More and more institutional investors are starting to invest in cryptocurrencies. As they do, the issue of crypto custody and how it fits within their existing workflows and regulatory requirements becomes a bigger and bigger issue. While a range of approaches are currently being used, everyone wants a better solution. Below David Wills, Co-Founder and COO of Caspian , reveals more.

Since the beginning of last year, cryptocurrencies have surged in popularity, usability, and, most importantly, value. While crypto markets have historically been dominated by individual investors, institutional investors have only recently joined the fray. However, with two Chicago-based commodity exchanges, Cboe and CME, launching the first regulated Bitcoin futures contracts at the end of last year, this new wave of involvement is growing.

As it does, the issue of crypto custody, which is essentially how an investor’s digital assets are stored and ‘kept safe’, gains more attention. In traditional markets, years of regulation have meant that organisations and mature systems, such as the broker/dealer relationship or future commission merchants, have developed for this purpose. In the world of cryptocurrencies, such institutions are only just being imagined or established and they are doing so against the grey area of crypto regulation.

Which begs the question, what solutions are institutional investors using now and are any of them good enough to survive for the long term?

Crypto custody as it exists today

While specific solutions for institutional investors are appearing with greater frequency by the day, they are normally a combination of established crypto storage practices. After all, much of the risk associated with holding and trading cryptocurrencies come from the fact that they are digital assets, which are as vulnerable as an individual’s personal online security measures.

This means that individual institutions are dealing with the same issues of hot storage on exchanges, which enables speed of trading, and cold storage offline, which means increased security of the digital assets held. One option that combines the benefits of both approaches for institutional investors is vault storage. In this scenario, the risk of hot storage is reduced because an exchange creates a private key offline, making it easy to send purchased cryptocurrency to the public address but much less easy to move it from the account using the private key.

Such solutions are being utilised in order to find the right combination of security and efficiency that institutional investors need. For the most part, they are using a diversified combination of hot and cold storage in combination with multi signature wallets and monitored concentration limits to mitigate risk.

As one can imagine though, this is still not the ideal solution for experienced investors used to a mature toolkit that has been optimised to make regulatory compliant trading as quick and easy as possible within a regulated fiat environment.

Solutions for the future

Innovation and consolidation in the area of crypto custody are occurring in parallel, signalling what the future direction of the solution might look like.

As mentioned, crypto funds are already providing a variety of custody solutions for institutional investors, including insurance, and this consultative approach will continue.

In addition, established crypto players are developing their own custody offers to attract the more security conscious players entering the market, either through internal innovation or acquisition. BitGo’s recent acquisition of digital asset custodian Kingdom Trust, which holds more than $12 billion in assets, is a recent example of the latter and it would not be surprising to see crypto exchanges making similar purchases to boost their offer.

On the technological side, recent innovations like the Glacier Protocol suggest that the development of blockchain-focused solutions will also play their part. Although designed for personal, long-term storage itself, the development of similar protocols to solve the problems of institutional investors would not be a surprise.

FInally, the role of the regulator cannot be ignored here. Institutional investors utilise custody solutions in the traditional fiat world that have been designed around the frameworks laid out by regulators. We already know that the SEC has kicked off a consultation with over 100 crypto funds, during which custodianship will undoubtedly be covered.

While a single solution has not yet revealed itself, as more and more regulated institutions enter the crypto space, more regulatory frameworks will be established, more solutions to fit this need will appear and the picture will become much clearer.

Less than 30 years ago, North Koreans were more than twice as wealthy as their comrades in China. Now, they're significantly poorer. Here's how it happened.

Below Finance Monthly hears from David Jones, Chief Market Strategist at Capital.com, on why Bitcoin's infamous reputation for extreme volatility may be coming to an end.

With the benefit of hindsight, there can be no doubt that the moves seen in Bitcoin, and other crypto-currencies, from the summer of 2017 through to February 2018 has all the hallmarks of a classic bubble - and corresponding bust. No doubt it will become a popular part of market history - just like the technology shares boom and bust of the late 1990s. Somewhat ironically, weekly volatility in Bitcoin recently hit a one year low below 3% - at pretty much the same time as the NASDAQ, that barometer of technology stocks, moved out to fresh all-time highs.

