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What Is a Bacs Payment?

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Bankers Automated Clearing Services (Bacs) is the most popular method for sending and receiving business payments in the UK, typically used to pay salaries, pensions, and bills. Over its impressive 50 year history, Bacs processed over 78 billion payments. The term Bacs actually refers to the payment network consisting of 27 UK banks and building societies that make up the membership organization. 

There are two forms of Bacs payments: Direct Credit, used to send payments directly into bank accounts, and Direct Debit, which collects payments directly from bank accounts. In 2019, there were 2 billion Direct Credits and 4.5 billion Direct Debits. 

What is Bacs Direct Credit? 

Bacs Direct Credit is a tried and trusted option for companies of all sizes to quickly and efficiently send or receive payments. Direct Credits predominantly handle State benefits, such as pensions, tax credits, and various allowances, and include general B2B payments, payrolls, and dividends. 

What is Bacs Direct Debit? 

Bacs Direct Debit is when a customer instructs their bank to authorize a third party to collect payments from their account for as long as the customer allows. Once the bank receives the authorisation, the authorized organisation can automatically take payments on a regular basis. Direct Debit is usually used for regular and recurring payments such as utilities and household bills, loan repayments, insurance premiums, and subscriptions. 90% of people in the UK have at least one regular Direct Debit payment. 

How long does it take to process a Bacs payment? 

A Bacs payment takes three business days to clear. If a payment file is submitted to the Bacs system on the first day prior to a cut-off time, a bank can process the file on the second day, and credit the payment to the recipient’s account on the third day. 

Bacs Direct Credit payments usually arrive by 7am on the third business day. Even though it is an electronic payment system, Bacs transfers only send Monday to Friday. 

How safe are Bacs payments?

Bacs has a long-standing reputation for being an incredibly safe and trusted way to collect and make payments. It has a 95%-100% success rate and is renowned for its secure and reliable electronic payments delivery. Bacs uses an SSL encrypted Bacstel-IP system and requires a secure and encrypted password. There’s also a Direct Debit Guarantee that protects customers from any fraudulent payments. 

How is Bacs different from Faster Payments?

Faster Payments is a UK banking initiative that enables mobile, internet, and telephone payments to move between customer accounts, usually within a few seconds. Almost all internet and telephone banking payments in the UK are processed through the Faster Payments Service (FPS). Usually, Faster Payments arrive instantly but can take up to two hours, depending on the service provider, while Bacs Payments take three days.

Unlike Bacs payments that only work during business days, Faster Payments can be made and received 24/7, including bank holidays. Delays may occur if the other bank or building society is not a participant of the Faster Payments Service or if there is confusion over the sender’s identity and additional security checks are needed. 

It is possible to send up to £250 thousand using a Faster Payments transfer, but individual banks and building societies may have their own thresholds and limitations in place for personal and corporate customers. Bacs allows transfers over the £250 thousand thresholds. 

How to become a part of Bacs?

Bacs direct participation is open to banks, building societies, electronic money institutions (EMIs), and payment institutions (PIs) that meet the following eligibility criteria: 

  • Have a settlement account at the Bank of England
  • Carry out business and operate an office in the EEA
  • Meet agreed technical and operational requirements, including having an agreement in place with VocaLink (or another provider of approved clearing services), and having an approved trust service
  • Be a bank, building society, authorised payment institution or electronic money institution
  • Sign a legal document in respect of participation, and of the settlement arrangements
  • Pay a share of Bacs costs.

Eligibility criteria. Source: Bacs.co.uk

Bacs participants have to abide by clear and transparent governance structure, rules, and procedures. 

SDK.finance, a white-label digital payment platform, has everything businesses need to launch their payment product in the shortest time possible. Contact the SDK.finance team directly to learn more about what type of payments software will be perfect for your business needs.

The list of SDK.finance solutions includes Digital Retail Bank, Microsoft Power BI payment dashboards, Voice payments, Money transfer, and Currency exchange

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Source: https://sdk.finance/what-is-a-bacs-payment/

AI

Aite survey: Financial institutions will invest more to automate loan process

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Financial institutions plan to increase their spend on automations and collections management solutions for their loan processes. Fresh results on consumer lending practice from research and advisory firm Aite Group indicate lenders plan to invest more heavily in their collections processes, said Leslie Parrish, senior analyst for the Aite Group’s consumer lending practice. Parrish shared […]

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Source: https://bankautomationnews.com/allposts/lending/aite-survey-financial-institutions-will-invest-more-to-automate-loan-process/

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Facial recognition, other ‘risky’ AI set for constraints in EU

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Facial recognition and other high-risk artificial intelligence applications will face strict constraints under new rules unveiled by the European Union that threaten hefty fines for companies that don’t comply.

