FUTURE OF PAYMENTS 16 - Galileo Financial

 
FUTURE OF PAYMENTS 16 - Galileo Financial
I N D EPEN D EN T P U B L I C AT I O N BY                                                                            RACONTEUR.NET   #0618   1 9/ 0 9/ 2 0 1 9

                                                    FUTURE OF
                                                    PAYMENTS
                                            03 HOW  SPENDING CAN
                                               BUY YOU HAPPINESS   06 SOCIAL IMPLICATIONS
                                                                      OF CASHLESS SOCIETIES 16   STANDING OUT IN A
                                                                                                 SEAMLESS FUTURE
FUTURE OF PAYMENTS 16 - Galileo Financial
02   FUTURE OF PAYMENTS                                                                                                                                                                                                                                                     RACONTEUR.NET               03

                          FUTURE OF                                                                  BEHAVIOUR

                          PAYMENTS
                                                                                                   How spending money
                          Distributed in

                                                                                                   can buy happiness
                          Published in association with                                            Behavioural economics can reveal useful insights into our
                                                                                                   motivations and feelings when parting with hard-earned money

                                                                                                   Marina Gerner                                                                                                                                                    payments make parting with money
                          Contributors

                                                                                                                                                                                                                                       Tristan Colangelo/Unsplash
                                                                                                                                                                                                                                                                    even easier.
                                                                  Sophie Charara                              magine you’re on your way                                                                                                                               The latest example of separating
                          Paul Amery
                          Founding editor of New                  Associate editor at                 I       back from work and you                                                                                                                                purchasing from paying are check-
                          Money Review, he is a                   WIRED UK, she writes                        pop into a shop. You weren’t                                                                                                                          out-less Amazon Go shops, where
                          former asset manager                    about technology                 looking for anything in particular,                                                                                                                              people don’t consciously pay at all.
                          and trader.                             and culture.
                                                                                                   but an hour later you find yourself                                                                                                                              Hundreds of cameras around the
                                                                  Edd Gent                         walking out with a big smile and mul-                                                                                                                            store are able to detect what custom-
                          Jack Apollo George
                          Writer and media                        Freelance science and            tiple bags in tow. What happened?                                                                                                                                ers take off the shelves and automat-
                          specialist whose articles               technology writer, his           Behavioural economists call it the                                                                                                                               ically charge their Amazon account
                          on technology and culture               work has been published          effect of “shopping momentum”.                                                                                                                                   when they leave.
                          have been published by                  in the BBC, New Scientist,
                                                                                                     We like to think we’re rational con-                                                                                                                             The second factor is our disposi-
                          the New Statesman and                   Science and MIT
                                                                  Technology Review.
                                                                                                   sumers when it comes to our spend-                                                                                                                               tion. People who are tightwads and
                          CLOT Magazine.
                                                                                                   ing. After all, our financial decisions                                                                                                                          who make up about 25 per cent of the
                          Marina Gerner                           Amy Hawkins                      have a huge impact on our wellbe-                                                                                                                                population, according to one study,
                          Award-winning arts,                     China-based journalist,          ing. Think of an unforgettable holi-                                                                                                                             experience more pain when it comes
                          philosophy and finance                  she writes about                 day or a house bought at the wrong                                                                                                                               to paying than spendthrifts who
                          feature writer, her work                technology and culture,
                                                                  and has appeared in The
                                                                                                   time. But in reality, we’re emotional                                                                                                                            make up 15 per cent.
                          has been published in
                          The Economist's 1843, The               Guardian, The Sunday             creatures, susceptible to biases and                                                                                                                               “Tightwads experience a lot of dis-
                          Times Literary Supplement               Times, Foreign Policy            external factors.                                                                                                                                                tress when they make purchases,
                          and Standpoint.                         and others.                        Luckily, behavioural economics                                                                                                                                 especially the optional kind, and
                                                                                                   makes our irrationality more predict-                                                                                                                            that prevents them from spending
                          Emily Hill                              Duncan Jefferies
                                                                                                   able. In the words of Nobel prize-win-                                                                                                                           the money they think they should
                          Freelance journalist and                Freelance journalist and
                          author, she is the former               copywriter, he covers            ning economist Professor Richard                                                                                                                                 spend on certain things, and they
                          commissioning editor at                 digital culture, technology      Thaler, it’s “economics done with                                                                                                                                sometimes kick themselves after-
                          The Spectator and feature               and innovation, and              strong injections of good psychology”.                                                                                                                           wards,” says Scott Rick, associ-
                          writer for The Mail                     writes for The Guardian            When considering paying for                                                                                                                                    ate professor of marketing at the
                          on Sunday.                              and Independent Voices.
                                                                                                   goods, researchers have found that                                                                                                                               University of Michigan.
                          Alexandra Leonards                      Ouida Taafe                      buying one thing makes us much                                                                                                                                     On the other side of the spectrum,
                          Freelance journalist, she               Editor of LIBF’s Financial       more likely to buy subsequent items,                                                                                                                             spendthrifts hardly experience any
                          writes in-depth features                World, she has also worked       regardless of our previous delibera-      our tendency for “duration neglect”         But what kind of a pain is it exactly?                                     pain at all. “They just can’t stop them-
                          on a range of subjects,                 for the International            tions. Browsing things to buy online      means we don’t typically think            A brain imaging study led by                                                 selves,” says Dr Rick. Spendthrifts are
                          including current affairs,              Financing Review and
                                                                                                   or in a store, puts us in a mindset of    about how long we’re going to use         Professor Nina Mazar, a behavioural                                          largely insensitive to payment meth-
                          culture, to healthcare, tech            Telecommunications
                          and logistics.                          International.                   “deliberation”. But as soon as we buy     it for. But if people are asked to con-   scientist at Boston University, found                                        ods, but for tightwads, contactless
                                                                                                   one item, a cognitive shift to “imple-    sider how long an item is meant to        that the pain of paying is not like a                                        methods and framing techniques,
                                                                                                   mentation” occurs. “Our mind-             last, they’re likely to pay more.         physical pain. It’s more similar to dis-                                     for example if a fee is described as
                                                                                                   set changes from whether or not I           Such framing techniques influ-          tress or anxiety on a neural level; it                                       “small”, make a difference.
                                                                                                   should buy something to how do I          ence our pain threshold for pay-          can help keep our spending in check.                                           The third factor is whether we
                                                                                                   buy this?” says Professor Ravi Dhar       ing. People are, generally speak-           However, not all payments are                                              consider a product virtuous or friv-
                                                                                                   of the Yale School of Management,         ing, loss averse and the idea of a        equally painful. Research tends to                                           olous. Buying fat-free yogurt feels
                          Lead publisher                          Head of production               New Haven, Connecticut.                   “pain of paying” was coined some          revolve around three key factors.                                            different from buying ice cream
                          Ellen Shannon                           Justyna O'Connell
                                                                                                     “If you want to resist the impulse,”    two decades ago by professors             The first is payment method. Paying                                          with sprinkles. Only the latter gives
                          Associate editor                        Design                           says Professor Dhar, “ask yourself        Drazen Prelec of the Massachusetts        by card is less visceral and therefore                                       us pangs of guilt.
                          Peter Archer                            Joanna Bird                      what else you could do with the           Institute      of   Technology      and   easier than paying with cash. In one                                           Virtuous items are those we con-
                                                                  Sara Gelfgren                    money.” His studies show that peo-        George Loewenstein of Carnegie            study, people were willing to pay                                            sider necessary and they’re more
                          Deputy editor                           Kellie Jerrard                   ple typically neglect to think of         Mellon       University,    Pittsburgh,   twice as much to bid on tickets for                                          likely to induce shopping momen-
                          Francesca Cassidy                       Harry Lewis-Irlam
                                                                                                   opportunity costs, or alternative         Pennsylvania. Think of sitting in         a basketball game if they could pay                                          tum than vice items, which make
                                                                  Celina Lucey
                                                                                                   things we could buy with the same         a taxi, staring at the meter creep        by credit card rather than in cash.                                          us pause because of the momentary
                          Managing editor                         Colm McDermott
                          Benjamin Chiou                          Samuele Motta                    amount of money. Those who do are         higher and higher. It’s painful.          Contactless payments and phone                                               guilt. So buying milk leads to more
                                                                  Jack Woolrich                    more likely to choose the cheaper                                                                                                                                subsequent purchases than buying
                          Digital content executive                                                option or buy nothing at all.                                                                                                                                    ice cream.
                          Taryn Brickner                          Head of design                                                             CONSUMERS AND THE PAIN OF PAYING
                                                                                                     Conversely, retailers can use                                                                                                                                    But there’s an effective way for
                                                                  Tim Whitlock
                                                                                                   framing techniques to get peo-                                                                                                                                   companies to counter the guilt we
                                                                                                                                             Widely cited survey of 13,000 respondents

