Snippings

In a recent discussion I said as a rule of thumb that two-third of European bank profits come from net interest margins and around half of this would be at risk. This correlates well with Klarna’s estimate that UK consumers lose around £6bn per annum through a lack of understanding of complex financial language in a market where combined bank profits are in the region of £20bn annum.

In Europe the embedded-finance market is growing at double-digit rates and the managment consultancy McKinsey forecasts revenues over €100 billion by the end of the decade.

In a recent survey on “Financial Services Expectations vs Reality”, FIS found that around half of all consumers want a single platform to manage all fo their financial services from all of their providers. Buit who would provide this single platform? Apple using open finance to access all of the consumer’s accounts? The consumer’s primary bank app? A brand (Nike savings account anyone?) or maybe new specialist financial health providers. Or Meta? Twitter?

 

I have to say that I agree with Tarun Bhatnagar, President, Platform and Enterprise Products at FIS, who said that as embedded finance propositions mature, there is a significant market opportunity for financial services companies to deliver a unique all-in-one platform experience for their customers.

Think about the dynamics. The distribution side of banking has a much better return-on-equity (RoE) than the manufacturing side of banking, for the obvious reason.

So it’s attractive to for banks to try and compete on the distribution side. But on the distribution side, they are not competeing with other banks but with Google and Instagram and Tik Tok.

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Ultimately, the opportunity is too good for any bank to ignore. The bigger banks will move slowly and cautiously, but they’re coming. If you wind that forward 20 years, you can see a world where banks no longer want to own distribution. They’d all start to look like Column, Lead Bank (or Griffin in the UK, who just raised their Series A). Banks, with a charter but no UI at all. Headless banks.

From: 🧠 Embedded Finance: Life after the consent orders. Apple vs DoJ.

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All but the biggest banks become headless. If embedded finance is so lucrative, why would banks operate any other way, especially smaller ones? Banks with large, profitable existing franchises are unlikely to give those up, but the prize for doing embedded finance well is too great to ignore.

Haggling will become the norm in all transactions, it’s just that people won’t be in the loop, so it won’t be annoying. This will have an interesting impact on supply and demand. Maybe I don’t want that Kindle at 149 but I’d take it at 119, whereas you might be happy at 129.

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Much as in the EU, AI regulation in New Zealand has been developing in tandem with a national strategy for digital identity. This week, the government launched its New Zealand Trust Framework Authority to determine which organizations are verified to provide digital identity services.

From: New Zealand crafts AI regulation and digital ID strategy with an eye on Europe | Biometric Update.

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Arguably the most significant obstacle to a regional cross-border payments network in Southeast Asia has been the difference in regulations and payment practices among the different countries. Unlike the European Union, which has a central bank that determines monetary policy for all of the member states, Southeast Asia has no unifying financial institution.

From: What are the prospects for Project Nexus? – Kapronasia.

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The Department of Homeland Security (DHS) Science and Technology Directorate (S&T) announced that Credence ID, Hushmesh, Netis d.o.o., Procivis, SpruceID, and Ubiqu have each won a government contract to develop technologies that protect the privacy of individuals using digital versions of credentials issued for immigration and travel. These digital credential users, including immigrants and travelers, could eventually store their information in privacy-enhanced digital wallets. Since DHS interacts more frequently on a daily basis with the American public than any other federal agency or department, maintaining secure, confidential digital interactions will have a tremendous impact on the privacy, security and safety of residents across the country.

From: Homeland Security Awards Contracts to Six Startups to Identify, Develop, and Implement Privacy-Enhancing Digital Wallets Technologies | Homeland Security.

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Helmut Lackner, CEO of OSD, says Younix Identity is dedicated to delivering secure, user-friendly and legally compliant digital ID products for Austrians. The proof of ID, he says, only contains the first name, last name, date of birth and photo of the holder; “this underlines the data-minimized approach, ensuring a user-friendly solution in full accordance with GDPR standards.”
Lackner says the design of the eAusweise wallet was guided by the EU’s new data regulation, noting that the wallet is “already fully ISO/IEC 18013-5 compliant and ready for future integration within the EU eIDAS 2.0 standard.”

From: Austrian digital wallet can now house national ID, proof of age alongside mDLs | Biometric Update.

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Fifth Third Bank, a large regional US bank headquartered in Cincinnati, is facing a sizable civil penalty because employees routinely engaged in the following misconduct, which the bank has been aware of since at least 2008:

Opening unauthorized deposit and credit card accounts in consumers’ names
Transferring funds from consumers’ existing accounts to new, improperly opened accounts
Enrolling consumers in unauthorized online banking services
Activating unauthorized lines of credit on consumers’ accounts. According to the CFPB, an incentive compensation program tied to unreasonable sales goals, performance ratings and, in some cases, employment caused bank employees to engage in unfair and abusive acts or practices violating several laws, including the Consumer Financial Protection Act.

From: Fifth Third Bank Faces $20M Fine for Fake Bank Accounts and Illegal Car Repossession – CNET Money.

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At fault is a body called the Financial Action Task Force (fatf). Established in 1989 by the g7 as a one-year, fact-finding unit that would catalogue policies to stop money-laundering associated with the illegal drugs trade, fatf has grown into a 40-member outfit central to the global fight against all grubby finance… In principle fatf recommendations are non-binding. In practice almost no country can afford to ignore them.

From: How strongmen abuse tools for fighting financial crime.

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exisNexis Risk Solutions, a data firm, lists 130,000 entities alleged by governments or media to have laundered money. Some 30,000 have had their assets frozen, up from 24,000 last year—the biggest rise in at least nine years. Although some of this increase reflects genuine crime-fighting, international directives create opportunities for large-scale abuse. And evidence suggests that strongmen are becoming increasingly creative in how they wield tools of financial suppression.

From: How strongmen abuse tools for fighting financial crime.

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