Payments Review Autumn 2024

2024 Financial Crime Trends Revealed

Insights into the biggest threats and trends in financial crime

Innovating cross-border payments Enabling trust frameworks

Exploring innovative solutions to overcome challenges in cross-border payments

Exploring the vital role of trust frameworks in secure open finance

Contents

P3 Editor’s word

P4 How widely adopted is open banking really in the UK?

P5 What does Revolut’s banking licence mean for its IPO plans?

P6 News in brief

P7 The role of trust frameworks in enabling an open finance ecosystem

P10 Banks, fintechs, and regulators set a course for APP security

P12 Overcoming the de-banking dilemma: Innovating the future of cross-border payments

P17 Making payments decarbonisation a reality

P20 Financial crime exposed: Navigating 2024’s biggest threats and industry insights

P30 Empowering independence: How Sibstar is revolutionising financial management for dementia patients

P32 Disability inclusion: Why you should start now

P34 PAY360 Awards preview

P37 A multi-service app may be the cure to what’s ailing small businesses

P40 Where are Europe’s top crypto hub contenders?

P44 Balancing act: Navigating payment friction for security and efficiency

Editor’s

Word

Benjamin David, editor

Welcome to the Autumn 2024 edition of Payments Review, where we explore the latest developments shaping the global payments landscape.

This issue provides an in-depth look at the Financial Crime 360 survey, which highlights the evolving threats like AI-driven fraud and the crucial role of collaboration in combating these risks.

We also examine the importance of disability inclusion in the workplace and the potential of central bank digital currencies (CBDCs) to enhance financial inclusion for those on the fringes of the system.

As the industry faces de-banking challenges, we explore how emerging technologies might create a more accessible cross-border payments landscape. Additionally, we scrutinise the actions firms are taking towards achieving net zero targets within the sector.

Our profile interview showcases how innovative solutions are empowering dementia patients, and we also highlight Europe’s top contenders for crypto hubs. Finally, we address the looming threat of quantum computing and its implications for global financial security, urging the industry to prepare for a quantum-safe future.

We hope you find this issue insightful. As always, we welcome your ideas— please get in touch to share your thoughts.

P46 Institutional custody considerations and challenges

P48 Preparing for Q-Day: Making payments quantum-safe

P52 Improving financial inclusion with CBDCs

P54 Improving the FCA’s complaints reporting process

P56 Not another ISO 20022 piece

P58 The future of cross-border payments depends on collaboration

P60 Introducing our newest members

P62 Balancing innovation and security: The urgent need for sensible payment regulations

P7 How trust frameworks secure the open finance ecosystem

P20 Key findings on 2024’s financial crime threats and trends

P12 Innovating the future of cross-border payments

The team

Benjamin David

Editor

George Iddenden Reporter

Anjana Haines

Editorial director

Tony Craddock Director general

Ben Agnew

CEO

Emma Banymandhub

Events director

Maria Stavrou

Operations director

Tom McCormick

Sales director

Tom Brewin

Head of projects

Riccardo Tordera

Director of policy and government relations

Sophie Boissier

Membership director

Jay Bennett

Projects assistant

Michele Woodger

Projects and content coordinator

Market Intelligence Board

Martyn Fagg

COO

Tillo

Joe Hurley

CCO

Crown Agents Bank

Kit Yarker

Director, Product and Propositions

EML Payments

Manish Garg

Founder & CEO

Banksly

Andrew Doukanaris

CEO

Flotta Consulting

Mark O’Keefe

CEO

Optima-Consultancy

Mark McMurtrie

Director Payments Consultancy

Paul Adams

Head of Strategic Alliances Trust Payments

Miranda Mclean

Chief Marketing Officer

LHV Bank

Sarah Jordan

Project Financial Crime Member

Anant Patel

President, Supply Chain Payments

Monavate

Jessica Cath

Head of Financial Crime

Thistle Initiatives

Lorraine Mouat

Head of Payment Services

Thistle Initiatives

How widely adopted is open banking really in the UK?

Mark O’Keefe is an ambassador of The Payments Association and founder of Optima Consultancy.

I have been involved in and studied the UK’s open banking landscape since its inception, with a particular interest in mobile banking services powered by application programming interfaces (APIs). Through our consultancy work and benchmark reports, we have focused on the rollout and adoption in the industry.

In July 2024, open banking celebrated reaching 10 million users. However, this figure raises questions about the true level of adoption. Considering the working population of approximately 40 million (aged 18-64), this would suggest a 25% penetration or 20% of the population aged 14 and above. These numbers seem exaggerated based on industry observations and discussions with clients, many of whom don’t seem to use these services.

What’s a user?

The term ‘user’ might be misleading. The reported 10 million users reflect connections with brands, not unique individuals. Since a KPMG report suggests 62% of consumers multi-bank, many users may have multiple connections. This means the actual number of unique users could be closer to 3 million, suggesting a more realistic 8% penetration.

Payments or data? Consumer or business?

The situation is further complicated by the inclusion of both account information service (AIS) and payment initiation service (PIS) connections, encompassing consumer and business users. The overlap between these categories makes it difficult to ascertain unique user numbers. For instance, someone using open banking for their small business might also use it personally, inflating the total count. Thus, the number of unique users could potentially be even lower, perhaps around 1.5 million, indicating a market penetration of 3–4%.

Why does this matter?

Accurately tracking open banking adoption is crucial for its success. We need reliable data, which could be achieved by collaborating with UK Finance and other bodies to standardise tracking methods. A practical approach could involve obtaining direct user penetration statistics from banks, weighted to reflect the market average and reported by open banking.

Ultimately, transparency is key to understanding and fostering the true adoption of open banking. More clarity in reporting will ensure a genuine understanding of its reach and impact.

Payments Review is published by The Payments Association. Payments Review and The Payments Association does not necessarily agree with, nor guarantee the accuracy of the statements made by contributors or accept any responsibility for any statements, which are expressed in the publication. The content and materials featured or linked to are for your information and education only. They are not intended to address personal requirements and not does it constitute as financial or legal advice or recommendation. All rights reserved. Payments Review (and any part thereof) may not be reproduced, transmitted, or stored in print, electronic form (including, but not limited, to any online service, any database or any part of the internet), or in any other format without the prior written permission of The Payments Association. The Payments Association, its directors and employees have no contractual liability to any reader in respect of goods or services provided by a third-party supplier. The Payments Association, St Clement’s House, 27-28 Clement’s Lane, London EC4N 7AE , Tel: 020 7378 9890

What does Revolut’s banking licence mean for its IPO plans?

George Iddenden

Revolut finally acquired its UK banking licence from the Prudential Regulation Authority in July, marking the start of the end of a long-standing saga that has hampered its efforts to become an adequate challenger to the UK’s financial landscape incumbents.

After three years of application efforts, some began to wonder if the fintech firm, which achieved its EU banking licence in 2021, would be able to convince auditors that it could verify its revenue numbers fully.

The company released its 2023 financial statements ahead of schedule to enhance its public image. Additionally, there were issues with the company’s share structure, as it initially included shares with preferential rights that conflicted with Bank of England requirements. To address this, the company consolidated multiple share classes to ensure compliance.

Revolut’s founder and CEO, former Lehman Brothers trader Nik Storonsky, criticised regulators last year for the lengthy licensing process. He claimed it was “hard to do business in the UK” due to high taxes and “an extremely bureaucratic regulator.”

Will it affect the company’s plans to go public in London?

Storonsky hinted that he would consider floating the fintech giant in the US instead of the UK, which would be a major blow to the London Stock Exchange (LSE) for a firm founded in Canary Wharf.

However, Revolut has laid the groundwork for a London IPO, announcing it was establishing a new global headquarters in Canary Wharf. This will put it among the City’s most recognisable names in finance, including Barclays,

KPMG, and Citi, and boost its office footprint in the capital by 40%.

The company also reported a 95% increase in revenue year over year to £1 billion in 2023. Meanwhile, its headcount climbed by 36% in the same period. The fintech firm announced in July that it was targeting a valuation of $45 billion, which will see it offload $500 million of employee-owned shares. This is a marked improvement on the $33 billion valuation it targeted in 2021.

It is thought that Revolut will look to float in either 2025 or 2026 despite the location being unclear. The UK’s regulatory space has been in a state of reform on its rules regarding IPOs on the LSE; this has been fuelled mainly by an exodus of firms to the US driven by the US market’s capacity for higher valuations, greater liquidity, and a broader investor base, especially for technology and growthoriented companies.

Polymath Consulting CEO David Parker believes the question of where Revolut will IPO is interesting, given it will be one of the country’s largest banks. “With circa 9 million of its 45 million customers in the UK—only 20%—there is no requirement even by customer numbers to list in the UK. It will surely come down to a decision on where they can get the

best price. However, given that obtaining a US banking licence is not on Revolut’s ‘immediate roadmap’, becoming a USlicenced bank is its long-term ambition,” according to the fintech’s US CEO.

“It might be expected that the US is not as big a draw as some expect. I would therefore assume that despite some past spats with UK regulators, Revolut will IPO here in the UK.”

What would it mean for the LSE if Revolut decides to list elsewhere? If Revolut decides to go public with its IPO outside of the UK, it could have significant implications for the UK’s banking and financial sectors. Such a decision might be seen as a lack of confidence in London’s regulatory and financial environment, especially after Brexit, and could damage its status as a global financial hub.

This move could also lead other UK-based fintech firms to consider listing their stocks abroad, potentially reducing the number of high-growth tech IPOs in London and weakening the UK’s influence in the fintech industry.

Additionally, it could result in missed opportunities for UK investors and may lead to re-evaluating the UK’s regulatory framework to prevent further outflows of domestic tech companies.

Santander NatWest

Source: Taljat - stock.adobe.com

HSBC commits to no more branch closures until at least 2026

HSBC has pledged not to announce any new closures of its bank branches until at least 2026, extending its previous commitment and underscoring its dedication to in-person banking. This move comes at a time when many other banks are closing branches on UK high streets.

This year, HSBC plans to invest over £50 million to update and enhance its branch network. As a result, its 327 branches will remain operational for at least the next 18 months, and potentially longer.

The pledge comes amidst a broader trend of bank branch closures across the UK, with thousands of branches having shut in recent years. According to the consumer group Which?, Lloyds, NatWest, and Barclays have significantly reduced their branch networks, with over 6,000 closures since 2015. HSBC alone has closed over 700 branches during this period.

Major banks argue that the decline of in-person services is due to a shift towards mobile and online banking. HSBC reported a 65% drop in regular customer visits to branches over the last five years. However, they also noted that five million customers have visited a branch this year, particularly for more complex banking inquiries.

To mitigate the impact of branch closures, the UK’s financial regulator is set to introduce new rules next month. These rules will require banks and building societies to ensure continued access to cash, including setting up alternative services such as banking hubs, ATMs, and Post Office facilities.

HSBC plans to offer services in 100 shared banking hubs by the end of the year, expanding from the current 41. Additionally, they have hosted community pop-ups offering some banking services in local venues like town halls, hospitals, garden centres, libraries, and selected WH Smith shops.

Christopher Dean, HSBC’s Head of UK Customer Channels, emphasised the importance of their branches in serving customers and highlighted the company’s £50 million investment in refurbishing and remodelling its network this year.

ClearBank secures European banking licence

ClearBank, a British bank specialising in real-time clearing and embedded banking, has obtained a European banking licence from the European Central Bank, under the supervision of De Nederlandsche Bank.

This development will enable ClearBank to expand its operations across Europe, offering euro accounts in addition to sterling. Leveraging its cloud-native platform, ClearBank aims to deliver next-generation banking and payment services, supporting both new and existing clients in their European growth.

The bank has established its central European headquarters in Amsterdam and plans to add 60 new employees over the next five years.

FCA issues warning to crypto marketers: “We will act”

The Financial Conduct Authority (FCA) has issued a stern warning to marketers promoting crypto asset products, stating that it will take action against poor practices. A recent review revealed numerous instances of inadequate practices and firms failing to meet required standards.

The FCA emphasised the necessity for firms to implement strong compliance systems and controls, warning that failure to improve could lead to regulatory action. The regulator also noted that firms’ compliance with existing regulations will be a key consideration in any future applications for authorisation under the forthcoming financial services regulatory regime for crypto assets.

The review uncovered instances where crypto assets were falsely promoted as stable despite not maintaining a stable value, which the FCA explicitly prohibits.

Apple to open NFC tech access to thirdparty developers

Apple has announced it will allow third-party app developers in select locations to access its near field communication (NFC) contactless payment technology.

Starting with iOS 18.1, developers in the US, Australia, Brazil, Canada, Japan, New Zealand, and the UK will be able to offer in-app contactless transactions independently of Apple Pay and Apple Wallet using NFC technology and the Secure Element (SE) chip.

Supported transactions will include in-store payments, closed-loop transit, corporate badges, car keys, event tickets, home and hotel keys, student IDs, and merchant loyalty and rewards cards.

To offer NFC transactions, developers will need to enter into a commercial agreement with Apple and pay associated fees. These fees will ensure that only authorised developers who meet specific industry and regulatory requirements and adhere to Apple’s stringent security and privacy standards can access the technology.

The role of trust frameworks in enabling an open finance ecosystem

Trust frameworks are the cornerstone of a secure and competitive open finance ecosystem, ensuring safe data sharing and fostering innovation across the financial services landscape.

George Iddenden

As the financial services industry continues to evolve towards more open and collaborative models, the role of trust frameworks has become increasingly critical. Trust frameworks are the foundation upon which secure and regulated data access can be facilitated, enabling the growth of open banking and open finance ecosystems.

Without a robust trust framework, consumers may hesitate to share their financial data with third-party providers, fearing a lack of security and control. Similarly, data holders such as banks may be reluctant to grant access to their systems and may be concerned about the potential for unauthorised or malicious use of the information.

Trust frameworks help bridge this gap by establishing clear rules, standards, and processes for identity verification and data access. They provide a common set of guidelines and protocols that all participants in the open finance ecosystem must adhere to, ensuring a level playing field and a secure environment for data sharing and utilisation.

According to Tink’s Head of Industry and Wallets, Jan van Vonno, the key to open access is business-to-business (B2B) identity verification. “This allows the party accessing the data to identify themselves to the data holder, enabling the data holder to monitor who is accessing the data,” he explains. “Data holders can distinguish between authorised access by their users,

authorised access by third parties, and unauthorised access, such as by potential criminals or unauthorised parties. Therefore, utilising the existing trust framework for the electronic identification, authentication and trust services (eIDAS) or a similar industryled framework for the UK is essential.” Moreover, trust frameworks can also facilitate innovation and competition within the open finance space.

According to van Vonno, by enabling more competition in trust framework services, policymakers may be able to empower a wider range of fintech providers to enter the market and drive forward the open finance agenda.

Key components of an effective trust framework for open finance

According to Payit by NatWest’s Market Development Lead, Tamian Godfrey, trust is central to the success of opening banking initiatives, which incorporate many elements. She explains: “From security to reliability and familiarity anything likely to erode trust will drive down adoption, so we need to ensure the journeys are robust, resilient, and safe to use. To gain traction in open banking, payment methods must be self-evidently secure, with consumers trusting their data is safe and seamless to use. Awareness is also key to building trust—if more consumers understand what opening banking is and the benefits, they are more likely to embrace it.”

Government-issued identity certificates are a crucial element of a trust framework. These certificates, embedded with official government identification, allow third-party providers to identify themselves as data holders when accessing customer data properly. This ensures trust and security in the data access process, as the data holder can verify the legitimacy of the accessing party.

Regulated and authorised thirdparty providers are another essential component. There is a need for third parties to be properly regulated and to only access data with the customer’s consent or under a contractual agreement. This helps prevent unauthorised access and ensures that customer data is handled responsibly.

Directory services enhance the trust framework used for open banking by verifying the registration and authorisation status of the third-party provider (TPP) on an ongoing basis. This gives the account servicing payment service provider (ASPSP) an additional check to verify that the identity certificates used by the TPP are correct, further strengthening the trust and security of the ecosystem.

Finally, the trust framework should enable competition and innovation in providing these trust services rather than relying on a single monopolistic entity. Multiple qualified trust service providers can foster a more dynamic and responsive open finance environment, benefiting consumers and businesses.

The need for government-issued identity certificates

The history of data aggregation predates the open banking era. In the past, this data aggregation was often done through a ‘screen scraping’ technology, where third-party providers would access customer data by logging into the customer’s account directly. While this technology has become ‘taboo’ in the financial industry, it is the foundation of how the internet operates, with web scraping being used widely across various industries.

The turning point came in 2010 when a German court ruled that consumers can trust their data with third-party providers, regardless of the bank’s terms and conditions.

According to van Vonno, the payment regulators and policymakers acknowledged the importance of protecting consumer rights and liberties. “They emphasised the need to regulate businesses accessing consumer data, ensure proper identification, and enforce strict security requirements. Additionally, they highlighted the importance of obtaining consumer consent for data usage.”

Challenges with the UK’s framework and the need for competition

Some believe that the monopoly that Open Banking Limited (OBL) holds on the issuance of qualified certificates presents a significant challenge in the UK’s trust framework. As the only party providing a qualified trust service provider (QTSP) function in the UK, OBL strongly influences this critical component of the open banking ecosystem.

However, this is not a view shared by all, with tell.money Director David Monty telling Payments Review that OBL does not have a monopoly on directory services. “We support over 80 brands who offer PSD2-compliant open banking APIs, and only a tiny fraction has chosen to reside on the OBL directory, with some of those actively moving off the directory as we speak,” he explains.

