Today’s tech weekly update features the UK’s investigation into card schemes; EU Parliament’s attempts to toughen up the crypto AML rules and align them to the traditional transactions; a paper on potential CBDC fragmentation and how to mitigate that risk; BaaS and its significant increase during the past 18 months; Visa’s new NFT program; UK’s milestone of $1 trillion tech sector; Bank of England’s decision to join the Federal Reserve and the Bank of Canada and start cooperating with MIT on CBDC; German startup that invented transparent antennas which may solve the high-frequency spectrum challenges; Nokia and Rakuten’s joint live 1Tbps trial; and Vodafone’s Road Safety Platform.
The UK’s Payment Systems Regulator (PSR) is investigating the fees of the card schemes, trying to come up with ways how to help merchants gain better deals, for instance through the use of account-to-account payments. The PSR has once again expressed its concern regarding the “high card fees” being paid to Visa and Mastercard, highlighting that those fees have “significantly” increased in the past few years.
Currently, the watchdog has requested more information about the structure of the fees and based on that, will proceed with short-term and long-term measures such as “ “price caps on scheme fees or cross-border interchange fees”.
Chris Hemsley, MD, PSR, said: “We’ll continue to act swiftly and decisively to make sure that consumers and businesses are protected, and to promote innovation and competition where it counts.”
Members of the European Parliament have voted against anonymous crypto transactions, which is a part of the AML initiative of the EU. The new rules will require all cryptocurrency transactions to include information such as the source and the beneficiary. The date of such transactions will be made available to the authorities. The rules will not apply to P2P transfers without a provider.
The new requirements are aiming at aligning crypto with the AML requirements for traditional payments of over 1000EUR.
Ernest Urtasun, co-rapporteur for the Committee on Economic and Monetary Affairs, says: “Illicit flows in a crypto-assets move largely undetected across Europe and the world, which makes them an ideal instrument for ensuring anonymity.
“As illustrated by all the recent money-laundering scandals, from the Panama Papers to the Pandora Papers, criminals thrive where rules allowing for confidentiality allow for secrecy and anonymity. With this proposal for a regulation, the EU will close this loophole,” he continued.
The proposal will now be transferred to the full EU parliament and the national ministers.
In a recently released paper by two members of the Barclays Chief Technology Office, the risk of CBDC fragmentation is addressed. The paper is written by the managing director Leed Braine, and an enterprise architect Shreepad Shukla, talks about how we can mitigate that risk using an architecture that would align CBDC with the commercial bank money.
Braine stated: “There is a risk of fragmentation in payments markets and retail deposits unless existing forms of money and new forms of money such as central bank digital currencies are interoperable and have similar operational characteristics.”
“This fragmentation risk can be mitigated by placing the different forms of money on a similar footing and so we explored how industry ecosystems could provide a common programmability layer that acts as an overlay service interfacing with the account systems at both commercial banks and the central bank. There could potentially be multiple ecosystems providing competing services using different platforms and technologies, but using common policies and standards,” he continued.
The risk of fragmentation has already been raised as soon as the CBDC discussion has started and some of the potential solutions have been high integration with the existing banking structure.
At this moment, Barclays is working on an “illustrative industry architecture” prototype and a full report with the findings is expected to be published during the summer.
The newly published market assessment report by Finastra shows that Banking as a Service is growing hugely in popularity, with 85% of senior executives claiming they already implemented, are in the process of implementation, or will implement BaaS in the next 12-18 months.
Finastra’s ‘Banking as a Service: Outlook 2022’ report includes the opinions of 1600 senior executives. “There’s no doubt that BaaS is an incredibly exciting opportunity for the entire financial services ecosystem,” comments Angus Ross, chief revenue officer, BaaS, Finastra. “Financial institutions can reach a greater number of customers at significantly lower cost, while distributor brands can open up new lines of revenue and build deeper relationships with their customers.”
Some of the most important findings of the study were:
Over 80% of regulated financial services providers expect the overall BaaS market to grow. BaaS represents a $7 trillion opportunity
Most enablers expect the overall BaaS market to grow by more than 50% over the next five years.
“It’s clear from our research that consumers – retail or corporate – are changing where they source financial services and shifting to non-bank channels. This trend will only accelerate as integrating regulated products into the customer journey becomes as simple as creating a social media account,” Ross commented.
Brian McKenney, HSBC’s chief innovation officer has also highlighted: “The application of BaaS represents an attractive opportunity to create new value for businesses around the world. Embedding financial solutions will bring contextualized, integrated banking services into the products and platforms that businesses use every day.
“How providers partner and support this unique international need of businesses will, over time, be the real differentiator,” he said.
Visa has kicked off a new NFT program aiming as supporting digital artists. The artists selected to participate in the Visa Creator Program will receive technical and product mentorship from the leading crypto experts at Visa, a stipend, and access to the industry thought leaders, as well as Visa clients and partners.
