Tag Archive for: payments

World Payments Report 2017

| 21-9-2017 | François de Witte |

Each year, during the summer, Cap Gemini publishes with BNP Paribas the World Payments Report, aiming at providing a preview of the global payments landscape. In the following I present you a short summary with what I consider the main findings. If you want to access the full report please click on this link.      

Introduction

2017 is a quite exciting year, with new regulatory initiatives having a big impact on the payments industry. In the EU, the most important one being PSD2, which  opens the market to new players (third party providers), and which needs to be transposed on the national legislation of the EU member states by 13/1/2018. We also have the AML Directive, which had to be transposed in the legislation of the different member states and the GDPR Directive which needs to be transposed by  6/5/2018. The report is giving attention to these new developments, in particular the ones linked to PSD2.

Main findings

The World Payments Report reported that global non cash transaction volumes grew 11.2% during 2014-15 to reach 433.1 billion transactions, the highest growth of the past decade, and slightly above last year’s prediction. Overall global non cash transaction volumes are expected to continue to grow, due to the rising adoption of these payment instruments, the growing inclusion, the increasing financial literacy and the enhance payments infrastructure, in particular ion the developing markets.

Source: World Payments Report 2017, page 6

 

When looking at the breakdown of the non-cash transaction (see following chart), we see some interesting trends:

Source: World Payments Report 2017, page 11

Debit cards and credit transfers were the leading digital instruments in 2015, while the check usage continues to decline globally.
Despite the increased adoption of digital payments, cash continues to keep an important role, in particular for low value transactions. Key factors contributing to the persistency of cash include the anonymity associated with cash transactions, lack of a modern payments infrastructure, and limited or no access to the banking system in developing markets. However in some countries (e.g. Scandinavia), the usage of cash was reduced drastically.

When looking at Europe, during the coming years credit card transaction volumes are expected to be affected by the interchange fee cap in Europe and by the less proactive policy of banks in this respect.

Conclusion

The ongoing increase of the non-cash transactions and the reduction of the checks is encouraging. We move towards more efficient payment instruments. The next years will bring new challenging new regulatory and industry initiatives, which will have to be implemented by the banks. This will require huge investments, and in my view, some more regulatory coordination will be needed.

François de Witte – Founder & Senior Consultant at FDW Consult

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De 100 meest veelbelovende FinTech bedrijven – wie wordt de winnaar?

12-9-2017 | FM.NL | treasuryXL |

Op 27 september is het zover. Buitenlandse investeerders en FinTech-specialisten van naam reizen dan af naar Brussel. Tijdens de European FinTech Awards & Conference 2017 zullen zij oordelen hoe de veelbelovende techbedrijven van Europa ervoor staan. De omgetoverde FinTech-awardzaal van ‘The Egg’ bombardeert  de Europese hoofdstad deze dag tot hét techcentrum van Europa. De top 100 aanstormende FinTech-bedrijven van Europa zijn bekend. Wie wordt gekozen tot winnaar?

Meer dan 34.000 FinTech enthousiastelingen hebben gestemd op hun favoriete Europese FinTech-bedrijf. Het is nu aan de FinTech vakjury: wie winnen de European FinTech Awards 2017? U hoort het op 27 september.
Honderden Europese fintechbedrijven staan op het punt door te breken en uit te groeien tot scale-up. Miljarden liggen klaar om geïnvesteerd te worden in bedrijven die de markten gaan veroveren. Wie wordt de volgende?

De 100 meest veelbelovende FinTech bedrijven

 FM.NL heeft de 100 bedrijven in een artikel gepresenteerd:
 

Bron: FM.NL

Top 3 FinTechs per categorie

 

 

 

 

 

 


Bron: FM.NL

Veelbelovende FinTech-bedrijven & verrassende visies op de European FinTech Awards in Brussel:
Deel expertise en visies. Laat u verrassen tijdens de vele kennissessies, keynotes en pitches. Krijg de beste antwoorden op uw vragen: Hoe schaalt u efficiënt een FinTech-bedrijf op? Wat kunnen we leren van succesvolle FinTechs? Hoe reageren banken en wat denken investeerders?

Laat u inspireren door de meest veelbelovende FinTech-bedrijven ten overstaan van aanwezige investeerders, stakeholders en andere belangstellenden op 27 september 2017.  Dit is de dag waarop u de beste FinTechs van Europa pas écht leert kennen.

Korting via treasuryXL

Bezoek de European FinTech Awards & Conference met korting
Ontmoet 27 september 2017 in ‘The Egg’ in Brussel 400 nationaal en internationaal befaamde FinTech-entrepreneurs, bankiers, investeerders en adviseurs. De European FinTech Awards & Conference 2017 biedt een unieke kans om uw netwerk te vergroten. Laat deze kans niet glippen om gearriveerde FinTech-sprekers op het podium te zien en 30 pitches te zien van Europa’s beste innovatieve ondernemingen van dit moment.

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De European FinTech Awards wordt georganiseerd door Alex van Groningen en B Hive. 

Annette Gillhart – Community Manager treasuryXL

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How can treasurers use cryptocurrencies?

| 7-9-2017 | Carlo de Meijer |

 

Recently I read a blog from Victoria Beckett published in GTNews, titled “How can treasurers use cryptocurrencies”.  Nowadays there are more than thousand different cryptocurrencies in circulation. The dollar value of the 20 biggest cryptocurrencies is around $ 150 billion. While cryptocurrencies soared to unknown levels, also the explosion in Initial Coin Offerings, or ICOs for funding purposes is evidence of their growing attraction. But are these cryptocurrencies suited for corporate treasuries.

