PayExpo 2016 conference publication - GEMA

This is the third occasion in which Gibraltar Finance, in partnership with the jurisdictions e-money firms, will be sponsors at Pay Expo. I am so pleased that Gibraltar firms and the Gibraltar Electronic Money Association strongly support this industry leading event and together we have a great opportunity to present the undoubted strengths of our proposition throughout the conference and, in particular, at our panel session.

Gibraltar is all about the strength of our growing reputation, the depth and quality of our regulation and the business friendly environment in which firms are able to access their chosen market at speed. In addition we are a transparent, internationally co-operative and in the European Union.

Gibraltar is Europe’s innovative e-money centre. We are open for business and welcome and support reputable firms and quality businesses that wish to establish in Gibraltar alongside our existing license holders.

Albert Isola MP Minister for Financial Services

The Gibraltar E-Money Association (GEMA) is a notfor-profit association established to represent parties participating in the e-money sector in Gibraltar.

It is dedicated to the progression of e-money and innovative payment solutions and promotes Gibraltar as an international centre for global Payment Service Providers (PSPs), wishing to benefit from Gibraltar’s unique position within Europe.

The Gibraltar E-Money Association addresses the challenges of the evolving e-money market, offering leadership and expert guidance.

Our members are: IDT Financial Services Limited Payoneer (EU) Limited The Bancorp – Transact Payments Limited Wave Crest Group Limited Rampart Corporate Advisors Limited

Gibraltar Finance

“What do you see as the biggest impact to Banking and the EU regulation in 2016?”

Your success in life isn’t based on your ability to simply change. It is based on your ability to change faster than your competition, customers, and business said Mark Sanborn Euro zone banks are mired in a cycle of low profitability for a number of reasons. Cyclically they are at a point that this is almost inevitable e.g. historically low interest rates leading to reduced revenue from “free” balances. A mounting and increasingly serious challenge is disruptive technologies.

Competition from new, non-traditional players in retail payments services is not new. Western Union and Moneygram, for example, are well-established. What is different now is that various elements are interacting which fundamentally changes the landscape of the retail payments market, and in ways that threatens established dominant market positions.

Here are three thoughts on this point: Regulation is opening up market access. The revised Payment Services Directive (PSD2) allows for increased activities that payment institutions can carry out to include the initiation of payments. This will inevitably – and deliberately – weaken banks’ market power.

The widening choice that customers are demanding is expanding at a speed of knots. Providers must now create systems that will allow for integration across numerous e-business and social platforms, the technology required to allow for this is not traditionally found in established banks.

Payments technology is also evolving at an unprecedented speed. Contactless cards, online payments and mobile payments are becoming the new “normal”. This is not the traditional forte of banks who are more intent on ensuring integrity of systems and reputation. Keeping pace with those technologies will require major investment and cultural adjustment and they have to contend with the fact that their new competitors, the likes of PayPal and Apple already lead in digital technology.

Paul Astengo | Senior Executive Gibraltar Finance

IDT Financial Services Ltd (IDT Finance) is an award winning, regulated issuing bank and market leader in providing European prepaid BIN Sponsorship Services. We have passported our banking license which permits us to provide payment services and issue electronic money across the whole of the European Economic Area (EEA). As a principal

member of MasterCard® International Incorporated and Visa Europe Limited, IDT Finance is the ideal partner for providing innovative prepaid solutions combined with extensive knowledge of the European regulatory and compliance environment.

With a focus on quality and high service levels our priority, we pride ourselves on taking the consultative approach throughout the program journey. IDT Finance structures its business in such a way that it allows us to support and encourage our partners to provide the best prepaid solutions available in the market today. We have launched many pioneering and exciting new programs in Europe and our partners across Europe include the largest and most reputable Program Managers, Processors and Card Manufacturers.

“What do you see as the biggest impact to Banking and EU regulation in 2016?”

The changes in the making for the Banking and E-money industries reach further than 2016 and herald a period of significant transformation for all involved.

PSD2 implementation is now officially a work-in-progress, it seeks to open doors for payment processing services encouraging the information access for third parties to client data where permission has been granted. This is sure to bring a new era of technology and apps all whilst walking the tightrope of regulation, data security needs and the reputational risk of what happens if it all goes wrong.

