Nothing like a well-timed meeting between two political powerhouses to showcase the importance of India to Britain post-Brexit. But while last month’s carefully crafted photo op between May and Modi inevitably grabbed the limelight, it is by no means the only blossoming relationship between the two nations.
The City of London Corporation has teamed up with the High Commission of India in an attempt to support the development of, you guessed it, Fintech. But like so many new initiatives surrounding perhaps the buzziest of business buzzwords, this particular link revolves around a familiar area — payments. It is easy to see why. After all, with cash accounting for the majority of transactions in India, and around one fifth of the population still without banking, the door is wide open to support a financial digital revolution across India.
This is all well and good, but investors need to understand that fintech is about much more than just payments. As such, political partnerships need to broaden their horizons beyond one specific part of the financial sector. There is endless tech innovation taking place within financial markets at the moment. And it is not like there is a shortage of firms in this space that would benefit from stronger ties between the UK and India. As a case in point, there is a growing need for specialist technology and services to support the growth of currency trading in India. The rupee, for example, is currently tied with the Russian ruble as the 18th most frequently traded currency in terms of FX turnover — valued at $58 billion daily according to the Bank of International Settlements (BIS). On top of this, the Securities and Exchange Board of India (SEBI) recently allowed the Bombay Stock Exchange to open a few futures contracts for major currencies against the rupee.
All this provides numerous profit-making opportunities for those trading the Asian currency markets. This in turn gives the chance to more specialist Fintech providers to get in on the act. When trading in and out of the region, traders will be seeking new tools that help deliver the fastest possible access to pricing. In addition, as volumes start to rise, the most reliable and scalable underlying IT infrastructure will be required. The latter is ultimately fundamental to the continued liberalisation of currency trading across the region.
With national annual GDP growth hovering around the 7 per cent mark, coupled with ongoing market appetite for alternative investment opportunities following Trump’s tariff threats on China, clear growth opportunities will emerge in Fintech beyond payments. Due to its less sexy appeal, market infrastructure and technology may not be receiving the same level of attention currently given to payments. This has to change. For new commercial doors to open, political partnerships need to go above diplopic visits this summer and start properly recognising the opportunities for UK Fintech firms throughout the financial markets.
Lenders are facing more competition than ever. From e-commerce giants to rideshare apps and investment banks. Applying for a loan or other forms of credit is getting easier, which is why traditional and fintech lenders need to be ahead of the competition to retain market share.
Getting in on the consumer and business loans market are companies that don’t need to go through a digital transformation. Companies such as Amazon, Rakuten Ichica, PayPal, Alibaba and Grab, a ride-share service in South East Asia who recently acquired the Uber network in that region — were born in the digital era. Now you can access finance and credit from any of them.
Between e-commerce giants, fintech startups and digital challenger banks, consumers have more options than ever when they want a loan. New lenders offer products aligned around the needs of digital consumers, often providing lending decisions within minutes, not hours or days.
Ultimately, that is what lenders need to provide to remain competitive. To achieve that, lenders need to go through a digital transformation of back-office functions.
How to transform financing proposals?
As Jim Marous, Publisher of the Digital Banking Report said in an article, “To digitally deliver an exceptional customer experience, an organization must build from within, engaging all functional areas and stakeholders.” This means doing more than creating an app, which Marous compares to putting “lipstick on a legacy pig.”
He says this transformation needs to include “all back-office processes and data flows to make sure they are in alignment with what is required by the digital consumer.”
For lenders handling a large volume of financing proposals (products that are often more complex than simple small-scale consumer loans), this means reviewing the following areas before looking at the user experience of the lending process:
Data flow: Lenders need to absorb a lot of information to come to a decision. Unfortunately, if this isn’t collected and processed quickly, borrowers will go to those they know to have a fast process to get the finance they need.
Review your information sources: Application form, credit checks, internal risk analysis, external signal checks, and see what can be streamlined. Understand how to make efficiencies to bring systems together, or overhaul legacy systems, to provide a more efficient process for stakeholders, colleagues and customers. Where necessary, introduce machine learning and other new tools to speed this process up.
Dynamic risk analysis (underwriting criteria): One area that can cause bottlenecks is underwriting. Especially when each case is assessed on its own merit. Criteria and risk analysis can also change on a regular basis, depending on a wide variety of factors.
