Welcome to issue 101 of Payments:Unpacked, get to grips with the UK’s retail payments landscape with Mike Chambers - exclusive payment insights, hot topic briefings and fundamentals unpacked.
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The Kalifa Review of UK FinTech - the Bangers ‘n’ Mash of reviews
Fintech is one of the UK’s great success stories and will help us seize new opportunities around the world.
Rishi Sunak, Chancellor of the Exchequer
The big news of the last week is the Kalifa Review or as HMT introduce it:
UK’s global fintech leadership bolstered by new review: An independent review has set out a plan for the UK to retain its global leadership in fintech by helping the country’s financial technology firms to scale up, access the talent and finance they need, and deliver better financial services.
The independent review was led by Ron Kalifa who sets out strategy to put UK at the top of the global fintech league table and includes recommendations include a new fintech scale-up visa stream, a ‘scale box’ for growing firms and changes to UK listings rules and states that support for the sector will create jobs and deliver better outcomes for people and businesses across the UK
The UK has more than 10 per cent of the global market share in fintech and the sector is now worth more than £11 billion a year to the UK economy.
The independent review, led by Ron Kalifa OBE, finds the UK is at a pivotal moment and presents a wide-ranging strategy and delivery model to build on its existing attractiveness to start-ups firms and become the best place for a fintech business to reach global scale.
It marks an important step in the Chancellor Rishi Sunak’s plan to make the UK the most open and dynamic place in the world to operate a financial services business. The government will now examine the recommendations and respond in due course.
The review highlights the opportunity to create highly skilled jobs across the UK, boost trade and extend a competitive edge over other leading fintech hubs.
introducing a new ‘fintech scale up’ visa route for specialists from around the world
implementing a ‘scale box’ to provide regulatory support for growing firms
improving UK listings rules with free float reduction and dual class shares
creating a £1 billion-pound fintech ‘growth fund’ to help firms grow independently
establishing a private sector-led Centre for Finance, Innovation and Technology to support national coordination and growth in fintech across the UK.
This review will make an important contribution to our plan to retain the UK’s fintech crown, create more skilled jobs, and deliver better financial services for people and businesses.
Rishi Sunak, Chancellor of the Exchequer.
Report recommendations at a glance (source: Gov.uk):
In an article published by The Stack, Dr Louise Beaumont, Chair, Open Finance and Payments Working Group, techUK, described it as “the Bangers ‘n’ Mash of reviews”:
It’s solid, sensible sustenance suitable for an industry which is emerging from its scrappy start-up phase and growing into its scale-up boots. The Review recognises that we must make the UK an attractive place to innovate: competition-igniting regulation; a rich supply of talent from all four corners of the UK and, of course, from overseas; deep pools of investment flowing all the way from funding first ideas to fuelling IPOs; and a warm welcome for inward investment plus enthusiastic support for export. There is much to do – and Wednesday’s Budget will tell us whether Rishi Sunak believes, as Ron Kalifa does, that FinTech is the future of Financial Services.
Dr Louise Beaumont, Chair, Open Finance and Payments Working Group, techUK
Download: The Kalifa Review of UK FinTech.
Lloyds taps into Mastercard's Open Banking Connect system
Lloyds Banking Group is tapping Mastercard's Open Banking software to enable customers to pay off their credit card bills via their mobile app and draw on funds directly from a current account of their choice.
By initiating a PISP (Payment Initiation Service Provider) payment using Mastercard’s Open Banking Connect system, Lloyds Banking customers will no longer need to go through the hassle of re-keying debit card details or having to set up the credit card as a payee from a current account using a different banking app.
Elyn Corfield, MD consumer finance, Lloyds Banking Group says: “We are constantly looking for new ways to offer our customers security, choice and convenience and this partnership with Mastercard allows us to do just that. We want to make it quick and easy for our customers to pay their credit card bills in just a few clicks, safe in the knowledge that their payments are completely secure.”
The new offering is in addition to Lloyds’ existing open banking features, which already allow customers to manage their money and compare current accounts from different banks.
European banks seek technical partners to help build rival to Visa and Mastercard
The European Payments Initiative (EPI), a bank-backed joint venture that aims to build a rival to Mastercard and Visa, has put out a Request for Information for 'qualified technical partners' to help build its central infrastructure.
Backed by 31 major Eurozone banks and acquirers Wordlline and Nets, the EPI is striving to create a unified pan-European payment system, offering a card for consumers and merchants across Europe, a digital wallet and P2P payments.
