Payments, Banking & FinTech Roundup: January 2021

A month into 2021, and partnerships are already emerging as a strong theme underpinning the future of the industry.

In Banking Circle’s latest webinar for Finextra, our Chief Growth Officer, Søren Skov Mogensen was joined by a panel of speakers to discuss a range of topics, including how banks can determine what should be built in-house versus where to outsource to partners. Watch the webinar on-demand here.

Our CEO, Anders la Cour also shared his thoughts on the vital role of digital financial infrastructure in rebuilding international banking as we enter uncertain and unpredictable times, in an article for The Paypers.

And finally, this month we were pleased to announce our partnership with global provider of local payments infrastructure, PPRO. Banking Circle is working with PPRO, who recently achieved Unicorn status, to enhance their service offering, supporting PSPs working with cross border e-commerce merchants. It’s a partnership which emphasises the effectiveness of Banking Circle as a next-generation provider of mission-critical infrastructure for online cross border payments.

Here are other important stories from the industry you may have missed this month:

Open Banking celebrates third anniversary

January 2018 saw Open Banking become a regulatory requirement, in a bid to increase competition and choice for consumers and small businesses. Three years on, the UK’s Open Banking Implementation Entity (OBIE), the body tasked with designing the technology, has revealed some figures on its growth:

  • More than 2.5 million UK consumers and businesses now use Open Banking to make payments, access their credit and manage their finances
  • 300 FinTechs and innovative providers have joined the ecosystem since it was built
  • Hundreds of thousands of UK consumers and businesses continue to become new active Open Banking users each month

With Open Banking implementation now entering its final stages, the past year has focused primarily on improving functionality and usability to help customers get as much from the technology as possible.

New UK requirements on cross border payments come into play

The Cross-Border Payments Regulation (CBPR) which sets out the principle of equality of charges for intra-EU cross border euro payments and corresponding national payments within an EU member state, has been amended.

As of January 1st 2021, CBPR has been “onshored” into UK law following the end of the Brexit transition period.

Find out more about the upcoming changes here.

Mastercard increases interchange fees for UK online purchases from the EU

Following Britain’s withdrawal from the EU, Mastercard is imposing a five-fold increase on credit card interchange fees, effectively ending the 0.3% cap imposed by the European Commission pre-Brexit.

From October 15th, these fees will increase to 1.5%, as payments between the UK and the European Economic Area are now classed as “inter-regional”. Debit card payment fees will also go up from 0.2% to 1.15%.

Whilst there have been calls for regulators to step in, amid claims of opportunism, it could also see a boost in alternative payment methods being offered to consumers by online merchants who want to avoid card scheme interchange fees.

FCA to regulate Buy Now, Pay Later companies

After the UK government initially voted down a bill to regulate Buy Now, Pay Later companies, following a review, the Financial Conduct Authority (FCA) will now be instructed to regulate the industry. The calls for regulation have also been welcomed by some BNPL companies themselves.

The increasingly popular payment option has been described by money expert Martin Lewis as “absolutely the fastest growing form of credit in the country.” Online merchants who have offered BNPL as payment options have seen a boost in revenue as baskets are likely to be higher when the cost can be spread over several months.

Further consultations with the BNPL industry are now underway.

Current cryptocurrencies are unlikely to last according to BoE governor

Speaking at an online forum organised by the World Economic Forum, Governor of the Bank of England, Andrew Bailey, claimed there is no existing cryptocurrency with a structure that is likely to allow it to work as a long-term means of payment.

Whilst both the UK and EU have investigated digital currencies, Bailey downplayed the idea of this being a viable option, stating: “Have we landed on what I would call the design, governance and arrangements for what I might call a lasting digital currency? No, I don’t think we’re there yet, honestly. I don’t think cryptocurrencies as originally formulated are it.”

Currently, the best known cryptocurrency is Bitcoin, which has seen great volatility, particularly in the past month, hitting a record high of $42,000 on January 8th, before sinking as low as $28,800 last week.
Both the BoE and the European Central Bank are looking into the option of issuing their own digital currency, under the logic that it would help to avoid this volatility.

Read more here.

FinTechs raise over $2 Billion in mega rounds in January

At least 13 mega rounds have seen FinTech fundraising reach an impressive total this month. These secured a combined $2,746 of funding, a figure which excludes funding rounds below $100 million, although it should be noted there were many others who raised substantial amounts in their Series A and Series B funding rounds.

The list of mega rounds that took place in January are as follows:

  • $450 million
  • Grab Financial: $300 million
  • Blend: $300 million
  • MX Technologies: $300 million
  • PPRO: $180 million
  • GCash: $175 million
  • Divvy: $165 million
  • Mambu: €110 million
  • Melio: $110 million
  • SimpleNexus: $108 million
  • MoMo operator M_Service: $100 million

Bank of England supplies ONS with card transaction data

For the first time, the Office for National Statistics (ONS) will begin publishing credit and debit card transaction data from the BoE to provide insights on consumer spending over the past year.

This data tracks the daily CHAPS (Clearing House Automated Payment System) payments made by credit and debit card payment processors to approximately 100 major UK retailers.

This data will be aggregated, anonymised and split into four consumption categories; staples (such as food, drink and utilities); delayables (e.g. clothing and household goods), work-related (transport and fuel); and social.

The data is set to be published weekly as part of the ONS’ Faster indicators series which shares experimental data on the impact of COVID-19.

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