Not everything in this process can be automated. However, with new tools, such as Visyond, underwriting can become more efficient. Your underwriters can update risk factors in a spreadsheet that everyone can access (without worrying about breaking formulas or over-writing data), while audit trails and other controls keep the companies lending criteria safe.
• Alerts. Fraud is on the increase. Customers need to know their data is safe, especially when it can be stolen and used to take out financial products.
• Predictions. Anticipating customer needs is the most effective way to provide ongoing solutions that fit their goals and circumstances. Taking a proactive approach, using past financial behavior and current activities, puts you, as a lender, in a stronger position when a customer is ready to take another step in their life, such as upgrading a car, buying a house, or investing.
• And then the application process. With everything else in place, you need to ensure the application process is smooth and frictionless. A mobile-friendly application is an essential part of the modern lending landscape, even when you work with brokers and intermediaries. Help those that send customers to you make it easier for the end-user.
At every step of the way, put the customer and their needs first. Simplify and streamline former analogue processes. Implementing these changes incrementally will make it easier to make the transformation, and ultimately, improve the customer experience, providing these changes start in the back-office, with data flows and systems, not just looking at the apps used in lending applications.
Gianluca Bisceglie is the founder and CEO of Visyond, a cloud-based spreadsheet automation software that enables finance and business professionals to collaborate securely whilst building models, streamlining routine spreadsheet operations and performing analysis in a quick, and easy, intuitive and visual way.
Real estate crowdfunding came into existence after the Global Financial Crisis. Several high profile startups got started around 2010–2012, spurred in part by the JOBS Act which streamlined the process of raising capital from individual investors. As the Internet transformed one industry after another, the real estate investment space appeared stodgy and overdue for disruption.
This article outlines some lessons we have learned from the successes and failures in this space so far, and a few predictions for the future.
Real estate crowdfunding is creating new and valuable options for investors. Today there are many companies that will allow investors to participate in real estate with as little as $5,000. In this sense, real estate crowdfunding companies have indeed begun to democratize real estate investing. Also, they have created alternatives to some questionable practices such as the original non-traded REITs which often charged their investors high up-front fees to invest. Thankfully, most of the new breed of companies we will discuss have avoided this approach, and have instead funded early operating losses by raising venture capital.
Nobody has a proven, profitable business model — yet. The hallmarks of a great start-up investment are a disruptive product or service that can yield a large-scale, profitable business. Five or more years after many companies in this space got their first funding, isn’t clear that any of them have figured out how to make money. Of course Amazon went from its founding in 1994 to 2001 without ever recording a profitable quarter. However, while there are some interesting companies in the real estate crowdfunding group, none of them can yet claim to have Amazon-like or Uber-like potential.
The industry is segmenting along two axes. All of these companies, and the entire real estate investment industry, breaks down based on a few distinctions: (1) debt (lending) focus or equity (ownership) focus? (2) brokerage model or investment management model? Beyond these distinctions, one can further differentiate industry players based on typical project size; asset type; or geographic focus.
There have been many pivots. Realty Mogul and Fundrise both appear to be focused on launching and managing small non-traded REITs which invest in real estate — which is different from where both companies started out. LendingHome has continued their original strategy of originating fix-and-flip loans, and is now also offering loans for owner-occupants. RealtyShares serves as a mortgage broker in many cases, and has exited the single family residential financing space to focus exclusively on commercial real estate. The shift in strategies is to be expected in a nascent industry, but it also speaks to the difficulty of finding a sustainable business model in this industry so far. One common theme has been that venture-backed companies have hired aggressively, taken on a lot of overhead, and then typically needed to let people go or change strategy because they and their investors were not confident that they had yet established their long-term success formula.
Lines between fintech and traditional players are blurring. LoanDepot has built a sizable business providing home mortgages by hiring hundreds of loan originators and opening offices around the U.S. At the same time, they are investing heavily in technology to optimize the customer experience and streamline operations internally. Are they a fintech company or a conventional mortgage lender? The answer is, they are both. Like Charles Schwab, they are simply a successful company seeking to provide value to their customers in any way they can, across every available channel that makes financial sense.
