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Payments Professionals Look at Innovation Around the Globe

  • By Magnus Carlsson
  • Published: 10/8/2015
paybuttonMIAMI -- The third meeting of the Payments Innovation Alliance this year, which centered on innovation, efficiencies and security, provided an international perspective of how payments are developing outside of the United States.

Latin America

Beginning with Latin America, attendees at the event noted that the prepaid card segment is the payment area that is seeing the fastest growth in this region. The primary reason for this is a growing unease about cash. At the same time, cards are considered expensive and worst of all, subject to a high fraud rate. Cyberfraud in this region is “vibrant” and presents a big problem, Alliance members added. Cell phone use is high and there are many mobile payment alternatives, but no real leader, making this segment somewhat overcrowded with small margins for the operators. A consolidation is probably likely but there are still a number of uncertainties.

Europe

Turning to Europe, discussions closed in on the Single Euro Payment Area (SEPA), which is now fully implemented in the eurozone. One item of particular interest is that a number of EU countries, including Italy, The Netherlands and Spain, are in the development phase of national Instant Payments (IP) Systems. Considering that the SEPA project took 12 years to be finalized, it is noteworthy that there are already efforts to move away from that standard in order to keep pace with faster payments. It is also noteworthy that countries like Germany and France are not working on similar enhancements, which raises questions in regard to standards and interoperability going forward.

The ultimate goal, however, is to create a single IP system for euro payments for all EU member states. It will be based on the SEPA Credit Transfer (SEPA SCT) scheme and a central clearing hub. A possible start for this new IP system, also called “SCT-Inst”, could be as soon as 2018.

All about the blockchain

Unsurprisingly, innovation was also a hot topic during the conference, with blockchain technology, public ledgers and bitcoin dominating their fair share of the discussion. Often the misconception is made that these concepts are all the same. One session in particular focused on sorting out what a public digital ledger and a Blockchain really is, and how the Bitcoin system uses this technology.

How these ledgers work seems to be the most difficult thing to comprehend. The best way is to describe such ledgers is to refer to them as databases shared by all the participants. All transactions are listed and linked together in chains with one link or transaction is added one at the time. Since every transaction is publicly stored in the chain it prevents double spending. What seems especially challenging is the thought of the potential value the technology can promote when applied to a virtual currency. Nevertheless, market participants, including a growing number of corporate treasurers, realize the disruptive nature of these technologies and are currently trying to figure out how they can possibly incorporate them in their current business structures.

Magnus Carlsson is the manager of treasury and payments for AFP.

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