Benefits

In her blog Victoria Beckett said that there are several benefits to treasurers using cryptocurrencies. These may bring various benefits including avoiding paying large transactions fees to banks, realising immediate payments and the ability for transactions to be kept open or private. According to her corporate treasury business no longer need to use mainstream financial regulatory frameworks. Cryptocurrencies could provide business with the ability to move assets outside of the normal banking regulatory framework.

She argued that one of the key benefits to making business payments using cryptocurrencies is that it cuts out banks in the transaction completely, avoiding large transaction fees, while “payments can also get transferred immediately anywhere in the world”.

Critics

But there were some critics as “banks have to trade off the operational benefits that the technology may provide against the added cost of needing to buy and sell a cryptocurrency to make a transaction.” “Therefore, the benefits are low when dealing with efficient ‘corridors’ such as US and Europe, but higher when transacting with Zimbabwe” David Putts.

Besides, there are a large number of different cryptocurrencies in circulation with different protocols etc. These are not interoperable/interchangeable.  So when using cryptocurrencies they at some point in time have to be transferred into fiat money. And that also costs money.

I also missed other use cases for corporate treasurers in the article. Just using cryptocurrencies payments would be a very limited use case, given the large number of other activities performed by corporate treasurers.

Risky business

When reading the article I got the impression that the risks of cryptocurrencies were rather  under estimated. Certain features of cryptocurrencies are not backed by any government, have no status as legal tender and rely on network protocols and cryptographic techniques to enable counterparties to transact. This may present various risks.
First of all cryptocurrency exchange platforms normally have no regulation. Thus there is no legal protection. And we have seen the various examples of hacking these exchanges with many people losing their money.
Second, virtual money is normally stored in a digital wallet on a computer. Though these wallets have passwords and key they are still valuable for hacking etc.
Third, there is no protection for funds under EU law when using cryptocurrencies as a means of payment. We still live in a largely fiat-money dominated world. So these cryptocurrencies had to be concerted one day into their own legal currency and that costs money.
Fourth, cryptocurrencies are very volatile. There is no guarantee that the cryptocurrencies will remain stable.  Cryptocurrencies currently lack a derivatives market, which makes them a risky medium for business contracts that last for any amount of timer, especially given their constant value fluctuations. This year for example the exchange rate of the bitcoin climbed from a low of 968 dollar to more than 3000, fell back to 1.800 six weeks ago and climbed to 5.000.
Fifth, due to the untraceable nature of cryptocurrencies, they provide a high degree of anonymity, making them vulnerable to misuse for criminal activities.

Action from regulators across the world

For some, it is a pro that cryptocurrencies in most countries are not regulated, such as for hackers and/or speculators.  That idea is however rapidly changing giving the risks associated. At a global level, there is an urgent need for regulatory clarity given the growth of the market.

All these risks mentioned above are prompting action from a growing number of jurisdictions.

Regulators in China have publicly announced that they will forbid the use of ICOs. And also regulators in other countries like Japan, Singapore, and the US are looking at ways to regulate. The SEC in the US has officially confirmed it was looking into regulation of cryptocurrency ICOs. The SEC is mainly concerned with the risks these ICOs pose. And Singapore will regulate ICO offerings that are deemed to be securities.

But also on a more broader scale Europa there is increased activity by regulators in Europe to reign in the use of crypto currencies. The EU Parliament is expected to pass measures soon to bring certain virtual currency service providers within their AML (anti money laundering) / CTF (counterfeiting) regulation. These measures do not seek to prevent the use of cryptocurrencies, but will require virtual currency service providers to implement customer due diligence measures.

Polish regulators are warning investors and banks to avoid dealing with digital currencies like bitcoin and ether. The regulators clarified that cryptocurrencies are not considered legal tender in Poland.

The Maltese regulatory watchdog (MFSA) also warned traders about the risks associated with the virtual currency. According to them a virtual currency is an unregulated digital instrument and is a form of money that is not equivalent to the national currencies. The MFSA however stressed that It does not (yet) regulate the acceptance of payment of service in regards to the virtual currencies.

Are central banks overcoming their reservations?

Central bankers, from Russia to China, Frankfurt and New York, are increasingly wary of the risks posed by these crypto currencies. I therefore question if central banks worldwide are overcoming their reservations versus cryptocurrencies and really come out in favour of the cryptocurrency.

The recent boom in cryptocurrencies and their underlying technology is becoming too big for central banks to ignore. The risk is that they are reacting too late to both the pitfalls and the opportunities presented by digital coinage.

Bitcoin and its peers pose a threat to the established money system by effectively circumventing it. CBs are well aware of losing control over the money supply, if they don’t react. A solution may be that CBs are issuing digital money themselves to maintain control. Various central banks worldwide are now experimenting with that idea.

Forward thinking

The attraction of virtual currencies is mainly for speculative reasons, rather than for corporates to facilitate treasury. Corporate treasuries are increasingly looking for centralisation of the treasury organisation away from decentralisation. They also are very much focused on reducing the various corporate risks including FX, short term interest rate, cross currency liquidity, etc.

And when it is regulated on a larger scale it is questionable if the described benefits of speed, efficiency or scalability attributed to the use of cryptocurrencies still will meet the costs associated .

The announcement by the Bank of China to put a halt on initial coin offerings or ICOs had a negative impact on the very volatile bitcoin and other cryptocurrencies. In one day it lost almost 15% of its value. The corporate treasurer however does not like volatility!

