We’ve gathered a collection of payments industry trending news and big-picture regulatory issues on the horizon for 2017. The challenges will start with the new Trump administration in the US and Brexit in the UK and continue into the EU where dissension and disruption are a certainty in the new year. Add in worldwide political tension, nervous financial markets and the impact of technology and you have a recipe for the perfect storm. One thing’s for sure, expect plenty of payments industry disruption to continue.

American Banker suggests the new President-elect start with tariffs to correct China’s restrictive policies against foreign payment cards. When it comes to growth potential,  a recent McKinsey & Company report estimated 2.5 billion of the world’s adults are currently unbanked, including 20% of the US population. Another report suggests 93 million Western EU residents are also underserved by banks.

The Electronic Funds Transfer Association (EFTA) issued a new white paper that looks at the challenges and solutions of user authentication to combat fraud and identity theft, enhance security and improve future e-commerce. The European Commission is looking at tougher capital and liquidity requirements for subsidiaries of banks operating in the EU, raising the possibility of increased costs and a further rise in protectionism.

Henri ArslanianFinTech and RegTech Lead for China/HK at PwC offered 10 fintech predictions for Asia in 2017 – recommended reading. Karen Webster, CEO of Market Platform Dynamics, shares 8 big shifts in fintech and payments.

Billentis’ Market Report 2016 estimated the total volume of electronic invoices worldwide will reach 30 billion in 2016. Capita’s 2016 Trends vs Technologies report says businesses are still slow to implement the obvious benefits of many new digital technologies.

Open APIs promise to transform the experience of payments for consumers as well as global corporations. Let’s Talk Payments looks in detail and how APIs are shaping the future of payments. The Indian government is planning regulations and tighter rules for e-payments privacy. After demonitization, the Indian government is introducing discounts on online payments for insurance policies, rail tickets and highway toll charges to promote digital payments.

Where Should Trump Start on China Trade Policy? Visa and MasterCard

http://www.americanbanker.com/bankthink/where-should-trump-start-on-china-trade-policy-visa-and-mastercard-1092977-1.htmlPresident-elect Donald Trump has suggested he wants to impose 45% retaliatory tariffs on China and other trading partners if they cheat on their obligations. To find examples of cheating, he could do worse than to look at China’s payment card market.

Payment networks and processors created and domiciled in the U.S., for the moment, rule the roost. But they only have toeholds in China, the world’s second-largest electronic payments market.

Trump should act early in 2017 to direct tariffs towards China’s foreign payment card policy. U.S. card leaders – Visa, MasterCard, American Express and Discover – are household names. Doing so would be a high-profile way to make the point with American voters and the Chinese government that he was serious about fair trade policy and about responding to countries that do not honor their obligations.

In stark contrast to American networks trying to compete in China, CUP and Chinese e-commerce and mobile commerce titans Alipay and Tenpay have unfettered access to the U.S. market. CUP and Alipay are building U.S. acceptance. No Washington regulator has instructed banks not to issue CUP cards. Via americanbanker.com

Innovation is opening the door to a real future of financial inclusion

http://www.businessinsider.com/innovation-is-opening-the-door-to-a-real-future-of-financial-inclusion-2016-12At last count, McKinsey & Company estimated that 2.5 billion of the world’s adults are currently unbanked, with just short of 2.2 billion of these in Africa, Asia, Latin America and the Middle East. And in the U.S., one government study showed that 20% of US households are underbanked.

Financial inclusion is about much more than just having a bank account. At its root level, it is a key element of social and economic inclusion. It is about helping people participate in today’s connected economy. Reaching the unbanked and underbanked population is a win for both sides – it can provide new customers for banks, while connecting people to financial services that can help them manage their money, save and get access to a wider range of welfare benefits.

