News In Brief: March 28-April 1, 2022

April 1, 2022
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Visa launches new a accelerator programme to help creative talent working with NFTs grow their business and Swedish firm Klarna launches a new brand focused on open banking.

Let The Minting Begin: Visa Launches Programme To Help Creators Navigate NFTs

U.S. card payments giant Visa has launched a new non-fungible tokens (NFTs) programme designed to nurture commercial talent among creators.

The Visa Creator Program aims to help digital-first artists, musicians, fashion designers and filmmakers accelerate their small business growth using NFTs.

Each cycle of the one-year program will support a select group of creators looking to deepen their understanding of the technology and platforms underpinning NFT commerce, including crypto and traditional payments.

Because NFTs can establish ownership and authenticity of digital goods and media, such as images, videos and music, they can help creators generate revenue and grow their business.

Cuy Sheffield, head of crypto at Visa, said that NFTs therefore have the potential to become a “powerful accelerator” of the creator economy.

“We’ve been studying the NFT ecosystem and its potential impacts on the future of commerce, retail and social media,” said Sheffield.

“Through the Visa Creator Program, we want to help this new breed of small and micro businesses tap into new mediums for digital commerce.”

The program aims to provide creators with: technical and product mentorship; a community to exchange ideas and problem solve; access to thought leaders; exposure to Visa’s clients and partners; and a one-time stipend to help participants get started.

NFTs are often considered to be in a grey area in terms of regulations, due to the fact that they can be sold either as a piece of art or as an investment, or they can serve as a means of payment.

In each case, different regulatory frameworks could apply to the product.

In February, the U.S. Treasury issued one of its first statements on the topic of NFTs, announcing that certain NFTs could be considered virtual assets.

As a result, some NFTs will fall under the remit of the Financial Crimes Enforcement Network (FinCen), and will be subject to U.S. AML regulations.

Sweden: Klarna Launches Open Banking Sub-Brand Klarna Kosma

Swedish-based fintech company Klarna has launched a new sub-brand and business unit known as Klarna Kosma.

Aimed at harnessing the growth of its open banking platform, Klarna claims that Kosma will provide access to more banks than any other open banking provider.

In total, Kosma will provide financial institutions, fintechs and merchants with access to 15,000 banks in 24 countries through a single API.

The formalisation of the Kosma brand is a clear sign that Klarna sees a significant market opportunity to leverage its existing capabilities and partner relationships.

According to the fintech, Kosma has more than doubled its number of connected banks in the past year, and currently processes close to a billion information requests to bank accounts each year.

In 2014, Klarna effectively entered the fledgling and pre-PSD2 open banking market through the acquisition of SOFORT, a direct bank-to-bank payment service based in Germany.

Since then, Klarna has expanded into 24 markets, and has begun to use its open banking platform to power additional in-house services such as Account Insight Services (AIS).

AIS provides spending insights to users of its Klarna shopping app and gives additional, real-time data to support lending decisions for Klarna payment methods.

“Over the past year, the demand for open banking services from financial institutions and fintech start-ups has reached a tipping point,” said Wilko Klaassen, vice president of Klarna Kosma.

“Which is why we have built a dedicated business unit which brings together engineering, product management, sales and marketing all together in the same team to focus on this $15bn, fast-growing market.”

Australia: Room for Improvement In AML/CTF Regime

An Australian Senate committee has called for an accelerated consultation to take place among stakeholders affected by anti-money laundering (AML) and counter-terrorism financing (CTF) laws.

In a new report, the Legal and Constitutional Affairs References Committee makes four high-level recommendations focused on improving the adequacy and efficacy of Australia’s AML/CTF regime.

It recommends the government should:

  1. Accelerate its consultation with stakeholders on the timely implementation of tranche 2 reforms, in line with recommendations from the Financial Action Task Force (FATF).
  2. Broaden the scope of its consultation to include a wider range of impacts among industry stakeholders.
  3. Seek advice as to whether Section 242 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) should be amended, to ensure the proper operation of legal professional privilege.
  4. Pursue a beneficial ownership register.

In terms of broadening the consultation, the committee recommends that specific consideration be given to the impact of regulatory burdens on small businesses.

