Sentiment Paper

Payments: The key to unlocking new ecosystems and why merchant services are on the up

Banks and Acquirers adapting to the digital frontier To say things have changed in payments, and, as a result, the merchants services space is to understate a dramatic and fast-moving digital and cultural evolution that has driven such change.  Digital transformation strategies now need to be framed around this rapidly paced market involving multiple payment methods, and hence, ever smarter payment devices, or Point of Sale (POS) machines. Cloud infrastructure is the order of the day to deliver on the breadth and scope of plans.  Integration is a key part of the overall picture as well as investment into infrastructure, real time payments and single API or single platform, and embedded services.  The SME (Small and Medium Enterprises) community- sometimes an arm of a bank’s retail division and sometimes housed within the corporate segment can be viewed in many ways as a microcosm of the changes happening at large in financial services in terms of digital disruption. Digital payments have enabled the establishment of hundreds of merchant businesses, particularly in developing markets, as well as the significant growth of global ecommerce.  Download this Finextra payments industry sentiment report, produced in association with Ingenico, to learn more. 


Event Report

Sustainable Finance Live - Sustainable Cities: Enabling positive change through innovation and collaboration

A Visual Record from the Sustainable Finance Live Conference and Hackathon 10 October 2023 On 10 October, Finextra Research and ResponsibleRisk held the annual SustainableFinance.Live Hybrid Conference and Hackathon, in partnership with NayaOne. Kicking off the day at Events@no6 in London, founder of ResponsibleRisk, Richard Peers, highlighted the objective of this year’s event, to bring people together in their likeminded desire to drive sustainability in their work. He outlined this year’s main theme: how to finance sustainable cities, what we can do to identify solutions and work towards resolutions through panel sessions, workshops, and the hackathon. Peers explained that within the use case of cities, the panel sessions focus on nature, climate, energy, the just transition, and various levers of change such as data, AI, risk, and financial instruments. He pointed out that after the conference, the best ideas will be put forward to accelerators and funded by venture capital firms to drive forward the sustainable agenda. Peers provided an introductory explanation to ‘doughnut economics’ as a model for describing the strategies at play and resources available for those looking to put their ideas into action. “If you are going to build a sustainable city around nature, collaborating with public and private financing, both public and private, [and] having the metrics to prove that the citizens money is being used for the reason it was intended and transcending political cycles [is crucial].” Download a Visual Record of the event below to find out more. Click here to watch the recordings of the SustainableFinance.Live 2023 plenary sessions in London. Click here to watch the related SustainableFinance.Live on-demand webinar - Placing cities at the centre of the climate change discussion.


White Paper

UK Open Banking API Performance 2022-2023

The UK continues to be at the forefront of the global Open Banking revolution thanks to the proactive attitude of regulators.  These regulators helped create an Open Banking ecosystem that encourages and facilitates smaller banks and new entries, including fintechs and neobanks, to participate in the Open Banking market alongside the largest banks. As the most advanced Open Banking market in the world, the UK provides an example of best practices in the implementation of API-based Open Banking that other jurisdictions can use as a model. In this follow-up to our 2020-21 and 2021-22 reports, we studied the performance of the Open Banking APIs exposed by the large CMA9 UK banks, traditional High Street banks, credit card providers and building societies, and new entrant banks (neobanks). The endpoints were provided by the banks and measured using the APImetrics active API monitoring service, including our patented quality scoring system, CASC (Cloud API Service Consistency). The data in this report, produced by APImetrics, has been generated from real API calls made using the FAPI-compliant consent process with the support of their third-party provider (TPP) partner tomato pay. All calls were made between July 1, 2022 and June 30, 2023.


Impact Study

What should European Banks prioritise in their payments modernisation journeys?

