Week In Brief - December 10, 2021

December 10, 2021
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A short roundup of some of the week's payments news you may have missed. This week we look at the UK Payment Systems Regulator's consultation on Confirmation of Payee, U.S. rulemakings aimed at fixing anti-money laundering loopholes, India's new national blockchain strategy, Klarna's new BNPL browser extension and news that blockchain SETL has demonstrated it can process a remarkable 1m transactions per second.

UK: PSR Publishes Proposal To Ease Transition Into Next Phase Of Confirmation Of Payee

The Payment Systems Regulator (PSR) has released a consultation paper laying out its plans on how to proceed to the next phase of Confirmation of Payee (CoP).

CoP is a tool aimed to help customers to reduce accidentally misdirected payments and prevent authorised push payment (APP) scams.

APP fraud has grown to record levels over recent years, with a 71 percent increase in the first half of 2021, and causing consumers £355m in losses.

Although CoP alone cannot eliminate APP fraud, the PSR found the first phase of the project had a positive impact, which prevented an even larger increase of fraud. It decided to move forward to the second phase of the project to facilitate wider adoption.

Pay.UK and OBIE have now developed the new technical environment for the second phase of CoP and the PSR proposes that participating payments firms migrate to the new environment by April 2022.

Interested parties can submit comments by December 17.

U.S.: Treasury Reveals Beneficial Ownership Reporting Rules, Plan To Require AML Reporting Of Suspicious All-Cash Real Estate Transactions

The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) has finally announced proposed rules that would implement the beneficial ownership reporting provisions of the Anti-Money Laundering Act (AMLA) of 2020.

The rules aim to end anonymous shell companies that facilitate illicit money flows by requiring certain businesses operating in the U.S. to file their beneficial ownership information with FinCEN.

The rules would apply to limited liability partnerships, business trusts, and most limited partnerships, in addition to corporations and LLCs that are set up in the U.S. or in a foreign country but are registered in any U.S. state.

In addition, FinCEN has issued an Advance Notice of Proposed Rulemaking (ANPRM) aimed to close a loophole in the AML rules regarding the U.S. real-estate market.

Real-estate transactions that involve loans or other financing by regulated financial institutions are subject to federal AML rules because financial institutions are required to report suspicious activity to FinCEN. In contrast, when real estate is purchased without such financing, there is no requirement imposed on real-estate agents to report suspicious activities.

The ANPRM seeks comment to assist FinCEN in preparing a potential proposed rule that would seek to impose nationwide recordkeeping and reporting requirements on certain persons participating in transactions involving non-financed purchases of real estate.

Interested parties have until February 2022 to submit comments to the proposed rule and ANPRM.

India - Ministry sets out a national strategy for blockchain use in government systems

The Ministry of Electronics and Information Technology (MeitY) has issued a national strategy on blockchain for adopting the technology for government services.

The strategy aims to create a trusted digital platform by developing a national blockchain infrastructure and to launch sandboxes to enable the testing of new applications to be built on it.

A multi-agency effort, the strategy requires the government to develop state-specific blockchain applications that can be added to the shared infrastructure.

The paper highlights that the Reserve Bank of India (RBI) is also exploring the potential application of blockchain technology in the banking sector.

Indian multinational conglomerate Mahindra has teamed up with IBM to develop supply chain management solutions, while the State Bank of India (SBI) has partnered with commercial banks and financial institutions for a blockchain-based application pilot. Meanwhile, several commercial banks, such as Yes Bank, Axis Bank and ICICI Bank, are also working on adopting blockchain in their banking business.

International: SETL Achieves 1m Transactions Per Second (TPS) On Its Blockchain Network

Blockchain settlement and payment infrastructure provider SETL has announced that its Regulated Liability Network (RLN) prototype has achieved 1m transactions per second (tps).

RLN, which was demonstrated at the Global CBDC Challenge hosted by the Monetary Authority of Singapore, is designed to act as a central bank digital currency (CBDC), issuing liabilities of commercial banks, e-money providers, as well as central banks.

In a white paper published this week, the blockchain said it achieved this “breakthrough moment” in collaboration with Amazon Web Services (AWS), which helped it design and conduct the performance test.

Scalability is of prime importance for payments networks. One of the major criticisms of decentralised blockchain payments networks, such as Bitcoin, is their lack of scalability which means they are not a viable option for mass payments.

For example, it is estimated that Bitcoin can process around three to seven transactions per second, while Ethereum can process 15-25.

According to Anthony Culligan, chief engineer at SETL: “People are used to talking about blockchains as being slow and having a high energy footprint.”

However, through this collaboration with AWS, the focus is on speed: “How can a DLT reach industrial speed, and therefore leave behind the Proof-of-Concept stage where so many DLT projects have been confined.”

Reaching 1m tps is way beyond the specifications of existing traditional payment networks, although it is highly unlikely that it would ever be a realistic requirement. For example, total global payments in 2020 was around 1.1trn. Even if it was a single payment system handling all of these transactions (in reality this will be divided across 100s of different payment systems), it would only require an average 35,000 tps. True these transactions will not be evenly spread throughout the year and there may be some bottlenecks, but current capacity is likely to be more than capable to match existing and future needs.

Many instant payments networks can process 5,000 to 10,000 tps, while it is claimed that card network Visa can max out at around 24,000.

Nevertheless, this is an impressive number highlighting the potential scalability of the SETL blockchain network.

Europe: Klarna Launches BNPL Browser Extension

Following on from news last week that Microsoft has embedded a buy now, pay later (BNPL) solution into its Edge browser, Klarna has also announced the launch of its own BNPL browser extension.

The service enables consumers to purchase with interest-free instalments from their desktop at every online store, even if the retailer is not yet a Klarna partner.

According to a Klarna press release: “Despite the significant growth of mobile shopping, desktop shopping still accounts for 32% of all ecommerce traffic, whilst 44% of online orders are placed on the desktop.”

The service was made possible through the company’s acquisition last month of Piggy. According to Klarna, Piggy is one of the fastest growing browser extensions and will power this new offering. The browser extension also enables coupons and cashback offers to be automatically added to purchases.

The company said that it had previously beta tested the new extension with more than 100,000 consumers.

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