Your Breaking Payments exclusive series is almost here and we can’t wait to show you all the different nuances and incredible projects behind this initiative. Fintech has deconstructed the payments industry and is re-building it seamlessly as an
embedded experience for the client. This is the moment to showcase exactly the vision for the future of payments – featuring Payoneer, Plaid, PPRO, and Thunes!
The Breaking Banks Europe Team
May is over and this means that’s time for News From The FinTech Front, our format that recaps the top fintech stories selected every month by the team of FTS group
Let’s see some of the top news from the last weeks
Klarna lays off 10% of its staff
Klarna, the buy-now, pay-later startup, plans to lay off around 10% of its global workforce, making it the latest large digital company to announce employment cuts.
Klarna’s CEO and co-founder, Sebastian Siemiatkowski, made the announcement to his workers in a pre-recorded video message on Monday. The changes will not affect the “great majority” of Klarna staff, he said, but others will be notified that they will be laid off.
“When we set our business plans for 2022 in the autumn of last year, it was a very different world than the one we are in today,” Siemiatkowski said.
“Since then, we have seen a tragic and unnecessary war in Ukraine unfold, a shift in consumer sentiment, a steep increase in inflation, a highly volatile stock market and a likely recession.”
Bolt, the paytech startup, to layoff one third of its staff
Bolt, a check-out payments business, has become the latest fintech unicorn to succumb to the raging tech stock market, announcing intentions to lay off a third of its employees, or 250 people.
The layoffs came only a few months after Bolt secured $355 million at a $11 billion value.
Mondu raises $43M confirming growth of B2B BNPL
Mondu, a Berlin-based B2B purchase now, pay later firm, has raised $43 million in a Series A round led by Valar Ventures, and plans to grow across Europe.
Mondu’s Series A funding has been sustained by previous investors Cherry Ventures, FinTech Collective, and digital entrepreneurs and senior executives from Klarna, Zalando, and SumUp. The firm has raised $57 million to date.
Mondu’s BNPL solution now provides for customizable payment arrangements through direct integration into online businesses’ checkout processes. Mondu supervises the processing of payments as well as associated services if a business client chooses to utilize one of the payment options available.
Last month, the company announced a Banking-as-a-Service partnership with Raisin Bank, which would provide a new option for future installment payments, as well as the ability to specify delayed payment dates via the merchant checkout.
JPMorgan makes further steps in the Metaverse
JPMorgan has created a metaverse library to house its annual Summer Reading List.
The list’s first trip into the metaverse will be in the Onyx by JPMorgan nightclub in Decentraland in 2022, which has been a summer ritual for more than two decades.
Visitors may visit a curated virtual library display on the lounge’s first level, which was produced in collaboration with metaverse real estate developer Everyrealm, for a limited time.
Visitors may make an avatar, learn about the books, and watch exclusive interviews with chosen authors, all while a scholarly owl sits nearby, ready to congratulate them on properly answering trivia questions about the novels.
Breaking Payments is back, today going deep on Open Banking evolution and the role that crypto will play in this development of the financial sector.
This article is based on the episode BBE 129, hosted by Ajit Triparthi with two exceptional guests: Liam Gray (Growth Account Manager at Plaid) and Elena Alicea (Head of Product EU/UK at Gemini)
The discussants proceeded discussing about cryptos also thanks to the last Gemini’s report about cryptos’ adoption
According to the report, the crypto industry hit numerous milestones in 2021. Bitcoin reached all-time highs at over $65,000 USD, and venture capital investment in crypto businesses soared beyond $30 billion USD. Last year was also transformative for crypto adoption, with 41% of existing crypto owners globally making their first investment in 2021, according to our report.
The report also found that nearly half of all current crypto owners in the United States (44%), Latin America (46%), and Asia Pacific (45%) first bought crypto in 2021. Inflation concerns were also highlighted as a primary driver of adoption. Further, the gender gap in crypto is potentially narrowing. Among those who plan to purchase crypto for the first time this year, 47% were women globally. With regard to barriers to entry, education remains the greatest obstacle to investing in crypto.
Developing countries Brazil and Indonesia led the way in crypto adoption with more than two in five (41%) respondents in each country reporting owning crypto, compared to just 17% across developed countries and regions including the U.S. (20%), Europe (17%), and Australia (18%).
The concept of accessibility is evolving and makes User Experience more central than ever. One of the goals in payment today is removing barriers to the access to crypto space, according to Elena.
Where is Open banking in this scenario? We asked it to Liam that says it can’t yet be used in the crypto space but it’s a soon-future development.
Article by: Elias Secchi
This article is based on episode BBE 126 powered by PPRO, industry-trusted provider for payments infrastructure that powers global growth for payment companies
The first Breaking Payments episode is here! PPRO is powering this incredible overview of some of the “Keys to success in hyper-growth companies” – basically how to ensure growth through the voices of some of the most dynamic companies in the industry. How to generate growth for your clients? Which are the operational challenges that payment providers have to resolve? Which are the key differences amongst markets that need to be resolved when scaling from local operations to a global presence? Which is the winning culture – how inorganic growth can foster competitive advantages to succeed especially when targeting distant markets?