So why has volatility evaporated? There are a few reasons we could point to, but first let's set the scene. From the middle of November to the middle of December the price of Bitcoin increased threefold. After spending years just being something of a niche IT interest, Bitcoin went mainstream and dragged plenty of other crypto-currencies along for the rise. The mainstream media picked up on the story with almost daily coverage on TV programmes and in newspapers that would never have even heard of crypto-currencies just a few months before. The gains in cryptos seemed to represent easy money and individuals, who would never dream of speculating in more traditional markets, were keen to find out how to get involved. Facebook and Google were full of adverts on how to profit. The prices moved ever higher.

It's a classic rule of market psychology - whenever the general public gets involved in a market in large numbers, expecting further rises, then a top could well be near. This of course proved to be the case - at the time of writing Bitcoin is around 60% below its December all-time high.

Why the lack of volatility?

The obvious reason is that the hype has gone from this market. Plenty of latecomers to the crypto currency rally have had their fingers burnt, have taken their losses (or are still sitting on them) and have vowed never to return. Activity amongst the wider public has slowed.

There are not as many new entrants buying and selling as the price has burst - the story of it being a somewhat boring market in recent months, is not going to make people excited about the potential for "easy money". Wider media coverage has dried up, reducing awareness amongst the public.

Facebook and Google have banned crypto currency adverts - so an incredibly important section of the digital media world is not increasing awareness of this market. You can see this in internet searches - Google searches for Bitcoin for example are down by 75% for the year so far, again pointing to a significant shift in interest by the casual investor.

Arguably, the introduction of a listed futures contract for Bitcoin has also calmed the wilder market moves. The additional media coverage resulted in widespread speculation prior to the listing. The unregulated crypto exchanges experienced extremely high numbers of new signups and in some cases stopped on boarding new customers. The futures contract was launched in the first week of December last year and, less than three weeks later, Bitcoin started falling. Now, institutions and more professional investors have a regulated way of gaining exposure to Bitcoin without having to worry about online wallets and the worries over lack of security. The futures contract also gave the ability to "sell short" - so to profit from Bitcoin falling. This has no doubt gone some way to initiate a more orderly two-way market in Bitcoin - making it more like most other markets. But even the official futures market has suffered as volatility has dropped off - current volumes are best described as modest.

The lack of volatility is seen as a positive sign by those who see more adoption of blockchain technology. It's hard to claim that cryptos are a store of value when the price is moving 10% and more in a very short period of time. More price stability and less volatility certainly helps this value arguement. Significant new money continues to move into blockchain, with billion dollar VC investment funds being raised to new blockchain startups. The world’s leading financial regulators and institutions continue to engage and determine how to regulate and participate in what has become a disruptive new area of investment. Although the boom and bust is over (for now, at least), it could end up being one of the best things to happen for the future of crypto currencies.

Contactless and online banking have pulled cash out of the pockets of most people, and while there are those that believe cash will always be a vital part of the international economy, there are some parts of the world that are borderline cashless. Below Shane Leahy, CEO of Tola Mobile, elves into the possibilities of cashless countries around the world.

With more digital payment options now readily available to consumers than ever before, the depreciation in use of traditional forms of payment, such as bank notes and the humble coin, has been inevitable. When we would once delve into our pockets for some cash, consumers today are now increasingly reaching for their mobile devices to complete purchases quickly and conveniently.

The rise of mobile payments technology over the last few years has played a particularly huge hand in enabling both merchants and customers worldwide to facilitate more cashless transactions. With the global mobile payment transaction market forecast to reach US$2.89 trillion in revenue by 2020, the rapid uptake of mobile-centric methods and the resulting shift towards a more cashless consumer culture is showing no signs of slowing.

Yet, not only have these technologies made fast digital payments accessible for smartphone owners in the more technologically advanced areas of the world; it has also empowered consumers in many emerging markets around the world to undertake instant and secure payments through their mobiles, without the need for physical cash or a registered bank accounts. In fact, it is these same developing regions in which we are now seeing the most widespread and advanced adoptions of mobile payment solutions, which are rapidly eliminating cash as a dominant form of payment amongst consumers within these markets.