                                                                                                                                             25%
                          Although this publication is funded through advertising and              ple to spend more. “Paying a lot                                                                                                                                 feel when buying “vice” products.
                          sponsorship, all editorial is without bias and sponsored features        for cashmere socks seems gross to                                                                                                                                It’s an age-old method: coupling vice
                          are clearly labelled. For an upcoming schedule, partnership              many people,” says Professor Dhar.                                                                                                                               products with charitable donations.
                          inquiries or feedback, please call +44 (0)20 3877 3800 or                If cashmere socks are presented                                                                                                                                  In one study, 48 per cent of people
                                                                                                                                                                           TIGHTWADS
                          email info@raconteur.net                                                 among other types of socks, we’re                                                                                                                                were likely to opt into a donation
                                                                                                                                                                           Those who spend less than
                          Raconteur is a leading publisher of special-interest content and
                                                                                                   inclined to see them as socks first                                     they ideally would like                                                                  when buying theme park tickets, but
                          research. Its publications and articles cover a wide range of topics,
                                                                                                   and consider their material second.                                                                                                                              only 32 per cent did so when buying a
                          including business, finance, sustainability, healthcare, lifestyle and
                          technology. Raconteur special reports are published exclusively in       But experiments have shown that if                                                                                                                               six-month supply of toothpaste.
                          The Times and The Sunday Times as well as online at raconteur.net        the same socks are presented along-                                                                                                                                So if a vice product is coupled

                                                                                                                                             15%                                       65%
                          The information contained in this publication has been obtained          side other cashmere goods, we cate-                                                                                                                              with a charitable donation, peo-
                          from sources the Proprietors believe to be correct. However,             gorise them as “cashmere” first and                                                                                                                              ple’s guilt is balanced by the warm
                          no legal liability can be accepted for any errors. No part of this       “socks” second, and we’re willing to                        SPENDTHRIFTS                                                                                         glow we experience when we give to
                          publication may be reproduced without the prior consent of the
                                                                                                   spend more.                                                 Those who spend                                                                                      charity and the moral satisfaction
                          Publisher. © Raconteur Media                                                                                                         more than they
                                                                                                     There’s another framing tech-                                                                                                                                  we purchase. Our pain of paying is
                                                                                                                                                               ideally would like                               UNCONFLICTED
                                                                                                   nique to increase spending. When                                                                                                                                 assuaged, while both the company
                              @raconteur         /raconteur.net            @raconteur_london       buying a new backpack, for example,                                                   Scott Rick et al, Journal of Consumer Research 2008                        and charity benefit.

                           raconteur.net                 /future-payments-2019
FUTURE OF PAYMENTS 16 - Galileo Financial
02   FUTURE OF PAYMENTS                                                                                                                                                                                                                                                     RACONTEUR.NET               03

                          FUTURE OF                                                                  BEHAVIOUR

                          PAYMENTS
                                                                                                   How spending money
                          Distributed in

                                                                                                   can buy happiness
                          Published in association with                                            Behavioural economics can reveal useful insights into our
                                                                                                   motivations and feelings when parting with hard-earned money

                                                                                                   Marina Gerner                                                                                                                                                    payments make parting with money
                          Contributors

                                                                                                                                                                                                                                       Tristan Colangelo/Unsplash
                                                                                                                                                                                                                                                                    even easier.
                                                                  Sophie Charara                              magine you’re on your way                                                                                                                               The latest example of separating
                          Paul Amery
                          Founding editor of New                  Associate editor at                 I       back from work and you                                                                                                                                purchasing from paying are check-
                          Money Review, he is a                   WIRED UK, she writes                        pop into a shop. You weren’t                                                                                                                          out-less Amazon Go shops, where
                          former asset manager                    about technology                 looking for anything in particular,                                                                                                                              people don’t consciously pay at all.
                          and trader.                             and culture.
                                                                                                   but an hour later you find yourself                                                                                                                              Hundreds of cameras around the
                                                                  Edd Gent                         walking out with a big smile and mul-                                                                                                                            store are able to detect what custom-
                          Jack Apollo George
                          Writer and media                        Freelance science and            tiple bags in tow. What happened?                                                                                                                                ers take off the shelves and automat-
                          specialist whose articles               technology writer, his           Behavioural economists call it the                                                                                                                               ically charge their Amazon account
                          on technology and culture               work has been published          effect of “shopping momentum”.                                                                                                                                   when they leave.
                          have been published by                  in the BBC, New Scientist,
                                                                                                     We like to think we’re rational con-                                                                                                                             The second factor is our disposi-
                          the New Statesman and                   Science and MIT
                                                                  Technology Review.
                                                                                                   sumers when it comes to our spend-                                                                                                                               tion. People who are tightwads and
                          CLOT Magazine.
                                                                                                   ing. After all, our financial decisions                                                                                                                          who make up about 25 per cent of the
                          Marina Gerner                           Amy Hawkins                      have a huge impact on our wellbe-                                                                                                                                population, according to one study,
                          Award-winning arts,                     China-based journalist,          ing. Think of an unforgettable holi-                                                                                                                             experience more pain when it comes
                          philosophy and finance                  she writes about                 day or a house bought at the wrong                                                                                                                               to paying than spendthrifts who
                          feature writer, her work                technology and culture,
                                                                  and has appeared in The
                                                                                                   time. But in reality, we’re emotional                                                                                                                            make up 15 per cent.
                          has been published in
                          The Economist's 1843, The               Guardian, The Sunday             creatures, susceptible to biases and                                                                                                                               “Tightwads experience a lot of dis-
                          Times Literary Supplement               Times, Foreign Policy            external factors.                                                                                                                                                tress when they make purchases,
                          and Standpoint.                         and others.                        Luckily, behavioural economics                                                                                                                                 especially the optional kind, and
                                                                                                   makes our irrationality more predict-                                                                                                                            that prevents them from spending
                          Emily Hill                              Duncan Jefferies
                                                                                                   able. In the words of Nobel prize-win-                                                                                                                           the money they think they should
                          Freelance journalist and                Freelance journalist and
                          author, she is the former               copywriter, he covers            ning economist Professor Richard                                                                                                                                 spend on certain things, and they
                          commissioning editor at                 digital culture, technology      Thaler, it’s “economics done with                                                                                                                                sometimes kick themselves after-
                          The Spectator and feature               and innovation, and              strong injections of good psychology”.                                                                                                                           wards,” says Scott Rick, associ-
                          writer for The Mail                     writes for The Guardian            When considering paying for                                                                                                                                    ate professor of marketing at the
                          on Sunday.                              and Independent Voices.
                                                                                                   goods, researchers have found that                                                                                                                               University of Michigan.
                          Alexandra Leonards                      Ouida Taafe                      buying one thing makes us much                                                                                                                                     On the other side of the spectrum,
                          Freelance journalist, she               Editor of LIBF’s Financial       more likely to buy subsequent items,                                                                                                                             spendthrifts hardly experience any
                          writes in-depth features                World, she has also worked       regardless of our previous delibera-      our tendency for “duration neglect”         But what kind of a pain is it exactly?                                     pain at all. “They just can’t stop them-
                          on a range of subjects,                 for the International            tions. Browsing things to buy online      means we don’t typically think            A brain imaging study led by                                                 selves,” says Dr Rick. Spendthrifts are
                          including current affairs,              Financing Review and
                                                                                                   or in a store, puts us in a mindset of    about how long we’re going to use         Professor Nina Mazar, a behavioural                                          largely insensitive to payment meth-
                          culture, to healthcare, tech            Telecommunications
                          and logistics.                          International.                   “deliberation”. But as soon as we buy     it for. But if people are asked to con-   scientist at Boston University, found                                        ods, but for tightwads, contactless
                                                                                                   one item, a cognitive shift to “imple-    sider how long an item is meant to        that the pain of paying is not like a                                        methods and framing techniques,
                                                                                                   mentation” occurs. “Our mind-             last, they’re likely to pay more.         physical pain. It’s more similar to dis-                                     for example if a fee is described as
                                                                                                   set changes from whether or not I           Such framing techniques influ-          tress or anxiety on a neural level; it                                       “small”, make a difference.
                                                                                                   should buy something to how do I          ence our pain threshold for pay-          can help keep our spending in check.                                           The third factor is whether we
                                                                                                   buy this?” says Professor Ravi Dhar       ing. People are, generally speak-           However, not all payments are                                              consider a product virtuous or friv-
                                                                                                   of the Yale School of Management,         ing, loss averse and the idea of a        equally painful. Research tends to                                           olous. Buying fat-free yogurt feels
                          Lead publisher                          Head of production               New Haven, Connecticut.                   “pain of paying” was coined some          revolve around three key factors.                                            different from buying ice cream
                          Ellen Shannon                           Justyna O'Connell
                                                                                                     “If you want to resist the impulse,”    two decades ago by professors             The first is payment method. Paying                                          with sprinkles. Only the latter gives
                          Associate editor                        Design                           says Professor Dhar, “ask yourself        Drazen Prelec of the Massachusetts        by card is less visceral and therefore                                       us pangs of guilt.
                          Peter Archer                            Joanna Bird                      what else you could do with the           Institute      of   Technology      and   easier than paying with cash. In one                                           Virtuous items are those we con-
                                                                  Sara Gelfgren                    money.” His studies show that peo-        George Loewenstein of Carnegie            study, people were willing to pay                                            sider necessary and they’re more
                          Deputy editor                           Kellie Jerrard                   ple typically neglect to think of         Mellon       University,    Pittsburgh,   twice as much to bid on tickets for                                          likely to induce shopping momen-
                          Francesca Cassidy                       Harry Lewis-Irlam
                                                                                                   opportunity costs, or alternative         Pennsylvania. Think of sitting in         a basketball game if they could pay                                          tum than vice items, which make
                                                                  Celina Lucey
                                                                                                   things we could buy with the same         a taxi, staring at the meter creep        by credit card rather than in cash.                                          us pause because of the momentary
                          Managing editor                         Colm McDermott
                          Benjamin Chiou                          Samuele Motta                    amount of money. Those who do are         higher and higher. It’s painful.          Contactless payments and phone                                               guilt. So buying milk leads to more
                                                                  Jack Woolrich                    more likely to choose the cheaper                                                                                                                                subsequent purchases than buying
                          Digital content executive                                                option or buy nothing at all.                                                                                                                                    ice cream.
                          Taryn Brickner                          Head of design                                                             CONSUMERS AND THE PAIN OF PAYING
                                                                                                     Conversely, retailers can use                                                                                                                                    But there’s an effective way for
                                                                  Tim Whitlock
                                                                                                   framing techniques to get peo-                                                                                                                                   companies to counter the guilt we
                                                                                                                                             Widely cited survey of 13,000 respondents

