CashFlows was launched in London in 2010 and provides BIN (bank information number) sponsorship services through its e-money license and direct membership in the Mastercard and Visa card schemes; this coupled with their EU regulatory and compliance expertise allows companies to easily cross over the hurdle of launching a European payment card program by helping them accept payments and facilitate transactions. CashFlows’ BIN sponsorship services are further complemented with their merchant acquiring capability that enables end customers to load funds to their card.

Marqeta’s recently unveiled European Digital Banking solution is already relied upon by digital banks like Morning Bank and YAPEAL, point of sale lender Aplazame, mobile payments provider Twisto and small business lender Capital on Tap. The Marqeta platform helps customers build, test and continuously refine new features in a developer sandbox, allowing them to build unique payment solutions that integrate with existing systems and software. It supports instantly issued virtual cards and offers advanced spend controls to engage users and grow card use, key functionality that will now be supported in partnership with CashFlows.

“Since we launched in the market at the end of 2018, we’ve seen a tremendous amount of energy and enthusiasm for our European Digital Banking solutions and real demand for a truly modern payments platform,” said Ian Johnson, Head of European Growth at Marqeta. “To be able to pair the new payment possibilities opened up by the Marqeta platform, with a BIN sponsor like CashFlows who knows what it takes to develop, launch and scale payment programs quickly in a rapidly evolving payments landscape is going to make us even stronger.”

“There’s a tight synergy and a close cultural alignment between what CashFlows and Marqeta are looking to accomplish in the market,” said Jonathan Bennett, Chief Commercial Officer, CashFlows. “Scheme membership is a complicated, time consuming and expensive process for fintechs that can otherwise focus their energy on honing the proposition and launch strategy. CashFlows brings inside-out knowledge of the process to speed things up and put power back in the hands of program owners. Marqeta is coming from a similar place - changing the rules in the market for the better, making it simpler and easier to get to market - and we’re excited to be working together.”

A study produced by payment firm Stripe and research firm 451 Research found that only half of the 500 businesses it surveyed expect to be compliant with the EU's Strong Customer Authentication (SCA) rules which are due to come into force in September.

Furthermore, the research suggests that the lack of readiness is disproportionately higher among smaller businesses with 60% of companies with less than 100 employees admitting that they are either unaware of the SCA regulation, unlikely to be compliant before September or unsure of when they will be compliant. In contrast just 4% of firms with more than 5,000 employees are unware of SCA. 

Part of the PSD2 regulation, SCA was brought into bolster security and reduce fraud in online transactions. However, it also requires technology and system changes and cooperation from consumers, many of whom may be unware of the additional steps thyat will be added to the payment process. 

Andeven for those firms aware of SCA, Stripe contends that there is an underestimation of the complexity of SCA compliance tools required and a misunderstanding of how possible exemptions might work.

Exemptions can be applied to recurring payments or small purchases under €30 but, states Stripe, administering the exemptions process could be a costly and complex undertaking for those firms choosing to do it in-house.  

Most worringly for e-commerce vendors and merchants, a failure to properly implement SCA could exacerbate the already low consumer tolerance for so-called 'bad checkouts' and lead to a sharp rise in cart abandonment. 

"SCA is unequivocally the single most disruptive event to impact European digital commerce, and many businesse, especially smaller ones, have yet to fully grasp its extensive impact," said Jordan McKee, analyst at 451 Research. "Our study indicates low levels of preparedness and, most troublingly, a lack of appreciation for how SCA will transform how European consumers will buy online.”

 “SCA will make or break internet businesses. The urgency to get ready for it cannot be overstated,” added Guillaume Princen, head of Continental Europe at Stripe. 

The findings are based on surveys conducted with 500 qualified payment professionals at online businesses and 1000 consumers in the UK, France, Germany, the Netherlands and Spain.

European businesses are unprepared for SCA and small businesses will bear the brunt of it

With just over three months to go before SCA is enforced, preparedness remains remarkably low: 40% of businesses aware of SCA say they feel prepared to address its requirements. Most businesses are now racing against the clock to become compliant, with 44% expecting to be ready only on the exact day SCA takes effect (September 14).

SCA will disproportionately impact small businesses: three in five businesses with under 100 employees are either unfamiliar with SCA, don’t plan on being compliant before September, or are unsure when they will be ready. Contrast this with larger merchants of more than 5,000 employees where only 1 in 25 payment professionals are unaware.

