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The Bank of Lithuania and Revolut(ion)

The fintech Revolut will feature in our upcoming RB2020 report on Digital Banking, and in the course of researching the progress of the digital banking alternative launched by Nikolay Storonsky in the summer of 2015, one feature stood out — and it wasn't a new service on the bank's app. It's the fact that half-fiat, half-crypto banks are about to become a reality. Revolut has been operating for the past two years on an e-money licence granted by the FCA in the United Kingdom, but it announced in November 2017 that it had applied for a European banking licence from the Bank of Lithuania, that country's central bank. If that licence is granted, Revolut can stop calling itself a digital banking alternative, and start calling itself a bank. The full licence will open up potential for the bank to begin lending from its own balance sheet, as well as offer savings accounts. What makes this particular application more than a foregone conclusion? This isn't like applying for a loan, where you go away for a few months and wait for an answer. Central banks tend to shepherd their applicants through a bank licence application, so there's constant back-and-forth between an applicant and its regulator. No cryptocurrency!The magic phrase sure to awaken interest during any presentation to banks by blockchain businesses is 'No cryptocurrency'. But in the case of Revolut, the bank applied to the Bank of Lithuania in November 2017, while it was building a cryptocurrency wallet to offer to its customers. Revolut launched the service in December 2017, which saw a spike in the number of new customers joining Revolut — in fact, its numbers grew from around a million in November 2017 to nearly two million six months later. There's no doubt that the crypto offering played a part in that, as Revolut became one of the first European services allowing clients to hold fiat currency and cryptocurrencies in the same account. The Square Cash app has been offering something similar in the US, although just with bitcoin; Revolut by contrast offers Bitcoin, Ether and Litecoin and plans to add Bitcoin Cash and Ripple's XRP token. (Many analysts put Square's first-quarter share price rise down to its bitcoin adventurism.)A Series C round by Revolut last month raised $250 million. It's unlikely that the lead investor, Hong Kong-based DST Global, along with Index Ventures and Ribbit Capital, didn't take a hard look at the regulatory hurdles before jumping in with money. Revolut stands out among the digital-only challenger banks because it says it has been breaking even and continuing to accumulate customers — and now it's got a reputation as the fastest growing fintech in Europe, as it plans its expansion across the English-speaking world. Lithuania seeks to map out an ICO futureWhat does the Bank of Lithuania have to say about all of this? Very little, in keeping with the gnomic reputation of central bankers. However, a handful of European countries have been taking notes and encouraging the progress of fintechs in order to open up competition — and indeed, fintech input helped to shape PSD2 rules. The early contender in this space was of course Switzerland, and the city of Zug in particular, which is making claims to be a world capital of cryptocurrencies. Malta has followed suit, recently attracting leading crypto-exchange Binance to move from Hong Kong. But the Baltics — and Lithuania in particular — are looking to be the northern giant. Indeed, the Bank of Lithuania has been upfront about its interest in blockchain and issuing since last year. In an article last week in Forbes, contributor Naeem Aslam spoke of recent meetings with Lithuanian finance minister Vilius Šapoka and Bank of Lithuania board member Marius Jurgilas to talk about blockchain and regulation. "Vilius Šapoka, Lithuania's Finance Minister, told me: 'Here is a red carpet, come disrupt the market,'" he wrote. "The Bank of Lithuania's aggressive posture puts the lie to the notion that global authorities have been caught napping by the sudden rise of these kind of crimes. I believe, and the central bank concurred, that the best approach is to get your hands dirty, test it, understand how it works, identify the risks, and then build the tools to minimise that risk. If the regulator is part of this process from day one, the timeline is streamlined."Mr Jurgilas told Forbes that the bank's regulatory sandbox should speed testing and approval of new approaches and mentioned that the central bank is exploring Ripple as a potential solution to existing challenges. While many in the cryptocurrency world dismiss Ripple, it's interesting to note a point of concurrence here. Don't bet against Revolut being offered a banking licence in the coming months by the Bank of Lithuania, cryptocurrencies and all, indicating a meeting of minds between banking regulators and cryptocurrency innovators. If that happens, Lithuania might indeed find itself front and centre in the ICO world.From Retail Banking 2020 InsightsQapital CEO: "Chatbots are confusing for people"Coconut wants to be the bank for the 'forgotten 90 percent'Revolu at the Bank of Lithuania?)Find out more than you want to know about your data on May 25Why Arro Money doesn't even want to see your credit scoreOakNorth makes profits straight out of the gate