There is no dominant marketplace for real estate among today’s players. One of Silicon Valley’s favorite types of start-up success is to establish a dominant platform where there was none before. Think about eBay, LinkedIn or even Google, each of which amassed dominant market share through a positive feedback loop of one kind or another. The more people used their services, the harder it became to displace these industry leaders. In real estate crowdfunding — as in the larger real estate investment industry — there are no dominant players. CBRE is the most prominent commercial real estate brokerage firm, but even this impressive global company has low market share as compared with the entire brokerage industry. Likewise, Blackstone Group is considered the largest real estate private equity firm with $120 billion of real estate assets under management. Meanwhile experts estimate the value of global real estate at $217 trillion (Source: http://fortune.com/2016/01/26/rea-estate-global-economy/. Even after stripping out all owner-occupied homes, this puts Blackstone’s market share well below 1%.
There is no Adobe for the real estate industry either. With their PDF file format and other innovations, Adobe became an industry standard used by virtually everyone — both in business and for personal applications. Who hasn’t sent or received a PDF file in the recent past? In the real estate investment world, having industry standards might be helpful in many ways. For example, a standardized way of handling escrows, loan transactions or even comparing one investment to another on an apples-to-apples basis would be very valuable. Sadly, no such innovation has arrived in the past 10 years. Having funded more than 800 investments in that time, the author’s company has been eager to adopt new approaches that would streamline operations. However, I can report that we are conducting business largely the same way we have since inception — by meeting borrowers and seeing their projects in person; assessing property values through comparable sales; and then closing their transactions as smoothly as possible, still using title and escrow infrastructures that are largely unchanged in decades.
Curating investments remains as important as ever. Blackstone has grown into an industry leader in large part because they have chosen investments that made money for Blackstone’s clients. Most real estate fintech companies are also curating or selecting investments, in one way or another. They must identify sponsors (individuals) who are competent and honest, who have projects that make sense. This may sound simple but as any experienced real estate investor will tell you, it is easier said than done, particularly with the vagaries of the market cycle. Choosing the right investments or opportunities to share with the investors they have aggregated will prove to be the single most important factor in the success or failure of these companies, as with any real estate investment business.
The most respected real estate investors are busy making investments, not building fintech companies. Most real estate crowdfunding companies started by focusing on the opportunity to use technology in novel ways, and/or the regulatory changes brought by the JOBS act (namely, the relative ease of raising capital from individuals after the JOBS act passed). The most seasoned investment managers did not join — and still have not joined — into the fintech fray, because they had no need to gamble on how this novel area would work out. They had strong reputations which they could leverage with or without using new technology aggressively. In this way, real estate investment and real estate crowdfunding are very different from, say, the old fashioned garage sale vs. eBay. Garage sale operators had no robust defense against the growth of eBay, but real estate investment managers have decades-long track records which cannot be replicated by upstarts quickly.
In summary, the real estate investment and mortgage industries are likely to follow a similar path to the larger investment industry. The future will not be defined by “old” and “new” companies that either ignore or embrace technology. Rather, there will be successful companies that take good care of their clients — some of which are new, and others well-established — and all the other companies, who will go out of business eventually. In retrospect, we should not be surprised that no new entrant has yet disrupted the entire business. Facebook exploded because young users with few entrenched ideas adopted it, and it spread from their as a new way for us to socialize. In contrast, real estate investment and mortgage decisions are largely the domain of relatively older people, who are unlikely to embrace new things for very important decisions, until they have proven themselves to be reliable over time.
Open Banking represents a once in a generation opportunity to transform the quality of information provided to consumers and enable them to take more control of their personal finances. But will it succeed?
With 40% of UK working age adults having less than £100 in savings, as identified last year by the House of Lords Financial Exclusion committee, there is a clear need to help consumers better manage their money. In 2015 a study by Able Skills identified the ability to create a budget as the number one thing British consumers wished they had learnt at school but did not.
There is no shortage of fintech apps available to help consumers take more control of their money. Services such as Bean and Chip use what have previously been known as personal financial management tools to provide a host of benefits for their users and help them avoid unnecessary additional expenses. Even smaller financial advice firms are also now able to offer their clients such personal financial management services either via practice management software suppliers like Intelliflo and True Potential or stand-alone client portal providers like Moneyinfo.
Banks may have good reason to be fearful of the impact of Open Banking. Recent research by Bain & Co of over 4,000 UK consumers identified that 63% of banking customers are willing to share information with another bank aggregator or fintech if it helps them get a better deal. This figure gets even higher for younger and more affluent customers, who generate a disproportionately high percentage of banks’ profits.
The more personalised insights fintechs and others can now offer could have been made available by banks for many many years, but giving customers better information, such as how to avoid going overdrawn and making their money last until the next payday, could hurt bank profits. In practice banks want customers to run out of money just before the end of the month, so they take expensive, but low risk, credit. This is a stark conflict of interest.
