The world of digital payments is incredibly complex. And it’s only going to get more complex as the popularity of digital payment apps such as WeChat Pay, Alipay and Apple Pay continues toincrease.
According to the Global Interconnection Index, a study published by Equinix that tracks interconnection bandwidth, private and direct interconnection between financial service providers transacting and exchanging payments digitally is set to grow 38% a year until 2020.
The digitisation of the financial industry is the major driver of this growth. Trading has largely gone electronic and now we are seeing banking, insurance and payments following suit.
Each individual digital payment requires real-time collaboration across various mobile networks, operators, financial institutions, card networks, retailers and fraud protection services.This is an incredibly complex process that needs to take place in real time, to ensure latency issues do not impact the customer experience.
So,how are companies preparing for the shift from a cash economy to a digital economy? And how are digital infrastructures being updated and rearchitected to ensure digital payments can be processed efficiently?
Developing a digital payment infrastructure
A recent study from UK Finance, a trade association for the UK banking and financial services sector, shows that debit card transactions surpassed cash for the first time in the UK last year. In 2017, a total of 13.2 billion debit card payments were made, up 15% on the previous year compared to a 15% decrease in cash payments to 13.1 billion. Better access to card payments and new technology is giving consumers increased choice and convenience in the way they pay, and there’s no doubt it’s a change that’s happened for good.
As the amount of digital payments increases, so does the demand placed on digital commerce solutions such as electronic wallets, security systems and network and cloud infrastructures. Data is created at every step along the digital payment supply chain, and it’s imperative that banks, retailers and digital commerce companies manage and process this effectively, so they can gather useful insights into consumer spending habits.
By positioning themselves in data centres close to their customers, partners and suppliers, businesses create an ecosystem where different companies can directly connect to one another. This increases the speeds at which data can be transferred, as companies bypass the public internet. It also makes it easier to scale-up during spike periods for digital transactions, such as the annual Boxing Day sales.
The interconnected future
In May of this year,Equinixannounced the expansion of our LD4 data centre at our London Slough campus. We made this decision as a direct response to the increased demand we were seeing from companies within the financial services sector based in the capital who want to connect directly with businesses all over the world.
Expanding LD4 was a natural choice. Its proximity to Canary Wharf and The City of London – two of the world’s major financial hubs – have made it Britain’s single biggest hub for high-speed financial services trading. In addition to this, LD4’s proximity to Oxford Street and Westfield London, two of Europe’s premier shopping destinations, make it a prime location for processing card payments within the retail sector.
The financial services and payments industry has come a long way in the last 20 years. These days, financial transactions largely take place inside the confines of a data centre, as algorithmic trading and digital payments become the new norm. As a result, latency of just a few microseconds is business critical – delays of even half a second can have multi-million pound implications.
Companies that colocate inside LD4 such as Nasdaq, the creator of the world’s first electronic stock market, demand this ultra-low latency to ensure they can transact in real-time. The London Slough campus offers latency in the region of 30 milliseconds to New York and 4 milliseconds to Frankfurt, andthe £24 million we are investing in LD4’s expansion is set to grow the financial hub by a third. This investment will also double the capacity of the initial build and enable customers to interconnect securely with 1,000+ businesses including leading capital markets’ participants, insurers and electronic payments firms, as well as 200+ network service providers and 275+ cloud and IT service providers.
A global solution
Digital disruption is impacting all industries, forcing companies to transform and rearchitect their IT infrastructures to remain competitive. It’s vital that financial services companies embrace this change, because the world of payments is only going to become more complex as time goes on. Those that do not prepare for thisrun the risk of falling short of their competitors that have become digital ready in response to this increased demand or, in the case of the rising FinTech firms, have been digital-first from the very start.
At Equinix, we understand that companies can only survive and thrive in this new world if they have the right digital infrastructure behind them. We have invested heavily in creating a digital payments ecosystem for global financial companies – those that embrace it will find themselves well prepared for what will be a truly digital future.
Russell Poole is UK Managing Directorat global interconnection and data centre company Equinix.
Oil prices hit 11-month highs on tighter supplies, Fed assurance on low rates
By Florence Tan
SINGAPORE (Reuters) – Oil prices rose for a fourth straight session on Thursday to the highest levels in more than 11 months, underpinned by monetary easing policies and lower crude production in the United States.
Brent crude futures for April gained 19 cents, 0.3%, to $67.23 a barrel by 0400 GMT, while U.S. West Texas Intermediate crude for April was at $63.30 a barrel, up 8 cents, 0.1%.
Both contracts touched their highest since January earlier in the session with Brent at $67.44 and WTI at $63.67.
An assurance from the U.S. Federal Reserve that interest rates would stay low for a while boosted investors’ risk appetite and global financial markets.
“Comments from Fed Chairman, Jerome Powell, earlier in the week relating to the need for monetary policy to remain accommodative have probably helped, but sentiment in the oil market has also become more bullish, with expectations for a tightening oil balance,” ING analysts said in a note.
