Daily Dash: New Eurosystem Retail Payment Strategy Strives For 'Resilience'

November 24, 2023
The European Central Bank has said resilience will be a key goal for retail payments in 2024, Tempo has published new research on the growth of euro-backed stablecoins, and the Bank of Korea prepares for a CBDC "usability test".

New Eurosystem Retail Payment Strategy Strives For 'Resilience'

The European Central Bank (ECB) has updated its retail payments strategy, outlining priorities for 2024 and beyond. The strategy was first developed in 2019 and expanded in 2020. 

According to the ECB, the creation of a pan-European solution for retail payments at the point of interaction (POI) and the enhancement of SEPA remain "at the heart" of the strategy. 

However, the central bank’s latest goal is resilience. The ECB said this is necessary due to international shocks, such as Russia's invasion of Ukraine, increasing cyber threats and an ever-growing reliance on digital payments.

"In light of recent external developments, the resilience of retail payments, in general, needs to be improved,” said the ECB.

This can be done by “ensuring the availability of a fallback option which is at least sufficient for a minimum service in case one type of payment solution does not work temporarily”. 

Euro-Backed Stablecoins Could See 'Tremendous Growth', Says Tempo France

Tempo France, operator of Tempo Money Transfer, has shared with Vixio new research on the likely growth of euro-backed stablecoins under new regulation.

Over the next three years, Tempo expects that stablecoins will make up 0.5 percent of all euros in circulation. Over the next five years, that figure could grow to as high as 1 percent, the company said.

At present, with about €700m in circulation, stablecoins make up 0.007 percent of euros in circulation. In the US, stablecoins currently make up 0.7 percent, or $130bn, of all dollars in circulation.

Under the Markets in Crypto-Assets Regulation (MiCA), Tempo said that 2024 will be a “year of implementation” for blockchain in payments, and it expects to see a 30 percent rise in EU financial institutions using blockchain.

New opportunities for firms to act as stablecoin custodians, trading platforms and payment service providers (PSPs) will create healthy competition within the EU, the company said.

Korean Regulators Publish Plans For CBDC 'Usability Test' 

The Bank of Korea (BOK), the Financial Services Commission and the Financial Supervisory Service have unveiled plans for a central bank digital currency (CBDC) usability test, beginning in Q4 2024.

The plans specify target use cases and confirm which banks will be participating, following consultations between regulators and the industry.

The tests will be divided into “real transaction testing” and “technical experimentation in a virtual environment”.

Real transaction testing will study payments use cases, including programmable payments, and will aim to explore the “high possibility” of “dramatically reducing” fees, complexity, settlement and verifications times.

FedNow Will Complement RTP Network, Says Fed’s Michael Barr

Michael Barr, vice chair for supervision at the Federal Reserve, has said he believes that FedNow, the newly launched instant payments system, will not duplicate or fragment RTP, its older rival.

“I don’t foresee this being a conflict,” he said at The Clearing House Annual Conference last week, as reported by Banking Dive.

”Banks are going to have optionality in the systems they use, and they might use different rails for different kinds of payments.”

Barr also said the uptake for FedNow, although slow, is consistent with expectations, adding that wide-scale adoption could take years.

To a question about loss of bank fee income, Barr said it will be a “huge benefit for American society” for businesses and households to be able to move money instantly and at almost no cost.

Last month, Vixio reported on interoperability challenges between FedNow and RTP.

Hong Kong, Abu Dhabi Sign MoU To Collaborate On Fintech Regulation

The Hong Kong Monetary Authority (HKMA) and the Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM) have signed a new memorandum of understanding (MoU) on fintech regulation.

Under the MoU, the two authorities will pursue joint proof-of-concept projects to connect the HKMA’s Commercial Data Interchange to the ADGM’s SME Financing Platform.

Both platforms allow businesses to share public and private data with lenders to increase their chances of accessing finance.

The two authorities will also partner on cross-border data exchange to address potential pain points in cross-border banking, such as opening accounts for small and medium-sized enterprises (SMEs).

The HKMA said the MoU is an important milestone following the signing of a co-operation agreement between the two partners in 2018.

Polish Mobile Payments System BLIK To Expand Into Romania, Slovakia

BLIK, a joint venture between six leading Polish banks and Mastercard, has announced a new partnership with DXC Technology to expand into Romania and Slovakia. 

DXC will modernise and adapt the payment platform’s central system to meet payment standards in Romania and Slovakia. 

It will also ensure that BLIK is able to handle transactions in Romanian leu and euros and can connect to the SWIFT system.

As one of the largest payment systems in Poland, between July and September 2023, BLIK facilitated 455m transactions worth PLN63bn ($15.7bn).

Mastercard Approved For Domestic Payments Processing In China

Mastercard’s joint venture (JV) entity, Mastercard NUCC Information Technology (Beijing), has received formal approval from the People’s Bank of China (PBOC) and the National Administration of Financial Regulation (NAFR) to commence domestic bank card clearing activity in China.  

“We are pleased to have reached this milestone with our local partner NUCC,” said Michael Miebach, CEO of Mastercard.

In a statement, Miebach said the company’s deeper participation in the Chinese market will benefit the country, its consumers and its businesses.

In February 2020, the PBOC principally approved the application from Mastercard NUCC to begin formal preparations to set up a domestic bankcard clearing institution in China. 

Since that time, the JV has established standards, rules, structures and infrastructure in line with local regulatory requirements, and obtained the required certificates for a local switch business. 

“Mastercard NUCC is committed to being in China as an active partner, working to expand issuance and acceptance of Mastercard-branded products for the benefit of local businesses and consumers,”  said Ling Hai, chair of the board of Mastercard NUCC and co-president, international markets at Mastercard.

