March 2021, over 7,000 people lost more than $80millions by investing in altcoins according to The Federal Trade Commission (FTC). The amount was 10 times smaller in the previous year.

Despite its rapid growth and severe caveats, the crypto transactions aren’t currently regulated by the Financial Conduct Authority (FCA) or covered by the Financial Services Compensation Scheme. This means that the industry is a minefield, full of unethical players. Under these circumstances, people should never invest more than they’re willing to lose.

This month, regulatory agencies issued a joint statement driven by the concern that ‘the emerging crypto-asset sector presents potential opportunities and risks for banking organisations, their customers, and the overall financial system.’ The Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC) analysed various issues regarding crypto assets and are aiming to provide coordinated and timely clarity. They believe that it’s necessary to use a common vocabulary, identify the key risks and analyse the applicability of existing regulations and guidance. This sets expectations for more consumer protection and a standard the whole industry can adhere to.

In addition to this, the OCC published a letter about how national banks and federal savings associations should implement safety measures before undertaking certain cryptocurrency and stablecoin activities. They suggested controls that include engaging with their supervisory office to show written notification of their proposed activities, alongside the criteria that the OCC will use for the evaluation, with a view to providing a supervisory non-objection.

All this progress is welcome, as at a macro level they’re meant to protect the interests of the investor. But the way things developed with the US Securities and Exchange Commission (SEC), which has the same goal, makes us want to take this with a pinch of salt.

On one hand, the SEC is looking after people’s money, but on the other, it wants to make the market more efficient. Catering for both is a challenging job, and some might say that it became too protective as an institution and got in the way of progress. See what happened to Basis, for example, designed to keep its price stable. This would have been an innovative solution for the crypto space, coming from a place of accountability and transparency. The project was however shut down because of strict, old regulations applied to a novel system. In its desire to go after scams, frauds and manipulative activity, it discourages entrepreneurs from launching new projects. This is one of the reasons why London, not New York, is the centre of fintech investments now.

With the industry’s rapid advancement there is a growing need for regulations that are agile and flexible. As the SEC might be directing its enforcement actions against DeFi, NFTs and even stablecoins, revising its modus operandi is required sooner rather than later.

While policy-makers are slowly devising their roadmaps to a healthier ecosystem, the industry could regulate itself by relying on trust and knowledge. The harsh reality is that in the crypto space there are many bad actors. We believe there is little to no chance that there are retail investors out there who didn’t experience scams or at least somebody trying to scam them. For the retail investor to have more confidence in this space, there is a high need for a tracked record system for projects, influencers, and anyone with a voice in this space. We can’t trust someone with our investment decisions just because they have a big following. Retail investors shouldn’t base their confidence on that. It’s important to understand that a tracked record of past performance, immutably stored on the blockchain, is a step forward towards building the trust bridge in 2022.

The same trust and knowledge lie at the heart of Coreto, our reputation-based research hub, which is a secure environment for crypto communities. Here, members have to prove their influencer status by building a history of accurate analysis and market predictions. This will elevate critical thinking, reasoned argument, shared knowledge, and verifiable facts. Only when they’ll have a good enough reputation score will they be able to influence the newcomers, and also monetise their knowledge. This is significantly different from what happens currently online, with some so-called crypto influencers misleading masses into faulty investments and then fleeing the scene. This creates a win-win situation: the goodwill influencers will be able to shine on a digital stage, while the community will be able to make more educated investment decisions.

If we all remain loyal to these guiding principles – trust and performance – the whole crypto community can benefit and evolve from it.

Adopting digital identities could provide a significant boost to not only the future of open finance, but also across the economy more broadly.

by Brian Costello, VP Data Strategy, Envestnet | Yodlee

One challenge that is evident following the introduction of Open Banking in the UK is consumer hesitancy to share financial data, which is required to access the Open Banking-powered products and services the consumer wants or needs. For the next step beyond Open Banking – open finance – to be a success the industry needs to overcome the data sharing trust challenge to unlock the benefits personalised open finance services can provide.

To show the scale of the challenge, an independent survey of UK adults, commissioned by Envestnet | Yodlee, found that two-thirds of consumers in the UK would find it easier and desirable to view all of their financial information in one place, highlighting the huge demand for open finance. However, when it comes to actually sharing the data, the challenge presents itself. While more than a third of respondents said they would be willing to share their financial data, which would enable these kinds of services, a similar number said they would not be willing to, and a quarter were uncertain.

Open finance stands to benefit everyday users in many ways. The Citizens Advice Bureau noted that in the UK, consumers are overpaying £3.4 billion in key areas including mobile, broadband, home insurance, cash savings and mortgages. A well-managed open finance initiative has the potential to drive innovation in financial wellness platforms, helping users understand their financial behaviours and how they could make improvements. This would also enable accessible financial advice, as advisors are able to gain a view of a person’s overall financial picture in a fraction of the time it currently takes.

Transparency and control are two key principles for any data sharing economy, and therefore essential for an effective and safe open finance environment. As it stands, users are required to grant separate consents to both the recipient and provider of their data, and sometimes to a third party as well. Though these levels of protection are laudable, the current user experience is highly procedural and can confuse the user to the point they abandon the consent experience. The requirement to grant multiple consents is at odds with the user experience of trying to achieve a singular cohesive outcome.

Could digital identities simplify the consent process and align consent with desired outcomes?

The UK’s National Data Strategy found that for data to have the most effective impact, it needs to be appropriately collected, accessible, portable, and re-usable. However, achieving this would likely involve enabling consumers to provide more overarching consent for data-sharing, whilst still maintaining stringent protections and avenues for redress. This is no easy feat, and there is still discussion between regulators and the industry on the best ways to achieve this.

The ideal situation is a single digital identity artifact with consent attributes that provides all parties in the data sharing transaction with enforceable evidence of the user’s explicit instructions. Once a digital ID is verified, data-sharing consents attributable to a person’s digital identity could enable them to assign consent to multiple parties involved in the data sharing process without experiencing the confusion and disruption that the current user journey typically entails.

Beyond simplifying the user journey, standardisation of certain consumer consents could enable users to incorporate ongoing consents to their digital ID, which would enable them to give permission to share their data with organisations in real-time or when they were not active in the user experience.

Another option is to leverage the current system of federated identity management providers by having those data providers become the sole identity provider for the transaction.  The Global Assured Identity Network is proposing just that, with ambitions to open the framework up across all sectors.

While this is a great opportunity with many upsides, there are many things standing in its way encompassing technical infrastructure, regulations, and conflicting points of view.

Provided there was a regulatory framework in place, these ongoing consents could also enable users to automatically share their data with new providers under specific circumstances. These sort of outcome-focused smart consents would enable many consumers to benefit from the data sharing economy and reap enormous benefits, without needing to engage too heavily with the procedural elements of data sharing.