Daily Dash: New eID Network On Horizon For Finland

September 2, 2022
Finland’s Ministry of Finance has issued a grant to a consortium of banks, technology companies and government services to develop a digital identity network, while NatWest admonished for breaching banking rules.

Nordic Banks Come Together For Finnish eID Network

Finland’s finance ministry has granted a €3m government grant to build a pilot environment for a self-sovereign, digital identity network.

The grant has gone to Findynet, a coalition of financial institutions that aims to develop a network that ensures that digital wallets developed by different service providers are interoperable, working for consumers and organisations. 

Findynet board chair Markus Hautala released a statement saying: “The trust network, which will now be built, promotes digital and human-centred data economies. This means that end-users manage their own data and can decide for themselves what information they share about themselves with different parties to preserve their privacy.”

For example, Hautala added, this exchange of information could involve electronic receipts, credit information and proof of professional qualifications.

Founding members of the Findynet Cooperative are made up of nine public and private sector organisations. These include public institutions such as Finnish Post, the trade association Finance Finland and Technology Finland, as well as banks such as Nordea Bank and OP Financial Group.

NatWest Breached Banking Rules By Forcing Businesses To Open Accounts, CMA Says

The UK Competition and Markets Authority (CMA) has found that NatWest breached banking rules by forcing business customers to open a business current account to secure a loan.

The practice, known as bundling, meant that hundreds of businesses paid monthly fees for a business account that they may not have needed.

“Forcing businesses to open costly current accounts to secure essential loans is unacceptable — and a direct breach of our rules, which have been in place for 20 years,” Adam Land, CMA senior director of remedies, commented on the announcement.

“NatWest should have known better,” he stressed.

The practices took place over a period of three and a half years between November 2016 and May 2020 and were reported by the bank itself to the competition watchdog. 

It affected 956 customers, 702 of which paid account fees. These businesses will be given refunds that may amount to £600,000 in total, according to NatWest.

The CMA has previously cracked down on HSBC, Danske Bank, Clydesdale Bank and Lloyds for similarly tying their loan products to the purchase of business accounts.

Klarna Woes As Losses Quadruple 

The Swedish fintech and buy now, pay later firm Klarna endured a net loss of $581m in the first half of this year, compared with $141m the previous year.

This is due to rising defaults on borrowing, the cost of integrating comparison site PriceRunner that it has acquired and staff costs. 

The company had previously announced in May this year that it was cutting 10 percent of its staff. 

Despite losses, first-half revenue was $950m, an increase of 24 percent since the first half of 2021. This has been driven largely by growth in the US, where it first launched in 2015. 

Bank Of Lithuania Revokes Payments Licence

The licence of the Alternative Payments payment institution has been revoked, Lithuania’s central bank has said

An inspection by the Bank of Lithuania revealed “gross and systematic violations” of the prevention of money laundering and terrorist financing related to the identification of clients and beneficiaries, the verification of information in reliable and independent sources, and the application of enhanced client identification measures. 

The Bank of Lithuania had already warned Alternative Payments about shortcomings in its money laundering and terrorist financing processes related to establishing the identity of customers, the origin of funds and the implementation of transaction monitoring. However, it has failed to implement appropriate actions to remedy this. 

It was also established that the payment institution failed in maintaining corporate governance requirements. For example, there was no proper separation of functions, a lack of employee positions necessary for the operation of the payment institution, conflicts of interest were not identified and managed, and other significant violations were recorded. 

Meanwhile, Alternative Payments’ risk management mechanism and internal control system were admonished as ineffective by the regulator, which added that risk management measures were not actually implemented, and the internal audit function was not performed at all for some time. 

In addition, during the inspection, it was established that the payment institution provided more services than the payment institution licence allowed.

Qatar Issues First Digital Payment Licences

The Qatar Central Bank has issued its first ever digital payment licences to Ooredoo Money and Vodafone Qatar’s iPay.

In a statement posted on Twitter, the bank said the licence issuances are part of an “initial step to include all companies providing digital payment services under the supervision of the Qatar Central Bank”.

The new licensing regime will “contribute to the development of the financial technology sector and enhance financial inclusion”. the bank added.

ING Shuts Down Yolt

ING-backed Yolt is set to close completely, bringing an end to its business-to-business open banking operations.

The Dutch financial services company said that, in the “rapidly evolving and changing market”, it has concluded that it is not feasible to achieve its ambitions with Yolt. 

Yolt has informed its clients of the decision and the planned winddown of its services. 

The aim is to complete the phase-out process by the end of April 2023, and until the termination of services, ING has said that Yolt will continue to fulfil its contractual obligations to meet clients’ expectations. 

Yolt was first launched in 2019, and achieved a milestone in the UK after being the first to make an open banking API call.

Indonesian Government Launches Its Own Procurement Credit Card

The Indonesian government has launched a new type of credit card designed specifically for central and regional government procurement.

Following a presidential directive in April this year, the new card was developed to reduce the use of cash in government procurement and to support local providers.

The Domestic Government Credit Card (KKP Domestik) is a multi-agency project led by the country’s central bank and the Association of State-Owned Banks (HIMBARA).