                                                                                                                                             25%
                          Although this publication is funded through advertising and              ple to spend more. “Paying a lot                                                                                                                                 feel when buying “vice” products.
                          sponsorship, all editorial is without bias and sponsored features        for cashmere socks seems gross to                                                                                                                                It’s an age-old method: coupling vice
                          are clearly labelled. For an upcoming schedule, partnership              many people,” says Professor Dhar.                                                                                                                               products with charitable donations.
                          inquiries or feedback, please call +44 (0)20 3877 3800 or                If cashmere socks are presented                                                                                                                                  In one study, 48 per cent of people
                                                                                                                                                                           TIGHTWADS
                          email info@raconteur.net                                                 among other types of socks, we’re                                                                                                                                were likely to opt into a donation
                                                                                                                                                                           Those who spend less than
                          Raconteur is a leading publisher of special-interest content and
                                                                                                   inclined to see them as socks first                                     they ideally would like                                                                  when buying theme park tickets, but
                          research. Its publications and articles cover a wide range of topics,
                                                                                                   and consider their material second.                                                                                                                              only 32 per cent did so when buying a
                          including business, finance, sustainability, healthcare, lifestyle and
                          technology. Raconteur special reports are published exclusively in       But experiments have shown that if                                                                                                                               six-month supply of toothpaste.
                          The Times and The Sunday Times as well as online at raconteur.net        the same socks are presented along-                                                                                                                                So if a vice product is coupled

                                                                                                                                             15%                                       65%
                          The information contained in this publication has been obtained          side other cashmere goods, we cate-                                                                                                                              with a charitable donation, peo-
                          from sources the Proprietors believe to be correct. However,             gorise them as “cashmere” first and                                                                                                                              ple’s guilt is balanced by the warm
                          no legal liability can be accepted for any errors. No part of this       “socks” second, and we’re willing to                        SPENDTHRIFTS                                                                                         glow we experience when we give to
                          publication may be reproduced without the prior consent of the
                                                                                                   spend more.                                                 Those who spend                                                                                      charity and the moral satisfaction
                          Publisher. © Raconteur Media                                                                                                         more than they
                                                                                                     There’s another framing tech-                                                                                                                                  we purchase. Our pain of paying is
                                                                                                                                                               ideally would like                               UNCONFLICTED
                                                                                                   nique to increase spending. When                                                                                                                                 assuaged, while both the company
                              @raconteur         /raconteur.net            @raconteur_london       buying a new backpack, for example,                                                   Scott Rick et al, Journal of Consumer Research 2008                        and charity benefit.

                           raconteur.net                 /future-payments-2019
FUTURE OF PAYMENTS 16 - Galileo Financial
04         FUTURE OF PAYMENTS                                                                                                                                                                                                                                                                                                                                                                                 RACONTEUR.NET                 05
                                                                                                                                                                                                                                                                                                                                                             Commercial feature
  B2B PAYMENTS

Streamlining the payments supply chain
                                                                                                                                                                                                                                  Five ways to simplify B2B payments
                                                                                                                                                                                                                                                                                                         Q&A
                                                                                                                                                                                                                                  01
                                                                                                                                                                                                                                                                                                         How to future-proof
                                                                                                                                                                                                                                           Public risk                court judgments against it, as
                                                                                                                                                                                                                                           scores                     well as anonymised data on its
                                                                                                                                                                                                                                                                      payment patterns gathered
Late payments can                                                                                                                                                                                                                 Fintech Swoop is developing         from open banking information.

                                                                                                                                                                                                     Matt Porteous/Getty Images
                                                                                                                                                                                                                                                                                                         your online payments
                                                                                                                                                                                                                                  a risk score for potential
have a disastrous                                                                                                                                                                                                                 business partners. The score

