Apple vs. Banks: The Digital-Wallet War; The growing momentum of account-to-account (A2A) payments; Cash App takes on Apple with a 4.5% APY for savings accounts;
Digital wallets like Apple Pay are continuing to grow in popularity. Banks are worried they’re losing ground to tech companies eager to gain market share in consumer payments. One of traditional finance’s biggest threats is Apple. Here’s how big banks are fighting back.
In this edition:
1️⃣ Cash App takes on Apple with a 4.5% APY for savings accounts
2️⃣ Revolut to Introduce Crypto Exchange Targeting ‘Advanced Traders’
3️⃣ PayPal invests in conversational AI firm Rasa
4️⃣ The growing momentum of account-to-account (A2A) payments
5️⃣ Apple vs. Banks: The Digital-Wallet War
6️⃣ Evolution of Core Banking System
7️⃣ Decentralized identity explained
News
Cash App takes on Apple with a 4.5% APY for savings accounts
Apple’s recent move to boost the interest rate for its Apple Card Savings Account to 4.5% is now prompting a competitor to do the same. Cash App today announced it will now offer “up to” a 4.5% APY (annual percentage yield) for its Cash App Savings customers, with a few caveats. While Apple’s Savings account requires that customers qualify for an Apple Card credit card, Cash App will limit its high percentage rate to its cardholders in a different way.
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Revolut to Introduce Crypto Exchange Targeting ‘Advanced Traders’
Digital bank Revolut is set to introduce a cryptocurrency exchange targeting “advanced traders,” according to a customer email seen by CoinDesk.
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PayPal invests in conversational AI firm Rasa
PayPal Ventures has co-led a $30 million Series C funding round for generative conversational AI platform Rasa.
Insights
The growing momentum of account-to-account (A2A) payments
Account-to-account (A2A) payments in eCommerce are projected to grow by 13% by 2026, reaching $850 billion in global market value, and are set to challenge traditional payment methods for eCommerce and wallet funding. Countries like the Netherlands, Poland, India, Brazil,Malaysia, and Thailand are already seeing A2A transfers as the leading online payment method. In the U.S., though adoption in eCommerce has been slower. Yet the impact of A2A payments is expected to be significant in 2024, especially with the Federal Reserve’s introduction of the FedNow instant transfer system and potential new regulation coming into effect with the Credit Card Competition Act. This trend is accelerated by the rise of open banking, greater connectivity with real-time payments and supportive regulatory frameworks.
Strategies
✅ Integrate real-time A2A options, such as Pix in Brazil and UPI in India, for enhanced cash flow management, reduced payment acceptance costs and zero chargebacks
✅ Connect loyalty programs with A2A payments for immediate rewards, incentivizing repeat purchases and boosting longterm customer value
✅ Increase conversions with Open Banking-enabled A2A payments. Open Banking unifies a consumer’s financial data within a single interface, reducing checkout friction and converting up to 40% better than cards
Source Nuvei
Apple vs. Banks: The Digital-Wallet War
Digital wallets like Apple Pay are continuing to grow in popularity. Banks are worried they’re losing ground to tech companies eager to gain market share in consumer payments.
One of traditional finance’s biggest threats is Apple. Here’s how big banks are fighting back.
Source Wall Street Journal
4 tactics for cross-border payment providers to upgrade their user experience in 2024
✅ 1. Bank feed
As the name suggests, a bank feed is the typical integration between a bank account and an accounting platform. It replaces the need to upload a bank statement to your accounting or ERP system and contains purely transactional data, like the payment date, amount, and counterparty.
This is the table-stakes accounting integration for any cross-border payment provider offering an account for customers to spend and receive foreign currency. As bank feeds for checking accounts are now so widespread, it’s something that business customers expect, and can be a barrier to winning market share from traditional banks if not implemented.
Benefits
Providers
✔️Increase competitive win rate
✔️Increase payment volumes
Customers
✔️Save time on bookkeeping
✅ 2. Bill payment (accounts payable)
A bill payment or accounts payable integration allows users to extract unpaid bills and supplier details from the accounting platform, and then sync payment data back into the accounting platform after payment has been made.
For B2B customers, having visibility of all unpaid bills in the FX payments portal increases the convenience of using the solution and makes them more likely to pay a higher number of their bills via that provider. Extracting supplier payment details directly from the accounting platform leads to fewer validation errors from details being entered in the wrong format, which for a smoother experience.
Benefits
Providers
✔️Increase payment volumes
Customers
✔️Save time on bookkeeping
✔️Fewer payment errors
✅ 3. Expenses
Where cross-border payment providers offer corporate expense management, an expense integration allows users to post payment receipts and information about the category of spending (travel, entertainment, etc.) directly to their accounts. This information is reconciled against the bank feed.