Paolo Sironi as anchor moderated a discussion with Javier Villaure de la Paz (COO at PPRO), Sendi Young (Managing Director at Ripple Europe) and Dora Zambra (COO at Azimo).
As pointed by Javier Villaure de la Paz (PPRO) Payment providers can create value through the introduction of new payment methods (Stripe) or can also help businesses providing a technological ecosystem that allows fast onboarding processes
Innovation in Payment can also make the market more efficient. According to Sandi Young (Ripple), blockchain-based payments can overcome the limits that legacy payment infrastructure shows when asked to support today’s world that requires global and instant payments.
Dora Zambra (Azimo) agrees on the pains that innovation can solve: cost and speed of international transfers, solving them is also the challenge that Azimo accepted to solve shaking the money-transfer sector.
One of the challenges in this market is fragmentation as the number of payment methods is increasing and, at the end, end users just want to pay and it’s necessary to serve them with a payment method that they like.
Focusing on the challenges that a payment company has to face when scaling up globally, the first is regulations that are different in different jurisdictions, and this can’t be solved, expanding internationally requires being fully compliant with multiple jurisdictions and it adds complexity. The other issue is represented by customer habits, for example in some countries people are more used to use mobile wallets, and in other countries bank accounts are more common.
The third problem, pointed out by Dora and confirmed by Javier, is related to the complexity of infrastructure. Suppliers are not the same and going global creates complexity. In some countries, for example, are common prepaid methods that don’t work well as payment methods where it is necessary to have confirmation tokens or in some countries there is still a high prevalence of cash.
April is over and this means that’s time for News From The FinTech Front, our format that recaps the top fintech stories selected every month by the team of FTS group
This article is based on the episode Breaking Banks Europe 125, hosted by Matthias Kroener with two guests: Giada Gambadoro (Fintech Driver at PwC) and Xavier Gomez (CEO and Co-Founder at INVYO)
Let’s see some of the top news and trends from the last weeks
Russia-Ukraine war impact on fintech
What’s happening was unexpected for most of us and has an ambiguous impact on fintech. It can foster some kinds of innovations, such as cryptocurrencies, it is changing some technological supply chains, for example in cybersecurity, with the replacement of solutions developed by Kaspersky Labs. The ESG topic may see some promotion thanks to the need to replace fossil fuels from Russia, but, according to Giada, it is too early to make a balance.
What will happen to startup valuations or sectors like the BNPL?
Current crisis is making the path to normalization of monetary policies steeper than expected and this tends to reduce the valuations. According to Xavier, the impact will be limited and the macro scenario can’t stop the cycle of innovation in many sectors like AI, life sciences and fintech.
Klarna, Scalapay and other BNPL unicorns may not be much affected by the macro scenario but our guests fear a debt bubble that can burst if recession leads more people not to pay installments.
An interesting development is the response of legacy players that are working not to lose customers. VISA installment APIs that enable issuers and merchants to offer installment solutions in-store and online for purchases made with existing Visa cards.
New developments in climate fintech
Climate fintech is growing, driven by consumer and corporate demand. 100+ countries are committed to net-zero emissions and this supports the market demand. Investors are acting and looking for sustainable investors.
According to Giada, the topic is hard to expand but there are good signals and authorities both at country level and local level are reacting and pushing green initiatives.
The current crisis reminded us that reducing
New crypto regulations in the US
The US is adopting new regulation on cryptocurrencies showing a proactive approach to protect consumers and give this sector a national regulatory framework.
The executive order is not very technical itself and According to Giada, it is more interesting to follow this topic and read the new, more detailed documentation that will come.
Xavier pointed out that signing an executive order on digital assets is significant because it qualifies them as an asset class and unlock the potential of good uses of them.
Article by: Elias Secchi
March is over and this means that’s time for News From The FinTech Front, our format that recaps the top fintech stories selected every month by the team of FTS group
Let’s see some of the top news and trends from the last weeks
Egypt’s Largest Banks Join Forces to Launch New $85M Fintech Fund
Three of Egypt’s largest national banks – Banque Misr, National Bank of Egypt, and Banque du Caire – and Global Ventures, a leading MEA-focused venture capital firm – have announced the launch of Nclude by Global Ventures, a new fund focused on the acceleration of fintech innovation and financial inclusion in the North African country. This follows the approval by the Central Bank of Egypt (CBE).
Currently, an equivalent of $85-million has been invested into the Nclude fund. The investments were led by Banque Misr as an Anchor Investor and National Bank of Egypt and Banque du Caire as Strategic Investors.
The Nclude fintech fund has already made its first investments in four Egyptian companies. These are:
- Khazna: A financial Super App that offers convenient, technology-driven financial solutions to underserved consumers
- Lucky: Egypt’s leading consumer fintech app, offering installments, offers, cashback rewards, and credit.
