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Banking

China’s BSN to Launch Global CBDC Payment System Beta in 2021

China’s lead in the race for developing a Central Bank Digital Currency (CBDC) is unassailable at this point. The country is making further progress, with the government’s blockchain service network looking to release a CBDC network beta this year.

Safe, Low-Cost CBDC Payments

China’s Blockchain-based Service Network (BSN) has announced plans to launch a public beta for a global CBDC network, per a blog post. 

The BSN is a blockchain network that enables digital token and decentralized app (dApp) development. 

In the post, the state-sponsored network explained that it would invest a considerable amount in research and development this year. The network plans to focus on digital payments primarily as it is working towards launching a Universal Digital Payment Network (UDPN).

Speaking on digital payments, the BSN pointed out that stablecoins and CBDCs have become more prominent across the world as countries look to embrace e-payments fully. The network plans to launch a payment network based on all developed CBDCs in the next five years.

“This digital payment network will completely change the current payment and circulation method, enabling a standardized digital currency transfer method and payment procedure for any information system,” the BSN explained, adding that a convenient, cost-effective beta will be available in the second half of this year.

With the payment network, the BSN is looking to provide a standard digital currency transfer procedure. It aims to combine systems like insurance, banking, enterprise resource allocation, and mobile apps through dedicated application program interfaces (APIs) to make global payments safe and cheaper.

The payment network is one of BSN’s four objectives for the year. The other three include expanding its network, promoting its new private platform, and expanding its ecosystem. In addition, the BSN reiterated its commitment to enhancing blockchain capabilities to companies and governments worldwide.

China Forges On With Digital Yuan

So far, digital yuan has been one of China’s most ambitious economic and financial projects. Officially launched in late 2019, the project has gone through extensive tests last year and looks to be entering advanced testing phases.

Last year saw several firms and government agencies partner on testing the CBDC in several real-world situations, mainly through giveaways and retail spending. The developers haven’t relented in their efforts this year as they look to strengthen their research and testing base.

Last week, local news sources confirmed that the Agricultural Bank of China, one of the country’s largest state-owned banks, had launched ATMs for the digital yuan. As the reports explained, the machines were installed at specific branches within Shenzhen. Customers at these branches have been able to spend and convert the digital yuan tokens they got as a part of the government’s “red envelope” lottery – a project that saw the government hand out $3 million worth of the asset to 100,000 citizens.

The machines reportedly allow digital yuan deposits and withdrawals via a smartphone app. Users can also convert their savings and cash to the CBDC.

China’s BSN to Launch Global CBDC Payment System Beta in 2021

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Toronto-Dominion Bank Announces Acquisition of Wells Fargo’s Canadian Direct Equipment Finance Business

Toronto-Dominion Bank (TD Bank) announced on Thursday it has signed a definitive agreement to acquire Wells Fargo’s Canadian Direct Equipment Finance business. TD reported that the acquisition of Wells Fargo’s Canadian Direct Equipment Finance business is expected to add scale and capabilities to its existing Canadian Equipment Financing business and expand its presence in core markets.

“Wells Fargo’s Canadian Direct Equipment Finance’s direct origination model is expected to allow TD to better serve a more diverse set of business customers in need of competitive equipment loans, leases, and customized financing services.”

TD Bank further revealed that Wells Fargo’s Canadian Direct Equipment Finance business has a 25-year operating history, which includes the acquisition by Wells Fargo of GE Capital’s Canadian Equipment Finance business in 2016. The business, which has approximately C$1.5 billion in assets and over 120 employees, provides loans and leases covering a full range of commercial equipment for businesses across Canada.

While speaking about the acquisition, David Pinsonneault, Executive Vice President, Commercial and Industrial, Canadian Business Banking, TD Bank Group, stated acquiring the Canadian Direct Equipment Finance business, it will expand TD’s competitive position in the Canadian’ equipment finance industry as well as build on TD’s customer service.

TD’s purchase of Wells Fargo Canadian Direct Equipment Finance business is expected to close in the first half of 2021, subject to receipt of regulatory and Competition Act approvals and clearance, and satisfaction of other customary closing conditions. Terms of the acquisition agreement have not been disclosed at this time.

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Plaid Has Decided to Terminate Pending Acquisition By Visa & Remain An Independent Company

Plaid, an open banking platform, announced on Tuesday it has decided to terminate its pending acquisition by Visa and will remain an independent company. The latest news on the acquisition was made just a little over two months after it was revealed that the U.S. Department of Justice has filed suit in federal court pertaining to the acquisition.

