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Phil Davies

By Phil Davies, MD, PSI-Pay

Phil Davies

Phil Davies

Phil Davies, Managing Director of PSI-Pay gives his personal perspective on American vs European payment ‘wallet’ models.

Wallets, or purses, have been around since bartering was replaced by the exchange of goods for currency of whatever variety. Therefore they were handy means of carrying that currency in case you needed to ‘buy’ something on your travels. Centuries, if not millennia, have passed and we are now in the electronic, or digital, age. The wallet and/or purse are still with us albeit with that all important prefix the ‘E.’ There are a plethora of ‘E’ wallets these days all offering the provision of various beneficial attributes, depending on the requirements of the user but the fundamental reason for being remains much the same.

For the purposes of this article I will, briefly, examine just two basic models, comparing and contrasting the differences and why payment professionals should be aware of them.

  • The “American”

the tale of two wallets

The first, which I am terming the American, model works primarily on the basis that someone wishes to buy goods online.

This model, unsurprisingly, is suited to the American payment culture and transactions are, literally, like for like. This is used for account discretion, security and may also embody a loyalty program. There is no element of stored value and transactions are fully card based and so it may be possible for chargebacks to be passed through, dependent on circumstances.

So having decided I’m going to buy something online and flag that with the merchant I will be presented with, typically, a number of payment options which will usually include a wallet alongside the usual payment card options. If I choose to pay by the wallet option, assuming I already hold an account, then the payment I have committed to is cleared and settled via the wallet operator using my predetermined deposit option. Should that deposit, or load, option be a payment card then it is easy for the scheme, and its associated issuer and acquirers, to identify the beneficiary of the funds and have the transaction coded in the most appropriate way since the funds are ‘passed through’ for an end to end transaction, in simple terms anyway.

There are many organisations operating wallets of this type, including the card schemes themselves. All well and good so far then.

  •  The “European”


Now we come to the second, which I’m terming the European, type of wallet. Catering for the many different payment cultures in Europe and feature many and varied forms of load of which cards may be one option.

One of the reasons that most of this type of wallet have payment cards attached to them so that a broader range of merchants can be reached and facilities, such as ATM’s, can be accessed.

Again this model is used where financial and account discretion and security is desired but this model also, invariably, incorporates a stored value element, including multi-currency capability. Because the load is used to complete a purchase of ‘electronic’ money any chargeback liability must stop with the wallet operator.


This type of wallet works in much the same way as a bank current account, the fundamental differences are that E money accounts are not allowed to offer credit so no overdraft. They are also not allowed to allow interest to accrue on outstanding account balances, although there are ways to reward those situations. The most noticeable difference, which is not entirely apparent, is that bank accounts are safeguarded under EU deposit protection schemes up to a specified limit (£75k in the UK, for example). Electronic money is not covered under these compensation schemes but are subject to even greater security stringencies in that 100% of funds must be ring-fenced in compliant safeguarded client accounts which have no financial limits imposed.

So it is these ‘wallets’ that have funds deposited in the aforementioned safeguarded accounts that must have those funds deposited, or loaded, before any further transaction can take place. With this type of ‘wallet’ a number of different types of transactions can occur, in much the same way as a bank current account does as mentioned previously, usually including the use of a payment card to access the funds contained therein.

It is clear, therefore, that the beneficiary of the funds is the ‘wallet’ operator as funds are stored for future transactions or future multiple transactions. If the funds are deposited/loaded using a payment card then the transaction coding should always be of a financial services nature since the customer is, at this point, purchasing ‘electronic money.’

The customer now has the wherewithal to conduct transactions, at their leisure, as if it were a current account, in fact there is an increasing number of individuals, and SME businesses, that are choosing to use these accounts instead of, or in addition to, bank current accounts.

I have, perhaps, laboured the point here but the purpose of this is to highlight the fact that some card schemes are trying to force the second model, as described, to fit the first type of model which just isn’t realistic, or accurate. My contention, therefore, is that we should have a category of ‘digital account’ for the second model and definitions applied accordingly thus giving full transparency and accuracy.