Similarly, the committee wants to see more consideration of technological innovations that could increase efficiency in AML/CTF, particularly those focused on streamlining processes and lowering costs.

Finally, the committee wants to see specific consideration be given to existing regulatory and professional obligations on tranche 2 entities under the AML/CTF Act.

Australia’s AML/CTF regime is being rolled out in phases, commonly referred to as "tranches". The 2006 AML/CTF Act is referred to as tranche 1, and a set of further reforms issued in January 2021 are referred to as tranche 1.5.

Tranche 1.5 was focused on Australia’s financial sector, and sought to increase its “resilience”, while making it easier for businesses to “understand and comply with their obligations”.

Tranche 2 is focused on the application of AML/CTF regulations to designated non-financial businesses and professions (DNFBPs).

Also known as "professional facilitators" or "gateway professions", DNFBPs include entities such as casinos, real estate agents, dealers in precious metals and stones, lawyers, notaries, accountants, and trust and company service providers.

The committee’s report and the evidence on which it is based focuses primarily on the potential impact of extending Australia’s existing AML/CTF regime to DNFBPs that are not already subject to such regulation.

Among the report’s aims was to identify governance and risk management weaknesses; evaluate compliance with FATF recommendations, and investigate Australia’s attractiveness as a destination for money laundering.

The 89-page report was commissioned by the Senate in June last year, and was published following the extension of its original December 2021 deadline.

Taiwan: New Rules To Protect Elderly Customers In Banking Takes Inspiration From UK

Taiwan’s financial watchdog has approved new draft regulations designed to help protect elderly customers in banking.

On March 23, Taiwan’s Financial Supervisory Commission (FSC) approved the Self-discipline regulations for fair treatment of elderly customers in the banking industry.

In a press statement, published on Tuesday (March 29), the FSC said the regulations are based on the Guidelines for fair treatment of vulnerable customers, which was published by the UK's Financial Conduct Authority (FCA) in February 2021.

The move reflects the UK’s leading role as a trend-setter in financial regulations globally, and indicates a growing concern worldwide about how to protect elderly and vulnerable customers from financial distress.

Such concerns are now widespread in Taiwan, where according to the government’s projections, the country is expected to become a “super-aged” society by 2025.

According to the United Nations (UN), a super-aged society is one where 20 percent of the population is over the age of 65. Current super-aged societies include Japan, Italy and Greece.

On recommendation from the Bankers Association of the Republic of China, the FSC has given banks six months to prepare to implement the self-discipline rules, which will go live in September this year.

Additionally, the FSC will require banks to cooperate with the formulation of internal operating regulations, which are listed as internal audit items.

The FSC said it saw a need for the self-discipline rules based on three observations that apply to elderly customers in banking.

First, the FSC said that elderly customers require more consultation in order for banks to accurately assess their financial needs.

Secondly, elderly customers require specific consideration in terms of customer service design and product development, particularly with regard to clear and friendly communications.

And thirdly, in product promotion and sales, and in prudential evaluation procedures, such as know your customer (KYC) and know your product (KYP), elderly customers require a greater degree of suitability analysis.

For example, elderly customers have a distinct risk tolerance profile for financial products, which the FSC has said must be respected, well managed, and controlled for by their bank.

According to the self-discipline rules, an elderly person is defined as someone aged 65 or over, pursuant to Article 2 of Taiwan’s Elderly Welfare Act.

As explained in its press statement, the FSC emphasised that the self-discipline rules cover seven measures that banks should extend to elderly customers to ensure fair treatment:

  1. Take appropriate measures to understand the business needs of elderly customers.
  2. Establish a mechanism to assist elderly customers in expressing their needs, and inquire about those needs.
  3. Establish a database of complaints from elderly customers, and regularly review the complaint data and the complaints’ handling.
  4. Provide elderly customers with investment financial products and trading services, with appropriate suitability evaluation mechanisms.
  5. Adopt a communication method that elderly customers can easily understand, and explain relevant information clearly.
  6. Formulate staff responses and protection measures for abnormal financial transaction behaviour from elderly customers.
  7. Establish financial friendliness techniques for employees to better serve elderly customers, such as educational training programmes.