One particular area of the world in which cashless payments have broken down many of the previous barriers to entry for both merchants and consumers is Sub-Saharan Africa. It has been demonstrating a rapid mass-market adoption of mobile money services of late and has so far outstripped the rest of the world in terms of its approach to cashless payments. So much so that it now accounts for more than half of the total 277 mobile money deployments worldwide.

One of the biggest driving forces behind this development has been mPesa, the mobile phone based money transfer service which now boasts over 30 million subscribers across various African countries, including Kenya, Congo, Tanzania, Mozambique and Ghana. Unlike apps such as Paypal and NFC-based mobile enabled credit card methods like Apple Pay and Samsung Pay which have been gaining traction in Western regions, the sheer simplicity of the technology required to conduct cashless payments across Africa has contributed to its growing uptake of mobile money options.

In contrast to these methods, which require users to invest in a modern and more expensive smartphones to utilise the technology, mobile money transactions across Africa can be carried out using the most basic handset and without needing an internet or data connection. By leveraging a low-level service menu provided on every GSM phone, this technology is widely accessible and therefore able to support the region’s current technological infrastructure.

What’s more, services such as Apple Pay and Paypal still also require users to link a bank account in order to complete mobile payments, making these methods largely inaccessible for the millions of unbanked consumers in developing regions. These factors also have an impact on merchants as they will have to pay more to process transactions conducted through a linked bank account, than they would if it was made directly through a physical credit or debit card.

With this and the growing preference towards cashless payment methods globally combined, it is unsurprising that the rate at which Sub-Saharan Africa is adopting mobile money is much faster than that of any other region. At the end of 2016, there were over 500m registered mobile money accounts in the region alone, a figure which has undoubtedly now significantly increased.

The establishment of mobile money across Sub-Saharan Africa is now giving much of its previously unbanked population unprecedented levels of financial inclusion and freedom to make purchases anywhere, at any time, a move which has undoubtedly played a significant role in the growth of cashless transactions and gradual decline in other payment methods. What’s more, these services have significantly reduced the concerns over carrying physical cash for consumers within these countries and have replaced them with a simple and secure means for them to instantly access funds and pay for goods and services.

Not only has this rise in mobile money use facilitated an increase in consumer empowerment; it has also paved way for merchants who have previously combatted against the region’s developing infrastructure, in which periods of downtime and network outages cause huge disruption and can often lead to lost funds when payments are made via credit cards. By ensuring a seamless and instant digital transfer of funds from customers to the merchants, the appeal of cashless options has increased dramatically, providing merchants with more business continuity and offering these countries an opportunity to drive economic growth.

While there is still some way to go before cash is rendered expendable globally, there are various countries Sub-Saharan Africa, such as Kenya and Tanzania which are currently leading the way in terms of changing consumer behaviour and quickly adopting a cashless approach. For now, cash still remains king across most Western and other countries. However, as consumers continue to seek convenience and security, it is certain that we will see a growing shift towards digital payment methods and a continued demise of physical cash worldwide.

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.

Andrius Sutas, CEO and Co-founder of AimBrain looks at the limitations of secrets-based authentication and the three simple steps that banks can take to enhance security and facilitate innovation.

In this digital world, security is more challenging and demands more resources than ever before. Customer centricity – remote onboarding and eKYC, faster payments, greater interconnectivity between FS providers and any other customer-first initiative – offers unprecedented convenience for the consumer, but places immense pressure on banks and FS providers to offer such services quickly, cost-effectively and, most importantly, securely.

Mobile banking, for example, is undoubtedly one of the greatest things to have happened to the sector. Reducing branch spends, rapidly enabling new products and greater segmentation, remote onboarding…it has been a pivotal step for the industry. But never failing to miss an opportunity are the criminals that seek to dupe, coerce and attack. Mobile banking is particularly susceptible to fraud; Trojan attacks doubled in volume last year against 2016 and increased 17-fold compared to 2015. McAfee also said that it had detected 16 million mobile malware infestations in Q3 2017; double the number of the same period in 2016. Supplement these attacks with omnipresent, large-scale data breaches and you’ve got one marathon migraine coming on.

