By Paul Thomalla, Global Head of Corporate Relations, ACI Worldwide
A recent Payments UK report forecasts an all-time record of 44 billion payments annually in the UK by 2024, a projected growth of 3.4 billion over the next 10 years. This will equate 120 million payments per day, an increase which will be driven mainly by rises in card, internet and mobile banking payments, the report states.
The report also suggests that the most significant part of that increase in the next decade is expected to come from debit cards. This will largely be at the expense of cash as more consumers use debit cards to make contactless payments. According to the research, it is expected that in 2016 the total volume of all non-cash payments made by consumers will exceed the volume of consumer cash payments for the first time.
The report also reveals the success and the growth of faster or real-time payments in the UK, with the overall number of one-off payments processed as Faster Payments set to double by 2024.
These figures certainly make interesting reading. For me they underline two important developments: Firstly, consumers are responding like never before to the ease and speed offered by new payment options as the expected rise in the total volume of non-cash payments clearly shows. Contactless for example, gives consumers the ability to ‘tap-and-go’ with the flick of a wrist. When it comes to mobile payments, we have barely scraped the surface. Mobile payments offer consumers more freedom than ever before, keeping pace with the ever-growing demand for ease and usability. The need to carry an array of different payment methods may in time prove futile, you wouldn’t fill your wallet with cards and cash when you can do it all from your mobile.
The second important conclusion we can draw from the data is that real-time payments are a commercial reality today. Consumers expect to be able to shop and make payments in real-time, and retailers and technology vendors are responding with new solutions and services. Banks and other payment providers need to underpin real-time commerce with the ability to make secure, real-time payments anywhere in the world.
Worldwide, there is now an unstoppable drive towards any-to-any payments, which will enable consumers, merchants, banks and other organisations to connect directly with one another using any payment type, any channel, any network and any currency.
Real-time or faster payments as well as global interoperability of such systems were also the big buzzwords at SIBOS just a few weeks ago. However, compared to previous years the debate has moved on. The question today for many countries and institutions is not any longer whether to do faster payments but how to do it, and what the risks and challenges are. With discussions about global interoperability and harmonisation of messaging standards far from over, my predictions is that for now more and more countries will go ahead with plans for their own real-time payments systems at their own speed.
The experiences in the US, UK, Asia Pacific and India clearly demonstrate that there is significant customer demand for real-time payments systems. Many banks across the world realise that they can attract and retain customers if they offer faster payments services. In the long run faster payments will reduce costs for banks, by abolishing their payments silos. Banks face excessive costs just to maintain the status quo in payments, operating and maintaining multiple silos for ACH, RTGS and cards payments. Over time there will be potential to remove some silos, such as those for cheques and ACH, and replace them with faster payments schemes. For banks faster payments represents a huge opportunity to move away from aging legacy payments systems and towards a more modern infrastructure.
As the use of the ISO 20022 framework proliferates there is also a greater possibility that faster payments schemes across the globe will become more standardised. It is likely ISO 20022 will help to establish inter-country scheme linkages so that a customer in the UK for example, could make an instant payment to a family member in Australia. Countries will be able to improve their domestic payments systems while at the same time building compatibility with systems overseas. Within the next five years global, real-time cross-border transfers could become a reality.
The winners of the new ‘faster payments world’ will be those who act now. Countries like Holland, Denmark and Sweden are moving fast and are currently following in the footsteps of those with more established real-time payments systems. In the US, the US Reserve Banks and the Federal Reserve Board are developing faster payments in collaboration with banks, merchants, corporates and consumers. The Fed has also set up a Faster Payments Task Force, which will identify and evaluate approaches to faster payments, engaging with a diverse range of stakeholders. And in the European Union the EBA’s Instant Payment Task Force is working on a pan-European solution for instant payment processing and has developed a roadmap for delivery of instant payment services by EBA Clearing by 2018.
The winners in the evolving consumer payments market will be those who understand that long- term success will depend on two things. Firstly, innovative products must be easy to use and easy to understand, otherwise consumers will continue to do what they have always done.
Secondly, new approaches require bullet-proof payments operation and IT systems. In today’s brave new payments world there will be little room for error. Speed and reliability will decide who wins.
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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