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Why the UK is standing tall at the forefront of fintech



Why the UK is standing tall at the forefront of fintech 1

By Michael Magrath, Director of Global Standards and Regulations, OneSpan

In recent years, the UK has established itself as one of the world’s leading financial centers, with a strong heritage in financial services and technology. This heritage has helped it become a prominent player and top innovator within the fintech space, particularly when it comes to fostering pioneering startups.

Its technological prowess and ever-evolving regulatory landscape have played key roles in driving the UK forward. For example, technology has enabled business and personal financial transactions to be completed entirely remotely and in a secure manner, while regulations are encouraging strict compliance to better protect customers’ sensitive information.

The country’s leading position in the world of financial services doesn’t look like it’ll disappear anytime soon. In fact, several factors are helping the UK to propel it’s fintech industry even further, with a number of technology initiatives and regulations laying the foundations for a modern, secure, and competitive financial services ecosystem.

Regulations level the playing field

Better data privacy and protection practices have long been on the minds of regulators and the introduction of the second Payment Service Directive (PSD2) and General Data Protection Regulation (GDPR) set out greater focus on security and privacy than ever before. Since their inceptions, they’ve been replicated around the world. Combined with the pioneering initiative of Open Banking, the UK’s regulatory landscape has been breaking new ground for global markets to follow suit.

As a result, the UK has created a strong financial services ecosystem. For example, traditional banks are digitizing their services for more streamlined digital user experiences that can compete with many emerging challenger banks and other financial services through Open Banking. New regulations have largely contributed and ultimately reaffirmed the UK at the center of financial services globally.

The provisions of GDPR post Brexit shall remain since the UK government enacted the Data Protection, Privacy and Electronic Communications (Amendments etc) (EU Exit) Regulations 2019 – which amends the Data Protection Act (DPA 2018) and merges it with the requirements of the EU GDPR.  This is under the name,‘UK GDPR’.  GDPR and the UK GDPR, are very similar so organisations that process personal data on UK citizens should continue to comply with the requirements of the EU GDPR.

Brexit impact on open banking

In July, the European Banking Authority (EBA) announced that eIDAS certificates of UK TPPs, required to access customer account information from account providers, or initiate payments, would be revoked when the transition period ends on 31 December 2020.

On November 3, 2020, The Financial Conduct Authority announced that it “will permit UK-based third-party providers (TPPs) to use an alternative to eIDAS certificates to access customer account information from account providers, or initiate payments, after Brexit. Firms must act to ensure they can continue to provide open banking services.”

Technology is driving competition

The emergence of digital only challenger banks over the past few years in the UK has triggered a number of major changes from their traditional banking counterparts and financial regulators. Now, due to the current climate amidst the ongoing pandemic, consumers are using less cash and digital channels have become the norm. The implementation of digital technologies and legislation has been accelerated, creating an increasingly competitive financial services market.

As a result, the main differentiators that banks and financial institutions (FIs) now depend on are the technological capabilities that their user experiences offer. But, baring the threat landscape in mind, digitization can’t be chased to the detriment of security. Banks need to source technologies that enable them to offer frictionless digital customer experiences while maintaining a strong security posture.

It’s clear that consumers today are more familiar with digital channels, which is why they now demand fully seamless experiences. Friction in the user experience can cause frustration and, in the digital environment we find ourselves in, it’s all too easy to switch to a competitor. The best approach for banks and FIs is therefore to create exceptional digital experiences. By focusing on security and implementing the latest technologies, banks can create platforms that are entirely seamless.

Michael Magrath

Michael Magrath

Technologies such as biometrics and risk-based authentication solutions are also growing in usage, helping banks to remove friction points and provide better customer journeys and onboarding processes. The increased level of competition today means technologies like these are vital for traditional banks and FIs in order to continue to compete and grow their customer base into the future.

