In our new monthly post, we provide comment & analysis on key developments across business strategy, regulation, M&A and technology. Amongst this months topics – see below – are the possible review of the Dodd-Frank Act in the USA, fund raising by Uber’s Asian rival Grab, early indications of India’s demonisation policy, and National Bank of Abu Dhabi launch of Ripple’s distributed transaction ledger solution.

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It was number three on Donald Trump’s campaign pledge  list (after reforming Obamacare and the Tax code), so the announcement  – that the new administration intends to review the Dodd Frank Act –  comes as no real surprise. The Consumer Financial Protection Act of 2010, commonly referred to as the Dodd-Frank Act, introduced new regulation on the US financial services sector. Primarily focused on regulating activities on Wall Street, an amendment concerning payments  was slipped into the bill at the last minute. The Durbin Amendment  placed price caps on debit interchange fees paid by merchant to banks and card issuers. It had a significant impact on the economics of the US payment card industry. Now it may well get repealed as part of Trump’s review of the Frank-Dodd Act. There are plenty of voices urging the White House to do so. In terms of timetable, a version of a bill to repeal the price cap was in fact introduced in Congress last Summer. The expectation is that an updated bill will be introduced “in a matter of weeks”. It will be interesting to see what legislative rollback might or might not come into effect.
UK Treasury has published draft plans for the UKs implementation of the EUs PSD2. With Brexit now a reality, debate and speculation over the UK governments PSD2 approach has increased. Apart from outlining the scope of PSD2 and setting out the government’s proposed approach to implementation, the consultation paper contains, in Appendix B, a draft version of the ‘Payment Services Regulations 2017’ which will be the instrument used to implement the EU Directive into UK national law. It will, in effect, be an amendment and update to the existing Payment Services Regulations 2009. The deadline for comments on the consultation paper is 16 March 2017. Notwithstanding the Brexit situation, the UK government, along with the other EU member states, is required to implement PSD2 into national law by 13th January 2018. With the UK government now likely to trigger Article 50 (the formal notification to withdraw from the EU) on or around the 9th March, it will be interesting to see how the UKs PSD2 implementation plans do in the end unfold. An overview of the UKs exit scenarios are in this article that we wrote in June last year. The scenarios – especially #5 – are still valid.
On Jan 26th, Ant Financial, Alibaba’s financial services arm that runs Alipay, announced that it would acquire US based MoneyGram for $880m. This deal is not to be underestimated and has possible major implications. MoneyGram is the 2nd largest money transfer organisation (MTO) in the US. The combined company has the potential of not only shaking up the global money transfer market but potentially enabling Alibaba to enter the US financial services market. But, the acquisition will need regulatory approval from the US Committee on Foreign Investment. This may be a bumpy road for two reasons. First, the new US President’s initial negative stance with regards to relations with China. However, Donald Trump met with Jack Ma, founder of Alibaba, last Dec and apparently had a “great meeting’. Then there is a possibly bigger issue of Alibaba’s AML (Anti Money Laundry) track record. A deal will no doubt require it to adopt more strict US AML rules. It will be interesting to see how this plays out. In his latest article, EDCs Samee Zafar provides a detailed explanation of the global implications of this acquisition.
Philippines based ride-hailing platform Grab announced that it has raised US$750 million in new funding. As a result it claims to be the best capitalised technology startup in Southeast Asia. SoftBank was the lead investor. Grab will invest in key areas including a continued commitment to invest in Indonesia which is the company’s most important market and where competition with Uber and home grown app Go-Jek is intensifying. Grab will also further develop its GrabPay mobile payment solution targeting the large under banked population and has partnered with Mandiri – Indonesia’s second largest local bank. Also part of the plan is an e-money payments platform that will enable the use of GrabPay at Lippo owned department stores, cinemas and other developments.
The UK’s Competition and Markets Authority published its so called banking final order on 2nd Feb. This is the culmination of a regulatory review process that started in Nov 2014. A core piece of the ’shake up’ is an order for UK banks to develop and adopt an open API standard by Q1 2018. A few UK banks have started offering APIs of some kind – HSBC for example offers APIs for branch locators, ATM locators and product finders. However, take a look at Spanish bank BBVA’s API Market. Its comprehensive API platform is probably best in class right now.



In the US, the Fed’s Faster Payments Task Force has published part one of a two part final report. Based on criteria released in Feb 2016, it is reviewing 19 faster payments solution proposals. The proposals are varied from upgrading existing infrastructure to adopting newer technologies. Part two covering the full assessment of the proposals will be published in mid 2017.
Distributed transaction ledger (DTL) technology provider Ripple has announced that “The National Bank of Abu Dhabi (NBAD) has become the first bank in the Middle East to use Ripple’s solution to provide real-time cross-border payments to its customers.” This follows significant momentum by the firm in 2016 including an impressive list of initial banks signing up to the Ripple network in June and a series B fund raising in Sept. Ripple’s network seeks to provide real time inter-bank commercial payments and cross-border transfers using its distributed ledger technology and thereby “drastically reduce the time and cost of settlement and enable new types of high volume, low value global transactions”. Here is a good overview of the Ripple solution. However, Ripple are not without company. This article provides a nice overview of other players developing distributed ledger solutions for cross-border payments.
Global Blue has launched a real-time refund service with Alipay to allow Chinese shoppers to claim VAT refunds directly to their accounts. Global Blue and Alipay have been working together since 2014 across nine European countries, providing tax refunds to Chinese travellers’ Alipay accounts within 10 working days. This is the first time Global Blue will offer real-time digital refunds. Global Blue processed 30 million Tax Free Shopping transactions in 2016 (up from 12 million in 2010) worth €21billion. A two sided business model means that Global Blue receives commission from both the shopper (reclaiming VAT) and from the merchant (who benefits from extra footfall and doesn’t have to worry about offering VAT refunds). Here is Global Blue’s Corporate Presentation.
On 8th Nov 2016, the Reserve Bank of India (India’s Central Bank) withdrew the legal tender status of the 500 and 1000 Rupee currency notes and stated that the notes could be turned in at bank branches with the value credited to a bank account. The idea of ‘demonetisation’ was to “effectively nullify black money hoarded in cash”. The resulting crisis was well documented by EDC’s Samee Zafar. The Reserve Bank has now started releasing representative data on payment volume on a weekly basis. According to analysis by Business Standard, the latest data released on 7th February suggests that digital payments, which jumped post demonetisation, has already begun to decline – possibly suggesting a preference for cash that is not going to go away any time soon. We will continue to monitor this data to see if the trend continues.

You can read all previous posts at the EDC Interface page.