#PAY360 Conference Review

Wow!

What an eventful day.

On 22nd March 2022 (great date by the way), The Payments Association held their annual #PAY360 and #DigitalCurrencies360 conference where leading organisations in the payments industry met to discuss the current landscape and where it's likely headed.

In association with Mastercard, the headline sponsor for the event, many businesses under Mastercard payments schemes were also in attendance such as JP Morgan, Curve, Nationwide, GPS and many more so it's fair to say that the agenda of the day was certainly met in giving a platform to industry leaders to share their insights.

I've picked a few keynote discussions and conversations to share some pointers from. These particular sessions genuinely made me think and assess for myself, what the future holds for payments and how the rapid adoption of technologies is affecting the direction it's going in.

Let's get into it!

Keynote Discussion: Spotlight on UK Payments Landscape

Moderator: Marion King

Speakers:

Mark Nalder, Jana Mackintosh, Chris Hemsley & Andrew Hewitt

• Consumers want products and services, not just payments.

• You know innovation has taken place if by the time you see it, you’re too late to contribute to it.

• The pandemic attributed greatly to the adoption of contactless payments and card schemes could not have planned for it hence why many are now playing catch up with the products they sell and the types of services they provide.

• There's a general concern that Buy Now, Pay Later (BNPL) services may be the death of the credit card. To get into anything quicker than usual is to create a product that does not require heavy regulation or any regulation at all. Not being regulated means that you are not allowed to charge an interest on your product putting it in direct competition with credit firms.

• Another concern across the board is how Open Banking will be regulated, since the Payment Systems Regulator (PSR) does not currently regulate Payment Initiation Service Providers (PISPs) and Account Information Service Providers (AISPs).

• Another emerging open banking concept is Request To Pay. As beneficial as this can be for certain economies, not enough use cases have been established yet, in comparison to concepts such as contactless payments where TFL was the main use case and has proven to be a fundamental benefit for travelling in London.

• Digital currencies are viewed as complex so the role of central banks should be to help manage our relationship with digital currencies via their involvement in creating CBDCs, stable coins, regulation and technologies to assist general understanding.

Keynote Session: The Evolution of Payments – Looking to the Future

Speakers: Mark Walker & David Jones

• Through movements such as Black Lives Matter (#BLM), payments schemes were able to see that when people are driven by purpose and human value, there were more cross-border payments being made. When there is purpose and value; money moves.

• A shift is happening between lenders who offer services based on credit history and lenders who offer services based on digital history.

• Digital inclusion is viewed as a means to financial inclusion - technology is now at the centre of financial access.

• It's believed that the needs of mass markets have already been met. The focus is now on tailoring solutions to niche markets: hyper personalisation being the main, niche concept that is at the core of services provided to the younger generation.

• What’s next for payments is CHOICE. Consumer, merchant and retailer choice. When making payments, all members of the ecosystem want to know that there's choice around how, where and when they pay.

• Fintechs are more focused on solving sole problems which is why they receive support from universal banks and institutions who usually cater to mass markets.

• Going forward, data is going to become more important than payments. To optimise the payments systems we currently have, high quality data is necessary and how that data is used is also key.
  

Keynote Session: The FCA’s priorities for payments

Speakers: James O’Connell, Helene Oger-Zaher, Paul Roe

The mains reasons why the Financial Conduct Authority (FCA) would disapprove the authorisation of a firm are:

• They are not ready, willing or organised enough to comply

• There are missing key documents or these documents are in draft form - in an attempt to simply get in the cue

• When business models are not thoroughly understood by those within the business

• When firms delay in attaining safeguarding accounts

• When projections can be challenged if unrealistic or seemingly unattainable

The FCA likes to look at firms holistically: they look at the regulated and unregulated activities within the firm and how they coincide with each other.

Panel session: How to regulate innovation in Crypto?

Moderator: Peter Howitt

Speakers: Nilixa Devlukia, Austin Elwood, Helene Oger-Zaher &Matthew Gravelle

How to regulate for innovation in crypto?

• Crypto businesses are just young innovators. Everything is new and so meshing that into the old would always prove to be difficult.

• Generally, crypto firms only register with the FCA for money laundering purposes and nothing else as they then fall out of the FCA's jurisdiction. The highly unregulated nature of crypto firms is the number one pain point for the payments services industry to date.

• To implement regulation for crypto firms (and stable coins) is to go to the extreme of banning these services totally or regulating every single function it performs... both of which are unrealistic - a happy medium must be found and that is what regulators are working on.

• The same way the FCA and other regulators had to "level up" for Electronic Money Institutions (EMI’s) is exactly what is needed for the regulation of crypto firms to be established.

• The EU regulation, Markets in Crypto-Assets (MiCA) is the closest thing on the horizon to regulate crypto firms.

• Decentralisation is also yet to be regulated. This is mainly because Decentralised Autonomous Organisations (DAOs) currently can’t be regulated, because of the nature of blockchain technologies. With this in mind, consumers are seeking protection via regulation that DAOs are not fraudsters.

Panel session: Are CBDCs and Stablecoins the catalyst to digital currency becoming a mainstream method of payment and wealth management?

Moderator: Dave Birch

Speakers: Lee McNabb, Richard Crook, Shiv Chowla, Martin Etheridge & Ciara Conway

• For knowledge purposes, Central Bank Digital Currencies (CBDCs) would have the exact same rate as physical money. Its value would remain stable and wouldn’t fluctuate the way that cryptocurrencies do.

• The Bank of England views CBDCs as a currency that perpetuates financial inclusion and this is a priority, regardless of socio-geographic elements.

• The Bank of England are still beckoning of the involvement of private sector firms and seek to establish the UK's CBDC by the second half of this decade! (pretty soon!)

• As the world becomes more digitalised, consumers are buying into the concept of assets and having digital ownership, in comparison to the traditional concept of money and having physical ownership.

• The main focus around digital currencies is how we build a digital society out of it rather than having a "sub-world" we live beside.

• Facebook’s Libra is seen to be the accelerant into this conversation. The same reason why we have had kings and queens on our legal tender is the same reason why Facebook (now known as Meta) wanted to create its own currency, within its rights as a merchant but they weren't supported to do so.

• Programmability is the future of payments via digital currencies: consumers want to be able to retrieve their money/assets without having to wait for the banks to fulfil that need.

• To round everything off, The Payments Association has a major focus on pushing the financial/CBDC agenda through parliament as the House of Lords have been specific in the requirement that CBDCs cannot go ahead without their approval.

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Liz. #FTWL