Industry roundup: 6 October 2020
by Ben Poole
ECB intensifies work on a digital euro
The European Central Bank (ECB) has published a comprehensive report on the possible issuance of a digital euro, prepared by the Eurosystem High-Level Task Force on central bank digital currency (CBDC) and approved by the Governing Council.
A digital euro would be an electronic form of central bank money accessible to all citizens and firms - like banknotes, but in a digital form - to make their daily payments in a fast, easy and secure way. It would complement cash, not replace it. The Eurosystem will continue to issue cash in any case.
“Europeans are increasingly turning to digital in the ways they spend, save and invest," said Christine Lagarde, ECB President. "Our role is to secure trust in money. This means making sure the euro is fit for the digital age. We should be prepared to issue a digital euro, should the need arise.”
The Eurosystem task force, bringing together experts from the ECB and 19 national central banks of the euro area, identified possible scenarios that would require the issuance of a digital euro. These scenarios include an increased demand for electronic payments in the euro area that would require a European risk-free digital means of payment, a significant decline in the use of cash as a means of payment in the euro area, the launch of global private means of payment that might raise regulatory concerns and pose risks for financial stability and consumer protection, and a broad take-up of CBDCs issued by foreign central banks.
The ECB says that a digital euro would preserve the public good that the euro provides to citizens: free access to a simple, universally accepted, risk-free and trusted means of payment. It also poses challenges, but by following appropriate strategies in the design of the digital euro the Eurosystem can address these.
The Governing Council has not taken a decision yet on whether to introduce a digital euro. The Eurosystem will engage with citizens, academia, the financial sector and public authorities to assess their needs, as well as the benefits and challenges they expect from the issuance of a digital euro, in detail. A public consultation will be launched on 12 October. The ECB says that experimentation will start in parallel, without prejudice to the final decision.
Nacha adopts rules for ongoing modernisation of ACH payments
Nacha has approved eight new amendments to its operating rules governing the use of ACH payments. Many of the changes reflect a long-term strategy to modernise the ACH system, both through infrastructure improvements such as Same Day ACH; and making ACH payments easier to use.
Most significantly, two of the rules provide businesses, financial institutions, payment providers and technology companies with a framework for authorising consumer ACH payments that can be applied to myriad channels and technologies that consumers are adopting to interact and transact with businesses.
Other components of the new rules include reducing several administrative requirements associated with obligations to obtain or provide payment-related documentation, and adopting a specific timeline for financial institutions to handle claims of unauthorised payments. Lastly, the new rules define and make explicit the scenarios in which reversing ACH payments are not valid; and enhancing Nacha’s authority to enforce the rules for egregious violations.
SIA to be incorporated into Nexi
Nexi, an Italian digital payments company, and SIA, a payment technology and infrastructure services provider, controlled by Cassa Depositi e Prestiti (CDP) through its subsidiary CDP Equity (CDPE), have signed a memorandum of understanding regarding the integration of the two groups through the merger by incorporation of SIA into Nexi.
The MoU was also executed by the respective reference shareholders, CDPE3 and FSIA Investimenti as regards SIA, and Mercury UK HoldCo, a company owned by Bain Capital, Advent International and Clessidra funds, as regards Nexi.
The entity resulting from the merger will cover the entire value chain of digital payments serving all market segments with a variety of solutions: from digital payments acceptance services for small and large merchants, to more sophisticated omni-channel and e-commerce solutions, from issuing and management of all type of cards to mobile payments apps, from B2B digital payments solutions to open banking, from local public transportation solutions to banking networks as well as clearing and trading services for the main Italian and international institutions.
The transaction will create a self-described European champion in digital payments, with approximately €1.8bn pro-forma aggregated revenues and around €1bn EBITDA as of 31 December 2019.
Finastra launches pre-packaged payments solution for small and mid-sized banks
Finastra has revealed Fusion Payments To Go - its payments solution aimed at small and medium-sized banks looking to implement domestic and cross-border payment services in Europe, the US and South Africa. The solution comes pre-packaged, with reduced fixed implementation costs, and rapid, secure and scalable deployment in the cloud on Microsoft Azure. The technology vendor says that banks will benefit from reduced costs and risks associated with system maintenance, while meeting changing market regulations and customer demand for frictionless and immediate payments.
Built on Finastra’s payment hub, Fusion Global PAYplus, Fusion Payments To Go provides functionality and operating rules for supported clearing and settlement mechanisms, along with standard integration to external applications. It removes the need for scheme maintenance, meaning that banks can redirect funds towards the delivery of innovative business services that will improve the customer experience and deliver revenue growth. Fusion Payments To Go is available to mid- and small-tier banks in Europe interested in implementing RT1 and/or TIPS immediate payments, as well as the FED and TCH immediate payment schemes in the US, with other schemes to follow. It also supports banks worldwide looking to implement SWIFT.
“The payments landscape is going through a unique period of change," said Gareth Lodge, senior analyst at Celent. "Market initiatives, such as ISO20022 adoption and constant changes to regulations, added to increasing expectations for a better customer experience and improved security, can put a significant amount of pressure on legacy systems and smaller banks. They are increasingly looking for packaged solutions that reduce the cost and risk of maintaining these current ecosystems, let alone new ones. A pre-packaged solution, that is easy to deploy and maintain, could enable banks to focus on what matters most to them and in turn grow their business.”
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