Payments modernisation is no longer a luxury for financial institutions. Dramatic shifts in consumer appetite, complete overhauls of financial regulation and a need to prioritise resilience, all propelled forward due to the digitisation of the financial world, mean that banks have little choice but to rethink their systems to operate in this brave new world. European banks have a particularly challenging task ahead of them. Not only has the region paved the way with open banking and API enablement initiatives, but its progress toward real-time and cross-border payments makes modernisation of legacy systems ever more complex. The European Payments Council’s (EPC) SEPA rulebook changes for 2023 present an especially difficult hurdle for banks to manage in the coming 12 months, as banks of all sizes prepare themselves for the migration to the ISO 20022 standard. Payments-as-a-Service (PaaS) and its global adoption has evolved dramatically, and as activity in the PaaS space continues to surge it is important to consider what is driving uptake. A recent survey by Finextra and Volante found that 67% of FIs are looking for new payments modernisation products within the next 12 months. The survey also found that the greatest pain-point listed by 79% of the global banks surveyed, was the challenge of accessing real time payments and real time liquidity. The cost of maintaining and upgrading these systems is also very prohibitive, and 75% of respondents raised the issue of cost of payment-processing as a key driver. These factors are causing a fundamental shift with regard to payment modernisation demand in the marketplace, with the follow-on effect of greater PaaS adoption globally. While these are happening, banks have to worry about handling their existing legacy systems. Legacy infrastructures are inflexible and cannot handle the volumes that banks need to handle in today’s payment environment. McKinsey research shows that the average age of IT applications at universal banks is 14 years, significantly older than the average age of applications at digital banks which is just three years. These factors present the perfect storm for bank modernisation to take off. This Finextra report, produced in association with Volante Technologies, explores the current European banking landscape to consider how banks in the region are approaching their modernisation journeys with respect to industry trends and rule changes. It will also consider how European banks are progressing compared to other regions, and suggest four key factors which will assist them in designing and implementing their payments modernisation journey.


White Paper

How can the future state of information technology combat fraud and money laundering?

Modernisation programmes, digital service proliferation, client demand and advancing technology are all shaping the evolution and the future of financial services.  Real time is the order of the day, and while real time payments come more and more to the fore globally, payment providers need to get up to speed in being able to offer them to their clients and end users, but also to ensure they are deployed and implemented in a fully robust, resilient and secure environment.  With real time payments comes real time fraud and the opportunities for value on both sides of the fence is eye-wateringly vast. Firms cannot afford to have payments held up by authorisation checks, fraud and AML controls and yet at the same time the sheer amount of information that should be processed with any given payment in order to scan, approve and hence protect against fraudulent or nefarious activity is great.  Institutions are allocating more and more to defend against financial crime and this is at the same time good news and bad news for them. Being smart about such allocations means minimising the resource and disruption presented by legacy systems and instead working around them.  Download this Finextra whitepaper, produced in association with Hazelcast, to learn more. 


Future of Report

The Future of Digital Banking in North America 2024

2023 was characterised by increasing amounts of uncertainty and a lack of clarity across the financial world. The collapse of banks, including Silicon Valley Bank, Signature Bank and First Republican Bank, in March 2023, added strain to already unsettled financial markets. While market volatility has remained relatively stable, soaring inflation and climbing interest rates slowed economic growth and this is expected to continue into 2024.  While forecasts regarding the length and severity of a possible recession are speculative, experts are even more divided about stock market predictions for 2024. Optimism is strong in many investors who expect that 2024 is the year rates will stop rising and predict bullish turns that will see markets soar to new heights. Yet with many other factors affecting North American markets, the only certainty we can expect as we look towards 2024 is more uncertainty. This Finextra report on the outlook of North American banking trends, is produced in association with Money20/20 and includes key insights and commentary from industry experts at EY and Mastercard.


Future of Report

The Future of ESGTech 2024

With every passing year, we are seeing our chances to tackle climate change diminish, but we are not without the opportunity to make a change. The summer of 2023 was the world’s hottest on record according to NASA, with Europe being stuck by the largest wildfires ever recorded, Storm Daniel decimating Libya, and record-breaking downfalls in Hong Kong. The financial sector has a big role to play in changing the trajectory of the world. The opportunities presented by ESGtech (Environmental, Social, and Governance Technology) play a large part in that. This report aims to analyse a variety of the ESGtech options and present a future the impacts they could have on our future. Focusing on sustainability will be pivotal for the financial sector moving into 2024. This Finextra report, produced as part of SustainableFinance.Live, features expert views from Dimitra, HeavyFinance, McKinsey & Company, MVGX, Rimm Sustainability, and Zumo, and explores how financial organisations use ESGtech to make substantial change.


White Paper

Build, Buy or Bust – Hybrid leapfrogging Legacy

The age-old Build Vs. Buy conundrum has never been brought into sharper focus than it is now. In light of unprecedented unpredictability and economic volatility in recent times, in light of converging pressure brought about as a result of myriad payments systems, real time rails, cross-border implications in a global village, standards development and heightened public awareness and expectation, financial institutions are leaping forwards by falling back on partners to bring systems in line with modern business expectations.  Undoubtedly, the advent and availability of open source technology has intensified and strengthened both sides of the Build Vs. Buy argument. For one thing, it has enabled banks and financial organisations to tailor and sculpt new processes and systems around their exact needs, with the availability of non-proprietary technology. For another, it has brought about a plethora of third party ‘enablers’, as well as having inspired fintech services firms by way of creating plug-and-play or pay-as-you-go offerings.  And alongside all of this, the development of cloud technology and its permeation throughout the financial services industry has oiled the wheels for the journey, facilitating the bespoke and dynamic capability that open source cloud offers, and compounding the technological know-how and prowess of both banks and fintech providers the world over.  There are other influencing factors, such as the API economy, the concepts of open finance, open data; external global, market and economic drivers and events that shape the demand for improved and instant banking services in the first place, putting pressure on operations to the point that banks need to fast-track pretty much every modernisation or product development project they have going, inevitably having to outsource some of this burden.  Download this Finextra report, produced in association with Cloudera, to learn more.


