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Rebalancing the business of payments
John Lyons at TSB has been speaking to The Paytech Magazine - in his article John considers how mid-tier banks like TSB might respond to a massive upheaval in the payments landscape.
These three quotes from John should be more than enough for you to want to read the whole interview:
The mobile banking app will be increasingly replaced with embedded finance, with the payment initiation happening elsewhere – initiation embedded in customer journeys will be a critical theme.
There’s a squeeze in payments – more volume, less opportunity to charge for them, higher costs of old infrastructure, growing compliance costs. Then there’s the cost of introducing new protections, such as confirmation of payee and secure authentication. It all adds to the cost of delivering a basic compliance service to customers.
Open banking is growing significantly, I see it in the volumes every day – more customers are initiating payments from within third-party apps than ever before. I also foresee a move from card acceptance to instant Faster Payments, particularly in e-commerce, as those smaller businesses try to avoid expensive merchant acquiring costs. As this capability is now far more instant, it’s starting to knock on the door of the traditional card rails as a viable alternative for the movement of money.
Read the whole of John’s piece in The Paytech Magazine: Rebalancing the business of payments.
HM Treasury urged to crackdown on BNPL as consultation closes
With the UK Treasury set to close its consultation on the FCA’s regulation of the booming buy now, pay later sector, consumer group Which? has called for stronger safeguards after publishing research which indicates that shoppers view BNPL products as budgeting solutions rather than credit.
Among the proposals set out by the regulator are for credit agreements laying out the terms of deals when people take them out, and for retailers promoting the services to ensure people understand the risks. The consultation also suggests section 75 of the Consumer Credit Act should apply, making BNPL providers jointly liable for the contract with the retailer in the same way that credit card providers are.
The growth of the market is phenomenal, with the value of transactions more than tripling in 2020 - to £2.7 billion. Since the consultation started in October, millions of people have taken out new loans to cover the costs of Christmas shopping. Citizens Advice said that one in ten people used Buy Now Pay Later over Christmas alone.
Many of the BNPL users interviewed by Which? did not think of BNPL schemes as a form of credit. Instead, participants described the schemes as a ‘way to pay’ or a ‘money management tool’, rather than a credit provider.
More: HM Treasury urged to crackdown on BNPL as consultation closes.
Single-day ISO 20022 migration?
The American Bankers Association is supporting the Federal Reserve's plan to migrate the Fedwire Funds Services to the ISO 20022 message standard in a single day - but says it has "serious concerns" about a lack of detail on testing strategy and requirements for the move.
Responding to the Fed's call for comment, the ABA says it supports a big bang implementation strategy for the ISO 20022 migration in November 2023, suggesting one of two non-holiday weekends during the month.
The association also says it is "essential" to ensure the move happens on the same day as The Clearing House's Chips service migrates to ISO 20022.
While agreeing to the timeline, the ABA says banks need a "detailed implementation plan as soon as possible" so that they can set up teams and allocate resources to begin preparing and testing.
The Fedwire migration is just one of several major projects facing US banks, which also have to contend with Swift's ISO 20022 migration in November 2022 and the FedNow real-time payments system going live in 2023.
Therefore, with "bank resources already being pushed to the limit", the ABA is asking the Fed to consider pushing back plans to extend the operating hours of Fedwire and the National Settlement Service and make the ISO 20022 migration the "highest priority".
Pandemic sparks evolutionary year for Canadian payment landscape
The Canadian payments landscape in nine facts from Payments Canada:
Electronic payments represented 79 per cent of all transactions, compared to 77 per cent in 2019 – accounting for 15.8 billion transactions and representing 66 per cent of total payments value (the combined monetary value of total transactions) in 2020.
Contactless payments grew dramatically, increasing 13 per cent in volume and 10 per cent in value year-over-year (YOY) in 2020, fuelled by Canadians’ concern about virus transmission and an increase in contactless transaction limits by most networks from $100 to $250. Debit accounted for the majority of all contactless transactions (62 per cent, up 10 percentage points from 2019) with credit accounting for the remainder.