 

Carlo de Meijer

Economist and researcher

 

Why is e-invoicing not the same as a PDF?

| 6-9-2017 | PowertoPay – Unified Post | Sponsored Content |

When they hear e-invoicing, companies often think that this is sending invoices by e-mail. However, e-invoicing is more than that. Not only sending the invoice is part of this, but also the electronic booking, payment and collection of the money belongs to this process. Electronic invoicing leads to a major save of costs. For the sender, but especially for the receiver. Since e-invoicing is digitalizing invoicing for the sender as well as the receiver, a PDF-invoice is not seen as electronic invoicing.

When receiving a PDF the receiver still has to, with or without the help of OCR software, manually put data into a systems or he has to correct it. In the case of e-invoicing, the receiver gets all the data electronically which can be automated with their accounting systems. Manual input is not necessary anymore and the control of the content of the invoice can be automated.

Automated

When a sender decides to do e-invoicing instead of just sending a PDF, there is a world of benefits for the entrepreneur. First of all, e-invoicing is like registered post but then faster. You always know for sure that the invoice is received and you’re always being informed about that. Since the payment period usually starts at the moment the invoice is registered, the e-invoice can shorten the payment period with a couple of days.  Without intervention of the post or post rooms or other internal departments, the e-invoice lands directly into the financial system of the receiver. Reminders can be sent automatically and payment options can be built into the invoice or reminder. E-invoices can be simply archived digitally which makes them easy to find and this way they’re always accessible within the organization. With e-invoicing you are ready for the future. It’s only a matter of time until receivers don’t want to receive invoices any other way. The (Dutch) government even made e-invoicing (so not PDF’) mandatory as from the 1st of January.

E-invoicing Method

Paper invoices and PDF invoices via e-mail are most of the time directly exchanged between two parties. Of course this is the case with e-invoices. In this so-called two-corner model, two parties make arrangements on the e-invoice format they use and about the technical connection. However, there are a lot of different formats in the electronic invoicing world and that variety has a function. A format (invoice standard), often reflects the specific needs of a sector or collaboration. Every sector has its own order and invoice process, that one format can even be undesirable.

Billing Service Provider

In the three-corner model, a Billing Service Provider (UnifiedPost) takes the burden away for both the sender and the recipient in the invoice process. The sender that uses its own sector standards, the billing service provider makes sure that the invoice gets to the receiver in their correct format. Preferably electronic, but e-mail or post are also optional. Another advantage for the sender is that there is only one technical link that should be realized with the billing service provider. The billing service provider is taking care of different links on the receiver-side. By translating different formats, the billing service provider is making sure that the receiver receives all his invoices electronically the same way and that the authenticity and the integrity of the invoice is determined the right way. Billing service providers have got a large network and make agreements with (large) accounting systems.

Simple with great advantages

By using an billing service provider, companies can easily exchange electronic invoices directly with many providers from different sectors and suppliers. This requires one link (one-time setup) between the accounting system and the platform of the service provider. Small companies can also use a webportal for sending and receiving e-invoices.

If you want to read more about the services of PowertoPay or about e-invoicing please click the following link:

Learn more about e-invoicing with these facts and figures. 

 

PowertoPay – Unified Post

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Bitcoin nieuws! De Splitsing!

| 4-9-2017 | Erna Erkens |

Wat is er gebeurd met de Bitcoin per 1 augustus? De Bitcoin is gesplitst! Ik zal het hieronder proberen uit te leggen. Ik voorspel u vast, het is niet eenvoudig. Na de vele discussies over de schaal van de digitale valuta Bitcoin, is er besloten om een ​​geheel nieuwe valuta te maken, de Bitcoin Cash. Het is wel een beetje ingewikkeld allemaal. Het is een resultaat van politieke, technologische en ideologische discussies over het laten groeien van de Bitcoin. Sommige deskundigen zeggen dat een hele nieuwe valuta,  genaamd Bitcoin Cash,  kan helpen om Bitcoin op grotere schaal toegankelijk te maken voor een grotere groep mensen.

De afgelopen tijd was er een strijd tussen concurrerende visies,” zegt Zaki Manain, een onafhankelijke cryptocurrency expert. Deze strijd is per 1 augustus voorlopig even gestreden. Om ervoor te zorgen dat de Bitcoin een eenvoudiger wereldwijd betalingssysteem wordt dat iedereen kan gebruiken, moet de Bitcoin over de groeipijn heen geholpen worden. Er is nu voor de oplossing gekozen om een ​​hele nieuwe valuta te maken met soortgelijke blockchain software.

Wat betekent dit nu?