Since expense management revolves around recording and categorizing expenses correctly, accounting integration is integral to winning customers in this space. An expense integration is complementary to a bank feed and allows expenses to be coded directly in the FX portal, saving customers more time on bookkeeping.
Benefits
Providers
✔️Increase competitive win rate
Customers
✔️Save time on bookkeeping
✅ 4. Invoice payment (accounts receivable)
Some cross-border payment providers help customers accept invoice payments from customers in foreign currencies. An accounts receivable integration allows you to extract invoices due to be paid by customers and sometimes add a payment link directly to the invoice to pay through you.
Benefits
Providers
✔️Increase payment volumes
Customers
✔️Get paid quicker
Source Codat
Decentralized identity explained
What is decentralized identity? How does it give you more control over your digital identity and keep your information on the internet safer? This video explains in short what decentralized identity is and how it can replace usernames and passwords to verify you are who you say you are quickly and easily.
Source Microsoft
Evolution of Core Banking System
A brief history of core banking
Banks started building their own core banking software because, when mainframe computers first emerged, there was no software industry to serve them. This later changed, with multiple vendors entering the market, including application software giants Oracle and SAP.
However, the problem for many banks is that they never replaced the systems they had built and, worse, they kept adding to them over time — additional home-grown applications, written in different programming languages and with different databases. Even where banks chose new generations of third-party systems (see below), these were either to replace point solutions (rather than for system-wide renovation) and/or were invariably augmented with local developments, meaning the application landscape remained or became complicated.
Consequently, and notwithstanding the strong growth in external spend over recent years, banks still spend more money on internal core systems than third-party systems, and that spend goes predominantly — 80% — on maintenance (run-the-bank) vs. innovation (change-the-bank).
The challenge — which successive generations of core banking systems have attempted to solve — is to provide both a viable alternative to banks’ existing systems as well as a credible path to making the switch.
Previous generations of core banking systems
The first generation of core banking systems were built on mainframe technology. These were systems such as Midas from Finastra or Systematics from FIS. They scaled pretty well, but they had batch-based hierarchical databases and no graphical user interface.
With the client/server revolution, a new generation of systems emerged. They had graphical user interfaces, relational database structures that could be organised around products and clients, and, in later iterations, real-time processing. The market leader was Temenos, which to its enormous credit, remains the leader today, even though the market has undergone a further technological paradigm shift from on-premise to cloud.
Public cloud systems benefit from many advantages over on-premise installations, such as lower infrastructure costs, lower internal operational needs, constant upgrades and infinite and elastic scalability. However, the drawback vis-à-vis on-premise installations is the extent to which a bank can extend the solutions and customize to their needs. The complaint levelled against Mambu, the initial market leader in the cloud era, is very much this, that bank clients are constrained to the existing functionality, with only limited configuration tools, and heavily dependent on the company to deliver on its roadmap for them to be able to broaden their usage.
Next generation core systems — solving for extensibility
Newer entrants to the market are attempting to solve for this trade-off. That is, they seek to harness the non-functional advantages of cloud deployments, but without imposing the same functional constraints.
Thought Machine, with its Smart Contract concept, was the first to offer a breakthrough. Smart Contracts enable banks to write their own logic on top of the platform logic and build products from scratch, to meet their specific needs or to adapt to changing market conditions, without being dependent on the software vendor. This approach has proved popular, especially with large banks. But, since the bank needs to build, test and launch products themselves and then maintain the code they write, it places significant obligations and costs on the bank, and is likely best suited to banks with large development teams and mature DevOps functions.
Tuum takes a different approach. First, through its “Business Builder” capabilities, it offers a very broad range of fine-grained configuration tools, enabling each client to have a high level of autonomy within a closed-boxed set-up (“configuration without customization”). In addition, it increasingly allows clients to extend the platform, permitting them to add to or override product logic based on their specific needs, including conforming to local market rules, through the use of custom parameters. Effectively, a customer can build their own IP, but within given constraints, posing no risk to upgradability and allowing all code to be governed within Tuum’s testing and deployment cycles.
Source Aperture
Reports
Risk as a Mechanism for Protection in the Payments Landscape: Key Areas for Proactive Action
The payments industry is undergoing a critical shift, driven by increased regulatory scrutiny, surging fraud activity, and a changing economic landscape. To thrive in this environment, payment institutions must leverage risk management as a proactive shield. This report delves into four crucial areas where proactive risk management serves as a powerful tool for protection and outperformance.
