We take a look back on some of the highlights from day two of the PAY360 conference, hosted by The Payments Association – featuring industry expert insights into all things payments.
Throughout the second day of the PAY360 conference, CBDCs, digital IDs, the metaverse and UK fintech were just some of the many payment-related topics covered by industry experts.
Emma Banymandhub, event director for The Payments Association and Tony Craddock, director general at The Payments Association kicked things off on the main stage with introductions to the day and opening remarks.
Adam Gagem, global head of government affairs at Revolut, discussed the importance of payment channels and what they enable. He explained: “So much of the innovation we’ve seen is not about the payments – it’s been much more about the channel. It’s the channel and biometrics, as well as the use of a mobile phone and all those kinds of things.
“I do think people are very suspicious of digital ID. I mean, in the UK, we’ve stepped away from it a number of times. It is a very interesting piece where we will give up loads of data to Google, Facebook, etcetera but we won’t have a digital ID, which I think would be in many cases very helpful.”
The discussion also turned to CBDCs, as Stephen Grainger, CEO of the Americas and UK region at Swift, said: “CBDCs – an asset that’s backed by a central bank – all of a sudden feels like a very different proposition to assets that might be backed by a commercial bank.
“It comes back to the ‘nuts and bolts’ of the infrastructure. How do you make these things work? Effectively, because if the backends don’t work, actually, it’s very difficult to innovate the front end with the certainty and assurance that consumers and corporates need to be able to use it in the first place”.
All aboard the metaverse
The focus of the main stage remained on the future of payments, as Jehangir Byramji, emerging technology and innovation at Lloyds, offered expertise on the potential for payments in the metaverse.
“In one example I saw in the metaverse, you needed to use NFTs to get into a concert and you share your ticket with an NPC bot. This is an analogy to the action you perform in real-life to access the VIP section of this virtual concert.”
Byramji also discussed how the metaverse could be used to reimagine business processes: “You can understand things far quicker by doing them out in a metaverse – by using a virtual asset already on the same rails as the payment is going to travel or on the same rails as the information is going to travel.
“The magic in the Web3 blockchain-type space is that all of a sudden all of that information and value is all carried on the same rails. For some assets, if I start tokenising financial assets or NFTs – those same assets could also travel on the same layer.”
Can the UK remain the fintech centre of Europe?
As the likes of France play catch up on the fintech foundations built by the UK fintech industry, the next panel debated whether the UK can remain the fintech centre of Europe.
Andi Kazerooni, investment manager at Outward, discussed where the UK needs to look out outside of Europe: “I’m looking less at the Frances and Germany’s of the world, albeit having great businesses, recycling capital etcetera. But in terms of the ones making huge pushes, in order to try and become new financial, fintech, or tech powerhouses of the world – I’m actually looking more at countries in the Middle East.”
Charlotte Crosswell, chair at Centre for Finance Innovation and Technology (CFIT), also offered her view on the tactics employed by Middle Eastern countries as they try to close to gap to the UK’s fintech industry.
“What we’re seeing is they are pushing forward really aggressively, but they are still coming to the UK for our expertise. So we’re still a thought leader by far. We’ve got to make sure that we don’t wake up one day and we’ve exported thought leaders and regulators and industry and the fintechs.
“These countries are basically copying and pasting and looking at our regulations and our views. So what we need to do is make sure that we are scaling that up and scaling our fintechs so we don’t just sit there and show everyone else how to do it. It’s really important that we retain that thought leader position but also take advantage of it and make sure we’re always staying ahead.”
Peter Sugarman, partner at JRJ Group, concluded: “If you’re starting a company in investment banking or private equity and you’re a young, ambitious investment bank today you would head to Dubai.”
What can we learn from SVB and Credit Suisse’s ‘situations’?
In the afternoon, the ‘show floor theatre’ welcomed Lord Chris Holmes MBE to discuss reacting decisively in times of crisis, and the potential for financial services to be more accessible and inclusive.
“I think many people would agree that when it comes to the spending of the quid that HSBC spent [to acquire Silicon Valley Bank UK] – that will be the best pound that was spent this year.”
“The Credit Suisse story is different to SVB. Again, the Swiss regulator, the Swiss government, acted quickly with focus, decision and a good result was reached for not just Swiss banking but for financial stability across the world.”
CBDCs – use cases and implementation
William Lovell, head of future technology at The Bank of England, explained the role the central bank looks to play, should a CBDC become a reality in the UK: “Part of it is making sure that we are focusing on doing the things only we can do. That’s actually how we operate effectively quite a lot in payments markets and also how physical banknotes operate. We don’t offer any ATMs – the private sector manages the actual interface for physical notes for the public.
“It’s that thinking that is driving this [CBDC development] as well. So operating the ledger is making sure people have access to that same secure settlement.”
Lee McNabb, head of payment strategy and research at NatWest, discussed the importance of building something that solves genuine existing issues.
“What are the practical applications that we’re going to have to try and educate the customers on? Because if we can’t educate the customers, things don’t work and the journeys aren’t very good, people don’t understand it and the user experience isn’t very intuitive and we can’t get those bits right – we will build something that isn’t going to be used.”
Basak Toprak, executive director, EMEA, head of coin systems for Onyx by J.P. Morgan: “From a JP Morgan perspective – why we are investing in digital form of money is because we see improved technology that brings programmability, composability And also integration with normal banking rails in digital forms of money.
“That’s why we want to make sure we already start with maybe some of the easier use cases in a control permission environment and then work from that. We will continue to have a diversity of forms of money which is only good for competition.”
Discussing digital IDs: useful or dangerous?
Next on the agenda was the use of digital IDs, consumer opinions on the innovation and why we must be careful not to “over-innovate”.
Harry Weber-Brown, CEO of TISA Digital, discussed the best use cases for digital IDs: “If you have a bank account, you’ve got a digital ID and a digital footprint. You’ve been through an online verification process. What you don’t have is the reusability aspect of that. So you’ve gone through the process once, how can you reuse those identity credentials? So we’re developing a scheme that enables you to reuse that identity.”
Weber-Brown also discussed the need for trust when implementing digital identification: “What would make consumers trust digital IDs? We found that a government mark on it comes back in two ways. People say the government has oversight, therefore it must be a proper scheme – but also, the idea that the government could be ‘watching’ them.”
Lu Zurawski, strategist of retail payments and data at Gen Digital, discussed the dangers of removing all possible barriers to payments: “I believe that there is an over-fetishisation of ‘frictionless’. The idea that people should be able to go and pay for something without entering anything, or leaving a store without having to engage in payment could become dangerous.
“I think it’s important to retain a certain amount of friction and remind people what they are doing, particularly when it involves large sums of money. The more you actually remove those bits of friction to make the processes invisible, the far more likely it is that people get defrauded.”
