Apple Pay is getting popular. That’s a problem for PayPal; PayPal launches PYUSD stablecoin for payments and transfers;

In this edition:

1?? Apple Pay Is Getting Popular. That’s a Problem for PayPal

2?? Apple Card’s Savings account reaches over $10B in deposits

3?? PayPal launches PYUSD stablecoin for payments and transfers

4?? Stripe launches tax solution to help solve ‘huge’ complex issues

5?? Market Map: 95+ Fintech Companies Automating Banking

6?? Pioneers of Generative AI in the Banking Landscape

7?? Implementing instant payments: 7 high-impact areas for PSPs

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News

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Apple Pay Is Getting Popular. That’s a Problem for PayPal

PayPal Holdings still dominates as a provider of digital payment services, but its lead is narrowing as rivals gain share. Apple Pay, which was launched by Apple in 2014, has been making the most strides, Lisa Ellis, analyst at MoffettNathanson, wrote in a note Tuesday.

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Apple Card’s Savings account reaches over $10B in deposits

Apple announced today that Apple Card’s high-yield Savings account offered by Goldman Sachs has reached over $10 billion in deposits from users since launching in April. The Savings account offers an APY (annual percentage yield) of 4.15%.

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PayPal launches PYUSD stablecoin for payments and transfers

PayPal is rolling out a stablecoin for payments and transfers, the company announced on Monday. PayPal USD (PYUSD) is issued by Paxos Trust Company and is backed by U.S. dollar deposits, short-term U.S Treasuries and similar cash equivalents. PayPal says the stablecoin is rolling out to U.S. customers gradually. Today’s announcement marks the first such move from a major U.S. financial institution.

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Stripe launches tax solution to help solve ‘huge’ complex issues

Firms can access Stripe Tax by linking their Stripe Connect accounts to offer payment services tax solutions to customers, making it easier for businesses to sell cross-border by providing a no-code solution for the complex tax requirements that international expansion presents.

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Insights

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Market Map: 95+ Fintech Companies Automating Banking

As digital banking trends continue to accelerate, these startups are enhancing the bank's front, middle, and back office functions through automation and artificial intelligence.

Digitizing the online account opening, lending, and customer service functions can provide a superior experience for the customer and a lower operational cost for the bank. As a result, startups and technology vendors that automate workflows or embed artificial intelligence (AI) and machine learning (ML) into bank operating models will likely continue to be in high demand.

Banking infrastructure software is a $500B global market, according to the CB Insights’ Industry Analyst Consensus. Automating operations presents a significant opportunity to increase productivity while lowering employee headcounts.

Front office

Account opening & onboarding: Startups in this category facilitate digital, automated services to reduce onboarding time for banking customers. Startups like Mantl provide a streamlined, omnichannel account opening platform for financial institutions.

Bots & virtual assistants: Companies in this category automate customer service channels between banks and their customers. Startups like Kasisto are building white-label conversational AI chatbots that allow financial institutions to automate communication with customers across multiple channels like mobile, messaging, and web.

Authentication & biometrics: Companies in this category offer digital authentication protocols to combat fraud, increase transaction security, and enhance customer experience. Startups like Payfone are creating digital identity platforms, enabling businesses to instantly verify customers.

Middle office

AML, KYC, & identity: Companies in this category complete customer background checks and know-your-customer (KYC) processes before banks open new accounts. Startups like Onfido provide real-time identity verification and facial biometrics for KYC and anti-money laundering (AML) compliance.

Fraud & risk management: This category includes companies that provide anti-fraud and risk management solutions for banks and financial services institutions. For example, Feedzai provides banks with ML and AI-based omnichannel solutions to prevent account opening and transaction fraud.

Legal & compliance: Startups in this category work with legal and compliance organizations within banks, automating workflows and improving operational efficiency with AI and ML. Behavox, for example, is an enterprise compliance software company that provides employee surveillance to detect market abuse and internal threats.

Source CBinsights

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Pioneers of Generative AI in the Banking Landscape

As the potential of Generative AI gains recognition, pioneering organizations within the financial industry have taken the bold step of embracing this transformative technology. Among these trailblazers, prominent names like Klarna and Morgan Stanley stand out as early adopters of OpenAI's cutting-edge GPT-4 model, revolutionizing the way financial services are delivered and shaping the future of the sector.

Source C-Innovation

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Implementing instant payments: 7 high-impact areas for PSPs

1. (Phase 1) All channels currently supporting regular SEPA credit transfers (SCTs) must be prepared for initiating instant payments This requires significant changes in PSP channels (e.g. support of instant payment messaging format).

2. (Phase 3.1.1) A new transaction processing system must be put in place to support single transaction processing with 24x7x365 availability. This requires significant operational resources and monetary investment from the PSP side.

3. (Phase 3.1.1) To validate transactions instantly, PSPs must ensure that they are always reachable. Additionally, an IBAN/Name check functionality must be included in the transaction validation stage, meaning that a suitable vendor must be chosen to deliver this functionality.

4. (Phase 3.1.1) Fraud scoring and AML checks must be conducted in real time on a per-transaction basis, without impacting the customer experience. This requires modifications to the current systems and operational processes.

5. (Phase 3.1.2) Data access must be in real time for processes using payment account information (e.g. ancillary processes need to be updated to access internal data sources in real time, particularly payment account statuses).

6. (Phase 3.1.3) Regular SCTs have cut-off times in place to balance cash positions, whereas instant payments require sufficient funds for instant settlement of accounts. This means that PSP accounts may heavily fluctuate, and liquidity must be monitored and forecasted more precisely. Ideally, PSPs should put fallback mechanisms in place to mitigate the risk of insufficient balances.

7. (Phase 3.2.2) Client support is highly impacted as extended support may be required, e.g. to educate customers and familiarise them with the benefits and features of instant payments or to handle the increased number of support requests related to potentially rejected instant payments due to their real-time nature.

Source Innopay

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BNPL 2.0 Customer Journey: An embedded, personalized checkout experience

As BNPL continues to see rapid growth, particularly in e-commerce, providers are grappling with several challenges in an unregulated environment. One major concern revolves around the potential harm to consumers who may be unaware of the risks associated with accumulating debt. To tackle these issues, efforts are being made to bolster regulations and introduce effective control measures in the industry, aiming to mitigate the risks and protect consumers. This recognition of the need for stronger regulations indicates that the current BNPL 1.0 model is not sustainable in the long run. But what does the next wave of BNPL look like?

BNPL 2.0 represents a safer and fully regulated alternative that promotes responsible lending practices. With the implementation of BNPL 2.0, merchants can offer an embedded and personalized checkout experience, leading to significant growth through improved conversion rates and cost-effective customer acquisition strategies. This regulated approach ensures that lending practices align with consumer protection measures while still providing the convenience and flexibility of installment-based payment options. By adopting BNPL 2.0, merchants can enhance their business performance and provide customers with a secure and tailored checkout experience.

Source Publicis Sapient