“The OBL directory is an expensive and complicated option that offers no technical, operational, or regulatory benefit. Following Brexit, OBL was the only entity issuing appropriate

certificates. That is no longer the case, although there are a few other options. To that end, they are the cert issuer of choice, which isn’t tied to their directory (from an ASPSP perspective). To my mind, OBL plays no material role in open banking beyond defining and maintaining a standard (specification),” he argues.

Some believe that policymakers could enable more secure open access by establishing a regulatory framework that fosters competition in the trust framework, ensuring multiple qualified entities can issue the necessary identity certificates to enable secure and open access to financial data.

Konsentus’ Chief Commercial Officer, Brendan Jones, tells Payments Review: “As a provider of trust frameworks from an advisory services and technical delivery (i.e. directories) perspective, ideally, we would like to see more competition in this space. However, for this to be achieved, UK regulation and oversight (i.e. The Joint Regulatory Oversight Committee) would need to be adapted and changed. As things stand today in the UK, there is little, if any room, for competition in the market space other than OBL.”

According to Godfrey, there is evidence of a need for more consumer familiarity and awareness. She says: “This can be a challenge for merchants trying to implement and build trust in opening banking initiatives. Open banking isn’t recognised by the vast majority of the UK—even the 10 million people who do use it are not able to easily describe what it is.”

In addition to a lack of consumer awareness, Godfrey believes there have also been issues around the number of parties involved in a transaction (the TPP, the tech platform, the ASPSP) and the domino effect if one aspect fails, resulting in a bad customer experience. “If the journey doesn’t work effectively, users will unlikely return. We have seen this with the Samsung default browser issue, customer impact, and ASPSP nonstandard API specs,” she explains.

Fostering competition and innovation To enable more competition and innovation in trust frameworks, policymakers should focus on three key actions:

1. Establish clear regulatory frameworks: Policymakers could develop clear regulatory frameworks that define the roles and requirements for qualified trust service providers (QTSPs) in the UK. This would allow other entities beyond OBL to become authorised QTSPs and issue the necessary government-backed identity certificates.

2. Encourage interoperability: Promote interoperability between different trust frameworks instead of mandating a single centralised system. This would allow businesses to choose the QTSP that best suits their needs while maintaining a secure and standardised ecosystem.

3. Provide incentives for innovation: Offer incentives, such as regulatory sandboxes or funding programmes, to encourage fintechs and other providers to develop innovative trust framework solutions. This would spur competition and drive the evolution of trust frameworks to better meet the needs of the open finance ecosystem.

Trust frameworks are essential to the success of an open finance ecosystem, serving as the backbone for secure and regulated data access. By ensuring proper identification and authentication through mechanisms like government-issued identity certificates, trust frameworks instil confidence among stakeholders—consumers, data holders, and third-party providers alike. This confidence is crucial in fostering the growth and adoption of open finance initiatives.

However, for these frameworks to truly thrive, competition and innovation within the trust services sector are crucial. Policymakers play a vital role in creating environments that encourage multiple QTSPs to enter the market, preventing monopolies and fostering resilience. Promoting interoperability and incentivising innovation will further enhance the effectiveness of trust frameworks, ensuring they evolve with industry needs. Ultimately, a competitive and well-designed trust framework not only protects consumer data but also drives the broader adoption of open finance, unlocking new opportunities for businesses and consumers alike.

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Banks, fintechs, regulators set a course for APP security

As APP fraud surges alongside the rise of automated push payments, banks, fintechs, and regulators are collaborating to bolster consumer protections and introduce new reimbursement frameworks to safeguard against escalating threats.

As consumers worldwide leverage the ease and convenience of automated push payments (APP), APP fraud is rising proportionately. UK Finance reports businesses lost £42.6 million, and consumers lost £196.7 million in the first half of 2023, with a 22% increase in reported cases (116,324) over the previous year. Researchers found fraudsters used social engineering in a variety of ways, with purchase fraud accounting for two-thirds of all APP cases.

Ben Donaldson, managing director of economic crime at UK Finance, observes that criminals are exploiting social media, online platforms, SMS, phone, and email channels to deceive victims into sharing sensitive data and transferring funds. “The financial services sector continues to lead the fight against these awful crimes,” he says, urging public and private sector leaders to join forces and rein in abuse of telecommunications and digital channels.

Reinforcing infrastructure

The result of launching a new payment method without establishing rules for participants or considering the outcomes of that new payment method is apparent. APP is a shortcut and not a new payment scheme.

Because APP runs on the UK’s faster payments, an infrastructure based on existing payment rails, the transactions performed are subject to the same terms and conditions set by the bank as wire transfers, which typically do not contain any dispute or refund clauses and can also be substantially different at different banks.

Fraudsters do not need stolen bank credentials to launch APP scams. They can just as easily use Instagram or TikTok to convince people to send money to an illegitimate source. Criminals have high success rates because most people don’t carefully check the recipient’s name and details before confirming the transmission of funds. Bankers and regulators are calling for better consumer protections, which is highly unusual for an industry where consumer protections are directly embedded into payment methods.

Proper consumer protection laws are crucial because, otherwise, people may stop using APPs and return to cards. Rivero and other members of The Payments Association and its financial crime working group explore these issues with industry stakeholders and policymakers.

Rivero would like to bring its domain knowledge from the card payment space to support the financial crime working group, especially in the domain of consumer protection rules. When Pay. UK implements the first consumer protection and dispute framework, currently in development, and releases APIs like Mastercard and Visa; Rivero will connect its Amiko dispute management system to this emerging system. This will enable the Amiko virtual agent to interface with customers and manage reimbursement claims similarly to Rivero’s for card payments.

Building resilience

In July 2023, the UK Payment Systems Regulator (PSR) introduced a reimbursement requirement for APP fraud within the faster payments service (FPS). This requirement requires sending and receiving payment firms to share the costs of reimbursing customers and protect those deemed most vulnerable. The PSR urged payment service providers (PSPs) to review the new reimbursement guidelines before the effective date of 7 October 2024.

Scams are not going anywhere anytime soon, and it’s the responsibility of everyone involved to protect ourselves better.

steps to improve end-to-end fraud prevention,” the PSR writes, noting that Pay.UK, operator of faster payments, will provide a reimbursement claim management system (RCMS) for APP fraud and invited public commentary on this and other reporting and compliance policies until 28 May 2024.

Believing these policies will stimulate fraud prevention, increase consumer protections, and expand Pay.UK’s capabilities as a payment system provider, the PSR is confident that it can leverage its regulatory toolkit to improve crossmarket security, compliance, and operational efficiencies, commenting as follows:

“We know that our incentives are already working, with PSPs taking significant

“As the operator of faster payments, Pay.UK will be responsible for monitoring all

Fraudsters do not need stolen bank credentials to launch APP scams—they can just as easily use Instagram or TikTok to convince people to send money to an illegitimate source.

directed PSPs’ compliance with the FPS reimbursement rules. Where necessary, and where it has the power to do so, it will take action to manage compliance. Pay.

UK has been developing its compliance monitoring regime in consultation with industry and the PSR. It has now submitted its regime to the PSR for review, which we will assess using the confidence objectives. Subject to our approval, Pay.UK will publish the regime on its website no later than 7 June 2024.”

Changing public perception

Szymon Morytko, principal consultant, global business consulting team, FICO, has seen a shift in public perception of individuals and firms impacted by fraud and noticed less of a tendency to stigmatise victims.

“While historically scams have often been seen as a ‘customer’s problem,’ where poor judgment or carelessness has been seen as a reason for customers becoming victims,

this perception is changing as scams become increasingly more sophisticated and harder to spot even for the cautious,” he writes in the FICO 2023 Annual Global Fraud Report.

Noting that 45% of FICO survey respondents believe banks can do more to protect them from scams, 77% want banks to have better fraud detection systems, and 64% want more warnings and education about known scams when making payments, Morytko remarks that regulatory bodies in the UK and EU are prioritising

consumer protection and US banks are working on refunding customers for illegitimate payments on Zelle.

Looking ahead, Morytko says he would like more collaboration among banks, telecom services, internet service providers, and social media platforms to detect, prevent, and remediate APP fraud. He states, “Scams are not going anywhere anytime soon, and it’s the responsibility of everyone involved to protect ourselves better.”

Thomas Müller CEO, Rivero

Overcoming the de-banking dilemma: Innovating the future of cross-border payments

As the cross-border payments industry contends with de-banking and stringent regulations, can emerging technologies and alternative solutions pave the way for a more efficient and accessible global payments landscape?

George Iddenden

The cross-border payments industry is facing a growing challenge of de-banking and de-risking. Stringent regulations have made banks more risk-averse, leading to declining correspondent banking relationships.

This has created an impasse in the industry, as banks struggle to balance compliance requirements with the need to facilitate cross-border transactions. Inefficient core banking systems, a lack of transparency, and the general complexity of the cross-border payments process have further exacerbated the problem. The impact of money laundering on the correspondent banking model is profound, creating significant barriers for smaller banks and electronic money

It’s unlikely that any form of global authority could ever create and enforce a universal standard across the board.

institutions (EMIs). Gary Palmer, founder and CEO of PayAll, highlights how these challenges are exacerbated by stringent regulations and the decline in correspondent banking relationships:

“For banks and regulators, it’s important to note that up to 5% of the global GDP is being laundered through banks. This high level of money laundering contributes to the difficulties smaller banks and EMIs encounter in establishing correspondent banking relationships. In fact, one of the main reasons some banks struggle in this regard is the concern about money laundering. Furthermore, there has been a 25% decrease in correspondent banks, indicating that the problem is worsening.”

The decline in correspondent banks has made it more difficult for certain institutions, such as e-money providers and payment service providers, to access the global financial system and move money internationally. This has reduced the efficiency and accessibility of cross-border payments, leading to slower transaction times, higher costs, and more barriers for certain customers and businesses trying to engage in international financial activities.

The need for more transparency, outdated technology, and complex compliance requirements in the correspondent banking model has exacerbated these challenges, highlighting the need for new solutions and approaches to improve the crossborder payments landscape.

Challenges in the correspondent banking model

Correspondent banking relationships play a crucial role in the cross-border payments industry, and various issues have arisen in this model. While crucial, the longstanding correspondent banking model is increasingly seen as outdated and inefficient. Palmer suggests that the industry must embrace technological innovations to overcome these challenges: “Software has redefined and transformed our lives, but we struggle to wrap our minds around how it can transform the banking industry. Software can play a big role in elevating our approach to risk management and making the overall crossborder payments experience better, more efficient, and more transparent.”

The correspondent banking model is being challenged due to several issues, including stringent regulations and risk-averse policies of banks, making it difficult for some institutions like EMIs and payment service providers to access correspondent banking services. There is also a lack of transparency in transactions and inefficiencies in core banking systems, creating a ‘mess’ in the cross-border payments process. Outdated software and technology are contributing to the problem, with 48% of the issue stemming from these outdated banking systems.

To address these challenges, new paradigms and solutions that can bring more transparency, safety, and

efficiency to the cross-border payments process are needed. This includes exploring alternative models and technologies, such as software solutions that can enhance risk management, provide more data and transparency, and streamline the correspondent banking relationship.

New payment platforms and networks, like those from Visa and Mastercard, that bypass the traditional correspondent banking model and offer faster, more cost-effective cross-border payment services are also emerging. Additionally, regulatory changes that enable more direct access to clearing and settlement for non-bank financial institutions could reduce reliance on the correspondent banking network.

Emerging alternatives and innovations Aside from software, several other new technologies, platforms, and approaches aim to improve cross-border payments. Direct access to clearing is one of these. Regulative efforts are underway to provide more direct access to clearing and settlement systems for non-bank financial institutions and payment service providers. This could help bypass the traditional correspondent banking network and enable faster, more efficient cross-border payments.

Palmer further elaborates on the importance of integrating new practices and technologies into correspondent banking, highlighting how these innovations can empower institutions to deliver better services: “The key is bringing transparency, safety, and efficiency to correspondent banking through software and new practices. This can empower banks, EMIs, and payment institutions to deliver great cross-border payment services to their customers in a way that manages risk effectively.”

Software can play a big role in elevating our approach to risk management and making the overall cross-border payments experience better, more efficient, and more transparent.

Initiatives from large payment networks like MasterCard’s Cross Border Services, which allows financial institutions to access MasterCard’s infrastructure for real-time bank transfers, foreign currency conversion, and global liquidity, are making a difference. This eliminates the need for financial institutions to manage foreign currency and settlement themselves, streamlining the cross-border payments process.

Emerging alternatives and innovations in cross-border payments have the potential to significantly benefit speed, cost, transparency, and inclusivity. New technologies, platforms, and approaches aim to improve the efficiency and accessibility of international financial transactions.

For example, some solutions enable faster settlement times, with payments processed in minutes or hours rather than days. This can greatly improve the speed of cross-border transactions. Additionally, these innovations reduce the

need for foreign currency conversions and pre-funded accounts, which can lower the overall costs associated with cross-border payments.

In terms of transparency, the new technologies provide more visibility and data on the payment process, allowing financial institutions and fintechs to manage risk better and comply with regulations. This increased transparency can help build trust and confidence in the cross-border payments ecosystem.

Furthermore, these innovations expand access to cross-border payments services beyond traditional banks, enabling more businesses and individuals to participate in the global financial system. This increased inclusivity can support the growth and development of international trade and commerce.

Regulatory and compliance considerations

Significant regulatory and compliance challenges still need to be addressed

in the cross-border payments industry. Navigating the maze of differing national regulations is one of the most complex challenges in cross-border payments. Navigating the regulatory landscape is one of the most complex challenges in cross-border payments, as Livia Benisty, chief external affairs officer at Banking Circle Group, points out to Payment Review: “It’s unlikely that any form of global authority could ever create and enforce a universal standard across the board. It just won’t work.”

She stresses the importance of transparency and accountability, stating that financial institutions need to be very clear and upfront with their clients about who is managing their funds and under what licences.

The transition from traditional banking models to innovative fund transfer solutions is a significant challenge for the industry. Eoin Cumiskey, director of payments strategy and innovation at Mastercard, explains the importance of

maintaining trust and security during this shift: “The traditional funded banking model has legitimacy from its legacy and is embedded into the operating models and control frameworks of the banks and regulators. Managing the transition of this model into a new landscape with competing innovative fund transfer solutions whilst maintaining consumer preferences in terms of trust and security will be one of the key focuses for the payments industry over the coming years.”

Maintaining transparency and building strong relationships with correspondent banks is crucial, as they are the gatekeepers to the financial system. Institutions must invest heavily in robust AML and KYC processes, find ways to share data, and demonstrate their risk management capabilities to correspondent partners.

Some are also exploring ways to bypass the correspondent banking model entirely, such as by gaining direct access to clearing systems or leveraging new payment platforms. However, as Palmer notes, these alternatives still face regulatory hurdles and require careful consideration of sovereignty issues. Overall, financial players must adapt their practices to balance regulatory demands with the need to provide efficient, accessible cross-border payment services.

Conclusion

The de-banking and de-risking issues plaguing the cross-border payments industry pose significant challenges to the efficiency and accessibility of international financial transactions.

As the traditional correspondent banking model struggles with stringent regulations, lack of transparency, and outdated technology, there is a clear need for innovative solutions to address these problems.

Emerging alternatives such as software platforms, direct access to clearing, and initiatives from major payment networks offer promising avenues to improve cross-border payments’ speed, cost, transparency, and inclusivity. However, regulatory complexities and compliance hurdles still need to be navigated.

Ultimately, finding effective solutions to the de-banking dilemma is crucial to supporting the continued growth and accessibility of the crossborder payments ecosystem, a vital component of the global financial system. Overcoming these challenges will unlock new opportunities for businesses and individuals to engage in seamless international transactions.

The traditional funded banking model has legitimacy from its legacy and is embedded into the operating models and control frameworks of the banks and regulators.

The Payments Manifesto for innovation and growth

Ensuring our payments infrastructure supports innovation, security, and economic growth.

Making payments decarbonisation a reality

Firms throughout the payments world have set net zero targets and put decarbonisation at the centre of new sustainability strategies. But what is actually being done?

Jon Yarker

With sustainability consciousness sweeping financial services, many institutions are setting net zero carbon targets to minimise their environmental impact. This has gained momentum in the wider financial services space, but activity is now occurring within payments. At The Payments Association (TPA), the ESG working group has been tasked with creating a decarbonisation framework specific to payments. This will deliver a framework payment firms can use to put carbon numbers to given transactions, offering unprecedented visibility of

their carbon footprints and arming decision-makers with the information they need.

However, in the face of climate change—and the worsening droughts, wildfires and storms—what change is happening at these companies? Mastercard has set a net zero target, and the firm’s chief sustainability officer and executive vice president, Ellen Jackowski, pointed to activities around decarbonising operations and the firm’s supply chain.

“Emissions from our operations—known as Scope 1 and 2 emissions—account for only 9% of our GHG emissions, and we’re working

to reduce those further through energy efficiency and purchase of renewable energy,” says Jackowski.

“78% of our emissions come from our supply chain. Tackling these ‘scope three emissions’ is a critical part of our environmental strategy. We believe it’s our duty to support our suppliers with their own emissions reduction journey.”

Building on this supply chain engagement, Mastercard has gone further and encouraged suppliers to set science-based targets. Overall, these steps have helped Mastercard reduce scope 1, 2, and 3 emissions

by 41% from its 2016 ‘base year’.

