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The curious case of the QR code

With standards emerging from Beijing to San Francisco, QR is coming of age. Could global security standards be coming into view for QR? There is an ISO standard for the "symbology" of a visual configuration that is now familiar worldwide. But, for payments, the standardisation needs to go far deeper. "At present there is no universally agreed security infrastructure," says Lafferty's Head of Research, David Hickey. "But I am sure security for QR payments will improve. China has just introduced two-factor authentication for QR transactions above a certain value. And EMVCo also published QR code standards last year." Indeed those moves made by the People's Bank of China show that there is a big difference to be aware of between 'static' and 'dynamic' codes: a dynamic code can be disposable, tokenised and also have detailed user/merchant metadata and verification elements baked in. Reassured by the added security such features make possible, the authorities in Beijing have decided that there should be no transaction limit on dynamic barcodes that incorporate at least two digital certificates or signatures, whereas static codes now have a transaction limit of 500 yuan ($80). The only surprise here is that it took the central bank so long, as static codes are so easy to fake it is a wonder they ever took off for transactions at all: for example, the code on a rentable city bike can easily be (and has been) replaced with a fake code that actually triggers a funds transfer to a fraudulent account.Two years into its project, EMVCo in California meanwhile is certainly serious about getting its standards in place as widely as possible: "Given its early stage of deployment and growing adoption, now is the time to ensure the technology's potential is not constrained in the future due to compatibility issues." It has also just released a mark for use by merchants to indicate that they can accept mobile payments via QR. As with any botched strategy, getting QR wrong at the commercial level can be costly: the ill-fated CurrentC app in the United States, developed by a consortium of merchants (including a Walmart aggrieved by the power of the traditional networks), required users to go through several steps at the point of sale, beginning with unlocking their phone, starting the app, then switching to the camera to capture the QR code. (And remember that, tellingly, there was no native app to scan QR codes on iPhones until iOS 11 of late last year: QR has not had an easy time of it in the US.) Compatibility mattersThe attractions of the QR protocol are many, especially if you are a small merchant that has been missing out over the years on payments by card (and now digital wallets). Cash-in-circulation may be growing worldwide but new forms of payment are a reality everywhere, and the QR solution is especially appealing for those not hooked up to the traditional schemes. China, as readers will know, is way ahead on QR, and the unprecedented success of Alipay and WeChat has been instrumental in that phenomenon. Cashless payments in the country really took off when people began using Alipay for buying things on Taobao (Alipay's shopping website), a shift intimately connected with QR. As Professor Chen Yiwen of the Chinese Academy of Sciences recently pointed out, the country "has started the transition to a cash-free economy faster than anyone could have imagined, largely because of the viral spread of two-dimensional barcodes". And by viral spread, he is hardly exaggerating: QR codes are even to be found on the clothing of waiters, bridesmaids and pedlars. With Alipay and WeChat bringing well-funded AI technology to bear on the analysis of real-time payment flows, anti-fraud efforts are on the up also. QR codes are particularly well-placed to meet the needs and opportunities of markets that have largely bypassed fixed-line infrastructure and have landed firmly in the smartphone age: in Nigeria, for example, Mastercard can deliver customised codes to small businesses via a Facebook Messenger bot.India too presents an eye-catching case: the official QR standard, BharatQR, is a common interface for RuPay, Visa and Mastercard through its integration with the official Unified Payments Interface and so brings the might of a state-owned payments infrastructure to bear behind the humble code displayed at the point of sale. This might draw in vendors and businesspeople that have found standard POS equipment significantly more expensive (in the case of India, more than a hundred times more so) to set up than QR. Paytm too is on board with QR: "From a transaction perspective, nothing much changes. While the user scans the same QR code, [he] will now get two or three options (e-wallet, account and debit card) and can choose the payment instrument. It does not add to the number of steps as the same screen will have multiple options", the company's chief operating officer recently told the Times of India.The great gain of QR is a symbolic convention that can reach both developed and underdeveloped markets, the banked and the unbanked alike: "What counts in making a happy marriage," Leo Tolstoy once wrote, "is not so much how compatible you are but how you deal with incompatibility." Assuming East and West can see eye to eye on security standards, QR's best days seem to be ahead of it.

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.

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