(The Paypers) Yandex.Checkout has announced that it starts offering Russian customers the opportunity to make an online preorder and an advance payment for Tesla Model Y.
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Eating the dust of Barclaycard’s partnership with Alipay, Finextra reports on the dominance of Ant Financial and Tencent in China and the emergence of the platform ecology business model in South East Asia, which will be dissected in detail at Money20/20 in Singapore this week.
Now making a play for the B2B sector, Big Tech giants are leveraging marketplace dynamics and are scaling at a hyper level to disrupt other business models but could come up against regulatory changes, forcing companies to evolve or die.
In addition to this, with billions being splurged on the likes of Grab and Go-Jek by Softbank and fast data speed, cheap connection and inexpensive smartphones available, platforms are booming across this region and can expand in the ride-hailing, groceries and retail markets.
Chinese tech giants are offering banks products and services built on cloud technology, machine learning and predictive analytics so that financial institutions can utilise this super app model to replace their core banking infrastructure.
However, as Drew Graham explained in Finextra’s feature on ‘The challenger bank playbook’, banks will become less relevant as those companies which are backed by Alibaba, Tencent and Softbank “start to monopolise the consumer digital experience.”
Hyper-scaling
In conversation with Finextra TV, Rebecca Martin, content director of Money20/20 Asia, highlighted that “the rise that we’re seeing at the moment with Chinese tech giants like Ant Financial and Tencent is developing this new type of business model which we’re referring to as the platform ecology model, or the superapp model.
“What we’re seeing is that these tech giants - with their apps Alipay and WeChat - are developing financial services products, wider products and services, in these platforms that they’re offering to consumers. They now have in these apps search functionalities, commerce, navigation and conversation that all sits within this one superapp and this is allowing them to develop and contextualise seamless experiences for their customers that otherwise wouldn’t be possible.
Martin referenced Ant Financial as an example. Now valued at $150 billion, the tech giant is a top 10 financial services company, raised 35% of fintech funding globally last year and now has over 600 million Alipay users.
“At Money20/20, we’re going to shine a light on what this model looks like, what the economics are behind it, how it’s enabling these giants to achieve hyper-scale, but also how it’s enabling the third parties that are creating products within this ecosystem.
“These third parties start to look at each other as partners within this ecosystem, rather than competitors and they’re able to grow much faster than they would do by themselves because they have access to the customer base of these platforms to start off with.”
Platforms by definition
Speaking to Finextra Research, Drew Graham suggested that for the consumer, not much has changed because they are receiving “the same benefits as shopping centres offered them before, and the high street before that. Companies that natively and deeply understand the customer interface will set the rules for engaging with what will become ‘their’ consumers, and consumers will end up with a low-friction, engaging experience.
“However, history will repeat itself and we will once again sacrifice long-term social value and consumer protection at the altar of short-term convenience. The word ‘platform’ has come to mean a specific thing in this context, but we have to remember that they have existed for generations.”
Graham continued to detail how the concept of the ‘platform’ is not new: printed media distribution, cars, television, mobile phones and money itself is a platform. “Platforms aggregate the work that would be impossible to replicate without gigantic amounts of time and money and then rent it out to those that sit atop it; billion-dollar companies and many billionaires will be created on top of this new generation of platforms.”
And that’s exactly what has happened, as Christopher Davison, co-founder and group CEO of BigPay, explained. “Many successful payment companies evolve from a larger platform: PayPal and eBay, Alipay and Alibaba, and BigPay and AirAsia. Platforms and ecommerce players enable the growth of payments companies, open up wide distribution, drive closed loop sales volume, provide stock keeping unit level data insights and have potential to leverage a trusted brand.”
The European conundrum
Martin also discussed the possibility of the Chinese model expanding to other countries and perhaps even to Europe. “We’re already seeing this model expand outside of China, so there’s a big chance we could see it coming into Europe and maybe in the US as well.
“If we look at the internationalisation strategies of players like Ant Financial and Tencent, what they’re doing outside of China, is looking at partnering or acquiring with the leading mobile wallets in countries across Asia to get their customer base ready and then build those platforms underneath these mobile wallets.”
She went on to speak about Ant Financial’s partnership with Paytm in India, B Cash in Bangladesh and Mint in the Philippines where the focus is on strategy. There is also home-grown talent across South East Asia such as Grab making an impact in this space, offering lending and payments services.
