Payments, Payments, Payments

Newsletter 30 | 29 June 2020

Jun 29, 2020

Welcome to edition 30 of Payments, Payments, Payments, this week we cover a call to unfreeze Wirecard Card Services accounts, the final day to implement Confirmation of Payee, post pandemic sticky payment habits and a payments barometer.

Next week, I hope to be able to share some exciting news on a project I have been chairing for the Emerging Payments Association. As a response to the excellent ‘Weathering The Storm’ white paper from the EPA we’ve been creating a COVID19 Recovery Toolkit containing industry resources, commercial resources, blogs, events and webinars. More to share next week!

Starting a payments newsletter was a bold step but one that has been rewarded with a subscriber list that grows daily and a lot of fantastic feedback (thank you!)

This week I have decided to be bold again and ask for a favour, if you enjoy reading Payments, Payments, Payments each week would you please share and ask your friends and colleagues to join the mailing list?

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Mums unable to feed their children. Young people unable to pay rent. People unable to receive their benefits. Payments due for essential items like insurance and bills, all frozen

From a post about “#FruityFrittataFreelancerFriday” to this Tweet in just over two hours, Friday was a tough day for ANNA Money and its customers:

ANNA Money @ANNAMoneyUK

We are urgently recommending you withdraw your money from your ANNA account as soon as possible. This is due to the FCA placing requirements on our UK payment provider.

Can you imagine how you’d react if your bank gave you a handful of minutes to move your money to another bank account?

Incredibly, as we are now all aware, this is what actually happened for some people in the UK on Friday. At least ANNA Money tried to communicate the impending account freeze, it seems that other providers froze clients accounts with no notice.

My first thoughts turned to an academic argument between the merits of holding an account that was covered by the Financial Services Compensation Scheme (FSCS) and an account that ring fenced my own money. I recalled conversations many years ago considering how a financial instruction might ‘pay away’ stricken funds within a seven day window.

I then wondered about the impact on the companies who had chosen to purchase underlying services from Wirecard - what it might mean for their future and the consequences for Fintech regulation, competition and innovation.

But, as important as these things are, we must not lose sight of the fact that whilst ultimately the customers money might safe, a situation where funds are not accessible for an undefined time is a real and immediate issue.

Bailey Kursar summed this situation up very well:

Mums unable to feed their children. Young people unable to pay rent. People unable to receive their benefits. Payments due for essential items like insurance and bills, all frozen.
What's happened to Wirecard has directly made these already vulnerable people more vulnerable.
Bailey Kursar, Co-founder and CEO, Touco

Bailey’s whole article on this subject is definitely worth a read - link.

Today, the Emerging Payments Association (EPA) wrote an Open Letter to the FCA in response to their decision to freeze Wirecard accounts.

The Emerging Payments Association (EPA) and its members strongly urge the FCA to unfreeze Wirecard Card Services accounts, or facilitate a solution to enable safe access to e-money by e-money holders affected, as soon as it can, for the sake of cardholders, companies and their employees, and the UK fintech industry.

Without this freezing being removed rapidly, the EPA believes there will be significant and lasting damage to individuals, companies and the UK’s current and future prospects as leaders in Fintech.

The EPA stress that the FCA decision to freeze Wirecard accounts is having a significant impact on three groups of stakeholders:

- Cardholders, especially the financially excluded

Friday was payday. Those receiving payments onto their prepaid accounts such as Pockit and The Change Account which includes vulnerable people, those without access to mainline banking, those with low incomes on benefits programmes, and young people, will not receive them. They will be unable to pay other bills including food, utilities and Direct Debits. A few will be merely inconvenienced, but many will suffer and some will become emotionally distressed and traumatised, with unknown consequences to their wellbeing and health.

‘One company whose cardholders are largely financially excluded reported over the weekend that their call centre has been overloaded with desperate cases. Some were even threatening suicide because they have no money at all. These cards are their only form of spending, encouraged by Fintech and accelerated by Covid-19. Knowing that the money is securely held in a safeguarded account does not mean anything to them. They need access to the funds. Now.’
Neil Harris, Chairman of The Inclusion Foundation CIC

- Payments companies and their employees

The EPA believes that the suspension will impact more than 150 companies and thousands of their employees. Not only are revenues no longer flowing, but the costs to service cardholders and to move to alternatives to Wirecard Card Services, a process that takes several months, are significant. The EPA predicts dozens of corporate failures, hundreds of job losses and significant reductions in tax payments, unless the freeze is removed right away.

- Fintech and the UK’s reputation

The EPA state that we are all proud of the UK’s leadership on the world stage of financial technology. It has brought investment, commerce, jobs and taxable profits to our country. Unless the suspension is reversed soon, the EPA predicts significant and irreparable damage to the UK’s reputation for having a thriving, balanced Fintech industry supported by an understanding and enabling regulator.

Urging the FCA to release the restrictions on Wirecard Card Services as soon as they can, for the sake of cardholders, the payments industry and the UK, Tony Craddock from the EPA concludes:

Our industry has weathered the storm of the Covid-19 crisis well and enabled the steady digitisation of our society. As soon as the balances of Wirecard Card Services’ cardholders have been assured and are in the UK, please unfreeze its accounts; for the sake of excluded cardholders, the payments industry and the UK’s reputation as a leading fintech hub.
The longer this lasts the more likely it is to create:
A crisis of confidence among consumers. Consumers have come to trust digital payments and services from non-banks enabled by the e-Money regulations that have worked well over the last 15 years
A crisis of confidence among clients of the emerging payments industry, who have come to rely upon Fintechs to provide high quality, secure services, and those who service it.
Tony Craddock, Director General, Emerging Payments Association

What next?