- Mozare3: Meaning farmer in Arabic, is an Agri-fintech platform that provides smallholder farmers with direct access to inputs financing, markets, and hands-on technical support.
- Paymob: A leading digital payment service provider.
Home renovation and energy efficiency, a new opportunity for Fintech and Embedded finance
The raise in energy prices, public incentives and the reduction of the expenditure on travel and other categories due to COVID-19 pandemic contributed to fuel a surge in the demand for home renovation services both in the US and in Europe.
According to data that comes from the fintech company Hearth demand for home renovation increased by 82% in 2021 compared to 2019 pre-pandemic.
This trend creates new opportunities for fintech companies and embedded finance as home renovations need to be funded.
Giving access to credit targeted to fund effective home renovations is a challenge but opens the opportunity to make them affordable for a wider range of customers. In this way customers may have access to lower-rate loans compared to alternatives and credit cards.
And some renovations can repay themselves. An example of embedded finance in renovations is Otovo’s solar loan, which makes it possible to fund the installation of a solar rooftop eliminating the upfront investment. Especially with high energy prices, the savings in energy bills can be even larger than the loan’s installments.
The list of financial players interested in NFTs continues to grow and VISA is now on board.
According to Visa there are some 50 million artists, musicians, designers, filmmakers and other creators publishing content as a full- or part-time source of income, contributing to a $100 billion economy.
The new one year Visa Creator programme promises to help some of these artists who want to incorporate NFTs into their business model.
Those picked to join the cohort will get technical and product mentorship from Visa’s crypto experts; access to their fellow members as well as industry thought leaders and Visa clients and partners; and a stipend.
Cuy Sheffield, head of crypto, Visa, says: “NFTs have the potential to become a powerful accelerator for the creator economy. We’ve been studying the NFT ecosystem and its potential impacts on the future of commerce, retail and social media.
“Through the Visa Creator Program, we want to help this new breed of small and micro businesses tap into new mediums for digital commerce.”
News From The FinTech Front: February Edition
Europe is in war and historically war is a technological and financial challenge. Today’s issue of News From The Fintech Front can’t forget what is happening in Ukraine and in Russia but is also an opportunity to introduce some good news from fintech companies in Europe.
Let’s see some of the top news from the last weeks
Scalapay has raised a 497M$ Series B round
Fintech company Scalapay has raised $497 million in a Series B funding round led by Tencent and Willoughby Capital, and featuring Tiger Global, Gangwal, Moore Capital, Deimos and Fasanara Capital. This enabled it to surpass a valuation of $1 billion, achieving unicorn status. Scalapay is active in the “buy now, pay later” sector: this is a market that is growing very fast and is becoming part of the customers’ habits.
“Using Buy-Now-Pay-Later at checkout is a new habit in Europe but in Australia, where I have lived for a long time, it has reached an important market share among payment methods and many people abandoned credit cards, so there’s much space to grow” said Simone Mancini, Co-founder and CEO of Scalapay.
“Following international standards allowed us to make this deal very easy as we closed in less than two months even with Christmas holidays in the middle” said Attilio Mazzili, Partner of the legal firm Orrick that advised Scalapay both in Series A and Series B round
The war between Ukraine and Russia is becoming a payment war
Digital payments are a key battleground in the current conflict between Ukraine and Russia. Not only tanks, drones and planes, but switching off a country from an international payment system like SWIFT and the actions taken by companies like Google, Apple and Samsung that decided to make their payment services unavailable in Russia are showing to be a powerful way to hit a country’s population.
Queues in Moscow’s underground are only some of the examples of the inconveniences that can happen when people don’t have access to quick payment services.
Cryptocurrencies also play a role in this conflict and are seen as a way to avoid limitations by more traditional providers. For example, some crowdfunding platforms decided to refuse donation campaigns targeted to support military funding of Ukraine. The country has raised more than 15M$ in bitcoins and other cryptocurrencies and will continue to get more. It’s far less than what they’ll receive from partner countries but it’s a support too.
German’s challenger bank N26 ready for IPO by end of 2022
“N26 will be structurally ready for an IPO by the end of the year” Maximilian Tayenthal, Co-CEO of the bank, told CNBC. N26 recently raised 900M$ achieving a total funding of 1.7B$ since the company was founded in 2013.
N26 is still not profitable as of 2020 with a loss of 150M$, -30% compared to 2019. But 2021 results may be better and show a path to profitability.
According to the CEO the year of IPO may be 2024, but it is not necessary as “the company can now sustain itself”
N26’s management is also comfortable with news about the rises in interest rate. This monetary policy’s decision is for most industries a risk as rising interest rates cause a raise in interest expenditures (and a shrinking in profits) but also a general reduction in market multiples.
For a bank like N26 the situation is different as banking business is generally more profitable with positive interest rates than with zero or negative interest rates.
