Open Banking Expo’s Ellie Duncan caught up with Tim Waller, head of legal and policy at Token, to discuss the European regulatory landscape, what the payments industry can do to instil confidence in consumers, and what lessons the UK and EU can learn from Singapore and Hong Kong.
1. What does your role at Token involve?
It’s such a varied role, which is what I was looking for when I joined in December last year. My role falls into three main areas: the first one is commercial contracts. So that can be anything from our supplier relationships, or corporate issues, to dealing with clients. One of the focuses in that area is on new and innovative ways of signing up clients and using new contract automation techniques in order to be able to do that quickly and effectively.
The second area is regulatory. We got our German European payments licence earlier this year from German Federal Financial Supervisory Authority (BaFin) and the main focus for me is to build the knowledge that we need for the German regulatory landscape. There are lots of payments businesses that were previously based in the UK but are now based in other jurisdictions around Europe and we’re all going through this process. I find that really interesting and rewarding.
Finally, there is policy. That’s where I support colleagues in terms of contributing to consultations that we have with the regulators and industry groups, and then also working with industry groups. We work with groups like FDATA to collaborate with various TPPs across the industry.
2. How has European regulation helped to shape the payments market so far, and what can EU and UK regulators learn from those in other jurisdictions?
The UK benefitted from a perfect storm. It had the Competition and Markets Authority’s (CMA’s) order back in 2015/16 for the CMA9 and the perfect answer to that was PSD2. Those have integrated and kickstarted Open Banking within the UK.
I think there are more challenges within Europe, only because there hasn’t been the enforcement background, as there has been with the CMA in the UK. Perhaps there hasn’t been, in the past, the issues around competition in the retail banking sector that there has been in the UK either.
In terms of other jurisdictions, I like to look to Asia. Any market that can bring us something like WeChat Pay – where you can pay a merchant directly through a QR code in a restaurant – we really need to take notice of those markets.
The approach of regulators in Asia has been really interesting, particularly in places like Hong Kong and Singapore, where the approach of the Monetary Authority of Singapore (MAS) and the Hong Kong Monetary Authority (HKMA) has been very much more collaborative. In Singapore, MAS has put in place a set of standards and focused on around 20 financial institutions to adopt those standards. But those standards aren’t compulsory.
What we in the UK and the EU could look at is the level of collaboration we’re seeing in Asian markets, where MAS has collaborated with the banks and the TPPs to generate innovation. Some of the difficulties we’ve had in the UK is that this has been forced down the banks’ throats to a certain extent and there is a bit of fatigue from the banks’ perspective. In turn, that doesn’t generate the right behaviours among some of the TPPs, where they’re feeling they need to be combative in their style, which doesn’t really help with collaboration. We, as an industry, could learn a lot from Asia in terms of how they’re working together across the industry.
3. What does the industry need to do – Token included – to instil confidence in consumers about Open Banking payments?
We all have a responsibility to deliver a clear message to consumers about the benefits of Open Banking payments so that they feel comfortable with using them. This can come from all directions, including the TPPs, but most importantly it can come from merchants and marketplaces, and also from the banks.
To instil confidence in consumers, we need to bring forward three very clear points. Firstly, simplicity. Every time you want to make a card purchase online you have to fill out a form to make that payment. The process isn’t standardised at all. We need to get across the point that those integrated Open Banking payment systems are simple and those customer journeys are easier to use.
The next point we need to get across is around security. Some merchants can’t control security on their websites. There is real detriment there for consumers because card details aren’t being held securely by merchants. That is just not an issue for Open Banking, because all the transaction details remain within your banking app.
Finally, there is a message around control. Open Banking payments always put the consumer in control of their payments. In an Open Banking payments transaction, the consumer will see a very clear, standardised screen where they give their consent to initiate that payment. The consumer is in control the whole time.
4. How is Token helping to drive policy in the payments space?
The main thing we’re doing is driving the market forward by building really good relationships across various industry partners. We deal with banks, payment schemes, PSPs, and large merchants, and we deal with them in different ways. By working with a variety of partners, we can help build innovation. By being fairly open and flexible about what we’re doing, that will drive the industry forward. It’s really important to have that approach.
5. What do you expect the European Open Banking payments landscape to look like in five years’ time?
I remember attending an Open Banking seminar in 2019 that turned out to focus on information, data, and credit scoring apps. At the end of the seminar, one person stuck their hand up at the end and said “what about payments?” and everyone sort of shrugged their shoulders. Back then no-one was talking about Open Banking payments at all. That was a just couple of years ago and we’re in a very different place now, which shows how quickly things are changing.
That’s also exemplified by what the card schemes are doing at the minute. Mastercard is working with Lloyds Bank to enable Open Banking payments, as announced in July this year. It’s really interesting that Mastercard, one of the leading card payments businesses in the world, is focused on Open Banking payment products. With Visa and its acquisition of Open Banking platform Tink, they are also getting involved in the Open Banking market. If Visa and Mastercard are focusing on Open Banking payments then I think it really will be a very considerable part of the payments market in five years’ time.
I don’t think you can talk about what will be happening in five years’ time without looking at issues around sustainability as well. Open Banking is a really sustainable option for customers. Why do we need to have bits of plastic sent to us in the post? We need to be looking at these sustainable payment options five years from now.
Find out what Token’s VP of technical sales and implementations, Nikita Septucha, had to say when Open Banking Expo caught up with him last month.