In the UK, WhatsApp is slowly becoming a superapp with the ability to share pictures, message and conference calls on the platform, as Martin explained and with the tech company already offering payments services in India, the platform model may penetrate the European market sooner than we think. But the question here is whether it will be WhatsApp or Facebook, or an influence from the East?
However, Graham’s view is that as “WeChat, Alipay and their surrogates in Go-Jek and Paytm are heavily China-funded and China-owned and just as we’re seeing with Huawei and we saw with the MoneyGram acquisition, politics will limit their impact in the West. The Facebook backlash is evidence that consumers are becoming wise to the long-term destructive possibilities of platforms and Europe’s already onerous data privacy regulation will hamper the platforms from dominating the way they have in Asia.”
Davison also has views on regulation and predicts that superapps “will have a more limited impact in Europe. Mega-apps have succeeded in markets where regulation has prevented open market competition, and hence have an oligopoly to create a large user base to cross sell multiple and diverse products. In a more open market this situation is unlikely to occur.”
The world’s most promising startups and FinTechs today move like Mastercard – in microseconds. We may be different in size, but there are many more similarities than differences, which we witness through Start Path.
The award-winning startup engagement program relentlessly scours the globe for firms that offer promising payments technologies and show a readiness for scale. After searching around its presence in 210 geographies and beyond, Mastercard and seven startups are descending upon Dublin this week to ignite their collaboration. Together, we will set a blueprint for the next six months between tailored programs, operational support and commercial engagements with the Mastercard ecosystem.
The newest Mastercard Start Path companies join a network of more than 190 that, through Start Path participation, have gone on to raise more than $1.2 billion in capital and now work with some of the world’s largest banks and widely renowned organizations.
• Fligoo uses AI, machine learning and big data with a focus on behavior analysis and prediction.
• LendingFront offers sophisticated and cloud-based small business lending software.
• mfarmPay is an AI-driven lending solution for African farmers.
• Monsoon CreditTech enables lenders to use advanced machine learning on a range of traditional data and alternate data to make informed credit decisions.
• Segasec provides early intelligence for upcoming cyberattacks and defends against hacking threats.
• Veridium‘s multi-factor authentication solutions use biometrics to safeguard your enterprise’s most critical assets.
• Voca.ai has created a human-friendly agent that has been proven to increase revenue and customer satisfaction for call centers.
The diverse technologies comprising the latest Start Path wave is a snapshot of the nearly 10,000 startups and FinTechs connected to Start Path since its founding in 2014. It also shows how, through Mastercard Labs, we partner successfully to explore new technologies, accelerate new concepts and deliver transformative growth and change to the commerce landscape.
Barclaycard, which processes nearly half of the UK’s credit and debit card transactions, has extended an existing provisional agreement with Alipay, enabling retailers across the country to accept the Chinese payment app at the point-of-sale.
Barclaycard first launched a pilot with Alipay in 2017, testing the QR code-based mobile shopping app in eight retail stores across the UK.
The new agreement will enable Barclays' entire network of 11,000 merchants to accept in-store Alipay payments without replacing their existing point-of-sale system. Barclaycard says it is already in discussions with around 70 clients interested in becoming early adopters.
Rob Cameron, CEO, global head of payment acceptance at Barclaycard, says: “Thanks to the significant investments we’ve made in our platform, our clients have access to a growing range of payment types, each of which can help them increase market share by meeting the needs of new customers.
The move comes on the back of stats from VisitBritain, which is expecting 483,000 visits from China in 2019, up 43% on 2017, with Chinese visitors expected to spend more than £1 billion this year, up 50%, moving it well into the UK’s top 10 tourism markets.
Says Cameron: “Our new agreement with Alipay gives retailers a vital tool to help them seize the revenue opportunity posed by the growth of Chinese visitors to the UK. At the same time, Alipay users will benefit from a more convenient and familiar in-store payments process - enhancing their overall shopping experience.”
This is the fifth blog out of eight in our series on the Contingent Reimbursement Model code (“CReM”) that purports to offer customers strong protection against certain types of Authorised Push Payment Fraud, or “APPF”.
Here we focus on who qualifies for cover, who is offering cover, and the vague contingency of cover on the as-yet non-existent Confirmation of Payee service.
