Trust me, I’m a social media company

Facebook’s cryptocurrency Libra will need to gain the trust of the financial community, as well as the social media platform’s one billion active users. Perhaps its aims are too radical, writes Thomas Morris, Senior Partner at Moorgate Finn-Partners.

 

Some recently-announced heavyweight recruitment at Libra Association, the body overseeing Facebook’s stablecoin project, suggests both that the launch of the cryptocurrency is still on the horizon and that the intention remains the same: nothing less than a revolution for the payments industry.

The appointments in May and June this year (Sterling Daines has joined from Credit Suisse as Chief Compliance Officer, Robert Werner has been appointed General Counsel – with a CV that includes HSBC, Goldman Sachs and Bank of America Merrill Lynch – and Stuart Levey has been made CEO, joining from HSBC Holdings where he was Chief Legal Officer) prove that Facebook’s nascent cryptocurrency, Libra, is more than just a PR stunt. Rather, the scale and seriousness of its recent recruits tell a different story: that Facebook is on the brink of attempting a major shift in the global payments industry.

Whether it succeeds, however, may well depend on how the platform’s users now perceive their host.

The idea behind Libra is obvious and rational. There’s little doubt that the “bigtech” companies of Silicon Valley (and increasingly, China) are keen to re-shape the financial services landscape particularly with respect to payments. In fact, Facebook can be seen as a latecomer in this respect. Amazon Pay was launched in 2007 and even that was in the wake of Chinese online retailer Alibaba’s “digital wallet” Alipay, which was launched in 2004 and claims around one billion users. While both retailers – making a foray into the US$2 trillion payments industry highly-logical – it’s the bigtech companies’ data that gives them the edge over the traditional payments providers (i.e. the banks and credit-card companies).

Facebook has thousands of pieces of data – voluntarily submitted – that paint a detailed picture of who its users are friendly with, their tastes, and even their thoughts (well, public ones at least). As one of the world’s biggest advertising platforms it knows how to commercialise this data, and the temptation to add uplift services such as payments (which then feed-back yet more data about users) may be too large to ignore. Yet mining this data for commercial ends is ethically difficult – one not helped by well-documented data indiscretions at Facebook in the recent past. The scale of Libra’s impact will therefore come down to trust in Facebook.

So those new appointees at the arms-length Libra Association are part-and-parcel of Facebook’s attempt to convince clients – consumers and corporates – to swap traditional currency for Facebook’s algorithm-generated and maintained Libra coins. To trust the platform with their money: not just in holding dollars, euros and pounds but in converting their hard-earned post-tax savings into an invented currency (albeit likely backed by hard currency).

Trust – as many PR people will tell you – comes down to “being transparent”. Having clear and published policies – underpinned by strong ethics – and being open when it comes to day-to-day operations and regulatory compliance. Certainly, this is Facebook’s playbook: the Libra Association is nominally independent (like a central bank) and Facebook has doubled-down on trying to build trust: spending time and money updating its policies and products and advertising that fact (even on the old media its spent 16 years undermining).

But such transparency could equally be seen as an attempt to restore lost trust. And that, says “trust expert” Rachel Botsman (author of books such as Who Can You Trust?) makes transparency not quite the silver bullet PR practitioners propagate.

Speaking at Sibos in London in 2019, Botsman said that “if you need for things to be transparent, then you have practically given up on trust. By making everything transparent, you are reducing the need for trust”.

“Trust enables us to navigate uncertainty, place our faith in people and take leaps into the unknown,” says Botsman, which seems to be a long way from Facebook’s position with respect to Libra, despite the heavy investment.

Meanwhile, the purveyors of more traditional forms of payments such as banks and credit card companies – using old-fashioned central-bank issued, government backed currencies – will drive home the security and safety of their age-old method of value exchange.

So, given the above, how should the Libra project position itself? First, it should position itself not as a revolution but as complementary to the existing system. The “fintech disruption” narrative may help win over some customers, but not enough to make the investment viable over the long-term. The most trusted companies, meanwhile, are those that collaborate and cooperate with existing structures. Just as the best – and most trusted – financial institutions are those that don’t communicate fintechs (or even bigtechs) as a threat, but as innovators able to enhance their trusted products and services, so should the best fintechs return the complement. They are not “exploding” or “revolutionising” a particular corner of finance but rather improving it by making it more efficient, more consumer-friendly and (yes) cheaper.

Just as banks should be embracing the idea of Open Banking and welcoming (approved and compliant, of course) fintechs into the fold, so should fintechs embrace the existing payments infrastructure – that generates trust for all its inefficiencies and costs – and seek to enhance it. Win:win communications, in other words, rather than a zero-sum war that will only play well with youthful radicals that have little money to invest.

Given this, Libra’s grand “we’re going to change the world” claims may ultimately result in it doing no such thing.

How are banks laying a path for the digitalisation of trade finance? BNY Mellon’s Joon Kim explores in an article for Global Trade Review

The Covid-19 pandemic is presenting global trade with exceptional challenges. With disruption to many supply chains due to large-scale logistics obstacles, and many sectors seeing significant decreases in demand, exporters must traverse an uncertain, unfamiliar landscape.

Prior to the pandemic, significant efforts were already being made by many banks to enhance trade finance through technological innovation. But events of the past few months have spurred a flurry of activity from blockchain to optical character recognition (OCR). Participants have been required to move away from ingrained, paper-based procedures and adopt digital solutions in order to ensure their businesses can continue to operate effectively.

In an article for GTR, Joon Kim, Global Head of Trade Finance Product and Portfolio Management, BNY Mellon Treasury Services, explains how banks are addressing these short-term challenges, and looking to a digital future.

To read the full article, please click here.