Laat ik beginnen met te zeggen dat uitgeven van de Bitcoin moeilijk en ingewikkeld is.
Bitcoins zijn gebouwd op iets dat blockchain heet. De Bitcoin blockchain is een openbaar grootboek dat alle transactiegegevens bevat van iedereen die Bitcoins gebruikt. Transacties worden toegevoegd aan “blokken” ofwel de koppelingen van codes die een keten (blockchain) vormen. Elke transactie moet in een blok worden opgenomen. Maar deze blokken zijn vol en dit levert een grote vertraging op in de betalingen. Momenteel zijn er gemiddeld ongeveer 1.700 transacties die per Bitcoin block kunnen worden opgeslagen, bij ongeveer drie transacties per seconde, zegt specialist Manain. Dat is niet heel veel. (Visa, bijvoorbeeld, handelt duizenden transacties per seconde).
Omdat de Bitcoin blockchain te druk wordt, kan het gebeuren dat iemand iets betaalt met een Bitcoin, maar dat het heel lang duurt voordat de betaling goedgekeurd wordt. Het verschil is de grootte van de betalingsblokken. De originele Bitcoin heeft blokken van 1 MB die snel vollopen met opdrachten, waardoor het verwerken van betalingen veel tijd kost. En dus duurt het lang voordat de partij waar de betaling aan verricht wordt kan zien dat hij/zij het geld ontvangen heeft. Dat is niet goed voor het vertrouwen. Bij Bitcoin Cash zijn de blokken 8 x zo groot, waarmee de betalingen veel sneller kunnen worden uitgevoerd. Er is ook een poging gedaan om dit probleem op te lossen door een regelwijziging toe te passen op de software. Deze werd genoemd: “Segregated Witness” (gescheiden getuigen. SegWit2X). De regelwijziging zou mensen in staat stellen om meer transacties op elk blok te zetten. Dit wordt in technische termen een “soft fork” genoemd. Sorry, ik kan er ook niks aan doen.  Dit zou niet hoeven leiden tot een hele nieuwe cryptocurrency. Deze nieuwe regel zou moeten worden ingevoerd in november. Dit vergroot de grootte van de software van 1 MB naar 2MB. Voor sommigen was dit niet genoeg. Daarom een tweede Bitcoin: De Bitcoin Cash.

Wat is de Bitcoin Cash?

De Bitcoin Cash is een zogenaamde “hard fork” (sorry, ik heb het niet bedacht). De makers zorgen voor een volledig nieuwe software, die het aantal transacties per blok acht keer groter maakt ( 4 x na SegWit2x). Geen idee hoe dit precies werkt. Dit betekent dat Bitcoin Cash transacties veel sneller kunnen worden verwerkt. Bitcoin Cash is niet hetzelfde als de “normale” Bitcoin. Op 1 augustus was een eenheid van Bitcoin Cash USD 240 waard. De echte Bitcoin was toen meer dan USD 2.700 waard.
Bitcoin Cash valt of staat met het vertrouwen van de markt, net als de gewone Bitcoin. Het zal alleen succesvol worden als mensen vaak beslissen om de blokken voor de Bitcoin Cash blockchain te creëren (minen of vinden, zoals u wilt). Het eerste blok is aangemaakt dinsdag 1 augustus.

Hieronder het koersverloop van de Bitcoin Cash tegen de USD van de eerste week:

Wat het betekent voor consumenten en bedrijven?

Voor iedere “oude” Bitcoin die u bezit, bezit u ook een Bitcoin Cash. Echter, niet alle Bitcoin-uitwisselingsplaatsen (de plek waar mensen hun bitcoin opslaan, waar je je Bitcoin wallet hebt een soort van Bitcoin portemonnaie) zullen Bitcoin Cash accepteren. U krijgt alleen Bitcoin Cash erbij als u zelf  uw Bitcoins beheert of als u bij een Bitcoin Cash-vriendelijke Bitcoinbeurs zit.
Dit kan een belemmering zijn voor de wereldwijde acceptatie van de Bitcoin Cash. En om Bitcoin Cash te gebruiken voor gewone transacties zoals koffie kopen, zullen bedrijven het moeten accepteren, ongeacht of ze de gewone Bitcoin al accepteren of niet. De toekomst zal uitwijzen of dit gebeurd of niet.  “Dit hele proces zal ons veel informatie geven over hoe we in deze toekomst met deze systemen omgaan,” zegt Manain. “Het zal een blauwdruk zijn voor toekomstige ontwikkelingen in de wereld van cryptocurrencies op basis van blockchain. We gaan hier heel veel van leren.
De vraag blijft: welke versie gaan de miners ondersteunen? Bitcoin-miners zetten de enorme rekenkracht van hun computers in voor het ‘ontdekken’ van nieuwe bitcoins. Om dat te kunnen  doen zijn ze verplicht om betalingsopdrachten te verifiëren. Zo fungeren ze als verwerkers van de Bitcoin betalingen en zijn dus essentieel voor een betrouwbaar systeem.
Het is mogelijk dat alle Bitcoin-miners overstappen naar de nieuwe versie, waardoor de oude variant niet meer functioneel is omdat er dan niemand meer is om de opdrachten te controleren. Maar de kans bestaat ook dat alleen maar een deel van de miners overstapt. Dan ontstaan er dus zelfs drie versies van de Bitcoin. Het is nog niet klaar met de Bitcoin ontwkkeling.

Hieronder nog het koersverloop van de “gewone” Bitcoin tegen de USD van de afgelopen maand:

Als u vragen heeft hoor ik het graag. Alles rond Bitcoins is flink ingewikkeld. Ik weet niet of ik meteen de antwoorden weet, maar ik ga er in ieder geval naar op zoek.

Erna Erkens

 

Erna Erkens

Owner at Erna Erkens Valuta Advies (EEVA)

 

Going cashless or not – will we have a cashless world?

|30-8-2017 | Olivier Werlingshoff | GTNews |

In their article ‘Going cashless or not: are Central Banks resigning facing private companies?‘ GTNews and author Nathan Evans depict an image of a cashless world and the decline of Central Banks. With online shopping sites or GAFA companies (Google, Amazon, Facebook, Apple) taking over with cashless payments because, as Nathan Evans writes, ‘the more cash disappears from our economies, the more money falls into their virtual pockets’  will we have a cashless world? We asked our expert Olivier Werlingshoff to give us his opinion about a possible disappearance of cash.