A rare winter storm in Texas has caused U.S. crude production to drop by more than 10%, or 1 million barrels per day (bpd) last week, the Energy Information Administration said. [EIA/S]
Fuel supplies in the world’s largest oil consumer could also tighten as its refinery crude inputs had dropped to the lowest since September 2008.
The Organization of the Petroleum Exporting Countries and their allies including Russia, a group known as OPEC+, is due to meet on March 4.
The group will discuss a modest easing of oil supply curbs from April given a recovery in prices, OPEC+ sources said, although some suggest holding steady for now given the risk of new setbacks in the battle against the pandemic.
Extra voluntary cuts by Saudi Arabia in February and March have tightened global supplies and supported prices.
(Reporting by Florence Tan)
Australian media reforms pass parliament after last-ditch changes
By Colin Packham and Swati Pandey
CANBERRA (Reuters) – The Australian parliament on Thursday passed a new law designed to force Alphabet Inc’s Google and Facebook Inc to pay media companies for content used on their platforms in reforms that could be replicated in other countries.
Australia will be the first country where a government arbitrator will decide the price to be paid by the tech giants if commercial negotiations with local news outlets fail.
The legislation was watered down, however, at the last minute after a standoff between the government and Facebook culminated in the social media company blocking all news for Australian users.
Subsequent amendments to the bill included giving the government the discretion to release Facebook or Google from the arbitration process if they prove they have made a “significant contribution” to the Australian news industry.
Some lawmakers and publishers have warned that could unfairly leave smaller media companies out in the cold, but both the government and Facebook have claimed the revised legislation as a win.
“The code will ensure that news media businesses are fairly remunerated for the content they generate, helping to sustain public-interest journalism in Australia,” Treasurer Josh Frydenberg and Communications Minister Paul Fletcher said in a joint statement on Thursday.
The progress of the legislation has been closely watched around the world as countries including Canada and Britain consider similar steps to rein in the dominant tech platforms.
The revised code, which also includes a longer period for the tech companies to strike deals with media companies before the state intervenes, will be reviewed within one year of its commencement, the statement said. It did not provide a start date.
The legislation does not specifically name Facebook or Google. Frydenberg said earlier this week he will wait for the tech giants to strike commercial deals with media companies before deciding whether to compel both to do so under the new law.
Google has struck a series of deals with publishers, including a global content arrangement with News Corp, after earlier threatening to withdraw its search engine from Australia over the laws.
Several media companies, including Seven West Media, Nine Entertainment and the Australian Broadcasting Corp have said they are in talks with Facebook.
Representatives for both Google and Facebook did not immediately respond to requests from Reuters for comment on Thursday.
(Reporting by Colin Packham in Canberra and Swati Pandey in Sydney; Writing by Jonathan Barrett; Editing by Leslie Adler, Stephen Coates and Jane Wardell)
OPEC+ to weigh modest oil output boost at meeting – sources
By Ahmad Ghaddar, Alex Lawler and Olesya Astakhova
LONDON/MOSCOW (Reuters) – OPEC+ oil producers will discuss a modest easing of oil supply curbs from April given a recovery in prices, OPEC+ sources said, although some suggest holding steady for now given the risk of new setbacks in the battle against the pandemic.
The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, cut output by a record 9.7 million bpd last year as demand collapsed due to the pandemic. As of February, it is still withholding 7.125 million bpd, about 7% of world demand.
In January OPEC+ slowed the pace of a planned output increase to match weaker-than-expected demand due to continued coronavirus lockdowns. Saudi Arabia made extra voluntary cuts for February and March.
Three OPEC+ sources said an output increase of 500,000 barrels per day from April looked possible without building up inventories, although updated supply and demand balances that ministers will consider at their March 4 meeting will determine their decision.
“The oil price is definitely high and the market needs more oil to cool the prices down,” one of the OPEC+ sources said. “A 500,000 bpd increase from April is an option – looks like a good one.”
A rally in prices towards $67 a barrel, the highest since January 2020, the rollout of vaccines and economic recovery hopes have boosted confidence the market could take more oil. India, the world’s third biggest oil importer, has urged OPEC+ to ease production cuts.
Saudi Arabia’s voluntary cut of 1 million barrels per day (bpd) ends next month. While Riyadh hasn’t shared its plans beyond March, expectations in the group are growing that Saudi Arabia will bring back the supply from April, perhaps gradually.
Some OPEC+ members also anticipate that the Saudis will be willing to ease cuts further, but it was not clear if they had had direct communication with Riyadh.
Saudi Arabia has warned producers to be “extremely cautious” and some OPEC members are wary of renewed demand setbacks. One OPEC country source said a full return of the Saudi barrels in April would mean the rest of OPEC+ should not pump more yet.
“The Saudi voluntary cut will be back to the market,” the source said. “I’m personally with no more relaxation, not until June.”
Russia, one of the OPEC+ countries which was allowed to boost output in February, is keen to raise supply and a source last week said Moscow would propose adding more oil if nothing changed before the March 4 virtual meeting.
(Additional reporting by Rania El Gamal and Nidhi Verma; Editing by Elaine Hardcastle)
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