It may be better for consumers to obtain Open Banking services from their savings or pension providers, or even their financial adviser. Any organisation involved in savings needs to help clients make sure they have enough money every month to afford their contributions.
Whilst Open Banking is pressing ahead under the close scrutiny of the Competition and Markets Authority, sadly the same cannot be said for the parallel project in long term savings, the so called Pension Dashboards. After making significant progress in late 2016 and early 2017 with two prototypes having been successfully created in just a few months, the project was moved out of HM Treasury to the Department of Work and Pensions.
There it seems to have lost its momentum. A command paper on its future was due to be presented to the House of Commons in March, but this appears to have slipped into Q2. Frank Field MP of the Work and Pensions Select Committee recently advocated the pension dashboard should only be available from the new single guidance body, putting the new consumer body on a collision course with the investment and financial advice firms that will pay the quango’s bills, before it even opens for business.
Under the Treasury regime there was a clear requirement that the project be delivered using a federated approach so that any organisation that could demonstrate suitable credentials could provide dashboards, in the same way as any firms with the Account Information Service Providers (AISP) regulatory permission can provide Open Banking services. Delivering a service only available via a, yet to open, government help service would severely constrain consumer choice and miss a golden opportunity to give customers better access to their savings information.
The pensions dashboard project is rapidly assuming the characteristics to be the next failed government IT project with a telephone number size bill being written off by taxpayers. When originally conceived, as part of the Financial Advice Market Review, it was to be funded by the pensions industry. If pension providers and advisers are to be denied access to the service, how can they be asked to pay for it? So will the cost fall back on the public purse?
The FCA have, in the AISP permission, implemented regulations that could also be used to ensure all organisations providing pension dashboard services have suitable bonafides. If the DWP do go down the single dashboard route I would expect to see pension organisations build their own collaborative service. Further work has been done since the original prototypes were built by insurer-funded fintech Origo who have a service ready that could be rolled out in just a few months. It would be important for insurers to allow competitors to emerge so as not to fall foul of competition legislation.
Rather than treating consumers banking and savings separately, the pending failure of the pension dashboard project should be used as a stimulus to expand Open Banking to deliver a holistic picture of a consumer’s personal finances. This would be a real benefit to taxpayers and be a great example of the UK’s fintech leadership capability.
Ian McKenna is the Director of the Finance & Technology Research Centre, founder of DigitalWealthInsights.com and was an Independent Member of the HM Treasury Pensions Dashboard Steering Group
GDPR has been covered in great length in the run up to the enforcement date, with checklists, guides and whitepapers telling us what we need to do to stay compliant. This is all great, if your data is held in and structured in one central place. But the rise of cloud based app usage within financial services and fintech organisations could certainly cause some difficulty when it comes to complying with the rules.
The Netskope Cloud Report by the Cloud Industry Forum found that the average European enterprise businesses are using over 600 cloud apps. While this covers the more obvious SaaS applications such as SalesForce and Expensify, it’s thought that organisations underestimate this figure by 90 per cent. Think teams setting up Dropbox to quickly share files for projects, or external agencies sharing large files with suppliers via WeTransfer.
This data fragmentation (caused by having hundreds of apps) creates an issue for financial services and fintech companies trying to ensure GDPR compliance within their organisation, as they are effectively unaware of 90 per cent of the applications their company uses and the types of data held within those platforms.
Platform Convergence Centralisation of this data can be a major step forward for GDPR. Products like G Suite and Office 365 allow fintech companies to provide good business tools for their teams while also having the benefit of providing centralised controls, reports, alerts and visibility of the data being used across the organisation. This minimises the number of apps, contracts and data fragmentation while also providing users with powerful tools to get the job done.
Policy complimenting technology However, technology is only one part of the overall solution. Whether you have hundreds of applications or only a few, fintech companies and financial services organisations also need to understand what other controls need to be implemented in order to ensure that they are compliant. This includes:
Understand Data Usage: When using cloud apps organisations need to audit and understand what data they hold, where it came from, where it is held, what they do with that data, if it’s shared and how it fits with their data policies.
Data Protection Policy, Business Processes and Procedures: Organisation need to ensure they have a data protection policy in addition to any required processes and procedures to ensure the information risk is being managed effectively.