ripple effect                                                                                                                                                                                                                     will give SMEs instant insight,
                                                                                                                                                                                                                                  on their mobile, into whether
on the supply                                                                                                                                                                                                                     a particular firm has a good
                                                                                                                                                                                                                                  track record of fair-dealing.
chains of small                                                                                                                                                                                                                   The score will reflect publicly                                        As payments innovation continues, regulations are becoming
                                                                                                                                                                                                                                  available data about the client
businesses and                                                                                                                                                                                                                    company, such as any county                                            more complicated. Bradley Riss, chief commercial officer of
there is big room for                                                                                                                                                                                                                                                                                    Checkout.com, explains how to thrive in this changing world
improvement
                                                                                                                                                                                                                                  02        Account-to-
                                                                                                                                                                                                                                            account payment
                                                                                                                                                                                                                                                                      network. Users should be able
                                                                                                                                                                                                                                                                      to present their clients with an
                                                                                                                                                                                                                                                                      open banking-enabled invoice
                                                                                                                                                                                                                                                                                                               How are online
                                                                                                                                                                                                                                                                                                               payments changing?
                                                                                                                                                                                                                                                                                                               It’s not uncommon to see an
                                                                                                                                                                                                                                                                                                                                                       chargeback rates, reducing exposure
                                                                                                                                                                                                                                                                                                                                                       to bad actors. Plus, as retailers become
                                                                                                                                                                                                                                                                                                                                                       increasingly global and look to grow their
                                                                                                                                                                                                                                                                                                                                                                                                     smartphone was available. As payments
                                                                                                                                                                                                                                                                                                                                                                                                     increase, so does the strain on these
                                                                                                                                                                                                                                                                                                                                                                                                     systems, leading to interruptions. The
                                                                                                                                                                                                                                  Invoices that can be paid           from early next year.                    Alipay or WeChat Pay logo out-          customer base through market expan-           Financial Conduct Authority has been
                                                                                                                                                                                                                                  electronically get paid faster.                                        side Asia as retailers realise they can       sion, they must think about unique,           vocal about the negative impact of out-
                                                                                                                                                                                                                                  Currently, this means paying                                           win more customers by supporting their        local payments landscapes. Solutions          ages, noting that systems failures in the
                                                                                                                                                                                                                                  card fees. Open banking                                                preferred payment method. “Buy now,           that allow retailers to accept any type       industry are increasing. This instability
                                                                                                                                                                                                                                  will make it possible to offer                                         pay later” payments have also shown           of local payment from any country can         is unacceptable, but avoidable. We built
                                                                                                                                                                                                                                  account-to-account payments                                            high adoption, helping retailers to max-      meaningfully support a company’s long-        our platform around a modern archi-
Ouida Taafe
                                                                                                                                                                                                                                  that are either free or undercut                                       imise basket size and allow access to         term growth, while streamlining internal      tecture, leveraging the latest technolog-
                                                                                                                                                                                                                                  card payments and can be done                                          premium products by spreading out             payments operations.                          ical standards. There are no finite limits
          usiness-to-business (B2B)                                                                                                                                                                                               more or less instantaneously                                           or deferring the payment. Meanwhile,                                                        on what we could process and stabil-
  B       payments matter as small                                                                                                                                                                                                over the faster payments                                               Payment Services Directive 2 imposes                 How can online retailers and           ity is an asset when compared to the
          companies live or die by                                                                                                                                                                                                                                                                       a requirement for strong customer                    services stay up to date?              wider industry.
their cash flow. Indeed, the impor-                                                                                                                                                                                                                                                                      authentication, or SCA. There’s con-                 It’s critical to find a payments
tance of getting paid on time is one                                                                                                                                                                                                                                                                     fusion around exactly what that means                partner that can seamlessly and               Finally, what is your advice for
of the main reasons why small busi-
nesses are willing to shoulder the
cost of card payments.
                                                                                                                                                                                                                                  03        Real-time
                                                                                                                                                                                                                                            cash-flow data
                                                                                                                                                                                                                                                                      with real-time data on cash
                                                                                                                                                                                                                                                                      flow, with automated nudging to
                                                                                                                                                                                                                                                                      chase and make payments, and
                                                                                                                                                                                                                                                                                                         with regulators across Europe differing
                                                                                                                                                                                                                                                                                                         on the enforcement of the regulations,
                                                                                                                                                                                                                                                                                                         and both retailers and issuing banks
                                                                                                                                                                                                                                                                                                                                                       successfully support hundreds of cur-
                                                                                                                                                                                                                                                                                                                                                       rencies, any payment method and navi-
                                                                                                                                                                                                                                                                                                                                                       gate nuanced regulations. Checkout.com
                                                                                                                                                                                                                                                                                                                                                                                                            retailers when it comes
                                                                                                                                                                                                                                                                                                                                                                                                            to payments?
                                                                                                                                                                                                                                                                                                                                                                                                            We’ll see new payment methods,
  Before cards came along, onerous                                                                                                                                                                                                Large corporates have financial     help with optimising payment       showing varying degrees of readiness.         offers a unified payment platform, so                new card processing features.
amounts of time and money were                                                                                                                                                                                                    professionals to manage             methods to avoid charges.          When coupled with emerging payment            no matter what payment method you             This could make life harder for compa-
spent on chasing what was owed with       However, the problem ripples           apart from the owner(s) in 2018.                                                  made possible by open banking,                                 payments. SMEs, in contrast,                                           methods, it makes for a complicated           want to offer, it is a part of our rep-       nies. But if you partner with a provider
written invoices. However, though       out much further than additional         Such firms find it particularly hard                                              the requirement that, if customers                             are often too small to have                                            landscape to navigate.                        ertoire. These include Alipay, Klarna,        that can help you offer the payment
card payments have brought ben-         cost to one firm, though these           to deal with a lot of admin.                                                      ask for it, banks must share account                           dedicated in-house staff and                                                                                         Union Pay, Visa, Mastercard, Apple Pay,       choices your customers want, and with
                                                                                                                                                                                                                                  put a lot of reliance on banks,                                              Can brands keep up?                     Qiwi, iDeal and many others. In theory,       the agility to adapt and capitalise as the
efits, the scourge of late payments,
which puts 50,000 small UK firms
                                        can be very high, including bank-
                                        ruptcy. Affected firms can strug-
                                                                                   The FSB lays the blame for B2B
                                                                                 payments woes squarely at the door
                                                                                                                           At the moment, late payments            data with other financial services
                                                                                                                                                                   firms. Those firms can then use                                which can levy steep, and not                                                Online brands want to focus on          a retailer could offer these by work-         sector evolves, you’ll be at the fore-
out of business each year, according    gle to pay their own suppliers on        of large businesses. It is not alone.     are seen as a minor infraction.         the data to offer payment services,                            transparent, charges. Under                                                  their core offering and custom-         ing directly with each payment service,       front of online retail, no matter how the
to HM Treasury, has not gone away.      time, which hits the economy as          The Forum of Private Business, a                                                  including B2B payments.                                        open banking, it will be possible                                            ers, not get distracted by new          but it’s an absurd amount of work. You        market changes. A payment partner can
  “Our members face an absolute         a whole. It’s often forgotten that       trade body representing around            We want them to be seen as a              Swoop, one of the fintechs recently                          to have a mobile dashboard                                             payment methods or how to comply              could be looking at 20 payment meth-          help your business cope with the torrent
late-payments crisis,” says Craig       SMEs employ around 60 per cent           25,000 SMEs, recently put out a           public embarrassment                    awarded a £5-million govern-                                                                                                          with new payment regulations. Of              ods in a region, each requiring inte-         of requirements. Our model is based on
Beaumont, director of external          of all those in private-sector jobs in   to-do list for the incoming prime                                                 ment grant under the Banking                                                                                                          course, they know that offering the best      grations, unique reporting formats and        our clients succeeding and the core
affairs at the Federation of Small      the UK, roughly 16 million people,       minister. Top of the 18 requests was                                              Competition Remedies Scheme,                                                                                                          checkout experience, including the pay-       settlement flows. Instead, we provide         reason why businesses choose us to help
Businesses (FSB). The figures seem      and account for 52 per cent of pri-      to make 30 days a legal requirement                                               aims to be a one-stop money shop for                                                                                                  ment method customers want to use,            everything via one integration, with          them enhance and expand their pay-
to bear this out. At the end of 2018,
43 per cent of UK small and medi-
um-sized enterprises (SMEs) had to
                                        vate-sector turnover, according to
                                        the FSB. That is why any problems
                                        in B2B payments are more than
                                                                                 for the payment of invoices once
                                                                                 work is completed and provide the
                                                                                 small business commissioner with
                                                                                                                             “There are a number of reasons for
                                                                                                                           late payments,” says Sam O’Connor,
                                                                                                                                                                   SMEs and sees payments as central
                                                                                                                                                                   to good cash-flow management, says
                                                                                                                                                                   the chief executive Andrea Reynolds.
                                                                                                                                                                                                                                  04        Foreign exchange
                                                                                                                                                                                                                                            transparency
                                                                                                                                                                                                                                                                      both international payments
                                                                                                                                                                                                                                                                      and foreign currencies, and
                                                                                                                                                                                                                                                                      give them the opportunity to
                                                                                                                                                                                                                                                                                                         provides a competitive advantage, so
                                                                                                                                                                                                                                                                                                         they can’t ignore these changes either.
                                                                                                                                                                                                                                                                                                                                                       back-office and settlement services
                                                                                                                                                                                                                                                                                                                                                       normalised irrespective of the payment
                                                                                                                                                                                                                                                                                                                                                       method or market. We service both
                                                                                                                                                                                                                                                                                                                                                                                                     ment functions.

deal with late payments and, on aver-   just a hiccup.                           the ability to fine consistently poor     chief executive of Coconut, which         Ms Reynolds is bullish on the                                When small firms make               shop around with a few clicks            What are the benefits of improv-        startups and established global giants,
age, they faced a bill of £9,000 for      Since the financial crisis, there      payers. However, ensuring big firms       provides bank account, tax and          benefits data capture can bring via                            B2B payments in foreign             on a mobile app.                         ing the payment process?                such as Samsung, Virgin, adidas and           To find out more please visit
recovering the money owed, accord-      has also been a notable increase in      play by the B2B payments rules is         accounting software to the self-em-     open banking, but warns “tech-                                 currencies, they do not have                                                 With the right payments solu-           TransferWise.                                 checkout.com
ing to the UK retail payments author-   self-employment. According to the        not the only problem that needs           ployed. “For self-employed people       nology can only go so far”. There                              access to the spot foreign-                                                  tion, retailers can improve con-
ity Pay.UK. The cumulative adminis-     Office for National Statistics, 75 per   solving nor, perhaps, the only way        who service small businesses, cli-      also has to be political will to make                          exchange price banks use nor                                           version, reduce costs and curtail risk.             What about stability?
tration bill was around £4.4 billion.   cent of businesses had no employees      to help SMEs.                             ents may have relatively immature       firms pay on time.                                             the near-wholesale terms big                                           For example, on risk reduction, some                Most payment systems run on
                                                                                                                           finance processes and not be great at     However, she says the ability open                           companies command and                                                  payment types have lower reversal and               technologies built before the first
                                                                                                                           managing payments well. It can also     banking will give SMEs to see what                             often pay hefty charges on top.
L ATE-PAYMENTS CRISIS
                                                                                                                           be hard for a sole trader to stay on    they are being charged for B2B pay-                            Open banking can bring SMEs
                                                                                                                           top of late payments, so some might     ments, to shop around and find new                             transparency on the costs of
                 of SMEs owed money are being                                owed money claim that                                                                                                                                                                                                           THE OLD WAY
                                                                                                                           slip through the net. Dealing with      solutions to cash-flow problems is
                 forced to wait one month or                                 large companies are                                                                                                                                                                                                             Slow. Inefficient. Complicated by third parties. The result? Hidden costs, failed transactions, frustration and poor service
                                                                                                                           accounting and tax admin is low         already making large banks much
                 more beyond their agreed                                    the worst late paying
                                                                                                                           down on the list of priorities when     more engaged in offering new financ-

