Rydych chi wedi mynd y tu hwnt i’ch terfyn gorddrafft

Issue 177 | 27 September 2021

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Rydych chi wedi mynd y tu hwnt i’ch terfyn gorddrafft

Customers of HSBC in Wales may soon be able to ask for a loan in their native language after the global bank announced that it was offering Welsh lessons to branch staff in the country.

More than 50 branch staff have volunteered to take lessons in the language, including online instruction and live tutorials with fluent Welsh-speakers.

The 45 surviving HSBC branches might soon be abuzz with expressions such as: “Rydych chi wedi mynd y tu hwnt i’ch terfyn gorddrafft” (“You’ve exceeded your overdraft limit”).

We have a long, proud history of providing banking services in Wales and in Welsh dating back to the 1760s and we were even the first bank to offer a Welsh-language credit card.

Jackie Uhi, HSBC UK’s head of branches.

HSBC’s roots in Wales go back to at least 1762, when the Banc y Llong (Ship Bank) was founded in Aberystwyth. It was later absorbed by Midland Bank, which HSBC bought in 1992.

However, HSBC has no plans to expand the scheme to Gaelic-speakers in Scotland or to Cornish-speakers.


A question of trust – how non-bank brands will take a $7 trillion slice of financial services

Ahead of last week’s Money2020 event Anne Boden (CEO over at Starling Bank) has been gathering her thoughts on trust in the banking industry and the future of embedded finance.

OK, I’ll say it. A lot of people don’t trust banks. This was, in great part, a motivation for the creation of Starling. Dissatisfaction with banks was at an all time low following the 2008/09 global credit crisis.

Anne Boden, Starling Bank

On the back of account switching gains made by Starling, Anne reflects on the fact that only 29% of consumers said that they trusted their banks ‘a lot’ to look after their long-term financial well-being.

With trust in traditional banks being so low, Anne suggests that it is little wonder that many companies are looking to see what leverage they may have when it comes to offering their own financial services, suggesting that the answer is: a lot!

Capitalising on hard-earned trust gives businesses a clear financial advantage. Embedded financial services, from loans to payment cards, increase a company’s competitiveness by enhancing the customer experience and generating additional revenue.

Silicon Valley VCs Andressen Horowitz has said that embedded finance could potentially increase per customer revenues by up to 5x. In the payments process alone, those gains could come from:

  • More control over the payment process.

  • Added-value

  • Lower Costs

  • Higher Revenue

Anne concludes:

One thing is for certain: many of the innovations we are yet to see will come from existing brands that will be offering financial services for the very first time. In fact, within the next decade the largest ‘bank’ in the world may not even be a bank at all. It is, you see, all a question of trust.

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Are Direct Debits doomed?

Nancy McCaw at ORG has been thinking about whether the revised NPA scope and timeline means that Direct Debit is now doomed.

Nancy writes:

The recent Payment Systems Regulator (PSR) determination that Pay.UK must revise both the scope and timeline for the introduction of the New Payments Architecture (NPA) was no great surprise to industry observers. 

Progress to date had been slow and the PSR was rightly concerned about the implementation risks. The focus has narrowed to supporting most Faster Payments transactions through real-time payments capabilities, with any other payment types coming later.

While the PSR’s prudence is welcome, navigating the future payments landscape has become more complex for payment processors and financial institutions. The Bank of England’s RTGS replacement and adoption of ISO20022 remains on track and in line with the SWIFT move to ISO20022. By 2025, international and CHAPS payments will have migrated fully to the new standards.

All of this means that financial institutions will need to have systems and payment rails which can run both ISO20022-formatted payments and current payment flows for a number of years, making system investment decisions potentially more difficult and more costly.

But, asks Nancy, what of Direct Debits?

The Direct Debit underpins most regular payments in the UK economy with around 4.5 billion payments made annually. Backed by an indemnity in case of bank error, it is safe for customers and is cheap for financial institutions and billers to run. However, as a payment product, it is almost invisible. It rarely appears in the press and has had very limited product development in recent years. Nine out of ten current account customers have at least one Direct Debit, but is the set-up process still fit for purpose in the digital age? Customers are becoming more digitally adept and savvy, and expect to be able to set up and manage financial transactions via a smart phone app.

