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Industry roundup: 14 January

Germany's neobank N26 to introduce crypto trading in 2022

As banks around the world rush to serve their customers, it has become increasingly apparent over the last decade that mass adoption of cryptocurrencies is inevitable. Germany's neobank N26, one of Europe's largest fintechs with a value of US $ 9 billion, is embarking in the cryptocurrency and equity trading world after aiming for global expansion. Max Tayenthal, co-founder and co-CEO, N26, commented in the Financial Times that even though the Berlin-based online bank was an early adopter in the growing financial technology arena across Europe, N26's global determinations have brought a setback in service diversification.

Subsequent to withdrawing from the two key fintech markets of the United States and the United Kingdom, N26 will strengthen its focus on European business by the new introduction of products and services to its seven million customers. Tayenthal further acknowledged that online banks need to expand their product offerings universally, and therefore, N26 plans to launch a crypto trading business in 2022.

Currently, the N26 mobile app does not offer crypto capabilities, and future product features related to cryptocurrency transactions have not yet been announced. However, a spokesperson for N26 confirmed that the digital bank is planning to launch a cryptocurrency trading business with a partner during 2022 as the first step in launching some of these vital products.

In November 2021, N26 publicised its withdrawal from the US market as it provided additional financial products and services to its European customers. According to N26, the strategy will focus on expanding its digital banking experience to new niches, including investment products.

In May 2021, N26 was provided restrictions imposed by the supervisory authorities of the Federal Financial Supervisory Authority (BaFin) of Germany, partially due to lack of control to combat money laundering. According to BaFin’s rule, N26 was not allowed to onboard more than 50,000 clients per month. However, N26 accepted an average of 170,000 new customers monthly in 2021.

Tayenthal described the new customer restrictions imposed by BaFin as a major restriction on fintechs funded by growth investors, but he expects the conditions to be lifted by the summer of 2022. An N26 spokesperson commented that compliance is N26's top priority, and the team continues to invest in improving standards as N26 grows.


PayPal stablecoin exploration to drive the growth of the platform

PayPal confirmed that it was investigating a US dollar-backed stablecoin after developer Steve Moser discovered the code and image that referred to "PayPal Coin" in the PayPal iPhone app, according to a Bloomberg report. Additionally, a PayPal spokesperson commented that the hidden code and images were prompted by a recent hackathon (a coding event designed for rapid, collaborative development of potential business solutions and ideas) within PayPal's blockchain, cryptocurrency and digital currency divisions, suggesting that they are initial ideas and subject to change.

According to Insider Intelligence (chart below), global blockchain spending will reach $ 8.3 billion in 2022.




Jose Fernandez Da Ponte, Senior Vice President of Cryptocurrencies and Digital Currencies, PayPal, stated that they would work with regulators if the company decides to proceed forward with the project. Furthermore, the development for PayPal stablecoin would require strict security parameters and support large payments.

According to Insider Intelligence, stablecoin is generally less volatile than traditional cryptocurrencies such as Bitcoin and Ethereum. Stablecoins are better suited for payment, as they are associated with the value of the underlying currency or commodity such as US dollars and gold. However, the downside of stablecoin is its acceptance as a means of payment and lack of adoption. However, with PayPal's massive merchant and client base, a PayPal stablecoin may overcome that obstacle.

The unique stablecoin is the culmination of PayPal's crypto-related efforts. PayPal has launched several crypto payment solutions since it began allowing US users to buy, sell and retain crypto through apps in November 2020. It introduced crypto checkout, introduced Cash Back to Crypto for Venmo credit card users, and crypto exchange to the UK.

Dependent on consumer interest and adoption, the potential stablecoin could be used with Bitcoin to buy through cryptocurrency checkouts and buy on the PayPal exchange to increase volume. PayPal can also enable users to make peer-to-peer payments with the currency via the app or Venmo.

An exclusive stablecoin can help increase PayPal's revenue. However, they would need to adapt to the changing regulatory environment. No official rules have been developed, but research and efforts are proceeding in the United States to establish a regulatory framework to include proper security measures.


Visa and ConsenSys partnership to link CBDC to existing payment network

Visa has partnered with ConsenSys, a blockchain company, on a project to link the CBDC network with existing payment systems. The card system is currently in the integration process stage of the CBDC payment module into the ConsenSys Codefi CBDC system. This partnership will enable central banks to create digital currencies based on ConsenSys' limits and leverage Visa's infrastructure to distribute currencies through financial intermediaries such as commercial banks.

According to Visa, the CBDC payment module is designed to provide access to existing payment networks and simplify CBDC networks to connect to traditional financial service providers. Bank and issuer processors can access modules to integrate existing infrastructure and issue CBDC-linked payment cards or wallet credentials for use by consumers.

