Payments, Banking & FinTech roundup: Summer 2022

The past couple of months has seen a number of big updates in the industry, not least of which, is the arrival of the UK’s Financial Services and Markets Bill.  Here are some of the key stories from the industry you may have missed over the past couple of months:

There have also been several big announcements at Banking Circle this summer. In a key step towards democratising global finance, we’ve added USDC stablecoins to our payment rails for payment acceptance. You can read more about that news, as well as how Banks can get on the crypto bandwagon safely, in this article for Coindesk.

We also launched a whitepaper on how Banks should approach CBDCs & stablecoins as crypto evolves. Download that here.

In a recent Finextra webinar, our Chief Growth Officer, Søren Mogensen, joined industry experts to explore how the rebundling trend is evolving and what financial institutions can do to meet new customer expectations. Read the wrap-up here or download our whitepaper on Rebundling: The Next Stage of the Fintech Evolution here.

Our Global Head of AML, Livia Benisty, discussed the benefits of investing in conversational AI in this article for Raconteur. Livia also took part in a podcast discussion for The Payments Association on the risks of cross-border payments, exploring how to achieve more efficient and commercially viable compliance processes.

In an interview for The Paypers, Jakob Pethick, CCO at YouLend, a Banking Circle Group company, looked at the future of financing and how SMEs can capitalise on new lending opportunities.

And finally, we launched The Knowledge Circle Podcast, bringing together a host of experts from across the payments and banking sectors to provide insights, updates, and opinions on the evolution of payments, accounts and FX.

Payments made in 2021 top £40 bn according to new UK Finance report

The trade association, UK Finance, published key statistics on payments in the UK last year, along with forecasts to 2031, including data on all of the UK payment clearings, cash machines, card payments and other key trends in the UK’s payment markets.

Here are some key findings from the research:

  • Payments made in 2021 reached £40.4 bn, a return to pre-pandemic levels
  • The value of CHAPS payments reached £86.3 trillion in 2021
  • Faster Payments and other remote banking totalled just over 3.6 billion in 2021, which is an increase of 23% 2020 to 2021
  • This is projected to grow to 5.7 billion payments by 2030
  • Faster Payments overtook Bacs Direct Credit as the payment method most frequently used by businesses to make payments
  • Almost one third of all payments in the UK were made via contactless methods in 2021, up 36% from 2020

Open consultation launched on Payments Regulation and the Systemic Perimeter

In its response to the ‘Payments Landscape Review’ in October 2021, the UK government committed to consulting on bringing systemically important entities operating within payment chains into Bank of England regulation.

A consultation and call for evidence on the government’s approach to reforms to the payments regulatory landscape, has now been announced, including the systemic payments perimeter of the Bank of England.

The consultation closes on 11 October 2022. Read more about the scope of the consultation here.

The arrival of the Financial Services and Markets Bill

First announced in the Queen’s Speech on May 11, the Financial Services and Markets Bill was finally revealed in July.

The 330 page bill is designed to ensure the UK remains a strong financial hub following its exit from the EU.

The bill covers several key topics, including the following:

  • Implementing the outcomes of the future regulatory framework review
  • Harnessing the opportunities of innovative technologies in financial services
  • Bolstering the competitiveness of UK markets and promoting the effective use of capital
  • Supporting the levelling up agenda, promoting financial inclusion, and consumer protection

Read more about what the bill means here.

ECB encourages use of CBDCs for cross-border payments

The European Central Bank (ECB) has described CBDCs as the “holy grail” of cross-border payments, and believes they are the answer to providing cheaper, universal and more secure instant payment solutions than current solutions such as bitcoin or stablecoins.

When exploring the reasons for a lack of progress in this area, the ECB puts this down to two main factors – regulatory issues, and back-end technology.

In order for CBDCs to be successful in improving cross-border payments, the ECB claims “CBDC design must consider cross-border functionality at an early stage and international cooperation and coordination are prerequisites.”

Read more about that here.

UK Parliamentary group starts crypto inquiry

Another key announcement in the Financial Services and Markets Bill was the news that stablecoins are set to be regulated in the UK. Any issuer of stablecoins used for payments must seek a licence from the Financial Conduct Authority (FCA) going forward.

In light of this, the crypto and digital assets All Party Parliamentary Group (APPG), started a crypto inquiry to compile a report with policy recommendations, which it will share with the government.

The group, which was founded in 2021 and comprises members from both houses of Parliament, is asking industry experts, regulators and the government to offer their opinions on a variety of areas such as consumer protection and CBDCs.

Find out more here.

A new consortium for testing CBDCs launched

Following the news of stablecoin regulation being included in the UK’s new Financial Services Bill, a new consortium, The Digital FMI Consortium, will carry out tests on digital sterling payment rails, as requested by the British Government.

The Digital FMI Consortium has been formed in accordance with the UK’s new legislation on blockchain and FinTech and includes names like IBM, Finastra and Trust Payments.

The project launches this autumn tasked with the aim of analysing the current digital currency use cases and providing a conclusion to Parliament.

Read more on that here.

New discussion paper on critical third parties to the UK financial sector

A discussion paper from the Bank of England (BofE), Financial Conduct Authority (FCA), and Prudential Regulation Authority (PRA) proposes new standards for monitoring services provided by critical third parties (CTP) to strengthen operational resilience in the UK.

The paper outlines ways in which the supervisory authorities could use their proposed powers in the FSM Bill to assess and strengthen the resilience of services provided by CTPs to firms and FMIs, thereby reducing the risk of systemic disruption.

The potential measures set out in the discussion paper are made up of three main building blocks:

  1. A framework for the supervisory authorities to identify potential CTPs and recommend them for formal designation to HM Treasury
  2. Minimum resilience standards for designated CTPs in respect of material services they provide to firms and FMIs
  3. A range of tools for testing the resilience of material services that CTPs provide to firms and FMIs

View the paper here.

FCA warns against promoting unapproved BNPL products

The Financial Conduct Authority (FCA) has issued a warning to firms against unlawful BNPL promotion, stating that they may face criminal charges if they do not have an FCA-authorised firm approve their promotions, or if their advertising does not comply with the FCA guidelines (unless an exemption applies).

The financial watchdog is attempting to protect consumers from misleading BNPL promotions online, especially those on social media, during a cost of living crisis.

Executive Director of Consumers and Competition at the FCA, Sheldon Mills said:  “Firms need to ensure consumers, particularly those in vulnerable circumstances, are equipped with the right information at the right time, so they can make effective, timely and properly informed decisions. It is vital that adverts are clear, fair and not misleading.”

So far in 2022, the FCA has brought action against 4,226 BNPL firms.

New FSB report sets out performance indicators for cross-border payments progress

The Financial Stability Board (FSB) has published preliminary recommendations about KPIs that could be used to monitor progress towards the G20 goal of improving cross-border payments. It also outlined ideas of potential sources of data to measure them.

The FSB believes that for the wholesale segment, private-sector network providers offer the most promising data sources for monitoring speed and access, while the use of surveys and proxies are being assessed for monitoring progress towards meeting the transparency target.

When it comes to the retail payments segment, the board suggests differentiated KPIs for the various use-cases. The report highlights that the sheer variety of end-users and payment service providers makes collecting comprehensive data unrealistic, and as an alternative, is exploring the option of collecting representative samples instead.

For the remittances segment, the FSB wishes to make use of the “multiple high-quality databases” available, most notably the World Bank’s Remittance Prices Worldwide database and Global Findex database.

Read more about that here.

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