So, it is no wonder that banks now find themselves in a position of having to pool resources just to defend against mobile account fraud; and that is a single channel in the customer engagement journey. On-device biometric authentication is a patch fix for a problem that is only going to grow; the fact is that the only way to be utterly certain of an individual’s authenticity is by verifying the person, not the device.

Passwords don’t work. It’s not rocket science. Anything that can be intercepted, guessed, hacked, teased out – does not work, and the more enterprises continue to rely on passwords and secrets, the more resources they will find themselves throwing at the problem. What’s left? Hardware is antiquated, OTPs via SMS have proven themselves to be dangerously easy to intercept, and push notifications rely on the physical proximity of a device.

So how can banks truly secure customer data, act compliantly and have the freedom and flexibility to innovate? We believe that the strength lies in layering on security, in a simple and easy-to-configure model that is fit for both today’s fraud and the challenges of tomorrow.

Biometrics (how someone behaves, looks or sounds) can fulfil these requirements, and more. Unlike securing the authenticity of a device, biometrics assure the authenticity of the person themselves. And better still – unlike passwords – they are not secrets. They are everywhere! We leave fingerprints wherever we go, our faces are on show, we talk into devices all day long.

This might seem counterintuitive, but it’s not the data, but the way in which biometric data is treated that creates the security. We’re not just talking about templating it using algorithms – pretty standard methodology across the industry – but about how to keep it secure.

If someone has your password, they have your password. It’s black and white. If they have a video of you, or a recording of your voice, this might be enough to beat some authentication gateways. So, the key is to continually add challenges to beat the fraudsters and make it impossible for someone to pretend to be the customer, whilst keeping it simple for the customer.

How? We think it boils down to three steps.

• Passive bot detection: feeding industry or enterprise-specific annotated fraud data into a passive anomaly detection module that provides an early warning for behaviours that could signal fraud, as early as at the onboarding stage, whether manual or synthetic.
• Configuring multiple biometrics: combine and layer biometric challenges; behaviour, bot detection, voice, face and any blend thereof, to create unique combinations of step-up/step-down security rules and weightings on specific outcomes. Use in-session risk-based assessments rather than the binary yes/no of passwords to ascertain a user’s authenticity in an ongoing way.
• Combining simple and smart tests: use the latest stringent anti-spoof and liveliness detection (that it is a user and not a representation of a user) that marry simple user challenges with time-sensitive outcomes underpinned by artificial intelligence, such as combining facial authentication with an in-session audio prompt. Simple and secure, and a strong indicator that even though biometrics are public, technology can render them worthless to fraudsters.

These steps will keep banks ahead of the capabilities of even the most sophisticated presentation attacks. We recently launched AimFace//LipSync, which combines facial authentication with a voice challenge and lip synchronisation analysis. A customer can enrol or access simply by taking a selfie and simultaneously reading a randomised number. Nothing exertive. Pretty simple really. But – we think – impossible to spoof by any method available today. It’s about staying one step ahead of fraud, in a way that minimises inconvenience to the user, and your biometrics partner should have a solid roadmap in place that demonstrates consideration for the fraud we haven’t yet seen.

The password is not fit for purpose. Secrets are dangerous. Biometrics are a simple yet secure way of authenticating the person and keeping their valuable data and assets safe.

AimBrain is a BIDaaS (Biometric Identity as-a-Service) platform for global B2C and B2B2C organisations that need to be sure that their users are who they say they are.

The Biometrics Institute predicts that the development of biometrics over the next five years will shift towards online identity verification, government mobile applications, online payments, e-commerce, and healthcare.

Biometrics has been viewed as a secure method for financial transactions and security in many walks of life, with fingerprints used for clocking in at work or verification for contactless payments, but the institute’s research suggests there are further user cases set to emerge in the coming years.

And, it comes as no surprise for those studying the market closely. The global technology powerhouses, such as Microsoft, Apple and Samsung, are strong proponents of using biometric identification for PC, laptop or mobile access purposes and, as consumers get used to this way of engaging with tech, it naturally paves the way for fingerprints and iris scanning in payments.

The case for businesses and consumers

Various technology companies and card schemes argue it’s a secure way of paying, and with the likes of Apple Pay, Android Pay and Samsung Pay mobile payment solutions already using biometrics as part of their authentication process, there could be calls for more to come.