Future of Report

The Future of the Global Financial Ecosystem 2024

A Sibos Special Edition. Our world has experienced several unexpected and unprecedented events over the last few years, which show no signs of slowing down. This year’s Sibos aims to connect those in the financial services community who have experienced fragmentation, in the hope that tackling this will help with some of the biggest issues facing banking. The role that financial institutions play in the global environment will continue to be placed under the microscope as situations continue to develop. In light of this, there has never been a better time for those in finance to come together and have frank and open conversations about their future. This applies to not only environmental and social goals for banks, but also the adoption of and adaptation to new technologies. No longer can these issues be placed on the side and given lip service, they need to become an integrated part of each financial institution’s core policies and practices. However, ever increasing this challenge are the continuously changing global circumstances. Due to these circumstances, communication and collaboration are essential drivers for 2024. This Finextra report, produced in association with Swift, includes commentary from BBVA, BNP Paribas, BNY Mellon, Deutsche Bank, ING, JP Morgan, Lloyds, McKinsey, NatWest, SEB, Standard Chartered, UniCredit, and Wells Fargo.


Impact Study

Power your banking value chain with AI/ML at scale

In a world of rapidly advancing technology, artificial intelligence (AI) and machine learning (ML) are essential to a bank's growth strategy.  McKinsey cautions that banks that do not prioritise AI adoption are at risk of being overtaken by competition and abandoned by customers who are looking for highly personalised experiences. The consulting firm cites four key trends that are leading banks to incorporate AI/ML into their core strategy and operations: Demanding customer expectations driven by digital banking improvements Competition from leading banks’ use of AI/ML solutions The disintermediation of traditional financial services by digital ecosystems Encroachment of big tech players into or adjacent to traditional financial markets and business models. Forward-looking financial institutions are eager to integrate AI/ML into their operations and leverage rapidly evolving AI/ML tools to more quickly and efficiently deliver hyper-personalized products and services to customers, improve operational efficiency, increase revenue, and drive innovation. International Data Corporation (IDC) forecasts that the banking and retail industries are set to deliver the most significant investments in AI/ML over the period of 2022-2026, and are projected to account for roughly 25% of all AI spending worldwide. As in any significant transformation journey, banks face a number of considerations and challenges along the way. First, they’re increasingly required to carefully balance the benefits of innovation brought forward by AI/ML solutions, alongside new regulation designed to ensure fair treatment of customers. Additional challenges in banks’ AI/ML journey include skills gaps and the ability to effectively scale AI/ML capabilities beyond pilots and singular use cases. According to Organisation for Economic Co-operation and Development (OECD) data, AI applications are increasingly evident across a breadth of financial market activities. However, such use cases are approached in silos leaving an opportunity for firms to embed AI/ML across the end-to-end value chain.  Download this Finextra Impact Study, produced in association with Amazon Web Services (AWS), to learn more.


Event Report

Entering New and Niche Markets with BaaS

A Financial Cloud Series Report Banking-as-a-Service (BaaS) has emerged as a prominent and steady trend in the banking sector, significantly disrupting the industry and introducing consumers to faster and more personalised services. Working hand-in-hand with embedded finance, BaaS allows third-party distributors to provide banking services, essentially integrating financial services in non-banking infrastructures. Research revealed that the BaaS market is expected to reach $11.34 billion globally by 2030, a huge jump from $2.41 billion in 2020. The rapid acceleration of the BaaS market is due to the speed of digital transformation currently occurring in the financial industry, with a sharply increasing number of banks and consumers seeking to integrate BaaS services into their offerings in order to provide quicker and more efficient experiences. The rapid growth of third-party non-bank platforms has grown exponentially in recent years to incorporate BaaS services into their offerings. The global market has embraced BaaS and new innovations are pushing the trend to become even more significant in the financial industry. BaaS opens up new opportunities for smaller businesses and for a diverse range of companies to facilitate banking operations on a wider scale. The banking sector has evolved and become more diverse and sophisticated through BaaS, which allows companies to focus on what is best for both businesses and banks. To understand how embedded finance and banking as a service can help to transform the backbone of business operations, experts came together for a Finextra webinar, hosted in association with Temenos, 'Entering new and niche markets with BaaS'. The panel explored how banks can best diversify their product offering with cloud.