If applicants for reimbursement under the CReM were the Grand National field, half the horses would fall at the first hurdle:
The CReM is only voluntary for the 2,000+ firms with whom UK customers might hold payment accounts; It is in no sense legally binding upon the firms that do sign up to it; Only consumers, microenterprises and smaller charities are eligible under the code to even have their cases considered; Businesses that are SMEs or larger, and larger charities, are ineligible.The field of eligible claims will be further thinned out during the first circuit of the track by the stipulation that the CReM does not cover “any payments completed before the coming into force of this Code”, as per para DS2.2.c, and it only comes into force at the end of May 2019.
Even if a claim is upheld there is no certainty that it will be paid if it is raised after the end of December 2019. The scheme is only funded from the end of May until the end of December 2019 – 7 months. After that no funding is place and UK Finance, the firms’ trade body, envisages that there will be a levy on all customers to fund it i.e. some account holders will subsidise others.
A dependency is established upon the usage of the new service called Confirmation of Payee, which does not exist now and is unlikely to exist in 2019. Its aim is to confirm the missing link in “wrong name” fraud by having the customer send a request to check that the name to which they want to direct a payment is the same one as is associated in the books of the beneficiary firm with the stated Sort Code and Account Number.
Surely it would be as easy for this check to be embedded in the processing of all payments as a given, and not to construct a new service around the problem.
The CReM states that the customer will be ineligible for reimbursement if they have used Confirmation of Payee and received the “Red Cross” (= no name match) as a response, before going ahead with the payment, but it is opaque:
Whether the customer must have attempted to use Confirmation of Payee; What the customer’s coverage will be once Confirmation of Payee exists under the dozen or more possible permutations in any one fraud case that (i) one, both or neither of the firms supports the service, and (ii) one, both or neither of the firms is a signatory to the CReM.This is hardly a recipe for ensuring victims are compensated when they are not at fault.
Middle Eastern payments processor Network International is contemplating a listing on the London Stock Exchange.
Fifty-one percent owned by Emirates NBD, Network International was spun off as a separate company in 2015 in a deal which saw Warburg Pincus and General Atlantic pick up the remaining 49% minority ownership.
The company operates in over 50 countries across the Middle East and Africa, processing digital payments for companies through desktop PCs and smartphones.
Rumours of a potential float have been circulating for some time, with a £2.2 billion valuation applied to the business. It is understood that the company will offer 25% of its shares on London's main market.
As part of the process, Network International has announced the departure of long-time chairman Abdulla Qassem, who will be replaced by Ron Kalifa, the former chief executive and current deputy chairman of the UK's WorldPay.
This is the sixth blog out of eight in our series on the Contingent Reimbursement Model code (“CReM”) that purports to offer customers strong protection against certain types of Authorised Push Payment Fraud, or “APPF”.
In it we discuss how customers’ baseline rights in law are overlooked.
The CReM fails to adequately qualify what happens in an APPF in the terminology used in the 2017 Payment Services Regulations (the "PSRs"), granting that a test case may be needed to bring case law up to date compared to the situation before the current PSRs were on the statue book.
In PSRs terminology as we read it the victim has used a “payment instrument” as defined on page 13 of the PSRs, focussing on part (b). A “payment instrument” is either a:
“(a) personalised device; or
(b) personalised set of procedures agreed between the payment service user and the payment service provider, used by the payment service user in order to initiate a payment order”.
The set of User ID, Password, PIN, and Memorable Information/Security Questions common to the eBanking services (through which the customer instructs a push payment) clearly qualify under (b), whether or not the eBanking service also involves a physical device for one-time password generation that requires a card and PIN to operate it.
The customer’s obligations around the usage of a “payment instrument” are laid out in Article 72 and are quite limited:
“A payment service user to whom a payment instrument has been issued must—
(a) use the payment instrument in accordance with the terms and conditions governing its issue and use; and
(b) notify the payment service provider in the agreed manner and without undue delay on becoming aware of the loss, theft, misappropriation or unauthorised use of the payment instrument.
(2) Paragraph (1)(a) applies only in relation to terms and conditions that are objective, non-discriminatory and proportionate.
(3) The payment service user must take all reasonable steps to keep safe personalised security credentials relating to a payment instrument or an account information service”.
A customer has no further responsibilities than these in law when using a firm’s eBanking service to instruct the firm to make a payment.
