Author: mithun

Fintech is going to have its own community soon. The Bank of England has launched a new community which brings together fintech-related organizations including startups, investors and regulators to engage with bank and share the developments in fast-growing fintech sector.

Central bank’s fintech accelerator, which works with financial service firms to develop new approaches has launched this initiative for building its understanding of fintech technologies and in return support development of the sector.

Community Members will have bilateral meetings with the Bank two-to-four times every year for sharing updates on trends and developments in the sector. The Accelerator team will also hold quarterly networking and knowledge sharing events to discuss developments, trends and insights on specific topics of interest.

The 18 founder members of the community include fintech investors Illuminate Financial Management and Euclid Opportunities (part of NEX Group), the Financial Conduct Authority, sector trade body Innovate Finance, data security startup Privitar and law firm Simmons and Simmons.

Community membership is expected to grow over time, but initially it will be limited to firms that are “most relevant to the bank’s remit and fintech objectives, and who have initiated contact with them for knowledge sharing purposes”.

This initiative by Bank of England validates that the fintech industry is no longer a niche industry and has the potential to disrupt traditional banking system. Only way for banks now to cope up with advancement with fintech sector is to collaborate and make progress collectively.

 

Reference: https://www.fnlondon.com/articles/bank-of-england-gathers-minds-for-fintech-salon-20170317

Payment companies are trying to push their boundaries of innovation, as wearable tech is becoming more mainstream. We can find this push of boundaries in this week itself that saw launch of two new payment-enabled wearable devices – Movado announced the launch of a line of smartwatches that will likely enable contactless payment functionality to ‘Kerv’ a new contactless payment ring, launched in the UK.

Barclaycard’s wearables a UK card issuer, saw £6.6 million ($8 million) in transactions from July 2016 to February 2017, and Tractica, a market intelligence firm expects the volume of these wearables to grow to up to $501 billion by 2020.

According to BI Intelligence “payment functionality will be included in 62% of wearable device shipments by 2020.” In markets with huge user base for contactless payment this could act as a catalyst for larger adoption.

I feel that customers are getting more and more interested in wearable payments but it is not likely that they may buy a new wearable just for making payment transactions. They are more interested in using multi-purpose accessories that allow them to do more than just payment, a best example of that would be smart watches, providing additional applications for other purposes. So, companies might have more success focusing on multipurpose offerings or integrating payments into products users already own or might buy rather than selling a dedicated payment device.

 

Reference: http://www.businessinsider.com/heres-whats-holding-back-wearable-payments-2017-3

P2P leader Venmo has a serious competition coming. Nineteen banks including Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo etc. are teaming up to launch Venmo like mobile application called Zelle. For a long period of time, millennials have been using third party application like Venmo to split checks and shared utility bills. In response now, banks are trying to draw these younger customers that are currently beyond their mainstream audience.

What is the difference?

As a P2P payment method, Venmo stands as a middle-man between any transfer. Amount sent first goes to receivers Venmo account and from there, they need to cash it out to their bank account. Using Venmo Instant cashing out is chargeable. With Zelle, banks propose to eradicate the need of this middle-man, so when any transaction, the amount sent from the sender would directly get transferred from his bank account into receivers account.

I believe inspite of banks efforts, Venmo has huge advantages because of its popularity and widespread user adaption. Venmo processed $17.6 billion in transactions last year, a 135 percent increase from the previous year. Now-a-days, “to Venmo” has become a common vernacular, meaning to move money to and from friends and family therefore, I believe it’s difficult for people to give up their habits of “to Venmo” soon.

Reference: https://www.bloomberg.com/news/articles/2017-02-22/big-banks-declare-war-on-venmo

Public Bank of China is set to issue its own cryptocurrency which means getting a step closer for becoming one the first major central banks to do so. PBOC announced in January 2016 that it will have its own cryptocurrency soon.

China have embraced digital payment to such a large extent, that according to Financial Times “Chinese mobile payments were nearly 50 times greater than those in the US last year”. This new PBOC-backed cryptocurrency wouldn’t seem much different to existing payment methods such as Alipay or WeChat but for sellers getting digital payments directly from the buyer will assist in lowering transaction costs as the middleman is cut out of the process.

