Finternet: Unified ledgers (Part 2); Acquirer tokens vs. network tokens: What’s the difference?; How Latin Americans Pay for Things;
Don’t forget to read my interview where I shared my thoughts on TabaPay withdrawing from the Synapse deal and the future of BaaS
Insights & Reports:
1️⃣ Finternet: Unified ledgers (Part 2)
2️⃣ Acquirer tokens vs. network tokens: What’s the difference?
3️⃣ European Mobile Payments: Domestic Solutions and Best Practices
4️⃣ Why embedded finance has moved up the priority list for UK B2B SaaS products
5️⃣ How Latin Americans Pay for Things
6️⃣ Digital Payments — Nordics
Curated News:
2️⃣ Google Pay will now display card perks, BNPL options and more
3️⃣ Starling Bank investor targets £10bn valuation for digital lender
TL;DR:
In this edition, we explore the transformative power of unified ledgers in financial transactions. Traditionally, a simple share purchase by Maria involves multiple steps and delays due to complex interactions between banks and settlement systems. With unified ledgers, all assets — securities, bank accounts, and reserves — exist on a single, programmable ledger, streamlining the process and reducing transaction time significantly.
Switching gears, let’s talk tokens. Acquirer tokens protect payment data at checkout, while network tokens secure credentials throughout the payment ecosystem, enhancing security and improving approval rates without changing merchant processes. It’s a win for customers, issuers, and merchants.
Now, let’s look at European mobile payments. Leading solutions like Swish, BLIK, and TWINT cover P2P, ecommerce, and POS features, achieving high adoption rates and a 52% annual growth rate. Despite regional differences, there’s a push for greater interoperability to simplify cross-border payments.
In the UK, embedded finance is a priority for B2B SaaS products. Product managers are using it to boost retention and revenue, with 32% prioritizing reducing customer churn. Embedded finance is a strategic necessity for 2024–25, increasing user numbers and revenue per user.
In Latin America, McKinsey’s surveys reveal a shift from cash to digital payments. Mobile payments have boosted financial inclusion in countries like Argentina and Colombia, while Chile leads with debit cards via BancoEstado’s CuentaRUT, covering 70% of the population. The future lies in expanding digital payment acceptance, especially through affordable QR codes for quick transactions.
Exciting news Google Pay is rolling out new features that make the payment experience even better. Now, when you check out with Google Pay, you’ll be able to see your card benefits and perks before choosing which card to use. Plus, you can take advantage of “buy now, pay later” options through partners like Affirm and Zip Co. And for added convenience, you can fill in your card details using biometrics or a PIN instead of manually entering your security code.
In other news, Starling Bank is making waves in the digital banking world. One of its top investors believes the UK-based digital bank could be valued at nearly £10 billion in the coming years. This optimistic outlook comes as Starling plans to roll out its banking software globally, potentially bringing in significant fees. Exciting times ahead for the fintech industry!
Insights & Reports
Finternet: Unified ledgers (Part 2)
To understand the transformational possibilities of unified ledgers, consider a simple financial transaction: Maria’s decision to purchase a security (eg a share in a company). In today’s financial system, this seemingly basic transaction would require a complex series of messages between multiple parties.
Moreover, the transfer of the security is only one part of the transaction. The other part would involve the banking system. As part of the share transaction, Maria would send a payment request to her bank, referred to here as Bank A (step 1). The bank would respond by debiting Maria’s account by the transfer amount together with any fees (step 2) and sending a payment order to the settlement system (step 3). The settlement system debits Bank A’s settlement account and credits the account of Maria’s broker, Bank B (step 4). It then sends an advice of credit with a reference number to Bank B (step 5). This follows an acknowledgement with a reference number to Bank A (step 6). Bank B must ensure that Maria’s broker has an account and perform any KYC or AML/CFT checks (step 7). If any of these checks fail, then Bank B will need to send a reversal request to the settlement institution (step 8a).
Acquirer tokens vs. network tokens: What’s the difference?
You may already be familiar with acquirer tokens, as J.P. Morgan Merchant Services can provide an acquirer token for each transaction. When your customer enters their payment information at checkout, instead of receiving their personal details directly, J.P. Morgan converts this information into an acquirer token which can be securely stored on your systems or passed on for processing.
Acquirer tokens protect the first part of the payment process between the acquirer and the merchant. Then, the network token secures credentials as they move the rest of the way through the ecosystem to the issuer. The more visibility and control that issuers have on the credential, the more confidence they are likely to have in approving a transaction.
Curated News
Exclusive interview: TabaPay withdrawing from Synapse deal; BaaS compliance and risk ownership; The future of BaaS
The situation with Synapse is quite complex, but I’ll try to summarise it. Synapse was providing BaaS services as an intermediary between its banking partner Evolve Bank & Trust and fintech startups like Mercury. Currently, there are disputes among these parties, adding to the complications.