Alliance

According to Nathan Evans a surprising alliance is slowly coming together, in the global war on cash. Large internet-based companies and commercial banks are mixing interests with top-level governmental bodies to press for the disappearance of hard currency, and speed up the digital transition towards a cashless world. On the losing end of the intended shift, central banks which seem to be putting up feeble resistance. Private banks are fed up with the high costs and low profitability of managing cash and its expensive security services.The EU Commission discretely published its anti-cash measures on its website: “The establishment of a common cash control strategy upon entering or leaving the territory of the EU was a decisive step in the EU policy aimed at the strengthening of measures to prevent money laundering, terrorist financing and other illegal activities. One would have imagined that central banks and mints would be the first on the barricades to defend the national symbols bequeathed upon them , as they cease to exist if coins and banknotes dissappear.   But so far, they have been remarkably feeble in their resistance.

Our expert Olivier Werlingshoff has read the articel and comes back with the following remarks:
I don’t think cash payments will disappear soon. At this moment 60% of all payments in Europe are done with cash. A few positive aspects of cash are:

  • It is anonymous
  • Secure
  • A save haven
  • It is a direct transaction
  • And it helps budgeting

Two years ago I set up a test at a shop B2C to see what happened if during six weeks cash payments were not accepted. What happened was that the number of contactless payments increased but the total turnover of the shop decreased. After the test when cash was again accepted the turnover didn’t reached the level of before the test.

A few customers decided during the test to look for other shops where they could still pay with cash and decided after a few weeks not to come back.

For more information about this topic you can visit de website of G4S for the cash report: http://www.g4scashreport.com/

If you are interested to read the complete article at GTNews, please click on this link.

Olivier Werlingshoff - editor treasuryXL

 

Olivier Werlingshoff

Owner of Werfiad

 

 

 

 

More articles of this author:

How to improve cash awareness without targets

How to improve your working capital with trade finance instruments

 

 

Startup FinTech company Facturis and the traditional bank: How do they do it?

| 23-8-2017 | PowertoPay – Unified Post | Sponsored content |

Facturis, a partner of UnifiedPost, is an online platform that helps to optimize the financial situation of small and medium-sized enterprises in the Netherlands. The platform facilitates a more efficient flow of incoming and outgoing invoices, debtor management, retrieval of digital debit authorizations, dynamic discounting and dynamic working capital credit. In this interview, Nico Ten Wolde, CEO of Facturis, is telling more about developments in the financial technical (FinTech) world.

 

How did Facturis originate from the Rabobank?

Nico: “Rabobank started a strategic orientation in 2010 to increase its added value and uniqueness for its business customers. Rabobank wants to provide services within the customers’ business processes whenever and wherever they are needed. Where Rabobank has traditionally focused on offering products such as transactions, finance and insurance, she wanted to offer services to support the full order-to-cash flow process of her customers. This goes further than the execution of transactions and the provision of funding. By offering different services that work in synergy on one platform, the customer has lower operating costs and a lower need for external financing. In order to achieve this, Rabobank has established a partnership with UnifiedPost in the form of Facturis. UnifiedPost delivers the invoicing platform technology.”

What is the target group of Facturis? What do you do to connect the product to this target group?

Nico: “Facturis focuses on the business market, with the primary focus on small and medium-sized enterprises (SMEs). These types of organizations need to obtain services from many different parties in order to optimize the financial and administrative processes. Because they buy services from different parties, there is insufficient insight into and grip on the overall financial process. By integrally providing services from various partners on one platform, we give entrepreneurs more insight into their financial situation. That goes further than sending invoices – it’s about getting bills paid as quickly as possible.”

Fin Tech initiatives – what changes?

Everyone talks about the changing role of the banks, partly through the FinTech initiatives. What do you think are the things we already notice?

Nico: “What I see is that 10 years ago a bank was the only place you would consider for financial services, this is no longer always the case. Think of FinTech parties like Adyen, which offer a wide range of financial products from banks and other financial institutions on a platform. The customer no longer deals directly with a traditional bank. In addition, we see a strong growth of (crowd) funding platforms. The financing is no longer obtained through a bank. More recently, several blockchain initiatives and the oncoming implementation of PSD2 will create new opportunities for players outside the traditional banking world.”

Why do you think banks will increasingly work with FinTech companies? What is the benefit for the banks?

Nico: “On the one hand, banks often have to deal with complex legacy systems which limit the possibilities to quickly implement new solutions. On the other hand, banks have to deal with implementing and maintaining new rules and regulations with the current processes. This makes it almost impossible to quickly implement innovations. FinTech companies can quickly launch new concepts for specific target groups. Through cooperation with banks, the power of the existing brand and distribution channel is optimally utilized. A win-win situation for the customer, the FinTech company and a bank.”

What was the biggest success in Facturis?

Nico: “The launch of the pilot Invoice Credit. The Invoice Credit is a dynamic working capital credit that moves along in real-time with the (outgoing) invoice flow of a company. As a result, the entrepreneur does not always have to return to his bank to make an adjustment on his credit line. Due to the flexibility of InvoiceCredit, companies can streamline the flow of money, thus optimizing their working capital. InvoiceCredit fulfils the companies need for a credit that reflects fluctuations in the invoice flow and that grows along with the company.”

What is your biggest challenge within Facturis?

Nico: “Our biggest challenge is to maintain the speed you need as a FinTech to be successful and to be able to continue to innovate. Laws, regulations and legacy systems sometimes limit the speed to launch new services quickly within large corporate organizations. In cooperation with large organizations, such as banks, we face the challenge of balancing speed and adopting new banking services.”