This new technology shift will have huge benefits for PBOC as well. Instead of relying on monthly surveys of businesses, or collations of spending from the statistics authority, using blockchain will allow to trace transactions and collect “real-time, complete and authentic” data to compile precise monetary indicators such as money supply growth. Policies could then be fine-tuned on a day-to-day, even hour-to-hour basis, giving an unprecedented level of precision to monetary management. The central bank will have unprecedented knowledge of how the economy runs.

A PBOC research paper last year outlined how digital money could work:

• The PBOC creates cryptocurrency and transfers it to commercial banks when more liquidity is needed
• Consumers would top up digital currency from modified automated teller machines or from bank tellers and store it in a crypto wallet on their mobile phone or other device
• For purchases, consumers wire from their person wallet to the merchant’s account
• The merchant deposits the cryptocurrency into their commercial bank account
• The cryptocurrency would be part of the overall money supply, replacing part of the outstanding paper tender, a separate paper published in the central bank’s magazine said in September.

Cryptocurrency like bitcoins didn’t get support as their legit adoption could have benefits so significant that centralized exchanges would not be able to compete. I think it’s a great move by PBOC which will surely have positive impacts on consumers and the government, curbing out the disadvantages of involving middle-man in transaction systems, and may also set examples for other nations to follow.

PBOC- Cryptocurrency

References:

https://www.bloomberg.com/news/articles/2017-02-23/pboc-is-going-digital-as-mobile-payments-boom-transforms-economy

https://www.ft.com/content/00585722-ef42-11e6-930f-061b01e23655

Mobile payment began with smartphones followed by smartwatch and similar wearable bands. Recently there has been a new add-on to the family of mobile payment wearables: Sunglasses. Now apart from using cell phones and smartwatches, user can use their glasses to make payment.

This initiative known as WaveShades is a new contactless payment system built into sunglasses, born from a partnership between Australian startup Inamo, sunglasses-maker Local Supply and Visa. The prototype is rolled out ahead of St. Jerome’s Laneway Music Festival and handed out to goers to make their contactless payment.

I feel the idea here is to present a use case where user (specially millennials who frequently attend such festivals) only need to worry about keeping track of one thing, which is almost always right in front of their eyes.

The payment procedure is similar to other wearables, where there is a NFC chip in one arm of the glasses. The user just need to wave his glasses in front of terminal to make the payment.

The ever growing mobile payment family continues to see new innovations like these more frequently than ever. This definitely opens up the possibility of contactless payment being a dominant industry of its own in payment segment making traditional payment methods obsolete in near future.

references:  http://www.geek.com/tech/get-smart-with-waveshades-tap-to-pay-sunglasses-1687654/

https://www.cnet.com/news/waveshades-contactless-payment-sunglasses-laneway/

The Commonwealth Bank of Australia, Westpac, National Australia Bank and Bendigo and Adelaide Bank — have applied to the ACCC (Competition and Consumer Commission) to negotiate with Apple Pay in Australia.

They accuse Apple of trying to take advantage on their investment in Australia’s contactless payment infrastructure, claiming that Apple is seeking for exclusive use of Australia’s existing NFC terminal infrastructure.  The banks fear being sidelined as mobile wallets gain in popularity, with Apple having approximately 40% of the smartphone market in Australia.

Apple claims that opening up access to the NFC function would not undermine the security of mobile wallets is dismissed by pointing Apple’s experience in China and Japan, where they were forced to modify demands to maintain parity with Samsung Pay.

The banks also want price transparency on transaction costs. Apple Pay derives its income from a part of Merchant Service Fee (MSF) that merchants pay to the card issuers. In its deal with Apple Pay, ANZ has given up some of its interchange fees to Apple, but the actual amount has not been disclosed. The banks pointed out if Apple gained a dominant share of mobile wallet transactions in Australia, then consumers wouldn’t be aware of the costs that are associated with this method of payment. This would conflict with the RBA’s objective of improving signalling to consumers the price of each payment option.

 

References: http://www.abc.net.au/news/2016-10-20/australia-apple-pay-dispute/7946998

In the world of mobile payment ecosystem, there is a new emerging technology: Contactless Cash. Apart from making payment using smartphone’s, users can now use their smartphone even to withdraw cash from their ATM’s.

Working of this technology is similar to Point-of-Sale mobile payment that uses NFC (Near field Communication) technology.

Major advantage is that using your smartphone for ATM withdrawal removes the risk of magnetic card skimming and distraction fraud.