So perhaps the question to ask should be:

  1. “When is a wallet not a wallet?”
  2. “When it’s a digital account!”

Phil Davies is the Managing Director of PSI-Pay Ltd. Prior to heading up PSI-Pay, spent eight years with MasterCard Worldwide as Vice President-Business Development. There he was responsible for implementing new initiatives designed to encompass new products, technology and strategic partnership to stimulate growth in emerging markets throughout Europe.

For more on PSI-Pay and partner sponsorships, visit or follow on Twitter @PSIPayLtd.

Illustrations by Nicola Cooper.

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UK seeks G7 consensus on digital competition after Facebook blackout



UK seeks G7 consensus on digital competition after Facebook blackout 1

LONDON (Reuters) – Britain is seeking to build a consensus among G7 nations on how to stop large technology companies exploiting their dominance, warning that there can be no repeat of Facebook’s one-week media blackout in Australia.

Facebook’s row with the Australian government over payment for local news, although now resolved, has increased international focus on the power wielded by tech corporations.

“We will hold these companies to account and bridge the gap between what they say they do and what happens in practice,” Britain’s digital minister Oliver Dowden said on Friday.

“We will prevent these firms from exploiting their dominance to the detriment of people and the businesses that rely on them.”

Dowden said recent events had strengthened his view that digital markets did not currently function properly.

He spoke after a meeting with Facebook’s Vice-President for Global Affairs, Nick Clegg, a former British deputy prime minister.

“I put these concerns to Facebook and set out our interest in levelling the playing field to enable proper commercial relationships to be formed. We must avoid such nuclear options being taken again,” Dowden said in a statement.

Facebook said in a statement that the call had been constructive, and that it had already struck commercial deals with most major publishers in Britain.

“Nick strongly agreed with the Secretary of State’s (Dowden’s) assertion that the government’s general preference is for companies to enter freely into proper commercial relationships with each other,” a Facebook spokesman said.

Britain will host a meeting of G7 leaders in June.

It is seeking to build consensus there for coordinated action toward “promoting competitive, innovative digital markets while protecting the free speech and journalism that underpin our democracy and precious liberties,” Dowden said.

The G7 comprises the United States, Japan, Britain, Germany, France, Italy and Canada, but Australia has also been invited.

Britain is working on a new competition regime aimed at giving consumers more control over their data, and introducing legislation that could regulate social media platforms to prevent the spread of illegal or extremist content and bullying.

(Reporting by William James; Editing by Gareth Jones and John Stonestreet)


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Britain to offer fast-track visas to bolster fintechs after Brexit



Britain to offer fast-track visas to bolster fintechs after Brexit 2

By Huw Jones

LONDON (Reuters) – Britain said on Friday it would offer a fast-track visa scheme for jobs at high-growth companies after a government-backed review warned that financial technology firms will struggle with Brexit and tougher competition for global talent.

Finance minister Rishi Sunak said that now Britain has left the European Union, it wants to make sure its immigration system helps businesses attract the best hires.

“This new fast-track scale-up stream will make it easier for fintech firms to recruit innovators and job creators, who will help them grow,” Sunak said in a statement.

Over 40% of fintech staff in Britain come from overseas, and the new visa scheme, open to migrants with job offers at high-growth firms that are scaling up, will start in March 2022.

Brexit cut fintechs’ access to the EU single market and made it far harder to employ staff from the bloc, leaving Britain less attractive for the industry.

The review published on Friday and headed by Ron Kalifa, former CEO of payments fintech Worldpay, set out a “strategy and delivery model” that also includes a new 1 billion pound ($1.39 billion) start-up fund.

“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.

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.

It also recommends more flexible listing rules for fintechs to catch up with New York.

“We recognise the need to make the UK attractive a more attractive location for IPOs,” said Britain’s financial services minister John Glen, adding that a separate review on listings rules would be published shortly.

“Those findings, along with Ron’s report today, should provide an excellent evidence base for further reform.”


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,” said Kay Swinburne, vice chair of financial services at consultants KPMG and a contributor to the review.