EU: Migration Of European ACHs To TIPS Now Complete

The migration of European automated clearing houses (ACHs) from TARGET2 to the TARGET Instant Payment Settlement (TIPS) system has been successfully completed.

In a statement issued on Monday (March 28), the European Central Bank (ECB) said that a total of 11 ACHs have moved their technical accounts from TARGET2 to TIPS.

The 11 ACHs are as follows:

  • Bankart, Slovenia
  • CEC, Belgium
  • CENTRO, Lithuania
  • DIAS, Greece
  • EBA Clearing
  • EKS, Latvia
  • equensWorldline, the Netherlands
  • Iberpay, Spain
  • Nexi, Italy
  • SIBS, Portugal
  • STET, France

According to the ECB, these ACHs can now offer instant payments services to their member payment service providers (PSPs), which can send and settle instant payments in TIPS.

Additionally, the PSPs can adjust the balance (funding and defunding) of their technical accounts in TIPS.

The move to TIPS started in December 2021, and took place in several waves, with groups of ACHs migrating at different times.

The final wave, which took place on March 25, marked the end of the migration.

Together with other measures approved by the ECB Governing Council, such as the obligation for all PSPs that had adhered to the SEPA Instant Credit Transfer (SCT Inst) scheme to be reachable in TIPS, the migration of ACH technical accounts to TIPS supports the rollout of instant payments across Europe.

These measures will ultimately enable all European citizens to send and receive electronic instant payments to and from any country in the EU.

The move creates interoperability between TIPS and different ACHs, meaning customers can send a transaction from EBA Clearing’s RT1 to an account that may only be connected to the TIPS service.

For banks, this could mean significant savings. For example, a large bank may be connected to STET, to EBA Clearing and TIPS and be required to manage participation fees and liquidity pools in three separate systems.

This new arrangement is designed to create greater efficiencies by reducing the need to participate directly in multiple systems and ease the liquidity burden of banks.

India: Central Bank Issues New Guidance To Monitor Payments Acceptance

The Reserve Bank of India (RBI) has issued new guidance to promote geo-tagging for payments system touch points.

The Framework for Geo-tagging of Payment System Touch Points, published on March 25, is focused on improving access and adding functionality to India’s digital payments system.

In a statement, the RBI said that geo-tagging will enable proper monitoring of the availability of payment acceptance infrastructure throughout India.

This includes point-of-sale (PoS) terminals, quick response (QR) codes and other technologies.

The monitoring of acceptance points will support policy intervention to optimise distribution of payment infrastructure, the RBI added.

The framework was issued in response to an RBI Statement on Developmental and Regulatory Policies, which was released with the bi-monthly Monetary Policy Statement in October 2021.

The new framework for geo-tagging will seek to plan, formalise and further expand India’s rapidly growing payments economy.

Since 2015, the total number of payments sent across National Payments Corporation of India (NPCI) payment systems, including credit transfers, direct debits, cheques and domestic card scheme Rupay, has increased 16-fold.

For example, the total number of transactions increased from 4bn in the year ending March 2016, to an estimated 64bn in the same period in 2022.

Instrumental to India’s impressive growth has been the Unified Payments Interface (UPI).

Developed by the NPCI and launched in 2016, UPI supports interbank peer-to-peer (P2P) and person-to-merchant (P2M) transactions through instant transfer of funds.

In its short existence, UPI has become the largest instant payments system globally in terms of absolute transaction volume, reaching an estimated 46bn transactions for the year ending March 2022, or equivalent to 70 percent of all payments across NPCI systems.

Despite this strong growth, India is still way behind many other markets in terms of cashless payments, and there represents a significant opportunity for further growth, which the geo-tagging framework and other initiatives from the RBI, such as UPI123Pay, aim to support.

The NCPI is an umbrella organisation for operating retail payments and settlement systems in India.

It is an initiative of the RBI and Indian Banks’ Association (IBA), and it falls under the provisions of the Payment and Settlement Systems Act 2007, which is designed to create a robust payments infrastructure in India.

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