Week In Brief - March 25, 2022

March 25, 2022
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A short roundup of some of the week's payments news you may have missed. This week we look at plans to monetise a new SEPA API access model scheme, the latest on cross-border CBDC initiative Project Dunbar, the rise in data protection complaints in Spain, and the launch of new international group to promote UK fintech.

EU: EPC Launches RFP To Help With New Scheme Business Model

The European Payments Council (EPC) has launched a request for proposal (RFP) for an economic consultant to help it define a business model for its new SEPA API access scheme.

The Euro Retail Payments Board (ERPB) had previously tasked the EPC with taking up the role as scheme manager to develop a new access to payment accounts scheme as part of the revised Payment Service Directive (PSD2).

The scheme aims to provide incentives for financial institutions to encourage cooperation and to take advantage of infrastructure investments made, to go beyond PSD2.

According to the EPC, as well as developing a basic access model, it has the remit to go “beyond such baseline to encompass value-added (‘premium’) services that may be provided in the context of ‘open banking’”.

It will offer a “fair distribution of value and risk between actors”, and allow the industry to develop new client experiences and additional revenue streams.

Potential examples of new payment experiences listed by the EPC, include "premium" one-off payments, future dated payments and IBAN validation services.

In its June 2021 report, the ERPB outlined the business conditions for these value added services, allowing for the remuneration of at least two elements with the new scheme: 1) the assets exposed through the service by the Asset Holder; and ii) the service itself, as provided by the asset holder.

The economic consultant will help the EPC define a detailed cost methodology based on these remuneration options, collect the relevant anonymised and aggregated data from the market to support this methodology, and compile a set of default fees for premium assets, and API exposure and consumption.

Applications must be submitted by April 22, 2022.

International: BIS and Central Banks Develop Cross-Border CBDC Prototypes

The Bank for International Settlement (BIS) has announced that its Singapore Innovation Hub and the central banks of Australia, Malaysia, Singapore and South Africa have developed two prototypes for a shared multi-CBDC platform for international settlements.

The experiments carried out as part of Project Dunbar are aimed to facilitate direct cross-border transactions between financial institutions in different currencies, with the potential to reduce costs and increase speed.

The project examined and proposed practical solutions for addressing questions, such as which entities should be allowed to hold and transact with central bank digital currencies (CBDCs), how cross-border payments could be simplified while respecting regulatory differences across jurisdictions, and what governance arrangements are necessary for countries to share with their national payments systems.

The prototypes addressed these issues and demonstrated the technical viability of shared multi-CBDC platforms for international settlements.

“A common platform is the most efficient model for payments connectivity but is also the most challenging to achieve,” said Andrew McCormack, head of the BIS Innovation Hub Centre in Singapore.

“Project Dunbar demonstrated that key concerns of trust and shared control can be addressed through governance mechanisms enforced by robust technological means, laying the foundation for the development of future global and regional platforms,” he added.

The experiments align with a G20 roadmap that urged the improvement of cross-border payments, particularly through an international CBDC design.

“Project Dunbar marks a key milestone in advancing the efficiency of cross border payments globally,” Sopnendu Mohanty, chief fintech officer of the Monetary Authority of Singapore, commented.

Spain: Spanish Agency Reveals 35 Percent Increase In Data Protection Complaints

Spain’s national data protection authority, AEPD, has spotted a 35 percent increase in data privacy-related complaints last year.

In 2021, the AEPD received 13,905 complaints, out of which 5 percent, or 643 cases, related to financial or credit institutions.

Although a small percentage, the number of complaints filed in this category has increased by 47 percent compared with the year before.

The most frequent complaints filed with the data protection agency were related to internet services (16 percent), video surveillance (12 percent), email or phone advertising (11 percent) and cases disputing inclusion in delinquency files (9 percent).

The AEPD stressed its primary focus in 2021 was to respond to the data protection challenges related to the coronavirus pandemic and to encourage data processors to increase their commitment to protecting privacy.

UK: Innovate Finance Launches International Fintech Group

UK industry body Innovate Finance has launched an international fintech group, intended to strengthen the UK’s standing as a “global leader” in fintech.

The group is a direct outcome of the Kalifa fintech review and Innovate Finance will co-chair the new group with the Department for International Trade (DIT).

The group will convene for a period of 12 months, bringing together organisations from across industry and government with a joint aspiration to foster growth in the sector by delivering and raising awareness of initiatives from trade agreements, regulatory frameworks and available support.

Its key objectives for the next 12 months include the creation and publication of a UK FinTech Trade & Investment brand that expands on the DIT Made in Britain campaign; the creation of a dynamic portfolio of more than 20 UK fintech case studies, with a focus on those that have achieved success in overseas markets; and ensuring more than 20 UK fintechs participate in FTA calls for input and consultations.

The group will also continue the work begun by the Kalifa Review, convening government and senior industry stakeholders to build a unified approach for the international promotion of UK fintechs.

Revolut, Klarna and Checkout.com are among the first high-growth UK fintechs to join the group.

Janine Hirt, CEO of Innovate Finance, commented: “The IFG will be central to the work we do to promote our UK FinTech sector internationally, with the aim to boost global cooperation and trade relations. Bringing industry and government together will help us better represent our great sector on a global scale, and cement FinTech as an important international asset for the UK.”

Alex Marsh, head of Klarna UK, commented: “FinTechs in Britain are disrupting the traditional banks from all directions, delivering better products, consumer experiences and building on capabilities like open banking faster than any other country. As we put the pandemic behind us, we have a unique opportunity to cement the UK’s future as the global fintech leader by embedding stronger links with fintech hubs around the world and continuing to deliver on products, services and regulation which benefit consumers, not banks.”

Jess Houlgrave, chief of staff at Checkout.com, commented: “International expansion has been a central part of Checkout.com's scaling journey. From our strong foundations in the UK, we've built a truly global business – and through our 19 offices around the world, we're enabling other UK fintechs to do the same. There’s a huge opportunity to make the UK the first choice for founders and a launchpad for all fintechs to go global. I look forward to driving this agenda forward through the International FinTech Group.”

US: Biden Warns Against Malicious Russian Cyber Activity

The White House has published a statement by US President Joe Biden, urging the country to accelerate work to “improve domestic cybersecurity and bolster national resilience.”

In the statement, Biden reiterated warnings based on evolving intelligence that “the Russian government is exploring options for potential cyberattacks.”

In response, the US government is telling firms to swiftly implement the following requirements:

  • Mandate the use of multi-factor authentication on systems to make it harder for attackers.
  • Deploy modern security tools on computers and devices to continuously look for and mitigate threats.
  • Check with cybersecurity professionals to make sure systems are patched and protected against all known vulnerabilities, and change passwords across networks so that previously stolen credentials are useless to malicious actors.
  • Back up data and ensure offline backups are beyond the reach of malicious actors.
  • Run exercises and drill emergency plans to be prepared and able to respond quickly to minimise the impact of any attack.
  • Encrypt data so it cannot be used if it is stolen.
  • Educate employees to common tactics that attackers will use over email or through websites, and encourage them to report if their computers or phones have shown unusual behaviour, such as unusual crashes or operating very slowly.
  • Engage proactively with the local FBI field office or CISA Regional Office to establish relationships in advance of any cyber incidents.

The US government is also implementing measures for the long term, asking technology firms to build security into products from the ground up to protect both intellectual property and customers’ privacy.

Additionally, the government is acting to strengthen cybersecurity defences from the top, mandating extensive new measures for the federal government and critical infrastructure sectors where it has authority to do so.

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