How has such a creative thinking startup within the (traditional) bank been adopted so well?

Nico: “On the one hand, with a lot of missionary work within Rabobank in the form of presentations and writing many memo’s to convince the right stakeholders inside and outside the Rabobank. On the other hand, the arrival of Wiebe Draijer (Chairman of the Board of Rabobank) helped us greatly with the adoption of Facturis within the Rabobank. With the establishment of a FinTech & Innovation department, Rabobank made a clear choice for the adoption of FinTech companies in the future.”

What do you think is the most successful FinTech initiative in the market?

Name 1 launched and 1 that has not yet been launched.

Nico: “Launched: Kabbage: Kabbage is an American FinTech that can assess a consumer’s or SME’s financing request within a few minutes.

Not launched: Easytrade, an innovative currency hedging solution for hedging currency risks of (international) companies. Easytrade is a new FinTech initiative created by Rabobank Moonshot Program, an internal acceleration program aimed at realizing the advancing ideas of employees.”

What do you think are the most important FinTech developments in the near future?

Nico: “In the coming years, I see major changes in risk management. Through the application of AI and machine learning, we are able to better estimate risks and utilize opportunities with a much larger predictive ability. This has a positive impact on customers, we can deliver services exactly when the customer needs them. In addition, integrating blockchain initiatives and virtual currencies within the financial sector will take a huge run. With the implementation of PSD2, it is possible for FinTech companies to combine the old world and the new world. This allows for gradual adoption
of these new developments for customers.”

PowertoPay – Unified Post

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Saving on FX deals? Often neglected but potentially a “pot of gold”

| 21-8-2017 | Patrick Kunz |

 

Doing business internationally often means dealing with foreign currency (FX). This poses a risk as the exchange rate changes daily, basically every second. To mitigate this risk a company can hedge the position via FX deals (discussed in a previous article). But what are the costs of those deals to companies?

 

FX deals

FX is traded on exchanges where only authorized parties have access to. This can be brokers or banks, the so called market makers. They can take your fx position for a give rate and they try to find a counterparty for the deal who is willing to take the opposite trade. For this effort (and risk as they might not be able to directly match the position) they ask a provision. This is the bid-ask spread; the spread between rate for buying and rate for selling the currency. The fx (mid) rate is determined by supply and demand.

The spread depends on several things:

  • Market liquidity; how many people are buying and selling and with what volume
  • Market timing; is the market open for that currency
  • Restrictions: some currencies have restrictions

For a company to trade FX they need an account with a party that has access to fx market makers. This is often a bank. This bank will take another bite out of the spread for their profit (and maybe risk as they might take the position on their books). The spread the bank will charge depends on how many deals and how much volume you will be doing. Sometimes it is an obligation to trade with the bank from a financing arrangement. For the big currencies for big clients the spread can be as low as 2-3 pips (0,0002/0,0003).

Trading FX seems to be without costs as the bank charges no fees. However, those fees are put into the fx rate. When doing spot deals it is easy to calculate them, it’s the difference between the traded rate and the then actual market spot mid rate. When doing forward deals or trading illiquid currencies it is harder to determine the spread. Always try to get to know the spread you are paying. The spread is basically the costs of the fx deal (for forward deals there is an interest component).

It therefore makes sense to always compare your FX rates and get quotes from several banks. Trading with a broker sometimes can be cheaper as one party in the process is eliminated. Savings can be up to 5% per deal (for exotic currencies), for the bigger currencies an average saving of 1% is possible. If you do several million worth on FX deals a year this is a big money saver.

Pecunia Treasury & Finance b.v. has an online fx trading platform backed by one of the biggest worldwide fx broker.

Patrick Kunz

Treasury, Finance & Risk Consultant/ Owner Pecunia Treasury & Finance BV

 

 

PSD2 – Update and new developments

| 17-8-2017 | François de Witte |

Early 2017, I published a post about PSD2, a lot of opportunities, but also big challenges. Now half a year later, I would like to update you on some developments in this area. PSD2 still needs to be transposed in the national legal system of all the member countries, and according to my knowledge several countries, including Belgium, have not yet released the draft laws. This creates quite some uncertainty in the market, as there will be several country-specific specifications. Hence one can expect that Fintech’s and other TPPs might already have started their certification application in countries that already enacted PSD2 in their local legislation.

LIST OF ABBREVIATIONS USED IN THIS ARTICLE

2FA: Two-factor authentication
API:  Application Programming Interface.
EBA: European Banking Authority
PSP: Payment Service Provider
PSU: Payment Service User
RTS: Regulatory Technical Standards (final draft issued by the EBA on 23/2/2017)
SCA: Strong Customer Authentication
TPP: Third Party Provider

Main updates on the regulatory framework

On 23 February 2017, the EBA published the final draft on the SCA (Strong Customer Authentication) and Secure Communication.
In this final draft, the EBA clarifies the new rules to be followed for customer authentication, applicable both for operations performed in traditional channels and over the new API (Application Programming Interfaces) services. The key clarifications concern the following:

The 2 factor authentication

Following systems would comply:

1. The 2-device-authentication, where the user has two independent devices:

  • one device to access the banking website or app
  • another device to authenticate himself or a payment: the authentication device, usually a hardware authentication token, a combination of a smart card and smart card reader, or a dedicated app on a mobile device.
    The authentication device generates one-time passwords (OTPs) over transaction data

2. The 2 app authentication:

This approach does rely on two different apps running on the same mobile device.