Companies like Starbucks utilise mobile payment providers like Apple Pay within their apps, meaning with the tap of a thumbprint money can move from bank account to Starbucks account, and subsequently be used at the point of sale. The simplicity of it continues to strike a chord with consumers, as the coffee chain’s latest figures show its Starbucks Mobile Order and Pay service represented 12% of US company-operated transactions in the three months to 1 April 2018.

Then there’s the Amazon Go effect to consider. As the online titan looks set to add more checkout-less physical stores to its inaugural offering in Seattle, enabling frictionless transactions without the need for shoppers to queue or visit a fixed cash desk or till, it will shape consumer expectations.

If this momentum continues and Amazon drives sales through these stores, you can imagine strong arguments from consumers for further installations of this type of technology in convenience retail – and one way of supporting speedy and secure transactions is through use of biometric identity.

Finger, face or eye scanning are all seen by industry analysts as ways to improve the authentication phase of payments for the consumer, while helping tackle growing fraud levels in retail and hospitality, and protecting customer information.

But biometric scanning isn’t fool-proof and can only be part of the identity solution, especially when being used to authenticate higher values purchases, for instance.

This means business considering adopting body-scanning payment methods need to be mindful of the trade-off between security and user-experience – and this requires a fine balance between how many false positives and false negatives are allowed in order to process a payment.  Too many false positives pose a security risk but, at the same time, too many false negatives could lead to a legitimate shopper not being able to authenticate a payment, resulting in poor customer experience and possible purchase abandonment.

A balance that provides the right level of convenience but mitigates against the risk of misauthentication will be key to successful biometrics payments solutions.

Choice trumps any individual payment type

At any trade show we attend the clear message is there’s no silver bullet when it comes to retail or payment technology.

Whether it’s mobile payment, buy-now-pay-later schemes, card and cash payment, crypto-currencies – or anything using biometrics in some way – they key for retailers is to know what their customers want and offer the relevant payment options. Businesses need to be sure that having helped navigate a customer to the all-important point of purchase they don’t lose them because they don’t offer the most suitable method of payment.

Therefore, retailers should be investigating biometrics usage as part of their suite of payment options, because the most forward-thinking organisations know they need to provide choice at the checkout.

Mobile support

It is clear mobile is very much at the heart of a lot of the innovation going on in the payment space, playing a fundamental supporting role for many of the new transactional options.

With Deloitte predicting that, by the end of 2023, 90% of adults in developed countries will have a smartphone, it’s obvious why tech companies and innovators in the payments space are targeting that piece of metal that sits in our pockets as a platform for their new solutions.

In the last 18 months the conversation in the financial world may have veered towards crypto-currencies and open banking, but before it becomes clear what impact these or, indeed, biometrics have on the overall landscape, we can be near-on certain that mobile will be central to it all.

As for the evolution of biometrics, fingerprints are already playing a key role in mobile payments processing, but in the future this could be usurped as the most dominant form of biometric payment.

Delving deeper into the Biometrics Institute research it appears facial recognition dominates as the biometric most likely to rise in popularity for businesses over the next few years. That is closely followed by a multimodal – a combination of two or more biometric forms – and then iris.

It’s certainly worth keeping an eye on how this all impacts retail payments in the not-too-distant future.

John Cooke is Founder and MD of Black Pepper Software, an agile software development company specialising in the financial services sector.

Data released in Creditsafe’s Prompt Payment Premier League has revealed Huddersfield FC takes on average 53 days beyond payment terms to pay invoices for its suppliers, the worst of any team from England’s top division.

Meanwhile Brighton & Hove Albion, who like Huddersfield are playing their first season in the Premier League, top the rankings, taking only two days beyond payment terms on average to pay suppliers. None of the current Premier League clubs pay businesses within the agreed payment terms however, with the average time to pay suppliers across all the clubs standing at 12 days.

Swansea City, who alongside Brighton takes only two days beyond terms on average to pay invoices, have the highest average value of unpaid invoices at £11,304. This is almost £7,000 above the league average, which stands at £4,385.