                                                                                                                                                                                                                                  05
                 terms before they are paid                                  offenders
                                                                                                                           you're trying to run a business.”       ing solutions as part of a wider mar-                                    Scheduling
                                                                                                                             Mr O’Connor says that one of the      ketplace. “Swoop has three live pro-                                     payments                  beyond traditional products,
                                                                                                                           major hurdles in improving pay-         jects with banks at the moment.                                                                    such as invoice financing, to
                                                                                                                           ments processing has already been       Banks are now looking at open bank-                            Small firms facing cash-flow        something more customised
                                                                                                                                                                                                                                                                                                               Merchant                     Payment                     Acquirer                     Payment                     Issuers
                                                                                                                           taken thanks to the arrival of mobile   ing as an opportunity, not just a mat-                         issues will be able to use open     and market                                                            gateway                                                 processor
                                                                                                                           point-of-sale (PoS) machines. “They     ter of compliance,” says Ms Reynolds.                          banking to help better schedule     responsive.
            64%                             51%                          40%                          34%                  have transformed how people get           Banks are not the only large firms                           their own payments and get
                                                                                                                           paid. Before that, it was either via    who see opportunities in B2B pay-                              improved access to short-term                                              THE CHECKOUT.COM WAY
                                                                                                                           invoice or cash, which are harder       ments. The FSB’s Mr Beaumont                                   financing. Say, for example, they                                          Fast. Direct. Reliable. You benefit from better approval rates, faster payment acceptance, and happier customers
                                                                                                                           to manage,” he says. However, PoS       points out that they took part in                              have an invoice due in 30 days,
                                                                                                                           machines still use cards, which         a roundtable with the Chancellor                               they could set up scheduled
                                                                                                                           come with fees.                         of the Exchequer in July, along-                               payments or use their own and
                           take large company                           experiencing late payments say                       The next step forward, Mr             side PayPal and other firms. “At the                           market data to organise short-
                        payment practices into                           they have to rely on overdrafts
                        account before trading                                 to help them meet their                     O’Connor argues, could be direct        moment, late payments are seen as                              term, bridge funding that goes                                                                                 Payment         Risk           Acquirer        Payment
                                     with them                                      monthly obligations                    account-to-account payments that        a minor infraction. We want them to                                                                                                         Merchant                          gateway                                       processor                         Issuers
                                                                                                                           will “either eliminate or drastically   be seen as a public embarrassment,”
                                                                                                             Pay.UK 2018   reduce payment fees”. This will be      Mr Beaumont concludes.
FUTURE OF PAYMENTS 16 - Galileo Financial
04         FUTURE OF PAYMENTS                                                                                                                                                                                                                                                                                                                                                                                 RACONTEUR.NET                 05
                                                                                                                                                                                                                                                                                                                                                             Commercial feature
  B2B PAYMENTS

Streamlining the payments supply chain
                                                                                                                                                                                                                                  Five ways to simplify B2B payments
                                                                                                                                                                                                                                                                                                         Q&A
                                                                                                                                                                                                                                  01
                                                                                                                                                                                                                                                                                                         How to future-proof
                                                                                                                                                                                                                                           Public risk                court judgments against it, as
                                                                                                                                                                                                                                           scores                     well as anonymised data on its
                                                                                                                                                                                                                                                                      payment patterns gathered
Late payments can                                                                                                                                                                                                                 Fintech Swoop is developing         from open banking information.

                                                                                                                                                                                                     Matt Porteous/Getty Images
                                                                                                                                                                                                                                                                                                         your online payments
                                                                                                                                                                                                                                  a risk score for potential
have a disastrous                                                                                                                                                                                                                 business partners. The score

ripple effect                                                                                                                                                                                                                     will give SMEs instant insight,
                                                                                                                                                                                                                                  on their mobile, into whether
on the supply                                                                                                                                                                                                                     a particular firm has a good
                                                                                                                                                                                                                                  track record of fair-dealing.
chains of small                                                                                                                                                                                                                   The score will reflect publicly                                        As payments innovation continues, regulations are becoming
                                                                                                                                                                                                                                  available data about the client
businesses and                                                                                                                                                                                                                    company, such as any county                                            more complicated. Bradley Riss, chief commercial officer of
there is big room for                                                                                                                                                                                                                                                                                    Checkout.com, explains how to thrive in this changing world
improvement
                                                                                                                                                                                                                                  02        Account-to-
                                                                                                                                                                                                                                            account payment
                                                                                                                                                                                                                                                                      network. Users should be able
                                                                                                                                                                                                                                                                      to present their clients with an
                                                                                                                                                                                                                                                                      open banking-enabled invoice
                                                                                                                                                                                                                                                                                                               How are online
                                                                                                                                                                                                                                                                                                               payments changing?
                                                                                                                                                                                                                                                                                                               It’s not uncommon to see an
                                                                                                                                                                                                                                                                                                                                                       chargeback rates, reducing exposure
                                                                                                                                                                                                                                                                                                                                                       to bad actors. Plus, as retailers become
                                                                                                                                                                                                                                                                                                                                                       increasingly global and look to grow their
                                                                                                                                                                                                                                                                                                                                                                                                     smartphone was available. As payments
                                                                                                                                                                                                                                                                                                                                                                                                     increase, so does the strain on these
                                                                                                                                                                                                                                                                                                                                                                                                     systems, leading to interruptions. The
                                                                                                                                                                                                                                  Invoices that can be paid           from early next year.                    Alipay or WeChat Pay logo out-          customer base through market expan-           Financial Conduct Authority has been
                                                                                                                                                                                                                                  electronically get paid faster.                                        side Asia as retailers realise they can       sion, they must think about unique,           vocal about the negative impact of out-
                                                                                                                                                                                                                                  Currently, this means paying                                           win more customers by supporting their        local payments landscapes. Solutions          ages, noting that systems failures in the
                                                                                                                                                                                                                                  card fees. Open banking                                                preferred payment method. “Buy now,           that allow retailers to accept any type       industry are increasing. This instability
                                                                                                                                                                                                                                  will make it possible to offer                                         pay later” payments have also shown           of local payment from any country can         is unacceptable, but avoidable. We built
                                                                                                                                                                                                                                  account-to-account payments                                            high adoption, helping retailers to max-      meaningfully support a company’s long-        our platform around a modern archi-
Ouida Taafe
                                                                                                                                                                                                                                  that are either free or undercut                                       imise basket size and allow access to         term growth, while streamlining internal      tecture, leveraging the latest technolog-
                                                                                                                                                                                                                                  card payments and can be done                                          premium products by spreading out             payments operations.                          ical standards. There are no finite limits
          usiness-to-business (B2B)                                                                                                                                                                                               more or less instantaneously                                           or deferring the payment. Meanwhile,                                                        on what we could process and stabil-
  B       payments matter as small                                                                                                                                                                                                over the faster payments                                               Payment Services Directive 2 imposes                 How can online retailers and           ity is an asset when compared to the
          companies live or die by                                                                                                                                                                                                                                                                       a requirement for strong customer                    services stay up to date?              wider industry.
their cash flow. Indeed, the impor-                                                                                                                                                                                                                                                                      authentication, or SCA. There’s con-                 It’s critical to find a payments
tance of getting paid on time is one                                                                                                                                                                                                                                                                     fusion around exactly what that means                partner that can seamlessly and               Finally, what is your advice for
of the main reasons why small busi-
nesses are willing to shoulder the
cost of card payments.
                                                                                                                                                                                                                                  03        Real-time
                                                                                                                                                                                                                                            cash-flow data
                                                                                                                                                                                                                                                                      with real-time data on cash
                                                                                                                                                                                                                                                                      flow, with automated nudging to
                                                                                                                                                                                                                                                                      chase and make payments, and
                                                                                                                                                                                                                                                                                                         with regulators across Europe differing
                                                                                                                                                                                                                                                                                                         on the enforcement of the regulations,
                                                                                                                                                                                                                                                                                                         and both retailers and issuing banks
                                                                                                                                                                                                                                                                                                                                                       successfully support hundreds of cur-
                                                                                                                                                                                                                                                                                                                                                       rencies, any payment method and navi-
                                                                                                                                                                                                                                                                                                                                                       gate nuanced regulations. Checkout.com
                                                                                                                                                                                                                                                                                                                                                                                                            retailers when it comes
                                                                                                                                                                                                                                                                                                                                                                                                            to payments?
                                                                                                                                                                                                                                                                                                                                                                                                            We’ll see new payment methods,
  Before cards came along, onerous                                                                                                                                                                                                Large corporates have financial     help with optimising payment       showing varying degrees of readiness.         offers a unified payment platform, so                new card processing features.
amounts of time and money were                                                                                                                                                                                                    professionals to manage             methods to avoid charges.          When coupled with emerging payment            no matter what payment method you             This could make life harder for compa-
spent on chasing what was owed with       However, the problem ripples           apart from the owner(s) in 2018.                                                  made possible by open banking,                                 payments. SMEs, in contrast,                                           methods, it makes for a complicated           want to offer, it is a part of our rep-       nies. But if you partner with a provider
written invoices. However, though       out much further than additional         Such firms find it particularly hard                                              the requirement that, if customers                             are often too small to have                                            landscape to navigate.                        ertoire. These include Alipay, Klarna,        that can help you offer the payment
card payments have brought ben-         cost to one firm, though these           to deal with a lot of admin.                                                      ask for it, banks must share account                           dedicated in-house staff and                                                                                         Union Pay, Visa, Mastercard, Apple Pay,       choices your customers want, and with
                                                                                                                                                                                                                                  put a lot of reliance on banks,                                              Can brands keep up?                     Qiwi, iDeal and many others. In theory,       the agility to adapt and capitalise as the
efits, the scourge of late payments,
which puts 50,000 small UK firms
                                        can be very high, including bank-
                                        ruptcy. Affected firms can strug-
                                                                                   The FSB lays the blame for B2B
                                                                                 payments woes squarely at the door
                                                                                                                           At the moment, late payments            data with other financial services
                                                                                                                                                                   firms. Those firms can then use                                which can levy steep, and not                                                Online brands want to focus on          a retailer could offer these by work-         sector evolves, you’ll be at the fore-
out of business each year, according    gle to pay their own suppliers on        of large businesses. It is not alone.     are seen as a minor infraction.         the data to offer payment services,                            transparent, charges. Under                                                  their core offering and custom-         ing directly with each payment service,       front of online retail, no matter how the
to HM Treasury, has not gone away.      time, which hits the economy as          The Forum of Private Business, a                                                  including B2B payments.                                        open banking, it will be possible                                            ers, not get distracted by new          but it’s an absurd amount of work. You        market changes. A payment partner can
  “Our members face an absolute         a whole. It’s often forgotten that       trade body representing around            We want them to be seen as a              Swoop, one of the fintechs recently                          to have a mobile dashboard                                             payment methods or how to comply              could be looking at 20 payment meth-          help your business cope with the torrent
late-payments crisis,” says Craig       SMEs employ around 60 per cent           25,000 SMEs, recently put out a           public embarrassment                    awarded a £5-million govern-                                                                                                          with new payment regulations. Of              ods in a region, each requiring inte-         of requirements. Our model is based on
Beaumont, director of external          of all those in private-sector jobs in   to-do list for the incoming prime                                                 ment grant under the Banking                                                                                                          course, they know that offering the best      grations, unique reporting formats and        our clients succeeding and the core
affairs at the Federation of Small      the UK, roughly 16 million people,       minister. Top of the 18 requests was                                              Competition Remedies Scheme,                                                                                                          checkout experience, including the pay-       settlement flows. Instead, we provide         reason why businesses choose us to help
Businesses (FSB). The figures seem      and account for 52 per cent of pri-      to make 30 days a legal requirement                                               aims to be a one-stop money shop for                                                                                                  ment method customers want to use,            everything via one integration, with          them enhance and expand their pay-
to bear this out. At the end of 2018,
43 per cent of UK small and medi-
um-sized enterprises (SMEs) had to
                                        vate-sector turnover, according to
                                        the FSB. That is why any problems
                                        in B2B payments are more than
                                                                                 for the payment of invoices once
                                                                                 work is completed and provide the
                                                                                 small business commissioner with
                                                                                                                             “There are a number of reasons for
                                                                                                                           late payments,” says Sam O’Connor,
                                                                                                                                                                   SMEs and sees payments as central
                                                                                                                                                                   to good cash-flow management, says
                                                                                                                                                                   the chief executive Andrea Reynolds.
                                                                                                                                                                                                                                  04        Foreign exchange
                                                                                                                                                                                                                                            transparency
                                                                                                                                                                                                                                                                      both international payments
                                                                                                                                                                                                                                                                      and foreign currencies, and
                                                                                                                                                                                                                                                                      give them the opportunity to
                                                                                                                                                                                                                                                                                                         provides a competitive advantage, so
                                                                                                                                                                                                                                                                                                         they can’t ignore these changes either.
                                                                                                                                                                                                                                                                                                                                                       back-office and settlement services
                                                                                                                                                                                                                                                                                                                                                       normalised irrespective of the payment
                                                                                                                                                                                                                                                                                                                                                       method or market. We service both
                                                                                                                                                                                                                                                                                                                                                                                                     ment functions.

