Daily Dash: UK Regulator To Pursue New Whistleblowing Legislation

May 5, 2023
The UK’s financial watchdog wants to work with the government to enhance the whistleblowing system and the country’s antitrust regulator goes after artificial intelligence. Meanwhile, El Salvador releases first data on its instant payments system.

FCA Hints At Whistleblower Legislation

In an effort to improve whistleblower confidence, the UK Financial Conduct Authority (FCA) said it will engage with the Department for Business and Trade “to support a review of whistleblower legislation to enhance the wider whistleblowing system”.

The announcement follows the agency’s whistleblowing qualitative assessment survey 2022, which identified a number of areas where whistleblowers felt unsatisfied with how the FCA handled their case.

In response to that feedback, the FCA says it will take steps to improve the process by providing whistleblowers with more detail on what has been done with the information provided or reasons for taking or not taking action.

The agency will also improve the use of whistleblowers’ information across the FCA and enhance its webform, which is the most popular way that whistleblowers contact the FCA, to fully capture every whistleblower’s disclosure.

Whistleblowing provides the FCA “with unique insights from inside the firms and markets it regulates”, the announcement says.

“We want to make sure we’re capturing and using the information provided by whistleblowers as effectively as possible and to give them as much information as the law allows on how we have acted on their concerns,” Therese Chambers, executive director of enforcement and market oversight at the FCA, commented.

CMA Launches AI Probe

The UK Competition and Markets Authority (CMA) has opened an initial review of artificial intelligence (AI) models and their potential impact on competition and consumer protection.

The investigation is looking at AI foundation models, which include large language models and generative AI, such as OpenAI’s ChatGPT or Google’s Bard.

The CMA will examine how competition may evolve in AI markets and analyse the risks and opportunities these scenarios could bring regarding competition and consumer protection. 

The review will conclude with guiding principles to support competition and protect consumers as AI foundation models develop.

“AI has burst into the public consciousness over the past few months but has been on our radar for some time,” Sarah Cardell, CMA chief executive, commented.

“It’s a technology developing at speed and has the potential to transform the way businesses compete as well as drive substantial economic growth.”

The CMA is asking for views and evidence from stakeholders and welcomes submissions by June 2, 2023.

El Salvador Releases First Data On Tranfer365 Adoption

El Salvador’s instant payments system went live in June 2021 and the new study published by the country’s central bank is the first to assess the adoption and impact.

The report finds that in its first 22 months, Transfer365 processed 14m transactions worth $17bn.

Since Transfer365 is a zero-cost solution, the central bank estimates it saved around $31.95m in commissions for the local economy, while allowing El Salvadorans to make payments “that were previously not possible”.

It notes, for example, that 35 percent of the transactions were carried out outside business hours and 24 percent on weekends or holidays when payments are typically unavailable.

Transfer365 was originally launched in 2013 but with a limited scope, enabling payment processing exclusively for government transactions, including supplier payments, subsidies and payroll processing. These transactions were processed in batches and settled on a deferred basis.

In 2021, Transfer365’s capacity was expanded beyond government payments to enable the wider public to send payments around the clock on a 24/7/365 basis.

The central bank says the service has 100 percent coverage among financial institutions that take deposits from the public.

Based on an online survey of 300 individuals, the report finds that 89 percent of the population have heard about Transfer365 and around 91 percent of them use it.

The report concluded with a set of recommendations, including expanding direct participation in the central payment infrastructure to fintechs such as e-money institutions and payment platforms.

Canada’s Payments Market Rebounds To Pre-Pandemic Level

In its 2022 annual report, Payments Canada found that digital payment usage had continued to accelerate while cash usage declined.

According to the national payment operator, the recent growth in Canada’s payments market represents a rebound to pre-pandemic levels.

In 2022, Payments Canada’s systems cleared and settled more than C$119trn,  which included C$9.1trn payments sent through the country’s Automated Clearing Settlement System and C$110trn payments going through Lynx, Canada’s high-value payment system.

Canada is currently undergoing a large-scale payment modernisation effort, which included the release of Lynx in 2021 and ongoing works to launch the Real-Time Rail (RTR) with instant, data-rich payments.

While acknowledging that 2022 “has been another important phase  on the journey to payment modernization”, Brent Mizzen, chairman of the Stakeholder Advisory Council (SAC) at Payments Canada, said he has “significant concerns”.

“Unfortunately, in addition to further RTR delays, the planned RTR release will not encompass everything that stakeholders have asked for or need,” Mizzen said in the report.

He criticised that key stakeholder asks, such as request-to-pay functionality and an alias directory, will not be addressed when the new payment system launches.

