U.K. pressures big tech as bank resiliency struggles

The Financial Conduct Authority has instructed the Treasury to designate certain technology firms as “critical technology providers,” or firms that could destabilize the United Kingdom’s payments and financial systems if they were to fail.

The FCA will assess the systemic impact of companies that banks and other financial institutions use to support financial transactions such as digital payment processing or fund transfers. 

Once designated as a CTP, these firms’ products would be subject to regulatory supervision that would be broader than the government oversight of a technology firm. These firms, which would likely include large U.S.-based Big Tech companies, would be required to report to the FCA on the strength of their resilience, details on their collaboration with other technology companies and banks, and conduct stress testing. 

The rules have also been strengthened for reporting cyberattacks, outages and natural disasters, and their potential impact on the U.K.’s financial system.

As digital payments have expanded, the U.K.’s banking system has experienced period outages, dating back up to 10 years, often resulting in consumers and stores unable to make payments, and travelers stranded at train stations. More recently, a payments breach caused contract negotiations between MoneyGram and the U.K.’s postal service to break down. The emphasis on third-party risk is part of a broad focus on operational resilience in the U.K., according to Daniel Mayo, a principal analyst for banking at Celent. 

“A key driver here was concern over provider concentration risks,” Mayo said. “While not specifically a cloud issue, certainly there have been noted concerns about high concentration with cloud service providers, particularly given the significant shift to use of these providers since 2020.” 

In the United States, where the Federal Reserve has warned about vendor risk, a survey from cybersecurity law firm Jones Walker found that small to midsize banks have dangerous shortfalls in managing third-party risk. “Disruption to one of the main hyperscalers could impact provision of key services at multiple firms, representing a significant potential systemic risk,” Mayo said. —John Adams  

Reserve Bank of Australia tests wholesale CBDC, tokenized deposits

The Reserve Bank of Australia and the Digital Finance Cooperative Research Centre last week published a 46-page consultation paper seeking input from the banking industry on its new digital currency initiative. Project Acacia will explore how digital currency and infrastructure could support the development of wholesale tokenized assets in Australia, including a central bank digital currency. 

“Shaping the future of money in Australia is a strategic priority of the RBA and the Payments System Board,” said Brad Jones, assistant governor in the financial system at the RBA, in a statement. “The role that tokenised asset markets could play in improving the efficiency and resilience of wholesale payments and settlements, and in enhancing cross-border payments, are areas of particular interest. “Wholesale CBDCs are designed for large volume payments. They are not subject to the same political controversies and technology complications as retail CBDCs, which are tailored for smaller payments for consumer or retail use. 

CBDC projects picked up pace at the start of 2023 but have in some cases — such as in Canada — fallen out of favor amid a lack of clear use cases. In the United States, CBDC development is likely to take a backseat amid President-elect Donald Trump’s administration, which has promised a focus on decentralized cryptocurrency. —Joey Pizzolato

Travelex updates its global ATM fleet

Foreign exchange brand Travelex is replacing more than 600 ATMs in eight countries, adding contactless cash withdrawals and other digital features.

Travelex is working with NCR Atleos to support software updates and remote monitoring. The ATMs are mostly in high-volume areas like airports and other travel hubs. New ATMs have touchscreens, barcode readers and contactless readers in certain markets.

Contact readers enable withdrawals by tapping a card or NFC device such as a smartwatch or phone. The ATMs additionally support Travelex’s Click and Collect function, which supports pre-ordering cash online, which is useful for travelers and for consumers who want to lock in the best possible rate for a currency conversion.

NCR Atleos is the ATM-focused company that resulted from NCR’s 2023 split (NCR Voyix is the payments technology spinoff). Atleos has relied on partnerships to build scale as ATM growth stalls, though self-service remains an important strategy for banks. —John Adams 

UBS bets on blockchain to boost cross-border payments

UBS has tested UBS Digital Cash, a payment system that uses a distributed ledger to enable shorter processing times for cross-border institutional transactions.