Developing a secure digital identity

As the ongoing pandemic has continued to shift the focus towards digital financial platforms, secure identity verification has become a major talking point which is now receiving more attention than ever. The pandemic has emphasised the need for a secure central database that banks and other FIs could use to efficiently and securely verify that a customer, new or current, is who they say they are. Today, more digital identity initiatives are developing rapidly, with the UK government saying it will continue to consult on issues related to privacy and technical standards for secure digital IDs by driving legislation forwards.

The UK government is looking to these new initiatives to support the private sector by undertaking preliminary discussions related to the development of a standard identity verification system alongside the Her Majesty’s Passport Office . This would allow banks and FIs to be able to securely verify customers’ identification documents through a central database, significantly reducing the amount of time it takes to complete certain financial activities such as opening a new account. This is in a one-year pilot scheduled to conclude in July 2021.

Furthermore, the Cabinet Office has issued new guidance with next steps to be taken in the area of digital identity, “with plans to update existing laws and a new set of guiding principles for policy development”. As these discussions and developments mature into written laws, we’ll see an industry more capable of offering digital identities that allow individuals and organisations to do business in a more secure and seamless way, fit for the modern digital era.  While the UK Cabinet Office is still involved, the government’s digital identity endevours have migrated to the Department of Culture, Media and Sport (DCMS) with “all hands” focused on the development of a UK-wide Trust Framework for Digital Identity that can be used across both public and private sectors.

The nature of upcoming and newly introduced regulations, highlighted in the latest Global Financial Regulations Report, demonstrate the UK remains at the pinnacle of financial services around the world due to its involvement with modern regulatory standards as part of the EU, and thanks to the pioneering products and services offered by the UK’s challenger banks and FIs. Today, we again see the UK innovating with modern technologies to offer better services and customer experiences, supplemented by regulations that are driving the industry beyond the norm for the rest of the world. As we have seen with legislation such as GDPR, UK GDPR and PSD2, new regulations that work towards improving the security of customer data and the processes with which financial activity is undertaken, other countries and regions will continue to look to the UK to set an example.

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IMF lifts global growth forecast for 2021, still sees ‘exceptional uncertainty’



IMF lifts global growth forecast for 2021, still sees 'exceptional uncertainty' 2

By Andrea Shalal

WASHINGTON (Reuters) – The International Monetary Fund on Tuesday raised its forecast for global economic growth in 2021 and said the coronavirus-triggered downturn in 2020 would be nearly a full percentage point less severe than expected.

It said multiple vaccine approvals and the launch of vaccinations in some countries in December had boosted hopes of an eventual end to the pandemic that has now infected nearly 100 million people and claimed the lives of over 2.1 million globally.

But it warned that the world economy continued to face “exceptional uncertainty” and new waves of COVID-19 infections and variants posed risks, and global activity would remain well below pre-COVID projections made one year ago.

Close to 90 million people are likely to fall below the extreme poverty threshold during 2020-2021, with the pandemic wiping out progress made in reducing poverty over the past two decades. Large numbers of people remained unemployed and underemployed in many countries, including the United States.

In its latest World Economic Outlook, the IMF forecast a 2020 global contraction of 3.5%, an improvement of 0.9 percentage points from the 4.4% slump predicted in October, reflecting stronger-than-expected momentum in the second half of 2020.

It predicted global growth of 5.5% in 2021, an increase of 0.3 percentage points from the October forecast, citing expectations of a vaccine-powered uptick later in the year and added policy support in the United States, Japan and a few other large economies.

It said the U.S. economy – the largest in the world – was expected to grow by 5.1% in 2021, an upward revision of 2 percentage points attributed to carryover from strong momentum in the second half of 2020 and the benefit accruing from $900 billion in additional fiscal support approved in December.

The forecast would likely rise further if the U.S. Congress passes a $1.9 trillion relief package proposed by newly inaugurated President Joe Biden, economists say.