deal with late payments and, on aver-   just a hiccup.                           the ability to fine consistently poor     chief executive of Coconut, which         Ms Reynolds is bullish on the                                When small firms make               shop around with a few clicks            What are the benefits of improv-        startups and established global giants,
age, they faced a bill of £9,000 for      Since the financial crisis, there      payers. However, ensuring big firms       provides bank account, tax and          benefits data capture can bring via                            B2B payments in foreign             on a mobile app.                         ing the payment process?                such as Samsung, Virgin, adidas and           To find out more please visit
recovering the money owed, accord-      has also been a notable increase in      play by the B2B payments rules is         accounting software to the self-em-     open banking, but warns “tech-                                 currencies, they do not have                                                 With the right payments solu-           TransferWise.                                 checkout.com
ing to the UK retail payments author-   self-employment. According to the        not the only problem that needs           ployed. “For self-employed people       nology can only go so far”. There                              access to the spot foreign-                                                  tion, retailers can improve con-
ity Pay.UK. The cumulative adminis-     Office for National Statistics, 75 per   solving nor, perhaps, the only way        who service small businesses, cli-      also has to be political will to make                          exchange price banks use nor                                           version, reduce costs and curtail risk.             What about stability?
tration bill was around £4.4 billion.   cent of businesses had no employees      to help SMEs.                             ents may have relatively immature       firms pay on time.                                             the near-wholesale terms big                                           For example, on risk reduction, some                Most payment systems run on
                                                                                                                           finance processes and not be great at     However, she says the ability open                           companies command and                                                  payment types have lower reversal and               technologies built before the first
                                                                                                                           managing payments well. It can also     banking will give SMEs to see what                             often pay hefty charges on top.
L ATE-PAYMENTS CRISIS
                                                                                                                           be hard for a sole trader to stay on    they are being charged for B2B pay-                            Open banking can bring SMEs
                                                                                                                           top of late payments, so some might     ments, to shop around and find new                             transparency on the costs of
                 of SMEs owed money are being                                owed money claim that                                                                                                                                                                                                           THE OLD WAY
                                                                                                                           slip through the net. Dealing with      solutions to cash-flow problems is
                 forced to wait one month or                                 large companies are                                                                                                                                                                                                             Slow. Inefficient. Complicated by third parties. The result? Hidden costs, failed transactions, frustration and poor service
                                                                                                                           accounting and tax admin is low         already making large banks much
                 more beyond their agreed                                    the worst late paying
                                                                                                                           down on the list of priorities when     more engaged in offering new financ-

                                                                                                                                                                                                                                  05
                 terms before they are paid                                  offenders
                                                                                                                           you're trying to run a business.”       ing solutions as part of a wider mar-                                    Scheduling
                                                                                                                             Mr O’Connor says that one of the      ketplace. “Swoop has three live pro-                                     payments                  beyond traditional products,
                                                                                                                           major hurdles in improving pay-         jects with banks at the moment.                                                                    such as invoice financing, to
                                                                                                                           ments processing has already been       Banks are now looking at open bank-                            Small firms facing cash-flow        something more customised
                                                                                                                                                                                                                                                                                                               Merchant                     Payment                     Acquirer                     Payment                     Issuers
                                                                                                                           taken thanks to the arrival of mobile   ing as an opportunity, not just a mat-                         issues will be able to use open     and market                                                            gateway                                                 processor
                                                                                                                           point-of-sale (PoS) machines. “They     ter of compliance,” says Ms Reynolds.                          banking to help better schedule     responsive.
            64%                             51%                          40%                          34%                  have transformed how people get           Banks are not the only large firms                           their own payments and get
                                                                                                                           paid. Before that, it was either via    who see opportunities in B2B pay-                              improved access to short-term                                              THE CHECKOUT.COM WAY
                                                                                                                           invoice or cash, which are harder       ments. The FSB’s Mr Beaumont                                   financing. Say, for example, they                                          Fast. Direct. Reliable. You benefit from better approval rates, faster payment acceptance, and happier customers
                                                                                                                           to manage,” he says. However, PoS       points out that they took part in                              have an invoice due in 30 days,
                                                                                                                           machines still use cards, which         a roundtable with the Chancellor                               they could set up scheduled
                                                                                                                           come with fees.                         of the Exchequer in July, along-                               payments or use their own and
                           take large company                           experiencing late payments say                       The next step forward, Mr             side PayPal and other firms. “At the                           market data to organise short-
                        payment practices into                           they have to rely on overdrafts
                        account before trading                                 to help them meet their                     O’Connor argues, could be direct        moment, late payments are seen as                              term, bridge funding that goes                                                                                 Payment         Risk           Acquirer        Payment
                                     with them                                      monthly obligations                    account-to-account payments that        a minor infraction. We want them to                                                                                                         Merchant                          gateway                                       processor                         Issuers
                                                                                                                           will “either eliminate or drastically   be seen as a public embarrassment,”
                                                                                                             Pay.UK 2018   reduce payment fees”. This will be      Mr Beaumont concludes.
FUTURE OF PAYMENTS 16 - Galileo Financial
06         FUTURE OF PAYMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                            RACONTEUR.NET                    07
                                                                                                                                                                                                                                                                                                                                                                                    Commercial feature