The European Commission, the bloc’s executive body, proposed measures on Wednesday that would ban certain AI applications in the EU, including those that exploit vulnerable groups, deploy subliminal techniques or score people’s social behavior.

The use of facial recognition and other real-time remote biometric identification systems by law enforcement would also be prohibited, unless used to prevent a terror attack, find missing children or tackle other public security emergencies.

Facial recognition is a particularly controversial form of AI. Civil liberties groups warn of the dangers of discrimination or mistaken identities when law enforcement uses the technology, which sometimes misidentifies women and people with darker skin tones. Digital rights group EDRI has warned against loopholes for public security exceptions use of the technology.

Other high-risk applications that could endanger people’s safety or legal status—such as self-driving cars, employment or asylum decisions — would have to undergo checks of their systems before deployment and face other strict obligations.

The measures are the latest attempt by the bloc to leverage the power of its vast, developed market to set global standards that companies around the world are forced to follow, much like with its General Data Protection Regulation.

The U.S. and China are home to the biggest commercial AI companies — Google and Microsoft Corp., Beijing-based Baidu, and Shenzhen-based Tencent — but if they want to sell to Europe’s consumers or businesses, they may be forced to overhaul operations.

Key Points:

  • Fines of 6% of revenue are foreseen for companies that don’t comply with bans or data requirements
  • Smaller fines are foreseen for companies that don’t comply with other requirements spelled out in the new rules
  • Legislation applies both to developers and users of high-risk AI systems
  • Providers of risky AI must subject it to a conformity assessment before deployment
  • Other obligations for high-risk AI includes use of high quality datasets, ensuring traceability of results, and human oversight to minimize risk
  • The criteria for ‘high-risk’ applications includes intended purpose, the number of potentially affected people, and the irreversibility of harm
  • AI applications with minimal risk such as AI-enabled video games or spam filters are not subject to the new rules
  • National market surveillance authorities will enforce the new rules
  • EU to establish European board of regulators to ensure harmonized enforcement of regulation across Europe
  • Rules would still need approval by the European Parliament and the bloc’s member states before becoming law, a process that can take years

—Natalia Drozdiak (Bloomberg Mercury)

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Source: https://bankautomationnews.com/allposts/comp-reg/facial-recognition-other-risky-ai-set-for-constraints-in-eu/

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What banks are looking for after COVID-19

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As the number of vaccinated adults in the United States grows and the average rates of COVID-19 infections drops, bankers and their customers are eager to move ahead. But what does “move ahead” look like, and how has consumer demand changed over the course of the past year?

To answer this question, we at MX surveyed 1,000 randomly selected U.S. consumers with results published in our ultimate guides. Among many insights, we found that 87% of consumers say they now visit their bank branch less often than they did before the COVID-19 pandemic, while 89% say they use mobile banking more often. We also found that a quarter of respondents said they’d currently feel insecure about their financial situation if they hadn’t received a third stimulus check, while half said that without the stimulus check they’d struggle to cover their monthly living expenses such as rent, mortgage, and recurring bills.

In other words, consumer demand for digital banking has surged at the same time that consumers have received an influx of stimulus cash — a shift that puts banks in a bit of a bind. As covered in an article from Bloomberg Opinion columnist Brian Chappatta, banks now face the largest gap in decades between a typical bank’s deposits at hand (which are high) and the demand for new loans (which is low). Given this gap, Chappatta writes, “In the near future, [banks] may need to rely even more heavily on revenue outside of their traditional business of making loans.”

Banks looking for these new revenue models in the wake of COVID-19 should know that the way forward must be digital first.

One possibility worth exploring is a subscription service, possibly in the vein of Amazon Prime. As Bradley Leimer, co-founder of Unconventional Ventures, says, “If banks can’t offer something more valuable than Amazon Prime, then we’re probably in the wrong business. I think we just need to retool our mindsets and put the customer at the heart of these decisions. What is at stake, in my opinion, is literally the future of the financial services model. The wolves are at the door.”

