Attended by more than 2,500 people, FinTech Connect Live returned to London for a second year in December, this time splitting the conference into three dedicated sessions of FinTech, PayTech and InsurTech talks and debates. FStech reports from the PayTech stream on day two of the conference.

The second Payment Services Directive (PSD2), which is set to be transposed into UK law on 13 January 2018, took centre stage throughout the course of the day, with speakers quick to criticise the European Commission for certain aspects of the new legislation; in particular the introduction of two-factor authentication for payments across the continent.

“Everybody hates PSD2,” said John Salmon, partner at law firm Hogan Lovells. He argued that the UK was one of the most technologically advanced markets, which currently encourages the development of FinTech firms, but claimed that the introduction of PSD2 would “change everything, potentially stifling innovation across the sector”.

Ben Lindgreen, head of security delivery at Payments UK, was quick to agree with Salmon, stating that PSD2 “is going in the wrong direction; the work Amazon has done for payment authentication would be undone”. He outlined his fears that the current proposals were not appropriate solutions to the problems faced by the payments industry, leaving both banks and consumers in worse positions.

He did believe, however, that the new directive would broaden the marketplace, encouraging new players to come in and disrupt the market, referencing the successes of Uber and WhatsApp in their respective markets.

As part of PSD2, banks will be required to grant third-party providers access to their customers’ online accounts and payment services in a regulated and secure way – for example through application programme interfaces (APIs) – while also allowing for customer identity verification and authentication.

Salmon acknowledged that PSD2 did provide an opportunity for those banks that were willing to work with FinTechs and open APIs, by extending their current API development beyond the minimum requirements to retrieve additional data and provide customers with further banking features. Banks around the world were hosting hackathons and other such events to come up with and develop innovative new ideas to try and keeppace with new players, he added.

E-commerce security can also expect a boost with the introduction of PSD2, according to Aiyapan Sivadasan, solutions manager at Gemalto UK. “The new legislation will help us to assess the technologies used behind e-commerce – which is where the uncertainty lies,” he said. Furthermore, Sivadasan noted that the introduction of two-factor authentication may not hinder innovation, but in fact encourage the development of better technologies.

Following on from the session on PSD2, was a panel discussion on how the digital age is affecting foreign exchange and money transfers. Edward Cooper, head of mobile at Revolut, hailed the rise of digital and the work it has done in levelling the playing field in the financial industry – making it possible for companies such as Revolut to compete with incumbents. The processes of foreign exchange still remain “archaic” for Cooper, with the idea that consumers are still forced to carry cash whenever they change currencies baffling him. Digitisation has helped Revolut reduce friction when making money transfers, while the onboarding process has also been made easier – with customers now able to set up a new account in just five minutes.

Digital has also greatly helped the progression of money transfers across the globe. Charlene Chan, chief operating officer of African money transfer platform Bitpesa, described how digital has provided an alternative payment method to many people who had struggled to complete money transfers in the past. Chan warned, however, that all new technologies come with a wave of regulation – which is often difficult to navigate.

Nick Day, CEO of Small World Financial Services, assessed how the switch to digital had negatively impacted his business. He said he was unsure whether the concept that digital is cheaper was strictly the case, suggesting that competition and transparency are behind lower rates, rather than digitisation. Day also highlighted that customers are much less loyal in the digital age, with mobile “shifting power and authority of processes to the consumer”.

The final consensus among the panel was that consumers are the real winner when it comes to digitisation in the financial services sector. Costs have been reduced, previously time-consuming processes have been simplified and customers are much more educated on their monetary situations than they were in the past. The successes of challenger banks are paving the way for greater usability for customers, resulting in a more efficient, understandable banking experience, the audience heard.

Data also proved to be a popular topic throughout the day, with James Maudslay, head of insurance at Equinix, leading a talk on how people can protect and monetise their data. The rise of smartphones, as well as new technologies such as the Internet of Things, has led to a rich stream of valuable customer data, which is now sought after by many companies. Maudslay suggested that there is a strong possibly that customers will begin to monetise their personal data in the future, claiming that “unless companies find an efficient way to collate data, they will not find a way to monetise properly.”

The legal director of Aimia, Jonathan Levy, agreed with Maudsley regarding the future of customers and data, stating that people are getting savvier and will soon be looking to gain something in exchange for their data. He also highlighted how important the safety and use of data is to Aimia, explaining that the trust of the firm’s 20 million UK customers would be lost if their data were to be breached or misused.

The value in data comes from its correct organisation and analysis, according to Harry Powell, head of advanced data analytics at Barclays. He noted that the bank currently has 248 different data systems, which are unable to integrate with one another. “The problem is also domain,” he said. “Barclays has a potentially strong data set but it is about how to put them all together.”

What seemed to be echoed throughout the conference was that, despite the climate of uncertainty regarding the implementation of new regulations, it is an exciting time to be a part of the financial industry, with new technologies and innovative ideas set to transform the banking and payments landscape in the coming years.

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