Other firms were not as forthcoming. When asked by Payments Review to elaborate on decarbonisation strategies and how these were being manifested, several payment firms that have made net zero commitments—including Visa, Klarna, PayPal, and Barclays—declined to comment. This lack of transparency is causing some concern. Adam Soilleux, director of financial services advisory, ESG governance, risk and compliance at BDO, sees a lot of noise being made at a high level around

decarbonisation but, in certain instances, a lack of “credible transition plans” executed in the interim.

“What we are seeing is ambitious targets but instances of a lack of clear transition plans to reach those,” says Soilleux. “It’s quite easy for an entity to decarbonise, say, the first 50% or so of its emissions, but getting to net zero is a lot harder. There are quick wins, but those won’t get an organisation to net zero.”

Here, a challenge to overcome is the unique business model of the payments industry. According to Soilleux’s colleague, associate director Gloria Perez Torres, these firms have not experienced the pressure that others in the wider financial services space have faced.

“While we see clients putting pressure on banks and asset managers to have net zero goals and green products, it has been different in payments as there is not that same pressure to change,” she says. “We expect that as payment firms start to work more with banks implementing green strategies, they will have to answer more questions about their own strategies. That could bring about some change.”

Language around sustainability and net zero is extensive across many payment firms’ websites but does not always reflect reality. According to fintech advisor Ian Benn, who has spent over two decades working in the payments industry, he sees decarbonisation manifesting as “tinkering”.

“One of the biggest issues here is that of greenwashing,” says Benn. “There is such

a fear of being accused of greenwashing, damaging the brand through making over-inflated claims about small improvements, that firms are increasingly going the other way and are shy of talking about their small, but sometimes meaningful improvements. This is almost as pernicious.”

One popular strategy, however, has been the role of carbon offset programmes. The World Bank recently revealed that adoption has been surging, with carbon pricing revenues reaching a record US$104 billion in 2023. According to Charlie Bronks, head of ESG and senior vice president at Crown Agents Bank, although these are not perfect, they are a readily available solution.

“Whilst it’s not a perfect science, the alternatives to reduce carbon from the start are challenging, and a lot of CEOs are open to what else they can do,” she says. “We are seeing many payment companies partnering generally with environmental organisations looking at reforestation, renewable energy projects, carbon offset initiatives, etc.”

The damage of inertia TPA’s work on establishing a decarbonisation framework is crucial because a reliable, standardised framework for measuring carbon data in payments does not yet exist. The logic is that this data will then better inform decarbonisation efforts. However, there is a danger of inertia if firms wait until such data is available. David Beer, head of business development (EMEA) at carbon management solution provider Cogo, says there is a danger of decision-makers

41%

Mastercard’s reduction in Scope 1, 2, and 3 emissions since its 2016 base year.

getting “hung up” on the accuracy and availability of this data.

“Don’t let perfect get in the way of action,” says Beer. “It might not be perfect when you start, but the numbers will improve. If you wait until methodology and data become better, that will never come.”

Don’t let perfect get in the way of action.

US$104 billion

The record amount in carbon pricing revenues reached in 2023, reflecting the growing adoption of carbon offset programmes.

This highlights the emphasis the payments industry is placing on balancing data accuracy with actionable progress. Crown Agent Bank’s Bronks says she has seen some progressive business leaders in payments who are more willing to act and not wait for data standards to be finalised. Though mindful of why some businesses prefer to wait— due to the cost of getting these decisions wrong—she points to the wider context that change is required.

“Any transition can be costly, but the famous quote from former US Deputy Attorney General Paul McNulty to ‘If you think that compliance is expensive, try non-compliance’ applies exactly the same to the futureproofing of a sustainable business model,” adds Bronks. “Implementing new technologies and updating infrastructure requires substantial investment and time. That is a big conversation to have and needs to come from the top.”

BDO’s Torres is seeing some firms being proactive on this front, with efforts made to measure carbon emissions and build up an annual picture of how these change over time. However, she notes that many of the firms she works with are only just starting in this journey.

“The bigger firms have been doing this for longer,”

We believe it’s our duty to support our suppliers with their own emissions reduction journey.

says Torres. “The smaller firms don’t have the same pressure or resources, but there are definitely smaller firms doing work on this and making sure they have sight of their carbon emissions and progress towards reducing their environmental impact.”

A team effort

It is clear that combatting climate change will not be reliant upon one individual or a singular company but rather through collaboration. Benn says combining efforts, with industry bodies being

a conduit for these, will help mobilise change on a significant scale.

“Whilst I suspect that every player is already making small improvements, a cooperative approach would allow our industry to draw out the entire payment lifecycle and then, for each step, identify those changes that could more easily be made,” he explains.

This need for collaboration speaks to the complex nature of payments, which can make meaningful change difficult. In a payment chain, several

parties will be involved, such as the customer, the intermediary, the bank, and so forth. This offers several decarbonisation routes, but knowing where to go can be challenging.

“You have many actors across the field, payment firms, merchants, acquiring banks, etc, and they all care about that little bit that belongs to them,” says Beer. “That’s when it gets difficult—who cares and who’s responsibility is it? My suggestion is to try not to eat the elephant at once. Look

at it in components and ask yourself what you can control and break it down.”

Likewise, BDO’s Soilleux highlights how decarbonisation will take a considerable amount of time to fulfil and points to the complexity of this challenge. Though net zero targets are helpful, he says more focus should be put on what change can be achieved in the near term.

“Our sense is somewhat that a firm might make a commitment to be net zero by 2050, and perhaps an interim to reduce by 50% by 2030. But they are buying themselves some time there,” he says. “I have not seen any short-term targets, for 2025, by example, that would require immediate action.”

Financial crime exposed: Navigating 2024’s biggest threats and industry insights

The Financial Crime 360 survey reveals how the industry is tackling evolving threats like AIdriven fraud, emphasising the need for collaboration, innovation, and updated regulations to effectively combat financial crime in 2024.

Benjamin David

The Financial Crime

360 (FC360)

survey provides a comprehensive and nuanced analysis of the current landscape in financial crime prevention, drawing on the perspectives of a diverse group of stakeholders within the payments ecosystem. The survey highlights the multifaceted challenges the industry faces, from traditional fraud to the rising threats posed by AI-driven attacks. It also underscores the strategic responses implemented across the sector, reflecting a proactive approach to mitigating financial crime.

Several key factors shape the financial crime landscape. The global economic downturn, geopolitical instability, and rapid technological advancements create new challenges and opportunities for financial institutions. The convergence of cybercrime and money laundering, the rising cost of compliance, and the need for highly skilled teams are central themes in the current state of financial crime. As the payments landscape evolves, becoming more complex and digitised, financial crime teams must be increasingly

alert, responsive, and agile to counter emerging threats and navigate unforeseen disturbances. This dynamic environment necessitates a multifaceted approach to fighting financial crime involving advanced technologies, robust regulatory frameworks, and continuous collaboration across the industry.

Survey key findings and trends

Financial crime remains a critical issue for businesses, with fraud identified as the top concern by 65% of respondents. This is followed by the growing threats of cybercrime (52%) and AI-enabled fraud (38%), underscoring the increasingly sophisticated nature of financial crime. Identity fraud is particularly prevalent, affecting 42% of respondents, and continues to be a significant challenge for the industry. Other issues, such as antimoney laundering (AML) and the quality and governance of data sharing, are also critical, with 36% and 34% of businesses struggling in these areas. The rise of authorised push payment (APP) fraud and AI-driven threats, including identity deepfakes (56%) and automated personal data collection (32%), highlights the evolving landscape of financial crime, demanding heightened vigilance and innovation in prevention strategies.

in cutting-edge technologies, with 59% prioritising machine learning and AI, 46% focusing on digital identification verification, and 44% on automation processes.

Respondents

In response to these challenges, companies are ramping up their investments

The emphasis on real-time transaction monitoring is also significant, with 34% of businesses rating their preparedness in this area as very high. Fraud prevention strategies are robust, with 59% of companies implementing strong AML/CTF programmes and a considerable number leveraging both rules-based (58%) and machine learningbased (49%) transaction monitoring systems. Additionally, customer education has become a focal point, with 41% of companies investing in programmes to better inform their clients about fraud risks. Financial investment in these areas is substantial, with nearly half of the respondents reporting spending between £50,000 and £500,000 on financial crime-related initiatives in 2023 and 30% planning to increase this spending in the coming year. Industry collaboration and staying updated through reports, conferences, and media are key to maintaining a strong defence against these threats. However, opinions are split on the adequacy of the UK’s fraud regulations, with 51% viewing them as fit for purpose, while 49% believe that regulatory updates are necessary to keep pace with the rapidly evolving threat landscape.

Survey participant breakdown

The survey highlights the diverse representation across the payments and fintech ecosystem. Technology and solution providers lead with 21%, followed closely by professional services to the industry at 20% and banking/ account providers at 18%. This diverse participation indicates a broad and vested interest in addressing financial crime from various perspectives, emphasising the ecosystem’s multifaceted approach to combating fraud.

Major challenges in financial crime

Fraud remains the dominant concern, cited by 65% of respondents as the most significant challenge in the coming year. This persistent threat is closely followed by cybercrime, which concerns 52% of participants, and AI-enabled fraud, which 38%

identified as a significant issue. Additionally, anti-money laundering (36%) and the quality and governance of data sharing (34%) are highlighted, underscoring the critical need for robust regulatory frameworks and improved data management practices.

INDUSTRY COMMENTARY

“Financial crime, particularly fraud, remains a critical concern for the payments industry. As APP and identity fraud challenges persist, firms must navigate a stringent AML regulatory environment and a volatile sanctions landscape. The new Labour Government is expected to clarify the regulatory framework, requiring businesses to be agile. Firms must stay ahead of regulatory changes, adopt cuttingedge technologies like GenAI, and collaborate to enhance their ability to prevent, detect, and respond to financial crime.”

Clarinda Woodford associate director, economic crime advisory BDO UK LLP

Prevalent types of fraud

Impact on businesses and customers

According to the survey, 42% of respondents report identity fraud as the most common type of fraud, indicating a critical area for enhanced identity verification measures. The significant percentage of ‘other’ (28%) suggests the emergence of various fraud typologies that require adaptive and comprehensive detection strategies. Misuse of facility (13%) and facility takeover (12%) further highlight the vulnerabilities within financial infrastructures that fraudsters exploit.

Authorised push payment (APP) fraud leads at 26%, showcasing the sophisticated nature of scams targeting direct customer payments. Identity fraud (17%) and

internet/telephone/mobile banking fraud (13%) further illustrate the digital shift in fraudulent activities. The presence of AI-enabled fraud (7%) and chargeback

fraud (5%) highlights the complexity and breadth of threats facing businesses today, necessitating a multifaceted approach to fraud prevention.

AI-driven fraud threats

The survey reveals significant concerns over AI-driven fraud, with identity deepfakes perceived as the most significant threat by 56% of respondents. Automated personal data collection (32%) also stands out as a notable

threat, indicating the risks associated with large-scale, automated harvesting of personal information for fraudulent purposes. Chatbot-powered fraud is another AI-driven fraud threat, highlighted by 9% of respondents.

Respondents

Awareness and response to APP rules

A significant majority (59%) are aware of the new APP rules proposed by the Payment Systems Regulator (PSR), reflecting industry readiness to adapt to regulatory changes. Among those aware, 70% plan to implement a combination of

measures, demonstrating a comprehensive approach to fraud prevention. Reviewing transactions and limiting them based on a maximum cap (19%) and focusing on the sending bank/PI/EMI (18%) are targeted efforts to mitigate risks.

Acceptable levels of fraud loss

Investment priorities in fraud prevention technologies

Investment in advanced technologies is a clear priority, with machine learning and AI leading at 59%, followed by digital identification verification (46%) and automation

processes (44%). This strategic focus on leveraging innovation for fraud detection and prevention reflects an industry-wide shift towards more sophisticated technological solutions.

There is a notable lack of consensus on acceptable fraud loss levels, with 48% of respondents unsure. However, 41% believe it should be less than half a billion pounds annually, reflecting a significant concern for minimising financial losses due to fraud. This uncertainty highlights the need for clearer benchmarks and more uniform standards across the industry.

Companies prioritising investments in machine learning and AI for fraud prevention

INDUSTRY COMMENTARY

“Financial crimes, including fraud, remain a major concern for institutions globally. The evolving nature of criminal technology exploitation challenges firms seeking value from their investments. Regulatory demands on smaller firms hinder competition in the payments market, making data analytics and collaboration essential for combating financial crime. Government and regulatory leadership, possibly through appointing a Minister for Economic Crime and fostering a collaborative data analytics ecosystem, could drive significant improvements and support much-needed economic growth.”

Jane Jee ambassador and financial crime working lead The Payments Association

INDUSTRY

COMMENTARY

“The Financial Crime 360 survey highlights that fraud dominates the agenda this year. Notably, 59% of firms see robust AML/ CTF programmes as essential in fraud prevention, underscoring the alignment of fraud and AML risk management. The survey also points to significant investments in AI, digital ID verification, and automation technologies, which present substantial opportunities for improving operational efficiency and enhancing the detection of suspicious activities.”

Jessica Cath head of financial crime Thistle Initiatives

Readiness for key technologies

The survey assesses readiness for various technologies:

● AI and machine learning systems: Moderate readiness with a weighted average of 3.15, indicating room for improvement.

● Blockchain and distributed ledger technologies: Lower readiness at 2.52, reflecting the nascent stages of implementation.

● Advanced analytics and big data solutions: Higher readiness at 3.37, showing a focus on leveraging data for fraud detection.

● Automated digital identity verification systems: Strong readiness at 3.38, underscoring the

emphasis on secure identity verification.

● Real-time transaction monitoring tools: Highest readiness at 3.75, highlighting the critical importance of real-time monitoring in fraud prevention.

Vendor community’s role in financial crime prevention

Respondents suggest that vendors should:

● Ensure their systems are fit for purpose and be held accountable when not delivering the required service.

● Enhance data exchange capabilities to identify fraudulent persons swiftly.

● Develop more advanced analytics and machine learning tools.

● Foster collaboration and share best practices.

● Provide businesses with trial access to AI/GenAI tools.

Collaborating to capitalise on cumulative knowledge and intelligence is essential in preventing, detecting, and responding to financial crime.

UK fraud regulation: Fit for purpose?

Opinions are divided on the effectiveness of the UK’s fraud regulation, with 51% considering it fit for purpose and 49% calling for updates. Those advocating for updates emphasise the need for AI regulation, more filters to

prevent fraud attacks, and dynamic, intelligence-led fraud detection solutions. This split opinion underscores the dynamic nature of financial crime and the necessity for regulatory frameworks to evolve continually.

Strong AML/CTF programmes (59%) and transaction monitoring systems (rulesbased: 58%, machine learning: 49%) are widely deployed,

demonstrating the industry’s commitment to comprehensive fraud prevention strategies. Customer education programmes (41%) also play a

significant role in these efforts, highlighting the importance of informed and vigilant consumers in the fight against fraud.

Financial crime-related spending in 2023

A significant portion of respondents (48%) reported spending between £50,000 and £500,000 on financial crime-related initiatives in 2023. A quarter of the respondents (24%) reported heavy investment, with expenditures ranging between £500,000 and £10,000,000. Additionally, 25% selected

‘other’, while a smaller segment (3%) invested more than £10,000,000, reflecting a wide range of financial commitments to combating financial crime across different organisations.

Industry optimism around curbing economic crime

Responses regarding the industry’s optimism in curbing economic crime are varied, with 40% positive and 40% neutral, indicating cautious optimism. Only 6% are very positive, reflecting the significant challenges in addressing evolving fraud threats. The industry’s ongoing interest in improving crime prevention measures, even if driven by self-interest, is driving advancements that make committing fraud more difficult.

We are witnessing the beginning of AI being used in financial crime.

Fraud prevention investment in the next 12 months

In the next 12 months, 30% of organisations plan to increase their spending on fraud prevention by up to 25%, reflecting a proactive approach to strengthening fraud prevention measures. Additionally, 10% expect to

Drivers of investment in financial crime capabilities

increase their investment by more than 25, while 22% plan to maintain current spending levels. A further 22% are uncertain about their future investment, and 17% fall into the ‘other’ category.

INDUSTRY COMMENTARY

Risk and regulatory enforcement (62%) are the primary triggers for investment, followed by cost considerations (18%) and revenue impacts (15%), highlighting the predominant influence of compliance and risk management over profitability in shaping financial institutions’ strategies. Other factors contribute less significantly, with the ‘other’ category accounting for 5% of investment drivers.

Staying updated on emerging fraud trends

The industry relies heavily on industry reports (81%), conferences (71%), and industry media (68%). Collaboration with financial institutions (57%), and law enforcement agencies (44%) also plays crucial roles in staying informed. Other sources contribute minimally, indicating a preference for established, formal channels of information over less conventional sources.

“AI is increasingly being used in financial crime, tricking individuals into transferring money to criminals. Traditional methods like MFA and biometrics may not prevent this type of fraud. The focus must shift towards improving transaction monitoring to detect and stop AI-driven fraud. A combined approach, leveraging AI for pattern detection and human resources for rapid response to emerging threats, is crucial in combating this evolving risk, particularly in combating authorised push payments (APP) fraud.”