  • Banking app : when a user wants to make a payment, he opens the banking app and enters the transaction data.
  • Authentication app: When the user has submitted the transaction, the banking app opens the authentication app. After verification and confirmation of the transaction data by the user, the authentication app generates an OTP (One Time Password) linked to the transaction data and sends it back to the banking app, which submits it to the banking server for verification

The dynamic linking

In order to dynamically link the transaction, the draft RTS states the following requirements must be met:

  • the payer must be made aware at all times of the amount of the transaction and of the payee;
  • the authentication code must be specific to the amount of the transaction and the payee;
  • the underlying technology must ensure the confidentiality, authenticity and integrity of: (a) the amount of the transaction and of the payee; and (b) information displayed to the payer through all phases of the authentication procedure (the EBA hasn’t specified the nature of this “information”);
  • the authentication code must change with any change to the amount or payee;
  • the channel, device, or mobile application through which the information linking the transaction to a specific amount and payee is displayed must be independent or segregated from the channel, device or mobile application used for initiating the electronic payment transaction.

The exemptions from the SCA

The exemptions from the SCA including also:

  • Transactions between two accounts of the same customer held at the same PSP
  • Low risk transactions: Transfers within the same PSP justified by a transaction risk analysis (taking into account detailed criteria to be defined in the RTS),
  • Low value payments or contactless payments < 50 euro, provided that that the cumulative amount of previous consecutive electronic payment transactions without SCA, since the last application, of the SCA < 150 euro
  • Unattended transport and parking terminals

The draft RTS (not finalized, not approved yet) also states that Screen scraping is no longer allowed. Screen scraping is a method to take over remotely the data on the screen of the user. This creates a lot of opposition in the financial community, in particular the Fintech’s, as this complicates the interaction between the bank, the TPP, and the PSU. On the other hand, the both the EBA and the EBF (European Banking Federation) are against it. There is a power game ongoing.

Main developments

Banks will have to implement interfaces, so they can interact with the AISPs and PISPs. This compliance with PSD2 is mandatory and all banks will have to make changes to their infrastructure deployments.

Although PSD2 does not specifically mention the API (Application Programming Interfaces), most technology and finance professionals assume that APIs will be the technological standard used to allow banks to comply with the regulation.

An API is a set of commands, routines, protocols and tools which can be used to develop interfacing programs. APIs define how different applications communicate with each other, making available certain data from a particular program in a way that enables other applications to use that data. Through an API, a TPP application can make a request with standardized input towards another application and get that second application to perform an operation and deliver a standardized output back to the first application. For example, approved third parties can access your payment account information if mandated by the user and initiate payment transfer directly.

In this framework, the challenge is to create standards for the APIs specifying the nomenclature, access protocols, authentication, etc.”. Banks will have to think about how their new API layers interact with their core banking systems and the data models that are implemented alongside this.

At this stage, following working groups were constituted to further elaborate on these standards:

  • UK’s Open Banking Working Group (OBWG). This initiative of UK Treasury aims to deliver a framework for open banking and data sharing via APIs for the UK’s banking industry. The joint industry/government initiative recently released its report on establishing the framework for an Open Banking Standard for the UK alongside a timetable for implementation.
  • The Berlin Group, a-European payments interoperability coalition of banks and payment processors, is pushing for a single standard for API access to bank accounts to comply with new regulations on freeing up customer data under PSD2. The aim is to offer operational rules and implementation guidelines with detailed data definitions, message modelling and information flows based on RESTful API methodology. It will be published for consultation in Q4 2017
  • STET has also released of a RESTFUL API standard which will allow TPPs to access payment accounts. This API has been built with the latest technology standards using REST, OAuth2, JSON and HTTP-signature. It relies on ISO 20022 elements for structuring the data to be exchanged between TPPs and ASPSPs

In the meantime, several providers are developing their services, including in the Benelux Equens Worldine, Capco, Sopra Banking and Isabel.

Along with the arrival of open API banking, there is also clear momentum for providing real-time services such as “instant payments”. This requires banks to shift their entire product and service mindset towards immediate delivery and to make fundamental changes to their legacy systems. While this is a challenge, it also presents opportunities (see also my article in TreasuryXL on this topic: SEPA Instant Payments – a catalyst for new developments in the payments market (https://www.treasuryxl.com/news-articles/francois-de-witte/sepa-instant-payments-catalyst-new-developments-payments-market and https://www.treasuryxl.com/news-articles/francois-de-witte/sepa-instant-payments-a-catalyst-for-new-developments-in-the-payments-market-part-ii/).

The large banks have already started working on being PSD2 compliant and on building for the opening of their banking architecture to the TPPs. However, several small or medium sized banks only started recently on this project. Hence a lot has to be done, and I do expect some shortages in resources in the next coming months.

With regard to the access to TPPs, article 113.4 of PSD2 explicitly states that the member states shall ensure the application of the security measures with the 18 months following the entry in force of the Hence, we might expect that this part of PSD2 needs only to be implemented by mid-2019. Given the strategic importance and the IT act, I recommend starting this exercise much earlier.

Conclusion

The PSD2 creates challenges. Several topics need to be clarified such as the RTS and the market players need also to agree on common standards for the interfaces.
However, there are initiatives, such as the Berlin Group, the UK’s Open Banking Framework and the STET group, which help give further clarity and direction in the absence of specific technical detail.
Consequently, there is no justifiable reason for any bank to delay starting these projects.
The clock is ticking in the PSD race.

If you want  further update on this topic, you can join the 1 day training session on this topic, which I will give on 22/11/2017 at Febelfin Academy.