But the imminent and looming presence of immediate change is 4MLD. Recent events in Europe are influencing the timeline for implementation and the EU Commission is striving to fast track the implementation with a December deadline. One of the benefits of 3MLD was the ease of engagement with new customers, minimal initial due diligence allowed customers to “try before they buy”, with 4MLD the reduction in the scope of ‘simplified due diligence’ levels may diminish the attractiveness of the product. Customers may revert to traditional bank products or even back to cash and away from the newer offerings and innovation of the payment industry, but we need to remember that the larger the company the slower the change.

Payment firms are and will remain, quicker and nimbler in adopting opportunity and whilst we cannot deny that change is coming we will do what we always do,adapt and succeed.

Daniel Spier | Managing Director IDT Financial Services Limited | idtfinance.com

Wave Crest Group Limited is an award-winning enterprise payment company that provides next generation payment solutions and services to large global corporations and governments across the world. We consistently innovate to

provide payment solutions that are ground-breaking and make the most of the ever growing and changing mobile, internet and social space. Our vision is to redefine and revolutionize the payments platform across the world and enable our clients to be market leaders in their sectors.

We offer turn key products for business payments, employee, student and taxpayer disbursements, fleet payments, prepaid cards, lottery payments. Both pre-defined and custom offerings are available for all of our products, which can be found at www.mychoicecorporate.com and www.myfarecard.com.

Wave Crest Holdings Limited in Europe is a regulated e-money issuer and a principal member of MasterCard and Visa EU. Wave Crest Payment Services of the Americas, Inc. is a FinCEN-registered prepaid access provider, and an issuer of Discover Network prepaid cards.

Miles Paschini | CoFounder and Chief Revenue Officer, Wave Crest Group Limited | wavecrest.gi

Payoneer empowers global commerce by connecting businesses, professionals, countries and currencies with its innovative cross-border payments platform. In today’s borderless digital world, Payoneer enables millions of businesses and professionals from more than 200 countries to reach new audiences by facilitating seamless, cross-border payments. Additionally, thousands of leading corporations including Google, Airbnb, Upwork and Getty Images rely on Payoneer’s mass payout services.

With Payoneer’s fast, flexible, secure and low-cost solutions, businesses and professionals in both developed and emerging markets can now pay and get paid globally as easily as they do locally.

Founded in 2011, Payoneer EU Ltd. is Payoneer’s European subsidiary that was granted an e-money licence by the Gibraltar Financial Services Commission in 2012, which is valid across the EU. Payoneer EU issues e-money and provides payment services in multiple currencies to businesses that reside in multiple jurisdictions.

“What do you see as the biggest impact to Banking and the EU regulation in 2016?”

Beyond the obvious impact that the EU Referendum result could bring: The roll out of the EBA’s technical guidance notes for the implementation of PSD2, in particular strong authentication.

With the release of the EBA’s draft regulatory technical standards on strong authentication this summer, this will provide the information for what we may need to build to comply but may create timing issues with other existing

or planned projects. These technical standards are directly applicable in EU law so there is no leeway in how national authorities can implement them. These standards will have a broad impact and are conceptual in nature.

Additionally the EU Commission released a statement in Feb 2016 presenting an action plan for 2016 to strengthen the fight against terrorist financing. It intends to propose additional rules to deal with new threats, and although this is obviously not a bad thing, they are targeting prepaid cards and virtual currencies. The substance of these proposals have not yet been released but there are concerns this may be a disproportionate reaction by the Commission and the impact of any changes cannot be quantifiable at this time. This coupled with the recent UK Government’s new AML/CTF proposals makes the future AML landscape very difficult to predict.

Howard Gibbs | Managing Director Payoneer (EU) Limited | payoneereu.com

With operations in the US and Europe, The Bancorp is dedicated to serving the unique needs of non-bank financial service companies, ranging from entrepreneurial start-ups to those on the Fortune 500. Our payments team has been the guiding force behind the creation, execution and service of numerous leading prepaid card and emerging payment solutions.

Our European entity (Transact Payments) maintains memberships with the E-Money Association, the Gibraltar E-Money Association, as well as with numerous payment networks including Visa® and Mastercard®.

“What do you see as the biggest impact to Banking and the EU regulation in 2016?”