Staff Training: Organisations must engage employees, teams and contractors on what GDPR means for them in their day to day job and train them on the policies and procedures that they need to adhere to, to ensure the company remains compliant.
It may be worth consulting or hiring a GDPR Data Protection Officer to ensure the correct level of controls are in place and remain relevant.
The bottom line is that fintech and financial services businesses need to understand what PI data they hold, why they are holding it, how long they need to hold it for and how it’s being managed. This must be communicated to customers and staff and, where appropriate, mechanisms must be put in place to remove the data should it be requested. Technology is not the only part of the solution. Policy and technology complement each other.
James Smith — Head of Architecture & Innovation at Cloud Technology Solutions
On 8 April 2015, Jamie Dimon, Chairman and CEO of JP Morgan, wrote to shareholders with the following caution: “Silicon Valley is coming”. This warning is often cited by those predicting the “imminent demise” of traditional banks and the rise of “FinTech”. But, fast-forward two years and Rome has not burned.
The big banks are still here, and whilst FinTech continues to disrupt and challenge the financial services sector, the companies that have pioneered FinTech do not dominate the sector and the traditional banks seem pre-eminent as ever. The banks and FinTech have come to realise that they need each other. FinTech can improve bank customer participation and experience, whilst Banks can give FinTech the missing component to their businesses — users.
But will the current symbiosis last? Online businesses such as the US tech giants are viewed by many as the biggest threat to banks. In January 2017, Accenture reported that 40% of Generation Y respondents (to a survey conducted in 2016) said that they would consider banking with the US tech giants if the option were available. This threat has garnered much attention in the press, with some commentators reaching fever pitch over an incoming piece of EU legislation: the revised European Directive on Payment Services in the internal market (2015/2366/EU) (“PSD2”).
PSD2 is due for implementation across all EU Member States (including, despite Brexit, the UK) on 13 January 2018. PSD2 will replace the existing European Directive on Payment Services (2007/64/EC). One of the most significant changes under the new regime requires Member States to ensure that payment service providers (“PSPs”) and payment institutions (“PIs”) have access to credit institutions’ (i.e. banks) payment accounts services (“PAS”) on an “objective, non-discriminatory and proportionate basis”. According to HM Treasury, this does not mean that banks *must provide PSPs and PIs with access to their PAS (as some have been led to believe). It merely requires that banks treat applications by PSPs and PIs seeking access to their PAS on an equal basis. Accordingly, banks will “need to make available criteria for assessing applications for PAS to PSPs requesting such access”.
So, why is this important?
Under the previous regime, Third Party PSPs (“TPPs”) offering payment initiation or account and aggregation services faced significant barriers to operating within the internal market. PSD2 changes that. It brings those TPPs within its scope by creating two new functions: payment initiation services (“PIS”); and account information services (“AIS”). Under PSD2, online businesses authorised as PISs, will be able initiate payments on behalf of a consumer without recourse to acquirer banks and card networks. Similarly, PSD2 will enable online businesses registered as AIS to consolidate a consumer’s bank account information to provide the consumer with an instant overview of their financial situation across their various bank accounts.
The Interchange Fee Regulation has already reduced the fees that can be generated from card-based transactions in the internal market. Despite this, card-based transactions still represent a significant source of revenue for many retail banks. As described above, PSD2 creates a situation where PISs can initiate payment directly from the customer’s bank account, removing acquirer banks and card networks from the transaction. Under this scenario, the interchange fees, network fees and acquirer fees received by the customer’s bank, card network and the acquirer bank are displaced and, in effect, retained by the merchant. Whilst the gross impact of this will depend on the extent to which firms adopt PIS services, it is clear that should online businesses such as the US tech giants seek to gain authorisation as PISs, millions of daily transactions, and the fees to be generated by those transactions, could be removed from the revenues of retail banks and card networks and placed in the hands of the merchant. For organisations such as the US tech giants, the opportunities presented by gaining authorisation as a PIS are compelling. Not only will online businesses such as the US tech giants be able to pass-on the interchange, card network and acquirer fees from the transactions they process, but they will also benefit from reduced liquidity risks and the possibility of faster clearing funds.