As the first month of 2022 is over it’s now time to analyze the top news in fintech of the beginning of the year
We have done it in our last episode of Breaking Banks Europe hosted by Francesca Aliverti with two exceptional guests:
- Gustavo Vinacua, Partner & Co-Founder at Net Positive Labs after 11 years working on innovation programs at BBVA and
- Chris Gledhill – FinTech Futurist, Speaker, Writer, and Advisor
Let’s see the main news discussed in the last episode
New funding rounds for digital banks
Digital banks are continuing achieving great funding rounds. The last example is Qonto’s 486 million euros’ series D with a valuation of 4.4 billion euros. This round follows the rounds of Q4 2021 achieved by N26, Revolut and others.
As these digital banks are not profitable yet it seems investors are trading profitability for growth.
According to our guest Gustavo Vinacua, analyzing success cases of challenger banks that are profitable, a success key factor can be the high frequency of interaction, as proven by cases like WeBank (a WeChat company) and Rakuten.
Can inflation become an opportunity for fintech companies?
The inflationary environment is known to be a risk for customers’ pockets. To fight it the traditional personal finance strategy includes an increase of investments to get returns higher than the inflation rate. Can it be an opportunity for fintech companies?
Our guest Chris Gledhill does not see a direct link between inflation and fintech space even if inflation can stimulate investments. Gustavo Vinacua sees instead this environment as an opportunity for circular economy business models as inflation is not only about investments but also about reducing the need for resources that become more expensive.
Buy now, pay later (BNPL) has redefined the relationship consumers have with credit
The growth of “Buy now, pay later” services are growing as proven by the success of fintech startups with this business model like Klarna and Afterpay. Banks and traditional lending companies have to change their perspective.
According to our guests we have to wait and see what will happen in the “later” part of the business model as BNPL companies have to face a credit risk with less robust credit score checks. B2B BNPL making credit more accessible especially for SMEs.
Visa acquisition strategy: Plaid, Tink and the last one CurrencyCloud.
Visa recently acquired Plaid, Tink and CurrencyCloud making a shift towards paytech. Visa and Mastercard play the role of incumbent in the payment ecosystem. This puts on them a new challenge as trends like account-to-account payment are reducing transaction fees. Sustainability and carbon footprint will also be a key topic in paytech.
Is the crypto world crashing?
While Central banks are considering to introduce CBDC (Central Bank Digital Currency), cryptocurrencies had a significant drop in the last week and regulators are getting more strict.
According to Chris individual investors risk to be misled by the massive advertising into cryptocurrencies. Gustavo preferred to talk about some opportunities coming from this technology as stablecoins can help, for example, farmers’ access to finance or make more efficient carbon-credits trading systems.
Keep reading our monthly “News From The FinTech Front” articles in the Breaking Banks Europe pages and listen to the podcast in your favourite streaming platform:
Apple Podcasts: https://bit.ly/BBEApple
Google Podcasts: http://bit.ly/BBEGoo
On episode 23 of Breaking Banks Europe, Matteo and Matthias are joined by Balazs Barna, Engineering Lead for TransferWise European Expansion Team, and Paolo Zaccardi, Co-Founder and CEO of Fabrick to discuss Platform Economy. Platform Economy sounds like an imperious buzzword, but simply put it’s an opportunity for non-financial players to build new services cross leveraging their distribution channels, their customer base and open banking.
But the idea is by no means, new. According to a 2014 MIT Sloan article titled ‘The ups and downs of dynamic pricing,’ “in 2013, 14 of the top 30 global brands by market capitalization were platform-oriented companies — companies that created and now dominate arenas in which buyers, sellers, and a variety of third parties are connected in real-time.” This has been and continues to be an upward trend. By 2018 seven of the 10 most valuable companies globally were based on a platform business model.
Despite the commonality of the platform economy, everybody has their own definition for it. Why don’t we take a look at how the hosts and guests define it.
Matteo: To me is the opportunity for an infrastructure to go way beyond the purpose for which the platform was built for and actually, through an open series of APIs, connect an ecosystem. If we look at a platform like Uber, Booking.com or Netflix, they were all born to do one thing but potentially their business could be extended way farther than the initial scope. That’s to me the opportunity given by the platform economy.
Balazs: It’s hard to add anything. I think, in general, these platforms don’t control the production, they control the means of connection. They are about connecting the supply and demand in a given market. As you said, the difference between a regular taxi company and Uber is that the regular taxi company is responsible for the production (buying the cars, employing the drivers, etc.) and Uber provides a platform that allows drivers to sign up and do the work while they subsidize their service for the users to reach the drivers.
Matthias: I like what you said about not controlling production but the connection. And, out of my perspective, this describes the major aim of a platform very well. In particular, once you talk about various stakeholders and ecosystems. However, pouring some water into the wine willingly, and provokingly, significantly changes the nature of what would define to be a bank as of today. Doesn’t it? Or maybe that’s pouring the wine into the water, actually.