The bank’s multinational corporate clients and partner banks were able to execute payments in U.S. dollars, Swiss francs, euros and Chinese yuan. UBS is trying to improve visibility into liquidity and believes shorter processing would reduce delays in settlement, thus bringing more clarity to cash positions.

By using blockchain, the payments will rely less on intermediaries such as correspondent banks to manage currency conversions.

It’s a similar strategy that firms such as Ripple have used to make smaller cross-border payments for e-commerce or P2P transfers simpler and less expensive. Real-time payment networks and digital currencies are also being developed to simplify international transactions. —John Adams 

Visa partners with Chinese company for palm-powered payments

Visa is bringing Tencent’s biometric-based Pay by Palm software to international markets.

Singapore will be the first country where the technology will roll out. Visa cardholders from banks such as DBS Singapore, Overseas Chinese Banking Corp. and United Overseas Bank will be able to pay by palm at Alchemist, a café in the country. 

“This innovative solution represents our commitment to providing a simple, convenient and secure way for consumers to pay,” said Adeline Kim, Visa country manager for Singapore and Brunei, in a statement. “Based on our biometrics study, close to seven in 10 Singapore consumers see this as a secure way to pay.”  

Customers will need to register once at the merchant point of sale by connecting their palm scan with their Visa card. Afterward, a Visa payment token is bound to their palm biometric template. 

Banks have been experimenting with biometric-based payments. JPMorgan said earlier this year it was planning a broad rollout of biometric authentication by 2025, which included palm-scanning technology. The bank partnered with fintech PopID for face-based biometric payments at fast-food retailer Whataburger in August. —Joey Pizzolato

BNZ acquires open banking fintech BlinkPay

Bank of New Zealand has agreed to acquire BlinkPay, a New Zealand-based company that enables payments directly between consumer and merchant bank accounts.

BNZ will use BlinkPay’s technology to improve data sharing and to speed connections between BNZ’s customers and third parties. BlinkPay’s open banking system made its debut in 2018 and has signed about 250,000 customers. Terms of the BlinkPay deal were not disclosed.

Open banking enables consumers and other clients to use their primary bank or payment account to access services from third parties, such other banks or non-financial companies. New Zealand adopted open banking earlier this year, sparking a need for banks to add technology and scale to power the permission-based data sharing and third-party connections required.

New Zealand trails neighboring Australia in adopting open banking by about three years. Open banking initially took hold in Europe and has spread to other counties as banks and fintechs seek ways to improve connections. In the United States, open banking has been developing for several years, though the Consumer Financial Protection Bureau only recently issued rules guiding the practice. —John Adams 

Overseas Chinese Banking Corp. rolls out P2P remittance service

Overseas Chinese Banking Corp. is using Visa Direct to enable near-instant, P2P remittance transfers in its mobile banking app through Weixin Pay, also known as WeChat Pay, and Alipay using recipient’s China national identification name and China mobile number. 

Weixin Pay and Alipay are two of China’s largest digital wallets with over a billion users.

OCBC has seen a 50% jump in remittances from Singapore to China in the last year as more Chinese individuals relocate for work. 

The pay-to-wallet service transfers money within seconds, according to the bank. On average, other account-to-account or nonbank remittance services can take between two and five days. 

The bank plans to expand the service to other digital wallets, such as GoPay and Ovo in Indonesia, and GCash, PayMaya and Coins in the Philippines, by 2026. —Joey Pizzolato

Revolut to expand crypto exchange to EU markets

Revolut is rolling out its cryptocurrency exchange, called Revolut X, to 30 markets in the European Economic Area following the launch of the exchange in the United Kingdom in May, according to Cointelegraph. 

The professional crypto exchange will be available in Belgium, Cyprus and Denmark, among others. Customers will be able to trade over 200 digital currencies using a Revolut bank account. 

“With the expansion of Revolut X, we’re aiming to make a real impact in the crypto trading space and offer a strong alternative to some of the more established platforms,” said Leonid Bashlykov, Revolut’s head of crypto exchange product, in a statement. —Joey Pizzolato

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