With Governments increasingly aware of the moral and fiscal costs of white-collar crime, the Dutch crime authority’s decision to hit ING, the Netherlands largest financial services provider, with fines totalling €775 million is of little surprise.
Tackling money laundering is currently high on the national and international agenda of many countries; the EU recently proposed providing the European Banking Authority with greater powers to sanction banks of member states that may be implicated in such activity.
In the case of ING, the bank has been forced to pay out the substantial fine for failing to flag abnormal transactions, and financing terrorism “structurally” by not verifying the beneficiaries of client accounts. The Dutch public prosecution service said that it found “clients were able to use accounts held with ING for criminal activities for many years, virtually undisturbed” from 2010 to 2016. The settlement, which is the largest ever imposed on a company by the Dutch prosecution service, is made up of €675 million in fines, and €100 million as the return of illicit gains intended to deter future violations.
The bank’s CFO has since announced his decision to step down following growing backlash. In addition, measures against ten employees were taken, ranging from dismissals to clawing back bonuses, with the prosecutor accusing the bank of “culpable money laundering”.
This is not a stand-alone case either; watchdogs have clamped down on Credit Suisse and Danske Bank this month over similar money laundering concerns. With authorities prepared to take a hard-line stance against money laundering, there will be severe reputational and financial consequences for organisations which – however unintentionally – enable this offence.
The focus is not simply on the culprits of money laundering, but on ensuring perpetrators have fewer tools to commit such crimes. The relevant authorities will increasingly take a punitive approach to financial institutions with lax crime prevention strategies. Financial institutions, whatever their size, must ensure their tools are inaccessible to those seeking to commit financial crime, or otherwise face extensive fines comparable to ING’s.
This is no easy task and requires a significant investment of time and resource. Banks must ensure they have robust financial crime compliance strategies and programmes in place with appropriate training to reduce risk and mitigate the consequences. This was a point that was not lost on Ralph Hamers, ING’s CEO, who stated that “although [ING’s] investment … [has] been increasing since 2013, they have clearly not been to a sufficient level”.
However, matters should not stop there; processes require frequent review given that criminals adopt increasingly sophisticated strategies to commit offences. Banks, therefore, must remain proactive and vigilant. To this end, the Dutch prosecutor noted that ING’s compliance department “was understaffed and inadequately trained”. In the case of ING, compliance failures were exploited by clients for years for money laundering practices before it was detected.
Effective streamlined processes, such as customer screening and alert processing, informed by risk assessments and financial crime regulations should leave little room for error during due diligence activities.
Iskander Fernandez, White Collar Crime Expert and Partner at commercial law firm BLM
The estimated 1.8 million British expats living in the EU should consider reviewing their personal financial strategies as ‘no-deal’ Brexit looks increasingly likely, warns the deVere Group.
The warning from James Green, deVere Group’s divisional manager of Western Europe, comes after British Prime Minister Theresa May claimed that a no-deal Brexit “wouldn’t be the end of the world,” as she sought to downplay statements made by Chancellor Philip Hammond.
It also follows the UK government publishing last week its first technical notices advising businesses and consumers on the preparations being done for the prospect of there being no Brexit deal.
Mr Green comments: “A no-deal Brexit is now expected by a growing number of experts and the wider population to be the most likely outcome.
“If the UK crashes out of Europe with no deal in place, the estimated 1.8 million expats living in the EU could be financially impacted in two key ways.
“First, the pound would inevitably suffer and it could fall hard. This would deliver another heavy and serious blow for those who receive UK pensions or income in pounds as the cost of living, in effect, would be significantly more expensive.
“Second, unless there is considerable post-Brexit collaboration between the UK and EU there is a risk that existing payments from British companies, including pension and insurance companies, to those living within the European Economic Area (EEA) could be disrupted or even made impossible. Of course, this would be a major inconvenience to many UK expats.”
He continues: “Against this chaotic backdrop it is prudent that British expats in the EU consider reviewing their personal financial strategies sooner rather than later with a cross-border financial expert. This will help best position them not only to mitigate the risks of a no-deal Brexit, but also to enable them to take advantage of potential opportunities that may arise.”
Mr Green concludes: “Unfortunately, a smooth and orderly exit of the EU is looking increasingly unlikely and this can be expected to hit the finances of many expats.
“They should seek to make their financial strategies ‘no deal Brexit’ proof.”
(Source: deVere group)
The United Kingdom, specifically London, has built a position as Europe’s primary financial hub, bridging the gap between the European Union and Asia, the United States and other regions. After Brexit comes into effect in March 2019, this once unassailable position will no longer be certain if it becomes more difficult for banks and other financial enterprises to provide services to EU clients due to a loss of ‘passporting’ rights – if no contingency plans are made.
Many financial institutions are not waiting to see how Brexit plays out and are seriously considering – or already planning – to move at least part of their operations to remaining EU countries in order to be prepared for any fallout from Brexit. Hiring rates in London’s financial sector have already halved, according to LinkedIn – reportedly due to the uncertainty surrounding Brexit and how it will impact the industry. Research from EY shows almost a third of banks and asset managers in the City of London confirmed that they are looking at moving staff to locations such as Dublin, Amsterdam and Frankfurt.
As a result, teams will be scattered across numerous time-zones and locations, with more employees likely to be working from remote locations, including their homes. Connecting a relocated and dispersed workforce is no easy task, and if the process is not well managed, it can cause serious disruption to day-to-day activities. Banking and financial services organisations need to have the right tools in place to ensure far-flung teams can communicate effectively and implement a standardised and coordinated way of working so that employees do not have to flit between numerous applications to complete tasks, collaborate on projects, monitor progress, manage resourcing and track deadlines. Fortunately, disruption can be minimised by utilising tools that nurture joined working environments despite geographical barriers and offer structure that keeps employees at different locations on the same page – in real time.
The challenges of collaborating across borders
Remote working is not new phenomenon – it’s widespread and a hugely popular way of working –
But many businesses are still trying to overcome the barriers it presents to communication and collaboration. Clarizen’s own research has shown that some of the most prevalent issues workers struggle with when working remotely include:
- Struggling to communicate with colleagues;
- Difficulty to remain efficient;
- Limited access to up-to-date documents;
- Finding it difficult to prioritise.
The banking and finance industry needs to ensure that these issues are resolved before Brexit takes place. Otherwise, the serious and negative impact they have on effective collaboration, productivity and business profitability. Having to relocate operations is just one area of business that organisations need to navigate as the UK continues its withdrawal from the EU.
