Paul Butterworth, Strategic Marketing Director, Trustonic
After a frantic few days in Copenhagen for Money 20/20 Europe, I’m finally back at my desk. The flight home gave me a bit of time to digest the discussions and presentations and, amid the melee and company announcements, a few themes stand out.
- Let’s get wallets out of the way first. The majority of industry folk now admit that wallets are not where we wanted or expected them to be. Adoption of the ‘Pays’ is happening, but it is painfully Take me as an example, I have Apple Pay, Android Pay and Samsung Pay on my devices but, more often than not, tap my contactless card. And I’m a self-confessed payment geek.
The crawling pace of adoption is bringing discussions on ‘value’ to the fore again (I know, I know…). Many (including me in previous lives) have been banging the value-added services drum for years, but now is the time where it can actually make a difference. The ‘Pays’ are out there, user experience is getting more seamless, more banks are signing up – they just need a reason for consumers to use them and payments on their own are not a sufficient driver. Rewards, in-app and online payments, offers, transaction notifications; these are the things that will change consumers’ habits and we’re about to see a lot more of them on offer.
- Lots of discussions on our stand related to secure biometrics and strong authentication. With PSD2 and 3D Secure 2.0 looming, the FinTech industry is scrambling to understand how authentication will work, if it is possible on time and how a consistent user experience can be locked down. On-device biometrics will likely form a part of the strong user authentication method for service authorisation and/or access to apps and services, but how this will shake out remains to be seen. Hardware security on devices will be essential, though, to protect users’ identities, data and services and we’ll be working closely with the key players to share the benefits of trusted execution environment (TEE) device security.
- Talk of invisible payments was also everywhere. Retailers are still talking about the idea of own-brand wallets. They are in a position totake control of the in-store buying experience and push the act of paying into the background. If they can identify their customers earlier on – as they enter the store for example, rather than at the checkout – they can personalise offers, deliver a more engaging experience and even remove the payment process altogether. All through an app. The ‘Pays’ would also like to be enablers here, but how they do this is still to be seen.
Spend is often higher when payment is taken out of focus, stores would need less checkout infrastructure and customer engagement and loyalty would be greater. Fewer overheads, more revenues. Security and privacy – both for the consumer and for the store – obviously need to be considered from the off but, with fraud management in the cloud and app/hardware security on devices, this could become a reality very soon.
- For the first time, next gen mPOS and PIN on glass are being seriously explored. But how do we get there? We have one eye on the new PCI standards that are set to come out at the end of the year. Hopefully these will bring some clarity. Beyond that, TEE technology in smartphones is already able to secure the display and enable secure PIN entry, perfect use cases for using smartphones as mPOS devices. Very soon we could be tapping our smartphones or cards on another smartphone to initiate a contactless payment, before securely entering our PIN into the merchant’s device. It will require some consumer education to bring trust, but it opens up a huge range of opportunities for small-scale retailers.
- The Chinese giants are coming to Europe. Some of the most interesting conversations were around players like AliPay and WeChat Pay launching in Europe. It’s going to be really interesting to see how much adoption they can generate. The QR code payment method will not be familiar for many, but the combination of secure biometrics may see people look past this. To my earlier point, if they manage to offer VAS quicker than the ‘Pays’, we may have an interesting land grab for mPayments supremacy on our hands.
- Finally, as always, the machines are coming. Artificial intelligence seems to have become the new buzz technology. There are different opinions on the best use case though. For me, the most interesting ones are back-end fraud management and the live analysis of customer/purchase data to tailor offers and loyalty. Many projects look set to integrate AI in some way in the coming years, we just need to make sure it is up to standard to deliver a seamless and secure customer experience.
In all, it was another extremely busy show that is establishing itself as the premier FinTech event in Europe. But what were your key takeaways?
UK might need negative rates if recovery disappoints – BoE’s Vlieghe
By David Milliken and William Schomberg
LONDON (Reuters) – The Bank of England might need to cut interest rates below zero later this year or in 2022 if a recovery in the economy disappoints, especially if there is persistent unemployment, policymaker Gertjan Vlieghe said on Friday.