Expected to enter the operational phase in 2022, the coalition established the EPI Interim Company in Brussels in July, with the intention of setting out clear deliverables including the completion of the technical and operational roadmap.
EPI is currently assessing how the necessary central infrastructure could be obtained, or built, and how best it should be operated, "to sustain all the necessary scheme functions and needs, as well as the solution needs of the technical entity, in relation to the payment products EPI intends to deploy".
In particular, determining the financial aspects of the different options for the setup, and the run of the central infrastructure is critical for allowing proper decisions and choices.
European Payments Initiative
The rise of Prepaid Cards
The industry often talks about payments as if it’s one, homogeneous group. But in actual fact, that couldn’t be further from the truth. A ‘payment’ is simply the action of paying or being paid. But the method this action chooses in order to complete itself is completely variable. Today, customers are presented with a wealth of methods. Options include debit, credit, and prepaid cards, mobile wallets, buy now, pay later (BNPL) integrations, or even open banking-initiated transfers – the list goes on.
Each of these off-shoots deserve their own spots in the limelight. That’s why Moorwand has decided to create ‘The History of Payments’ series, where they will dig deeper into a handful of payment types. Moorwand plan to dispel common myths, review the headway they’ve made since they started out, and highlight their individual benefits.
Moorwand have started with prepaid cards, a payment group which has experienced huge growth. Particularly following the emergence of the post-2015 UK fintech cohort, many of which rolled out prepaid cards as part of their initial offerings. Globally, the prepaid card market was valued at $1.8 trillion in 2019. And it’s projected to reach $5.5 trillion by 2027.
Britain should get ahead on CBDCs
Bank of England should lead the world by developing its own cryptocurrency, urges former WorldPay boss.
The Bank of England should steal a march on the rest of the world and develop a crypto-currency, a fintech entrepreneur has urged.
Ron Kalifa, former boss of payment processing company Worldpay, urged governors at the Bank to embrace the currencies rather than dismiss them as a dangerous fad. He said:
‘Britain should get ahead on this. Why leave it to China?’
In a report on how to improve the UK’s burgeoning fintech sector, he added: ‘Individuals would be able to access central bank money.
‘The UK would be able to take advantage of its mature payment network, and build a more efficient and innovative structure on top of it. The UK would become the first jurisdiction to introduce this innovation.’
Source: This Is Money
HMRC: Confirmation of Payee (CoP)
HMRC continues to demonstrate its support for Open Banking with the release of its latest tender for a CoP solution, following award of PISPs only a few weeks ago.
CoP will dramatically reduce the risk of payment fraud by calling on APIs to automatically check names against account information held by payment service providers in real-time.
It will help to avoid common errors such as mistyping account details accidentally, therefore providing substantial operating efficiencies in the number of payments that need to be investigated or recalled.
Link: HMRC: Confirmation of Payee.
Purpose Codes for UK Payments
Pay.UK been working closely with the Bank of England on its policy statements, including a draft list of Purpose Codes for UK payments.
Pay.UK are inviting stakeholders who are familiar with the latest update “Conclusions and Shaping The Way Ahead” from the original consultation for the Next Generation Standard for UK Retail Payments to help provide feedback on Purpose Codes.
Open Banking publish first Annual Report - learn about OBIE activities in 2020 and their objectives for the rest of 2021.
Klarna confirms $1 billion fund raise, valuing the Swedish firm at $31 billion.
….BNPL expected to double market share in UK e-commerce within the next four years.
…. Starling Bank shines a spotlight on ‘buy now.pay later products’: Buy now pay later: What you need to know.
Digital tipping point for the Bank of Ireland as it announces that it will shut a third of its branches.
Eftpos Australia to launch national QR code payment scheme.
TreeCard secures $5.1 million investment for wooden debit card.
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The Payments:Unpacked newsletter from Mike Chambers at Northey Point explores a wide range of the UK’s payment news including: Open Banking, Request to Pay, Direct Debit, Confirmation of Payee, Bacs, CHAPS, Faster Payments, LINK, cash, cards, cheques and Central Bank Digital Currencies (CBDCs) and unpacks the eco-system that supports the operation of these systemically important payment systems.
The newsletter is an independent and informed insight into the UK’s payments landscape – exclusive payment insights, hot topic briefings and fundamentals unpacked.