Internal company restructuring, product and services analysis and engagement planning are also elements businesses have to plan and execute, which is why it’s so important that teams have tools that facilitate a coordinated work environment during this tumultuous period.
Equipping employees with the tools to succeed
During Brexit and beyond, banking and financial organisations need to ensure employees are equipped with tools that help promote coordination between dispersed teams, while maximizing efficiency. Recent research from Clarizen found that almost three quarters of respondents said that what they specifically need to boost communication and collaboration among employees is technology, structure and support that enables them to overcome geographical barriers and the gap between time zones to increase productivity, ensure management oversight and foster flexibility.
What can help achieve this is a cloud-based platform that enables real-time collaboration across locations and empowers teams to coordinate workflow, track progress, align goals, allocate budget and meet deadlines from any device and location.
Overcoming communication overload
Ahead of Brexit, businesses need to ensure that they pick the right tool to maximize productive interactions between employees. Some businesses have previously used social media apps to facilitate easy and frequent employee discussion – such as WhatsApp and Facebook – in the belief they would streamline communications between workers and reduce long email chains that cause frustration and confusion. Unfortunately, such applications have often only served to encourage non-work chat and oversharing of irrelevant information that doesn’t bring employees any closer to meeting business objectives.
In a bid to become more focused in their approach, businesses have been turning to business-focussed communication apps. A recent global survey showed that, in the past year, companies deployed one or more of the following apps to improve productivity: Skype (39%), Microsoft Teams (14%), Google Hangouts (8%) and Slack (7%). Yet, even then, efforts to boost productivity proved fruitless as they merely became a place for office banter and overloaded people with numerous notifications and interruptions, which negatively impacts productivity.
It’s a modern workplace malady that has been dubbed ‘communication overload’, which is symptomized by workers struggling under the weight of clusters of unfocused messages, meeting requests and unnecessary interruptions. Clarizen’s research indicates that, in the end, apps that fail to directly link communication to business activities, aims and status updates actually hamper collaboration, effectiveness and efficiency. The survey showed that 81% of respondents said that, despite taking steps to improve communication among employees, they still lack a way to keep projects on track and provide management oversight – and only 16% of the companies surveyed said productivity levels were ‘excellent’ – while a nearly quarter said they were ‘just OK’ or ‘we need help’.
Looking ahead to a post-Brexit world
Brexit presents the banking and finance industry with a number of challenges that could put successful collaboration – and ultimately revenues and profits – at risk. However, by employing tools and methods that encourage an environment that nurtures a truly collaborative environment – where communication is in a business context and reporting in real time – the sector can enhance productivity and business agility, taking some of the sting out of any staff redeployments necessitated by Brexit. Even though it’s not clear what shape Brexit will take, there is no reason businesses in the banking and finance sector cannot minimise disruption and its potential costs by providing their employees with an approach and the tools they need to succeed during Brexit and beyond.
Website: https://www.clarizen.com/
Amidst the recent shock resignations of Brexit Secretary David Davis and Foreign Secretary Boris Johnson, investment uncertainty, slower economic growth and a weaker pound, the United Kingdom is on its way to a slow but steady Brexit, with negotiations about the future relations between the UK and the EU still taking place.
And whilst the full consequences of Britain’s vote to leave the EU are still not perceptible, Finance Monthly examines the effects of the vote on economic activity in the country thus far.
Do you remember the Leave campaign’s red bus with the promise of £350 million per week more for the NHS? Two years after the referendum that confirmed the UK’s decision to leave the European Union, the cost of Brexit to the UK economy is already £40bn and counting. Giving evidence to the Treasury Committee two months ago, the Governor of the Bank of England Mark Carney said the 2016 leave vote had already knocked 2% off the economy. This means that households are currently £900 worse off than they would have been if the UK decided to remain in the EU. Mr. Carney also added that the economy has underperformed Bank of England’s pre-referendum forecasts “and that the Leave vote, which prompted a record one-day fall in sterling, was the primary culprit”.
Moreover, recent analysis by the Centre for European Reform (CER) estimates that the UK economy is 2.1% smaller as a result of the Brexit decision. With a knock-on hit to the public finances of £23 billion per year, or £440 million per week, the UK has been losing nearly £100 million more, per week, than the £350 million that could have been ‘going to the NHS’.
Whether you’re pro or anti-Brexit, the facts speak for themselves – the UK’s economic growth is worsening. Even though it outperformed expectations after the referendum, the economy only grew by 0.1% in Q1, making the UK the slowest growing economy in the G7. According to the CER’s analysis, British economy was 2.1 % smaller in Q1 2018 than it would have been if the referendum had resulted in favour of Remain.
To illustrate the impact of Brexit, Chart 1 explores UK real growth, as opposed to that of the euro area between Q1 2011 and Q1 2018.
As Francesco Papadia of Bruegel, the European think tank that specialises in economics, notes, the EU has grown at a slower rate than the UK for most of the ‘European phase of the Great Recession’. However, since the beginning of 2017, only six months after the UK’s decision to leave the EU, the euro area began growing more than the UK.
Reflecting on the effect of Brexit for the rest of 2018, Sam Hill at RBC Capital Markets says that although real income growth should return, it is still expected to result in sub-par consumption growth. Headwinds to business investment could persist, whilst the offset from net trade remains underwhelming.”
All of these individual calculations and predictions are controversial, but producing estimates is a challenging task. However, what they show at this stage is that the Brexit vote has thus far left the country poorer and worse off, with the government’s negotiations with the EU threatening to make the situation even worse. Will Brexit look foolish in a decade’s time and is all of this a massive waste of time and money? Or is the price going to be worth it – will we see the ‘Brexit dream’ that campaigners and supporters believe in? Too many questions and not enough answers – and the clock is ticking faster than ever.
The financial services industry must “unite and fight” against a no-deal Brexit that potentially erodes clients’ rights and damages the financial sector itself.
This warning from deVere Group founder and CEO, Nigel Green, comes as the UK's International Trade Secretary, Liam Fox, said that Britain should accept a ‘no-deal’ scenario, instead of requesting more negotiating time.
It also follows MPs being told earlier this week by the Association of British Insurers that it could be “illegal” to pay private pensions to British expats if the UK crashes out of the EU with no deal.
In addition, the City of London is claiming that Brexit will cost Britain up to 12,000 financial services jobs in the short-term, with many more potentially disappearing in the longer term.
