In its Quarterly Review, the BIS offers nice perspectives on the future of payments. Morten Bech and Jenny Hancock survey innovations in payments, and where the problems lie. Tara Rice, Goetz von Peter and Codruta Boar examine the fall in the number of correspondent banks. Morten Bech, Umar Faruqui and Takeshi Shirakami discuss cross border payments. Morten Bech, Jenny Hancock, Tara Rice and Amber Wadsworth discuss securities settlement. And Raphael Auer and Rainer Böhme explore design choices of a retail CBDC.
List of third parties (other than PayPal customers) with whom personal information may be shared, according to Paypal, October 2019.
In the FT, Martin Arnold reports about a new cross-border payment method tested by the Bank of England. The “interledger” program transfers money “near-instantaneously and without settlement risk.” The Bank of England
set up two simulated RTGS systems on a cloud computing platform, using the Ripple interledger to simultaneously process “a successful cross-border payment”.
This is not necessarily good news for the blockchain community. The Bank of England’s proof of concept is
“about connectivity between central bank systems rather than replacing the central bank systems with the blockchain,” [according to] Daniel Aranda, head of Europe at Ripple.
The Economist reports that forthcoming European payments regulation has the potential to disrupt the industry.
Provided the customer has given explicit consent, banks will be forced to share customer-account information with licensed financial-services providers.
… payment services … could become more integrated into the internet-browsing experience …
With access to account data … fintech firms could offer customers budgeting advice, or guide them towards higher-interest savings accounts or cheaper mortgages. Those with limited credit histories may find it easier to borrow, too, since richer transaction data should mean more sophisticated credit checks.
In a series of articles, The Economist reports about technology companies that compete with traditional banks in areas ranging from lending to payments and wealth management.
The introductory article refers to AngelList and references reports by Goldman Sachs (The Future of Finance, copy posted here), BCG and Accenture. And it highlights two factors driving the structural change which I have also emphasized in a recent article: Technology and vanishing trust in banks. The other articles cover:
- Peer-to-peer lending, mentioning Lending Club, Prosper, SoFi, Zopa, RateSetter, Lendable and Kreditech.
- Crowdfunding of businesses, mentioning Funding Circle and OnDeck.
- Wealth management, mentioning Wealthfront, Betterment, Personal Capital, FutureAdvisor, nutmeg and motif and offering this comparison:
- International money transfers, mentioning TransferWise. (See also my earlier blog post.)
- Payments, mentioning Venmo as well as Square, Stripe and others.
- Emerging markets.
- bitcoin’s blockchain technology, summarized in the following figure, and mentioning Ripple and CoinSpark:
- A conclusion, mentioning Currency Cloud.
Updates—some more firms in the business: