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Zelle volumes increase rapidly, exceeding checks for the first time – Industry roundup: 20 July

Investments in the UK fintech industry increase by 24% in the first half of 2022

Despite global investment stagnation, the UK fintech sector grew by 24% year on year. According to Innovate Finance, UK fintechs have raised £7.6 billion in funding, trailing the United States (£20.8 billion), but with more than the rest of Europe combined, and twice the amount of Germany (£2 billion) and France (£1.9 billion). In spite of the infusion of capital, the rise in the first half of 2022 has reportedly been far slower than the 217% annual growth reported for UK fintechs in 2021, when investment levels rocketed back to their pre-pandemic highs.

Reports indicate that the total capital invested in fintechs globally during the first half of 2022 has leveled off at £49.1 billion year-on-year. According to Innovate Finance, geopolitics is the main reason for investors tightening their wallets. However, Beauhurst, a data platform, indicated that equity investments into UK fintech companies reportedly reached a ten-year high of £2.5 billion in the first quarter of 2022. Additionally, the number of transactions during this period fell to around 149, down from a high of 170 in the first quarter of 2021, indicating that more money is invested per transaction despite fewer transactions. Some of the noteworthy transactions include mobile payment startup, Checkout.com, which obtained a £730 million investment in a Series D in January 2022, and an automated loan company, Lendable, which pooled a substantial £210 million in March 2022.

Janine Hirt, CEO, Innovate Finance, stressed the importance of fintechs in the UK maintaining their momentum on securing exceptional levels of investments.

MDT and AvidXchange collaborate to bring invoice-to-pay solution to more credit unions

Member Driven Technologies (MDT), a credit union service company, and AvidXchange Holdings, Inc., a provider of AP automation software and payment solutions for middle market firms and their suppliers, announced their referral relationship. MDT is said to host the Symitar Episys core platform as a private cloud alternative for core processing and IT needs.

Through this alliance, MDT will be able to introduce its 100+ credit union clients to AvidAscend, an invoice-to-pay software solution. Reports indicate that AvidAscend integrates effortlessly with MDT's Symitar Episys platform, enabling users to save time and money by transitioning from outdated paper-based systems to automating the AP process with a single cloud-based solution. Moreover, by allowing the platform to handle some of the department's typical duties, these automated processes allow for a more effective plan for AP tasks, in addition to increased visibility and control over outstanding invoices, enabling professionals to focus on strategic business goals.

Larry Nichols, CEO and President, MDT, emphasized that it is vital for credit unions to evaluate their business models in this competitive financial services landscape and decipher ways to increase efficiencies and optimize employees’ time by effectively streamlining and automating processes.

Given the numerous business-changing challenges that credit union executives are currently facing, such as cybersecurity threats and staffing issues, this new offering from MDT is said to facilitate their vendor payments properly and in a timely manner, commented Boyce Adams Jr, SVP of Growth, AvidXchange.

BofA's Zelle volumes increase rapidly, exceeding checks for the first time

Zelle, a person-to-person (P2P) payments service that debuted five years ago, has brought rapid payment volume growth for one of its founders, Bank of America (BofA). The bank reported its second-quarter 2022 P2P Zelle transaction volume of 239 million, a 26 percent increase from 189 million payments in 2021. The total value of payments sent and received via email or mobile phone identification was noted at US $73 billion, representing a 29 percent increase year over year. BofA reported that it currently has 17 million active Zelle users, up nearly 19% from 14.3 million last year.

According to BofA's most recent financial report, Zelle transactions have surpassed checks. BofA customers wrote 133 million checks and sent 125 million Zelle payments in the second quarter of 2021, compared to 156 million Zelle transactions but only 123 million checks in the fiscal year ending June 30, 2022.

The report indicates that small businesses are now among Zelle's 17 million active users. According to a spokesperson for BofA, more than 1.2 million small-business owners sent and received more than 24 million Zelle transactions totaling $15 billion in the second quarter 2022. Additionally, BofA reported combined second-quarter credit and debit card spending of $221 billion, a 10% increase year over year.

Furthermore, some major banks are reportedly interested in expanding Zelle's retail payment reach. Arizona-based technology company, Early Warning Services, Zelle’s operator and owned by some of the country's largest banks, stated in 2020 that it would launch Zelle for small business. Payments received by small businesses increased 162 percent year on year in 2020.

In the interim, fraud on P2P networks such as Zelle remains a source of contention. Last week, US administration officials requested specific information from the seven banks that own Zelle about their handling of P2P fraud to be submitted by 8 August.

CFPB to press banks to reimburse victims of fraud on Zelle and other payment platforms

The Consumer Financial Protection Bureau (CFPB) is reportedly planning to pressure banks to compensate more customers who were victims of Zelle and other money-transfer scams. According to new guidance, the bureau is expected to notify banks on new heightened requirements regarding certain fraudulent activities that have become more prevalent on these platforms, such as when a customer is tricked into submitting funds to scam artists posing as bank representatives.