Mr Green says: “Now is the time for the financial services industry to unite and fight against a no-deal Brexit that potentially erodes clients’ rights, protections and freedoms. It must also stand against it potentially damaging the financial sector itself.”
He continues: “It is an outrage that if the UK crashes out of the EU, and free movement of capital stops because there is no agreement in place, people could stop receiving their hard-earned retirement income, saved over many years, simply because they have chosen to live outside the UK, which they are perfectly entitled to do.
“As an industry we need to step up, lobby the policymakers, and ensure clients are secure on this issue, amongst others. We need politicians to guarantee their rights, choices and safeguards as a matter of urgency.”
Mr Green goes on to say: “This latest warning, and the ongoing uncertainty, is likely to trigger even more people who are eligible to do so to consider moving their British pensions out of the UK into HMRC-recognised pensions while they still can.
“Many will be seeking to safeguard their retirement funds by transferring them into a secure, regulated, English-speaking jurisdiction outside the UK.”
The deVere CEO adds: “The financial sector also needs to make its own voice heard.
“The industry needs continuity and certainty. What it does not need is the chaos and the expense of a no-deal Brexit.
“A no-deal scenario will likely mean a reduction of the services and products that we are able to offer clients, as well as increased costs for businesses and, ultimately, the client.
“Therefore, we must actively engage with politicians – who largely seem only to have their own political agenda at heart - to prevent this from happening.”
(Source: deVere Group)
The European funds industry still has major concerns over Brexit and the fear and uncertainty that comes with it, according to new research with European fund managers.
More than half of respondents (55%) say that Brexit continues to be one of the biggest issues facing the funds industry in 2018. However, the study, conducted by online board portal provider eShare with delegates at the recent FundForum International event in Berlin, also revealed the funds industry was generally optimistic about prospects for the industry in 2018 and beyond - 82% believe that the funds market is generally buoyant despite political and economic affairs.
“The fund management industry has faced much pressure over the past few years, with new regulation intended to improve transparency adding many layers of complexity to governance and compliance programs,” said Camilla Braithwaite, Head of Communications, eShare. “But confidence amongst European fund managers remains high despite this, with Brexit the only main concern for many. However, with the major decisions over Brexit and its impact on financial services still to be made, fund managers are proceeding as normal until they know more and the industry is thriving because of it.”
The new regulations, such as GDPR and MiFID II, have undoubtedly affected the industry though, with fund managers increasingly aware of the risks that come with non-compliance. 84% of those surveyed felt that their organisation could improve the operations surrounding risk management and decision-making.
With fund managers facing tough decisions about compliance, investments and many other factors, the ability to be transparent about such matters was one of the most important things identified by survey respondents. 97% said that demonstrating transparency into decision-making is increasingly important for the industry.
As the pressure grows on fund managers to be compliant and well-governed, so the need for transparency increases too. 84% of respondents said that technology is the future for improving governance standards within the funds industry.
“Transparency is essential in modern fund management and demonstrating this is right at the top of the agenda for most fund managers, keen to reassure clients and regulators alike,” continued Camilla Braithwaite. “Technology can play a significant role in this, showing how decisions were reached and supporting governance and compliance requirements. The industry has woken up to the potential of technology to help in this way, and the research would suggest that the mood within fund management is positive.”
(Source: eShare)
In light of last week’s events surrounding markets and Brexit talk, Rebecca O’Keeffe, Head of Investment at interactive investor comments for Finance Monthly.
There is no doubt that President Trump has been highly positive for US equity markets, which has fed through to rising global markets, but his increasingly erratic behaviour is making it very difficult for investors to work out whether he remains a friend or foe. His America first policy is designed to play well at home, but in classifying the rest of the world as competitors rather than allies, he has increased tensions and raised geopolitical risks for investors.
Bank of America, Blackrock and Netflix all report second quarter earnings today, which may provide further clarity for financials and the outperforming technology sector. Mixed results from three of the big US banks on Friday saw bank stocks fall, so today’s figures from Bank of America should provide further clarity for financials. Technology stocks have been the place to be invested in the first half of the year with the Nasdaq up over 13% compared to relatively flat performance elsewhere. The first of the FANGS to report, Netflix earnings are hugely important for investors to confirm whether the outperformance of technology stocks is warranted or if the market has got ahead of itself.
Calls for a second referendum and a coordinated effort by Brexiteers to undermine Theresa May’s policy and position means this could be a make or break week for the Prime Minister. Having set out a radical plan to seek what she believes is the best possible deal for the UK economy, Theresa May must now try to sell the deal to parliament this week. The hard-line Brexiteers have already indicated their objections, but they could also instigate a direct challenge to May’s leadership if they can secure the 48 Tory MP signatures necessary for a leadership ballot. After months of failed negotiations and an increasingly divisive government, this week is pivotal for Theresa May.
Refugee crisis, political turbulences, economic struggles brought on by austerity and Brexit. Katina Hristova explores the crisis that the European Union has found itself in.
"The fragility of the EU is increasing. The cracks are growing in size”, warns EU Commission Chief Jean-Claude Juncker. With Italy’s Government crisis finally being resolved and the country’s shocking rejection of NGO migrant rescue boats, it has been easy to detract from the political earthquake that the third largest EU economy experienced and the quick impact that it had on the Euro. But Europe’s problems go deeper than Italy’s political turbulences. A month ago, Spain, the fourth biggest Eurozone economy, was faced with a very similar crisis and even though the country now has a new leader, analysts believe that the Spanish instability is not over yet. With the shockwaves of both countries’ political uncertainty being felt on Eurozone markets, on top of migration pitting southern Europe against the north and as the UK marches on towards Brexit whilst Trump abandons the Iran Nuclear Deal, which could mean the end of the transatlantic alliance between the US and Europe, is the EU in serious trouble?
Why is it so serious?
Billionaire Investor George Soros is one of those people that can sense when social change is needed and when the current cultural and political processes are about to collapse. A month ago, in a speech at the European Council on Foreign Relations, Soros claimed that: “for the past decade, everything that could go wrong has gone wrong”, believing that the European Union is already in the midst of an ‘existential crisis’. The post-2008 policy of economic austerity, or reducing a country’s deficits at any cost, created a conflict between Germany and Greece and worsened the relationship between wealthy and struggling EU nations, creating two classes – debtors and creditors. Greece and other debtor nations had sluggish economies and high unemployment rates, struggling to meet the conditions their creditors set, which resulted in resentment on both sides toward the European Union. Back in 2012, the European countries that struggled with immense debt, malfunctioning banks and constant budget deficits and needed help from other member countries were Portugal, Ireland, Greece and Spain. In order to help them the creditors countries set conditions that the debtors were expected to meet, but struggled to do so. And as Soros points out: “This created a relationship that was neither voluntary nor equal – the very opposite of the credo on which the EU was based”.