Paolo: In general, we consider the platform model and open banking to be concretely the way to bring open innovation into banking. In the last decade, we have seen the rise of the platform economy in many industries and I think that now, more than before, the platform economy is essentially cross-industries. So if we combine non-banking and banking services we can really create a superior customer experience.
Everyone adds their own spice and their own idea of what a platform can achieve. And so do the platforms themselves. TransferWise and Fabrick are both financial services-oriented platforms. TransferWise is an international technology platform whose primary goal is to move money across borders in the most efficient and cost-effective way possible. Fabrick’s mission was to create an open banking ecosystem, so more than a platform. A combination of an ecosystem of FinTechs and a platform to connect fintechs with banks and incumbents in general. Matteo believes “Fabrick is where open banking, platform economy and the API world are really coming together.”
On this upcoming episode of Breaking Banks Europe, we have the second episode of our ‘Breaking Impact’ series, where we share stories about entrepreneurs, talents and former and current executives who are changing the world. Not only on the financial inclusion angle which might be actually a closer topic to FinTech but generally speaking, they are changing lives for the better. On this episode, Matteo and Meaghan are joined by Tiago Borges Coelho, Co-Founder of UX Information Technologies, and Andre Van Zyl, Co-Founder of CLIC.World. They shared with us their lives stories, how they came about their idea, how they developed it, the hurdles they had to overcome and their effect in the ecosystem. We’ll give you a short overview of their story, but don’t forget to tune in next Monday to the BBE podcast for the whole story.
Tiago is, first and foremost, a social serial entrepreneur. After spending many of his formative years in Portugal and the rest of the world, he decided to return home to Mozambique and create meaningful and impactful businesses. He Co-Founded UX Information Technologies in 2013, an information technology company with a strong focus on social entrepreneurship. They develop a range of online desktop and mobile applications for companies and institutions while creating their own products and solutions for social empowerment. Their two flagship products are Emprego and Biscate. An online recruitment platform for the formal sector and a mobile recruitment platform for the informal sector, respectively. These flagship products have become the biggest job boards in Mozambique and in addition to seen productivity increase for all users they have experienced some positive unforeseen consequences. “For example, some of the most highly rated workers (a la Uber) have taken to mentor other workers in the same job or formed working groups to be able to meet the demand for their services”. They are also solving pay points for the companies themselves by taking care of the payroll directly through their platform with the collaboration of Vodacom’s M-Pesa.
Andre is, to say the least, a visionary and an early adopter of new technologies (e.g. Andre had the first internet line in South Africa) Something he tells us can be problematic when navigating a regulatory environment. CLIC.World is at the moment something you could call a social financial marketplace, although Andre himself is still looking for the proper way to describe it. Despite that, he believes the end goal of CLIC.World to be that of a “Lifestyle Service Provider.” Andre is a South African expat residing in Uganda. The idea for CLIC.World came to Andre in 2008 while working an economic development consulting project in DRC Congo, where he realised that “if we don’t come up with some sort of banking or financial set of rails, you’re not going to go very far.” But in 2008 the technology was not readily available yet. They tried to get on a saturated Ripple with no success and went then to become one of the first members in the Stellar Blockchain. Founded in 2016, ‘CLIC.World is built on the Stellar blockchain and uses Stellar Lumens (XLM) as the primary mechanism of transferring value during fiat currency-based transactions’. Cryptocurrencies have been met with scepticism in many parts of the world and with its unnecessary share of fake bitcoin scams, Uganda is no exception. Meaghan posed an interesting question for Andre, “How did you educate your consumers about Stellar? How much did you have to tell users about this non-traditional banking platform?” For the sake of time, Andre gave us the short version. “We do not use the C-word. We rarely use the B-word. It’s just technology, OK?” We are all looking forward to the long version.
Tune in next Monday to learn more about how UX is transforming the labour market in Mozambique and how CLIC.World is creating a financial services ecosystem with digital identity at the foreground, as well as their hurdles and achievements.
Innovation and Tech Zoom In: Central Bank Digital Currency
In this article, we will attempt to unpack some of the interesting information shared by the hosts (Ajit Tripathi & Brett King) and guests (Makoto Takemiya from Soramitsu, Aleksi Grym from Bank of Finland, Todd McDonald from R3, and Lynn McConnell from Binance) such as ‘What is CBDC?’, ‘Different types of CBDC’, ‘CBDC Projects moving ahead’ and ‘What is implementable in the current environment?’. For more input on the conversation, please take a listen to Breaking Banks Europe, Episode 20, in your favourite podcast streaming service.
Contrary to popular belief, Central Bank Digital Currency (CBDC) are not cryptocurrencies. CBDC represents the digital form of a fiat currency of a particular nation (or region) and is issued and regulated by the competent monetary authority of said nation (or region). Basically, ‘CBDC will act as a digital representation of a nation’s fiat currency and will be backed by a suitable amount of monetary reserves, such as forex or gold’. Another important differentiating factor from cryptocurrencies is that CBDCs are centralized. Which, as Brett King mentions in this episode, “for a lot of crypto purists, that’s kind of the issue of fiat currencies.”