What is being done to optimise the flow of trade finance transactions? BNY Mellon’s Joon Kim explains in an article for TRF News

As a result of the global lock-down, almost every aspect of trade – from value chains and logistics networks, to pending and production – has faced a series of profound challenges. With the grip of the situation still being felt the world over, what is being done to optimise the flow of trade finance transactions? In an article for TRF News, BNY Mellon’s Joon Kim, Global Head of Trade Finance Product and Portfolio Management, explains.

For one, there has been a significant shift in attitudes towards the digitalisation of trade finance. As a traditionally physical, paper-intensive business, trade finance, when performed from a ‘working from home’ environment, has encountered a number of challenges. And, as it became clear that lockdowns would remain in place for the foreseeable future, the industry reacted swiftly – coming together to adopt a series of digital initiatives.

To read the full article, please click here

In an article for The International Banker, BNY Mellon’s Isabel Schmidt and Marcus Sehr explain how to best prepare for ISO 20022

The introduction of ISO 20022, the new payments messaging standard, is set to revolutionise the payments industry. The existing infrastructures, including SWIFT MT messages and their proprietary equivalents, are no longer suitable for modern payment needs. By replacing them, the industry aims to create a messaging ecosystem that can facilitate an efficient, value-added payments experience for clients.

Of course, these benefits will come at a cost. Preparing for the new standard will require substantial efforts and resources from banks. It crucial that banks be fully apprised of the impending developments, understand what is required and have effective strategies in place. BNY Mellon’s Isabel Schmidt and Marcus Sehr explore in an article for the International Banker.

To read the full article, please follow this link.

 How can you best prepare for ISO 20022? BNY Mellon’s Marcus Sehr and Isabel Schmidt explore in an article for TMI

The introduction of ISO 20022, the new payments messaging standard, is set to revolutionise the payments industry. ISO will replace existing SWIFT MT messages and their equivalents, which are unsuitable for supporting evolving transaction needs, as the format for the transfer of cross-border and high-value payment information. Crucially, the new messages will incorporate more structured, robust and comprehensive data, thereby driving enhanced speed and efficiency; reducing false positives, manual intervention and costs; and helping to pave the way to 100% straight-through processing (STP).

As these deadlines draw nearer, considerable efforts and resources from all participants will be necessary to meet the associated challenges. But, by establishing a clear transition roadmap, educating staff and upgrading their systems, banks – and their clients – can unlock the full benefits of ISO 20022.

The article can be read here

In an article for GB&FR, BNY Mellon’s Marcus Sehr and Isabel Schmidt explore the impact of the upcoming ISO 20022 migration

During the next five years, ISO 20022 is set to transform the payments industry. The migration will touch the payment lifecycle end-to-end and, as the implementation deadlines draw near, the implications and considerations are set to be far-reaching – requiring significant efforts and resources from banks and their clients.

The upcoming changes should not be underestimated. In the lead-up to and aftermath of the transition, banks will face a myriad of challenges. If they can overcome these hurdles – by establishing a clear, comprehensive strategy, educating and supporting their staff and clients, and preparing their systems – they have an opportunity to deliver a truly improved end-to-end payments experience for clients.

The article, published in Global Banking and Finance Review, can be read here.

 

Deutsche Bank releases instant payments guide for corporates

Instant payment schemes have been developing around the world over the past five years, gaining traction in the consumer payments sector to the point where physical cash is supplanted as the preferred form of payment. But what is the infrastructure that sits behind making all of this happen and how is it regulated? Where can the opportunities and benefits be found for corporate treasurers embracing these schemes as part of their liquidity management strategy? Deutsche Bank’s new white paper provides a comprehensive guide of the schemes in place, how they work and how treasury can make the most of them.

The news was covered in Payments Journal, Global Banking and Finance Review , Finextra, Fintech Finance, Treasury Today

Natixis Payments and Visa launch Xpollens “Payments in a box”, integrate Apple Pay, covered by the specialist press

Natixis Payments and Visa have partnered to launch Xpollens, the first end-to-end “Payments in a Box” offer that integrates a full range of innovative payment solutions for Fintechs, corporates and retailers.

Xpollens helps these players integrate a full range of payment services, from payment cards to instant payments through customer accounts. The integration of Apple Pay will help answer high demand for greater control, functionality and better user experience. Apple Pay will be available as soon as Xpollens’ solution goes live.

The news was covered by Finextra, PYMNTS, Fintech Finance, The Paypers, Ecommerce News, Infoplay, Fintech Insight.

BNY Mellon’s Sindhu Vadakath discusses the arrival of open banking in International Banker

In a commentary article for International Banker, Sindhu Vadakath, Senior Product Manager, Global Payment Services and Asia Payments, Treasury Services, BNY Mellon, takes a look at the introduction of the Second Payment Services Directive (PSD2) and the impact it will have on the core of traditional banking.

PSD2 requires banks to share their closely guarded customer data, opening the gates for the first time to third-party payment providers (TPPs), thus disrupting banks’ long-held monopoly on the payments sector. With an aim to improve transparency, customer rights and service, as well as the costs linked to the end-to-end payments process, the legislation allows TPPs to harness customer data to create cutting-edge products that can viably compete with bank offerings.

But this data-sharing, of course, is not without its risks – especially as TPPs cannot claim the same historical reputation for security and familiarity as their bank counterparts. As such, collaboration between these industry players is key to ensure a smooth roll-out of an efficient and secure payments service for customers in the new era of open banking.

Please note, access to this article requires a subscription. To subscribe to International Banker, please click here.

CAB CEO talks cross-border payments tech

Albert Maasland, CEO of Crown Agents Bank, talks to GTNews about the future of SWIFT gpi and Ripple, noting that both are “obviously two key players” in the cross-border payments space.

To read the full article, please click here.