Cuy Sheffield, head of crypto, Visa, says: “NFTs have the potential to become a powerful accelerator for the creator economy. We’ve been studying the NFT ecosystem and its potential impacts on the future of commerce, retail and social media.
“Through the Visa Creator Program, we want to help this new breed of small and micro businesses tap into new mediums for digital commerce,” he added.
The UK tech ecosystem has reached the value of $1 trillion and the biggest chunk goes to fintech, as seen by the number of most valuable firms in the tech sector. UK is the third country to reach the trillion number, after the US and China. With that milestone, the digital economy of the United Kingdom is valued at more than double as compared to Germany and nearly five times bigger than the digital economy of France or Sweden.
Out of 13 tech decacorns in the UK, 9 are based in the fintech sector: Markit, WorldPay, Checkout.com, Revolut, FNZ, Wise, Rapyd, Admiral Group, and eToro.
Digital minister Chris Philp says: “We’re working hard to make the UK the best place in the world to found, grow or float tech businesses – whether they’re early-stage startups or global innovators – ensuring they have the best talent, investment, and regulation to thrive.”
In the past month, we have written about the Bank of Canada and The Federal Reserve Bank of Boston partnering with MIT on the CBDC research project. Now, The Bank of England joins the roster and reveals it has also started the collaboration with the world-renowned Massachusetts Institute of Technology on the 12-month long research on CBDCs.
“This work is focused on exploratory technology research and is not intended to develop an operational CBDC,” stated the Bank of England. “No decision has been made on whether to introduce a CBDC in the UK, which would be a major national infrastructure project. Undertaking this type of technical research will help inform wider policy thinking around CBDC.”
German startup, Alcan Systems, has invented a transparent antenna that we could stick on a window to ensure the high-frequency spectrum will go through. This would solve the challenges that arose once it was clear that while the low-frequency waves are fine with penetrating windows and walls of a building, the higher the frequencies are, the bigger the challenge and the less effective spectrum is in regard to the penetration.
The invention by Alcan Systems seems to be solving this problem with their transparent antennas that have been developed together with the Japanese company AGC and their Wavethru glass treatments.
“We are very excited about the partnership with AGC and seeing the unique benefits of using liquid crystal technology, in this case, its transparent nature, allow a form factor that solves a real problem when it comes to mmWave 5G,” said Alcan Systems CEO Onur Hamza Karabey.
“The low-E glass is essential from an energy efficiency perspective and the collaboration with ALCAN ensures we can add value for our customers by meeting the requirements for high throughput anywhere in the building without affecting its appearance,” said ACG GM of biz dev Satoshi Takada.
Nokia and Rakuten have successfully completed the live trial of 1Tbps per channel transmission which would account for a 500% speed increase in Rakuten’s existing fiber network. The trial was conducted in Japan’s Kanto region and connected data centers that were roughly 135km apart. The aim behind the trial was to show the capabilities in terms of scaling the network capacity over Nokia’s open optical line system infrastructure.
“The 1 Terabit per channel trial demonstrated the capability to dramatically increase fiber capacity and future-proof the Rakuten Mobile network infrastructure to support new high-speed data center interconnection,” said John Lancaster-Lennox, Head of Market Unit Japan at Nokia.
Tareq Amin, Representative Director and CEO of Rakuten Mobile added: “We are delighted with the performance of 1 Tb/s per channel on our optical network in collaboration with Nokia. This technical milestone will allow us to maximize bits per fiber and achieve improved power efficiency. The enhanced capacity will also support our traffic growth, deliver higher bandwidth and enable Rakuten Mobile to provide new service offerings.”
Vodafone is launching a connected vehicle platform, created to enable real-time data sharing between the transportation authorities and the drivers. The Safer Transport For Europe Platform (STEP) will be available this year and is expected to be compatible with third-party apps and available regardless of the vehicle and device.
Once released, STEP is meant to deliver updates and safety messages that will include traffic incidents, road closures, or speed restrictions, as well as ‘modeling of the road network in real-time using secure, anonymized, and aggregated vehicle position data. In the long term, Vodafone wants to upgrade the platform’s capabilities to include detection warnings for vulnerable road users, fleet management, stolen vehicle tracking, or insurance based on usage.
“Improving road safety is still a major challenge for Europe,” said Joakim Reiter, Chief External and Corporate Affairs Officer at Vodafone. “We believe that open platforms for faster, more efficient data sharing can play a significant role in helping prevent the unnecessary fatalities and injuries happening on our roads each year.”
Vinod Kumar, CEO, of Vodafone Business added: “This scaled platform enables the delivery of vital safety information to all road users, no matter what app or system they rely on. STEP encourages the collaboration needed between transport authorities, app developers and the automotive industry to unlock the full value of data and connectivity in helping make Europe’s roads safer.”