Although Italy finally has a government, after nearly three months without one, the financial markets are apprehensive about what to expect next, considering the country’s €2.1 trillion debt and inflexible labour market. On 29 May, fearing the political crisis in the country, the Euro EURUSD, +0.6570% slid to a six-month low, whilst European stocks ended sharply lower, with Italy’s FTSE MIB I945, +1.43% ending 2.7% lower, building on the previous week’s sharp losses. Bill Adams, senior international economist at PNC believes that: “The situation serves as a reminder that political risk in the Euro area hasn’t gone away. Italy is not on an irrevocable road to anything at this point,” he said. “I think what is most likely is another election later this year, and what we’ve learned is that outcomes of elections are very unpredictable.”
Spain on the other hand has made huge progress since being on ‘EU life support’ when ‘its banks were sinking and ratings agencies valued its debt at a notch above junk, on a par with Azerbaijan’. Since receiving help, the country’s economy has been growing, unemployment is not as high and its credit rating has been restored. However, with the Catalonia separatism, and the parties, Podemos and Ciudadanos who have emerged to challenge the old duopoly between the Popular Party (PP) and the Socialists, the political uncertainty in the country is set to continue.
Greece has been in a permanent state of crisis for a decade now, with its current debt of 180% of its gross domestic product (in comparison, Italy's is 133%). In less than two months, on 20 August, the country is due to exit its intensive care administered by the European Central Bank and International Monetary Fund. The EU will then have to come up with a new debt relief offer on the $280 billion Greece still owes – which could be challenging, as the ‘creditors’ are not in a charitable mood.
In contrast, Poland and Hungary are financially stable, however, both countries seem to be in opposition to the EU with regards to immigration, the independence of the judiciary, ‘democratic values’ and freedom of the press. Both governments have dismissed EU plans to share the burden that the Mediterranean region carries in terms of migrants arriving into these countries. In addition to this, Hungary’s Prime Minister is promoting an ‘illiberal’ alternative to European consensus, whilst Poland has sided with the US and against its European partners on a range of subjects, including the Iran sanctions and Russian gas pipelines.
And of course, let’s not forget the EU’s list of unsolved issues – the main one being Brexit. With nine months until its deadline, the terms of Britain’s exit from the EU are nowhere near finalised.
Make the EU an association that countries want to join again
Today, young people across the continent see the European Union as the enemy, whilst populist politicians have exploited these resentments, creating anti-European parties and movements.
Since its establishment, the EU, an association that was founded to offer freedom, security and justice without internal borders, has survived many turbulences. Although the current crisis is based on a number of deep-rooted problems, odds are that these challenges will be overcome. To save the EU, Soros believes that it needs to reinvent itself via a ‘genuinely grassroots effort’ which allows member countries more choice than is currently afforded.
"Instead of a multi-speed Europe, the goal should be a 'multi-track Europe' that allows member states a wider variety of choices. This would have a far-reaching beneficial effect."
And even though he isn’t offering a proposition for a bill that someone needs to draft and pass as soon as possible, he has opened a conversation - a conversation about moving away from the EU’s unsustainable structure. “The idea of Europe as an open society continues to inspire me”, says Soros. And in order to survive, it will have to reinvent itself.
An independent study commissioned by Dun & Bradstreet reveals a UK business community that believes it has already lost out due to the EU referendum. When asked how the Brexit process has affected business finances, 43% of business leaders say they have felt a negative financial impact since the Brexit vote. More than a third (37%) say they have lost out on potential revenue and, on average, businesses say 19% of their revenue will be put at risk by Brexit.
Two years on from the vote, almost a third of business leaders (32%) reveal that their organisation has or is planning to reduce UK investment, and almost a quarter (23%) have already halted or slowed their plans for expansion in the UK. This suggests businesses could be considering moving activities elsewhere in the EU or beyond, or simply downsizing the scale of activities in the UK.
When asked about their initial reaction to the 2016 EU referendum in a previous survey, business leaders’ views mirrored those of the general population, with 42% saying it was positive and 41% negative. Despite this fairly even split of opinion initially, it appears that optimism has waned significantly since then. The recent study found only 23% of leaders feel that the impact of Brexit has been positive, with 42% citing that Brexit has had a negative influence on their business.
Political instability, including Brexit, has been the biggest challenge that the majority (51%) of businesses have faced over the past two years. Many are still unsure of how the negotiations and outcomes will affect their business and views remain split. Almost a quarter (24%) say leaving the single market will impact them most, followed by the regulatory landscape (18%), the length of the potential transition period (15%) and the settlement on migration (13%).
However, the research also highlighted that not all businesses believe Brexit will have an impact on their business, positively or negatively, and in fact, a fifth (21%) of businesses believe that Brexit will have no impact at all. Moreover, over half (51%) of business leaders feel the impact of Brexit has not been as negative as they first anticipated. Perhaps most critically, over half of businesses are confident that they will survive and thrive after Brexit.
Commenting on the results, Edward Thorne, Managing Director UK of Dun and Bradstreet said: “As we move closer to the Brexit deadline, it’s evident that there is still a high level of uncertainty amongst UK businesses about their future in a post-Brexit era. Our research suggests that businesses have already been affected financially and are still unclear about further impacts once the UK does leave the EU. How businesses get ahead and plan for Brexit will be crucial to their future success.”
(Source: Dun & Bradstreet)
Although the Markets in Financial Instruments Directive II (MiFID II) was implemented at the start of the year, work for the financial services industry to comply with this new regulation is far from over. Still remaining are a number of uncertainties, with multiple milestones and deadlines for specific requirements set throughout 2018 and beyond.
Hailed as one of the biggest overhauls of the financial services industry in decades, MiFID II introduced 1.4m paragraphs of rules and a number of new obligations for firms operating in the sector. These included new and extended transparency requirements, new rules on payments for research, increased competition in trading and clearing markets and guidelines to promote financial stability. With many of these rules being delayed or their introduction staggered over the course of the year, there is still a challenging path for the industry to navigate.