China’s economy is expected to expand by 8.1% in 2021 and 5.6% in 2022, compared with its October forecasts of 8.2% and 5.8%, respectively, while India’s economy is seen growing 11.5% in 2021, up 2.7 percentage points from the October forecast after a stronger-than-expected recovering in 2020.

The Fund said countries should continue to support their economies until activity normalized to limit persistent damage from the deep recession of the past year.

Low-income countries would need continued support through grants, low-interest loans and debt relief, and some countries may require debt restructuring, the IMF said.

(Reporting by Andrea Shalal; Editing by Shri Navaratnam)

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Leon Black step downs as Apollo CEO after review of Epstein ties



Leon Black step downs as Apollo CEO after review of Epstein ties 3

By Mike Spector and Chibuike Oguh

NEW YORK (Reuters) – Leon Black said on Monday he would step down as chief executive at Apollo Global Management Inc, following an independent review of his ties to the late financier and convicted sex offender Jeffrey Epstein.

While Black, whose net worth is pegged by Forbes at $8.2 billion, will remain Apollo’s chairman, his decision to step down illustrates how doing business with Epstein weighed on the reputation of one of Wall Street’s most prominent investment firms. Black co-founded Apollo 31 years ago.

Apollo said it plans to change its corporate governance structure, doing away with shares with special voting rights that currently give Black and other co-founders effective control of the firm.

The independent review, conducted by law firm Dechert LLP, found Black was not involved in any way with Epstein’s criminal activities. Black paid Epstein $158 million for advice on tax and estate planning and related services between 2012 and 2017, according to the review.

Black, 69, said that although the review confirmed he did not engage in any wrongdoing, he “deeply” regretted his involvement with Epstein.

“I hope that the results of the review, and related enhancements … will reaffirm to you that Apollo is dedicated to the highest levels of transparency and governance,” Black wrote in a note to Apollo fund investors. He will step down as CEO no later than July 31.

Apollo co-founder Marc Rowan, 58, will take over as CEO.

Rowan has often kept a low-key profile compared with Apollo’s other co-founder, Joshua Harris, 56, and spearheaded many initiatives that turned Apollo into a credit investment giant, including the permanent capital base the firm enjoys through its ties to reinsurer Athene Holding Ltd.

The revelations of Black’s ties to Epstein took a toll on Apollo, which Black turned into one of the world’s largest private equity groups. Apollo executives had warned in October that some investors had paused their commitments to the buyout firm’s funds as they awaited the review’s findings.

Apollo shares are down 1% since the New York Times reported on Oct. 12 that Black paid at least $50 million to Epstein for advice and services, when most of his clients had deserted him.

Over the same period, shares of peers Blackstone Group Inc, KKR & Co Inc and Carlyle Group Inc are up 19%, 10% and 23%, respectively.

“We think a large number of (Apollo fund investors) took a ‘pause’, and we believe the outcome (of the review) and changes today will cause most of them to return to allocating to future Apollo funds,” Credit Suisse analysts wrote in a research note.

Apollo shares jumped 4% to $47.65 in after-hours trading on Monday.

“We continue to follow these events closely and will evaluate how Apollo addresses its issues,” the California State Teachers’ Retirement System, one of the largest U.S. public pension funds and an Apollo investor, said in a statement.

Epstein was found dead at age 66 in August 2019 in a Manhattan jail, while awaiting trial on sex trafficking charges for allegedly abusing dozens of underage girls in Manhattan and Florida from 2002 to 2005. New York City’s chief medical examiner ruled that the cause of death was suicide by hanging.


Black previously said he had paid millions of dollars to Epstein, but the exact size of his payments was revealed for the first time on Monday. Beyond the $158 million in payments, Black made two loans to Epstein totaling $30.5 million in early 2017.

Dechert said in its report that Black’s social ties with Epstein, who built his fortune by endearing himself to powerful figures in high society, went back to the mid-1990s.