 

François de Witte – Founder & Senior Consultant at FDW Consult

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Please read my earlier articles on PSD2:

PSD 2: A lot of opportunities but also big challenges (Part I)

PSD 2: A lot of opportunities but also big challenges (Part II)

Sepa instant payments – A catalyst for new developments in the payments market (Part I)

Sepa instant payments – A catalyst for new developments in the payments market (Part II)

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Industries are ready for blockchain take off

| 16-8-2017 | Carlo de Meijer |

An interesting study was released recently by Juniper Research. Given its findings this survey needs some more widely spread recognition and that’s the reason for this blog. Named “Which industries are the best fit for blockchain”, this study came to some interesting conclusions, that were broadly in line with my blog of early June (see: Blockchain technology by 2018: a breakthrough, June 3, 2017). Their findings may underline my statement that we are further in the Gartner Cycle and that 2018 may be the year of the real breakthrough for blockchain technology for a number of industries. But for whom? Let’s have a look.

The study and its main finding

The survey’s main finding is that almost 40% of all interviewed (almost 370 executives, managers and IT profs) including 56% of the largest companies were either “considering” or “were in the process of employing blockchain solutions”.

This indicates that a majority of companies nowadays have a much greater understanding of blockchain and distributed ledger technology. They are recognizing that blockchain has the ” potential to be deployed in a variety of use cases”. There is also increased awareness amongst industries to consider deployment to gain competitive advantage.

Other findings

This “dramatic” increase in awareness is shown by the outcome that more than 80% of the surveyed companies have ‘a little’ or ‘a good’ understanding of blockchain

“It is clear that companies across the board have a significantly greater understanding of blockchain technology than was the case 12 months ago,”Juniper report.

More than three quarter of the respondents believe that blockchain could be ‘very useful’ or ‘quite useful’ for their company.
The time of exploring what blockchain is and what corporates can do with it lies largely behind us. It is now more about what blockchain systems to choose and how to integrate it in their legacy systems. Or as the study stated “It’s now much more geared to competing protocols, or the vetting of use cases …”.

Companies anticipating integration of blockchain

The survey also shows that many corporates are actively considering blockchain deployments.

Amongst the largest companies even 54% are in the so-called Proof of Concept (PoC) stage, while a further 16% is already involved in blockchain trials.
And those who already are in the PoC stage, two-thirds expect blockchain will be integrated in their legacy systems by the end of 2018.
While 81% of the smaller companies surveyed expect integration to be completed by the end of 2018, almost 60% of the large companies surveyed say they will reach that stage at that date.

Corporates and disruption

Despite the dramatic increase in blockchain awareness and identified benefits over the past 18 months, however, it is “critically important that companies consider all alternative options before deciding whether or not to deploy blockchain” according to the report.
Juniper mentioned that companies should consider whether blockchain is the necessary solution to their needs, as some companies under-estimate the challenges of deployment. They should seek “systemic change, rather than technological” innovation.

That “might be a better and cheaper solution than blockchain, which could potentially cause significant internal and external disruption.” Juniper report.

One main concern for the surveyed companies is in what way, who and where blockchain might disrupt not only their legacy systems but also their relationships with their clients. This is in part due to their fears around interoperability. Customers’ systems may no longer integrate with (or be compatible with) their upgraded systems.

The survey further shows that:

  • 35% of all corporates surveyed are considering or actually deploying blockchain and feel it will cause ‘significant’ disruption (in general)
  • And more than half of these corporates considering or actively deploying blockchain feel it will cause ‘significant’ disruption to their partners/customers
  • 42% of them were concerned that the reluctance or refusal of their clients or partners to deploy blockchain might cause them difficulties , compared with a quarter of all companies surveyed.

“Companies may have underestimated the scale of the blockchain challenge. For issues such as interoperability, the proportion of survey respondents expressing concerns progressively increased as companies proceed towards full deployment, while concerns also rose sharply regarding client refusal to embrace blockchain”. Juniper research

Who are the industries with largest blockchain opportunities?

This is a very interesting part of the survey. Jupiner Research conducted a comparative assessment of blockchain’ potential’s across 9 key industry areas. Main conclusion is that “in most cases, the more a vertical (industry) is suited to blockchain deployment, the greater the degree of implementation challenges”.

“Essentially, blockchain offers particular benefits to improve efficiency and corporate transparency; if an enterprise is heavily dependent upon paper-based storage and has high volumes of transactions or transmitted information, it can be especially effective.”  says Windsor Holden, blockchain specialist at Juniper

Deployments in verticals such as Utilities and Content Publishing do not pose the scale and variety of challenges involved in Financial Settlement, according to the survey. They however “will not achieve the extent of gains, cost savings, efficiencies and risk reduction as is possible in the financial settlement industry”, according to the Juniper Research survey.

And what industries are (already) fit for blockchain

According to the survey, when challenges are measured against the scale of the opportunity, industries like Automotive, Financial Settlement and Land Registry emerge as particularly interesting prospects for blockchain application. This compared to other segments such as Utilities, Telcos a.o.

This is not that strange as next to the relative successes achieved in blockchain integration especially in the financial sector thus far, blockchain may bring more benefits as it will be a real problem solver for these industries challenges. While the inherent characteristics of these sectors make them more suitable for blockchain technology.

What else is needed?

But that is not the whole storey. Corporates are not isolated entities. To be successful corporates should raise the awareness of blockchain’s capabilities at their customers. And before integrating blockchain in their own systems they should get a greater understanding of the scale of potential hurdles.

 

Carlo de Meijer

Economist and researcher