Peter Keenan, Zapp, Chief Executive Officer, tells us why a cardless society is closer than some may think…
Increasing smart phone adoption is driving a change in payments – by 2018 almost 100% of mobile phone users will have a smartphone. Today, the smartphone is less an instrument of communication than a remote control for our entire lives. We use them to take pictures, listen to music, check the news, watch films, and of course shop. In doing so they’ve displaced all manner of other gadgets, from cameras to alarm clocks to MP3 players.
Payments is the next sector to undergo a major revamp at the hands of mobile. With huge jumps forward in other industries occurring around us, the way we pay has remained comparatively stagnant for the last half a century since the introduction of debit cards in the 1980s. With the exception of EMV chips and NFC, we have seen minimal innovation in payments, but mobile is set to change this. A cardless society is closer than you think.
The popularity of mobile banking has created a generation that is used to accessing their finances on the move and in near real-time, through their mobile phones. The FCA estimates that around 25% of current account holders (the equivalent of 42% of smartphone owners) are active users of mobile banking and this number is increasing. Naturally so are the numbers utilising the convenience of their mobile phones to pay – 50% of the population are either already using mobile payments or interested in doing so and this shift is gaining pace. The Centre of Economics and Business Research (Cebr) predicts 20 million adults will use their mobiles to pay by the end of the decade.
With consumers increasingly reaching for their mobile phones when paying both online and in-store, retailers are beginning to sit up and listen. Our recent partnerships with, amongst others, Asda and Sainsbury’s illustrates this perfectly. If retailers do not accommodate mobile payments, their competitors will. Apple’s recent move into payments hints that mobile payments are to become a mainstay of the retail industry, we are all aware this company has a history of successfully entering markets only when they are ready for mass adoption.
Aside from giving companies a competitive edge over less innovative retailers, mobile payments have a lot to offer businesses that credit cards can’t.
For example, faster settlement when customers pay. The Faster Payments infrastructure that some mobile payment solutions are based around means money taken from a customer is transferred almost instantly from their bank account to the retailer’s. This is especially helpful for small companies for whom late payments can put significant stress on their cash flow. On top of this, mobile payments will lower retailer transaction costs. Credit cards are very costly to process – another reason survival is not on the cards.
Some may argue the cost of upgrading in store payment systems to be able to receive mobile payments would outweigh the above benefits. However, if retailers partner with a mobile payments solution that takes a technology-agnostic approach, the infrastructure for mobile payments is already in place through NFC and Chip and PIN devices meaning that businesses can embrace innovation, and compete at little extra cost.
The rise of mobile payments also presents opportunities for the banking industry. Our research tells us that consumers are far more likely to pay for items using their mobile phone if the service was provided by the banks. Bank involvement has the benefit of allowing consumers to keep a better eye on their finances by checking their balance before they pay. A service consumers would no doubt be thankful for as over a quarter of UK consumers incurred an overdraft charge in 2012.
Placing the bank account at the heart of mobile payments allows consumers to make payments on their mobiles without sharing any of their private account information with the merchant. As well as ensuring the security of the consumer’s card details, this innovation (known as tokenisation) will save the banks money as well – fraud losses on plastic cards last year totaled £388m.
It is clear, consumers are leading the way, calling for the convenience of mobile payments and a cardless society. Retailers and banks need to keep up with the ever accelerating pace of innovation or risk turning customers away.
Bank of England’s Haldane says inflation “tiger” is prowling
By Andy Bruce and David Milliken
LONDON (Reuters) – Bank of England Chief Economist Andy Haldane warned on Friday that an inflationary “tiger” had woken up and could prove difficult to tame as the economy recovers from the COVID-19 pandemic, potentially requiring the BoE to take action.
In a clear break from other members of the Monetary Policy Committee (MPC) who are more relaxed about the outlook for consumer prices, Haldane called inflation a “tiger (that) has been stirred by the extraordinary events and policy actions of the past 12 months”.
“People are right to caution about the risks of central banks acting too conservatively by tightening policy prematurely,” Haldane said in a speech published online. “But, for me, the greater risk at present is of central bank complacency allowing the inflationary (big) cat out of the bag.”
Haldane’s comments prompted British government bond prices to fall to their lowest level in almost a year and sterling to rise as he warned that investors may not be adequately positioned for the risk of higher inflation or BoE rates.
“There is a tangible risk inflation proves more difficult to tame, requiring monetary policymakers to act more assertively than is currently priced into financial markets,” Haldane said.