By contrast Article 73 lays out the firm’s obligations under the introduction:
“A payment service provider issuing a payment instrument must:
(c) ensure that appropriate means are available at all times to enable the payment service user to notify the payment service provider in accordance with regulation 72(1)(b) (notification of loss or unauthorised use of payment instrument);
(d) on request, provide the payment service user at any time during a period of 18 months after the alleged date of notification under regulation 72(1)(b) with the means to prove that such notification to the payment service provider was made”.
As long as the customer has carried out its responsibilities, the customer has the following right of redress under Article 74:
“A payment service user is entitled to redress under regulation 76, 91, 92, 93 or 94 (liability for unauthorised transactions, non-execution or defective or late execution of transactions, or charges and interest), only if it notifies the payment service provider without undue delay, and in any event no later than 13 months after the debit date, on becoming aware of any unauthorised or incorrectly executed payment transaction”.Regarding timing, this Article mismatches the stipulations of the CReM about discounting claims originating before the CReM’s live date of the end of May 2019: in law the customer has 13 months to raise their claim and so could raise a claim at the end of May 2019 for an APPF occurring at the start of May 2018.
As regards the content of the Article, the customer may claim under it because they have used a “payment instrument” to order a payment based on data as specified by the firm, inter alia naming the beneficiary. The firm, under “wrong name” APPF, has executed a different payment, which is therefore unauthorised.
This in turn triggers the determination as to whether the customer is eligible for reimbursement and where the burden-of-proof lies, under Article 75:
“(3) Where a payment service user denies having authorised an executed payment transaction, the use of a payment instrument recorded by the payment service provider, including a payment initiation service provider where appropriate, is not in itself necessarily sufficient to prove either that—
(a) the payment transaction was authorised by the payer; or
(b) the payer acted fraudulently or failed with intent or gross negligence to comply with regulation 72 (user’s obligations in relation to payment instruments and personalised security credentials).
(4) If a payment service provider, including a payment initiation service provider where appropriate, claims that a payer acted fraudulently or failed with intent or gross negligence to comply with regulation 72, the payment service provider must provide supporting evidence to the payer”.
The key point remains that the customer instructed the payment in its entirety: Name + Sort Code + Account Number. The customer did not authorise a payment to Sort Code + Account Number + different name. The customer’s firm has a responsibility to carry out the customer’s payment as instructed, both if the beneficiary account is in its own books (an “internal transfer”) and when it is being sent through an external clearing and settlement mechanism. Firms have a further duty to ensure that such clearing and settlement mechanisms cause a payment to be returned if the name on the beneficiary account is not coherent with the name in the payment.
This ought to be the situation as regards customers' baseline rights in law and the CReM should have done one of two things, meaning either (i) to confirm them; or (ii) to deny them.
Then it should have stated what firms were proposing to add to those rights voluntarily under the CReM, and what the resulting cover would be.
The CReM fails to do this and thus leaves the inference that any cover for the customers is voluntary by the firms. This has the effect of causing customers' rights in law to go up in smoke.
Today, 14 March 2019, is the day that all Financial Institutions across Europe must have PSD2 open banking APIs live for external testing.
Konsentus, a regtech company, today also announced the signing of seven new partners ensuring that their Third-Party Provider (TPP) Identity & Regulatory checking platform is even more widely available to Financial Institutions as they look to meet the PSD2 open banking requirements and commence testing.
Konsentus is the only live SaaS based API solution available to check TPP Identity and Regulatory status in the market. This is required each time TPPs access a Financial Institution through their dedicated interface.
Brendan Jones, Chief Commercial Officer of Konsentus said; “We are delighted to have signed up the following additional strategic partners:
1. Epiphany Srl
2. Fiorano
3. Forgerock
4. Paymentology
5. PSI-Pay
6. Transact Payments
7. Tribe
A rapidly increasing number of technology companies are recognising Konsentus as the market leader in delivering a critical solution for PSD2 “TPP Identity & Regulatory checking” and have chosen to partner with Konsentus to service their own customer demand.
Brendan added “With a live production environment, as well as sandbox and swagger documentation, we have everything in place to quickly support Financial Institutions as they look to comply with PSD2 open banking requirements”
About 14 March 2019 - FCA Email sent out
Testing facilities and specifications
Key date: 14 March 2019
• All providers of payment accounts that are accessible online must comply with the requirements to make available, no later than 14 March 2019:
o technical specifications regarding their access interface(s), and
o testing facilities for third party providers (TPPs).
• We encourage firms to make these facilities available earlier where possible and to discuss them with TPPs.