The forthcoming guidance is not yet complete and is subject to change. Reports indicate that it appears to be directed primarily at a wave of Zelle complaints, but it may apply to any other payment service, such as Venmo, that connects directly to a consumer's bank account.

Bitkub, a Thai cryptocurrency exchange, and Circle join forces to promote USDC stablecoin

Bitkub, a Thailand-based cryptocurrency exchange and licensed by the Thailand Securities and Exchange Commission (trading volume over US $30 billion in 2021), has partnered with Circle, a global financial technology developer of the US peer-to-peer payment platform, to boost the United States Dollar Coin (USDC) stablecoin in the Southeast Asian region. The alliance will reportedly introduce and develop learning materials on USDC for retail investors through Bitkub Academy, the exchange's learning platform.

Bitkub claims that its collaboration with Circle will provide Thai investors a thorough understanding of digital asset investing, blockchain technology and stablecoins. According to Bitkub’s mission, this will enable citizens to enter the digital space with security and assurance. The announcement comes two months after TerraUSD (UST), the world's third largest stablecoin by market capitalisation, lost its peg to the US dollar, resulting in approximately US $40 billion in losses for UST and Luna holders worldwide.

Giant payments technology, MX, launches “Processor Tokens” to improve open banking

MXapi Processor Tokens were introduced by US Utah-based open-banking network MX Technologies Inc. in an effort to simplify money movement and financial account openings for consumers. MX gives fintechs access to consumer financial data and assists clients in transforming raw data into usable information. According to MX, token-based application programming interfaces (APIs) can provide account ownership data, transaction history, account balance data and more for the processor to move money for the consumer.

MX claims that the new service will expedite secure funds transfers and account openings. In addition, MXapi Processor Tokens are said to eliminate the need for clients to store sensitive user data. They give access to the data required for identification and know-your-customer processes, deliver real-time balances, and improve fraud-control analysis.

David Whitcomb, VP, Product, MX, commented that the tokens differ from those used for Visa or Mastercard card transactions, in which the card number is converted into data that fraudsters cannot use. At the moment, the processor tokens allow processors to obtain data from MX via APIs by using the token as a method of authentication. Tokens are meaningless unless they are used in conjunction with client credentials to authenticate before accessing data, stated Whitcomb.

Open banking has grown substantially in importance as more consumers depend on fintech apps to perform financial tasks such as funds transfers, which require access to bank accounts to authenticate funds and account ownership.

MX, said to be one of the largest providers of open-banking technology, publicized enhancements to its partner network last month. The network reportedly connects 13,000 financial institutions and fintech companies. MX's goal, according to Whitcomb, is for twenty-five processors to use the token service for payments and Know Your Customer functions by the end of 2022.

Juniper predicts tokenised payments will surpass $1 trillion by 2026

According to a report by Juniper Research, a UK-based firm, the total volume of tokenised payment transactions worldwide will exceed 1 trillion by 2026, up from 680 billion this year. The majority of the growth is expected to come from click-to-pay options that would enable buyers to pay with a single click using tokenised credentials.

Tokenisation arose primarily as a response to fraud caused by stolen payment card credentials. It reportedly substitutes information of no or little value to data fraudsters for these valuable data points. In 2014, the international standards body of Europay, Mastercard and Visa (EMVCo) developed the first tokenisation standards. Card networks such as Visa and Mastercard, two of the international networks that own EMVCo, were said to be among the first to adopt the technology.

The report indicates that these options, provided by major credit card networks, depend on tokenised cards on file to support payment authorizations. Additionally, the research firm noted that the option enables consumers to fill out details at checkout and complete payment with a single click, making it more popular due to its convenience. Accordingly, Juniper’s new report, Payment Tokenisation: Key Opportunities, Segment Analysis, and Market Forecasts 2022-2027, forecasts that the number of tokenised transactions will increase by 74% between now and 2026.

However, the Internet of Things (IoT) will account for 19 billion tokenised transactions by 2027, up from 3.8 billion this year, representing a 400% increase over the next five years, as stated by Juniper's report. IoT payments cover transactions from payment-enabled objects like clothing, watches and automobiles.

This particular development is said to present new opportunities for payment processors. “Tokenisation is critical in facilitating IoT payments, enabling transactions to be made via new use cases and form factors, unlocking new revenue opportunities for payment providers,” stated Juniper. However, the report warns that technology suppliers must act quickly to capitalize on this growth, especially given the lengthy development cycles tokenisation software is subject to. Other than the highly developed card networks, Juniper added that tokenisation vendors must start expanding their own IoT tokenisation solutions or face the risk of losing out on this financially rewarding opportunity.

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