So, what does this mean? Ajit sets the question in a way most of us living in economies with wide adoption of digital payments can relate to. “What is CBDC? I mean, money is already digital, I can make payments with Venmo, Revolut, you name it. So how is a CBDC different from what we do today in terms of electronic payments?”From an end-user perspective is really not very different. The key difference is that if you use Venmo or Revolut or any of these electronic money type of solutions, as a customer of that service provider you have a claim on that company (i.e. You have put money on that service or account and then you can use that to make payments so in the end, it’s that service provider who owes you the money or it owes you the services that it’s promising to provide). In the case of CBDC, the service is very similar, the difference is that the claim is on the central bank (i.e. the Central Bank takes your money and promises to keep it safe and provide those payments services). As of now, Central Banks don’t do that, they have left it to the private sector.
Now that we have gotten the premise of what CBDC is and what would actually change if implemented, let’s touch open the different types of CBDC. There’s a lot of talk about ‘Wholesale CBDC’ and ‘Retail CBDC’, but what does that mean? In very simple terms, a retail CBDC is one that will be issued for the general public and a wholesale CBDC is for financial institutions that hold reserve deposits with a central bank. A retail CBDC based on DLT has the features of anonymity, traceability, availability 24 hours a day and 365 days a year. This proposal is relatively popular among Central Banks in emerging economies, mainly because of the motivation to take the lead in the rapidly emerging fintech industry, to promote financial inclusion by accelerating the shift to a cashless society, and to reduce costs of cash printing and handling. A wholesale CBDC could be used to improve payments and securities settlement efficiency, as well as to reduce counterparty credit and liquidity risks. The wholesale CBDC is seen as the most popular proposal among Central Banks because of the potential to make existing wholesale financial systems faster, inexpensive and safer. ‘The Bank of International Settlements also shares the view that wholesale CBDC could potentially benefit the payments and settlements systems.’ Decisions on whether to implement retail, wholesale or hybrid CBDC, depends on each specific Central Bank and what is trying to achieve. If you are interested to learn more please visit the WEFs’ ‘CBDC Policy-Maker Toolkit.’
What are some CBDC projects moving ahead? One of the projects touched upon with most detail was ‘Bakong’, a collaboration project between Makoto’s Soramitsu and the Bank of Cambodia. “Bakong is a next-generation Real-Time Gross Payments system already in production, that promotes financial inclusion through a friendly yet powerful app.” If you want to learn more about Bakong, please visit their case study. Other projects mentioned in the podcast where: Bank of England, People’s Bank of China and Riksbank. Others such as Canada, Uruguay, Thailand, Venezuela and Singapore, are looking into the possibility and validity of introducing a Central Bank issued digital currency.
The podcast ended with the guests sharing what they believe to be “implementable in the current environment.” but it would not be right of me to take away the joy of listening to these stellar analysts closing statements.
The Largest distributed ledger
project, outside of major crypto’s.
Back in December of 2017, the Italian Banking Associations’ (ABI) Spunta project started, giving way to the largest distributed ledger project outside of major cryptocurrencies. It all started when ABI Lab and NTT Data Italia started working on a blockchain POC for straight-through processing of interbank reconciliations using R3’s Corda platform. Since then, SIA has also come on board as a technical partner. The total collaboration team comprises the following:
- 17 industry-leading banks, including Intesa Sanpaolo and Banca Mediolanum
- ABI Lab: A consortium of 150 banks and 60 ICT providers, focused on research into the use of innovative technologies to manage processes, channels, and security in banking
- NTT Data: A leading global IT innovator, delivering technology-enabled services and solutions to clients around the world
- SIA: European leader in the design, creation and management of technology infrastructures and services for financial institutions, central banks, corporates and the public sector
- R3: The enterprise blockchain software firm, working with a broad ecosystem of more than 200 members and partners across multiple industries from both the private and public sector
Demetrio Migliorati, Head of Blockchain at Banca Mediolanum, tells us the unusual story of how the project came to be. “..18 different banking groups, 50 banks, meeting with the desire of working together in a coopetition constructing something different. This is absolutely singular.” You are right, Demetrio. It is singular as it is unique. These levels of cooperation and coopetion do not usually go any further than conference panels. Yet here we are. This project will make Italy “the first and only entire country banking sector working together with Corda … And it is coming from a country that has not been very well known for being ahead on the technology trends.”
“Spunta” is a word surely familiar to Italians in the Banking sector, and one to probably be the cause of many a headache. Is the current reconciliation system for interbank transactions in Italy, and, as you expected, it is notoriously complex. The aim of the process is to ensure that the banks at each end of a transaction are in complete agreement about every aspect. However, if the banks don’t agree, then resolving the mismatch can be labour-intensive and time-consuming, partly due to the lack of a standardized procedure and communication method.