John Erik Setsaas director of innovation

Tietoevry Banking - Financial Crime Prevention

Moving forward

As financial crime grows in complexity, the findings from the FC360 survey underscore the urgent need for a robust, multi-faceted approach. The industry must not only adopt advanced technologies like AI and real-time monitoring but also ensure these tools are effectively integrated into existing systems. This technological adoption should be complemented by strong regulatory compliance and a commitment to continuous learning and adaptation.

Collaboration across the financial ecosystem is crucial. Sharing knowledge and best practices will strengthen our collective ability to detect and respond to emerging threats. Improved data sharing and analytics capabilities will be key to quickly identifying and addressing vulnerabilities.

The evolving nature of financial crime also necessitates a dynamic regulatory environment. With opinions divided on the adequacy of current UK fraud regulations, there’s a clear need for updated frameworks that can keep pace with technological advancements. Enhanced regulatory leadership, possibly through

roles dedicated to economic crime, could drive meaningful progress.

Customer education remains a vital component of fraud prevention. As fraud tactics become more sophisticated, empowering customers with the knowledge to protect themselves will bolster the overall security of financial systems.

Stronger guidance and leadership from government and regulators could transform the market.

In the face of these challenges, the financial industry must remain vigilant, agile, and collaborative. By aligning technological innovation, regulatory support, and industry cooperation, we can significantly strengthen our defences against financial crime and navigate the threats of the future.

08:15 - 10:00 BST

De Vere Grand Connaught Rooms, London

Senior product professionals within the payments space - Members only

Tuesday 24th September SCAN

6,000

Empowering independence: How Sibstar is revolutionising financial management for dementia patients

Jayne Sibley shares how her personal experience with dementia led to the creation of Sibstar, empowering those affected to manage their finances safely and independently.

What inspired you to create Sibstar, and how has your personal experience with dementia influenced the development of the product?

We created Sibstar from my personal experience of dementia while caring for my Mum and Dad, both of whom lived with the condition for many years. I wanted to help Mum live independently for as long as possible, but scams and overspending were major problems. We eventually made the difficult decision to take away access to her own money, which meant also taking away her financial independence. We knew there had to be a better way for people with dementia to maintain their independence for longer, so we created Sibstar. We wanted to help families just like mine and enable them to protect their loved ones with dementia without taking away their independence.

What differentiates the Sibstar debit card and app from other financial management tools available for people living with dementia?

Sibstar is very different from the current offerings available from banks, such as carer cards, youth cards, and a

We empower people to enjoy their lives as they normally would, enabling them to live financially independently for longer in a safe, supported way.

secondary card in your regular bank account. Sibstar meets an entirely different and currently unmet market need, which is for vulnerable adults to access and manage their everyday money. We empower people to enjoy their lives as they normally would, enabling them to live financially independently for longer in a safe, supported way.

Current offerings from banks allow a third party to spend your money on your behalf. Sibstar is the complete opposite. We are not another carer or secondary card. We empower vulnerable adults to spend their money for themselves by themselves whilst knowing their money is safe. We offer personalised money management with features such as spend and ATM limits, real-

time notifications, and instant freeze or unfreeze.

Additionally, our UK-based customer service team is experienced with dementia care, ensuring deep understanding and support across all touchpoints for our customers.

How have partnerships with organisations like the Alzheimer’s Society and Mastercard enhanced Sibstar’s capabilities and reach?

Both organisations have been critical to our success.

Winning the Alzheimer’s Society Accelerator Programme was a gamechanging moment for us—the first step towards Sibstar being more than an idea on a piece of paper. The charity’s endorsement has brought us huge credibility and trust with our audience; their resources enabled us to research and co-create our product directly with people living with dementia and their families. Alzheimer’s Society has not only helped validate Sibstar’s core reason for being but also allowed us to connect and reach thousands of people facing the same challenges my family experienced.

Partnering with Mastercard has hugely elevated our credibility and visibility. The Mastercard team has supported us throughout our journey providing insight, knowledge and expertise. Mastercard supported us with our launch publicity campaign and has given me a platform on which to tell my story. As someone who had never worked in payments this has been invaluable to what we have achieved.

As we look to the future, I am excited to continue working with Mastercard to expand our impact here in the UK and beyond.

What were your biggest challenges in developing Sibstar, and how did you overcome them to create a user-friendly solution?

As I said, I don’t have a background in banking or payments, but I knew that securing collaborations with bigname brands would be challenging yet essential for our success. Fortunately, our involvement with the Alzheimer’s Society Accelerator Programme then

opened doors to Mastercard, and once we partnered with Mastercard, we started to be seen as a credible solution.

I also faced challenges as a female fintech founder. Although there’s a lot of talk about the need to improve diversity in the finance sector and a big focus on having fair representation at events, it feels like there is a lack of action. I would love to see more women in finance, from entry-level positions all the way to the boardroom. There is an advantage to the industry as a whole in encouraging women to take up these positions.

Securing investment also proved to be a real challenge, which is why we decided to pitch Sibstar on Dragons’ Den. Securing a £125k investment from Deborah Meaden and Sara Davies was a significant milestone for us. Deborah and Sara’s endorsement validates our efforts and helps propel Sibstar forward, enhancing our ability to make a meaningful impact on the lives of people with dementia.

Can you share some feedback or success stories from users who have benefited from Sibstar’s services?

We’ve had some great feedback from our users whose families have really benefited from using Sibstar. Mike and his caregiver, Penny, who have been using Sibstar for many months now, love how easy the card is to use. When asked about how Sibstar has impacted their life, Penny comments, “Sibstar is easy to use and gives us both peace of mind.”

We’re also really pleased to be helping families who haven’t been affected by dementia but face different challenges. Sibstar is already helping people living with autism, gambling addictions, and learning disabilities. It’s been amazing to see the wider impact Sibstar is having and the range of people who are benefiting from our product. Our mission is to create safe spending for all, so it’s great to start seeing that happening.

What are your future plans for Sibstar? Are there any new features or expansions in the pipeline?

Sibstar has the potential to transform the lives of underserved communities

who are not adequately supported by the current financial system. By offering more tailored solutions, we aim to empower them to achieve greater financial independence.

Therefore we are focused on expanding our customer base through B2C marketing and B2B partnerships across banking, retail, charity, and even a few police forces. We are also about to embark on our next investment round.

We have a busy few months coming up, and we’ll unveil some exciting new announcements in the coming weeks.

How do you plan to increase awareness and adoption of Sibstar among the growing population of people living with dementia in the UK?

Despite dementia being the leading cause of death in the UK, surpassing other major causes such as cancer and heart disease, organisations working to support people with dementia still do not receive the amount of funding or coverage they deserve.

By partnering with large organisations such as the Alzheimer’s Society, Mastercard, banks, retailers, and charities and appearing on Dragon’s Den, we hope to spread as much awareness about financial vulnerability and our solution as possible. Our goal is to normalise financial health discussions and demonstrate how Sibstar can both empower those living with dementia and support their caregivers, ultimately leading to financial equity for all.

Do you plan to expand Sibstar’s services beyond the UK to support people living with dementia in other countries? If so, what steps are you taking to achieve this?

Although we are based solely in the UK, we are a business with global ambitions. We are often contacted by people worldwide who wish they had access to Sibstar in their own countries to help their families and friends. With dementia expected to affect 150 million people worldwide by 2050, we are not dealing with a niche audience. Expanding our services to create safe spending for all on a global scale is something we are constantly striving to achieve.

Disability inclusion: Why you should start now

Highlighting key initiatives driving meaningful disability inclusion in the workplace and beyond.

National Inclusion Week, held 23–29 September, marks the latest in a series of initiatives promoting disability inclusion in the workplace and beyond, following the month-long celebration of Disability Pride in July and the Paralympic Games from 28 August. The increasing number of disabilityfocused events highlights its growing prominence.

According to a Valuable 500 study, 59% of respondents noticed improvements in disability representation in the media and marketing over the past five years. Labour’s latest manifesto further reflects this rising awareness, pledging to prioritise the rights of disabled people and ensure their voices are central to decision-making.

However, translating this positivity into meaningful and lasting workplace change is necessary for it not to be tokenistic. The Valuable 500’s Disability 100 Report revealed that as of 2021, no executives or senior managers at any FTSE 100 companies had disclosed a disability. This reluctance among leaders at major organisations suggests a culture where disability is still seen as a weakness and is neither entirely accepted nor embraced.

Project Nemo, co-founded by Joanne Dewar and Kris Foster, is a 12-month campaign connecting disability inclusion experts with fintech decision-makers to raise awareness and generate action to improve disability inclusion across the payments industry. Project Nemo recently partnered with The Payments Association to host a webinar: ‘Disability Inclusion: The Next Frontier in Payments’

Dewar and Foster were joined by Mike Adams, CEO of Purple Tuesday, Whitney Simons, Head of DEI Consulting, Missive, and Ben Agnew, CEO of The Payments Association, to discuss what more needs to be done to ensure disability inclusion becomes a core part of working culture, all the way up to the boardroom.

Disability inclusion is not a siloed activity

Disability inclusion is often seen as a niche issue and, therefore, one that companies often do not treat as a priority. Many disability inclusion activists report that if companies have disability inclusion on their agendas, it is usually included as an afterthought. Dewar notes that organisations are frequently tackling diversity, equity, and inclusion (DEI) issues in a specific order, “addressing gender first, then ethnicity, then LGBTQIA+, meaning that disability inclusion is, in most organisations being addressed, at best, fourth”, and frequently overlooked. This oversight stems from the lack of understanding in organisations of how many of their workforce either consider themselves to have a disability or know someone who does. The FCDO estimates that approximately 1.3 billion people, or 17% of the global population, have disabilities worldwide. In the UK specifically, 24% of people have rights under disability legislation. Out of these people, 83% acquired their disability after birth and up to 80% have a hidden impairment. Additionally, 87–92% know someone with a disability in their close circle. With such high figures,

organisations must tackle disability inclusion alongside other DEI issues in a holistic way.

Jayne Sibley is the co-founder and CEO of Sibstar, a fintech that provides payment options for financially vulnerable people, such as those living with dementia and their families. Sibley notes: “Disability inclusion must be seen as an integral component of all diversity and inclusion (D&I) efforts. This requires a holistic approach of embedding disability inclusion into a company’s policies and strategic initiatives and its culture and ethos.”

Simons comments that while a holistic strategy can be daunting, “it’s important to recognise that a fragmented approach to DEI is counterproductive.”

She adds that a comprehensive approach to DEI “acknowledges that there is no hierarchy of diversity—all aspects are equally important and deserving of attention.”

Many individuals will simultaneously identify as belonging to multiple diversity categories, so grappling with these issues in a siloed way is ineffective. For instance, the FCDO finds: “in the job market, only 20% of women with disabilities are employed”. Similarly, they report that “women with disabilities are up to 10x more likely to experience gender-based violence, while up to 70% experience sexual abuse before turning 18”. These women simultaneously need measures that improve gender equality in the workforce and reduce discrimination against disabled people. Simons notes that “addressing only one aspect of diversity at a time risks overlooking

Natasha Healy

complex human experiences and marginalising employees.”

To support lasting culture change that promotes disability inclusion, companies must not distinguish between diversity and inclusion practices; if organisations do not have the foundations to support inclusion, they cannot sustain meaningful diversity. If companies focus on inclusion for all rather than putting all their efforts into ensuring a ‘diverse’ workforce, an organically inclusive and diverse culture will flourish.

Why should companies care about disability inclusion?

Firstly, a workforce confident in disclosing their disabilities and who feel accepted in their workplace is more productive and can provide good customer service. The panel noted a tight correlation between NPS and customer satisfaction. Sibley says that a truly inclusive and diverse work environment “enables companies to tap into a broader range of perspectives and experiences, leading to the development of more accessible products and services”.

There is also a financial incentive to improve disability inclusion. Tribh Grewal, head of fintech and commercial programs at Discover Global Network and member of the Financial Inclusion Working Group, suggests that “creating a culture of respect and understanding” through holistic and comprehensive disability inclusion policies will help develop better B2B relationships and “contribute to overall profitability by demonstrating a commitment to diversity and engaging a wider pool of talent and perspectives.”

The Department for Work & Pensions previously estimated the overall disposable income of households where there is a disabled person to be £274 billion per annum. However, Adams identifies that fewer than 10% of businesses have any strategy for accessing that market. He adds, “Increasing numbers of suppliers are building social value into their decisionmaking criteria. And investors expect to see disability in all ESG metrics. Those who do will thrive, others who don’t struggle to survive.”

Research finds that companies that have led on key disability inclusion criteria saw 1.6 times more revenue, 2.6 times more net income and twice as much more economic profit than other companies in

the DEI. Further, leaders are more likely to outperform industry peers in productivity by 25%.

By meaningfully working on disability inclusion within their organisation, across products and services, organisations can secure a more satisfied and skilled workforce and potentially generate greater profits.

What does real change look like?

The Valuable 500’s Disability 100 Report finds “only 5 of 100 (organisations) have issued board level statements on disability as part of their leadership agenda.” Even then, having disability inclusion on the agenda does not guarantee action will be taken.

Inclusion cannot be an afterthought when designing products and services, as this will lead to further unintentional accessibility issues. Dewar highlights that while bringing financial services online has made them more accessible for customers with restricted mobility, it has also introduced new forms of exclusion for those with other needs. For example, if websites and apps are not designed with comprehensive accessibility, users with verbal tics may struggle with voice recognition features, creating barriers rather than removing them.

Simons argues that the kinds of checkbox inclusion activities that

Organisations are frequently tackling DEI issues in a specific order, addressing gender first, then ethnicity, then LGBTQIA+, meaning that disability inclusion is, in most organisations being addressed, at best, fourth.

inadvertently create barriers to use put organisations at risk of stagnation: “Effective disability inclusion goes beyond surface-level compliance or one-off initiatives. It requires a deep understanding of the nuances and complexities of disability and a willingness to learn and adapt continually.” Simons provides examples of effective action by conducting thorough accessibility audits of physical spaces and digital platforms and actively seeking input from employees with disabilities on workplace practices.

Foster emphasises the importance of thoughtful and nuanced action, noting that too often, “People speak for us, about us, in front of us, but it’s never our voice.” While companies may have good intentions with disability inclusion policies, genuine progress comes from “having disabled people at the table as decisionmakers.” Similarly, Adams cautions that “staff and suppliers can detect authenticity. Organisations relying on tickbox exercises will be exposed. Inclusion must be ingrained in the culture, not just a budget line item.” For disability inclusion efforts to be meaningful and lasting, they must be central to decision-making and product design.

Start now

Regarding disability inclusion, workplaces need to rid themselves of the inertia that stems from the fear of ever making the occasional well-intentioned mistake.

Adams echoes the sentiment that “disability inclusion is a journey,” calling organisations in the payments space not to “worry about getting everything right, but do worry if you simply mean that you’re not going to do anything because it might risk your reputation.” As Sibley reiterates, “By committing to continuous learning and adaptation, companies can foster a truly inclusive culture.”

Dewar poses this idea as the reason for founding Project Nemo. The 12-month grassroots pro bono campaign encourages organisations to start their disability inclusion journey by bringing to attention real-life stories of how individuals are currently adversely impacted and what can make a positive difference. A wonderful by-product is that initiatives that seek to address challenges faced by the disability community often ultimately benefit everyone.

“The Payments Association looks forward to seeing you again this year at the 16th annual PAY360 Awards on 2 October 2024. We come together as an industry to recognise our peers for their achievements and innovations across 21 categories. And we get the chance to rub shoulders with the ‘movers and shakers’ in this dynamic wonderful ecosystem ranging from large incumbents to emerging fintechs.

“Many thanks to the sponsors, judges, entrants, and finalists—you’re all winners in my book and playing a valuable part for our community. I also look forward to raising a glass of champagne with you and sharing a boogie on the dance floor. Always an evening to remember!”

Laura McCracken, Head Judge - Global eCommerce & Payments Industry Lead

Discover

PAY360 Awards preview

Explore the key sponsors and their pivotal role in the PAY360 Awards as we celebrate the outstanding achievements and innovations in the payments industry.

At Discover Global Network we are committed to fostering innovation and excellence in the payments industry, and sponsoring the PAY360 Awards allows us to celebrate and recognise the companies and the leaders in the payments space that are making a real impact. Our involvement underscores our commitment to advancing the industry and encouraging those who are driving transformative change.

B2B payments are at the heart of global commerce and how businesses operate. Through the sponsorship of Best B2B Payments category, we acknowledge outstanding achievements and applaud those driving innovation and making things efficient, easier, faster, and more secure. By supporting this category, we are recognising the success of initiatives that will shape the future of B2B payments.

Mastercard

Mastercard is delighted to sponsor the PAY360 Awards, celebrating the achievements and innovations of the UK payments industry. As a global leader in payment technology and services, Mastercard is committed to advancing the digital economy and creating a world where everyone can access the benefits of fast, secure and convenient payments.

By sponsoring the PAY360 Awards, we aim to support and recognise the excellence and creativity of a sector at the

forefront of transforming how people pay and get paid. These awards showcase the companies, individuals, and technologies driving the payments industry forward. Mastercard is honoured to be part of this prestigious event as we look forward to celebrating the success of the nominees and winners.

