Snippings

In his excellent book “Banking As A Service”, Jason Mikula examines the viability of various business models and notes the rise of “headless” banking: He points at a group of banks — eg, Column, Lead, and Cross River — who built new API-centric systems rather than put a middleware layer on legacy infrasturcture. These “headless” banks direct much or all of their banking business through partnerships in which third parties integrate directly with the bank tech stacks. Jason refers to this as a sort of wholesale/retail model, in which the bank provides the core capabilities of banking to the partners who build specific retail products for end customers.

Jason is right to highlight this stable model as a way forward in the U.S., which lacks the regulatory equivalent of the Payment Institutions (PIs) or Electronic Money Institutions (ELMIs) found in other jurisdictions. In other words, fintech firms in the US will continue to be dependent on banks if they wish to offer regulated products and services.

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Pairpoint, the joint Economy of Things business by Vodafone and Sumitomo Corporation, has partnered with Mastercard to launch a new embedded payments technology that will transform the way machines interact autonomously in the freight, shipping, fleet, and logistics sectors. The service, initially launching in the UK with a broader rollout across Europe, will allow fleet operators and logistics companies to authorize direct payments between machines, enhancing efficiency and automating transactions.

From: Vodafone, Sumitomo & Mastercard Launch M2M Autonomous Payments System for Logistics.

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A sea change in the US’s approach to digital assets under the upcoming Trump presidency may see major lenders move towards crypto custody services as a precursor to deeper engagement in the space

From: Providing custody services offers crypto ‘entry point’ for US banks – The Banker.

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The Government has today introduced the Property (Digital Assets etc) Bill into Parliament. The Bill enacts the recommendations of the Law Commission of England and Wales. Its effect is to confirm the existence of a third category of personal property, into which crypto-tokens and other assets could fall.

The Bill is available here and has been introduced into the House of Lords under the special parliamentary procedure for Law Commission bills.

The Law Commission’s digital assets report in June 2023 concluded that certain digital assets, including crypto-tokens and non-fungible tokens (NFTs), are capable of attracting personal property rights. However, because they are fundamentally different both from physical assets, and from rights-based assets like debts and financial securities, they do not fit easily within traditional categories of personal property. The Commission recommended that legislation should confirm the existence of a “third” category of personal property. The Commission published a draft bill to implement this recommendation in July 2024.

From: Property (Digital Assets etc) bill introduced into Parliament   – Law Commission.

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In 2021, El Salvador became the first country in the world to make bitcoin legal tender.
This week, the cryptocurrency briefly hit a fresh record high of more than $108,000.
“The potential risks of the Bitcoin project will be diminished significantly in line with Fund policies,” the IMF announcement said.
“Legal reforms will make acceptance of Bitcoin by the private sector voluntary. For the public sector, engagement in Bitcoin-related economic activities and transactions in and purchases of Bitcoin will be confined.”

From: El Salvador strikes $1.4bn IMF deal after scaling back Bitcoin policies – BBC News.

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The Swedish case is even more special due to the pervasive role of banks in the payment and identification infrastructure. Banks created the widely used payment app Swish, and also issue the electronic ID needed to access public services like the tax authority and benefits for illness, disability and unemployment.

Consequently, if you are not a bank customer, you can’t access these public services.

From: Sweden is a nearly cashless society – here’s how it affects people who are left out.

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If cash is the only money you have or the only money you can manage without help, you are confined to “cash bubbles”. Cash works like a local currency, isolated from the rest of the economy.

In the cash bubble, you can buy necessities and go to no-frills cafes, but you can’t pay for parking and you can’t pay bills without help. Volunteers at local community groups told us that they spend most of their time doing people’s banking for them.

A Ukrainian refugee, who can’t get a bank account because of their migration status, worried about a bill from the local health clinic that they had no technical means of paying.

Homeless people who sleep in cars can’t use the cashless parking meters, so an illicit market has emerged where people with smartphones and bank accounts pay for their parking at a substantial extra cost. It’s expensive to be digitally poor.

From: Sweden is a nearly cashless society – here’s how it affects people who are left out.

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The California DMV’s commitment to transparency and open standards was evident throughout these hackathons, and the OpenID Foundation’s involvement was instrumental in this regard.

By incorporating the ISO 18013-5, W3C Verifiable Credentials, and the OpenID for Verifiable Credentials (OIDC4VC) specifications, the DMV demonstrated its commitment to aligning its mDL infrastructure with global standards

From: Reflections on the California mDL Hackathons.

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In addition to being fine-tuned, AI models are given some quiet instructions—a “system prompt” distinct from the user’s prompt—as they’re deployed and before you interact with them. The system prompt tries to keep the models on a reasonable path, as defined by the model maker or downstream integrator.

From: The Words That Stop ChatGPT in Its Tracks – The Atlantic.

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A commercial model that works for all parties – retailers and billers are accustomed to paying fees for card payments (although they find them complex and excessive). Thus reasonably, open banking service providers can charge them similar fees, but fees need to be far below those for cards, rather than equivalent, to be compelling. Additionally, banks are mandated to provide APIs at, in effect zero cost, so they have no incentive to provide anything other than the bare minimum, which is a problem for open banking service providers dependent on bank APIs, controls and processes.

From: Open Banking UK Product-Market Fit – by Jeremy Light.

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