Daily Dash: Bigtech Cat Fight

October 28, 2022
Meta criticises Apple for changes to its digital purchase rules, while central banks have completed another cross-border digital currency project and the US Treasury has sanctioned more Iranian officials in light of human rights abuses.

Apple Agitates Meta With App Ad Change

Under the new guidelines, Apple now says that “digital purchases for content that is experienced or consumed in an app, must use in-app purchase”. This has spurred criticism from Meta, as these new rules also include buying advertisements to display in the same app (such as sales of “boosts” for posts in a social media app). 

The new rule means that Meta’s platforms must now funnel their post-boosting payments through Apple’s own in-app purchase system. This gives the bigtech giant a 30 percent cut of all such payments made on the iOS system.

“Apple continues to evolve its policies to grow their own business while undercutting others in the digital economy,” a spokesperson for Meta told the Verge.  

“Apple previously said it didn’t take a share of developer advertising revenue and now apparently changed its mind. We remain committed to offering small businesses simple ways to run ads and grow their businesses on our apps.”

Apple, meanwhile, has defended its policy change, stating that boosting, which allows an individual or organisation to pay to increase the reach of a post or profile, is a digital service.

“Of course In-App Purchase is required,” said Apple spokesperson Peter Ajemian. “This has always been the case and there are many examples of apps that do it successfully.”

BIS Completes Wholesale CBDC Pilot

Central banks in the Middle East and Asia have completed the first and the largest scale pilot of central bank digital currencies (CBDCs).

The pilot was part of the Bank for International Settlements’ (BIS) Project mBridge, which experiments with cross-border payments using a common platform based on distributed ledger technology (DLT), which central banks can use to issue and exchange their CBDCs.

The participating banks were the Central Bank of the United Arab Emirates, the Hong Kong Monetary Authority, the Bank of Thailand, the Digital Currency Institute of the People's Bank of China and the BIS.

According to the UAE, project mBridge demonstrated faster, cost effective and secure cross-border monetary settlements using central bank money, identified as a G20 economic priority, and of positive impact for regional and international trade as well as participating entities. 

“The mBridge reflects the leadership vision for the UAE to be one of the leaders in CBDC development and issuance, and the preferred regional hub for advanced financial infrastructure, as well as for the CBUAE to be among the top central banks globally,” said Khaled Mohamed Balama, the UAE’s central bank governor. 

US Treasury Sanctions Iranian Officials Over Censorship

The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) is designating ten Iranian officials in what it says is a brutal ongoing crackdown on nationwide protests in Iran, as well as two Iranian intelligence actors and two Iranian entities involved in the Iranian government’s efforts to disrupt digital freedom.

The action comes after 22-year-old Mahsa Amini’s arrest and death in the custody of Iran’s Morality Police and the ongoing oppression of peaceful protests in the Middle Eastern country. 

The decision follows on from OFAC designations in September, which targeted other Iranian officials. 

US Unbanked Population Reaches Record Low

Last year, there were roughly 5.9m households in the US where no one in the household had a checking or savings account at a bank or credit union.

According to the FDIC National Survey of Unbanked and Underbanked Households, this means that only 4.5 percent of the US households were unbanked, which represents a record low since the survey began in 2009.

The unbanked rate fell by 0.9 percent compared with the findings of the last survey in 2019, showing that around 1.2m additional households became banked during the last two years.

At the same time, an estimated 81.5 percent of US households, around 107.9m, were fully banked, according to the agency.

Paraguay Drops Crypto Law Over Environmental Concerns

Following a lengthy back-and-forth in the Paraguay legislature, the House of Deputies has decided to not pursue a bill that sets up a comprehensive crypto legal framework in the country.

According to the lower house, the country’s electricity regulator raised significant concerns that the crypto mining industry has high energy needs while it does not generate new workplaces in the country.

The use of energy is a particularly pressing issue in Paraguay, with the energy regulator estimating that the country may face challenges with energy supply at any rate in the next seven years. 

If the crypto-asset law was approved, energy cannot be guaranteed to industries, the regulator stressed.

The crypto-asset bill had previously been passed by both the deputies and the senators in the summer, but it received a presidential veto in late August. 

Paraguay President Mario Benitez argued that the bill included conflict of competencies between agencies, had inconsistent definitions and that it would be difficult to promote crypto mining in a sustainable future.

