B2B Payments

In South Korea: Calls For Greater Bank, FinTech Collaboration

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Bank and non-bank collaboration gets a boost in South Korea through an interbank payment network and sandbox. Elsewhere, individual FinTech company initiatives shine a spotlight on open banking.

Open banking may foster talk in Europe and the U.S. centered on collaboration between FinTechs and traditional banks. The movement to bolster such joint efforts and give a leg up to nimble tech upstarts is also gaining traction in other corners of the globe.

News came Monday (Feb. 25) that in South Korea, the financial regulator there (known as the Financial Services Commission) is encouraging the creation of an interbank payment network that will allow access to banks and FinTechs. As reported by The Korea Herald, the Commission also will lower the required usage costs that have previously been in place for firms.

The move may bolster mobile money transfer and payment apps such as KakaoPay, the site said. The announcement marks a shift in South Korea, where access had previously been offered only to the payment networks that were needed to complete transactions.

Payment processing fees are being cut by as much as 90 percent, said the Commission. The upshot will be faster payments. Representatives from the Commission stated that banks should look to create FinTech unicorns (commonly viewed as companies with private market valuations of at least $1 billion).

The Commission also said that banks will be responsible for sharing more financial data with FinTechs.

The move comes a few weeks after South Korea said through the Financial Services Commission that a sandbox will be rolled out this year to help support FinTech development. In South Korea, as has been seen elsewhere, companies will be able to test their products and services with customers for a set period of time, with regulatory exemptions in place. The Commission had said earlier this year that it would invest the equivalent of $3.5 million USD to underpin the sandbox effort.

In terms of individual company efforts, OakNorth, a challenger bank, said it will use a platform being offered by ClearBank to facilitate real-time payments, which in turn will allow instant payments. OakNorth offers debt financing for enterprises in a range of 500,000 pounds to 45 million pounds.

The COO of OakNorth said in a statement that “ClearBank’s API and virtual account support capabilities are best-in-class, and in them, we’ve found a long-term, strategic partner who will enable us to provide an even faster and more seamless experience for our clients.” The company said thus far, it has lent more than 2.7 billion pounds to U.K.-based businesses.

In the states, PayJoy, a FinTech that offers pay-as-you-go smartphone financing, said last week that it debuted its Lock API on a global basis. The API lets PayJoy lending partners secure financing – and the firm uses the customer’s phone to underwrite data and serve as collateral. The Lock offering has thus far been deployed across 10 countries including Tanzania, Mexico and India, among others.

In a release, Mark Heynen, co-founder and chief business officer at PayJoy, said that “the fundamental challenge in extending credit in emerging markets – whether for a loan or a phone – is the lack of collateral and underwriting data. By introducing a way for consumers to pledge their smartphone as collateral virtually, we give finance companies a tool to approve a lot more people with the comfort that it has a proven history of cutting defaults in half. With affordability being top of mind, we created a technology that empowers lenders to better leverage pay-as-you-go smartphone loans with fewer defaults.”

Also in the States, payments platform Adyen said it has launched a payments service powered by open banking. Adyen said it is offering an alternative to card payments; the firm has launched a PSD2 AP method that can deliver access to more than 90 percent of consumer accounts in the United Kingdom. The new payment service is first being launched in the U.K., with plans to roll out into other European markets.

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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 Pay Advances: The Gig Economy’s New Normal, a PYMNTS and Mastercard collaboration, examines pay advances – full or partial payments received before an ad hoc job is completed – including how gig workers currently use them and their potential for future adoption.

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