The three banks that makeup HIMBARA — BNI, BRI and Bank Mandiri — will issue the new credit card, and have plans to expand issuance to regional development banks.

The card is built around the QR Code Indonesian Standard (QRIS), and can therefore be used at more than 20m connected merchants, with all transactions processed domestically.

On August 31, VIXIO reported on a new payment linkage between Indonesia and Singapore using the QRIS standard.

BankLine, B4U Financial Launch New Bitcoin-For-Cannabis Payment Solution

BankLine and B4U Financial have unveiled a new integration that will connect B4U’s bitcoin payment solution with point of sale (POS) systems at cannabis stores throughout the US.

The move will enable merchants to connect B4U to their existing POS via API, or they can set up B4U on any internet-connected device, which can then be used in store or online.

In a statement, Bankline said that merchants will benefit from zero interchange fees, no chargebacks and guaranteed settlements in either fiat currency or bitcoin.

For the consumer, using the B4U solution eliminates the need to liquidate their bitcoin via an exchange, thus reducing conversion fees. It also offers consumers a tax-exempt, peer-to-peer way to spend their bitcoin.

BankLine is a crypto-friendly banking network, while B4U, which stands for “bitcoin for you”, is a provider of bitcoin ATMs and POS products.

Together they will target the US’ 7,000 licensed cannabis dispensaries in states where the drug is now legal.

UK Crypto Scam Shut Down

Micasa, along with an associated company called Remultex, have both been shut down after accounts failed to explain large payments, and misuse of Bounce Back Loans, according to the UK’s Insolvency Service. 

An investigation found that Micasa had seen around £1.3m pass through its accounts from February 2019, when it started operating, until December 2020.

The company had been identified as potentially involved in a cryptocurrency scam, although the lack of accounting records meant it was not possible to verify whether its business was legitimate trading activity.

Investigators also identified that it had secured a £50,000 Bounce Back Loan (BBL), which were offered by the UK government during the COVID-19 pandemic, although there was also no evidence that the company was eligible under the scheme rules.

Nearly all the BBL was transferred to Remultex Ltd, which the investigation said started operating in December 2019. Remultex also received its own BBL of £30,000, although it was similarly not possible for investigators to confirm that the company was entitled to the BBL.

Both companies have now been shut down by the UK’s High Court. Additionally, liquidators will seek to recover and realise the assets of the company to make returns to creditors.

US Congressman Says No To Shoot Now, Pay Later

US Representative Stephen Lynch (D-MA), chairman of the Task Force on Financial Technology, has spoken out against using buy now, pay later (BNPL) for financing firearms.

On Monday (August 29), Lynch sent a letter to Dusty Wunderlich, CEO of BNPL firm Credova, after the firm “aggressively advertised” the use of BNPL products to finance online purchases for guns, ammunitions and firearm accessories. The company is currently partnered with more than 60 online gun and hunting supply retailers.

“Amid more than 100 daily gun-related deaths and recurrent mass shootings nationwide, the US continues to endure a devastating gun violence epidemic that we firmly believe will only be exacerbated by this misguided and egregious business practice,” the members wrote.

“We are concerned that the ease with which buyers can acquire guns through BNPL will result in more guns and increased gun violence in our nation’s communities. As the online gun market continues to grow exponentially, public safety clearly demands that we conduct robust oversight of Credova Financial, LLC’s Buy Now, Pay Later services.”

Although Americans may use their credit cards to purchase firearms, in practice, some payment processors may not allow it as guns are considered high-risk purchases.

The letter was co-signed by fellow Democratic representatives Carolyn Maloney (D-NY), Alma Adams (D-NC), Al Green (D-TX) and John Larson (D-CT).

More Chinese Cities Launch CBDC Payments On Public Transport

Several more Chinese cities have launched central bank digital currency (CBDC) payments on their public transport networks.

According to a local news report, Guangzhou — a city of 15m opposite Hong Kong — has become the first Chinese city to accept CBDC payments on its public bus network.

Known as digital renminbi (RMB), residents can now use their CBDC wallet to pay for bus fares via a QR code-based system. 

The app is still in beta, but is quickly becoming operational in a growing number of locations.

According to another news report, Ningbo — a city of 8m people south of Shanghai — has started accepting digital RMB payments on its subway network, making it the ninth city to do so.

As an incentive, passengers who opt to pay using digital RMB may be charged as little as one penny per fare as part of a “red envelope” giveaway.

US Consumer Watchdog Cracks Down On Data Broker

The Federal Trade Commission (FTC) has filed a lawsuit against data broker Kochava, alleging the company sold geolocation data from hundreds of millions of mobile devices that can be used to trace the movements of individuals to and from sensitive locations.

The FTC alleges that Kochava’s location data was not anonymised and it enables others to identify individuals and expose them to “threats of stigma, stalking, discrimination, job loss, and even physical violence”.

The move comes as the agency is stepping up its enforcement and rulemaking activities concerning consumers’ data privacy.

