I’ve recently attended Money20/20 Europe in Amsterdam, uncovering the latest innovations in international payments and discussing the state of the industry. Cross-border payments remains one of the most complex parts of the industry.
The focus this year was on three key issues:
- How important is speed of payments?
- Where could blockchain technology have the biggest impact?
- What improvements for customer experience lie ahead?
The Broad Takeaways
While listening to the roundtable talks, keynote addresses, and talking to many of you across the conference, a few broad insights emerged.
1) RegTech is hot but still has fundamental barriers Regional variance in KYC/AML requirements, combined with greater awareness of financial regulation from the dual combo of GDPR and PSD2 have made RegTech a high-growth space. However, despite the necessity (and effectiveness) of many of these services, the AI-focused language often used to describe the tech obscures the fact that most of these verification and KYC providers are still working with relatively limited, similar datasets and rely on human verification teams to ultimately power their products. Crypto-based products (such as crypto payment cards) may require different solutions entirely, as the normal systems for detecting fraud and anomalies struggle with the decentralised nature of these products – one group told us one of the best tools they’d found was a set of bad actor user addresses scraped from dark web marketplaces. RegTech plays a critical role both in the customer on-boarding journey (where every second counts) and the ongoing cost of serving customers. As customers use more financial products from multiple providers, we also expect to see the issue of KYC portability (such as universal financial IDs) become a bigger topic as well.
2) Blockchain facing renewed skepticism The crypto space is very active, as evidenced by the presence of multiple crypto exchanges at the conference this year (they need banking partners), alongside now-mainstream providers such as Ripple. At the same time, many panelists and attendees expressed skepticism of the broader use case of blockchain technology for actually intermediating payments – especially at the corporate level. The core benefits of increased speed and in some cases settlement are clear for difficult corridors such as inbound to Mexico or Brazil but less obvious across the mainstream GBP/EUR/USD/JPY type corridors. There were also growing calls for blockchain to tackle more parts of the value chain outside settlement, such as KYC and other components of the supply chain including finance and credit. “Blockchain needs to be more than a solution looking for a problem” was often the line.
3) OpenBanking on the cusp After years of talk and planning, OpenBanking (the mandate for mainstream banks to provide API access to their customer’s accounts) is finally emerging as a real source of change. One immediate improvement is the ability for brokers to reduce friction in the user journey by allowing customers to fund transactions from their bank account directly through the broker’s site (removing the last potential roadblock for the transfer or hedge). Right now the UK is perhaps furthest ahead in terms of actual product use, with the rest of the EU and Scandinavia in various stages of implementation and roll-out. Be careful on your assumptions The opportunity OpenBanking brings is a great example of one of the big flawed assumptions we see being used to forecast and plan across the sector at the moment – that customer behaviour remains the same. This could not be more wrong. Mobile, voice, seamless API integrations, and facial recognition mean the customer experience that will be available over the next few years will be fundamentally different to what it is today. How you embrace and respond to that will define the growth potential of your company.