Snippings

xxx

Parliament notified up to 9,000 staffers earlier this month that it had suffered a data breach of its online recruitment application called PEOPLE, which contained ID card details, birth certificates, diplomas, employment history, medical records, rights to entitlements, insurance and proof of work dating back 10 years of part of the Parliament’s staff.

From: EU Parliament staff in uproar over breach of ID cards, personal records – POLITICO.

xxx

The “challenger banks” didn’t really disrupt the retail finance world. I love the banking app on my phone, and there is no doubt that the pressure from new players has led to a better interface, better user experience and a better service. However, when it comes down to financial services, I use it to access checking account, savings account, debit card and mortgage products that are exactly the same as they were a generation ago.

Today, around two-thirds of British adults use a mobile banking app up from a third a decade ago as the incumbents developed and extended their own digital banking services. The challengers have a nice niche for payment management but they are not a replacement for traditional current accounts.

I think it’s time for another review of terminology and I’ve got a couple of suggestions. Let’s standardise this way: a “neo-bank” is something that looks like bank, but isn’t (eg, my Simple account when I first got it and before they were taken over by BBVA, which is an actual bank, and then shut down), whereas a “near-bank” is something that performs a function traditionally associated with banks but isn’t a bank and doesn’t look like a bank (eg, Wise). Then we have the non-bank, which isn’t a bank and doesn’t perform a function traditionally associated with banks but nevertheless embeds financial services (such as an accounts package that uses transactional data to deliver data-driven liquidity). Oh, and then we have challenger banks.

Challenger banks are not a special or different kind of bank. They are just banks. They may be banks, neo-banks or near-banks or non-banks that perhaps address a new niche, or deliver interesting new functionality into an existing niche, but they are not a distinct category. They are banks. That’s it. So when people talk about the “challengers” to the incumbent big banks, I do not see Monzo in my fevered imagination, but Amazon. It’s BigTech that is the real challenger.

Monzo once said that it was on a mission to usurp “legacy” banks, particularly the Big Four of HSBC, Barclays, Lloyds and NatWest that dominate the UK market. They have attracted nearly 10 million customers (not including the British finance minister) and have some £11 billion under management and while they have not yet overthrown the incumbents, they have arguably succeeded in their mission of setting new standards for digital banking; features such as foreign currency transactions and bill-splitting, along with reliable, smartphone-friendly technology, are loved by younger customers.

(They have a way to go to a billion customers even though they are now profitable. But its hard to keep up the fintech pace as you mature. Acquisition costs were £4 a couple of years back, £14 last year and now £25 per net new customer. A high number of customers come from referrals, but they account for a less than a fifth of the growth.)

 

xxx

A Visa study found that more than half of card users want the power to access multiple accounts through a single credential.1 The Visa Flexible Credential will allow a single card product to toggle between payment methods, putting the power of choice in the hands of the consumer.
Now people can easily set parameters or choose whether they use debit, credit, “pay-in-four” with Buy Now Pay Later or even pay using rewards points. Visa Flexible Credential is live in Asia and will be launching with Affirm later this summer in the US.

From: Visa reinvents the card: New suite of digital products.

xxx

xxx

Monzo also continues to suffer costs related to fraud. Last year, it reimbursed £20.4 million to customers, equivalent to 4% of its total expense base. The company has been investing in systems to reduce fraud and currently screens out around 700 impersonation attempts per month, but the costs of both detection and remediation remain higher than the original business case likely assumed.

From: Monzo. And More. – by Marc Rubinstein – Net Interest.

xxx

xxx

Ripple has added another $25 million to the coffers of Fairshake, a federal crypto super political action committee (PAC) that’s spending big this election year to support crypto-friendly Congressional candidates.
Ripple also made a $25 million donation to Fairshake in 2023, bringing its total contribution to the political action committee (PAC) to a whopping $50 million.

From: Ripple Donates Another $25M to Crypto Super PAC Fairshake.

xxx

xxx

JPMorgan later this year plans to expand the use of a generative AI tool that flags questionable decisions by portfolio managers, such as potentially selling top-performing stocks too soon, company officials told the Financial Times.

The tool, dubbed “Moneyball”, is meant to show portfolio managers “how they and the market have behaved in similar circumstances and helps them correct for bias and improve their process”, said Kristian West, head of investment platform for JPMorgan Asset Management.

From: AI is promoted from back-office duties to investment decisions.

xxx

xxx

The good news is that customers are growing in profitability, with average revenue per customer increasing to £81 from £48. In combination, card transaction fees, subscription income and partnership income rose to £24 per customer from £20.

From: Monzo. And More. – by Marc Rubinstein – Net Interest.

xxx

xxx

Over the period, they spent £58.5 million on marketing, compared with £21.7 million the year before, equivalent to £25 per net new customer versus £14 last year (and £4 the year prior). A high number of customers still come via referrals (rewarded at a cost of £10 per new customer) but at 17% of the growth, it’s nothing like the groundswell that occurred in the first few years

From: Monzo. And More. – by Marc Rubinstein – Net Interest.

xxx

xxx

ypically, de-dollarization means the movement away from US dollars in favor of the local currency. Countries wanting to regain control over monetary and exchange rate policy, recoup seigniorage, and reduce foreign exchange risk in the financial system and other sectors have initiated de-dollarization policies to varying degrees of success in the past.

However, the goal of the BRICS effort is not to increase the use of local currencies—although “alternative financial plumbing” is an interim step of the de-dollarization process—but rather to replace the US dollar with the “R5,” a reference to the five currencies used by the founding BRICS members: the renminbi, ruble, rupee, real, and rand, or with other multilateral central bank digital currency (CBDC) as the new global currency that undergirds international finance. In practice, China and its BRICS partners are pushing de-dollarization as an economic weapon to reduce US influence in the global financial system.

From: China’s de-dollarization message finds a receptive audience in North Africa – Atlantic Council.

xxx

I wonder how many fintech players understand just how big a deal Visa’s recent announcements were? Here’s a benchmark: Tom Noyes’ blog is a must-read for those of us who are fascinated by payments and in his new post about Visa Flex, he gets to the heart of the matter: “using a credential instead of a PAN creates a many-to-one relationship and acts much more as an ‘identity’ than an instrument”. Identity is indeed the new… well, you know.

A few years ago I remember talking about digital wallets at a 

 

 

 

xxx

A Visa study found that more than half of card users want the power to access multiple accounts through a single credential.1 The Visa Flexible Credential will allow a single card product to toggle between payment methods, putting the power of choice in the hands of the consumer.
Now people can easily set parameters or choose whether they use debit, credit, “pay-in-four” with Buy Now Pay Later or even pay using rewards points. Visa Flexible Credential is live in Asia and will be launching with Affirm later this summer in the US.

From: Visa reinvents the card: New suite of digital products.

xxx

This doesn’t come out of nowhere: Visa is smart. It’s now about 15 years since I worked on a Visa project (which in those days was called Non-Payment Authentication, or NPA) to experiment with using a Visa card as a credential and I don’t doubt that there have been many other experiments since then. 

 

Now, of course, some people might argue that using some other token (eg, an EU Digital ID) instead of a Visa card might bring more competition into the payment space, since it could allow customers to choose payment mechanisms that bypass banks (ie, Visa’s customers) and bank networks completely (eg, stablecoins) but there’s no denying that Visa have seized the commanding heights.

 

In reality, the battle for the consumer’s identity is only just beginning. In addition to what’s going on here with credentials, keep an eye on what is bubbling under with request-to-pay (R2P) and variable-recurring-payments (VRP) because I expect we’ll see more innovation here before the year is out.