Event Report

Keeping Pace with Customer Experience Demands during Cloud Migration

A Financial Cloud Series Report It has been widely established that the cloud is the next big step for financial institutions to become more agile, flexible, and scalable. The financial industry has become a storm as more and more companies flock to the cloud for data, real-time efficiency, and broader accessibility. According to Google, by 2027 over 50% of enterprises will have shifted to the cloud to boost their businesses and create more accessible and efficient platforms for their services. Cloud is seeing massive growth from all industries, and prominently from the fintech and banking sectors as industry leaders rush to get ahead of their competitors. However the move to the cloud is no easy task, as financial institutions require funds, time, energy, and talent to support the transition. As enterprises embark on their modernisation and digital transformation journeys, they are looking to new technologies to aid as they transition such as AI-driven technology. 72% of cloud experts see digital transformation as more than a simple task of “lifting and shifting” of company data to the cloud. The complexity of restructuring a company’s infrastructure with the help of a third-party in a new space is daunting, and requires a significant amount of prior planning and decision-making. To discuss how financial institutions are adapting to consumer demand and security concerns in the cloud transition, experts came together for a Finextra webinar, hosted in association with Temenos, ‘Keeping pace with customer experience demands during cloud migration’. The panel explored how banks are approaching digitisation on the cloud and using new technologies to scale up and expand.


Future of Report

The Future of Fintech in Latin America 2023

Many companies, countries and regions have forged ahead in leveraging data, cloud, blockchain and AI. One such region is Latin America, where according to Statista, there are 2,300 registered fintech companies, operating across payments, remittances and lending. Latin America is a region with undoubtedly high user penetration across the internet and associated services, but obstacles to financial inclusion remain and prevent individuals from being banked or served by their financial services providers. What this means is that Latin America is ripe for fintech companies to leverage this opportunity and offer a solution to this substantial, yet online, population. However, some progress has been made. Organisations in Brazil and Mexico saw a staggering $6 billion in investments into fintech companies in 2021. Further to this, in Brazil, the number of finance app downloads increased by 274% from 2019 – 2022 and in Mexico, the number of downloads more than tripled. Paraguay, however, is the country with the highest share of adult population using mobile money services. Digital payments is the area of fintech that is most widely used, accounting for nearly eight in 10 users in 2022. Personal finance, neobanking, and alternative lending are also present within Latin America, with Nubank as a clear success as the largest digital bank in Latin America and one of the largest in the world with 1.34 million. When Latin America leverages technologies such as AI, blockchain, cloud and data, the region will become one of the world’s leaders in fintech and grow across the digital banking, digital payments, personal finance, lending, and investment sectors. This report, in association with NovoPayment, compiles expert insights from a range of firms, including: BBVA, Kueski, PagBank PagSeguro, provides predictions for the future of fintech in Latin America.