Below, Matt Smith, CEO of compliance tech and data analytics firm SteelEye, explains for Finance Monthly the key steps financial organisations should take over the course of the year to ensure they are meeting MiFID II’s demands.
Q2 2018: Best execution under RTS27 and 28
MiFID II has two major “best execution” requirements which must be met by financial services firms – regulatory standards RTS27 and 28. As part of their obligations, RTS28 mandates that firms report their top five venues for all trading. With a deadline of April 30, the purpose of RTS 28 is to enable the investing public to evaluate the quality of a firm’s execution practices. Firms are required to make an annual disclosure detailing their order routing practices for clients across all asset classes.
Obligations include extracting relevant trade data, categorising customers and trading activity, formatting the data correctly in human and machine readable formats, adding analytical statements and placing all of this information in a publicly available domain.
Limiting disclosure to five trading venues makes complying with these obligations relatively simple for small firms with straightforward trading processes. As a firm’s activity increases in complexity, however, so does its reporting obligation and managing RTS28’s data component could become a significant burden, as compliance departments spend time classifying trades, normalising data, formatting reports and completing administrative tasks.
RTS28 is followed soon after by RTS27, which will hit the industry on June 30. RTS27 requires trading venues to provide quarterly best execution reports, free of charge and downloadable in machine readable format, and is intended to help investment firms decide which venues are most competitive to trade on. All companies that make markets in all reportable asset classes that periodically publish data relating to the quality of execution will be required to comply with RTS27.
The necessary publication of these reports requires the gathering and analysis of a significant quantity of data, which must detail price, costs, speed and likelihood of execution for individual financial instruments. Investing in the right technology ahead of the June deadline will ensure firms have the solutions needed to help digest such data and analyse it to inform their trading decisions. As we move through 2018 and 2019 however, analysis of this data, rather than being an additional burden, should help firms refine their best execution processes and generate a competitive business edge.
Q3 2018: Increasing transparency under Systematic Internalisers
One of MiFID II’s main aims was increasing transparency in the financial services industry in an attempt to avoid repetition of the 2007-2008 financial crash. In order to do this, a number of new rules attempting to regulate ‘dark pool’ trading were implemented, allowing regulators to police them more effectively and bring trading onto regulated platforms.
This system of increased transparency is designed to be effected through MiFID II’s new expanded Systematic Internaliser (SI) regime, the purpose of which is capturing over-the-counter trading activity to increase the integrity and fairness of industry trading and reduce off-the-book trades. For a firm to become an SI, they must trade on their own account on a ‘frequent and systematic basis’ when executing client orders. However, it is currently unclear what precisely ‘frequent and systematic’ means and as a result, many in the industry have been left without the necessary guidance to be able to implement these new rules correctly.
In August 2018, ESMA is set to publish information on the total number and volumes of transactions executed in the EU from January to June 2018. Any firm that has opted in under the regime or that meets the pre-set limits for ‘frequent and systematic’ basis will thereafter be classified as an SI under MiFID II.
The deadline for SI declaration follows shortly afterwards in September, which is when investment firms must undertake their first assessment and, where appropriate, comply with the SI obligations, which will become a quarterly obligation from then on.
Firms’ reporting obligations will increase considerably should they be classed as an SI. They will be required to notify their national competent authority; make public quotes to clients on request for their financial instrument; publish instrument reference data, post-trade data, and information on execution quality; and disclose quotes on request in illiquid markets. Adopting an effective pre- and post- trade transparency solution can help any firm set to be classified as an SI in September meet their obligations well ahead of the deadline in four months’ time.
Q4 2018: The impact of the pricing of research
Another major change under MiFID II is the regulation’s new rules on payment for research, which had previously been distributed to fund managers, effectively free of charge, but paid for indirectly through trading commissions. The provision of equity research is now considered to be an inducement to trade and the sell-side is only able to distribute their research to fund managers that pay for it. Moreover, an extra burden of red tape and reporting is being introduced as, by the end of 2018, investment firms must have provided clients with detailed information related to the costs and associated charges of providing investment services.
Research has effectively moved from an unpriced to a priced model and fund managers are now having to find a budget for research, with most firms electing to absorb that cost, which will inevitably impact their bottom line. The sell-side meanwhile will have to grapple with how to price their research, an unenviable task, given JPMorgan’s strategy to grab market share from smaller rivals by charging $10,000 for entry-level equity research.
Even before the aggressive pricing strategy adopted by the investment banking behemoth, the sell-side was facing consolidation and significant analyst job losses as the shrinkage of overall payments for research services to investment banks continues and asset managers become increasingly selective about the products and services they procure from investment banks. What is already certain is that the pricing and quality of investment research will be subject to closer scrutiny than ever before, driving up competition among research providers and triggering fragmentation and innovation in the marketplace.
Q1-2 2019: The UK’s departure from the European Union
While the FCA has stated that Brexit – at least currently – will not have an impact on their enforcement of MiFID II rules, the UK’s departure from the EU still leaves considerable uncertainty for those in the market. One recent survey found that 14% of surveyed compliance professionals had no idea how Brexit would affect their compliance requirements.[1] There is speculation that the UK could opt for ‘MiFID II-lite’ in all or some areas in order to better align it with the UK’s financial markets. This could mean that, while the industry must comply with MiFID II for this next year, after April 2019 a whole host of new rules and amendments could come into force.
As one of the core architects of the MiFID II rules, including many of its record-keeping and reporting principles, the FCA is unlikely to favour watered-down standards that could see London regarded as a less safe or transparent marketplace. However, with so much still up in the air, preparations should be made in order to ensure a swift transition once Brexit comes into force.
The strength of the UK’s regtech and fintech offering means the City should be well-placed to adapt to whatever shape MiFID II takes post-Brexit. To help prepare, strategy teams should work on plans for various post-Brexit scenarios in order to help weather the challenges that the UK’s EU departure will bring. UK players will undoubtedly emphasise their strengths in financial talent, product development, AI, fintech and regtech, helping the UK retain its leading position in the European financial market.
[1] https://www.thetradenews.com/uk-compliance-managers-predict-mifid-ii-exemption-post-brexit/
According to many reports, Italy’s ongoing political failure has potential to bring the Eurozone crashing down, which in turn could cause mass impact across the globe’s economy, both short term and long term.
In a recent turnoff events, both parties Five Star Movement and Lega Nord have been committed to the Italian government following a period of limbo since the March general election. Italy currently represents almost a fifth in the Eurozone economy and is feared as “too big to be saved.” Giuseppe Conte has been appointed the interim PM.