“As we ramp up our domestic operations, we look forward to working with customers and partners in China to harness technologies and innovations in a way that empowers local businesses and delivers the best payments experiences to people every day.”

Irish Banking Association Calls For National Fintech Centre

Financial Services Ireland (FSI), a lobby group representing financial institutions in the country, has called on the government to launch a national centre for fintechs. 

“To capitalise on the growth potential, FSI would like to see the establishment of a dedicated FinTech Hub in Ireland,” said Joe Heneghan, FSI chair. 

“As consumer appetite for digital services continues to grow, every firm operating in financial services is now a fintech firm,” said Heneghan. 

Heneghan continued that Ireland can be at the forefront of fintech. “We believe that establishing a dedicated physical space will be a pivotal part of that.”

This would follow on from the work already done by the Irish government to encourage innovation, such as a regulatory sandbox. 

“We envision the fintech hub to be a vibrant centre for innovation, collaboration, and growth, open to everybody in the industry. Such a hub would not merely be a testament to our commitment to the digital evolution in financial services,” he said. 

Los Angeles Lawmakers Say No To Cashlessness

The Los Angeles City Council has unanimously passed a ban on cashless businesses

“Cashless businesses create an economy in our city that is not inclusive and accessible for all people," said council representative Heather Hutt in a statement

Hutt, who introduced the motion, said there are many unbanked residents in Los Angeles county, from minority groups and low-income communities, that rely on cash to pay for goods and services.

"As a city that has promised to be a safe and fair place for all, we must be proactive in ensuring that all our systems create fairness and equity for each and every individual," she said. 

Although the motion has passed, it will take some time to come into effect, as the City Attorney is yet to draft the required legislation.

Epic Games CEO Labels Google ‘Crooked’ During Antitrust Court Testimony

Epic Games CEO Tim Sweeney has accused Google of using bullying and intimidation to force rivals not to compete in the app distribution and in-app payments markets.

Sweeney made the comments during court testimony on Monday (November 20), as Epic Games continued its attempt to sue Google for antitrust violations and “illegal” price gouging through in-app payment commissions. 

In 2018, Epic Games decided to release the Android version of its Fortnite video game app directly via its own website, so that it could use its own payment system.

Sweeney recalled that Google called him into its California HQ to offer a range of financial incentives for Fortnite to release via the Play Store.

“It seemed like a crooked arrangement,” Sweeney told the jury, as quoted by AP News. “Google was proposing a series of side deals, which seemed designed to convince Epic not to compete against them.”

Younger Australians Are Cutting Back On Subscriptions, Says NAB

New research from National Australia Bank (NAB) has found that younger Australians are saving on average more than A$76 ($50) per month by cutting down on subscriptions.

Four in ten Australians under the age of 30 have cancelled a streaming subscription since mid-2023, as have one in three Australians of all ages. Australians were more likely to cancel streaming subscriptions than news, dating app and other app subscriptions.

At the same time, NAB has seen a 62 percent jump in the number of customers using its new Spending feature to track their spending.

The feature automatically categorises transaction data so that customers can better identify where their direct debits are going, removing the need to trawl through old statements.

Singapore QR Code Tie-Up With Indonesia Goes Live

Bank Indonesia (BI) and the Monetary Authority of Singapore (MAS) have confirmed that a cross-border linkage between their respective national QR code standards is now live.

The linkage enables customers of participating FIs to make retail payments via their existing mobile banking apps using Indonesia's QRIS or Singapore’s NETS QR code.

Only two FIs from Singapore, OCBC and UOB, can facilitate QRIS transactions at present, and DBS will join them at a later date. On the Indonesian side, ten FIs are already signed up.

BI governor Perry Warjiyo and MAS managing director Ravi Menon launched the linkage together by making live cross-border QR payments at the Singapore FinTech Festival last week.

BI and MAS have also signed a letter of intent (LOI) to establish a local currency settlement framework.

Set to launch in 2024, the framework will facilitate the settlement of cross-border payments, including QR payments, trade and investments, between Indonesia and Singapore in their respective local currencies.

Mastercard Launches CBDC-Backed Debit Card In Kazakhstan

Mastercard has launched a new debit card backed by the digital tenge, the central bank digital currency (CBDC) of Kazakhstan.

The card went live on the 30th anniversary of the creation of the tenge, Kazakhstan’s national currency, and is the first card of its kind in the Eurasian region.

The card is issued by Eurasian Bank and is powered by the Mastercard network.

In a statement, Mastercard said the card “instantly converts funds to traditional Tenge currency” and can be used anywhere that Mastercard is accepted — both in Kazakhstan and overseas.  

“Digital Tenge unlocks the potential of blockchain technology to create innovative financial services, ensures targeted and efficient government spending, and also builds a ‘bridge’ between traditional finance and the world of digital assets," said Binur Zhalenov, chair of the National Payment Corporation of Kazakhstan.

"Today’s launch gave a start to the development of the Digital Tenge ecosystem and, in the near future, Kazakhstanis will be able to use the first products based on it."

Hong Kong Moves Ahead With Alternative Credit Reference Pilot

The Hong Kong Monetary Authority (HKMA) has welcomed the launch of a new pilot to study the feasibility of a multiple credit agencies model.

Following consultation by the Hong Kong Association of Banks and others, the project will officially be named Credit Data Smart.

The three prospective credit agencies that have been selected to take part in the pilot are offered by NovaCredit, PingAn and TransUnion.

Credit Data Smart is a data infrastructure enhancement project being conducted as part of Hong Kong’s Fintech 2025 strategy.

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