Now, thanks to this otherworldly collaboration, there is a faster, more efficient and more transparent way of reconciling interbank transactions. ‘This new system is the product of their collaboration; a successful POC for a blockchain-enabled interbank reconciliation system based on R3’s Corda Enterprise. The trial ran for 10 months and concluded in October 2018, with the participating banks processing a total of 1.9 Million transactions. The project confirmed an interbank system underpinned by R3’s Cora Enterprise blockchain platform can help the counterparties on each side quickly identify and address any mismatched transaction, boosting speed and transparency while reducing cost and effort.’
With the POC successfully completed, the group moved onto testing the solution in daily operations in 2019. ABI says that:
“the test simulated the production with the one-year volumes of 200 banks. The loading and the Data reconciliation took place in a geographically distributed environment and connected to a secure network. The applied architecture was robust without having to resort to specific technical solutions. The methodology used allowed to analyse the operation for banking groups and large and small banks. The test also allowed for an initial analysis of the response time process. The test was completely successful.”
The push towards full-scale implementation comes as Spunta successfully cleared “200 million transactions per year. By far the largest project on the blockchain infrastructure if you don’t mention the largest cryptocurrencies.” The new system will provide banks with complete visibility of own and counterparty movements, daily instead of monthly reconciliations and improved communication with counterparties.
Demetrio adds, “this Spunta project is a great move forward for our country.” But more importantly “I think the most fun part is that when you find the right people to work together, you can create fantastic stuff.” Read More.
Finologee: An ecosystem on its own
In the last ‘Ecosystem Zoom-In’ series of Breaking Banks Europe, we had the opportunity to take a deep dive into Luxembourg with Nasir Zubairi and Jonathan Prince, two exceptional individuals of the Luxembourg ecosystem in their own rights. They themselves do not tend to need an introduction, but just in case, Nazir is the CEO of the LHoFT (The Luxembourg House of Financial Technology) and Jonathan is a serial entrepreneur, his latest hat being the Co-Founder and Chairman of Finologee. Luxembourg gives a lot to talk about, from being a major financial hub in Europe to being on the first-mover wave of FinTech adoption at a governmental level to their work in Microfinance and Financial Inclusion. We could go on, and on. For the purpose of this article, we will focus on Finologee, their outstanding journey of the last two and a half years and what lead them there.
Who better to tell the story than the founders themselves:
“we started out in 1999 by building a digital agency from scratch, Nvision; then we launched a telecom messaging, routing and micro-payments specialist company in 2006, Mpulse; the next endeavour was to build the Luxembourg’s retail banks’ mobile payments product and infrastructure as of 2012, with Digicash; and finally we launched our latest venture in 2017 to provide the tools and platforms to digitalise financial industry customer experiences and processes, Finologee.”
As mentioned by the founders, Finologee “provides the tools and platforms to digitalise financial industry customer experience and processes,” from PSD2 for Banks to Digital onboarding to platform operations. After years of providing technology solutions for banks and financial services, they decided to make the move towards a novel space, RegTech. During an interview with InFinance they clearly explained what Finologee offers:
- facilitate digital on-boarding of end-users by aggregating the best international FinTech products
- help banks holding payment accounts to achieve full PSD2 compliance
- create a digital marketplace and a leading-edge technical environment where FinTech companies and traditional financial industry players give access to their services and expose their APIs
- enable customers to identify, fill-in and sign their SDD mandates using their computer or mobile phone
- and finally, develop a system for creating multichannel messaging strategies, e.g. for the optimization of billing procedures, user authentication or digital marketing
Basically, Finologee is operating a one-stop-shop for FinTech building blocks. Since launching their products they have; 30 banks in 9 countries live with their PSD2 for Banks and are delivering their Digital Onboarding product for KYC automation with partners such as IDNow, KYCTech, ARIADNEXT and LuxTrust. They ave also obtained a ‘Support PFS’ License by the Luxembourg Minister of Finance and are regulated by the CSSF.
Be it whether you are a FinTech, a Bank or a payment provider, you are sure to find easy to improve your offerings by visiting Finologee’s website. Read More.
Fighting Financial Crime with Advanced AI
Founded in Portugal during 2010 by a combination of data scientists and aerospace engineers, Feedzai is a company fighting financial fraud through AI. Since then, it has become one of the leaders in its market, with a remarkable portfolio of clients and results. As of 2019, their outstanding numbers were the following:
- $5 Billion in transactions scored each day
- 10 of the largest 25 global banks are protected by Feedzai
- $82 Million in total funding
- 30 Million transactions go through their systems each day
- 200 Million people protected by Feedzai
- 500+ employees worldwide
As they themselves put it; “Feedzai is coding the future of commerce with today’s most advanced risk management platform powered by big data and machine learning. The world’s largest banks, processors, and retailers use Feedzai’s fraud prevention and anti-money laundering products to manage risk, while improving customer experience.”