Vlieghe said he thought the likeliest scenario was that the economy would recover strongly as forecast by the central bank earlier this month, meaning a further loosening of monetary policy would not be needed.
Data published on Friday suggested the economy had stabilised after a new COVID-19 lockdown hit retailers last month, while businesses and consumers are hopeful a fast vaccination campaign will spur a recovery.
Vlieghe said in a speech published by the BoE that there was a risk of lasting job market weakness hurting wages and prices.
“In such a scenario, I judge more monetary stimulus would be appropriate, and I would favour a negative Bank Rate as the tool to implement the stimulus,” he said.
“The time to implement it would be whenever the data, or the balance of risks around it, suggest that the recovery is falling short of fully eliminating economic slack, which might be later this year or into next year,” he added.
Vlieghe’s comments are similar to those of fellow policymaker Michael Saunders, who said on Thursday negative rates could be the BoE’s best tool in future.
Earlier this month the BoE gave British financial institutions six months to get ready for the possible introduction of negative interest rates, though it stressed that no decision had been taken on whether to implement them.
Investors saw the move as reducing the likelihood of the BoE following other central banks and adopting negative rates.
Some senior BoE policymakers, such as Deputy Governor Dave Ramsden, believe that adding to the central bank’s 875 billion pounds ($1.22 trillion) of government bond purchases remains the best way of boosting the economy if needed.
Vlieghe underscored the scale of the hit to Britain’s economy and said it was clear the country was not experiencing a V-shaped recovery, adding it was more like “something between a swoosh-shaped recovery and a W-shaped recovery.”
“I want to emphasise how far we still have to travel in this recovery,” he said, adding that it was “highly uncertain” how much of the pent-up savings amassed by households during the lockdowns would be spent.
By contrast, last week the BoE’s chief economist, Andy Haldane, likened the economy to a “coiled spring.”
Vlieghe also warned against raising interest rates if the economy appeared to be outperforming expectations.
“It is perfectly possible that we have a short period of pent up demand, after which demand eases back again,” he said.
Higher interest rates were unlikely to be appropriate until 2023 or 2024, he said.
($1 = 0.7146 pounds)
(Reporting by David Milliken; Editing by William Schomberg)
UK economy shows signs of stabilisation after new lockdown hit
By William Schomberg and David Milliken
LONDON (Reuters) – Britain’s economy has stabilised after a new COVID-19 lockdown last month hit retailers, and business and consumers are hopeful the vaccination campaign will spur a recovery, data showed on Friday.
The IHS Markit/CIPS flash composite Purchasing Managers’ Index, a survey of businesses, suggested the economy was barely shrinking in the first half of February as companies adjusted to the latest restrictions.
A separate survey of households showed consumers at their most confident since the pandemic began.
Britain’s economy had its biggest slump in 300 years in 2020, when it contracted by 10%, and will shrink by 4% in the first three months of 2021, the Bank of England predicts.
The central bank expects a strong subsequent recovery because of the COVID-19 vaccination programme – though policymaker Gertjan Vlieghe said in a speech on Friday that the BoE could need to cut interest rates below zero later this year if unemployment stayed high.
Prime Minister Boris Johnson is due on Monday to announce the next steps in England’s lockdown but has said any easing of restrictions will be gradual.
Official data for January underscored the impact of the latest lockdown on retailers.
Retail sales volumes slumped by 8.2% from December, a much bigger fall than the 2.5% decrease forecast in a Reuters poll of economists, and the second largest on record.
“The only good thing about the current lockdown is that it’s no way near as bad for the economy as the first one,” Paul Dales, an economist at Capital Economics, said.
The smaller fall in retail sales than last April’s 18% plunge reflected growth in online shopping.
BORROWING SURGE SLOWED IN JANUARY
There was some better news for finance minister Rishi Sunak as he prepares to announce Britain’s next annual budget on March 3.
