Payments, Banking & FinTech Roundup: October 2021

Encouraging growth figures have dominated the headlines this month, especially for the UK FinTech scene. There has also been positive progress in anti-fraud efforts, as well regulatory updates.

Banking Circle Group CEO, Anders la Cour, was joined by a panel of experts to discuss the rise of BaaS solutions in our webinar with Finextra: ‘Embedded finance – friend or foe for the financial services sector?’. Watch it on demand here.

In the latest Knowledge Circle webinar, our co-head of institutional banking, Jon Levine was joined by industry specialists for a Sibos special episode to discuss who will plug the service gap as large banks de-risk. Watch it here.

Jon also took part in a webinar hosted by The Banking Scene, alongside speakers from PayBelgium and BNP Paribas, to explore how bank and FinTech partnerships can deliver better payment solutions.

Finally, Banking Circle’s CIO, Michel André gave his thoughts on what the future holds for collaboration between key players in the financial services industry in the FinTech Finance Show. Watch it here.

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

European FinTech funding hit €15 billion in H1 2021

According to a Finch Capital report, European FinTech funding hit €15 billion in the first half of this year, up from €5 billion the year before, following a pandemic lull.

B2B businesses accounted for 65% of this, although unicorns like Klarna and Rapyd are currently dominating this growth.

Despite the trend, the report does warn that funding could stall in 2022, due to rising interest rates, increased regulatory scrutiny, a slowdown in public and IPO marketing, and battles for the best talent causing costs to increase.

Strong growth for FinTech companies in the UK

UK FinTech businesses attracted $5.7 billion worth of venture capital investments through 317 deals in the first half of the year. The momentum of growth here is far outpacing the rest of the world, enabling UK FinTech companies to make huge investments and profits.

This is largely due to soaring consumer demand. Increasing numbers of FinTech companies mean that UK consumers naturally have access to better products and services, with more options available when it comes to payment methods.     

It’s great news for the industry and clearly there are plenty of opportunities for growth, with trust in technology improving. But it also means UK FinTechs face increasing competition, and the need to provide the best service and security to stay ahead.

Read more on that here.

UK’s Banking Protocol prevents $44M in scam attempts in H1 2021

Digital commerce is projected to grow more than 40% over the next four years, but with this increase in payments volume comes an increased risk of fraud. Online transactions are an entry point for cybercriminals to carry out illegal activities such as phishing or advanced AI-aided schemes in an attempt to breach accounts. 

A recent PYMNTS report on authenticated payments revealed that losses from payment fraud are estimated to exceed $200 billion by 2025. 

In the UK, between January and June this year scam attempts to a value of £32 million were prevented through the help of a rapid scam response scheme, the Banking Protocol. And a group initiative between UK Finance, National Trading Standards and local police department focused on training banking staff to detect potentially fraudulent activities. 

The Banking Protocol was invoked 4,782 times in the first half of this year, with 90 suspected cyber criminals arrested, according to UK Finance.

New guidance on hybrid working issued by the FCA 

As firms increasingly move towards remote and hybrid working models, the Financial Conduct Authority (FCA) has set out new expectations so that companies can plan and continue to meet regulatory responsibilities.

Part of the guidance involves making sure that a lack of a centralised location doesn’t lead to issues such as, but not limited to, causing detriment to consumers, damage to the integrity of the market, increasing the risk of financial crime, or reducing competition.

Firms considering remote or hybrid working will be evaluated by the FCA on a case-by-case basis. These expectations apply to existing firms as well as firms applying to be regulated, and firms proposing to submit further applications.

Find more details on the new guidance here:

BNPL regulation is welcomed 

HM Treasury has launched its long-awaited consultation on the regulation of Buy Now, Pay Later (BNPL), following the publication of the Woolard Review, which exposed some of the potential consumer risks of BNPL.

The BNPL market has been the subject of scrutiny and criticism, with figures suggesting that young people in particular who use the service, have amounted significant debts when they haven’t been able to afford repayments.

Plans for regulation are being seen as positive by many in the market, with Sebastian Siemiatkowski, co-founder and Chief Executive of BNPL service Klarna, describing the move as a “welcome step forward.”

The consultation closes on 6 January 2022. 

Capgemini publishes World Payments Report 2021

The new report predicts that by 2025, instant payments and e-money payments will make up over a quarter of global non-cash transactions, increasing from 14.5% in 2020.

The study also found that almost 45% of consumers frequently use mobile wallets to make payments, up from 23% in the 2020 poll. In addition, global B2B non-cash transactions are estimated to reach almost 200 billion transactions by 2025, up from 121.5 billion in 2020.

Capgemini stresses that as the use of alternative payments accelerates, banks must urgently embrace the next generation of payments to stay in the race. 

Download the report, and read our highlights here.

FSB publishes targets for enhancing cross border payments and progress

A progress report has been published by the Financial Stability Board on the first year of the G20 ‘Roadmap for Enhancing Cross-Border Payments’, bringing together in one place the work under the wide-ranging, but interconnected, set of initiatives.

It has also published specific quantitative global targets for addressing the challenges of cost, speed, transparency and access faced by cross border payments, something which was a key early action under its Roadmap.

An implementation approach for monitoring progress toward the targets will be developed in 2022.

Read more about that here.

2021 McKinsey Global Payments Report published

The 2020 report detailed the first decline in global payments revenues in 11 years, however this year’s report paints a more positive picture.

While payments revenue did decline globally (to $1.9 trillion), the drop was less than anticipated. Furthermore, McKinsey predicts global payments revenue to hit approximately $2.5 trillion by 2025.

While it projects that the global payments sector is poised for a quick return to healthy growth, it warns the benefits will not be evenly distributed to all participants.

Learn more on that here