Their constant innovation and experienced technological background allow Feedzai to continue to lead the market while making sure their technology keeps its cutting edge. The company receives awards yearly in many different categories, for example, Tech tour Growth Alumni 50-2017, Medici Top 21 RegTech edition, Forbes FinTech 50-2018, Forbes AI 50-2019, Top 15 Machine Learning Companies 2018 by Datamation, between many others.
Feedzai’s founders’ background has certainly proved helpful to lead such a task. Nuno, Pedro and Paulo’s career before Feedzai would reassure any investors. With past positions at Deloitte, Critical Software, European Space Energy, CERN, Microsoft, Carnegie Mellon, Forbes Technology Council, EPCC, and two PhDs, it is clear they are masters of their domains. And their appearances on stages like Money 20/20, where they chatted with pioneers like The Woz and Stephen Hawking tells you everything you need to know about their pitching skills.
On more recent news, a five-year agreement between Feedzai and SafetyPay was announced earlier this year. SafetyPay is one of the leading digital alternative payment platform providing solutions through LatAm and Europe. The objective of the agreement is for SafetyPay to offer an extra layer of security against fraud risk. As Gustavo Ruiz Moya, CEO of SafetyPay, puts it: “Secure payments have been a core focus for us since SafetyPay was founded more than a decade ago. We constantly strive to leverage the latest technology to protect our customers – both consumers and merchants – and offer them the best experience when they buy and sell online. Our partnership with Feedzai further solidifies SafetyPay’s commitment to enabling fraud-free transactions.” As we move forward into digital payments we are more aware and wary of the possibility of fraud, these are two of the companies providing us with a piece of mind as we transact digitally.
At the time of this writing, it becomes more relevant than ever. We are at the epicentre of the COVID-19 crisis, in which most of us are transacting digitally if transacting at all. And where financial fraud is expected to increase substantially. It also comes as we expect the 6AMLD to come into place later this year. 6AMLD is the ‘The Sixth Anti-Money Laundering Directive’ which “ushers in a new, tougher-on-crime era in the EU. Money laundering is directly linked to an increase in bribery, corruption, human trafficking, terrorist financing and countless other heinous acts. Regulations such as 6AMLD, can empower organisations to create more efficient AML programs that help the innocent victims of the money laundering crimes.” Regulated entities within the EU zone must be compliant by December 3rd, 2020, entities outside the EU have an extra 6-month period.
Finally, we all look forward to Feedzai realizing its mission: “To make banking and commerce safe.” Read More.
Payments are cool again. The renewed interest in payment technologies made us launch a new spin-off of Breaking Banks Europe focused on the payment ecosystem, “Breaking Payments”.
Today is on the first edition of Breaking Payments hosted by Matteo Rizzi and four great guests: James Allum (Payoneer), Tamer El-Emary (Thunes), Keith Grose (Plaid) and James Booth (PPRO)
Here’s the key topics developed in today’s episode
Real-time payments are getting real
EBA Clearing will upgrade its Step2 pan-European mass payment system later this year to process Sepa transactions around the clock, seven days a week, and to provide settlement results to participating banks in minutes.
Step2 processes on average 55 million Sepa credit transfers and direct debits per day, connecting more than 4800 payment service providers operating in Europe.
The upgrade, planned for November, will enable Step2 participants to shorten end-to-end processing timelines for retail payments in euro from hours to minutes.
“Real-time payments create more economic opportunities for entrepreneurs within the EU economy. The economic benefit represented by the reduction in uncertainty and the increase in working capital can drive financial inclusion” according to our guest Tamer El-Emary
Digital payments are overtaking cash as the most popular in-store payment method
COVID-19 pandemic has been a catalyst for the growth of in-store digital payments as they’re seen as safer and more hygienic. Even countries like Italy are promoting digital payments by making compulsory to stores to accept them.
Digital wallets will account for >50% of e-commerce payments by 2024, also thanks to agreements like the one between Paypal and Shopify agreement to make more accessible cross-border payments in the Indian Market
Non-Banks lenders will empower SMEs credit demand
40% of SMEs have unmet credit demand for a total value of 5.2B$, 1.4 times the total value of lending to SMEs.
The success of Buy-Now-Pay-Later startups (Klarna, Affirm, Afterpay) in B2C can be followed by innovative solutions in B2B.
Startups in this sector are growing, like the UK-based Tide that expanded into India with the goal to fund 2M SMEs with 10B$.
This creates the opportunity to integrate credit functions into other services: Tel-Aviv based startup PayEm is doing that by automating financial and credit functions in procurement.
The development of this topic will be interesting in the next months and years. It will also have links with topics like open bankings, for example in making easier to BNPL company to have access to customers’ financial information to develop proper but quick credit scoring systems.
Keep reading our monthly “News From The FinTech Front” articles in the Breaking Banks Europe pages and listen to the podcast in your favourite streaming platform:
Apple Podcasts: https://bit.ly/BBEApple
Google Podcasts: http://bit.ly/BBEGoo
Author: Elias Secchi (FTS Group)