Optty is once again proud to sponsor the PAY360 Open Banking Award, reflecting our commitment to empowering the market with seamless payment connectivity across nine architectures, including open banking and account-to-account (A2A) payments. Traditionally utilised for services, rent, and non-FMCG verticals, A2A payments are now mandated globally. Unifying their availability across all categories is not an easy ask for legacy payment technologies and this shift has posed challenges for PSPs, gateways, orchestrators, and retailers. By celebrating A2A service providers, we recognise their role in delivering a low-cost payment option, scalability, performance, and security in real-time payments.

Furthermore, we recognise that PAY360 and The Payments Association are excellently fostering and supporting payments inclusion. For this reason, we align with and sponsor these efforts. Optty CEO Natasha Zurnamer affirms, “Optty is a crusader for customer payment choice, providing the fastest and easiest way for the entire value chain to enable payment connections. We sit in the background as the silent hero, powering giants with our state-of-the-art global connectivity solutions, and we are proud to provide A2A real-time payments as part of our ecosystem.”

Cardaq

Cardaq Limited is excited to announce that we will be sponsoring the prestigious PAY360 Awards for the second consecutive year and the third time in our company’s history. We believe that the PAY360 Awards is a significant event in the financial sector of the UK, providing an invaluable platform for recognising and celebrating innovation and excellence. By sponsoring this event, we aim to contribute to the recognition and promotion of innovative companies that play a vital role in driving the financial industry forward and positively impacting the economy. It is our privilege to support an event highlighting the outstanding contributions of companies that make the UK’s financial sector exceptional.

Optty

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A multi-service app may be the cure to what’s ailing small businesses

UK banks’ reduced lending and account closures stress SMEs, highlighting the need for multi-service apps (MSAs) to streamline financial services with open banking.

If Britain’s leading banks truly care about the country’s small businesses, they have a strange way of showing it.

Lending to small businesses fell by £14 billion last year. The country’s’ eight largest banks shut more than 142,000 accounts from small businesses as banks feared regulatory action. Banks also closed more than 600 branches, mostly in rural areas.

Banks are essential partners for small businesses, and when they show disinterest, it places stress on small businesses.

Lending to small businesses fell by £14 billion last year, and the country’s eight largest banks shut more than 142,000 accounts from small businesses.

Limited access to capital:

Retail banks are often a primary funding source for small businesses. Without their support, it can be challenging for small businesses to secure the necessary capital for growth, expansion, or even day-to-day operations.

Higher borrowing costs:

When retail banks are not supportive, small businesses may turn to alternative lenders, such as online lenders or credit cards, which often come with higher interest rates and fees. This can lead to increased borrowing costs and financial strain.

Difficulty in obtaining loans:

Retail banks typically have stringent loan approval criteria. Small businesses may struggle to qualify for loans without support, especially if they lack sufficient collateral or a strong credit history. This can hinder their ability to invest in new equipment, hire more employees, or pursue other growth opportunities.

Lack of financial advice:

Retail banks often provide valuable financial advice and guidance to small businesses. Without their support, small business owners may miss out on important insights and expertise that could help them make informed financial decisions and navigate challenges effectively.

Limited access to banking services:

Retail banks offer various essential banking services, such as merchant services, cash management, and payroll solutions. The lack of support from banks may limit small businesses’ access to these services, making it more difficult to manage their finances efficiently. 1 2 3 4 5

The total of these inconveniences can have a meaningful and sometimes fatal impact on businesses’ growth and financial stability. Small businesses must look elsewhere to fulfil these mission-critical functions.

Rise of fintech and boutique services

The danger is that a singular representative who once served as a portal to a large financial institution will be replaced by tens or even dozens of smaller relationships with fintech companies and boutique services.

This is why the multiservice app (MSA) model is so appealing. It is a major step forward as it presents the ability to have a single portal or reference point to address reactive issues such as lending, advice, or insurance. One reliable, trusted, and dependable reference model where businesses can see the overall health of their

enterprise and eventually be proactive, with the ability to financially plan and see issues coming down the road, spot weaknesses and correct course.

The appeal and potential of multi-service apps

An MSA is a mobile application that offers a wide range of services and features within a single platform. It combines multiple functionalities such as messaging, shopping, food delivery, ride-hailing, financial services, and more. The goal of an MSA is to provide users with a seamless and convenient experience by integrating various services into one app, eliminating the need to switch between multiple apps for different tasks.

MSAs are already common in Asia, where billions of customers access services through integrated applications offered by Grab, AliPay, and WeChat. Small businesses in these countries

A survey conducted in 2022 by PYMNTS and PayPal found that 72% of respondents were at least ‘slightly’ interested in a multi-service app.

also have products designed to meet their specific needs.

MSAs are ready to come to the UK because of the arrival and full implementation of open banking.

Open banking is a system that allows thirdparty financial service providers to access and use customer banking data with the customer’s consent. It is based on the principle that customers have the right to control their financial information and can choose to share it with other banks or fintech companies.

Open banking is typically enabled through application programming interfaces (APIs) that securely connect different systems and allow data transfer. This data sharing enables customers to access a wider

range of financial products and services, such as personalised financial advice and budgeting tools, making switching between different financial providers easier. Open banking can potentially promote competition, innovation, and customer empowerment in the financial industry—and provide the infrastructure needed to develop an MSA here in Britain.

The demand is here. A survey conducted in 2022 by PYMNTS and PayPal found that 72% of respondents were at least ‘slightly’ interested in an MSA (respondents were from the UK, US, Australia, and Germany). We believe this is the year that MSAs can jump from something on the horizon to an everyday part of peoples’ lives through the UK.

Andrew Martin CEO, SMEB

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Where are Europe’s top crypto hub contenders?

Europe’s top contenders for crypto hubs –cities like Zurich, Berlin, Tallinn, and London, as well as countries like Malta—offer unique regulatory frameworks, thriving ecosystems, and innovative environments for blockchain and cryptocurrency growth.

George Iddenden

In recent years, cryptocurrency and blockchain technology have rapidly transformed from niche innovations into mainstream financial instruments and technological breakthroughs. As these digital assets and decentralised systems gain traction, Europe has become a significant player in the global crypto landscape. The continent’s blend of technological innovation, regulatory foresight, and vibrant entrepreneurial spirit has positioned several European cities as leading contenders to become top crypto hubs.

Crypto hubs are cities or regions that offer a conducive environment for the growth and development of blockchain and cryptocurrency industries. These hubs are characterised by favourable regulatory frameworks, robust technological infrastructure, active communities, and abundant investment opportunities. In Europe, locations like Zurich, Berlin, Tallinn, Malta, and London are at the forefront, each bringing unique strengths to the table and contributing to the dynamic crypto ecosystem.

Zurich, Switzerland

Switzerland, particularly Zurich, was an early understander of the enormous potential of blockchain technology, creating a fertile regulatory environment for crypto developments to thrive. This environment has prompted a wave of investment in the country geared towards exploiting the upscale capabilities of this burgeoning technology.

The Swiss approach is technology-neutral, focusing on the impact and implementation rather than the technical specifics. This principle ensures that legal protections apply equally to digital assets as they would to traditional assets. For example, shares issued on a blockchain are treated with the same legal protections as those issued physically.

Regulatory environment

The Swiss canton of Zug, known as ‘crypto valley’, offers one of the most favourable regulatory environments for blockchain and cryptocurrency businesses. The Swiss Financial Market Supervisory Authority (FINMA) has established clear and comprehensive guidelines for the industry, providing legal certainty and fostering innovation. These regulations cover various activities, from initial coin offerings (ICOs) to digital asset exchanges, ensuring businesses can operate within a well-defined legal framework. This regulatory clarity has been instrumental in attracting numerous blockchain companies to the region.

Business ecosystem

Zurich has a thriving business ecosystem that includes many blockchain companies. The city’s strong financial sector and its reputation for stability and reliability make it an ideal location for blockchain ventures. Major global players in the blockchain industry, such as Ethereum and Cardano, have a presence in Zurich, benefiting from the city’s robust infrastructure and access to top-tier talent. The collaborative environment and proximity to other European tech hubs further enhance Zurich’s appeal as a leading crypto hub.

Government support

The Swiss government actively supports blockchain technology through initiatives like the Blockchain Taskforce and the Crypto Valley Association. Efforts include promoting blockchain education, supporting research, and fostering public–private partnerships to maintain Switzerland’s competitive edge in the global blockchain arena.

Case study: Ethereum

One of the most successful blockchain companies with roots in Zurich is Ethereum. Co-founded by Vitalik Buterin and a team of developers, Ethereum has revolutionised the blockchain industry with its smart contract platform. The Ethereum Foundation, based in Zug, has played a pivotal role in advancing blockchain technology and fostering a global developer community. Ethereum’s success story highlights the importance of a supportive regulatory environment, access to talent, and an active community in driving blockchain innovation. The foundation’s ongoing projects and initiatives continue positioning Zurich as a leading hub for blockchain technology.

Berlin, Germany

Berlin has established itself as one of the European epicentres in the global blockchain and Web3 scene. The city is home to over 180 entities, including startups, corporates, accelerators, innovation hubs, research institutions, and investors, all actively engaged in various aspects of blockchain and Web3 technology. This diverse and dynamic ecosystem makes Berlin a promising city for blockchain innovation and collaboration.

Regulatory clarity

Germany has led the way in creating a clear regulatory framework for cryptocurrencies to provide legal certainty for businesses and investors while fostering innovation. The Federal Financial Supervisory Authority (BaFin) has issued detailed guidelines on the legal status of cryptocurrencies and ICOs. These guidelines cover many aspects, including regulatory requirements, compliance standards, and investor protection measures. By doing so, BaFin has demystified the legal landscape for industry participants and set the stage for a more transparent and secure environment for cryptocurrency businesses to operate in. This proactive approach by BaFin has instilled confidence among market players, enabling them to navigate the regulatory framework with clarity and certainty.

Germany’s regulatory clarity has alleviated legal concerns and assured businesses and investors in the cryptocurrency sector. By offering clear guidelines and legal frameworks, Germany encourages investment and fosters growth in the cryptocurrency industry.

Access to talent and education

Berlin has a strong focus on blockchain education, with universities like the Technical University of Berlin and University of Potsdam offering specialised courses. This emphasis ensures a steady supply of skilled professionals and fosters a collaborative environment for research and development in blockchain. As a result, Berlin has become a hub for attracting local and international talent seeking to contribute to the evolution of blockchain technology.

Investment and funding opportunities

Berlin has a substantial investment community with access to venture capital and other funding sources. The city’s reputation as a start-up hub attracts investors looking to fund innovative blockchain projects. Numerous venture capital firms and angel investors in Berlin specialise in technology and fintech, providing essential funding to help blockchain start-ups grow and succeed.

Case study: IOTA

IOTA, a leading Berlin-based blockchain startup, specialises in the internet of things (IoT) and is managed by the IOTA Foundation. The foundation develops innovative solutions using blockchain technology to improve IoT connectivity and security. Its Tangle technology facilitates transactions between IoT devices. IOTA’s success showcases Berlin’s position as a growing crypto hub.

Tallinn, Estonia

Tallinn has become a leading crypto hub due to Estonia’s pioneering approach to digital innovation and e-government. Estonia’s commitment to embracing technology is evident in its nationwide digital transformation initiatives, creating a supportive environment for blockchain and cryptocurrency development. Estonia was one of the first countries to integrate blockchain technology into its national infrastructure, placing Tallinn at the forefront of the global crypto scene.

E-Government and blockchain integration

Estonia’s e-government initiatives are a cornerstone of its blockchain strategy. The country’s digital nomad visa and e-residency programme have attracted international entrepreneurs and blockchain innovators to Tallinn.

The e-residency programme allows individuals worldwide to establish and manage a business in Estonia entirely online, leveraging blockchain technology for secure digital identity and transactions. This forward-thinking approach has created a fertile ground for blockchain startups and tech companies.

Regulatory framework and support

Tallinn, Estonia’s capital, benefits from the country’s supportive regulatory framework for cryptocurrencies. The Estonian Financial Supervision Authority oversees digital asset regulation to encourage innovation, protect investors, and maintain financial stability.

Estonia’s regulatory approach aims to foster innovation and growth in blockchain and cryptocurrency while prioritising investor protection and ensuring financial stability. This benefits businesses in Tallinn and enhances the city’s position as a hub for blockchain enterprises.

Estonia’s clear and transparent regulations attract and retain blockchain businesses in Tallinn, positioning the city as a growing hub for blockchain technology and cryptocurrency innovation. This regulatory clarity and supportive ecosystem establish Tallinn as a favourable location for blockchain ventures, fostering continued industry growth and development.

Cryptocurrency and blockchain technology have rapidly transformed from niche innovations into mainstream financial instruments and technological breakthroughs.

Malta, ‘Blockchain Island’

Malta has branded itself as the ‘blockchain island’, aiming to be a global blockchain and cryptocurrency innovation hub. Its proactive stance on blockchain regulation, government support, and thriving tech ecosystem make Malta attractive to blockchain-focused entrepreneurs and investors.

Proactive regulatory framework

Malta has a progressive regulatory framework for blockchain and cryptocurrencies, including the Virtual Financial Assets Act (VFA), the Innovative Technology Arrangements and Services Act (ITAS), and the Malta Digital Innovation Authority Act (MDIA). These laws provide a strong legal foundation for blockchain businesses.

Government support and initiatives

The Maltese government has played a pivotal role in helping to foster a blockchain-friendly environment. By establishing MDIA, the government ensures the regulation and certification of blockchain-based businesses and technologies. Additionally, government initiatives aim to integrate blockchain solutions into public services, demonstrating a commitment to leveraging technology for national development.

Thriving blockchain ecosystem

The blockchain ecosystem on the island is home to numerous startups, technology firms, and financial institutions exploring and implementing blockchain solutions. It is supported by accelerators, incubators, and coworking spaces providing resources and networking opportunities. The Malta Blockchain Association (MBA) actively promotes the industry and facilitates collaboration among stakeholders.

International conferences and events

Malta has gained recognition as ‘blockchain island’, hosting key international blockchain conferences such as the Malta Blockchain Summit. These events attract global leaders, innovators, and investors in the blockchain and cryptocurrency sectors, providing a platform for networking and showcasing Malta’s advancements in blockchain technology.

Business-friendly environment

Malta’s favourable business environment is another factor contributing to its ‘blockchain island’ reputation. The country offers attractive tax incentives, a robust financial services sector, and a skilled workforce, making it an appealing location for blockchain and fintech companies. The Maltese government’s proactive approach to reducing bureaucratic hurdles and streamlining business processes also enhances the ease of doing business on the island.

Case study: Binance

A notable success story highlighting Malta’s efforts to position itself as a blockchain stronghold was the relocation of crypto-exchange Binance in 2018. Binance’s decision to move its operations to Malta underscored the country’s initial supportive regulatory environment and its attractiveness as a base for blockchain businesses.

London, UK

London’s status as a global financial centre significantly benefits its cryptocurrency industry. As one of the world’s foremost financial hubs, the city boasts a deep and diverse financial ecosystem, which includes a wealth of institutions, services, and expertise that support the growth and integration of crypto assets.

The city’s robust infrastructure, established financial markets, and extensive network of professional services create a favourable environment for cryptocurrency businesses to thrive. Major banks, financial institutions, and trading platforms in London are increasingly engaging with blockchain technology, leading to more innovative financial products and services.

Regulatory landscape

The Financial Conduct Authority (FCA) regulates cryptocurrencies to protect consumers, ensure market integrity, and foster innovation. Recent measures include stringent AML and CTF requirements for transparency and legitimacy. The UK government is also exploring central bank digital currencies (CBDCs) and updating regulations to address emerging challenges and opportunities in the crypto space.

Investment opportunities

London provides access to a diverse network of investors and venture capitalists interested in the cryptocurrency sector. The city’s vibrant investment ecosystem offers financial backing for crypto startups to innovate and expand. Additionally, London’s financial infrastructure facilitates seamless interactions between investors and blockchain companies, further driving investment in the sector.

Education and talent

London is a hub of education and talent in the blockchain space, with several leading universities and institutions offering specialised programmes. Institutions such as University College London (UCL), King’s College London, and Imperial College London provide cutting-edge research and educational programmes in blockchain and cryptocurrency.

Case study

One leading blockchain company in London is ConsenSys, which is known for developing decentralised applications (dApps) and blockchain solutions. Its presence underscores London’s pivotal role in the global blockchain space, contributing significantly to the technology’s advancement and adoption. ConsenSys exemplifies the impact of the crypto industry in London’s financial and technological landscape.

Balancing act: Navigating payment friction for security and efficiency

Payment friction is essential for security, but how can providers strike the right balance to ensure it enhances, rather than disrupts the user experience?

George Iddenden

Payments are critical to the modern consumer experience, enabling seamless transactions across a wide range of goods and services. However, the need to protect consumers from fraud has introduced various payment friction points in the payment process. Balancing these security measures with user experience has become a significant challenge for payment providers, merchants, and consumers alike.

While payment friction is essential for deterring fraudulent activities and safeguarding businesses and their customers, excessive payment friction can frustrate users, leading to abandoned transactions and a diminished overall experience. Striking the right balance between security and user experience is crucial for ensuring efficient and satisfying payment journeys.

Matt Clare, vice president of fraud and 3D secure operations at Thredd, emphasises the need for a balanced approach to friction, one that recognises the unique needs of different consumers and businesses: “We’ve got to watch payment friction, but I think also, in parallel with that, we’ve got to treat each consumer or business differently.” As new methods, such as mobile wallets and biometric authentication, become more prevalent, payments providers must

carefully calibrate payment friction levels to maintain both security and a seamless customer experience. By addressing these challenges, providers can tailor payment friction to meet the diverse needs of consumers, ensuring security measures enhance, rather than hinder, the user experience.