Though public sector borrowing of 8.8 billion pounds ($12.3 billion) was the first January deficit in a decade, it was much less than the 24.5 billion pounds forecast in a Reuters poll.
That took borrowing since the start of the financial year in April to 270.6 billion pounds, reflecting a surge in spending and tax cuts ordered by Sunak.
The figure does not count losses on government-backed loans which could add 30 billion pounds to the shortfall this year, but the deficit is likely to be smaller than official forecasts, the Institute for Fiscal Studies think tank said.
Sunak is expected to extend a costly wage subsidy programme, at least for the hardest-hit sectors, but he said the time for a reckoning would come.
“It’s right that once our economy begins to recover, we should look to return the public finances to a more sustainable footing and I’ll always be honest with the British people about how we will do this,” he said.
Some economists expect higher taxes sooner rather than later.
“Big tax rises eventually will have to be announced, with 2022 likely to be the worst year, so that they will be far from voters’ minds by the time of the next general election in May 2024,” Samuel Tombs, at Pantheon Macroeconomics, said.
Public debt rose to 2.115 trillion pounds, or 97.9% of gross domestic product – a percentage not seen since the early 1960s.
The PMI survey and a separate measure of manufacturing from the Confederation of British Industry, showing factory orders suffering the smallest hit in a year, gave Sunak some cause for optimism.
IHS Markit’s chief business economist, Chris Williamson, said the improvement in business expectations suggested the economy was “poised for recovery.”
However the PMI survey showed factory output in February grew at its slowest rate in nine months. Many firms reported extra costs and disruption to supply chains from new post-Brexit barriers to trade with the European Union since Jan. 1.
Vlieghe warned against over-interpreting any early signs of growth. “It is perfectly possible that we have a short period of pent up demand, after which demand eases back again,” he said.
“We are experiencing something between a swoosh-shaped recovery and a W-shaped recovery. We are clearly not experiencing a V-shaped recovery.”
($1 = 0.7160 pounds)
(Editing by Angus MacSwan and Timothy Heritage)
Oil extends losses as Texas prepares to ramp up output
By Devika Krishna Kumar
NEW YORK (Reuters) – Oil prices fell for a second day on Friday, retreating further from recent highs as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather.
Brent crude futures were down 33 cents, or 0.5%, at $63.60 a barrel by 11:06 a.m. (1606 GMT) U.S. West Texas Intermediate (WTI) crude futures fell 60 cents, or 1%, to $59.92.
This week, both benchmarks had climbed to the highest in more than a year.
“Price pullback thus far appears corrective and is slight within the context of this month’s major upside price acceleration,” said Jim Ritterbusch, president of Ritterbusch and Associates.
Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude production and 21 billion cubic feet of natural gas, analysts estimated.
Texas refiners halted about a fifth of the nation’s oil processing amid power outages and severe cold.
Companies were expected to prepare for production restarts on Friday as electric power and water services slowly resume, sources said.
“While much of the selling relates to a gradual resumption of power in the Gulf coast region ahead of a significant temperature warmup, the magnitude of this week’s loss of supply may require further discounting given much uncertainty regarding the extent and possible duration of lost output,” Ritterbusch said.
Oil fell despite a surprise drop in U.S. crude stockpiles in the week to Feb. 12, before the big freeze. Inventories fell by 7.3 million barrels to 461.8 million barrels, their lowest since March, the Energy Information Administration reported on Thursday. [EIA/S]
The United States on Thursday said it was ready to talk to Iran about returning to a 2015 agreement that aimed to prevent Tehran from acquiring nuclear weapons. Still, analysts did not expect near-term reversal of sanctions on Iran that were imposed by the previous U.S. administration.
“This breakthrough increases the probability that we may see Iran returning to the oil market soon, although there is much to be discussed and a new deal will not be a carbon-copy of the 2015 nuclear deal,” said StoneX analyst Kevin Solomon.
(Additional reporting by Ahmad Ghaddar in London and Roslan Khasawneh in Singapore and Sonali Paul in Melbourne; Editing by Jason Neely, David Goodman and David Gregorio)
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