Below Finance Monthly has collected Your Thoughts in this financial debacle, summarising some points of expertise form top reputable sources across Europe.
Daniele Fraiette, Senior Economist, Dun & Bradstreet:
Italy’s new prime minister, Giuseppe Conte, will need to try and strike a balance between reassuring European partners about Italy’s permanence in the eurozone, and the 5SM’s and NL’s overt intolerance towards European Union rules on budgets and immigration.
In the weeks before the resolution of the crisis, Italian bond yields rose to levels only seen at the peak of the debt crisis in 2012, dragging yields on other peripheral euro-zone economies’ debt higher. The spread between Italy’s 10-year government bonds and Germany’s equivalent-maturity bonds also soared, passing the 330 basis point mark. The political vacuum seems now to have been filled; however, the spread remains at levels which signal significant market concerns around the country. The end of the ECB’s bond-buying is an additional factor of concern as they could prompt a significant increase in Italy’s borrowing costs.
Italy’s overall macroeconomic environment has improved remarkably over the past years: real GDP grew by 1.5% in 2017 and looks set to expand further in the 2018-19 period, the current account surplus currently stands at around 3% of GDP and its debt service cost has dropped to below 4% of GDP, down from above 6% before the introduction for the single currency. However, at 132% of GDP, Italy’s stock of public debt is huge, and the ongoing political turmoil poses a threat to the country’s stability. Indeed, should the political crisis morph into a sovereign debt crisis, debt costs would soar and debt service become unsustainable.
If Italy defaulted on its debt (which is not Dun & Bradstreet’s baseline scenario given Italy’s strong domestic investor base), the survival of the eurozone would be irreparably compromised. There is also a risk that concerns over a possible referendum on the euro, repeatedly contemplated by the 5SM and the NL but eventually scrapped from their election manifestos, could trigger a flight of deposits from Italian banks, many of which remain saddled with high levels of non-performing loans.
Although the darkest hour of Italy’s politics seems to be over, tensions between the Italian government and the EU, as well as within the government itself, are highly likely to persist; political uncertainty will likely remain elevated in the quarters ahead and the risk of early elections constantly looming.
Roberto Sparano, Globalaw:
After the longest political crisis in Italian history, a new cabinet of ministers was appointed on Saturday. Technically, the new government needs the confidence vote of both chambers of the Italian parliament, but it seems likely that the vote will go in favour of the odd alliance between the 5stars movement and the Lega.
In the closing moments of his BBC TV commentary for the 1966 FIFA World Cup Final, Kenneth Wolstenholme said "They think it's all over," but in reality it was not! This is, more or less, what is happening now. Most Italians are happy that it is over and we are back to normal, however, in realty this is only the beginning.
Local elections are scheduled for the 10th of June, and both the Lega and M5S will campaign on different and opposite barricades. Campaigns can easily turn ugly in Italy, and the first objective of the new government will be to survive these next few weeks without any major clash between the two parties.
In fact, the new local elections will be the first referendum against Europe and the Eurozone.
As Italians, we always have difficulty owning up to our responsibilities, that is the way we are, and we have become experts in the art of shifting the blame onto others. Germany has, for many reasons, been the perfect target since the end of WWII.
The notion of external control was actually one of the factors that convinced Italian lawmakers and politicians to join the European Union in the first place. This is because, if anything goes wrong, or is hard to swallow and unpopular, the blame falls on the EU as an external body- and obviously the Germans!
This may be a hopeless situation... but it is not serious, like in the 1965 movie directed by Reinhardt.
I do not think that the Eurosceptic have been strengthened from the last Italian elections. The truth is that most people are not ashamed to feel anti-EU (given that the EU has served as a punching ball and a symbolic cradle-of-all-evil over the past decades). Two non-traditional political movements are only going to cash in on this feeling.
Italy’s political climate will have a consequential effect on the Eurozone and the European Union. I am convinced that the Lega is aware that we cannot leave the EU or the Euro (I cannot speak for the M5S since I do not think they have any policy or line at all), but they are also aware that the other Euro partners cannot afford Italy’s break from the Euro or the EU.
The current anti-European feeling will undoubtedly be used as a bargaining chip for other purposes, for example, to stop immigration or, even better, to accelerate the process of moving immigrants from Italy. If Germany and the EU play this the hard way it could be fun to watch, although, as an Italian, it will be painful. On the flip side, it could be the perfect opportunity to change the EU, although, while Lega and M5S are calling for a new and stronger Europe, nobody knows (including Lega and M5S) what a “stronger Europe” really means. My idea of a stronger Europe … I fear it is exactly the opposite of the idea of the Lega.
The situation is unpredictable, some of the measures that form part of the “Contract” between Lega and M5S could have a beneficial impact on our economy, although the Italian debt will skyrocket and in the long term, this would have a devastating effect.
The real problem will be the Italian State rating and the Italian bank rating. If the new government leads to a downgrading, the ECB will not be allowed to acquire our State bonds. Due to this, quantative easing measures will cease to help our growth, and the banks will collapse.
Italian economics are already not brilliant (that is lawyerlish for awful). We are the slowest growing European member, our private sector has never driven, and our banks … well our banks are declining.
We are already a supermarket for foreign corporations; Chinese, Indian, USA and other European companies have already acquired most of the jewels of the crown in terms of brand know-how, and excellence. Despite this, if anything goes wrong, we will become a discount or outlet!
On the other hand, our history shows that Italy always manages to survive, after all, on April 25th each year we celebrate the victory against nazi-fascism in WWII.
Giuliano Noci, Professor of Strategy and Marketing, Politecnico di Milano School of Management:
Following a week of political uncertainty in Italy, international financial markets are recovering well. Analysts expect that the announcement of a new government and the unlikelihood of fresh elections indicate that no further disruption will occur.
However, the root causes of how Italy landed in this particular political situation – where the young Five Star movement and Matteo Salvini’s League won more than half the votes in parliament – must not be ignored.
Both parties – although internationally scorned for Eurosceptic views – were able to gain the support of the Italian population, playing on both their emotions and feelings of insecurity. Both delivered well-designed storytelling campaigns via social media rather than mainstream media – a technique neglected by other parties.
The population’s insecurity has two main manifestations. Firstly, the feeling that the EU did not do enough to help Italy during the mass immigration of refugees of Syrian war. Secondly, the sense that the EU is failing Italy in important economic areas. Five Star promised a basic income for the unemployed whilst they train and upskill, and the League pledged to reduce the burden of fiscal taxation on companies by introducing a flat tax system.