The plethora of ways of paying being developed by fintechs is proof of this. Many of the innovative payment methods are underpinned by card payments or Faster Payments via Open Banking, but the latter have no indemnity if things go wrong. Research* by Pay.UK points to growing generational differences in attitudes to money management and payments. These attitudinal changes may lead to very different approaches to managing those regular bills that have been the driver of Direct Debit growth. Without investment to adapt to those changes, for example allowing more flexibility to direct collection from different accounts, the product may lose its appeal to those younger generations.

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A guide to Variable Recurring Payments in open banking from Yapily

Yapily have been unwrapping Variable Recurring Payments;

What are Variable Recurring Payments (VRP)?

Variable Recurring Payments (VRP) are a huge milestone for open banking. This allows variable payment amounts to be collected on an ongoing basis and, when fully mandated, will act as a smarter, flexible version to direct debits.

VRP allows authorised payment initiation service providers (PISPs) to make payments on the customer’s behalf, offering all the security benefits of an open banking single payment. They can vary in frequency and value and, most importantly, remove the friction from recurring Strong Customer Authentication (SCA).

Yapily’s blog goes on to cover:

  • Building a better savings habit using sweeping.

  • How do Variable Recurring Payments differ from Direct Debit payments?

  • How secure are Variable Recurring Payments?

  • How can Variable Recurring Payments be improved?

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Contactless control

Lloyds Banking Group customers will be able to set their own limits when the new £100 ceiling on contactless card payments comes into effect in October.

The upcoming hike in the contactless spending limit on consumer debit cards has raised fears that they could become a target for fraudsters, who can escape unchecked for at least five transactions when tapping to pay at high street retailers.

Lloyds says it is responding to customer concerns by introducing new card controls in its mobile app, which will enable users to move the limits in £5 increments of between £30 and £95. Customers will also be given the option to switch off contactless functionality all together, opting for PIN entry at the checkout instead.

We’ve listened to customer feedback to introduce this option which will allow them to make the most of the £100 limit in a way that works for them.

Philip Robinson, personal current accounts, payments and fraud and financial crime director at Lloyds Banking Group.

The app udpate will be available for customers of Lloyds, Halifax and Bank of Scotland.

Lloyds are the first to publicise the move but other banks are thought to be working to upgrade their apps. Starling Bank first raised the possibility when the uplift to a £100 contactless limited was mooted earlier this year.


Tracking the rise of Faster Payments

An exert from Northey Point’s latest Payments Tracker.

In the 12 months to the end of August 2021 we see that:

  • Single Immediate Payment volumes have increased by 26% (12 months to July 25%)

  • Total Faster Payment volumes have increased by 22% (12 months to July 21%)

  • Single Immediate Payment values have increased by 27% (12 months to July 25%)

  • Total Faster Payment values have increased by 25% (12 months to July 22%)

The trend has continued in August with both volumes and values significantly ahead of 2020 levels and with the percentage rise in values increasing again month on month. August 2021 saw an increase of 32% in the volume of Single Immediate Payments processed in the month compared to 2020 and 33% in the value of Single Immediate Payments.

The increased use of faster payments seems to be a digital payment habit that will be here to stay, reinforced throughout each lockdown over the last 12 months but also continuing as restrictions ease. The resilience of this particular payment habit coupled with likely increased activity in 2021 suggests that further year on year growth would be expected over the remainder of the year.

And a little extract from the tracker on cheques:

With both volumes of digital payments continuing to increase the share of legacy payments within the total continues to fall. For example, for the twelve months to August 2020 the volume of cheque payments accounts for 1.8% of the total (for Bacs/CHAPS/Faster payments and Image Clearing System) falling to 1.4% in 2021.

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Tipping in Bitcoin

Twitter is rolling out its tipping feature to all users and letting some people tip their favourite tweeters using bitcoin.

First unveiled in May, Tips is designed to help users earn money from their feed. It is now available to all iOS users, with Android to follow in the next few weeks.

Tweeters can add a link in their profile to a host of payment options, including the Cash App, Patreon, Venmo, Wealthsimple Cash and PicPay.

Now, people in the US (excluding Hawaii and New York) and El Salvador can also get tipped with bitcoin using Strike - a payments application built on the Bitcoin Lightning Network. Users can also add a bitcoin address to their profile.

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Mike