                                                                                                                                                                                                                                                     MmeEmil/Getty Images
  CASH
                                                                                                                                                                                                                                                                            Riding high with unicorns
Are we                                                                                                                                                                                                                                                                      As fintech consolidates, a new crop of billion-dollar unicorns is on the horizon,

sleepwalking                                                                                                                                                                                                                                                                writes Clay Wilkes, chief executive of Galileo

into a cashless                                                                                                                                                                                                                                                               F
                                                                                                                                                                                                                                                                                       inancial technology (fintech)
                                                                                                                                                                                                                                                                                       is making a significant impact
                                                                                                                                                                                                                                                                                       on our daily lives, from how
                                                                                                                                                                                                                                                                                                                         GLOBAL FINTECH FUNDRAISING
                                                                                                                                                                                                                                                                                                                         Investment volumes and deal activity by fintech category

future?
                                                                                                                                                                                                                                                                            we pay for public transport to pro-
                                                                                                                                                                                                                                                                            viding alternatives to big banks and
                                                                                                                                                                                                                                                                                                                         NUMBER OF DEALS                                                                      FUNDING ($M)
                                                                                                                                                                                                                                                                            making international money trans-
                                                                                                                                                                                                                                                                            fers cost effective. There are 11,500          818         951        1,207       1,838      2,742       3,251      1,561           4,844       13,358        21,214     23,373      26,653        55,347     22,046
                                                                                                                                                                                                                                                                            companies across the globe whose
                                                                                                                                                                                                                                                                                                                                                                                                                                                                   1%
                                                                                                                                                                                                                                                                            primary focus is fintech, with about           3%                                  3%         3%          2%          3%                                       2%          1%                        1%                        Back office
                                                                                                                                                                                                                                                                                                                                       6%          5%                                                             4%          3%                                                              3%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                   3%
Without access to cash or the right support                                                                                                                                                                                                                                 3,000 focused on payments fintech,
                                                                                                                                                                                                                                                                            getting money from one person, busi-
                                                                                                                                                                                                                                                                                                                           5%
                                                                                                                                                                                                                                                                                                                                       5%          8%
                                                                                                                                                                                                                                                                                                                                                               8%         8%          7%          6%              4%          5%
                                                                                                                                                                                                                                                                                                                                                                                                                              3%
                                                                                                                                                                                                                                                                                                                                                                                                                                           6%
                                                                                                                                                                                                                                                                                                                                                                                                                                           3%         22%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                   4%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              3%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              3%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           operations
                                                                                                                                                                                                                                                                                                                                                                                                                  6%
in a transition to digital payment, the older                                                                                                                                                                                                                               ness or government to another.                 9%
                                                                                                                                                                                                                                                                                                                                       10%         9%
                                                                                                                                                                                                                                                                                                                                                               6%         6%          7%          8%                          3%           5%                      8%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                30%          11%           Wealth/asset
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           management
                                                                                                                                                                                                                                                                              For a decade, fintech has been the                                                                                                  9%
generation will suffer                                                                                                                                                                                                                                                      darling of venture capitalists (VCs). In       9%
                                                                                                                                                                                                                                                                                                                                       9%
                                                                                                                                                                                                                                                                                                                                                              10%         11%
                                                                                                                                                                                                                                                                                                                                                                                      9%          9%
                                                                                                                                                                                                                                                                                                                                                                                                                             22%                       5%                                                  Markets
                                                                                                                                                                                                                                                                            the first half of 2019, investors poured                               9%
                                                                                                                                                                                                                                                                            $15.1 billion into fintechs globally, with     10%                                                                                                                         7%         31%            3%          25%           Current accounts
                                                                                                                                                                                                                                                                                                                                                                                      18%         15%
                                                                                                                                                                                                                                                                            54 challenger banks alone attract-                         12%                    16%         17%                                                                                                    5%
                                                                                                                                                                                                                                                                                                                                                   15%                                                           27%
                                                                                                                                                                                                                                                                                                                                                                                                                              7%          45%
Alexandra Leonards                                                                                                                                                                                                                                                          ing nearly $1.5 billion. Why so? Firstly,      9%                                                                                                                                                                              Lending
                                                                                                                                                                                                                                                                            because investors recognise the
                                                                                                                                                                                                                                                                                                                                       12%                                                        14%                                                 28%                        19%                       Insurance
                                                                                                                                                                                                                                                                            tremendous opportunity inherent in                                                15%         14%         13%
                                                                                                                                                                                                                                                                                                                                                   14%                                                                                                             9%                        14%
         he plump purses and coin-        2026, according to a report by the                                cool, if not a little scary, but they   introduce and uphold the concept of                           ing that for many this change will                        disrupting traditional banking. And, sec-                                                                                             7%

   T     heavy pockets of a once          Access to Cash Review. Although                                   contribute to the fact that cash fea-   inclusive digital design.                                     be gradual.”                                              ondly, because successful fintechs have
                                                                                                                                                                                                                                                                                                                           34%                                                                                                                                                   8%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           Payments

         cash-centric society have        it’s unlikely that cash will actual-                              tures in only 15 per cent of purchas-     “You should not expect people                                 If the UK is destined for a future of                   generated stratospheric valuations.                                                                                                                                                                                            Other
long been replaced by sleek plas-         ly disappear entirely, the report                                 es and this carries consequences for    to fit around changes, but design                             bank closures, contactless cards and                      Every VC wants in on the next Stripe                                                                      23%        25%                                       13%         8%
                                                                                                                                                                                                                                                                                                                                      30%                                                                                     51%
                                                                                                                                                                                                                                                                                                                                                                          27%                                                                                     31%
tic cards and shiny mobile devices.       does say that in 15 years’ time cash                              the elderly in Sweden.                  technology so the changes work                                a rejection of cash, then banks, fin-                     ($22.5 billion) or Adyen ($19.5 billion).                             30%         28%                                                32%                                                                         28%
The UK is experiencing what feels         could account for as little as one in                               Access to Cash Review warns that      for them, then you will start to                              techs and government bodies must                            The trajectory of fintech is about to                                                                                                                                                             23%
like a natural and inevitable move-       ten transactions.                                                 Sweden demonstrates the “dangers        see greater take up of new tech-                              take responsibility for the impact                        change, however, and the result will be                                                                                                                                    19%
ment towards a cashless society. The        It’s the rising ATM and bank clo-                               of sleepwalking into a cashless soci-   nology and see more people ben-                               this will have on the older genera-                       fewer fintech businesses overall and                                                                                                                          20%
                                                                                                                                                                                                                                                                                                                           20%                                                        21%        20%
changeover has been easy for most,        sures, a growing rejection of cash                                ety”. Namely, millions could be left    efit from it,” explains Joel Lewis,                           tion. Cash must survive for the eight                     more fintech unicorns, privately held                      16%                                16%
                                                                                                                                                                                                                                                                                                                                                   11%        13%                                                                                                 12%                        12%
but digital payment has only been         in shops – often a consequence of                                 without financial inclusion, facing     policy manager at Age UK. “Older                              million adults who would struggle in                      startups with valuations exceeding $1                                                                                                10%                                   10%                       10%
                                                                                                                                                                                                                                                                                                                                                                                                                              6%           5%
designed with financial inclusion         those branch closures – and a broad                               heightened risk of isolation, ex-       people can become accustomed to                               a cashless society and digital tech-                      billion. Within three to five years, the
of the mass market in mind, not for       movement towards digital pay-                                     ploitation, debt and rising costs.      changes and many embrace it, but                              nologies should be designed with                          number of fintech businesses is likely         2013       2014        2015        2016        2017        2018     1 H 2019         2013         2014         2015        2016        2017           2018      1 H 2019
those heavily reliant on cash.            ments driving the decline in cash                                   “The problem we have is that as       there needs to be an understand-                              financial inclusion for all in mind.                      to drop by half, while valuations of the
  For the older generation, who of-       use across the UK.                                                we use less cash and if we don’t re-                                                                                                                            remaining companies and the number                                                                                                                                                                    Accenture analysis of CB Insights data, 2019