As previously reported, Visa announced in January 2020 it was planning to acquire Plaid for $5.3 billion. In purchasing Plaid, Visa was reportedly to jumpstart its push for digital prominence. Kelly called the acquisition a “natural evolution” as it connects consumers with digital financial services. At the time Al Kelly, CEO and Chairman of Visa, stated:

“The combination of Visa and Plaid will put us at the epicenter of the Fintech world, expanding our total addressable market and accelerating our long-term revenue growth trajectory.”

At the time of the lawsuit’s announcements, Visa refuted the suit:

“Visa strongly disagrees with the Department of Justice (DOJ), whose attempt to block Visa’s acquisition of Plaid is legally flawed and contradicted by the facts. This action reflects a lack of understanding of Plaid’s business and the highly competitive payments landscape in which Visa operates. The combination of Visa and Plaid will deliver substantial benefits for consumers seeking accessto a broader rangeof financial-related services, and Visa intends to defend the transaction vigorously.  As we explained to the DOJ, Plaid is not a payments company. Visa’s business faces intense competition from a variety of players – but Plaid is not one of them. Plaid is a data network that enables individuals to connect their financial accounts to the apps and services they use to manage their financial lives, and its capabilities complement Visa’s. Together, Visa and Plaid will deliver better digital experiences and more choice for consumers in managing their money and financial data. Visa is confident that this transaction is good for consumers and good for competition.”

Speaking about Plaid remaining an independent company, Zachary Perret, Co-Founder and CEO of Plaid, shared:

“Since founding Plaid 8 years ago, we have been maniacally focused on expanding access and improving financial outcomes for consumers, developers, and financial institutions – and the intent of joining Visa was to accelerate that work. Unfortunately, the pace of a multi-year regulatory review is not compatible with the fast-moving realities of a startup – and delaying close another year or more is not in the best interest of our customers, the financial system, or consumers themselves.”

Perret further revealed despite the struggles that happened in 2020 globally, the past year has been one of exciting growth for Plaid, with hundreds of new banks joined the Plaid platform, and more than 4,000 companies turned to the platform’s service as the infrastructure to support their businesses, including many of the largest Fortune 500 companies who are focused on bringing digital financial products to their customers. In regards to his 2021 predicts, Perret added he expects the year to be more of the same as 2020.

“In addition to our ongoing focus on helping companies of all sizes deliver digital financial products, we have made significant progress in the ways that we work with financial institutions. Delivering on the promise of open finance is in everyone’s best interest, and we’ll be working in lockstep with our customers and financial institutions to bring this to fruition globally.”

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Crypto Market Plummets, Sheds Off $170 Billion in 24 Hours

The crypto market has been on a tear for the past few weeks, with Bitcoin leading the charge and surging past one milestone after another. However, the market now appears to be cooling off, much to investors’ and traders’ dismay.

Losses Across the Board

At press time, the crypto market capitalization stands at $917.41 billion. This is a 17 percent drop in the past 24 hours alone, down from the record $1.1 trillion levels recorded on Monday. Top cryptocurrencies are also trading down on the day, with many fearing that the rally sustained over the past month might finally be coming to an end.

As expected, Bitcoin had led the rally and is now dragging other coins. The leading cryptocurrency crossed the $40,000 mark in the middle of last week, surging past $41,500 for good measure. However, its price eventually stabilized around $39,000 to end the week. While many investors hoped to see the rally continue, things haven’t exactly panned out.

Bitcoin is now trading lower than $34,000. Instead of another staggering run above $40,000, a drop to possibly the high $20,000s now seems like a more imminent possibility. Data from Coinmarketcap also shows that Bitcoin’s market cap had dropped by 16.08 percent. It currently stands at $584.7 billion.

Ether, the second-largest cryptocurrency, is also witnessing a notable fall. The asset started 2021 on a tear, reaching the $1,000 price peg for the first time since January 2018. Many attributed the asset’s growth to the frenzy in the decentralized finance (DeFi) space and its Ethereum 2.0 staking.

Sadly, the asset has dropped 15.38 percent in the last 24 hours and now trades at $936. Its market cap has plunged by 19.29 percent as well, dropping to $110 billion.

XRP, the third-largest cryptocurrency, is not any different. Last month, the Securities and Exchange Commission (SEC) slammed XRP’s developers, Ripple Labs, with a suit alleging that it violated the Securities Act of 1993 via its 2013 XRP Initial Coin Offering (ICO).

The lawsuit alleges that XRP is a security, setting the stage for a possible paradigm shift. Between the suit’s filing and January 6, XRP’s price plunged by 55.6 percent. The asset climbed after then, gaining over 20 percent before entering the weekend’s bloodbath. XRP’s $12.15 billion market cap is also an 18 percent drop over the past 24 hours.