Spain’s Caixa Bank has provided app-enabled ATMs since 2011 and now with improved technology there are is a rapid growth in Contactless Cash industry. Last year, BMO Harris Bank rolled out cardless ATMs in the U.S. using QR codes for authentication. Most recently, Bank of America rolled out NFC-enabled ATMs in the U.S. this year, Barclays bank is rolling out a new NFC enabled ATM system in branches across the U.K. that lets Android users take out money with just a tap of the device.  Chase and Wells Fargo are expected to launch this feature soon.

With all banking giants making shift towards Contactless Cash, could result in a vital new category of mobile payment industry in near future.

(Reference: http://money.cnn.com/2016/11/21/technology/barclays-atm-contactless-cash/

http://www.yourphx.com/news/finance/barclays-new-atms-withdraw-money-with-a-tap-of-your-phone/611183403

http://www.digitaltrends.com/mobile/wells-fargo-wallet-nfc-atm/ )

POS (Point of Sale) payment is one of the categories of mobile payment ecosystem. It is also known as tap-to-pay as the user just taps his device on the terminal to make the payment.

User stores his card details in his smartphone (or any compatible wearable). Instead of swiping the card, user can just tap the phone on the terminal. The device then requests for user authentication via fingerprint to confirm payment.

Tap-to-pay system uses NFC (Near field Communication) technology that allows two devices placed within a few centimetres of each other to exchange data. In order for this to work, both devices must be equipped with an NFC chip. So, when user taps the device on the payment, the NFC-powered terminal subtracts money from the balance written to the card.

Apart from making payment, now mobile payment can also allow you to withdraw cash from ATM. From end of 2016, Bank of America has services allowing the customers to withdraw cash from the user’s bank account by simply tapping their NFC device.

According to nfcworld.com “value of transactions conducted via NFC handsets will grow from US$30bn in 2016 to US$45bn in 2017, US$70bn in 2018, US$110bn in 2019, US$160bn in 2020 and US$240bn in 2021”

Major players: Apple Pay, Android Pay and Samsung Pay

More than 100m people will make an NFC mobile payment in 2016

Smartphones are more ubiquitous than ever, and the number of mobile payment options available to consumers is increasing. Bloomberg Technology noted, “by 2019, eMarketer estimates that the total value of transactions made by tapping a phone on an in-store terminal will reach $210 billion, up from $8.7 billion in 2015.”

 

There are four types of businesses making major moves in mobile P2P payments: social messaging companies, banks, card networks, and other payment companies. Each of these types of companies has its own objectives and strengths in offering mobile P2P payment services.

Major banking institutions, such as JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co. and U.S. Bancorp, have a created a joint venture called clearXchange that allows customers to transfer funds instantly to another bank account through their phones.

Social media and messaging apps have also joined. Customers can pay using social media apps Facebook Messenger and use WhatsApp has a commerce channel.

With companies like Venmo processing more than $1 billion in one month in mobile P2P payments, and the thousands of other companies like Square processing billions more on mobile devices, the fintech industry and mobile payments industry is ripe to becoming one of the next valuable sectors in tech.

References:

http://www.biztechmagazine.com/article/2017/01/what-s-ahead-fintech-2017

http://www.businessinsider.com/facebook-messenger-promotes-p2p-payments-2016-9

The evolution of the mobile payment

Advancement in fintech has led conglomeration of financial industry with digital industry like never before. But while merger of two worlds helped broadening the reach, flexibility, and level of innovation to finance industry, this also bought along the bad side, i.e. cybersecurity. To give a perspective, just a year ago, in 2015 there was a cybersecurity attack ‘JP Morgan hack’, which is considered to be ‘the largest theft of customer data from a U.S. financial institution in history’. Incidents like such proves that there is a constant need to improve and enhance cybersecurity.

Hacks, security breaches, and a lack of trust by consumers is becoming commonplace. The need for new solutions is becoming more obvious, and IT and fintech security budgets across the private and public sectors are increasing accordingly. As a result, cyber security has become the fastest-growing sector in IT. The global spending for cyber security was nearing $76.1 billion in 2015—and that number is expected to rise to $170 billion by 2020(Source: Gartner).

The last thing any financial institute wants is to become the victim of a crime. The result could be a massive loss of customers, a damaged brand reputation, and legal and financial liabilities that may be impossible to recover from.

 

(reference: https://centricdigital.com/blog/fintech/is-your-data-safe-fintech-security-challenges-and-solutions/)