Daily Dash: Revolut’s Drama Era Continues

May 12, 2023
Revolut’s chief financial officer has quit, the EU’s artificial intelligence act has passed committee stage in the European Parliament and Singapore’s DBS Bank has been served a capital requirement order following another major outage.

Revolut’s CFO Bows Out

Chief financial officer Mikko Salovaara has said he is leaving the fintech giant for "personal reasons", after a two-year stint with the company. 

“I am grateful for the opportunity to serve as Group CFO at Revolut and remain confident in the firm’s future success,” the CFO said in a statement. 

Meanwhile, CEO Nik Storonsky thanked Salovaara for his contribution. “I wish him well on his next steps.”

The CFO’s departure comes after Storonsky’s comments regarding the company’s UK banking licence application, which is reported to have “almost halted”.

Previously this year, Salovaara is reported to have said that confirmation would “arrive any day”. 

EU’s AI Act Moves Ahead After Committee Vote

The Internal Market Committee and the Civil Liberties Committee have adopted a draft negotiating mandate on the first ever rules for artificial intelligence (AI).

Members of the European Parliament (MEPs) endorsed new transparency and risk-management rules for AI systems.

MEPs also endorsed boosting citizens’ right to file complaints about AI systems and receive explanations of decisions based on high-risk AI systems that significantly impact their rights. 

“We are on the verge of putting in place landmark legislation that must resist the challenge of time,” said Brando Benifei, one of the legislation’s rapporteurs. 

“It is crucial to build citizens’ trust in the development of AI, to set the European way for dealing with the extraordinary changes that are already happening, as well as to steer the political debate on AI at the global level.”

“We are confident our text balances the protection of fundamental rights with the need to provide legal certainty to businesses and stimulate innovation in Europe,” he added. 

MAS Tightens Capital Requirements On DBS Following Online Banking Outage

The Monetary Authority of Singapore (MAS) has imposed an additional capital requirement on DBS Bank following a ten-hour outage of its online banking services in March this year.

As per the order, DBS must now hold 1.8 times its risk-weighted assets for operational risk, which translates to S$1.6bn ($1.2bn).

The MAS has also ordered DBS to take “immediate steps” to improve the resiliency and recoverability of its existing systems, including enhanced monitoring, more comprehensive testing and additional system redundancies.

Last year, DBS was served a similar order following a two-day outage of its online banking services. In that case, DBS was ordered to hold 1.5 times its risk-weighted assets for operational risk.

“The repeated inconvenience caused to the public is unacceptable,” said a MAS executive. “The additional capital requirement imposed at this time underscores the seriousness with which MAS treats this matter.”

FCA Ramps Up Scare Tactics As Consumer Duty Deadline Nears

The UK’s Financial Conduct Authority (FCA) has warned firms that it is prepared to take "robust action" against those who fail to meet the impending Consumer Duty deadline.

According to a speech by consumer chief Sheldon Mills, the FCA is willing to use “interventions or investigations, along with possible disciplinary sanctions”.

“When the Duty comes into force, firms need to make sure, and be able to show us, that they are acting to deliver good customer outcomes and protecting consumers from harm,” said Mills. 

Mills continued that the FCA will prioritise the most serious breaches and act swiftly where it finds evidence of harm or risk of harm to consumers.

Firms now have less than three months to implement the Consumer Duty, which comes into force on July 31. 

Its introduction has been divisive, but the FCA says that it will help the UK financial services industry remain world-leading proponents of financial services.

WhatsApp P2M Payments Go Live In Singapore Through Stripe Partnership

WhatsApp, the Meta-owned instant messaging platform, can now be used in Singapore to send person-to-merchant (P2M) payments within chat conversations.

The new feature has been made possible through a partnership between WhatsApp and US fintech Stripe, and is built around the Stripe Connect and Stripe Checkout platforms.

It is available only to Singapore-based businesses using the WhatsApp Business Platform, and its supported payment methods include debit cards, credit cards and PayNow, Singapore’s instant payments system.

Singapore businesses that accept payments through WhatsApp chat will also gain access to the Stripe Dashboard, a tool for managing payments data, handling refunds, responding to disputes and monitoring integrations.

Canada Consults On Digital Dollar

The Bank of Canada has announced it has opened an online public consultation on the features of a digital Canadian dollar.

“As the world becomes increasingly digital, the Bank — like many other central banks — is exploring a digital version of Canada’s national currency,” the central bank said.

The release emphasises that it does not plan to issue a Canadian central bank digital currency (CBDC) at this time and the decision to do so rests with the parliament and the government.

However, this might change in the future if cryptocurrencies or other countries’ CBDCs become widely used in Canada.

It also stresses that even if a CBDC is issued in the future, “cash isn’t going anywhere”.

“As Canada’s central bank, we want to make sure everyone can always take part in our country’s economy. That means being ready for whatever the future holds,” said senior deputy governor Carolyn Rogers.

The central bank is seeking public views on how people would likely use a digital Canadian dollar, what security features are important for them and what concerns they have about accessibility and privacy.

The consultation is open until June 19.

ECB On Look Out For More Digital Euro Help

The European Central Bank (ECB) has issued a call for candidates to contribute to the identification and authentication workstream for the digital euro scheme rulebook.

Candidates need to submit their application by May 22 and are expected to be leading experts in strong customer authentication (SCA) and identification. 

This includes digital identity initiatives, preferably with experience in related regulatory technical standards on SCA, and in implementing customer identity and access management (CIAM) solutions.

The main objective of the workstream is to suggest identification and authentication requirements for the digital euro, the ECB said. 

Here, the central bank has said that the requirements “should be guided by the aspiration to offer best-in-class user experience and security, supported by an impact analysis of existing identification and authentication approaches”.