Epstein won Black’s trust by resolving an estate tax issue for him in 2012 potentially worth at least $500 million, the report said. He ended up advising Black on various aspects of his personal financial affairs, from his family office and airplane to his yacht and artwork.

Black believed that Epstein provided advice over the years that conferred between $1 billion and $2 billion in value to him, according to the Dechert report. Black said in his note to investors that he had paid Epstein a fee equivalent to 5% of the value he generated on an after-tax basis, and not tied to hourly rates.

Black and Epstein’s relationship deteriorated after Epstein failed to repay $20 million of the loans and Black refused to pay tens of millions of dollars in fees that Epstein demanded, according to the Dechert report.

They severed ties in October 2018, according to the report. Black knew Epstein had been convicted in Florida a decade earlier for soliciting prostitution from a minor, the Dechert report said, but there was no evidence suggesting Black had knowledge of the other alleged crimes before they were publicly reported in late 2018, culminating in Epstein’s July 2019 arrest.

On Monday, Black pledged $200 million toward “initiatives that seek to achieve gender equality and protect and empower women,” as well as helping survivors of domestic violence, sexual assault and human trafficking.

Apollo said it would pursue a “one share, one vote” corporate governance structure that would do away with shares with special voting rights. It said the move could qualify it for listing on the S&P Global indices.

Apollo also said it would seek to give its board more authority to oversee its business, eroding the power of its executive committee led by Black.

The board will be expanded to include four new independent directors, including Avid Partners founder Pamela Joyner and physician and scientist Siddhartha Mukherjee, Apollo said. Apollo co-Presidents Scott Kleinman and James Zelter will join the board and take on increased responsibility running day-to-day operations.

Apollo had about $433 billion in assets under management as of the end of September.

(Reporting by Mike Spector and Chibuike Oguh; Additional reporting by Lawrence Delevigne and Jessica DiNapoli in New York; Editing by Sonya Hepinstall, Leslie Adler and Kim Coghill)

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EU sees no cliff-edge ending for COVID fiscal stimulus



EU sees no cliff-edge ending for COVID fiscal stimulus 4

BRUSSELS (Reuters) – European governments will not need to abruptly end fiscal support for their economies after the pandemic, top officials said on Monday, noting that any withdrawal of stimulus would be carried out gradually and only once the economy has recovered.

Euro zone public debt rose sharply during 2020 and is likely to exceed 100% of GDP this year as governments borrow to help individuals and businesses survive lockdowns.

The higher debt raises concern about how to deal with it down the road and when to start cutting it again, since the EU last year suspended its rules limiting budget deficits and debt, known as the Stability and Growth Pact (SGP).

EU finance ministers are to discuss when to reintroduce any borrowing limits in the second quarter of this year.

“I believe it important that finance ministers debate and reach a common understanding on the appropriate fiscal stance by the summer. This can then serve as guidance for the preparation of their draft budgetary plans for 2022,” the chairman of the euro zone’s group of finance ministers, Paschal Donohoe, said on Monday.

“To avoid any misunderstanding, let me stress that this is not about an imminent withdrawal of fiscal stimulus,” he told the economic committee of the European Parliament.

“We all agree that our immediate priority is to shield our citizens, in particular younger cohorts and those most exposed to the crisis. There must be no cliff-edges,” he said.

Joao Leao, the finance minister of Portugal which holds the rotating presidency of the EU and therefore sets the agenda for EU finance ministers’ work until June, was equally cautious.

“We should not withdraw stimulus too early. We need to make sure the suspension clause for the SGP remains in force at least until we return to pre-crisis economic figures,” he told the committee. “We need to make sure jobs are maintained as well as the production capacity of companies.”

He said first cash from the EU’s 750 billion euro post-COVID economic recovery programme should reach the economy in the first half of the year.

“Real funding should be getting to the economy before the summer or in early part of the summer,” he said.

(Reporting by Jan Strupczewski; Editing by Giles Elgood)

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