He pointed to the BoE’s latest estimate of slack in Britain’s economy, which was much smaller and likely to be less persistent than after the 2008 financial crisis, leaving less room for the economy to grow before generating price pressures.
Haldane also cited a glut of savings built by businesses and households during the pandemic that could be unleashed in the form of higher spending, as well as the government’s extensive fiscal response to the pandemic and other factors.
Disinflationary forces could return if risks from COVID-19 or other sources proved more persistent than expected, he said.
But in Haldane’s judgement, inflation risked overshooting the BoE’s 2% target for a sustained period – in contrast to its official forecasts published early this month that showed only a very small overshoot in 2022 and early 2023.
Haldane’s comments put him at the most hawkish end among the nine members of the MPC.
Deputy Governor Dave Ramsden on Friday said risks to UK inflation were broadly balanced.
“I see inflation expectations – whatever measure you look at – well anchored,” Ramsden said following a speech given online, echoing comments from fellow deputy governor Ben Broadbent on Wednesday.
(Editing by Larry King and John Stonestreet)
Bitcoin slumps 6%, heads for worst week since March
By Ritvik Carvalho
LONDON (Reuters) – Bitcoin fell over 6% on Friday to its lowest in two weeks as a rout in global bond markets sent yields flying and sparked a sell-off in riskier assets.
The world’s biggest cryptocurrency slumped as low as $44,451 before recovering most of its losses. It was last trading down 1.2% at $46,525, on course for a drop of almost 20% this week, which would be its heaviest weekly loss since March last year.
The sell-off echoed that in equity markets, where European stocks tumbled as much as 1.5%, with concerns over lofty valuations also hammering demand. Asian stocks fell by the most in nine months.
“When flight to safety mode is on, it is the riskier investments that get pulled first,” Denis Vinokourov of London-based cryptocurrency exchange BeQuant wrote in a note.
Bitcoin has risen about 60% from the start of the year, hitting an all-time high of $58,354 this month as mainstream companies such as Tesla Inc and Mastercard Inc embraced cryptocurrencies.
Its stunning gains in recent months have led to concerns from investment banks over sky-high valuations and calls from governments and financial regulators for tighter regulation.
(Reporting by Ritvik Carvalho; additional reporting by Tom Wilson; editing by Dhara Ranasinghe, Karin Strohecker, William Maclean)
Britain sets out blueprint to keep fintech ‘crown’ after Brexit
By Huw Jones
LONDON (Reuters) – Brexit, COVID-19 and overseas competition are challenging fintech’s future, and Britain should act to stay competitive for the sector, a government-backed review said on Friday.
Britain’s departure from the European Union has cut the sector’s access to the world’s biggest single market, making the UK less attractive for fintechs wanting to expand cross-border.
The review headed by Ron Kalifa, former CEO of payments fintech Worldpay, sets out a “strategy and delivery model” that includes a new billion pound start-up fund and fast-tracking work visas for hiring the best talent globally.
“It’s about underpinning financial services and our place in the world, and bringing innovation into mainstream banking,” Kalifa told Reuters.
Britain has a 10% share of the global fintech market, generating 11 billion pounds ($15.6 billion) in revenue.
“This review will make an important contribution to our plan to retain the UK’s fintech crown,” finance minister Rishi Sunak said, adding the government will respond in due course.
The review said Brexit, heavy investment in fintech by Australia, Canada and Singapore, and the need to be nimbler as COVID-19 accelerates digitalisation of finance all mean the sector’s future in Britain is not assured.
Britain increasingly needs to represent itself as a strong fintech scale-up destination as well as one for start-ups, it added.
The review recommends more flexible listing rules for fintechs to catch up with New York.
“Leaving the EU and access to the single market going away is a big deal, so the UK has to do something significant to make fintechs stay here,” said Kay Swinburne, vice chair of financial services at consultants KPMG and a contributor to the review.
The review seeks to join the dots on fintech policy across government departments and regulators, and marshal private sector efforts under a new Centre for Finance, Innovation and Technology (CFIT).
“There is no framework but bits of individual policies, and nowhere does it come together,” said Rachel Kent, a lawyer at Hogan Lovells and contributor to the review.
Britain pioneered “sandboxes” to allow fintechs to test products on real consumers under supervision, and the review says regulators should move to the next stage and set up “scale-boxes” to help fintechs navigate red tape to grow.
“It’s a question of knowing who to call when there’s a problem,” Swinburne said.
($1 = 0.7064 pounds)
(Reporting by Huw Jones; editing by Hugh Lawson and Jason Neely)
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