Following the veto, the bill went back to the legislative body. The Senate voted to pass the bill in late September, but the Chamber of Deputies has now decided to accept the presidential veto.

Amazon Launches Venmo As Payment Option At Checkout

Amazon has announced that it will begin offering Venmo, the PayPal-owned mobile wallet, as a payment option at checkout on Amazon.com and the Amazon mobile app.

In a statement, Amazon said that checkout with Venmo would be rolled out to “select Amazon customers” from Wednesday (October 26), and will be available to all US customers by Black Friday (November 22).

Venmo, which currently has almost 90m active users, will also offer Venmo Purchase Protection on eligible items, while purchases from third-party sellers are protected by Amazon’s A-to-z Guarantee.

“Whether it’s paying with cash, buying now and paying later, or now paying via Venmo, our goal is to meet the needs and preferences of every Amazon customer,” said Max Bardon, vice president of Amazon Worldwide Payments.

Kuwait Central Bank Tests BNPL Product

The Central Bank of Kuwait (CBK) will allow a buy now, pay later (BNPL) product to test within its regulatory sandbox, the central bank announced.

As part of the sandbox, participants will launch a new BNPL product in the local market with a group of volunteer customers and merchants.

The new product will allow customers to purchase from the participating online retailers and pay online in a deferred manner, either as a one-time payment or in instalments. 

It has no interest or fees charged on customers, potentially making the new product more Shariah-compliant in the Islamic country as opposed to other types of interest-bearing credit products.

Merchants will also benefit from the product by potentially generating more sales and being able to manage their banking operations easily, and view all details of purchases, payments and return processes, the CBK said.

The central bank also noted that it aims to develop supervisory policies and instructions to regulate BNPL in the Kuwaiti market and to define the legal aspects of this activity.

Ireland's AML Risks Growing, Says IMF

As a growing international financial centre, Ireland faces significant and increasing threats from foreign criminal proceeds, according to the International Monetary Fund (IMF). 

The risks facing Ireland include illicit proceeds from foreign crimes, while sectors such as retail and international banks, trust and company service providers, lawyers, and accountants are medium to high-risk for money laundering. Meanwhile, virtual asset service providers (VASPs) pose emerging risks, the report says. 

In addition, the IMF outlines that Brexit, with the recent move of international banks to Dublin, and the COVID-19 pandemic has increased the money laundering risks faced by Ireland.

Although the country is well equipped to deal with these risks, the IMF has recommended that authorities adopt an increased focus on the risks.

Introducing data analytics tools, including machine learning to leverage potentially available big data on cross-border payments, would allow for efficient detection of emerging risks, the organisation said. 

New Apple Rules Limit Limit Functionality Of NFTs Within Apps

Apple has published a new round of software updates — iOS 16.1, iPad OS16.1 and macOS Ventura — which include new rules that limit what features can be unlocked through non-fungible tokens (NFTs).

In its new App Store Review Guidelines, Apple said that apps may allow users to list, mint and transfer their own NFTs within an app, but ownership of an NFT should not unlock more features within the app.

Similarly, apps may allow users to browse NFT collections owned by others, but must not display external links, buttons or calls to action to purchase NFTs. Users can only purchase NFTs through Apple’s own in-app payment system.

Elsewhere in the updated guidelines, Apple prohibits apps from using other mechanisms such as QR codes or cryptocurrencies to give special access to users.

EU Banking Watchdog On Look Out For AML Experts

The European Banking Authority (EBA) has launched a call for interest for two expert groups and a call for input to advise on its work regarding the EU’s Funds Transfer Regulation (FTR). 

One Technical Expert Group will focus on the FTR’s inclusion of crypto-asset service providers (CASPs), while members of the other will advise the EBA on systems and controls that institutions put in place to comply with restrictive measure regimes and with targeted financial sanctions. The group will also look at the challenges faced while implementing these systems and controls.

Each group will be chaired by EBA staff and composed of up to 20 experts. Applicants will need to express an interest by November 4

In addition, the EBA has launched a call for input, which aims to identify practical issues that financial institutions experienced when complying with the European supervisory authorities’ guidelines on preventing the abuse of fund transfers for money laundering and terrorist financing purposes. Responses need to be returned by November 15.

Bank of England Wants CBDC Advice

The Bank of England is tendering for a proof-of-concept for offline payments using a central bank digital currency (CBDC). 