Mark O’Keefe, director at Optima Consultancy, underscores the primacy of convenience in the customer experience when it comes to payment friction: “I think when it comes to payment friction in payments, from a customer perspective, convenience reigns supreme.

“Of course, with great convenience comes great responsibility—the responsibility to safeguard user data and combat fraud. Traditional banks often find themselves caught in a tug-of-war between robust security measures and a seamless user experience.”

The critical role of payment friction By introducing additional steps and authentication requirements in the payment process, payment friction helps prevent fraudsters from easily accessing and exploiting consumer payment information. Strong authentication measures like 3D secure and transaction limits can significantly hinder low-level fraud tactics, such as bin attacks and

using fake card numbers to target weak e-commerce merchants.

However, the effectiveness of payment friction as a fraud deterrent is not absolute. Additionally, excessive payment friction can backfire, leading to customer frustration and abandonment, undermining the very security that payment friction was intended to provide.

The downside

When customers encounter too much payment friction in the payment process, it can lead to significant frustration and, in many cases, abandonment of the transaction. This results in a loss of sales for merchants, damage to the overall customer experience, and erosion of brand loyalty over time.

Clare highlights the risks of excessive friction, cautioning that it can push customers away from using payment systems that are overly burdensome. According to data from Baymard Institute, the average cart abandonment rate in 2024 currently stands at 70.19%. This exemplifies the significance of friction in payments. Research conducted by Tink into consumer online payment expectations found that 88% of consumers are willing to abandon a transaction if they experience some form of friction. A more common-sense

approach is needed to protect consumers while maintaining trust in a company’s products and services. Clare explains: “If it’s under £3, let it through. If it’s between £3 and £500, let it through, but you’ve got to authenticate with a biometric or one-time passcode. Above that, you might want to have additional scrutiny.”

O’Keefe points to neobanks as leaders in innovation, offering solutions that maintain a frictionless experience without compromising security. He says, “Here’s where challenger banks are yet again stepping up, employing innovative solutions without sacrificing that allimportant frictionless experience.

“Monzo announced a new feature set that allows users to enable stronger methods only for specific actions, such as high-value balance transfers or savings withdrawals using a user’s location or trusted friends. This puts some of the decision-making between payment friction and security back in the hands of users, allowing them to strike a personal balance between security and convenience.”

Tailoring payment friction

Clare highlights a crucial challenge: tailoring payment friction to meet different customer segments’ diverse needs and preferences. For example, tech-savvy millennials comfortable managing their payment settings and leveraging features like in-app card controls may appreciate the ability to fine-tune their payment friction levels. In contrast, elderly consumers less familiar with digital banking tools may find it stressful to navigate complex settings.

Achieving the right balance becomes even more difficult when considering customers’ different levels of digital literacy, physical abilities, and risk tolerance. Payment providers must carefully create payment friction mechanisms that empower tech-savvy users without excluding or overwhelming more vulnerable demographics, ensuring an inclusive and accessible experience for everyone.

Relying on blunt, one-size-fits-all rules is often ineffective, as it fails to account for the diverse behaviours and needs of different customer segments. Payment providers and merchants must leverage real-time fraud monitoring, transaction history analysis, and other data-driven techniques to develop more personalised payment friction models.

By drawing insights from various data points, such as device ID, point-of-sale mode, and account history, organisations can tailor payment friction levels to individual customers and transactions, striking a balance between security and user experience. Additionally, consortiumbased solutions that leverage collective industry insights can be valuable in informing these data-driven approaches to payment friction management.

“Consortium models are absolutely critical if you’re a small fintech start-up,” Clare says. “You haven’t got the visibility in the market, and you haven’t got the experience. However, if you’re part of a consortium model or just benefiting from that experience as a standalone client, then you’ll be much more effective at fighting fraud.”

O’Keefe uses the example of challenger banks, demonstrating that it is possible to strike a balance between using intelligence and customer journeys while making the set-up simple, too. “We are increasingly in a world of personalisation; customers want everything customised to them, whether it be their banking app, the ads they see or their shopping experience. We will increasingly see user-centric security solutions being implemented, with the fintechs already paving the way.”

Striking the right balance

Several critical factors must be carefully considered when determining the optimal levels of payment friction. Firstly, the diverse needs and behaviours of the customer base must be considered. A one-size-fits-all approach to payment

We are increasingly in a world of personalisation; customers want everything customised to them, whether it be their banking app, the ads they see, or their shopping experience.

friction management is unlikely to be effective, as the preferences and comfort levels of tech-savvy millennials, elderly consumers, and every demographic in between can vary significantly. Payment providers must, therefore, adopt flexible, personalised payment friction models that allow customers to customise their settings based on their individual risk profiles and transaction patterns.

Secondly, the delicate balance between security and user experience must be continuously evaluated. While payment friction is an essential deterrent to fraud, if it is excessive, it can lead to customer frustration, abandonment, and the potential for users to seek out less secure payment alternatives.

Payment providers must analyse data-driven insights, such as transaction histories, fraud trends, and customer feedback, to identify the sweet spot where payment friction is sufficient to mitigate risk without unduly compromising the overall user experience.

Finally, payment friction management strategies’ operational efficiency and cost implications must be considered. Investment in robust, real-time fraud monitoring tools and 24/7 customer support can be crucial for effectively managing payment friction, but these capabilities require ongoing financial commitment.

Payment providers must carefully weigh the trade-offs between security, user experience, and operational costs to determine the optimal payment friction levels that align with their business objectives and customer needs.

By considering these critical factors, payment providers and merchants can navigate the nuanced challenge of payment friction management and strike the right balance between consumer protection and payment efficiency.

Institutional custody considerations and challenges

Institutions must carefully choose between managed and self-custody solutions to ensure security, scalability, and regulatory compliance in the rapidly evolving digital asset landscape, as effective custody is crucial for leveraging blockchain’s full potential.

Blockchain and digital assets have spread across myriad industries as real-world use cases grow and progressive regulatory regimes take effect.

Across the finance sector, institutional adoption of digital assets is gaining momentum, largely driven by new use cases, subsequent revenue streams, and efficiency gains afforded through blockchain technology.

Institutional-grade digital asset infrastructure is a prerequisite for implementing and utilising blockchain’s capabilities. Digital asset custody is one component of this infrastructure, and it is integral to adoption growth, security, stability, and compliance with global industry standards and regulations.

The value of crypto assets held in custody solutions is expected to reach $10 trillion by 2030, and 10% of all financial assets will be tokenised by 2030. A few custody options are on the market, each suitable for different purposes. Therefore, institutions must consider several factors before selecting the right provider for their business.

Institutional use cases

The tokenisation of real-world assets will transform finance, so institutions must note progress in this space at every stage. Many already use blockchain technology to streamline familiar financial use cases like payments, treasury, staking, and trading.

With faster global transactions, real-time settlement, increased transparency, and 24/7/365 market access, the opportunities to improve financial services with blockchain are endless.

Outside of finance, tokenisation will support the growth of new business models and use cases, from stablecoins and real estate to tokenising carbon credits and electric vehicles to luxury physical assets like jewels and artwork. The many possibilities are already becoming reality.

However, the efficiency gains, innovative use cases, and new revenue streams promised through tokenisation

may go unrealised if institutions fail to adopt highly secure digital asset infrastructure like custody.

In this early stage of institutional adoption, ensuring the right choice of custody solution can provide the highest level of security and ability to meet regulatory compliance requirements. This is fundamental to establishing credibility and trust across the crypto industry at large.

Traditional custody vs digital asset custody

In traditional finance, custody refers to the safekeeping of conventional financial assets like cash and securities. A bank or a third-party financial institution, such as a trust company or a brokerage firm, can carry out this task.

While the provider’s main responsibility is to prevent loss or theft of the customer’s financial assets, they are also responsible for ensuring regulatory compliance and can provide related asset management services.

Digital asset custody providers play a similar role in the secure and compliant storage of financial assets. However, cryptographic keys (also known as ‘private keys’ or ‘secret keys’) are required to access and move these assets.

Choosing the right provider can empower institutions to confidently navigate the digital asset ecosystem and prepare them for the future of finance.

At a basic level, there are two main types of digital asset custody:

• Managed custody: Not unlike traditional custody solutions, institutions place management, storage, and movement responsibilities on a third party.

• Self-custody: Institutions manage digital assets independently without relying on a third party for support.

Considerations for institutions

Similar to the advent of the internet, institutions may experience a significant learning curve regarding the different types of digital asset custody solutions, regulatory constraints, and the best approach depending on their business model. There are a few trade-offs between managed and selfcustody solutions that institutions need to consider.

First, managed custody may require less operational overhead, as the third-party provider is responsible for storing and safeguarding private keys. However, this can lead to greater risk, as you are entrusting the safekeeping of your private keys to someone else and, therefore, relinquishing control.

Managed custody solutions may work for some, but the standardised approach can impact an institution’s ability to operate at scale for others. In the short term—and perhaps without adequate knowledge of the different types of solutions—quickly onboarding a managed custody solution may seem appropriate, but it can hinder long-term growth.

With self-custody, institutions can retain ownership and control over their private keys while simultaneously leveraging a highly customisable and scalable solution that can be adapted for new business frameworks and use cases. However, not all self-custody solutions are created equal. While some can appear cost-effective, flexible, and out-of-the-box at initial deployment, the reality is that those solutions often become difficult and expensive to scale alongside your business and need more security and compliance requirements of institutional players such as global custodian banks.

The value of crypto assets held in custody solutions is expected to reach $10 trillion by 2030, and 10% of all financial assets will be tokenised by 2030.

When it comes to build vs buy, financial institutions and businesses of all shapes and sizes need to understand their options and ultimately find a trusted, experienced partner to help make their digital assets business and future-proof their financial infrastructure.

The path forward

The crypto industry is constantly evolving at a rapid pace, and custody providers are not excluded from this evolution. They must adapt and grow alongside the market to best serve institutions and emerging use cases.

Equally, institutions must carefully consider which digital asset custody solution can help them meet their current and future goals. Choosing the right provider can empower institutions to confidently navigate the digital asset ecosystem and prepare them for the future of finance.

Cassie Craddock managing director, UK & Europe, Ripple

Preparing for Q-Day: Making payments quantum-safe

As the threat of quantum computing looms, how can the payments industry safeguard against the quantum decryption capabilities that could undermine global financial security?

George Iddenden

Quantum computing represents a revolutionary leap in computational power, with the potential to solve complex problems far beyond the reach of classical computers. However, this power also threatens the cryptographic systems currently securing digital payments. As quantum technology advances, the payments industry faces a critical challenge: preparing for the inevitable arrival of Q-Day—the moment when quantum computers can break the encryption protecting our financial transactions.

Q-Day would compromise the cryptographic protections underlying

many aspects of digital security, including payment systems, online communications, and data storage. This could potentially expose sensitive information to attackers with access to quantum computers.

Although the exact timing of Q-Day is uncertain, the concept serves as a call to action for companies and governments to prepare for the postquantum era. It underscores the urgency of developing and adopting quantumresistant cryptographic algorithms before quantum computers can break current encryption standards. With the stakes clearly defined, it’s crucial to understand

how quantum computing could impact the security of payment systems and the vulnerabilities it could expose.

Understanding quantum computing and its potential impact on payments

Current payment security relies heavily on encryption methods like Rivest–Shamir–Adleman (RSA) and Elliptic curve cryptography (ECC), based on the complexity of solving intricate mathematical problems. However, quantum computers, particularly with the use of Shor’s algorithm—developed by mathematician Peter Shor in 1994—pose a serious threat to these encryption schemes.

Shor’s algorithm is capable of factoring large numbers exponentially faster than the best-known classical algorithms. For instance, while a classical computer might take an impractically long time to factor a 2048-bit number typical of RSA encryption, a sufficiently powerful quantum computer running Shor’s algorithm could break this encryption in a fraction of the time.

The implications for the financial industry are profound. If quantum computers can crack the encryption safeguarding payment systems, attackers could gain access to vast amounts of sensitive information. Decrypted credit card data could be exploited for unauthorised transactions, while personal data breaches could lead to widespread identity theft. Furthermore, the ability to undermine current encryption could facilitate large-scale financial fraud, eroding trust in digital payments and potentially destabilising the entire financial system.

This looming threat underscores the critical need for companies to begin transitioning to quantum-resistant cryptography, ensuring that their payment systems remain secure as quantum technology advances.

Sudeepta Das, chief technology officer at Cohesive Architecture, warns of the catastrophic potential of quantum computers compromising widely-used encryption: “While Shor’s algorithm could potentially compromise RSA encryption, if such an event were to occur, it would put much of the internet at risk, as RSA-2048 safeguards payment systems and a wide range of other data.”

The gravity of this potential threat highlights the urgency with which the financial industry must approach the development and adoption of quantumresistant cryptographic methods. The sooner these systems are in place, the more secure payment systems will be against the growing capabilities of quantum technology.

Key threats to current payment systems

One of the most pressing concerns with the advent of quantum computing is its potential to render current encryption methods, such as RSA and ECC, obsolete. Today’s payment systems rely heavily on these cryptographic algorithms to secure financial transactions and protect sensitive data.

These algorithms are designed to make it extremely difficult for anyone without the proper decryption key to access the information, thanks to the monumental computational challenge involved in factoring large numbers and solving complex mathematical problems.

However, the arrival of quantum computing threatens to upend this security paradigm. Quantum computers, equipped with algorithms like Shor’s, could break these encryption methods with relative ease, exposing a wide range of data to potential compromise. The types of data at risk are extensive and include:

• Credit card numbers: If encryption is broken, credit card information could be intercepted and used for unauthorised transactions.

• Transaction records: Financial transaction histories could be exposed, allowing attackers to manipulate or steal funds.

• User credentials: Login credentials, including passwords and PINs, could be decrypted, giving attackers access to accounts and financial resources.

The decryption of sensitive financial data by quantum computers could lead to a surge in identity theft and financial fraud. Once attackers gain access to decrypted information, such as personal identification details, bank account numbers, or credit card information, they can easily impersonate individuals, open fraudulent accounts, make unauthorised purchases or even transfer funds without the owner’s consent.

The scale of this impact could be staggering. While individual accounts may be compromised, quantum computing’s ability to decrypt data on a large scale means that entire databases

of financial information could be exposed in a single breach.

Such breaches could result in massive financial losses across millions of accounts, overwhelming financial institutions with fraud claims and disrupting services. The sheer magnitude of these potential breaches could dwarf any data theft or fraud incidents seen to date, putting unprecedented pressure on the financial industry to respond and recover.

As the threat of quantum computing continues to loom, it is essential for the financial industry to recognise these risks and take proactive steps to safeguard payment systems before it’s too late.

Steps companies can take to prepare for quantum computing

As quantum computing advances, the potential threats to payment systems become increasingly clear, making it crucial for companies to take proactive measures to safeguard their data and systems. The key to mitigating the risks posed by quantum computers lies in adopting cryptographic algorithms designed to withstand quantum decryption capabilities. Researchers are already developing quantum-resistant cryptographic methods that are believed to be secure against these emerging threats.

Two notable types of quantumresistant algorithms are latticebased cryptography and hash-based cryptography:

• Lattice-based cryptography utilises mathematical structures known as lattices to create encryption methods that are highly challenging for quantum computers to break. These methods rely on problems related to lattice structures, such as finding

Quantum computing presents a profound challenge to the security of digital payment systems, with the potential to render traditional cryptographic algorithms obsolete.

short vectors or solving the closest vector problem, which are currently considered difficult even for quantum machines.

• Hash-based cryptography uses hash functions to build secure digital signatures. This approach leverages the strength of hash functions, which are inherently resistant to quantum attacks, to create signature schemes that remain secure even in the quantum era.

To effectively transition to a quantum-safe future, companies must begin integrating these quantumresistant algorithms into their security infrastructure now, before quantum computing capabilities reach a critical level. The process of transitioning to quantum-safe encryption should be methodical and phased to minimise disruption and ensure compatibility with existing systems.

Beyond adopting new cryptographic methods, companies should also consider the following steps:

1. Evaluate current cryptographic infrastructure: Start by assessing your existing cryptographic algorithms to identify vulnerabilities to quantum

The urgency of this transition cannot be overstated; while the full realisation of quantum computing’s potential may still be years away, the time to act is now.

The sooner organisations begin this transition, the better prepared they will be to face the challenges of the postquantum era.

Looking ahead

Quantum computing presents a profound challenge to the security of digital payment systems, with the potential to render traditional cryptographic algorithms obsolete. As the industry moves closer to the era of quantum computing, the stakes for financial institutions and technology providers have never been higher. The threats posed by quantum technology could lead to widespread financial fraud, identity theft, and a significant erosion of trust in digital payments.

attacks. Understanding where your systems are susceptible is essential for planning an effective transition.

2. Implement a phased transition plan: Develop a phased plan to replace old algorithms with quantumresistant ones gradually. This approach allows for testing and validation of new algorithms before full deployment, ensuring minimal disruption to existing systems.

3. Engage with industry and standards organisations: Collaborate with industry peers and participate in standards organisations working on quantum-resistant cryptography. This engagement helps ensure your practices align with emerging standards and best practices.

4. Educate and train personnel: Ensure your IT and security teams know quantum threats and quantumresistant cryptography. Training will be essential for managing and implementing the new systems effectively.