Catherine Gu, Head of CBDC, Visa, stated that the CBDC network integration into the existing banking app will enable consumers to use the CBDC-linked Visa card at checkout seamlessly. Furthermore, consumers can access their digital wallet with CBDC balances and payment information and safely pay for transactions at any of the 80 million merchants worldwide that accept Visa and affiliated networks. Gu added that the new card structure is expected for pilot and prototype in spring 2022. Additionally, Visa’s global crypto advisory practice and digital currency team will collaborate with central banks, financial institutions and fintechs to integrate and configure the CBDC payment module.


4.5 million users on open banking: substantial UK adoption

The UK’s Open Banking Implementation Entity (OBIE) cites the significant adoption of the open banking initiative by 3.9 million consumers and 600,000 small enterprises to commemorate the fourth anniversary of the Revised Payment Service Directive’s (PSD2) rollout across the EU.

According to OBIE, open banking increased by 60% in 2021 (from 2.8 million users in December 2020). Furthermore, one million new users were added every six months, representing over 26.6 million open banking payments made in 2021, a substantial growth of over 500% in twelve months. This growth is due to revisions made in early 2021, and HM Revenue & Customs (HMRC) has become the world's first government sector to enable users to make open banking payments. Currently, over £ 2.4 billion has been raised using this method, a significant reduction in payment fraud risk and customer mistakes. Charlotte Crosswell, Chair and Trustee, OBIE, stated that they have helped enable and support the breakthrough in financial innovation and collaboration across the sector due to the strong regulatory framework and the support of visionary policy makers.

With open banking, customers have more control over their funds. Additionally, the increased use of digital and financial services by customers have led to this growth particularly as a result of the pandemic. Open banking is becoming more mainstream as innovative products and services surface in the market, which led to adoption of more than four million users. Furthermore, the new OBIE Board continues to work on strengthening governance and culture, which is an important focus in taking open banking to the next stage of its journey.

Andrea Coscelli, Chief Executive Officer, Competition and Markets Authority (CMA), commented that an additional two million people migrated to open banking in 2021 due to the CMA ordering banks to provide customers with more control of their information, transforming the industry with innovation and stimulating competition. Furthermore, CMA is working diligently with OBIE to strengthen governance and maximize the potential of open banking in years to come.


Bank of America launches CashPro Forecasting: solution leveraging artificial intelligence and machine learning

Today Bank of America launched CashPro Forecasting, a tool that uses artificial intelligence (AI) and machine learning (ML) technologies to more accurately predict future liquidity positions in customer accounts of Bank of America and other financial institutions. According to the press release, the solution was developed in partnership with a fintech, which specializes in applying machine learning to liquidity forecasting, one of the biggest challenges for companies to manage without manual or costly technology investment.

Ken Ullmann, co-head of Global Commercial Banking, Global Transaction Services, Bank of America, commented that many companies rely on manual repetitive work to predict their liquidity needs and have minimal time to analyse the data to make strategic decisions, the ultimate goal of the forecast. CashPro Forecasting enables enterprises to automate the forecasting process while improving forecasting accuracy without making an IT investment.

Furthermore, CashPro Forecasting is available to customers who are already using CashPro®, the platform used by banking companies and corporate customers to manage their daily financing and lending needs. Additionally, CashPro Forecasting is fully integrated into the platform and can be automatically plugged into the client's past cash flow information, eliminating the need for onboarding, stated Jay Davenport, Head of Product Structure Sales in Global Transaction Services, Bank of America. Customers can activate the service themselves through the CashPro settings and get started right away.

According to the press release, CashPro Forecasting uses a variety of ML models to learn from the client's past cash flow and automatically selects the most accurate model for each account and uses it to predict future cash positions. At the end of each day, the model will be retrained based on the new cash flow of the day, allowing it to continuously learn and adapt to seasonal changes and other company-specific operational impacts.

Alenka Grealish, Senior Corporate Banking Analyst, Celent, commented that the economic impact of the pandemic emphasized the importance of liquidity transparency first and then accurate cash flow forecasts. Many companies, regardless of the source, have experienced inadequacies in their cash flow forecasts. Innovative banks continue to accelerate improvements in their cash flow forecasting services.

The main features of CashPro Forecasting detailed by Bank of America are:

  • Improved accuracy – Machine learning technology automatically learns from historical cash flows.
  • Scenario analysis – Users can create their own forecast scenarios by taking trailing averages or assigning growth rates.
  • Multibank reporting – The service forecasts cash flows across Bank of America and bank accounts held at other third-party banks.
  • Transaction mapping – Users can create simple rules to automatically classify and forecast individual transactions into categories such as collections or payroll.
  • Simple setup – Zero implementation. Companies can enable the service directly within CashPro and begin using it immediately.
  • Customizable – Companies can forecast by account, currency or transaction type, or choose their own cash flow categories. These can be done on a daily, weekly or monthly basis, up to a year in the future.

For more information, please visit Bank of America CashPro Forecasting Tool Services.

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