Liverpool are the only club in this season’s top six to better the overall league average, taking seven days to pay suppliers, with runaway league champions Manchester City ranking 16th overall at 12 days. Last year’s champions Chelsea have the second worst record of prompt payments, taking on average 30 days beyond terms to pay.

Last year’s worst offenders to still be playing in the Premier League, Manchester United, have only improved their ranking slightly, rising two places from 19th to 17th.

Chris Robertson, UK CEO said: “It’s still surprising to see that even in the Premier League, where the clubs have never been wealthier, late payments are becoming a growing problem for businesses of all sizes to deal with.

“It’s also striking to see the gap between two of the newest clubs to enter the Premier League, each having totally different attitudes to paying suppliers promptly. It’s clear that being a new club in the league, such as in Huddersfield’s case, is no excuse for paying businesses significantly later than their agreed terms with suppliers, especially when Brighton were able to pay their invoices much more promptly.

“The money Premier League clubs receive through the new television rights deal will total more than £5bn over the next few years, so we can only hope the clubs become better in paying their invoices on time with this additional revenue.”

(Source: Creditsafe)

Despite a well-developed electronic payment infrastructure, cash remains a dominant payment instrument in Singapore with 58.7% of transaction volume made at POS terminals in 2017, according to leading data and analytics company GlobalData.

In addition, more than 75% of transactions made at hawkers and wet markets are carried out in cash. This can be primarily attributed to the limited acceptance of electronic payments among small-sized merchants such as street vendors, food stalls and hawkers due to the high cost associated with POS terminals.

Singapore has for a long time been at the forefront of the payments innovation. Acceleration of electronic payments in the country has been one of the key objectives of the government’s Smart Nation Vision and in this regard, the country has invested substantially in building long-term infrastructure for cashless payments. Overall, the POS terminal penetration (number of POS terminals per thousand inhabitants) in Singapore stands at 35, compared to its Asian peers: Australia (39), Hong Kong (22), Japan (18), China (21), Indonesia (4) and India (2). In Singapore, card-based payments accounted for 32.8% of total payment transaction volume in 2017, increasing from 24% in 2013.

Singapore has a very high concentration of small and medium-sized enterprises (SMEs). According to the Department of Statistics, Singapore, there were 220,100 business enterprises in the country in 2017, with 99% of them being SMEs. To encourage adoption of electronic payments among SMEs in particular, the government along with other payment participants is increasingly considering QR-based payments as a viable alternative for cash.

Kartik Challa, Payments Analyst at GlobalData, comments: “The economic rationale for QR codes is stemmed from the difficulty banks had in persuading smaller merchants to begin accepting payment cards. The QR-code based payment acceptance eliminates the need for a significant expenditure, as merchants can now either display a printed QR code on their stall or download the merchant app on their mobile phones to accept electronic payments.”

In November 2017, the Singapore Payments Council announced the development of a common standard for Singapore Quick Response Code (SG QR) payments, designed to work across all schemes, e-wallets and banks. Unlike the existing NETS QR system, which focuses on domestic market, the new system will accept electronic payments through both domestic and international payments. The SG QR, developed by an industry taskforce co-led by the Monetary Authority of Singapore (MAS) and Infocomm Media Development Authority, will be deployed throughout 2018. Furthermore, as part of the process, the existing NETS QR will also be integrated into the new system and will be replaced with SG QR at all merchant locations.

Singapore's banks have also agreed to update their mobile payment apps/wallets to support SG QR. To expand the scope for SG QR, the Association of Banks in Singapore agreed to bring in banking P2P service –PayNow under the purview of SG QR. All seven participating banks of PayNow service, Citibank Singapore, DBS Bank, HSBC, Maybank, OCBC Bank, Standard Chartered Bank, and United Overseas Bank – enable their customers to transfer funds via SG QR.

Challa concludes: “The SG QR system is an important milestone, and to win over merchants, payment solution providers need to support the large number of e-wallets, offer quick payment settlement process and pricing benefits. Similarly, incentivizing consumers is a key factor to pique consumers’ interest in the new payment system. With the SG QR making a good headway, cash payments in Singapore are likely to soon become passé. Once again Singapore is at the forefront of innovation in payments, and other markets in Asia and globally are likely to follow the suit.”