Jordan McKee, analyst at 451 Research said: “SCA is unequivocally the single most disruptive event to impact European digital commerce, and many businesses—especially smaller ones—have yet to fully grasp its extensive impact. Our study indicates low levels of preparedness and, most troublingly, a lack of appreciation for how SCA will transform how European consumers will buy online.”

Businesses underestimate the complexity of SCA compliance tools: exemptions and 3D Secure 2

Many businesses are preparing to minimize the transactions for which SCA will be required. This can be achieved through a set of exemptions, which allow, for example, recurring payments or small purchases (under €30) to be approved without extra layers of friction.

However, businesses are dramatically underestimating the complexity and resource burden of managing and optimizing these exemptions; 50% of respondents plan to handle management of exemptions completely in-house. The challenge is that exemptions are complex to administer, especially for smaller businesses, and require visibility on how card networks and banks will apply exemptions across Europe. For instance, purchases under €30 are exempt from SCA, but SCA will be requested by the customer’s bank once five transactions below €30 have been made or the total value of those transactions reaches €100.

The most recent version of 3D Secure, which to date has been known by consumers under names such as Verified by Visa and Mastercard Secure Code, is emerging as a popular SCA-compliant way to accept payments online. However, one in four online businesses are not yet familiar with it. Further, for those that are familiar, 24% believe they will only implement it after the September deadline.

“SCA will make or break internet businesses. The urgency to get ready for it cannot be overstated,” commented Guillaume Princen, Head of Continental Europe at Stripe. “We’re building infrastructure to insulate internet businesses from this kind of regulatory complexity. Our ambition is to accelerate online commerce and empower innovators to easily experiment with new internet business models.”

SCA will exacerbate low consumer tolerance for bad checkouts, causing a rise in cart abandonment

Just 47% of European consumers feel today’s online checkout process is ‘very easy’ and the most attractive customers for online businesses often abandon purchases when encountering a poor checkout experience. For example, 74% of Gen Z shoppers have abandoned an online purchase in the past six months due to a bad checkout experience. Over half (52%) of online shoppers who abandon a purchase end up completing the transaction with a competing merchant.

Against this backdrop of low consumer tolerance for poor checkout design, SCA is likely to make matters worse. 73% of shoppers are unaware of new authentication requirements coming to the online checkout experience in September. SCA increases the likelihood that shoppers will abandon shopping carts in September when they encounter unexpected obstacles to everyday online purchases, such as paying for taxis, ordering food delivery, and subscribing to TV and music services.

Many consumers prefer SMS passcodes over Apple Pay despite convenience and security benefits

When asked what they believe to be the best authentication experience, 54% of consumers said one-time passcodes, while 26% said fingerprint recognition (like Touch ID on Apple devices). Despite this apparent low preference for fingerprint recognition, 43% still believe that it is “most secure”. This indicates a need to help consumers get more comfortable with mobile wallets like Apple Pay and Google Pay as a secure and easy way to check out online.

Major customer milestones for Stripe’s international expansion

Today, Stripe also announced that it is powering payments for WeWork, Rappi, Github, AJ Bell, Turo and FX Pro. Facilitating money movement for these complex, global businesses in Europe, Latin America and North America marks a major milestone in Stripe’s international expansion.

Guillaume Princen, Head of Continental Europe at Stripe, commented: “We’re building a goal payments and treasury network to power economic connectivity between every combination of currencies, countries, payment methods, and regional bank networks in the world. By stitching together and virtualizing the world’s financial rails, we're allowing companies to accelerate their business growth by moving money further and faster.” 

The firm has been tasked with creating a regulated network of distributed Financial Market Infrastructures (dFMIs) to support global exchange of value transactions.

Initially, five currencies are in scope: CAD, EUR, GBP, JPY & USD. Fnality will create digital versions of each, which will be 100% backed by fiat currency held at the respective central bank with convertibility into fiat at par guaranteed at all times.

Its backers say that the USC reduces settlement risk, counterparty risk and ultimately system risk in the post-trade settlement process.

Rhomaios Ram, CEO, Fnality, says: "We are delighted to launch Fnality, the commercial realisation of the USC Project. Working with our founding shareholders, we will start the regulatory approval process right away and look forward to connecting to the first business applications as soon as possible

"USC will be an enabler for tokenised markets and also offers a significant opportunity to simplify liquidity management using one cash asset for as many settlement needs as possible."

Banco Santander, BNY Mellon, CIBC, Commerzbank, Credit Suisse, ING, KBC Group, Lloyds Banking Group, MUFG Bank, Sumitomo Mitsui Banking Corporation and State Street are all backing the new Fnality International operation.