Payments, Banking & FinTech Roundup: July 2021

It’s been another busy month in the industry. Not only have we celebrated London FinTech Week; we have also seen record investment in the UK FinTech sector, with $5.7 billion of venture capital invested across 317 deals so far this year.

Meanwhile, here at Banking Circle our Chief Information Officer, Michel André, shared his thoughts on how collaboration is helping banks overcome the barriers created by legacy technology, in this interview for financial IT.

Earlier in the month, our Co-Head of Institutional Banking, Jon Levine, explained how more needs to be done to make cross border payments work for corporates, in an article for Finextra.

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

Bank of England raises concerns over Big Tech cloud providers

In its bi-annual Financial Stability Report, the BoE has warned about the financial stability risks that may result from the growing concentration of power of global cloud providers such as Google, Amazon and Microsoft.

With concerns of over-reliance on a smaller number of cloud service providers (CSPs), the BoE has singled out the ‘secretive’ practices of these CSPs and called for additional policy measures.

In a recent press conference, Governor Andrew Bailey also highlighted fears that the problem may worsen as banks move critical infrastructure to the cloud, as Big Tech companies have too much influence over the future stability of the financial system. He has advised that “greater direct regulatory oversight” is needed.

Read more about that here.

Implementation of ISO 20022 messages announced

The Market Infrastructure Board has made the decision to move forward with fully-fledged ISO 20022 message implementation in the T2-T2S consolidation project, instead of pursuing the ‘like-for-like’ alternative which was also under consideration.

It comes as SWIFT (Society for Worldwide Interbank Financial Telecommunications) confirms that an in-flow translation solution will be available which will allow the conversion of ISO 20022 messages to multi-format MT/MX messages for correspondent banks until they have migrated to the ISO 20022 message standard.

ISO 20022 offers a standardised approach to messaging formats in cross border payments. The global adoption of the ISO 20022 standard will have a substantial impact on the way payments are made and the transfer of financial information. To continue to push this forward, Pay.UK has published its first set of technical materials for organisations implementing ISO 20022 and moving to the Next Generation Standard for UK retail payments.

Record investment for UK FinTech in H1 2021

UK FinTech investment closed the first six months of 2021 on a high, with $5.7 billion of venture capital invested across 317 deals – a third higher than the total investment secured across the whole of last year and topping what was previously the highest full-year amount of $4.6 billion in 2019.

UK FinTechs are thriving, with investors confident in the growth and anticipated returns in the sector, and the country ranks second only to the US, with Brazil, Germany and India following.

In the first half of 2021, 13 UK FinTechs closed mega deals, again surpassing previous records set in 2019, when 10 firms secured mega deals.

European Commission presents new AML legislative proposals

The European Commission has shared new legislative proposals to strengthen the EU’s Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) rules.

The proposals focus on creating a brand new EU authority to combat money laundering. The aim is to improve the detection of suspicious transactions and activities, as well as close the loopholes that criminals take advantage of to launder illicit proceeds or finance terrorist activities through the financial system.

View the proposals here.

Eurosystem launches digital euro project

Eurosystem, the governing council of the European Central Bank (ECB) has now launched the investigation phase of a digital euro project thanks to the “encouraging results” of previous analysis and experiments.

The project will kick off with a two year long investigation phase, designed to address key issues around design and distribution, as well as how to avoid any undesirable impact on financial stability and monetary policy. Eurosystem has reiterated that a digital euro would complement cash rather than replace it.

It will work with the European Parliament and other European decision-makers on the project, as well as citizens, merchants, and the payments industry.

Find out more about the plans here.

Payment Systems Regulator publishes quarterly update

The Payment Systems Regulator (PSR) has used its Summer 2021 update to share developments on its work to tackle Authorised Push Payment (APP) scams and the implementation of the second phase of Confirmation of Payee.

Also covered is a review of the PSR’s work with the FCA on access to cash, including actions to support the government as it consults on legislative proposals this summer. Information on its Competition Act investigation is included too. Download the report here.

Similarly, the FCA has published an updated assessment of the UK’s cash infrastructure and wider banking services, alongside its commissioned consumer research exploring the needs and preferences of those who identify themselves as being reliant on cash. It highlights the reality that despite a huge shift to digitalisation, access to cash and banking services remain vital for many consumers and businesses.

MiFID II fines more than quadrupled during 2020

The European Securities and Markets Authority (ESMA) has published its third report into the use of sanctions by National Competent Authorities (NCAs) under the Markets in Financial Instruments Directive (MiFID II), finding an increase in 2020 compared to both 2019 and 2018.

This increase is seen in both the number of fines, and the amount fined. NCAs imposed a total of 613 sanctions and measures last year, with an aggregated value of approximately €8.4 million. This is compared to 371 sanctions and measures and around €1.8 million in 2019.

However, it’s important to consider that there are some differences in the way sanctions and measures are distinguished and identified. More details on this are included within the report itself.

The ESMA will continue to proceed issuing reports on sanctions on an annual basis for future reporting periods.