The biggest impact on the sector will be how EU regulation and membership will structure the future provision of EEA cross-border services. The Banking and Payments sectors will potentially be impacted by the outcome of BREXIT and although the fallout will not be fully witnessed in 2016, there will be an initial impact to all financial institutions in evaluating how they move forward with providing competitive and compelling solutions and services across Europe. Any movement in the early adoption of the 4AMLD within the EU will also require accelerated consideration for those operating on a cross border basis in 2016. Although change inevitably brings challenges it also creates opportunity and we look forward to exploring how best The Bancorp, and our industry, can continue to support the continuing evolution in the Banking and Payments industry.

Kriya Patel | Managing Director The Bancorp – Transact Payments Limited | thebancorp.com

withdraw support for strategic reasons unrelated to the customer.

European Law Firm

Ramparts is a European law firm based in Gibraltar and in the UK. We specialise in UK, Gibraltar and EU-wide legal, commercial and regulatory issues. Ramparts provide support for clients in the financial services (e-money, finance and funds), electronic commerce (including payments and e-gambling) and technology sectors. Our clients include individual entrepreneurs, early stage and growth innovation companies and publicly listed multinationals. We also have a private client practice to support wealthy individuals and families with their personal wealth management matters (including family office support services).

“What do you see as the biggest impact to Banking and the EU regulation in 2016?”

The first, will be the impact to banking (and payments) with the overhaul of the UK clearing and settlement system.

The Bank of England is due to consult on the current bank settlement system: http://www.bankofengland.co.uk/markets/ Pages/paymentsystem/strategy.aspx In addition, the new Payments Systems Regulator in the UK is tasked with reviewing the competitiveness of the current payments market and its proper functioning in respect of access to payment systems including clearing and settlement accounts.

We consider that the current settlement system is broken.

Allowing a wider range of suitable regulated financial institutions direct access to the BoE settlement and clearing system is one of the key elements to any meaningful shake-up of the existing ecosystem. It would reduce reliance upon the banking oligopoly and really allow innovation in payments to flourish. This would give Britain a world leading modern diverse finance and payment infrastructure and we believe the impact on innovation for all players and the growth of SME’s with new services would be very significant.

Until an open and fair system for access to the payments infrastructure is achieved meaningful innovation will always be constrained by the speed of the banks, their operational infrastructure and their willingness to provide access and services. In many cases we see individuals, SME’s and even regulated financial entities denied banking services or having a service withdrawn with few legal rights of remedy. Access to payments is the lifeblood of any business and yet there is currently no legal right to access the financial systems and banks can act in a largely arbitrary manner or they may

Whilst banks do have significant risk of fines for AML breaches and are therefore understandably cautious, it is simply not feasible or fair for them to have this much control over who does what. It is not fair on them either since they are being asked to be the world police for payments when in fact all regulated entities are responsible for AML compliance and regulators should be in the driving seat here.

Another major positive side-effect of opening up access and diversification is that it will reduce the systemic over-reliance and importance of the old banking system and too big to fail banks. This will help reduce risks to the wider economy in the event of any failures of those banks and also reduce the impact arising from new risks (such as cybercrime which is going to be an increasingly major risk).

In the meantime, for an example of the work the EPA is doing in this field, see here for an intro to a white paper on some aspects of opening up access to the system enable the rise of Fintech and alternative providers: http://www. emergingpayments.org/resources/payments-infrastructure-acall-for-fair-and-equal-access-for-fintech/ The second biggest impact item we see are the changes to European law: The European Commission has suggested that certain elements of the cryptocurrency sector should fall within the 4th AML Directive prior to implementation and they are also considering adding it to the 2nd Payment Services Directive.

If these changes occur then the impact on the payments sector could be significant as cryptocurrency exchanges and wallets would be able to access a wider range of payment systems and customers and it would improve confidence in bitcoin and similar internet payment technologies that are particularly useful for cross-border and cross-currency transactions.

Consultation on implementation of the 2nd Payment Services Directive are also due to take place this year and next across Europe - this legislation is likely to have a major impact on the payments sector over the next few years as it also enables a more open infrastructure for payment service providers and fintech operators that wish to offer value add services based around PSP services such as payment initiation and access to financial account information. It will also restrict some ecommerce platforms from handling payments which represents an opportunity for PSPs. Peter Howitt | Founder/Director Rampart Corporate Advisors Limited | ramparts.eu