Several other large-cap cryptos are also down. The ten largest cryptocurrencies have dropped by an average of 14.03 percent in the past day. Their market caps have also plunged by 13.67 on average.

Investors Hanging On

Price drops like these – especially those seen in Bitcoin – tend to make investors antsy. However, many institutional investors remain bullish on cryptocurrencies in the long term. Last week, investment banking firm Morgan Stanley increased its ownership in business intelligence firm MicroStrategy to ten percent.

MicroStrategy was one of last year’s big crypto winners, purchasing $425 million in Bitcoin when the leading asset traded around $10,000. Factoring in the gains from the past two months, the company should be sitting on a Bitcoin stash worth well over $1 billion.

With Wall Street getting more interested in crypto, we could see a repeat of 2020 where institutional players prop up the market. This correction could then be seen as a momentary blip.

Crypto Market Plummets, Sheds Off $170 Billion in 24 Hours

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By 2022, Most Payments will Migrate to ISO 20022, a Standard for Electronic Data Interchange between Financial Institutions, According to Payment Components

The team at Payment Components, a UK-based firm that’s empowering Open Banking with agile PSD2 and API frameworks (developing solutions for banks, corporates, and developers including BaaS while supporting Fintech payments), notes that with the introduction of new regulations and payment systems, managing a bank’s payment infrastructure is “becoming increasingly complex.”

Bank institutions have to integrate with new acquisitions, localize their proprietary technology stacks to the countries they move to, while also having to keep up with standard payment integrations. If banking platforms don’t complete these tasks, then their payments messaging “becomes siloed and causes system delays, errors, and increased costs,” according to Payment Components.

The Payment Components team asks how smaller banks and e-money institutions can “efficiently keep up with the constant stream of new releases?” The Fintech firm states that it has created a solution that lets banks manage all their payment flows “within the same system.”

The company explains:

“Each country has its own domestic payment service and each bank and group may have its own messaging system. So far, the dominant messaging standard used for the last decades has been SWIFT MT. But this international standard has reached its limits as the industry needed a messaging protocol able to carry more data and requiring fewer manual intervention.”

They added:

“The demand for instant payments is growing. In the UK, the use of Faster Payments has seen an increase with double digits quarter on quarter. And growth is similar all over the world.” 

Big Four auditing firm Deloitte reveals that real-time payments have helped with increasing and providing easier access to working capital. They’ve also improved the efficiency of the financial system by enhancing financial inclusion, while lowering the overall cost of payment systems. According to Payment Components, it should be clear that the trend is “moving towards instant payments and ISO 20022 is the messaging standard that can be used for all types of financial communication.”

The payments firm further noted:

“There are a huge number of benefits to managing payments with a new protocol such as the ISO20022. Firstly, it can transfer a lot more data and therefore enable banks to build informational structures and make data-driven decisions. Secondly, it offers long term benefits for the economy as it allows for more flexibility and innovation in the financial sector.”

Payment Components explains that it’s a protocol that serves as an “enabler” since it provides a more organized way to take care of payments messaging. Two of the primary features are that messaging components are reused instead of having to be created “from scratch” for each message, and the format (syntax) is separate or distinct from the semantics. This reportedly makes it a lot easier to understand messages wherever they might be coming from, the Payment Components team noted.

They also mentioned:

“ISO20022 is there to help improve communication, understand messages from other institutions, and enhance cooperation. The vast majority of the payments around the world will have migrated to the ISO20022 by 2022.”

The Fintech firm continued:

“SEPA, the EURO area payment integration initiative, also utilizes ISO20022 to offer low-value transfers at minimal cost and real-time payments throughout the SCT Inst scheme. That’s why the best strategy is to implement a system that can manage all types of payment protocols.” 

They further noted that it’s one that manages to stay up to date with new releases, and can also integrate with ISO20022, SWIFT MT, SEPA and proprietary payment protocols. With an Internet-based end-to-end solution, banks and financial institutions may add digital payments to their core system in “a simple plug-in application.” They also mentioned that the upfront time and investment required to install it is “minimal,” and the system is “specifically built to integrate seamlessly with different banking core systems.”

Payment Components claims that being able to stay up-to-date with the latest releases and payment infrastructures does not have to be costly and time-consuming. We also don’t have to work with fragmented legacy systems, because with payment systems such as aplonHub, your bank may use the same technology that Fintech firms use and take advantage of the latest payment standards “without creating more siloes,” according to Payment Components.

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