E-commerce transactions grew by 20 per cent in value, with close to half of Canadians (47 per cent) reporting using e-commerce platforms for online purchases more frequently to purchase a wider range of products compared to pre-pandemic. E-commerce payments accounted for 477 million transactions and generated over $56 billion in value in 2020, compared to $47 billion in 2019.
Canadians’ use of card alternatives continued to grow. Use of card alternatives (such as smart watches) increased dramatically, generating $244 million in payment transactions in 2020, an increase of 115 per cent and 125 per cent in the volume and value respectively from 2019. Approximately 29 per cent of Canadians made a purchase using a mobile payment or digital wallet; 21 per cent of Canadians made in-app purchases compared to 18 per cent in 2019, and 14 per cent of Canadians made purchases using gaming consoles or Internet of Things (IoT) devices, compared to 15 per cent in 2019.
Credit card use declined for the first time in seven years, with a 11 per cent decrease in volume and an eight per cent decrease in the value of credit card transactions. This follows a record high in the use of credit cards in 2019. However, credit cards continue to represent the largest share of all payment types in terms of transaction volumes. In 2020, 93 per cent of Canadians reported owning at least one credit card, and the number of credit cards in circulation increased by three per cent overall.
Debit card use decreased nine per cent in 2020 from 2019 to represent 28 per cent of all transaction volume, but continues to be a key payment method. The vast majority of Canadians have debit cards (97 per cent) with the average transaction value being $44.
Online transfer growth skyrocketed in 2020, increasing 48 per cent in volume and 40 per cent in value from 2019 and is poised to meet or exceed debit value in the coming years. This growth follows a 40 per cent increase in the use of online transfers from 2018 to 2019, with a staggering growth of 569 per cent over the last five years.
Cash payments declined by a further 17 per cent, following a nine per cent decrease in 2019. Cash usage accounted for 17 per cent of total payments volume and is expected to continue to decline steadily. Interestingly, 47 per cent of Canadians reported making a cash purchase in the last seven days. Of those who are regular cash users, 38 per cent received a portion of their monthly work income in cash, an increase of eight per cent YOY; in part, this trend is fuelled from the growing gig economy.
Cheque use continued to decline, while average cheque transaction value increased. Cheque transaction volumes declined by 26 per cent, and transaction values by 15 per cent from 2019. But, the average cheque transaction value was $7,075 (compared to $6,142 from 2019). The year-over-year increase in average cheque transaction value is linked to the continued use of cheques for large value business payments.
Download the full report: Pandemic sparks evolutionary year for Canadian payment landscape.
Integrated Payment Systems – finding the right digital solution
In a recent blog, '“Integrated Payment Systems, digital solutions where size no longer matters”, we discussed the benefits of joined up systems for companies of all sizes. In a recent blog we considered why businesses simply stop at a standalone card accepting system when there are many other options available.
Integrating systems yields many more benefits – so how can this be accessed and where do you start? The theory is all very well but with many other pressures how does a small business without a dedicated IT department determine which system is best and how do they access and implement it?
As a case study we are looked at an independent coffee house which has been trading for just over ten years. Like many businesses, systems have been added over the years as new technology became available – and no doubt like many businesses this now means disconnected systems which have been subject to bolt on after bolt on with much of the processes pre-dating the current technology available. If starting from scratch, a new business wouldn’t start from here!
Navigating the New Opportunities for Corporate Payment Cards
The Payments Association have published a new whitepaper, ‘Navigating the New Opportunities for Corporate Cards’
Download the whitepaper now to find out the ground-breaking technologies, key strategic considerations, and optimal routes to achieving greater corporate card penetration - https://okt.to/KXY8fL
Fintech companies have entered the $7.8 billion European commercial card market with innovative solutions that expand upon what a commercial card can do with new digital functionality and virtual cards have gained increased recognition of the working capital benefits of digital payments, meaning that this payment type will continue to grow long term at a 30% rate.