(Source: GlobalData)

Most conversations about doing business in Africa will include words such as “challenges,” “instability” and “risk.” Nat Davison, Partner at foreign exchange and international payments firm, Frontierpay, explains for Finance Monthly the promises and pitfalls behind payments across the African continent.

The same three words are often applied to managing currency risk and making payments throughout Africa. Costly transmission fees, unestablished banking systems, central bank restrictions and market volatility are all obstacles keeping treasury managers and payroll teams up at night.

That said, Africa also has a lot to offer from a payments perspective. The continent is becoming a hub of new payments technology, same-day payments are possible in countries such as Nigeria and there is a booming mobile payments landscape.

In short, while there is some volatility, if payroll teams are aware of the potential pitfalls and how best to avoid them, there are plenty of rewards to be reaped in the continent.

Finding the right supplier

When looking at currency markets, risk is a constant. Before even considering how currency fluctuations could affect your business though, you first need to gain access to any of Africa’s local currencies; a process which isn’t always as straightforward as it might sound.

In an ideal world, a single supplier would be able to meet most, if not all, of a business’ currency requirements. The reality though, is that many high street banks have a limited or restricted offering and are unable to provide a solution that covers multiple African nations. It’s important, therefore, when preparing to do business in the continent, to find a partner who can cover as many currencies as possible. Not only will this help to smooth internal processes, but it will also enable more effective currency hedging.

Companies often try to get around liquidity limitations in Africa by making payments in US dollars instead. The problem in doing so is that unless the beneficiary bank account is denominated in USD, the payment will be converted to the local currency before crediting at an arbitrary and more than likely unfavourable rate of exchange. Furthermore, it’s impossible to pay a supplier or employee a fixed amount using this system.

Currency volatility

Markets can be fickle beasts and to use even a commonly traded currency such as the South African rand can require a thick skin and heightened awareness of risk. Last year, the currency dropped 7.5% in the last four days of March, only to rise by the same amount in a nine-day stretch in April. Shifts of this nature are more than capable of affecting your payment costs and can hit with little warning.

On the flip-side, anyone with the nerve to have played the rand over the long term will have seen a downward slide of more than 50% in its value between 2011 and 2015, only for it to rise by 13% in 2016 and outperform every EM currency except Brazil’s real and Russia’s rouble.

To remove a degree of the uncertainty from trading the rand, I would advise anyone who hopes to do business with South Africa to have an understanding of the carry trade; a strategy that involves borrowing a currency with a low interest rate in order to fund the purchase of another with a higher rate.

Payment risk

As a result of the combined political and currency volatility in the region, knowledge and experience of South Africa’s local markets are key to successfully negotiating the pitfalls that could cost you time and money.

Where possible, work with partners who can demonstrate a strong track record and broad network within the region, to speed up the delivery of payments and avoid overblown fees. Some banks and payment partners may be able to deliver funds to Nigeria, for example, but not all will have access to local banking systems. Having this capability would open up the possibility of naira crediting bank accounts within hours rather than days.

Pricing is affected in the same way. A deeper knowledge of local market conditions, parallel markets and FX volatility will allow you access to much more favourable currency rates and the most efficient processes available within the rapidly developing continent.

Banking requirements are also fluid, with differing beneficiary data needed in different countries – in stark contrast with the EU and Single European Payment Area. Specialist experience when it comes to making payments in less-developed regions, such as Mozambique or Lesotho, will help to avoid lengthy delays, payment rejections and administration charges.

Volatility in Chinese economy

Africa’s prosperity increasingly depends on China. Over the past 20 years, China has become its largest trading partner and a significant source of investment and lending, paving the way for deep economic ties between the two countries.

As a result, recent signs of a slowdown in the Chinese economy are likely to be a very bad omen for Africa, which is massively dependent on China to not only purchase its natural resources, but also to upgrade its decaying national infrastructure.

Ultimately, a slowing China will hinder Africa’s ability to grow. However, as a decelerated China is looking ever more like an inevitability than a possibility, any business with exposure to Africa must ensure they are monitoring the landscape in China just as closely.