The proof-of-concepts need to be completed in time to be integrated into the second phase of the Bank for International Settlements’ Project Rosalind in February 2023, but a final report can be submitted after that deadline. 

The proof-of-concepts will need to demonstrate how offline CBDC payments can be achieved with finality and irrevocably, as well as key design considerations such as the token/account, protocol, and messaging for payment between devices. 

Another problem that needs to be solved by stakeholders is how an offline CBDC can detect double spend and enforce AML while preserving privacy.

Millions Of Brits Struggling With Bills, Says New FCA Survey

A new survey by the UK’s Financial Conduct Authority (FCA) has found 7.8m Brits are struggling to keep up with their bills, an increase of around 2.5m since 2020.

According to this year’s Financial Lives survey, about one in four adult Brits is in financial difficulty, or could quickly find themselves in difficulty if they suffered a financial shock.

Moreover, 4.2m people have missed bills or loan repayments in at least three of the six months before the survey took place.

During this year, the FCA has issued new guidance to a number of financial service sectors on how to support customers in financial difficulty.

In September, the FCA warned insurers to protect their customers from unnecessary add-ons and unfair penalties, and in February the FCA engaged with buy now, pay later (BNPL) providers to improve their terms and conditions.

Similarly, in July, the FCA announced that it will pursue a new Consumer Duty, which will force firms to end rip-off charges and fees and make it easy to switch or cancel products and services. 

Japan’s Largest Convenience Store Chain Launches Cashless, Walk-Through Checkout

Lawson, Japan’s largest convenience store chain, has opened the first branch of its new rapid checkout store, Lawson Go.

With the first branch located in downtown Tokyo at the Mitsubishi Foods headquarters, Lawson Go is designed to allow shoppers to enter, exit and pay for their items in the shortest time possible.

To enter the store, consumers first have to register with the Lawson Go app and display a QR code.

Inside the store, an AI-based system connects cameras to weight sensors on the shelves to determine which items a shopper has chosen and these are automatically billed using a predetermined payment method on the way out.

Unlike many other developed markets around the world, Japan is still a cash dominated society. In 2021, as reported by VIXIO, more than 90 percent of Japanese consumers said cash was their most-used payment method.

DG COMP Clears Vipps/Mobilepay Merger

The European Commission’s antitrust wing has approved a merger between the Nordic mobile payments players MobilePay and Vipps after a third partner, Pivo, pulled out.

Pivo, a Finnish mobile payments app, was taken out of the merger after competition concerns from the commission.

The combined company is set to launch on November 1, and will have close to 11m consumers and 400,000 shops and e-commerce websites across Finland, Denmark and Norway.

Vipps' bank owners will hold 72.2 percent of the new company, with MobilePay, which was originally developed by Danske Bank, will take the remaining 27.8 percent.

BIS Completes Latest CBDC Project

The latest in a long slew of central bank digital currency (CBDC) projects has been unveiled by the BIS.

Project Aurum is a collaboration between the BIS Innovation Hub Hong Kong Centre, the Hong Kong Monetary Authority and the Hong Kong Applied Science and Technology Research Institute, and is focused on developing a prototype for two-tier CBDC.

Project Aurum is a full-stack — front-end and back-end — CBDC system that comprises a wholesale interbank and retail e-wallet systems. 

The aim of the project was to bring to life two very different types of tokens: an intermediated CBDC; and stablecoins backed by CBDC into the interbank system.

Fintech The ‘Vector Of Innovation’, Says Banque de France Chief

“Fintechs, major vectors of digital innovation, are becoming lastingly implanted in the financial landscape,” said François Villeroy de Galhau in a speech to the Banque de France’s Forum Fintech. 

The digital revolution has ushered in a new wave of players, activities and services that first swept into the payments sector and then spread gradually to all financial services, the regulator said approvingly. “Some of you, the fintechs, are living proof of this.”

For example, in France, more than half of all payment and electronic money institutions received their licence between 2018 and 2021 — in other words, since European regulations relaxed the conditions for market entry. 

“Fintechs are here to stay,” he said, pointing out that a recent study published by the regulator that revealed online banks and other digital payment players doubled their customer base between 2018 and 2020, and in 2020 alone captured 35 percent of new retail current accounts.

Villeroy de Galhau also used his speech to warn of the need for France and EU to keep up with digital innovations such as crypto-assets, whereby he praised the EU’s upcoming Markets in Crypto-Assets regulation.

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