So, are the parties reaching the core of Italy’s problems and setting out the right solutions? This is a question which deserves careful consideration. In my opinion, the parties were wrong to use aggressive tactics to fuel the debate about whether to remain in the EU. However, they were very right to suggest that the European Union must significantly change the rules of the game. We are seeing problems not only in Italy, but in Greece, Spain and perhaps even France in the imminent future.
These are signs that the Eurozone is not working, which is most likely because the Euro project is incomplete. Although we have a unique currency, there is no unique system for managing the risk of banks or the unbalanced, heterogenous economic systems of each country.
In the long run, a lack of reforms will create a bigger problem for the Eurogroup than Italy’s political situation. Change must come from within the EU following this situation and discussions of structural reforms in the banking sectors, as well as a safety net fund, must begin.
If no change occurs, the 2019 EU elections are likely to be just as complex as Italy’s.
Stephen Jones, Chief Investment Officer, Kames Capital:
Following Macron’s victory, the eurozone was the ‘good news’ story of 2017 as the area’s economy burst into life and global investors returned in droves. This year has seen economic momentum collapse sharply and, perhaps more than coincidentally, populist pressures have brought the fault lines back to the fore. For the moment this is an Italian issue but these pressures exist in most eurozone nations.
Equity markets have weakened on these changes but Italian worries have largely reinforced a trend already in place. Elevated ratings, and analysts offering a very rosy earnings outlook, left markets vulnerable to poor news and a variety of geo-political developments have emerged to offer that challenge; fat profits were there to be taken.
These risk markets setbacks have, however, taken the steam out of rising short rate and long yield forecasts and will probably succeed in ensuring that quantitative easing is continued in Europe for longer than might otherwise have been the case. When the dust settles, this should underpin equity markets, allowing progress to be made afresh and from safer levels; the positive earnings outlook offered by analysts have good real-world support.
However, to be clear, this supposes that Italy stops short of turning a drama into a crisis. Those of us of a certain vintage know well enough that Italian politics are not to be trusted.
Jordan Hiscott, Chief Trader, ayondo markets:
I was recently asked If I thought the current situation in Italy, in regard to potentially leaving the EU, was a black swan event. My response was no; a grey swan would be a much more suitable adjective to describe Italy in its current state. The ultimate definition of this would be a risk event that can be anticipated to a certain degree but still considered unlikely. A black swan being an event that is not anticipated in the slightest.
Italy has the third largest economy in the Eurozone and this political turmoil, of once again populist vote, threatens the unity of the bloc. But the situation is further exacerbated by the perilous state of Italian banks. Indeed, this is nothing new and they have been in the poor shape for a while, and the only surprising part to me is that the market hasn’t been paying attention to this, until now.
The culmination of the situation is we now have a perfect storm. Another type of a coalition government has been formed and the cynic in me looks at Italian politics on a historical basis and questions if this is this indeed the end of an unstable ruling government or in the colloquial sense, papering over the cracks? This is coupled with a worsening financial situation for the nation’s major banks. The move on Italian two-year treasury yields last week was nothing short of astounding, with the range and volatility more akin to a cryptocurrency than of a bond from a first world country.
The Italian stock market is now almost completely unchanged on a five-day basis, given it was down over 7% at once stage last week. In addition, to confirm this, EURUSD has moved from a low of 1.1520 last week to 1.1750. The next move will be key, but from my perspective I’m finding it hard to feel positive, even from a mean reversion perspective, for the pair, given the length and weighted negative implications surrounding Italy at present.
April LaRusse, Fixed Income Product Specialist, Insight Investment:
In contrast to the European sovereign crisis, Italy is now an idiosyncratic story. Across Europe, the previous crisis hit countries such as Spain, Greece and Portugal are all on an improving path, reaping the rewards of structural reforms implemented after the crisis. In Italy, pension reforms were certainly a positive step, but the country failed to undertake the deeper changes needed to sustainably raise potential growth.
The two key parties are proposing a range of expansionary fiscal measures, cutting both income and corporate taxes and proposing a minimum citizens income of €780 per month. Although more controversial measures, such as asking the European Central Bank (ECB) to write off up to €250bn of Italian debt, have been dropped, investors will be well aware that these were considered serious policy proposals by elements of the new government.
Debt/GDP will start to rise once again and credit rating agencies are likely to start to downgrade Italian debt, in contrast to the rest of Europe where credit ratings are improving. This leaves us cautious on Italian spreads, especially in an environment where we believe the ECB will be winding down its quantitative easing purchases.
David Jones, Chief Market Strategist, Capital.com:
There is a familiar feel to the catalyst behind the increased levels of volatility that traders and investors have seen across all markets, leaving some wondering if we are going to have another Eurozone crisis along the lines of that involving Greece from 2016. At this stage that does seem like an overly-pessimistic view, but it’s not hard to understand why safe-haven buying is the order of the day.
An oft-repeated phrase from past Eurozone crises was “kicking the can down the road”, referring to deferring that country’s debt obligations. This time around it feels as if the political can, rather than the financial one is being kicked into the long grass - and this is what is spooking markets. One of the main worries for traders is another election in a few months could result in a populist government that wants to renegotiate Italy’s debt with the EU. This is running at around 130% of the country’s GDP - the second highest level after, you guessed it, Greece.
The obviously immediate casualty was the euro. It had hit a three-year high against the US dollar as recently as February this year. Since then it’s dropped back by around 8% to its lowest level since last July. There is a double-whammy behind traders’ decisions to sell euros. Clearly any uncertainty about Italy’s debt repayments and the country's commitment to the single currency doesn’t inspire confidence - plus this year already we have seen a resurgence in popularity for the US dollar after its slide in 2017 was the worst performance for more than a decade. It can always be argued that the market reaction is overdone - but whilst Italy’s political future remains uncertain, it’s a brave trader who calls the bottom of this slide.
European stock markets have also been hit. The Italian market is the obvious biggest casualty and is now down by 13% in just one month - but the German and UK markets are also lower as investors adopt the familiar “risk-off” approach at the slightest whiff of a possible euro crisis. Many world stock markets already had some fragility when it comes to investor sentiment after the sharp falls seen in February and an ever-increasing oil price - it is difficult to see these recent losses being made back quickly.
While some sort of “dead cat bounce” can’t be ruled out in the days ahead, as long as this political can-kicking continues, then investors are likely to remain cautious about taking on risk - so it could be a summer of European-inspired volatility across all asset types.