By taking these steps now, companies can position themselves to stay ahead of quantum threats, ensuring that their payment systems remain secure as quantum technology continues to evolve.

To safeguard against these looming risks, it is crucial for companies to begin transitioning to quantum-resistant cryptographic algorithms and implement robust security measures. The process of securing payment systems against quantum threats will require significant investment, collaboration, and a proactive approach to adopting new technologies.

The urgency of this transition cannot be overstated. While the full realisation of quantum computing’s potential may still be years away, the time to act is now. By preparing today, companies can ensure that their systems remain secure in the face of tomorrow’s quantum challenges, protecting sensitive data and maintaining the trust of their customers.

As the industry works towards harnessing the power of quantum computing, it is essential that these advancements are pursued responsibly. Das emphasises the broader implications: “Looking forward, I hope that those of us involved in developing and using these technologies will strive to create innovations that benefit humanity and society as a whole. Quantum computing has the potential to bring about transformative changes, and it is crucial that we harness this technology responsibly.”

In the end, the transition to quantumsafe encryption is not just about protecting financial systems—it’s about ensuring the continued trust and stability of the entire digital economy. The time to prepare is now, before the quantum future becomes the quantum present.

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60+ speakers

8+ hours

600+ attendees

Improving financial inclusion with CBDCs

Central bank digital currencies (CBDCs) are exciting many in the digital assets world, but what can these mean for those who are less engaged and on the fringes of financial services altogether?

Jon Yarker

CBDCs are rapidly becoming a reality around the world.

According to data from the American think tank Atlantic Council, 19 nations out of the G20 are in the advanced stages of CBDC development. Three other countries—Jamaica, the Bahamas, and Nigeria—have fully launched their own CBDCs, with 36 CBDC pilot schemes in action. This is causing much discussion and excitement within the world of digital assets, but questions remain over those who are less engaged with the sector.

It remains to be seen how CBDCs will operate in developed countries’ economies and to what extent those who are on the periphery of financial services will be impacted. The World Bank Group estimates that 1.4 billion people around the world are ‘unbanked’ with no access to regulated financial services.

Fortunately, many payment experts believe CBDCs will help improve financial inclusion and support more ‘unbanked’ people to access financial services.

“Done well, and CBDCs will make payments cheaper and faster, which will benefit the unbanked by offering lower costs and faster service,” says Alessandro Hatami, managing director

of strategy consultancy Pacemakers, who also co-authored a book on the digital revolution of finance, Reinventing Banking and Finance. Here, Hatami points to the better customer experience CBDCs can potentially offer people.

“The prospect of cheaper payments through CBDCbased money transfer companies could be a real incentive for the unbanked to finally open a digital wallet,” he says. “It’s also an idea to ensure that CBDC transactions under a certain value remain anonymous to help overcome privacy concerns among the unbanked.”

Those who are unbanked struggle to make or receive payments, pay bills and participate in other everyday banking activities. Chris Lawrence, chief programs officer at global non-profit The Interledger Foundation, says a lack of government-issued ID can hamper these efforts, with banks still abiding by base criteria for opening accounts. Here, Lawrence says CBDCs can play a critical role.

“CBDCs can bypass some of the most fundamental barriers to financial access for underbanked populations,” says Lawrence. “By contrast, anyone can create a digital wallet or account that enables

them to transact using CBDCs. That’s because account creation for CBDCs is subject to different criteria than traditional banks. Instead of relying on governmentissued IDs, users are issued private keys that identify them and enable them to transact.”

This could help banks and other institutions become more comfortable engaging with the unbanked. Bound by regulations, banks are committed to KYC processes to ensure they only engage with real people. CBDCs can help fill the gaps unbanked people bring, which George McDonough, CEO of digital asset investment company KR1, believes can help make it easier for these companies to grant approval for products and services.

“The inability to access financial services can sometimes come down to a lack of data and knowledge on that particular person in terms of compliance,” says McDonough, explaining this can be a barrier to reaching conclusions about granting access. “CBDCs could go deeper in terms of data access—a mobile wallet CBDC might be able to provide instant locations, back history, and financial connections with other individuals. Might that not boost inclusion?”

A question of integration

The majority of CBDC projects around the world still need to go live. This raises many questions about how CBDCs will work in reality and, concerning those who are financially excluded, how these currencies could foster better inclusion on a day-today basis. Bryan Daugherty, global public policy director at the BSV Association, points out several barriers that may hamper CBDCs’ efforts to improve financial inclusion. These are digital literacy, technology barriers, security concerns, and access to infrastructure.

Specifically, CBDCs’ use of technology could be a disadvantage for some, he explains: “Limited digital literacy among marginalised populations may hinder the effective use of CBDCs… [and] the complexity of digital wallets and CBDC-related technologies could overwhelm some users.

“Despite CBDCs’ aim to increase inclusion, people in areas with poor internet connectivity or lacking digital devices may still face exclusion.”

The risk of consumers not understanding CBDCs cannot be overlooked. Julia Demidova, head of CBDC and digital currencies product and strategy at FIS, warns that

CBDCs can bypass some of the most fundamental barriers to financial access for underbanked populations.

these concepts may be too complex for some.

“Wallet management and the new payment interfaces prove difficult for some consumers to use… and consumers may also not be educated enough on CBDCs,” says Demidova. “These concerns, however, can be addressed with education, training, simplified interfaces for consumers, provision of support systems and other strategies to reduce the risk of overcomplicating financial services for those already on the margins.”

Connection issues

Ultimately, CBDCs are digital assets which rely on an internet connection. While this can enhance how some access them, it can also limit access for those without devices. Adam Preis, director of product solution marketing at digital security and identity verification specialists Ping Identity, argues considerations need to be made for those ‘off the grid’, such as the elderly and people who cannot afford digital devices. Preis champions a hybrid approach to make the most of CBDCs in a way that allows access for all.

“By hybrid, we mean consumers must have access to in-branch services, devices which cater to disparate

needs, and the ability to make both online and offline payments,” he says.

“Vulnerable people, those who are unbanked and people with disabilities must be a forethought, accommodated and supported—CBDCs will not work otherwise.

“Hybrid experiences must also be underpinned by strong cybersecurity and data privacy practices. Consumers need to know their data and money is safe. Without regulation stipulating good practices, consumers are at risk of fraud, theft, and their data being stolen—all deterrents to financial inclusion.”

Interledger’s Lawrence agrees and argues that a CBDC has to be supported by appropriate digital infrastructure. He says individuals without digital devices on their person shouldn’t be restricted from accessing CBDCs—and the products and services they in turn access—and that payments infrastructures in general need to be updated around them.

“Access to CBDCs will depend on the digital public infrastructure built to transact them, but infrastructure challenges are not limited to technology,” says Lawrence, who doesn’t think the ideal scenario means creating workarounds for a lack of

internet access or access to smart devices. “Instead, digital public infrastructure projects should account for these potential setbacks as they roadmap the rollout of their new interoperable financial systems.”

This hybrid narrative has other applications. Crucially, CBDCs shouldn’t be reliant upon connectivity, warns FIS’ Demidova, who says offline functionality needs to be considered.

“The offline functionality of CBDC is paramount, especially for retailers, other businesses and households without a strong, consistent internet connection,” she says. “Offline functionality also ensures that CBDC as a payment system is resilient to intermittent availability challenges including individual user connectivity interruptions, all the way to the regional or system-wide impact events like natural disasters that could affect basic services.”

What’s next?

The launch date of CBDCs may not be imminent, but this doesn’t mean preparations should be delayed. While CBDCs promise advantages such as greater visibility, easier access, and improved efficiency, they also present challenges, particularly for those who are financially illiterate or unfamiliar with digital currencies.

This is why financial education is crucial to the successful adoption of CBDCs. Pacemakers’ Hatami emphasises that comprehensive public education must go ‘hand in hand’ with the introduction of CBDCs to ensure consumers understand this new form of currency. “These should

be targeted education programmes aimed at all customers, helping to boost their knowledge of CBDCs and to challenge the extensive disinformation about this transformational innovation,” he adds.

Moreover, the introduction of CBDCs coincides with the rise of digitally savvy younger generations, who often need more financial literacy despite their comfort with technology. Su Carpenter, director of operations at the selfregulatory trade association Crypto UK, sees this as an opportunity. “Working with the government—and other organisations—we can promote financial education to ensure the next generation of consumers and a future workforce can make more informed decisions,” says Carpenter. She suggests that collaborating with the digital assets industry could be key to achieving these objectives if the government is truly committed to growth, jobs, innovation, and inclusivity. Looking ahead, CBDCs’ success will hinge not only on the technological infrastructure and regulatory frameworks supporting them but also on the public’s readiness to embrace this new financial tool. Governments, educational institutions, and industry stakeholders must work together to create an environment where all individuals, regardless of their financial background or digital literacy, can benefit from CBDCs’ opportunities. By addressing these challenges proactively, we can ensure that CBDCs fulfil their promise of enhancing financial inclusion and driving broader economic participation.

Improving the FCA’s complaints reporting process

Payments Review: “The FCA welcome the opportunity to speak to the industry, and their valuable insight will help us carry out our review of complaints reporting requirements.

“We want to work with firms to improve the quality of complaints data we receive as well as complaints returns and guidance while ensuring that any changes we make are proportionate.”

and inefficiencies due to multiple, often duplicative returns.

High-level categorisation fails to provide deep insights into root causes, making it difficult to spot specific issues or emerging trends. Meanwhile, inconsistent reporting across firms is complicating industry-wide comparisons, while limited visibility into informal complaints further compounds the issue.

George Iddenden

The Financial Conduct Authority’s (FCA’s) complaints reporting review is a comprehensive initiative aimed at modernising and enhancing the current process for financial firms. Its key objectives include improving data coverage and quality to identify potential consumer harm better, reducing time lags in data collection to enable swifter regulatory action, and streamlining the reporting process to minimise unnecessary duplication and regulatory burden.

The review also seeks to update complaint categories to reflect current industry issues such as fraud better, explore ways to adjust reporting frequency based on firm size and complaint volume and improve the overall usability and accessibility of the reporting system.

Central to this effort is the FCA’s commitment to engaging with industry stakeholders, gathering feedback, and testing proposed changes before implementation, ensuring that the revised process meets both regulatory needs and industry practicalities.

FCA Senior Manager, Consumer and Retail Policy, Jonathan Pearson, tells

Effective complaints reporting in the financial sector is crucial for maintaining the integrity and stability of the industry. It serves as a vital tool for consumer protection by enabling regulators to identify and address issues promptly, while also providing firms with valuable insights to improve their products and services.

Proper complaints handling and reporting help maintain trust in financial institutions, ensure regulatory compliance, and offer a window into emerging market trends and consumer expectations.

Moreover, it acts as an early warning system for potential widespread issues, allows for performance measurement and industry benchmarking, and can drive operational efficiencies. Ultimately, a robust complaints reporting system contributes to a healthier, more responsive financial sector that better serves its customers and maintains public confidence.

Current challenges in complaints reporting

Attendees of a recent consultation session between The Payments Association and the FCA identified several issues with the current complaints reporting process. Key challenges include significant time lags in data collection, which hinders quick identification and resolution of issues,

Additionally, aligning complaints data with newer regulatory frameworks, such as consumer duty, and discrepancies between the FCA reporting categories and firms’ internal taxonomies create mapping difficulties, leading to a troublesome lack of traceability in complaints data across different regulatory bodies. The current system struggles to link complaints data directly to actual customer harm, and the volume of data makes quick pattern identification challenging.

Pozitive Payments uses complaints data to map against consumer duty outcomes, believing it useful in identifying gaps in complaints reporting. Janet Johnston, the company’s chief risk and compliance officer, says: “If, for example, a communication sent to customers raised a number of complaints or enquiries then we would investigate how we could have been clearer in our communication to ensure that the ‘customer understanding’ outcome was met. Likewise, an upward trend in the number of complaints regarding product usage would prompt us to review the product offering and modify if required.”

The FCA is considering implementing more frequent reporting to reduce time lags and enable quicker regulatory action. However, balancing the need for frequent reporting with operational burdens remains challenging.

Similarly, improving the granularity and real-time capabilities of data to better pinpoint root causes and correlate complaints with specific products, services, or business practices remains a challenge.

Source: Financial Conduct Authority

Complaints closed in the period

Source: Financial Conduct Authority

Key aims of the FCA’s review

The FCA is conducting a thorough review of complaints reported by regulated firms. The focus is on the complaints themselves, not the firms reporting them.

The key objectives include enhancing data quality and coverage to identify potential consumer harm better, reducing the regulatory burden on firms by eliminating unnecessary duplication, and improving the timeliness of data collection to enable quicker regulatory action.

The review also seeks to update complaint categories to reflect current industry issues, explore ways to adjust reporting frequency based on firm size and complaint volume and improve the overall usability of the reporting system.

Additionally, the FCA aims to align complaints reporting with other regulatory frameworks and enhance its ability to spot trends and address emerging issues promptly.

Ultimately, the review seeks to create a more efficient, effective, and responsive complaint-reporting system that benefits both regulators and financial firms.

Streamlining complaints: Industry best practice

There are a number of changes which could be implemented towards reporting structure to address current inefficiencies, while also improving data quality. One of the key focuses of the FCA is the consolidation of multiple returns based on firm permissions. The regulator is hoping this will reduce duplication and streamline the reporting process.

Alongside the consolidation of returns, the FCA is considering removing group reporting to simplify requirements further and adjusting reporting frequency with the possibility of moving towards quarterly reporting for larger firms, while tailoring requirements based on firm size and complaint volume.

Santander UK Head of Complaints Strategy & Insight, Brodie Sinclair, explains that while the FCA uses high-level categories, banks like Santander have hundreds of lower-level categorisations that roll up into these broader groups.

“This granularity allows banks to quickly identify root causes of issues and understand specific drivers of complaints,” he says. For example, where the FCA might have a general category like ‘disputes over sums/charges’, a bank’s internal system would break this down into more specific issues such as whether the complaint relates to interest, charges or fees, and then if driver is due to these having been applied incorrectly, not refunded, or at the wrong rate, for example.

This level of detail enables banks to route complaints to the right teams, capture nuanced data about new products or services, and gain a much deeper understanding of customer issues than the FCA’s broad categories allow.

He suggests that the regulator could improve its process by working with firms to understand their existing categorisation systems and create common, more detailed categories that firms could easily align with. He argues that better categorisation would lead to more meaningful data and insights, benefiting both the regulator and the firms.

Leveraging AI for root cause analysis in financial complaints

According to Sinclair, artificial intelligence (AI) could potentially benefit root cause analysis of complaints in several ways. It could automate some of the manual analyses currently performed by people, allowing for faster and more complete processing of a larger volume of complaints. “You could then have the AI indicating what the complaint is about and rely on AI to categorise the complaints, rather than a human, which might mean you’ve got more consistent and accurate data,” he tells Payments Review.

AI could also support existing staff, freeing them up to focus on deeper, more detailed analysis. It could also package up many of the manual tasks in the complaint process, allowing human staff to focus more on service quality, empathy and restoring the relationship.

Sinclair emphasised that the key is to have AI support human activity and do a better job overall rather than entirely replacing human analysts or complaint handlers.

Transforming financial oversight: The path to enhanced reporting

The FCA’s initiative to enhance the complaints reporting process represents a significant step towards modernising regulatory oversight in the financial sector.

To effectively address key challenges such as data coverage, timeliness, and usability, it is important to streamline reporting requirements and enhance the quality and granularity of complaints data. These improvements are crucial for promptly identifying consumer harm, ensuring regulatory compliance, and fostering operational efficiencies within financial firms.

For smaller firms, it is easier to tailor complaints reporting to meet the FCA’s specific requirements, Johnston admitted. She says: “The current reporting system does not provide the FCA with complaints data across the customer journey and against consumer duty outcomes which would be beneficial.”

Ultimately, a more responsive complaints reporting system will contribute to a healthier financial sector capable of addressing issues proactively while promoting fair treatment of consumers.

Not another ISO 20022 piece

As ISO 20022 adoption accelerates, financial institutions face a pivotal moment to strategically overhaul their payment systems or risk falling behind.

As the payments world moves closer to full adoption day by day, the move to ISO 20022 adoption from a strategic perspective becomes ever more relevant. A key principle to understand with the ISO migration is that it’s not just a technology/IT programme of work; it is a full financial institution roll-out, and underestimating the size of the challenge can prove a high-risk approach.

ISO 20022 is a complete set of standards for all financial institution messages. It will replace the existing MT ISO 15022 format with a data-rich MX ISO 20022 format, which will be able to carry data embedded within messages that have been difficult to send to date. Enrichment of this payment data, combined with additional data standards, will enable financial institutions to benefit from payment processing efficiency and economic gains.

Challenges of data enrichment

Instant payments continue their dominance of the payments market, with many regions already adopting or poised to adopt the medium to offer instant payments. The European Parliament has made instant payments mandatory under new regulations by the end of 2024 (inbound and outbound by September 2025).

Banks operating outside the eurozone must be ready not only for single euro payments area (SEPA) instant payments but also provide the OLO ‘one-leg-out’ service, where one account is outside the eurozone, bringing into play cross-border instant payments. As of April 2024, over 20% of global crossborder payments on Swift already utilised ISO 20022.