Talking with Silvia Mensdorff-Pouilly of FIS on the benefits of the positives of digitalisation of payments, she commented: “There is the ease with which you can use them on your mobile phone and include them frictionlessly into your digital journey. You don't have to manually enter data with virtual cards, which makes the experience so much easier and slicker.”
Download: https://okt.to/KXY8fL
The future of analogue payments
As the Spanish government protects the acceptance of cash some are calling for UK shops to be forced to take our cash by law and Lord Holmes has been applauding the work of Natalie Ceeney CBE, UK Finance, Which? and many others working to protect our access to cash.
Great progress has been made but more must be done. As well as protecting peoples right to use cash and ability to get hold of it for free and without having to travel miles away from their local area we also need an urgent review into access to digital payments.
Lord Holmes
Forecasting in a time of uncertainty Is forecasting science or art?
Access PaySuite have been looking at forecasting in a time of uncertainty….
One of the most important things to remember is that forecasts will almost always be wrong. This is because forecasting is, in itself, an uncertain activity.
You may forecast something as small as a subscription for your CRM, only to find out that the developers put the price up unexpectedly.
You may forecast your headcount with absolute certainty and then someone suddenly hands in their notice.
The truth is that forecasting isn’t binary - it’s not about whether you are right or wrong, just how wrong you are. This means that to a very large extent, forecasting is more of an art than a science. Sure it looks like science with whizzy software and multi-layers workbooks but at the end of the day, it needs to be laced with quite a bit of intuition to get close to an accurate outcome.
What makes the most difference to a forecast is getting the direction of travel right and understanding what happens if things suddenly go awry.
More: Forecasting in a time of uncertainty.
UPI Plans Outside Of India
In her latest edition of Fincuts Tanya Thourani has been exploring developments in India’s Unified Payments Interface (UPI):
When I visit other countries, I can seamlessly use debit/credit cards for making payments. Offcourse, there are currency conversion charges, and fees, but the payment is carried through without any hassles.
WAIT.... can I pay for products and services using UPI outside India ? and While living outside India, can I send money back to India, using UPI?
These questions made me explore what is being done for expansion of UPI to other countries. Digging deep, I identified that very soon, the same payments and transactions in foreign locations will be done via UPI.
NPCI International Payments Limited (NIPL) is the the international arm for NPCI. Incorporated on April 3, 2020, it is devoted for deployment of RuPay (domestic card scheme) and UPI (mobile payment solution) outside of India.
Who are they solving for?
The India traveller abroad : by creating an acceptance network which will help Indian travelers pay through UPI in their destination country of travel.
The local consumer : by helping countries which want to establish a ‘real time payment system’ or ‘domestic card scheme’ in their own country.
Around 777 million Indian consumers shopped across the border in 2021 and consumers & businesses globally are demanding faster payments, and more countries are hearing the call and taking action.
More: UPI Plans Outside Of India.
ICYMI
Cash 101 - the UK’s ATM cash acquisition habits.
The old joke that you wait ages for one bus, then three come along at once, is bordering on cliché. The past few weeks have presented the Nationwide Building Society with a few operational issues in processing Faster Payments - two processing issues in December followed by a post-New Year queuing of inbound payments - Blog: A “nation-wide” problem.
Don’t forget: The UK’s path to digital inclusion
Join LINK and friends the 9th February to explore the UK’s path to digital inclusion.
Register: The UK’s path to digital inclusion.
In brief
Starling CEO Anne Boden says the bank has pulled all paid advertising on Facebook and Instagram until Meta tackles fraudsters advertising on its platforms. Also Starling confirms the planned launch of a Software or Starling as a Service (SaaS) proposition during 2022.
Tanzanian instant payment system to be launched in February 2022.
Denmark approves role of P27 as new national clearing house
And finally
The Bank of England are recruiting within their payment system supervisory team - a great opportunity to join a team that ensures that the firms that sit at the heart of the financial system are well run and operationally and financially resilient. If you're interested in potentially working on anything from the newest payment system operators trying to shake up the status quo through to some of the largest and most sophisticated financial institutions globally click here: BoE payment system supervisory team.
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Mike