Future of Report

The Future of Fintech in the Middle East 2023

Middle Eastern ambitions drive the Digital Gulf In 2020, a research paper was released titled 'Statistical models and stochastic optimisation in financial technology and investment science' by Tze L. Lai, Shih-Wei Liao, Samuel P. S. Wong and Huanzhong Xu. This report explored how after the global financial crisis of 2008, the utilisation of technologies such as artificial intelligence (AI), blockchain, cloud and data resulted in the fintech industry boom. These technologies are now referred to as the “cutting-edge” or “ABCD” of fintech. A growing number of players within fintech are benefitting from automation, particularly those that ensure that these technologies are a central part of processes and operations. The report read: “AI is assuming an increasingly important role in traditional banking as it provides technologies such as voice recognition, natural language processing, and computer vision for useraccount management and fraud detection, machine learning methods and deep learning networks for anti-money-laundering and credit modeling.” While AI is used for a number of uses, financial institutions and fintech firms alike must be constantly reviewing how best they can use AI to provide an efficient customer service, and whether consumers trust the products they are using. The report continued to comment on how “financial systems have long operated on the basis of trust, for which banks and governments have served to provide top-down control of monetary value. “Now, however, bottom-up ‘trust-machines’ are emerging through blockchain technology to provide immutable shared ledgers to exchange information digitally and determine value by consensus, as exemplified by bitcoin and other cryptocurrencies.” While trust is the cornerstone of the fintech industry, there are still reservations around the use of particular technologies. Blockchain, for instance, could be used to establish a sharing economy, new online marketplaces or to simply optimise transactions and improve efficiency and security. Cloud, on the other hand, has seen accelerated uptake and fintech firms are migrating processes to the cloud to achieve efficiency, security, agility, and scalability. In line with this, the report furthered that “mobile and internet payment systems are closely connected to cloud computing. The past ten years have witnessed increasing adoption of cloud computing by financial institutions around the globe. As a highly regulated industry, there are many challenges for the financial industry that handles sensitive personal information to use cloud computing for core business processes such as credit risk management and customer services.” Further to this, for digital banking, digital payments, personal finance, lending, and investment – the fintech industry as a whole – data is the most important source for the analysis of financial products and services, bridging the gap between security and satisfaction. Many companies, countries and regions have forged ahead in leveraging data, cloud, blockchain and AI. One such region is the Middle East, which has seen exponential growth with an influx of fintech startups being established, the Islamic banking industry boom and increasing internet and mobile phone usage. Statista projections revealed that there would be 465 fintech companies established in the Middle East by the end of 2022. Alongside this, the United Arab Emirates (UAE) is leading the charge in regard to fintech in the region with 30 companies as of 2015, followed by Egypt with 17 and Jordan and Lebanon with 15 fintech startups each. Within the Middle East, digital payment was the most direct service used by banking customers in the region and the fintech adoption rate is especially high amongst younger people and has increased steadily due to the increased usage of smartphones. This surge of innovation also encouraged the traditional banking sector to push forward with full scale digital transformations or launch digital banks that can operate under established bank’s licenses. To name a few, these include lia by Bank ABC, Liv by Emirates NBD, meem by Gulf International Bank, Neo by Mashreq and Now by CBS. The opportunity across fintech in the Middle East is vast, but certain niches are also increasing in popularity. For instance, in 2017, there were 1,389 sharia-compliant financial firms worth a combined $2.4 trillion in assets in 56 countries and the Islamic finance industry grew 11% YOY because of fintech growth in the Middle East, according to Reuters. The article continued to reveal that Islamic banks continue to retain the lion’s share of the industry, accounting for 71% of total assets, but growth remained muted at 5%, with consolidation pressures mounting in the Gulf and Southeast Asia. Statista also found that while the majority of Islamic fintech companies are based in the United Kingdom, followed by Malaysia and the United Arab Emirates, only nine Islamic fintech companies are based in Saudi Arabia. Saudi Arabia has the largest market for fintech services with $17.9 billion, while the net largest market for Islamic fintech services was in Iran worth $9.2 billion. If the Middle East leverages technologies such as AI, blockchain, cloud and data, the region’s fintech firms will only prosper across the digital banking, digital payments, personal finance, lending, and investment sectors. This Finextra report, in association with Paymentology, compiles expert insights from a range of firms including, FIL, MENA Fintech Association, NOW Money, Tarabut Gateway, Tweeq, Strategy& (part of the PwC network), and Wio Bank, and provides predictions for the future of fintech in the Middle East.


Future of Report

The Future of Fintech in Africa 2023

Across fintech - digital banking, digital payments, personal finance, lending, and investment - data is central to the function of all these technologies and the most important source for the analysis of financial products and services, bridging the gap between data security and customer satisfaction. Many organisations, countries and regions have forged ahead in leveraging data, cloud, blockchain and AI to their advantage – one such continent is Africa. Two years after the global financial crisis, Kenyan payments, money transfer and micro-financing service M-Pesa became the most successful mobile phone based financial service in the developing world. This was also just three years after its launch by network operators Vodafone and Safaricom. Further to this, transaction flows sent by banks have grown by an average of 10% year-on-year during this 10-year period. Alongside this, mobile money payments have exploded, with the monthly value of transactions increasing 25 times over between 2010 and 2018. The digital payments market has matured faster in Africa than it has in Europe: the number of electronic payments in France grew from 33 million in 2009 to 61.5 million in 2018, but in Nigeria, the number of electronic payment transactions grew from 66 million in 2008 to over two billion in 2018, according to Statista. Further to this, the number of digital payments users is slated to amount to a staggering 611 million users by 2027. However, Africa’s largest market will be digital investment with a total transaction value of $994 million in 2023 and the digital assets market is expected to show a revenue growth of 36% in 2024. It is evident that Africa is on the rise and leveraging technologies such as AI, blockchain, cloud, and data will only allow the continent’s fintech firms to excel across the digital banking, digital payments, personal finance, lending, and investment sectors. This Finextra report, produced in association with Kora, compiles expert insights from a range of firms, including: Binance, Cloud Africa, Data Scientists Network, JUMO, Mojaloop Foundation, TymeBank, and Yoco, and provides predictions for the future of fintech in Africa.