Taiwan Ministry Of Finance Unveils New Incentives To Use National QR Code

Taiwan’s Ministry of Finance has unveiled new rebate measures in an effort to promote the use of Taiwan Pay, which uses the country’s national QR code standard.

In a statement, the ministry said it is launching a new series of digital coupons that will allow shoppers to claim up to TWD1,400 ($45) in discounts over seven purchases worth no more than TWD4,500 ($146).

The promotions will be delivered by eight banks that already support Taiwan Pay, although according to The Taiwan Banker, 26 banks support Taiwan Pay. 

Since its launch in 2016, acceptance of Taiwan Pay has expanded to more than 200,000 merchants.

Apple Reaches $1bn Deposits For New Savings Accounts

The creep of bigtech in financial services continued with news reports suggesting that Apple had hit $1bn in deposits for its new US savings account, just four days since it launched.

The account, which launched on April 17 in partnership with Goldman Sachs, offers up to 4.15 percent annual returns, which Apple says is more than ten times the national average.

According to Apple: “Savings helps our users get even more value out of their favourite Apple Card benefit — Daily Cash — while providing them with an easy way to save money every day,” said Jennifer Bailey, Apple’s vice president of Apple Pay and Apple Wallet.

The savings account is only available to existing Apple credit card customers.

First Republic Bank Seized By FDIC And Sold To J.P. Morgan

Following the second-largest bank failure in US history, First Republic Bank (FRB) has been sold to J.P. Morgan after being seized by the Federal Deposit Insurance Corporation (FDIC).

In a statement, the FDIC said it expects the seizure and sale will cost the Deposit Insurance Fund about $13bn, although the final cost will be confirmed when the FDIC terminates its receivership of the bank.

Some observers, such as Genevieve Roch-Decter, CEO of Grit Capital, have questioned the takeover. Given that J.P. Morgan now controls $2.4trn of US bank deposits — more than 10 percent of the nation’s total — it would normally have been ineligible to take over FRB.

“This crisis has taught us that rules don’t matter in times of panic,” said capital markets analyst The Kobeissi Letter.

In Q1 this year, FRB deposits fell from $176bn to $74bn, excluding a $30bn support package from major US banks, which failed to rescue FRB.

So far in 2023, FRB’s stock price has fallen 97 percent, with most of the drop taking place within three days of the run on Silicon Valley Bank.

In response to the bank collapses, the FDIC issued a proposal for a comprehensive review of the deposit insurance system, with three options for deposit insurance reform. One of these proposals would give unlimited deposit insurance coverage to all depositors.

PPRO Partners With NPCI International On UPI Cross-Border Project

PPRO, a global payments infrastructure firm, has partnered with the international arm of the National Payments Corporation of India (NPCI) on a project that aims to connect overseas merchants to the UPI instant payments system.

In a statement, PPRO said the UPI cross-border payments feature will allow merchants to sell to India’s domestic market without the need for a legal entity in India, settlement at an India-based bank or uploading invoices to clear funds.

”By integrating UPI into PPRO’s digital payments infrastructure through a single connection, we have removed all the operational complexity for our partners to sell cross-border into India at scale,” said Simon Black, CEO at PPRO.

PPRO and NPCI International said the UPI cross-border payments feature is set to go live within the “coming months”.

US Justice Department Launches Probe Into Mastercard

Mastercard has received a civil investigative demand (CID) from the US Department of Justice (DOJ), the card giant said in its latest regulatory filing.

The CID, which is typically the first official step of a probe to obtain information from a company, was issued in March.

According to the filing, the probe is looking at a potential violation of Sections 1 or 2 of the Sherman Act, the antitrust laws of the United States.

More specifically, the CID focuses on Mastercard’s US debit programme and competition with other payment networks and technologies.

Mastercard said the company is cooperating with the DOJ in connection with the CID.

Bank Of Thailand Hits Brakes On Virtual Banking Framework

The Bank of Thailand (BOT) has announced that it will postpone the launch of its new virtual bank licensing framework and will re-open a public consultation in certain aspects of the regulations.

Following a consultation in January and February this year, the BOT said it had received questions from both domestic and foreign firms on licensing matters that would “significantly affect” their business plans.

In response, the BOT said it plans to “clarify” certain regulations and provide further details on the licensing process in an updated applications manual. It will also host forums to ensure that all applicants can receive information about the application process at the same time.

Going forward, the BOT said it expects to submit its final licensing regulations to the Ministry of Finance for consideration by July this year.

As covered by VIXIO, the BOT had planned to open applications for virtual bank licences in Q1 this year, with the first licences being awarded in 2024, ahead of virtual bank launches in 2025.

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