In conclusion

As a market to do business in, Africa is gathering global interest. Widespread urbanisation is fostering large cities in which to set up shop and readily available workforces to recruit from. New consumer markets, such as a growing middle class, are presenting previously untold opportunities to trade and the region is seeing strong growth, both economically and from a perspective of technological innovation.

However, for any new business, success on the currency and payments front needs to be an immediate concern. Failure to manage currency risk can fundamentally jeopardise your business, while holes in your liquidity provision may even leave you unable to pay suppliers or employees. Familiarise yourself with your required currencies and the local banking infrastructure, and invest time in finding a partner with the knowledge to keep any potential risk under control.

You may think cash has come to an end, or maybe you’re on the other side of the fence, where cash is king. However, a balance is to be struck. Below WeSwap CEO Jared Jesner explains why travellers will also need cash, despite a predominantly digital economy.

Trailing closely behind Sweden and Canada, the United Kingdom is the world’s third most cashless society. According to UK Finance, cash will be used for a mere 21% of all payments by 2026. Increasingly, countries around the world are making definite moves towards a futuristic economy based on fully digital transactions for goods and services, with cash often portrayed as obsolete. In Sweden, 80% of all transactions are made by cards via the mobile payment app, Swish.

According to a report in Reuters citing the Bank for International Settlements, the study found that the use of cash is actually rising in both developed and emerging markets. “Some of the breathless commentary gives the impression that cash in the form of traditional notes and coins is going out of fashion fast,” said Hyun Song Shin, BIS economic adviser and head of research “despite all the technological improvements in payments in recent years, the use of good old-fashioned cash is still rising in most, though not all, advanced and emerging market economies.” Furthermore, the Bank for International Settlements found that in recent years, the amount of cash in circulation has increased to 9% of GDP in 2016 from 7% of GDP back in 2000. That said, the same study stated that debit and credit card payments represented 25% of GDP in 2016, up from 13% in 2000.

Cash’s resiliency comes at a time when the odds are seemingly stacked against its historically ubiquitous presence, with the critical mass of consumers owning more credit and debit cards today than ever before, using them for smaller transactions than in years past. Moreover, thanks to new technologies, consumers are able to use contactless payments via their mobile devices to pay for things in record numbers. These now societal norms have led to predictions that cash is dying as the world moves to digital payments. WeSwap asserts this prediction as flawed.

Jared Jesner, CEO of WeSwap, founded his company on the notion that cash remains indispensable across the majority of countries around the world: travelers will inevitably need to access hard currency beyond UK borders, and the method with which to do so, should be fair and transparent. As the key driver of a uniquely positioned digital banking revolution sweeping the nation, Jesner demystifies the notion that cash is moving closer towards extinction, instead recognizing its unwavering importance to society in 2018.

In just three years since launching its core product, WeSwap has rapidly risen to become the world’s largest peer-to-peer currency conversion platform, also enabling users to buy-back excess currency and receive cash delivered straight to their door. Its promise to streamline the travel budgeting process, empowers tourists and business travelers to make the most of their money abroad, with users loading funds onto the WeSwap card and swapping currency directly with each other at the interbank rate with no hidden fees. The service is unique and currently used by over 400,000 UK travelers, all of which appreciate and use the notes in their wallets, coins in their purses and contactless pings of their MasterCards.

CEO of WeSwap Jared Jesner states: “Our nation loves to travel and although we are moving closer towards becoming a cashless society within our own borders, when we go abroad this all changes.”

Jesner is optimistic about the enormous potential to change the landscape of payments, having founded WeSwap to make currency exchange cheap and fair for ordinary people: “I’m incredulous to the fact that we still 'buy' money when we should just be swapping with each other.”

With Futurologists long predicting cash will one day become obsolete, contextualised by the advent of blockchain technology, mobile money and similar innovations, a transition towards a more cashless society is inevitable, but not to the extent where notes are no-more. For all the convenience that digital payments offer, many remain reluctant to fully part with their notes and coins. WeSwap believes that an emotive and security-based connection – similar to our attachment with photographs, films, books and other things of tangible value – secure the role of hard-currency in our lives, inevitably.

Kristo Kaarmann, TransferWise Ltd. chief executive officer, discusses the company's new multicurrency online account and the growing demand for its services. He speaks with Bloomberg's Selina Wang on "Bloomberg Technology."