Capture BBVA
Banking accessibility

With so many innovative goings-on in the world of banking, finance and tech (often times simultaneously enmeshed with each other) it can be surprising to realise that banking accessibility on a human level is still not where it should be.As hackathons, mass tech-hire events, blockchain innovations and technological implementations occur to better equip banking, there are still many left on the sidelines, too often untouched by developments that improve how the majority of people — executives, consumers, merchants, developers — engage with the financial ecosystem.Those with disabilities of various kinds are one group that springs immediately to mind.Something as simple as withdrawing money from an ATM is an activity that too many of us take for granted. However, BBVA's launch of its BBVA For Everyone app back in early March reveals quite a lot about how starkly different the banking experience is for the visually impaired, for example.Developed alongside ILUNION Tecnología y Accesibilidad and engaging with specialist financial technology solution provider GFT's Innovation Lab from late 2017, the new app aims to facilitate the simple cash withdrawal process for customers in Spain. All throughout its pilot phase, which involved 30 people with disabilities, GFT worked to figure out how customers could preprogram cash withdrawals from ATMs, as well as how the visually impaired could more easily locate the ATMs.In January 2018 it was fully launched, with Luis Javier Blas, director of Engineering at BBVA Spain, stating that customers with a disability would be able to "use any of BBVA's ATMs" to avail themselves of the service.In Spain, customers can now use the app to locate the specially modified BBVA ATMs. The app works with Google Maps to plot the quickest and most convenient routes and interacts with the ATM, following a sound emitted by the ATM in order to locate it. After inserting the bank card, the client completes a few more steps via the smartphone before collecting the cash.It's a pretty innovative solution to a neglected problem. People with visual impairments often have to wait for someone trustworthy to become available to help them withdraw cash from an ATM (due to the sensitivity of the information potentially being revealed); this app navigates around that obstacle quite nimbly.The app facilitates a marriage of privacy and convenience that has the potential to make a big difference to the lives of many people.In fact, considering that almost ten percent of the Spanish population have a disability, it's clear just how vital a development like this one is, and it paves the way for further, similar improvements."The new app makes banking a lot easier for blind people like me. We can look for an ATM and specify the details of the transaction in advance. Then, when we can navigate to the ATM, and the transaction is completed automatically. It is an enormous improvement, not only for blind people, but also for older people and those who find it difficult to use the standard ATM at a traditional branch", said Daniela Rubio who worked as part of GFT's multidisciplinary development team.The link-up between BBVA and GFT will certainly not benefit every customer, but it could prove to be the catalyst that changes the mentality that has seen disability neglected by innovative bank thinking. Those with disabilities can be considered as a type of 'underbanked', and their financial inclusion deserves more consideration as exemplified by BBVA.Elsewhere, in the United Arab Emirates, people with disabilities (known as people of determination) are being afforded greater inclusivity, with Emirates NBD introducing new services to ameliorate customer experience. braille-enabled account opening, tools to cut out unwanted background noise for those with hearing problems, and staff trained in basic sign language are all positive steps by the major lender.Each of these are only waves in the ocean that is the financial services industry, but if firms such as BBVA, GFT and Emirates NBD continue to propel similarly inclusive ideas into the current of everyday user experience, the ripple effect could take hold until the rest of the big banks have no choice but to react and emulate.

Jernberg Danish
Danish Banks exodus

It looks like the Danes are losing confidence in their big banks.According to a recent Voxmeter customer survey, almost 45,000 customers switched from big banks to smaller ones last year — almost three times more than the previous year.This is a significant development according to Voxmeter CEO Christian Stejr. "The clients lack closeness, security and trust, and there is an expectation that you will get these in smaller banks", he added.The pattern has been the same for all Nordic bank surveys. The direct banks and the smaller local banks beat the big ones, with the exception of Handelsbanken. This is mostly likely due to Handelsbanken's decentralised strategy. (Handelsbanken began building its decentralised system in the early 1970s and it is a principle the bank still holds dear today — as you can see from Lafferty News' 2017 interview with its CEO Anders Bouvin).Another rating firm — EPSI Rating — has been conducting annual Pan Nordic customer satisfaction surveys since 1999. According to its 2017 Nordic report, digital bank customers are missing personal relationships they get from brick-and-mortar banks.I define myself as a digital customer. I have not been in a branch for many years. But I do have a personal banker I can call from time to time to discuss financial matters.Paradoxically, my main bank — DNB — has shown all-time high profits despite the fact their customer satisfaction index is only under-performed by Nordea. The two big banks have had the least satisfied customers in Norway for decades.The strategic question is to what extent does customer satisfaction affect market shares and profitability? Digitalisation is increasing accessibility and reducing cost at the same time.But how many branches do banks have to close? Is it sufficient for customers to be in contact only with unknown personnel at call centres? How does having a personal banker affect a customer's loyalty?With the latest news from Denmark I guess these are matters which banks have to carefully consider if they want to keep their clients.Frank Jernberg is a former banker and writes for Lafferty News on Nordic affairs.

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