Customer engagement is critical for businesses seeking to build loyalty and cross-sell partner products and services. Indeed, many of today’s retail banks are full service firms offering current accounts, insurance, loans, financial planning, and payment services. At present, banks play a critical role in our day-to-day lives with many of us using our online banking apps to make, take, and review payments. The liberalisation of payment initiation services puts the banks at risk of losing that day-to-day role, along with the direct customer contact that comes with it. Registered AISs with access to customer account information could fulfil many of our online banking needs, creating a one-stop-shop for those seeking to review their financial status and transaction history across various bank accounts and numerous merchants. This has led some commentators to argue that banks could be reduced to nothing more than a utility service, with little or no direct contact with the customer, reducing their ability to cross-sell products.
However, banks understand change, they have seen much of it before. They are also keenly aware of the implications of PSD2 and the need to adapt their consumer offering, and whilst many consumers may have a love/hate relationship with their Banks, for most consumers, it is still their principal or only financial services relationship and may prove a hard habit to break.
The regulatory burden
In order for PISs to gain access to banks’ PAS, they must first become authorised as a PI. Applications for authorisation are governed by Article 5 of PSD2. HM Treasury has transposed the provisions of Article 5 into Regulation 6 of the draft Payment Services Regulations 2017 (“PSRs 2017”), which is extensive to say the least. For example, under Regulation 6, a PIS must:
be a UK company having its head office and registered office (if any) in the UK;
carry on at least part of its payments service business in the UK;
provide, or include in its application, the information set out at Schedule 2 of the PSRs 2017;
comply with the UK Money laundering Regulations 2007;
satisfy the FCA as to its compliance with the provisions of paragraphs (6), (7) and (9);
have, immediately before the time of authorisation, initial capital of 50,000 Euros;
hold professional indemnity insurance or “a comparable guarantee” against their regulatory liabilities which covers the territories in which the PIS proposes to operate. The European Banking Authority is yet to develop final guidelines on the criteria to be used by Member States to establish the minimum monetary amount of professional indemnity insurance or comparable guarantee to be held by PISs, having previously consulted on the matter; and
comply with its duty to notify the Authority (i.e. the Financial Conduct Authority (“FCA”) in the UK) of changes to its information.
Whilst significant, the regulatory burden is not insurmountable. The appropriate allocation of resources and careful consideration of the regulations should see most firms wishing to operate as PISs and/or AISs succeed in achieving authorisation as a PI.
In contrast, the regulatory burden for firms seeking to operate as AISs is somewhat lighter. AISs do not need to be authorised as payment institutions. Instead, an AIS must merely be registered as a PI with the competent authority. This does not mean that AISs can disregard Regulation 6 in its entirety. AISs will still need to comply with certain provisions of Regulation 6 should they seek to register with the FCA. Furthermore, whilst AISs are not required to hold a minimum amount of initial capital, they are required to hold professional indemnity insurance or “a comparable guarantee” which, amongst other things, covers the territories in which the AIS proposes to operate.
Opportunities for all
PSD2 doesn’t mean the end of the big banks. On the contrary, PSD2 offers banks the opportunity to invest in technology and build new lines of business in order to diversify and improve their current offering for their extensive consumer network. Collaboration, not competition, will continue to be the path trodden by many banks in their relationship with FinTech. But, it is likely that some banks will not see the opportunity until it is too late.
The Open Bank Project and Accenture have both produced illuminating reports which highlight some of the opportunities for banks in the payments services industry going forward. The common theme identified is that banks can leverage their expertise to create an ecosystem of consumers, PISs and AISs that trust using the banks’ services and develop on that basis. This would allow the banks to retain their position as the heart of the payments services industry, and consumers’ lives, enabling them to introduce new lines of business and create new methods by which they can cross-sell both bank and partner services.
No discussion of PSD2 is complete without mention of Brexit. On 24 June 2016, the FCA stated that “Firms must continue to abide by their obligations…derived from EU law and continue with implementation plans for legislation that is still to come into effect”. Thus, we can rest assured that, for the time being at least, the FCA will be keeping an eye on firms’ implementation activities. However, PSD2 concerns payment services in the internal market. The UK’s implementation of PSD2 does not guarantee UK firms’ access to data and payment transactions emanating from the internal market, nor does it guarantee that PISs and AISs authorised and registered as PIs by the FCA will be recognised as such across the EU. More important, perhaps, is the possibility that once Brexit has been finalised, UK based PISs and AISs may no longer be able to passport their authorisation into and across the internal market, inhibiting their ability to conduct payments services business in those jurisdictions. The loss of passporting rights would undoubtedly have a significant impact on the structure of UK based AISs and PISs going forward.
Authors David Ramm (Partner), Philip Stone (Trainee Solicitor)