Many real-time gross settlement (RTGS) schemes are already ISO 20022 native; to use these rails and offer instant

payments, being ISO 20022 compliant is Hobson’s choice (there is simply no choice). Instant payments are one of the new(er) technologies that will rely on ISO 20022 to operate and benefit from its capabilities.

Enriched payment data is both a blessing and a curse. Current systems may struggle to handle the additional data fields and volume introduced by the MX format.

The time for strategic adoption is now

While ISO 20022 will offer a wealth of benefits, it is important to recognise that it is not an easy task. It is not as simple as mapping MT messages to MX messages. Banks must review the entire end-to-end stack and understand what systems and applications need to be migrated to newer infrastructure and systems. The programme needs to account for payment processing, but also reconciliation, investigations, sanctions, reporting, treasury, IT, and risk all need to be studied, and the changes understood, and many hands need to be involved; it’s about bringing multiple stakeholders together as one (we all know this is much easier to write down and say than do).

Enriched payment data is both a blessing and a curse.

Extension for enabling cross-border payments using ISO 20022 moved to November 2022

Migration extended following ECB decision to delay moving Eurosystem

Benefits of ISO 20022 compliance outweigh the challenges

Increased transparency (in line with one of the core objectives for the G20) by leveraging data contained within the enriched data sets will also support increased straight-through processing (STP). STP for payments remains a key priority for most institutions. A key benefit of ISO 20022 is faster processing of transactional and cash reporting messages, which provides a great advantage for financial institutions and final beneficiaries and helps institutions with cash management, forecasting, and liquidity.

More efficient reconciliation and returns can be achieved by reducing delays in processing that result from unstructured, incomplete, inconsistent data, and an additional gain in reconciliation and returns can be realised. With ISO 20022, it is anticipated that up to 84% of messages can be sorted automatically. Dedicated returns and investigations messages that all use standardised return codes and delays experienced by customers when banks apply returned funds to their accounts or respond to queries should also be reduced. The customer journey for reconciliation will be enhanced with dedicated reference fields in conjunction with structured, standardised remittance data.

Many use the phrase ‘data is the new oil’ when referring to the ISO 20022 change, but what good is oil without refinement? Firms can leverage analytics for evolving business models, improving automation, compliance, and customer orientation. Building a richer view of customers will also help spot ‘out-ofnorm’ payments trends.

Fraud and financial crime remain constants. More effective sanctions screening with dedicated country fields and legal entity identifiers, enhanced fraud checking with five key data points collectively known as enhanced fraud data (EFD), and the standardised format can combine to help institutions in their continued fight. The standardised format is also a primary candidate for automation.

Standardising messaging across the industry benefits from simplifying the operations processes for payments processing, investigations, data analytics, and reporting, which will help reduce these costs. With a universal message type, integration

CHAPS migration to 200222

ISO 20022 enabled for general participants

End of coexistence period and adoption of ISO 20022 messaging format

across schemes will open up across the industry faster. Several RTGS domestic schemes have already moved to ISO, and with most payments ending in RTGS, if you want to drive frictionless payments for your customers, being part of the e2e chain is paramount.

There are challenges but also rewards—how each institution adopts and approaches a migration will vary.

Build vs buy: Choosing the right path

Many have opted for a converter/translator to receive inbound MX messages and convert them back into MT messages for processing, then back to MX to send outbound. Reliance on this method can lead to truncation and loss of data, breaks in the STP, and, more importantly, making cross-border payments increasingly difficult. Without instant and cross-border payment capabilities, customers may seek other providers.

Building an in-house native solution might not be viable if this journey is not already underway, with timelines fast closing in on the November 2025 deadline. Often resourceintensive and time-consuming (especially combined with the volume of upcoming regulations—SEPA Inst, DORA, PSD3, PSR, IP, FiDA, the list is long), the ability to balance regulatory compliance, ISO 20022 compliance/migration, innovation, and BAU activities is difficult to face down.

The age-old ‘build vs buy’–an option remains to partner with a vendor to take the journey together, being able to leverage an out-of-the-box but highly configurable native solution, and understanding how to migrate services, or indeed enable new instant services for consumption, might be the most viable option.

Whatever option is being considered, now is the time to shift from a tactical to a strategic adoption approach.

Kevin Flood director, FIS payments ecosystem strategy, corporate and international banking, FIS Global

First SWIFT message sent using MT ISO 15022 standard

ISO 20022 launched

ISO 20022 for cross border enabled on an opt-in basis

The future of cross-border payments depends on collaboration

Global collaboration is essential to overcoming inefficiencies in cross-border payments, with innovations like blockchain and CBDCs paving the way for faster, seamless transactions.

Cross-border payments are the lifeblood of global trade. They fuel the import and export of goods and services, facilitate commodities and equities trading, and are vital to improving financial inclusion in the world’s poorer countries. So why are they still hampered by settlement delays, high fees, and inefficiencies that block the path to business expansion in new markets?

The value of cross-border payments is estimated to increase from almost $150 trillion in 2017 to over $250 trillion by 2027, a jump of over $100 trillion in just 10 years. Cross-border payments can cover wholesale and retail purposes, from large-scale multimillion-dollar government, corporate or financial institution transactions that

circumnavigate the globe to individual remittances to neighbouring countries. They’ve evolved from paper-based bank and wire transfers to cards, instant credit transfers, e-money and mobile wallets. In our increasingly interconnected and digital world, in theory, they should be as convenient and as frictionless as domestic payments.

Challenges in cross-border payments

However, cross-border payments remain beset by the same old problems. A lack of interoperability between various national payment systems necessitates international banks and payment providers acting as intermediaries and correspondent banks to facilitate FX conversions and settlements. The more

Kamran Hedjri group CEO, PXP Financial

intermediaries involved in a crossborder transaction, the slower and more expensive it becomes. In some cases, a cross-border payment can take several days and cost up to 10 times more than a domestic payment.

Transactions can also be delayed when they travel through different time zones and different clearing house operating hours, which can cause trapped liquidity. Compliance and security checks can also slow down cross-border payments, as each transaction needs to adhere to AML/ KYC requirements. Then there is the fact that many banks and payment providers still depend on legacy technology platforms designed for scheduled batch processing, which are

We’ve already had tantalising glimpses of the future of cross-border payments; now is the time to work together to make those visions a reality.”

struggling to keep up with the pace and volume of cross-border and real-time payments. This has been highlighted by a slew of high-profile payment system outages worldwide in recent weeks.

Innovations and future directions

Some progress has been made in tackling these frictions. Introducing the ISO 20022 messaging standard will help reduce the problems of fragmented and incomplete messaging data carried with cross-border transactions. ISO 20022 will improve the clarity and speed of transaction data and help overcome the interoperability issues between different clearing systems.

But there is still much more work to be done. This is why the Bank of International Settlements (BIS) and the G20 are prioritising cross-border payment efficiencies and tackling these frictions by exploring blockchain and decentralised solutions, central bank digital currency (CBDCs) and interlinked payment systems worldwide.

The launch of Project Rialto by the BIS in June 2024 is an exciting development. It explores the use of modular FX components combined with wholesale CBDCs as settlement assets to improve FX settlement for instant cross-border payments. A collaboration between the BIS and the central banks of Singapore, France, Italy, and Malaysia, Rialto’s focus on FX is timely. FX accounts for around 60% of P2P payment costs and as much

as 97% of P2B payments, exposing transaction participants to liquidity and settlement risks.

The modular possibilities of Rialto could also cross over into Project Agorá, the cross-border payment project run by the BIS in collaboration with the central banks of France, Japan, the UK, and some entities in the private sector. Agorá is considering tokenising wholesale central bank money and commercial bank deposits on programmable platforms. If its results show potential, this project could transform crossborder payments by integrating tokenised commercial and central bank deposits. It promises fast atomic settlements, eliminating settlement delays experienced currently. Smart contracts underpinned by blockchain can essentially allow for programmable money that can be adjusted for interest rate moves, for example. Security will also be improved, as tokenised assets reside in tamper-proof ledgers that remove the risk of fraud and improve transparency.

Then there is the multi-phase Project Nexus, being run under the auspices of the BIS with a view to connecting several instant payment systems across Asia with a mission to achieve crossborder payments at scale. Nexus is the first BIS payments project that’s moved to a successful go-live. Phase four is underway, which will see the central banks and domestic payment

Cross-border payments are the lifeblood of global trade.

system operators of Malaysia, the Philippines, Singapore, and Thailand collaborating with the Reserve Bank of India to extend the use of India’s Unified Payments Interface (UPI), which has enjoyed stellar uptake since its launch in 2016. Nexus has the potential to connect a market of 1.7 billion people globally, enabling them to make instant payments across borders as easily as domestically.

The path forward for global payments Ultimately, with these projects and the continued push by the private sector to create even more innovative solutions, we could be on the verge of realising the full potential of cross-border payments. However, improving their speed and efficiency requires collaboration between countries and public and private entities. We’ve already had tantalising glimpses of the future of cross-border payments; now is the time to work together to make those visions a reality.

Introducing our newest members

Meet the latest additions to The Payments Association, driving innovation and excellence in payments.

Roq is an independent, outcomes-focused quality engineering consultancy. It provides an independent view of all things quality to organisations on their most important technology initiatives. Roq helps them to realise the benefits of high-functioning, highquality technology solutions delivered at a pace that aligns with their business imperatives.

that exceptional quality engineering is at the heart of this.

Its independence, driven by its great people and strong values, delivers quality engineering.

• Mobile payments: Enable payments through mobile wallets and apps, catering to the growing mobile-first population.

It is committed to helping its clients improve the way they deliver business outcomes through technology by removing inefficiencies, improving quality, reducing delivery costs, and mitigating the risk of brand damage.

With its high Net Promoter Scores, Roq is trusted to get the job done, and its clients appreciate it. Roq listens to what outcome its clients want, helps them understand what they need to achieve it and work in partnership with them to deliver it. It believes that technology should work properly and

Roq has a firm belief that technology should work properly by providing quality engineering services to clients who care about delivering high-quality software at the same pace. By embedding a qualityfirst mindset with its clients, Roq aims to ensure quality is engineered across the whole development lifecycle, from inception right through to deploy and maintain.

Roq’s quality engineering expertise spans all business sectors. Whatever sector your business is in, Roq has the experience to ensure that quality, tailored to your needs, can be engineered into your technology domain to enhance performance, mitigate risk, and deliver on user expectations.

Pay Easy is a payment service Provider based in Brazil, dedicated to revolutionising how businesses and consumers handle transactions across Latin America. Its mission is to simplify and streamline payment processes, making them more accessible, efficient, and secure for everyone involved.

Pay Easy offers a comprehensive suite of local payment solutions tailored to meet the unique needs of the LATAM market. Its services include:

• Local payment processing: Handle transactions in local currencies, ensuring smooth and hassle-free payments.

• PIX integration: Leverage Brazil’s instant payment system for real-time transactions.

• Credit and debit card processing: Accept all major credit and debit cards easily.

• Bank transfers: Facilitate secure and efficient bank transfers across the region.

Pay Easy’s vision is to become the go-to payment solution provider in LATAM and across the globe. It is committed to expanding its footprint and bringing its innovative payment solutions to new markets.

In line with its vision, Pay Easy is excited to announce its upcoming expansion into Africa, Asia, and Europe. It aims to replicate its success in LATAM by offering localised payment solutions that cater to the specific needs of each region. Pay Easy’s goal is to empower businesses and consumers worldwide with the tools they need to conduct transactions effortlessly and securely.

Pay Easy is dedicated to providing exceptional customer service and support. Its single API integration allows businesses to access all their payment solutions through one unified interface. Additionally, its solutions are designed to grow with your business, whether a small startup or a large enterprise.

Paynetics is a B2B payments, embedded finance and a digital banking platform provider. It’s on a mission to simplify payments.

Paynetics is pioneering a new type of fintech company — it works to be Europe’s leading “regulated fintech”, combining the trust that comes from being an e-money institution and principal member of Mastercard, Visa, SWIFT, and SEPA with the digital DNA and innovation of a fintech.

It helps its clients introduce new financial services to market via its digital banking platform, which has multiple entry points for card issuing and acquiring, IBAN accounts, and bank transfers.

In e-commerce acquisition, its solution combines a quick onboarding process with robust processing technology.

Paynetics offers its partners a wide range of card issuing options. Accepted worldwide, its cards can be digitalised on a mobile phone and offer other features such as loyalty, rewards, parental control, and more.

Its BIN sponsorship services provide a fast and simple way to launch a card program, significantly shortening the time to market.

As a principal member of SWIFT and SEPA, Paynetics offers fully functional IBAN accounts with the same facilities as regular bank accounts, but it also reduces administrative costs and complexity for you.

Paynetics is developing an alternative payment ecosystem—through interoperable white-labelled eWallets, QR payments , and the world’s first Androidagnostic software point of sale.

Paynetics work with its partners to implement any of these services as “point solutions”. But the real benefit of working with Paynetics comes from working with it across a range of services to greatly improve implementation time for you and time to cash for your customers.

It has a team of payment experts who helped introduce ATMs and chip cards to entire nations and re-established financial systems of whole countries. Whatever your payments challenge, Paynetics can help you meet it.

Paynetics offer payments, simplified.

Worldpay powers businesses of all sizes to make, take, and manage payments. The company offers unique capabilities

to power omni-commerce. Whether online, in-store or mobile, you’ll find Worldpay at the heart of great commerce experiences in 146 countries and across 135 currencies. Worldpay helps its customers become more efficient, more secure, and more successful.

Xapo Bank is a fully licenced bank that offers a straightforward way for members to manage and grow their Bitcoin.Founded in 2013, it has evolved from an e-money wallet into a digitalfirst bank that is regulated by the Gibraltar Financial Services Commission. Following the sale of its institutional custody business to Coinbase‘s custody arm in 2019, Xapo pivoted to solely service retail customers. It enables members from nearly every corner of the globe to maximise the value of their Bitcoin by offering a competitive interest rate

Founded in 2015 and launched in 2017, Tide is a prominent business financial platform in the UK. Tide helps SMEs save time (and money) in the running of their businesses by offering business accounts and related banking services and a comprehensive set of highly usable and connected administrative solutions from invoicing to accounting. Tide has 600,000 SME members

without needing to stake, lend, or lock up assets. Members can make their Bitcoin work harder by easily converting it to USD and investing in the US S&P 500 stocks or acquiring select cryptocurrencies, or their USD can earn interest. They can also spend their Bitcoin as easily as fiat with a universally accepted debit card. As the Fort Knox of Bitcoin, Xapo utilises a physical vault in tandem with MPC technology to bolster members’ security. Xapo Bank offers a secure service with a significant Bitcoin reserve treasury and guarantees its members’ USD deposits up to the US dollar equivalent of €100,000, providing an option for financial growth.

in the UK (more than 10% market share) and more than 300,000 SMEs in India. Tide has also been recognised with the Great Place to Work certification for two years. Tide has been funded by Anthemis, Apax Partners, Augmentum Fintech, Creandum, Salica Investments, Jigsaw, Latitude, LocalGlobe, SBI Group and Speedinvest, amongst others. It employs around 1,800 Tideans worldwide. Tide’s long-term ambition is to be the leading business financial platform globally.

Balancing innovation and security: The urgent need for sensible payment regulations

Riccardo Tordera-Ricchi, director of policy and government relations at The Payments Association, examines the looming challenges posed by new payment system regulations, emphasising the need for a balanced approach to ensure both innovation and consumer protection in the UK’s financial sector.

As we approach the critical deadline for the implementation of the Payment Systems Regulator’s (PSR) new rules around APP fraud reimbursement, it is an opportune moment to reflect on the challenges and implications these changes present.

The industry has been deeply engaged with the PSR over the past years, providing feedback and highlighting concerns, particularly around the proposed £415,000 liability threshold. Although the final rules have introduced a threshold that could have far-reaching consequences, particularly for smaller players within the market, there remains a sense that the evolving dialogue and ongoing considerations could yet influence the outcome. However, as things stand, it is crucial that we prepare for the 7 October implementation.

The £415,000 cap is not just a financial burden; it is a potential barrier to innovation. Smaller firms, which are often at the forefront of new and dynamic financial solutions, may find it impossible to absorb such significant losses. This could lead to a consolidation of the market, where only the largest, most established companies can afford to operate under these new conditions. Furthermore, the threshold could deter international players from entering the UK market, as the financial risks become too great.

To put it in perspective, the UK’s long-standing liability for suppliers of consumer credit has a claim limit of £30,000 under the Consumer Credit Act 1974. The credit card chargeback system has also proven to work well within this framework. A similar approach could strike a more appropriate balance,

ensuring protection without stifling market innovation. The current proposal’s scale is disproportionate and could have unintended consequences, including an increase in first-party fraud and the creation of moral hazards.

We have taken our concerns to the highest levels of government, stressing the need for a revision of the threshold. The recent positive signals from policymakers suggest they share our concerns and claim to remain committed to working closely with the industry to tackle this pressing issue and ensure the UK financial services sector remains competitive and innovative.

However, the clock is ticking, and the implementation of these rules is just around the corner. We continue to urge the PSR to listen to the industry’s concerns and to consider adjustments that would prevent the unintended consequences we foresee. A payment system that is secure, fair, and conducive to growth is essential not just for the industry, but for the broader economy. The coming months will be crucial in determining whether we can achieve that balance.

As we move forward, our focus remains on ensuring that the payment system supports innovation while safeguarding consumers. We are committed to working with the government and the PSR to achieve a solution that benefits all stakeholders and maintains the UK’s position as a leader in financial services.