Tertius Bonnin, Investment Analyst, EQ Investors:
This had been a slow moving car crash in which the signs have been there for all to see; populist parties were the clear winners of the March election (nearly three months ago) and the two largest parties, the Five Star Movement and the Northern League, had been negotiating a framework for co-governance since. Surprisingly, a number of market participants had expressed that they didn’t anticipate the “change” in attitude of the two famously Eurosceptic parties towards the euro. It should be noted that Italy isn’t new to political uncertainty, with Italian voters seeing 62 governments since 1946.
The Italian President’s veto of the proposed finance minister, Paolo Savona, and the subsequent increase in the probability of another election caused a kneejerk reaction in the markets on Monday. These moves spilled into the Tuesday session as the Monday was a bank holiday in the US and UK. Trading volumes on the Monday were therefore relatively thin in comparison. Tuesday saw huge spikes in key barometers of relative risk such as the Italian-German government bond spread (difference in yield) and the Italian two year bond yield. Global banking stocks, considered most sensitive to a change in economic activity, also sold off. Despite the so called PIGS (Portugal, Italy, Greece and Spain) taking significant knocks, investors in relatively safe government bonds (German bunds, UK gilts and US treasuries) benefited from a “flight to safety” whereby panicked investors moved capital into less risky assets.
There had briefly been calls by the Five Star Movement’s leader to impeach President Mattarella. Under Article 90 of the Italian constitution, parliament may demand the president to step down after securing a simple majority. Italy’s constitutional court would theoretically then decide whether or not to impeach Mr Mattarella. Given the president had not violated any Italian laws, this route appeared relatively futile. On this impasse, the populist coalition appeared to have collapsed and the market took a collective sigh of relief as the Italian President moved to appoint ex-IMF director Carlo Cottarelli to run a short-term technocratic administration until the next set of elections. It should be noted that the Five Star Movement, the Northern League and Berlusconi’s party all said they would have vetoed this.
It is likely this development fed into the Northern League’s decision to call for fresh elections at a political rally, having seen an uplift of circa 8% in opinion polling. Investors once again panicked that the risk of future elections had the potential to not only reinforce the populist parties’ positions in both parliamentary chambers, but become a de facto referendum on Italy’s euro membership. After 2017 being relatively benign year for political risk, investors had been caught asleep at the wheel in terms of pricing in uncertainty in the political sphere.
By Friday the situation had turned around once again after the Italian President provided more time for the Five Star and Northern League parties to form a government; the former designate Prime Minister Giuseppe Conte was sworn into office while the key Finance Minister role went to a seemingly more pro-European, Giovanni Tria, who headed the Economy Faculty at Rome’s Tor Vergata University. Paolo Savona, the former candidate vetoed for this position will now serve as Minister for European Affairs in a sign that the new administration’s focus will be on fiscal expansion plans and rolling back reforms, rather than investor angst around fresh elections and euro membership. This rollercoaster ride in political uncertainty has been tracked by the spike in yield of the supposedly risk-free Italian government bond.
We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!
PSD2 had been previously described as a game changer for the financial industry, that was set to have a substantial impact on how mobile payments are conducted and authorised. Along with the challenges that face the mobile payments industry, there are also sizeable advantages to the new payment services directive that offer increased security for its users and a level playing field for payment providers. Shane Leahy, CEO of Tola Mobile, explains for Finance Monthly.
Since its inception in January 2018, many businesses which already operate within this space have argued that PSD2 hasn’t made an immediate and significant impact within their processes like they thought it would. Having said that, it is clear that PSD2 has bought a whole host of benefits and opportunities for new players to enter the market and produce a strong, customer-centric offering.
Whilst it was initially reported to be disruptive, the new regulation update has allowed for a real opportunity to move out of digital services and into a new era of payment services. PSD2 is helping to standardise and improve payment efficiency across the EU fintech industry, all whilst promoting innovation and competition between banks and new payment service providers.
PSD2 not only encourages the emergence of new payment methods in the market, it also creates a level playing field for new and existing service providers to innovate, create and ultimately give customers increased choice and availability. It puts the customer back in charge and offers a secure protection of data regulations that merchants will have to abide by.
One of the biggest impacts for mobile payment providers has been the imposition of spending limits on the Mobile Phone Network Operators (MNOs). For them, and companies who are operating under the PSD2 exemption, the maximum transaction amount a subscriber can be charged is £240 per month. This is all for voice, SMS, data and third party products either offered and available to the subscriber.
Another impact has been the requirement for a two-factor authentication process on every payment, and the restriction on the ‘billing identifier’ being taken by the payment provider from the network. In this instance, the billing identifier is the mobile phone number, and this has to be provided by the subscriber during the discovery phase of the acquisition of the mobile payment. This aligns the process more closely to credit card payment acquisition. By having a two-factor authentication, a new level of payment authorisation and transparency not previously seen in mobile payments has been discovered. This brings new levels of trust that is more commonly associated with credit cards, but with more ease of use and convenience of using your mobile phone number to make purchases for goods and services.
Some banks within the industry have grasped PSD2 with both hands, including Dutch client bank, RaboBank. RaboBank is creating its own mobile ecosystem around mobile payments with a rich choice of value-added services, as it looks to move its customers from a SIM-based mobile payments model into the cloud - and becomes one of the first banks to tap into what PSD2 allows banks to do.
Recent reports from MobileSquared have seen that ticketing could be one of the biggest industries to be affected by PSD2, with a third of customers in the UK being keen to start using charge to mobile to buy low-value tickets such as bus fares and train tickets. PSD2 opens up the market to a full transformation that will allow big ticket items to be sold using direct carrier billing. This brings a whole host of benefits for ticketing merchants and its customers, that can benefit from a seamless payment system, quicker processing times and easily accessible.
With the continued effects of the new directive set to be felt across the next 24 months, payment providers in the European Union must ensure they are compliant with the regulations of this well anticipated update.
The customer is at the core of PSD2, and banks, merchants and new payment providers will be looking to become completely compliant with the changes to suit a more customer-centric offering. Payments via any IoT devices will become a more popular method for customers and merchants will look to push more mobile payments due to lower processing fees, subsequently empowering the customer even more. As the industry sets to move towards a more open and intelligent banking ecosystem, financial institutions and fintech companies should embrace the impact PSD2 is having and understand that it will continue to have an ongoing significant impact on their offering throughout 2018.