ten depend on cash, this new-found          In Sweden, the most cashless                                    form the infrastructure, those costs                                                                                                                            of unicorns among them will soar.
dominance of digital payment is           country on Earth, payments can                                    are borne by the retailers,” says
an upward struggle. Regardless, its       now be made on messaging apps                                     Natalie Ceeney, chair of Access to                                                                      Seniors are guided by volunteers                        Fintech consolidation                          Fintech consolidation will have the                         Unicorns rising                               high-cost international money trans-        costs low, they’ll continue to attract
growing dominance shows no sign           and thousands of its citizens have                                Cash Review. “They may decide to                                                                      to download relevant mobile apps                          While fintech investment will be robust      important corollary effect of consoli-                        Strong, ongoing investment will boost         fers. Its founders, both of whom had        investment and, potentially, displace
of slowing. In fact, a straight-line      microchips implanted into their                                   go cashless because they feel they                                                                    and learn how to log into their                           for the next decade, VCs will become         dating financial data into fewer hands,                       the number of fintech unicorns. Three         been paid in foreign currencies, were       traditional banks for everyday con-
trajectory of existing trends would       hands for speedy purchases. These                                 have no choice; what happens if lo-                                                                   epayment accounts. Alongside                              more discriminating about the compa-         which is a positive outcome if the data                       years ago, there were 27 worldwide,           tired of giving up 5 per cent of their      sumer financial needs.
see a complete end to cash use by         purchasing methods might sound                                    cal authorities or utility providers                                                                  this, they learn about different                          nies they invest in. The “two developers     is handled securely and consumers                             with a combined $16.9 billion valuation.      income to currency conversion, so they
                                                                                                            do the same?”                                                                                         epayment modes, such as                                   in a garage” model of fintech innova-        control their information. Companies                          Today, there are 48, valued at $187.0         created a low-cost, fully mobile alter-     Follow the money
                                                                                                              Cash is a key part of national in-                                                                  transferring money through mobile                         tion may not be dead, but those garage       with access to the data will have an                          billion, with seven added during the          native. Today, TransferWise has five        The key to the future of fintech is
MOBILE PAYMENTS WEIGHTED TOWARDS YOUNGER PEOPLE                                                             frastructure, not just a commercial                                                                   apps, paying for food and beverage                        startups will face increasing difficulty     advantage over those that don’t,                              first half of 2019. And there’s a strong      million customers and processes $4          following the money. And the smart
                                                                                                            issue. This means it’s the duty of a                                                                  items by scanning QR codes,                               obtaining funding. Consequently,             strengthening the market positions of                         pipeline of fintechs; in the United           billion a month in currency transfers.      money is backing fintechs, particu-
Distribution of mobile payment users and the total population in the UK by age
                                                                                                            number of bodies to ensure there is                                                                   and topping up travel cards with                          the fintechs that disappear because          the “haves”.                                                  States alone, 40-plus are on the cusp           Not surprisingly, two of these            larly companies with a proven track
                                                                                                                                                                                   NemanjaMiscevic/Shutterstock

                                                                                                            financial inclusion for older people.                                                                 debit cards. They also learn about                        they’ve exhausted their funding                Galileo, for example, will grow this                        of unicorn status.                            unicorns are challenger banks and all       record of creating value by unshackling
                                                                                                              “Ensuring that older people aren’t                                                                  staying safe online and are given                         without gaining market traction, and         year to process roughly ten million                              So, what does a payment fintech            three are Galileo clients.                  banking and payments, and offering
30%                                                            Percentage of total population
                                                                                                            left behind should be a joint respon-                                                                 useful cybersecurity tips.                                there have been many, aren’t as likely       financial transactions daily. Using                           unicorn look like? Here are three UK-                                                     convenient, cost-effective services.
                                                               Percentage who use mobile payments           sibility,” says Gill Moffett, policy                                                                    "IMDA is continually refining                           to be replaced by newly minted ones.         advanced technologies, combined                               based examples.                               Challenger banks                              Later this year, for example, expect
                                                                                                            manager at Independent Age. “Al-                                                                      our Silver Infocomm Initiative                              Other fintechs will be acquired, some      with artificial intelligence, we’ll use                          Monzo ($2.5 billion), a challenger bank    During the first half of 2019, chal-        financial products that address banks’
25%                                                                                                         though many older people are hap-                                                                     to better equip seniors for the                           scooped up by traditional banks to           the immense amount of anonymous                               launched in 2015, offers an alternative       lenger banks attracted $2.5 billion,        low, zero or negative interest rates.
                                                                                                            py to use cards and mobile banking,                                                                   digital economy and society,                              strengthen their payments operations.        data generated by these transac-                              to traditional banks with a completely        an average of $45.45 million across         Look for all types of companies,
                                                                                                            it is vital that those who do need or                                                                 and this epayment learning                                Still others will merge to create larger,    tions to reduce card-based fraud                              mobile banking service that attracts          55 deals, from VC firms. To put this        beyond traditional banks and even
20%                                                                                                         want to use cash aren’t disadvan-        Singapore’s                                                  journey for seniors is our latest                         stronger businesses. And the strongest       losses to less than half the industry                         55,000 new customers a week. The              staggering number into perspective,         fintechs, to offer new, incredibly con-
                                                                                                            taged or forgotten about.”               epayment lessons                                             addition,” says Koh Li-Na, senior                         will continue to receive support from        average. Similarly, other large fin-                          company recently announced it’s               it surpasses 2018’s record investment       venient payment options. APIs (appli-
                                                                                                              Earlier this year the government                                                                    director, digital readiness                               investors, who will focus increasingly       techs will use their own big data to                          expanding to America, where it will           of $2.3 billion for the entire year.        cation programming interfaces) are
                                                                                                                                                     for seniors
15%                                                                                                         launched its Joint Authorities Cash                                                                   cluster, IMDA. “Using technology                          on proven companies in their later           fuel positive innovation.                                     take on not only traditional banks,           Investors recognise that challenger         enabling this next wave of payments
                                                                                                            Strategy Group, aimed at safeguard-      Singapore’s government body,                                 appropriately allows seniors                              funding rounds.                                                                                            but native challenger banks, including        banks are deconstructing banking,           innovation, which will lead to massive
                                                                                                            ing consumers’ access to cash. It’s a    Infocomm Media Development                                   to connect with their family                                This transition is already under-                                                                        Chime and Varo.                               unpacking the services consumers            adoption, like the explosion of mobile
10%                                                                                                         start, but there’s still much more to    Authority (IMDA), is helping                                 members, access eservices                                 way because a maturing fintech                                                                                Revolut ($1.7 billion), another chal-      want and delivering those services          apps a decade ago.
                                                                                                            be done.                                 its senior population learn                                  and enjoy the convenience of                              environment doesn’t need 11,500 par-                                                                       lenger bank launched in 2015, ena-            in a digital, easy-to-consume format          We’re only beginning this fintech
                                                                                                              The Emerging Payments Associ-          how to use epayments                                         etransactions and epayments."                             ticipants. Although we never want to                                                                       bles customers to hold cash in mul-           at attractive price points. Challenger      journey; there’s much more to come.
5%                                                                                                          ation says that cash is not a long-
                                                                                                            term fix for financial exclusion, nor
                                                                                                                                                     and empower them to use
                                                                                                                                                     technology securely and
                                                                                                                                                                                                                    IMDA organised 50 sessions
                                                                                                                                                                                                                  throughout 2018 at different
                                                                                                                                                                                                                                                                            lose the entrepreneurial spirit of two
                                                                                                                                                                                                                                                                            developers in a garage, consolidation
                                                                                                                                                                                                                                                                                                                         Challenger banks are helping                                  tiple currencies. As of late-2018, it
                                                                                                                                                                                                                                                                                                                                                                                       holds a European banking licence and
                                                                                                                                                                                                                                                                                                                                                                                                                                     banks     are    helping    consumers
                                                                                                                                                                                                                                                                                                                                                                                                                                     understand that although they need          Galileo is fintech’s tech. We power
                                                                                                            a sound foundation for 21st-centu-       confidently. This is part of                                 locations, in collaboration with                          will increase the efficiency of fintech      consumers understand that                                     offers banking services, currency and         banking services, they don’t need           the    world’s     leading   fintechs,
                                                                                                                                                     Singapore’s wider initiative to                              various community groups,                                 investments, creating businesses that                                                                      cryptocurrency exchange, and peer-to          traditional banks.                          including many current and soon-
0%                                                                                                          ry economies. If this is true, there
                                                                                                            needs to be the right support in         help its citizens take part in                               and reached out to 2,000                                  can scale, achieve profitability and
                                                                                                                                                                                                                                                                                                                         although they need banking                                    peer payments. Like Monzo, it has US            Challenger banks have some of the         to-be unicorns. Contact us for more
             16-24          25-34           35-44           45-54          55-64            65+
                                                                                                            place for elderly people to make the     the digital economy.                                         older people.                                             fulfil their mission to improve how          services, they don’t need                                     expansion plans.                              largest audiences among fintechs. If        information at galileo-ft.com/contact
                                                                                                            transition to digital payment. Regu-                                                                                                                            consumers, businesses and govern-                                                                             TransferWise ($3.5 billion) launched       they continue to expand their bases
                                                                                          UK Finance 2018   lators must work with businesses to                                                                                                                             ments handle their money.                    traditional banks                                             in 2010 to solve the problem of               while keeping customer acquisition
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