Payments, Banking & FinTech Roundup: January 2022

January has seen new research shared, system and regulatory upgrades, and great progress in speeding up real-time payments.

And of course it wouldn’t be the start of a new year without some industry predictions. Banking Circle asked a selection of payments and banking experts about their expectations for 2022, from sustainability to post-pandemic transformation, which you can read here.

We’re also pleased to announce that our UK Head of Compliance and MRLO, Mitch Trehan, has joined The Payments Association’s Advisory Board to help drive change and innovation in the payments industry.

Here are some other important stories from the industry you may have missed in January:

New plans for Denmark’s financial sector approved

P27 Nordic Payments is set to become the new national clearing house, replacing Finance Denmark, to make it easier for individuals and businesses in the country to pay bills and send real-time payments to other Nordic countries.

Denmark’s financial sector will secure robust and stable systems enabling Danish krone transactions between participating banks to be cleared at any time and settled at the central bank, Danmarks Nationalbank.

Denmark’s banking sector is investing hundreds of millions of krone in the continued modernisation of these systems, and once the new payments infrastructure has been put into operation, there will be new opportunities to develop innovative solutions for the benefit of consumers.

There are also plans to bring the country up to date with the latest payments standards, a crucial step in enabling payments solutions across the Nordic region and potentially also in the rest of Europe.

European Banking Authority launches AML database

The European Banking Authority (EBA) has launched a central database for Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF), which it says will act as an “early warning tool” that will help authorities to act before risks crystallise.

The EBA said that ‘EuReCA’ will contain information on material weaknesses in individual financial institutions in the EU that have been identified by competent authorities, and that the latter will also be reporting the measures they have imposed on financial institutions.

It went on to say that it will use information from EuReCA to inform its view of AML and CTF risks affecting the EU financial sector, and will share information from EuReCA with competent authorities.

EBA publishes new Discussion Paper on selected payment fraud data

The EBA has also published a Discussion Paper on its preliminary observations on selected fraud data under the Payments Services Directive.

The regulatory agency has analysed payment fraud data reported by the industry and subsequently aggregated by national authorities for both 2019 and 2020, and this Paper delivers an overview of the preliminary patterns observed across a variety of different payment instruments. The Paper reveals there are some inconclusive patterns which require additional analysis.

In order to better interpret fraud data that will be reported in future years, the EBA is inviting stakeholders to respond to questions included in its Discussion Paper.

Read more about that here.

Survey of London banks highlights frustrations with ageing IT

A survey of over 250 senior bankers revealed that unclear regulations and legacy technology are holding banks back, resulting in them losing out to FinTechs.

The research, carried out by Censuswide for tech firm Yabota, showed some of the most common issues being a clash between old systems and new ones, and frequent IT crashes. Half of those surveyed (50%) believe their organisation has an overreliance on legacy tech, while 40% feel they are falling behind competitors on innovation. 55% felt that a lack of formal guidance from regulators is also hampering them.

It comes as new data from the FCA reveals that 8% of personal current accounts are now held with a digital challenger bank, up from just 1% in 2018.

Update to ISO 20022 timeline

The Bank of England has issued an updated approach for the delivery of the revised RTGS service.

Payments data in the UK is changing, with the industry moving to ISO 20022, the emerging global standard for payments messaging. This standard creates “a common language for payments data across the globe.”

The changes also include a migration of CHAPS, the sterling high value payment system, which will move over to ISO 20022 messaging in April 2023.

The update is designed to deliver substantial long-term benefits for the economy, due to better data in payments.

Read more about the change here, and on the BoE’s ISO 20022 Technical Resources page, for an overview of the current and final approach to ISO 20022 migration.

European Payments Council launches consultation to expand EU direct payments

The non profit organisation is launching a consultation to extend the scope of Single Euro Payments Area (SEPA) payments beyond the Euro area.

A SEPA payment scheme enables funds (from a credit transfer) to be available in the recipient’s account within 10 seconds, however, not all payments are harmonised in SEPA.

The proposed arrangement would allow international Euro transfer payments between a payment account held at a PSP established in and/or licensed to operate in a country or territory included in the SEPA geographical scope, which currently includes the 27 European members, three countries from the EEA, and six non-EEA countries.

Find out more about that here.

STEP2 upgrade imminent

From November 2022, Step2 will be upgraded to process SEPA transactions around the clock, seven days a week, as well as provide settlements to participating banks within minutes.

The planned improvements to the pan-European mass payment system will allow STEP2 participants to shorten end-to-end processing timelines for retail payments in Euro from hours to minutes to benefit both European businesses and consumers.

STEP2 currently processes an average of 55 million SEPA credit transfers and direct debits a day, with the system connecting more than 4,800 payment service providers operating in Europe.

FCA publishes approach for TPR firms that fail to meet its expectations

The Temporary Permissions Regime is designed for companies who wish to operate in the UK in the long term, and are getting ready for full UK authorisation, to help them meet the required standards.

The regulatory body has now outlined the actions it may take for TPR firms that don’t meet its expectations.

Actions taken (including contacting a firm’s home state regulator and publishing a notice in the UK), could be prompted by four scenarios:

  • Missing their landing slot
  • Failing to respond to mandatory information requests
  • Not intending to apply for full authorisation
  • Firms whose authorisation application is refused

The FCA has also shared more detail on different types of action it may take:

  • Taking steps to remove the firm from the TPR
  • Asking the firm to confirm that they have voluntarily stopped undertaking new business (ie onboarding new customers)
  • Directing a FSMA firm to apply in a landing slot sooner than the existing landing slot
  • For payments and e-money firms, requesting the firm to specify a date when they will cease to engage in new business

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