Bailey Kursar concludes:

If we really believe in building a new, fairer financial services system then we should react with more empathy when the problems in our industry hit those less fortunate than ourselves.
Over the coming days I hope we can push for practical ways we can help the hundreds of thousands stuck without access to their money. I hope the FCA completes their investigations ASAP, but what if they don't? What can we do?
And over the coming weeks I want us to look inward. What would be the impact on your users and the wider community if one of your key suppliers went offline? What plans do you have in place for that?
Are there lessons we can learn about better explaining what we do, and how, to consumers?

As this issue unfolds and is, ultimately, resolved what part of the solution can you be?

Confirmation of Payee

With just one day left until the implementation of the UK’s new name checking service should be completed how much do you know about Confirmation of Payee?

Confirmation of Payee helps protect consumers and businesses from certain types of fraud and misdirected payments by letting them know if the account name they have entered matches the account name of the recipient.

The Confirmation of Payee service is intended to give businesses and consumers greater assurance that they are sending payments to the intended recipient.

Whilst not a silver bullet, the implementation of Confirmation of Payee is expected be an effective way of combatting Authorised Push Payment Scams (e.g. where a fraudster tricks their victims into willingly making a large bank transfer to them).

Confirmation of Payee will also help to avoid payments being sent to the wrong account due to ‘fat fingers’ (keyboard errors) when we type in somebody’s Sort Code and Account Number.

Click here for all you need to know: Confirmation of Payee 101.

Has COVID19 Formed Sticky Payment Habits?

LINK report another slight increase in ATM withdrawals last week (compared to the previous week) but still circa 50% less than the equivalent week in 2019.

It seems that the payment habits that were formed during COVID19 are proving to be sticky.

The current week (as measured by LINK) finishes on the 5 July so it will be interesting to see whether we all fill our wallets with cash in anticipation of the freedoms we will experience as part of the next phase of unwinding lockdown.

Almost impossible to predict but I’d place a bet on 31 million ATM cash withdrawals this week - what about you?

ICYMI: Subscriber Editions

In addition to this weekly newsletter I also produce a weekly ‘subscriber’ edition.

Three weeks ago subscription edition outlined the UK’s retail payments landscape and set the scene for the ‘Payments, Payments, Payments’ newsletters in 2020.

Over the last two weeks the subscriber only edition has begun to unpack the UK’s changing payments landscape piece by piece.

The briefest snapshot on each of the two newsletters are below.

For a 60 day free subscription click here: 60 Day Free Subscription.

Last week, we looked at “Bacs: 6.5 billion transactions a year ... and counting”.

In their own right both Direct Debit and Direct Credit are significant payment systems based on volume but in aggregate the numbers add up to a cool 6.5 billion transactions per annum.

As Direct Debit established itself as a firm favourite in the UK’s payment habits and the Direct Credit scheme crystallised its late 1990’s / early 2000’s growth spurt the balance shifted in favour of Direct Debit.

The split between Direct Debit and Direct Credit now stands at 70:30.

The previous week we looked at the world's first 24*7*365 instant payments system - Faster Payments.

Recipients in North America, the Middle East and Fintech’s in the UK receive the weekly subscriber edition and the feedback has been excellent.

For a 60 day free subscription click here: 60 Day Free Subscription.

In Brief

Bacs advise of a temporary increase of the minimum Direct Debit dormancy period.

Webinar: “The Future of Payments - What's Coming Next?” In this webinar Kyriba will be joined by Simon Brooks from Pay.UK, Philip Mind, from UK Finance, and Bob Ford from Request To Pay Ltd - link.

Customer Retention - the power of payments: This article covers some of the ways in which the payment mechanism(s) offered by a business can encourage a customer to do business with a particular business, or charity, and how the payment mechanism can be ‘flexed’ to help to discourage a customer from migrating to a different provider Customer retention - the power of payments.

Big Issue returns to the streets with PPE and contactless card readers - link.

Credit card for streamers and influencers - "Now I have the credit I need, the perks I want, and a fax machine that I can set on fire," says TheRussianBadger.

A trip down memory lane - running down Lombard Street clutching a outsized cheque (Bankers Payment) trying to get to Threadneedle Street before the door to the banking hall at the Bank of England was closed firmly shut at 3.10pm. Personal recollections of a 18 year old bank clerk.

Longer read

58% of financial decision-makers view loss to payment fraud as ‘part and parcel of running their business.’
Bottomline 2020 Payments Barometer

This week’s suggested longer read is the 2020 Business Payments Barometer from Bottomline. The report highlights the trends in the payment industry as described by 800 financial decision-makers in Great Britain.

The 2020 Business Payments Barometer arrives at an unusual time, amidst COVID-19. It provides a snapshot of how companies are managing their payments pre-pandemic.

The report analyses where companies are set to make investments over the next year, where they won’t, and how a ‘new normal’ might influence these findings as we emerge from the pandemic.