By Martijn Hohmann, CEO, Five Degrees
The ‘Internet of Payments’
Advancements in mobile and real-time payments in 2019 will lead to the creation of an ‘Internet of Payments.’ Customers will have access to a wider portfolio of payment options, from the use of Blockchain and virtual currency, to cross-border banking and eWallets.
Earlier in 2018 we saw a use case of Blockchain in banking involving a cross-border funds transfer between Krungsri: Thailand’s fifth largest bank and Standard Chartered in Singapore facilitated by a Krungsri’s Blockchain Ledger. We’ll continue to see banks harnessing the power of Blockchain in 2019 as it becomes another form of payment solution used as commonplace.
Cognitive technologies to stay relevant
According to CACI, 35 million people will be using their mobile as a preferred banking platform by 2023. Banks will begin to adapt to these changes in customer preferences in 2019 via cognitive computing. This will ensure they stay relevant in a digital age, generating insights to provision for the right mix of branches, digital, and mobile offerings.
Through using cognitive computing systems, including real-time insights and information processing, banks can seize an opportunity that will grow revenues up to 30 per cent by 2022.
A robust strategy to face regulatory challenges
Regulation will continue to dominate the banking and finance landscape of 2019. With the introduction of PSD2 and GDPR earlier in 2018, banks will be required to be regulatory compliant or risk facing heavy fines. For banks to stay compliant they will need to be ready and tested by March 2019.
Overcoming regulatory challenges needs a robust strategy, operational and infrastructure change, a comprehensive assessment of risk, and seamless execution. To align with regulation, banks must facilitate digital transformation across their entire business ecosystem by opening up of their APIs to third parties. This will provide full visibility over customer data, and enable banks to cater better to customer needs.
Industry collaboration to improve customer experience
Over 2018 we saw disruption to the customer experience of traditional banks caused by outdated legacy IT systems. As a way of overcoming these problems, we’ll see banks form greater collaborations with FinTechs and third parties to deliver a seamless experience for end-users and a wider array of services: also known as ‘Open Banking.’
‘Open Banking:’ the opening up of banks’ APIs, will result in multiple partnerships between banks, fintech companies, and other professional service providers, such as accountants and lawyers. Services provided via ‘Open Banking’ in 2019 will become the norm, making it possible to integrate blockchain, video chat, mobile wallets, and data analytics with existing traditional offerings as one complete end-to-end solution.
We will also see smarter collaboration between FinTechs and corporates in 2019. 8 in 10 (82 per cent) of incumbents are expected to increase FinTech partnerships in the next three to five years, with a greater investment by corporates in FinTech collaborations rather than buying products. Smart collaboration is expected to impact up to 80 per cent of existing banking revenue pools by 2020.
Speeding up while remaining secure
The need to become fully digitalised, secure, and regulatory compliant will result in an uptake of cloud based solutions, making it easier for banks to have visibility to customer and business data on a single interface.
Financial institutions understand the importance of building IT architecture on cloud platforms already, but according to a recent Accenture report entitled ‘Cloud and Clear’ they lack a cloud strategy that will enable migration to the cloud. In 2019, we’ll see banks working more closely with technology specialists, to create and deploy an IT architecture that will provide consistency and efficiency to banking operations in a digital age.
We will also see testing and the deployment of Quantum Computing technology, enabling corporations and financial institutions to deliver their products and services at greater speed to their customers. We’ve already seen the experimentation by Barclays and JP Morgon Chase with IBM’s quantum technology. Other banks will do the same as they realise the benefits of Quantum Computing to drive efficiencies and transform operations.
Sunak to use budget to expand apprenticeships in England
LONDON (Reuters) – British finance minister Rishi Sunak will announce more funding for apprenticeships in England when he unveils his budget next week, the government said on Friday.
Employers taking part in the Apprenticeship Initiative Scheme will from April 1 receive 3,000 pounds ($4,179) for each apprentice hired, regardless of age – an increase on current grants of between 1,500 and 2,000 pounds depending on age.
The scheme will extended by six months until the end of September, the finance ministry said.
Sunak will also announce an extra 126 million pounds for traineeships for up to 43,000 placements.
Sunak’s March 3 budget will likely include a new round of spending to prop up the economy during what he hopes will be the last phase of lockdown, but he will also probably signal tax rises ahead to plug the huge hole in the public finances.
Sunak is also expected to announce a “flexi-job” apprenticeship scheme, whereby apprentices can join an agency and work for multiple employers in one sector, the finance ministry said.
“We know there’s more to do and it’s vital this continues throughout the next stage of our recovery, which is why I’m boosting support for these programmes, helping jobseekers and employers alike,” Sunak said in a statement.
(Reporting by Andy Bruce, editing by David Milliken)
UK seeks G7 consensus on digital competition after Facebook blackout
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 Stateâ€™s (Dowden’s) assertion that the governmentâ€™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)
Britain to offer fast-track visas to bolster fintechs after Brexit
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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