And another recent study estimated that 93 million people in Western Europe are financially underserved. While solutions like online payments, mobile banking, and prepaid cards have made important strides in promoting financial inclusion, these sobering numbers make it clear that there is still a great deal of work to do. Via businessinsider.com

EFTA issues paper on implementing user authentication in payments

The Electronic Funds Transfer Association (EFTA), which works to advance electronic payments and commerce through responsible federal government relations and member education, today released its final white paper in a three-part series on “User Authentication,” which details the benefits and challenges of utilizing user authentication as a component of an overall security strategy. The white paper is a free resource for the payments industry, and the full report is available here.

A recent 2016 study by Javelin revealed there are 13.1 million identity theft victims with a total of $15 billion stolen. Additionally, Javelin notes that the EMV chip requirements may have lowered fraud for in-person, POS transactions, but fraudsters have moved away from existing card fraud to focus instead on new account fraud, which has grown 113 percent.

In an effort to address these threats and obstacles to digital commerce, the white paper explores user authentication which affords security benefits and how industry stakeholders will play key roles in moving forward with its wider adoption. Via greensheet.com

Proposed EU financial regulations raise questions of protectionism – World Finance

http://www.worldfinance.com/banking/proposed-eu-financial-regulations-raise-questions-of-protectionismWhile the international spotlight remains focused on a shift towards protectionism in trade policies, new EU proposals – which will be unveiled in full on November 23 – are likely to further rein in globalisation in the financial sector.

Some details of the proposals have been addressed in a speech by Valdis Dombrovskis, Vice President of the European Commission. If implemented, the changes would see tougher capital and liquidity requirements for the subsidiaries of banks operating in the EU, leading to raised costs for overseas banks.

Arguably, this move comes in retaliation against the protectionism of similar policies in the US. These policies were revealed in 2014 and have the similar effect of increasing costs for foreign lenders. According to the Financial Times, at the time of the US’ announcement, the EU commissioner warned the move could prompt a protectionist reaction. Via World Finance

10 FinTech Predictions for Asia in 2017

https://letstalkpayments.com/10-fintech-predictions-for-asia-in-2017/In 2016, FinTech went mainstream. So what can we expect for 2017? Here are some predictions for FinTech in Asia for 2017:

1. Forget the unicorns… Watch out for the Chinese dragons instead!

China is the global leader in many aspects of B2C FinTech, with firms such as Tencent and Lufax deploying innovative ways to deliver financial services to millions of customers. For example, Ant Financial’s money market fund, Yu’e Bao, is now the third-largest money market fund in the world and ZhongAn’s online insurance offering has more than 350 million customers. However, very few outside of China are aware of these firms and appreciate how advanced their offerings are compared to their peers in the West.

Perhaps 2017 will be the year when China’s role in FinTech innovation finally gets the respect and attention it deserves on the global level? Via letstalkpayments.com

8 Big Shifts In FI, Retail, Payments

Most everyone operating today as part of these ecosystems understands this, too, and feels the pressure points and the tensions building. Each recognizes that shifts are inevitable, and each are actively engaged in strategies to blunt the impact of the inevitable eruptions that are in the offing.

Others are forcing those shifts, systemically and strategically applying pressure to the weaker links in the hopes of being the last man standing in the ashes of an entirely new payments and commerce ecosystem.

There are eight such shifts now happening quietly and forcefully beneath the surface of what we define as payments, commerce and retail today. What’s been fascinating to observe this year is not only the extent to which these shifts are putting pressure on a discrete aspect of the ecosystem but how they are reshaping those ecosystems right before our very eyes. Via pymnts.com

Building the future with electronic invoicing

http://www.worldfinance.com/special-reports/building-the-future-with-electronic-invoicingIn the past few years, the pace of change in the electronic invoicing industry has seen steady, unequivocal growth, which has been driven mainly by the development of new technologies. Adoption of digital automation has led to year-on-year growth of between 10 and 20 percent, while Billentis’ Market Report 2016 estimated the total volume of electronic invoices worldwide would reach 30 billion in 2016. By digitizing business processes such as invoicing, companies will benefit from cost savings, increased control and fraud reduction, in addition to improving the customer experience.