A UK fintech wanting to serve EU clients would have to open a hub in the bloc, an expensive undertaking for a start-up.

“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,” Swinburne said.

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.

($1 = 0.7064 pounds)

(Reporting by Huw Jones; editing by Jane Merriman and John Stonestreet)


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G20 to show united front on support for global economic recovery, cash for IMF



G20 to show united front on support for global economic recovery, cash for IMF 3

By Michael Nienaber and Andrea Shalal

BERLIN/WASHINGTON/ROME (Reuters) – The world’s financial leaders are expected on Friday to agree to continue supportive measures for the global economy and look to boost the International Monetary Fund’s resources so it can help poorer countries fight off the effects of the pandemic.

Finance ministers and central bank governors of the world’s top 20 economies, called the G20, held a video-conference on Friday. The global response to the economic havoc wreaked by the coronavirus was at top of the agenda.

In the first comments by a participating policymaker, the European Union’s economics commissioner Paolo Gentiloni said the meeting had been “good”, with consensus on the need for a common effort on global COVID vaccinations.

“Avoid premature withdrawal of supportive fiscal policy” and “progress towards agreement on digital and minimal taxation” he said in a Tweet, signalling other areas of apparent accord.

A news conference by Italy, which holds the annual G20 presidency, is scheduled for 17.15 (1615 GMT)

The meeting comes as the United States is readying $1.9 trillion in fiscal stimulus and the European Union has already put together more than 3 trillion euros ($3.63 trillion) to keep its economies going despite COVID-19 lockdowns.

But despite the large sums, problems with the global rollout of vaccines and the emergence of new variants of the coronavirus mean the future of the recovery remains uncertain.

German Finance Minister Olaf Scholz warned earlier on Friday that recovery was taking longer than expected and it was too early to roll back support.

“Contrary to what had been hoped for, we cannot speak of a full recovery yet. For us in the G20 talks, the central task remains to lead our countries through the severe crisis,” Scholz told reporters ahead of the virtual meeting.

“We must not scale back the support programmes too early and too quickly. That’s what I’m also going to campaign for among my G20 colleagues today,” he said.


Hopes for constructive discussions at the meeting are high among G20 countries because it is the first since Joe Biden, who vowed to rebuild cooperation in international bodies, became U.S. president.

While the IMF sees the U.S. economy returning to pre-crisis levels at the end of this year, it may take Europe until the middle of 2022 to reach that point.

The recovery is fragile elsewhere too – factory activity in China grew at the slowest pace in five months in January, hit by a wave of domestic coronavirus infections, and in Japan fourth quarter growth slowed from the previous quarter with new lockdowns clouding the outlook.

“The initially hoped-for V-shaped recovery is now increasingly looking rather more like a long U-shaped recovery. That is why the stabilization measures in almost all G20 states have to be maintained in order to continue supporting the economy,” a G20 official said.

But while the richest economies can afford to stimulate an economic recovery by borrowing more on the market, poorer ones would benefit from being able to tap credit lines from the IMF — the global lender of last resort.

To give itself more firepower, the Fund proposed last year to increase its war chest by $500 billion in the IMF’s own currency called the Special Drawing Rights (SDR), but the idea was blocked by then U.S. President Donald Trump.

Scholz said the change of administration in Washington on Jan. 20 improved the prospects for more IMF resources. He pointed to a letter sent by U.S. Treasury Secretary Janet Yellen to G20 colleagues on Thursday, which he described as a positive sign also for efforts to reform global tax rules.

Civil society groups, religious leaders and some Democratic lawmakers in the U.S. Congress have called for a much larger allocation of IMF resources, of $3 trillion, but sources familiar with the matter said they viewed such a large move as unlikely for now.

The G20 may also agree to extend a suspension of debt servicing for poorest countries by another six months.

($1 = 0.8254 euros)

(Reporting by Michael Nienaber in Berlin, Jan Strupczewski in Brussels and Gavin Jones in Rome; Andrea Shalal and David Lawder in Washington; Editing by Daniel Wallis, Susan Fenton and Crispian Balmer)


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