The workstream will contribute to the “Functional and operational model” section of the digital euro rulebook, including end-to-end flows and associated data requirements. 

Compliance Concerns Made TD-First Horizon Deal Fall Through

Concerns over how TD Bank handles anti-money laundering (AML) compliance has got in the way of its $13.4bn merger with First Horizon, according to media reports.

TD and First Horizon announced they had abandoned the multi-billion dollar deal on May 4 after TD informed First Horizon that it “does not have a timetable for regulatory approvals to be obtained for reasons unrelated to First Horizon”.

Citing unnamed sources, the Wall Street Journal said US banking regulators — the Office of the Comptroller of the Currency (OCC) and the Federal Reserve — had concerns about how TD handled unusual transactions and the timeliness of reporting suspicious activities.

Although TD is one of Canada’s biggest institutions, this is not the first time it has been associated with regulatory failures.

In 2013, TD received a $52.5m fine from the OCC and the Securities and Exchange Commission for failure to file suspicious activity reports which facilitated a $1.2bn Ponzi scheme. In 2020, the bank had to pay a $25m fine and $97m in restitution for deceiving consumers.

In light of TD’s history with US regulators, last July, Democratic lawmakers Elizabeth Warren (D-MA) and Representatives Katie Porter (D-CA) and Jesús Chuy García (D-IL) wrote to the OCC urging close scrutiny of the proposed deal.

“As TD Bank seeks approval from your agency…to become the sixth-largest bank in the US, the OCC should closely examine any ongoing wrongdoing and block any merger until TD Bank is held responsible for its abusive practices,” legislators wrote.

Under the terms of the termination agreement, TD will have to pay $200m in cash to First Horizon in addition to a $25m fee reimbursement.

Standard Chartered Expands Cross-Border Payment Partnership With Tazapay

Standard Chartered has announced plans to expand its cross-border payments partnership with Tazapay, a digital payments platform licensed in Singapore and Canada.

The expanded partnership will allow Tazapay to leverage Standard Chartered’s banking services, including bank accounts, payment acceptance, payouts and FX solutions. The partnership began in 2021 and is focused on B2B cross-border e-commerce payments. 

Using Tazapay Checkout, e-commerce merchants can accept payments from buyers in more than 70 markets via a single application programming interface (API). Similarly, B2B marketplaces can onboard third-party sellers across 170 markets.

Buyer protection is built around a joint escrow-as-a-service (EaaS) platform that allows users to integrate document verification (such as shipping proof) and customised payment release only when transactions are completed.

Revolut Dissatisfied With UK Regulators 

Neobank Revolut has hit out in recent days at the UK’s “extreme bureaucracy”, prompting reports it may leave the UK.

Nikolay Storonsky, the company’s chief executive, criticised the Financial Conduct Authority (FCA) for its slow moving response to the bank’s application for a banking licence. 

In comparison, the EU has granted the company a banking license and competitors such as Starling and Monzo have already secured licences in the UK. 

“You wait for emails or letters for months. This is not the business environment to operate in the modern world,” he said while speaking with The Times at the Web Summit in Rio de Janeiro, Brazil. 

UK media outlets reported over the weekend that business secretary Kemi Badenoch is now seeking an emergency meeting with the company to try and resolve the situation.

US Large Banks Warned About AI Scams Targeting Voice Authentication

US senator Sherrod Brown (D-OH) has sent letters to J.P. Morgan, Bank of America, Wells Fargo, Morgan Stanley, Charles Schwab and TD Bank warning them that artificial intelligence (AI) generated voice clips can allow fraudsters to break into customer accounts.

The letters follow news reports by the Wall Street Journal, Guardian and others whereby reporters used a voice creation service to mimic their voice and get access to their bank accounts using the AI-generated voice clip.

Although that was a harmless exercise, video clips on Instagram, TikTok and YouTube can be easily used by bad actors to replicate the voices of other people.

Brown said he has concerns about the issue and he seeks to “better understand what measures financial institutions are taking to ensure the security of the voice authentication tools and the steps they are taking to ensure strong data privacy for voice data”.

He asked the banks to reply to a series of questions by May 18.

Kenya Becomes Latest Country To Pursue National QR Code Standard

The Central Bank of Kenya (CBK) has announced plans to launch a national QR code standard to facilitate greater use of digital payments. 

The CBK said the new standard will be implemented in two phases. First, merchants will be identified using a combination of their existing merchant payment service provider (PSP) ID and their own merchant identifier. 

Second, the CBK will work with PSPs to ensure interoperability of the standard across multiple platforms. The standard is based on the EMV® QR Code Specification for Payment Systems Merchant-Presented Mode.

As in other markets, such as the Philippines, PSPs will be asked to comply with the standard within a time period specified by the CBK. Patrick Njoroge, CBK governor, said the launch of the standard aligns with Kenya’s National Payments Strategy 2022-2025.

After A Year In Beta, Malaysia, Indonesia Launch QR Code Linkage

The central banks of Malaysia and Indonesia have announced that a bilateral linkage of their respective QR code standards, DuitNow and QRIS, is now live for general use.

The launch opens up cross-border person-to-merchant (P2M) payments via QR code for customers of banks and non-bank financial institutions (NBFIs) in both countries.

Following a trial period that began in January 2022, the two central banks said they expect the number of NBFIs participating in the linkage to increase rapidly.

“This payment interconnection will support market expansion for businesses and facilitate increased settlement of payments using local currency,” said Nor Shamsiah Mohd Yunus, governor of Bank Negara Malaysia.

“Users from Malaysia and Indonesia will benefit from more, safer, easier and more efficient cross-border payments.”

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