As noted in Capita’s 2016 Trends vs Technologies report, there is a clear disconnect between businesses recognising the benefits of technology to increase efficiencies, and businesses actually taking advantage of and implementing that technology. This slow adoption sees many businesses fail to operate as efficiently as possible.

Where investment in innovation has been made, it has typically been in the customer-facing ‘shop window’ of the business, like in marketing automation. Meanwhile, the back office has often been neglected. Herein lies the opportunity. Via worldfinance.com

How Open APIs Are Reshaping the Future of Payments

https://letstalkpayments.com/how-open-apis-are-reshaping-the-future-of-payments/Open APIs promise to fundamentally transform the experience of payments for end-users, ranging from private individuals to global corporations. Whether driven by the global rise of FinTechs and real-time payments, or by regulations such as PSD2 in Europe, it’s clear that the momentum towards open APIs is now irreversible. As a result, it will soon be the norm for consumers and businesses to get account information and initiate and track payments using third-party applications that connect directly into banks’ systems via public domain APIs. But this isn’t just a big change for customers – it also brings huge implications for banks, not only around how they source, manage and use payments technology but also around how they differentiate themselves in the payments marketplace.

Application Programming Interfaces (APIs) are neither new nor as complicated as their name suggests. Originally developed 15 to 20 years ago in the era of enterprise systems and service-oriented architecture (SOA), APIs are software tools that enable different systems and applications to talk to each other and share processing and data. In their early days, APIs were largely internally focused, proprietary and non-standardized, meaning they were inaccessible to the outside world and that substantial customization work was needed to link to them. But today, with the emergence of open APIs, their role and importance have escalated to a whole new level.

The big differences with open APIs are that they’re visible externally and easier and simpler to access – and their emergence over the past decade or so reflects the rise of the developer as a force in corporate IT. In an era when enterprise software was traditionally procured by the central IT function, open APIs emerged as an almost grassroots response to enable new software to be developed on top of other products and platforms. To meet these needs, open APIs share a number of characteristics. They’re developer-friendly and developer-centric; accessible from outside the corporate firewall; built using web-based programming; and “fine-grained” and standardized, enabling developers to take advantage of multiple APIs from multiple vendors and attach new utility to existing systems quickly and easily. Via letstalkpayments.com

Govt plans tighter privacy rules for e-payments

http://www.livemint.com/Industry/VcLcVc6huMHGloWSSfe2EK/Govt-plans-tighter-privacy-rules-for-electronic-payments.htmlThe government is working on a legal framework that will define the liabilities and obligations of payment companies, Aruna Sundararajan, secretary in the ministry of electronics and information technology, said in an interview.

The framework will cover e-wallets, payment gateways, prepaid cards and other payment platforms. It will also cover services of banks and the use of credit cards for online transactions.

The move, aimed at preventing data theft, comes in the wake of a surge in phone banking and electronic payments as the nation of 1.25 billion people moves towards a cashless economy following the invalidation of old high-value currency bills last month. In October, about 3.2 million debit cards were reported to have been compromised in a massive cyber-attack. Via livemint.com

Digital payments to get cheaper than cash transactions from 2017

In a move to encourage citizens to adopt cashless payments and a digital economy, the central government is planning to make it cheaper for people to transact digitally through taxation measures, Niti Ayog’s chief executive officer Amitabh Kant said.

“The government is saying it will ensure people with digital transactions are supported through various taxation measures. That will happen in the next few days,” an Economics Times report quoted Amitabh Kant as saying. “We will make digital transactions cheaper than cash transactions, and the market forces will take over,” he emphasised.

On December 8, Finance Minister Arun Jaitley announced a raft of measures including discounts on online payments for insurance policies, rail tickets and highway toll charges as the government looked to promote digital cash post-demonetization. Via indiatvnews.com

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