In early August, the FTC initiated a rulemaking process into “commercial surveillance”, the practice of businesses collecting a vast amount of data about people, analysing it and profiting from it. 

In May, the agency also warned businesses that, in case of a data breach, they must disclose information to help parties mitigate reasonably foreseeable harm or risk facing FTC action.

The FTC’s lawsuit now is seeking to halt Kochava’s sale of sensitive geolocation data and require the company to delete the sensitive geolocation information it has collected.

Brazil Reveals New Research Related To Pix, CBDC, DeFi

The Brazilian Central Bank (BCB) has published a list of eight projects that it will include in LIFT Lab, a collaborative virtual environment aimed to promote the development of innovative products in the financial industry.

The new projects, which include new payment products on Brazil’s successful Pix instant payment system and further research relating to a central bank digital currency (CBDC), will start in mid-September and run until mid-December. 

One of the projects, carried out by Lovecrypto, will work to convert a stablecoin on the Celo blockchain into a digital real, study the interoperability between the public blockchain and the CBDC and potentially also examine interoperability with Pix.

In a separate project, Ailos Pix Credito will work to create a new payment method on Pix to facilitate installment payments without intermediaries.

Itaú, Brazil’s largest bank, will research direct debit payments on Pix using NFC technology and study QR code payments on Pix in an offline environment. Separately, the bank will also research a DeFi liquidity pool for stablecoins.  

According to the central bank, all of the selected projects are in line with the BCB’s agenda to promote inclusion, competitiveness, transparency, education and sustainability in the financial system.

Cash Could Be Phased Out In Five Years, Warns LINK CEO

LINK chief executive John Howells has made an intervention in the UK’s pertinent access to cash debate, warning that cash could have as little as half a decade left due to cuts in the cash supply infrastructure. 

Howells told the Daily Telegraph that it could experience “death by a thousand cuts”.

“This infrastructure will start to fall apart unless something is done, and we are already seeing ATMs and branches closing at a worrying rate,” Howells told the news publication. 

This could result in an estimated 5m people who rely on cash being at risk of being left behind unless more is done to help them adapt to the digitalisation of payments, he warned. 

According to LINK, the number of free cash machines has dropped by more than a fifth in four years, from 52,358 in 2018 to 40,830 today. 

Meanwhile, UK Finance has estimated that just one in every 20 transactions will be made using cash by 2031.

Dutch Central Bank Announces Payments, Electronic Money Investigation

De Nederlandsche Bank (DNB) has announced that this autumn it will be launching an investigation into the country’s payments and electronic money sector.

In a bid to ensure full compliance with financial services and money laundering regulations, the DNB has said that it will be assessing the payments and electronic money institutions that it supervises. 

In total, some 74 payment institutions and 11 EMIs are licensed in the country. 

The DNB’s investigation will focus on the growth of institutions and the question of whether the growth has also led to increased integrity risks. 

In particular, it will examine how a fast-growing payment institution or EMI is complying with obligations under the country’s Financial Supervision Act and the Money Laundering and Terrorist Financing Prevention Act.

When selecting institutions for this research, among other things, the percentage growth in transaction volume and/or in the number of merchant clients is being considered, the DNB said. 

The selected institutions will receive a questionnaire from the central bank, and in-depth studies are expected to be completed in the first half of 2023. 

Last month, the DNB also confirmed that it is assessing the effectiveness of sanctions-screening systems, and is targeting payment institutions in this study as well. 

This investigation will look at the testing of transaction screening and the screening of the names and details of relations, and is expected to begin in mid-September. 

FIS Launches New Tools To Help Central Banks Move To Instant Payments, CBDC

US-based fintech FIS has launched a new payments infrastructure solution, RealNet Central, to help central banks move towards digital-first, real-time payment systems. 

According to FIS, RealNet Central will accelerate real-time payments adoption by connecting a country’s businesses, consumers, financial institutions and government entities to real-time networks, both domestically and internationally.

Alongside RealNet Central, FIS has also launched CBDC Virtual Lab, a tool that will allow central banks, commercial banks and other financial institutions to experiment with and pilot the core propositions of CBDC.

These include issuance, transfer, redemption, offline payments, programmable payments, retail, wholesale and cross-border payments.

FIS CBDC Virtual Lab was created in partnership with US-based digital currency platform M10 Networks.

US Agency Says DOJ Should Mend SAR Feedback

The US Government Accountability Office (GAO) has said that the Department of Justice (DOJ) should improve data collection and provide better feedback to federal agencies and the industry on the effectiveness of anti-money laundering (AML) reports.

US AML regulations require banks to report potentially illegal transactions to the Financial Crimes Enforcement Network (FinCEN). FinCEN then makes these reports, known as suspicious activity reports (SARs), available to law enforcement agencies to help with investigations.

Although the US AML legislation passed last year directed the DOJ to provide annual statistics on agencies' use of these reports, the department’s first such report discussed only qualitative information and data already available to FinCEN.

In practice, it means that neither FinCEN nor banks have any knowledge about how effective these reports are.

GAO now recommends that the DOJ improve its data collection and involve two additional agencies in the design of its report.

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