In light of this, financial institutions can ask themselves which benefits they offer could be packaged together for a monthly subscription. For example, Utah Community Credit Union (UCCU) has developed a product called UCCU Prime, which gives members services including $600 per claim in cell phone protection in the event their phone is broken or stolen, $80 in coverage for roadside assistance (4x a year), a $10,000 reimbursement in expenses in the event of stolen identity, $10,000 travel accidental death coverage, special deals for local businesses, travel discounts nationwide, debit card rewards, and more — all for $6 a month. As UCCU creates new offerings, they can add them to the bundle and increase this revenue stream.

This is just one of many possibilities that comes with looking at banking with a new pair of eyes as we work to put COVID-19 behind us and explore new revenue streams.

Learn more at www.mx.com

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Source: https://bankautomationnews.com/allposts/retail/what-banks-are-looking-for-after-covid-19/

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The Future of Finance: How to Cope With Open Banking In Emerging Asia

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For more than a decade, Asia has been the largest regional banking market and as the continent’s massive middle class continues to grow, McKinsey expects personal financial assets in the region to reach US$69 trillion by 2025, or 75% of the global total.

However, in recent years, traditional banks have been disrupted or have faced stiff competition from fintech startups — be they pure-play digital banks or e-commerce platforms offering quasi-banking services. These players have catered to largely ignored, low-margin, high-risk customer bases, namely those in rural areas of emerging markets.

Despite the significant growth in Asia’s banked population, a third of the world’s 1.7 billion unbanked people live in just four Asian countries: China, India, Pakistan, and Indonesia.

Often left to state-owned financiers or developmental banks due to smaller margins, increased hand-holding, and issues assessing creditworthiness, these customer groups have been targeted by innovative fintech brands offering tailored products such as P2P lending, crowdfunding, and for micro enterprises on e-marketplaces, invoice financing.

Examining the Asian digital banking scene

A 2020 Working Paper by the Consultative Group to Assist the Poor examined three case studies of digital banking across emerging Asia, revealing some common features. The successful ones tend to:

  • Leverage data analytics to better understand target customers
  • Develop affordable products tailored to customer needs
  • Offer streamlined digital on-boarding processes
  • Blend offline and online customer engagement

The final feature above is worth highlighting for its relevance to Indonesia, an archipelago nation where even e-commerce unicorns like Tokopedia and Grab have invested heavily in online-to-offline solutions that cater to customers in rural areas.

According to a 2019 survey by the local Financial Services Authority, Indonesia’s financial inclusion rate stood at 76%, marking an increase of some 40 million unbanked adults from 2017, when the rate was nearly 50%.

One path traditional banks can take without reinventing the digital wheel is open banking, a concept centered around the sharing of bank data with third parties, with the goal of opening up the banking industry and encouraging innovation.

impression of Open Banking?

Emerging Payments Association Asia

Exploring the concept of open banking

If you’re still fuzzy on what open banking is, here’s an easy way to wrap your head around the concept: You’ve just picked out a new laptop on your favorite e-marketplace. It’s time to check out and make payment. When doing so, you notice that you’re able to apply for a bank loan directly through the site. In fact, the whale process is integrated. There must be some sort of technical cooperation between the site and the bank itself. This is one example of open banking.

Through application programming interfaces (APIs), customer data is shared securely and seamlessly between banks and third parties which enables the creation of new apps and services. These apps can be plugged into banks’ own systems to offer new or improved services to their customers, or non-bank services that require customers’ banking data.

Allied Market Research figures put the global open banking market at US$7.3 billion in 2018, and this is expected to balloon to US$43.2 billion by 2026 at a CAGR of 24.4%.

Key drivers of open banking

Two key financial services will drive this growth: banking and capital markets products, as well as payments. In terms of distribution, the app market far outpaces other channels.

Not only is open banking a cheaper alternative to doing everything in-house, it is also a more effective way to reach customers and collate richer, more in-depth data via partnerships with apps.

For decades, traditional banks have been seen as having “moats,” protection against the threat of new competitors or substitute products. Historically, these have been things like making it hard or expensive for the customer to switch products, or just creating and relying on economies of scale.

But today, the massive scale and market shares that traditional banks have long enjoyed no longer represent durable moats in the long term. Neither do difficult, complicated, and opaque customer onboarding experiences. Fintech brands are offering easy, seamless experiences for customers looking to open accounts, make payments, and get loans.

Nonetheless, traditional banks still have the upper hand, with years of brand name recognition among customers and access to rural areas via brick-and-mortar branches and other networks. Via open banking, banks can lend their know-your-customer expertise to third parties, while gaining access to a richer level of customer data across different apps (e.g. spending behavior and transaction volumes).

The Emerging Payments Association Asia suggests three key elements for successful open banking: open APIs, fintech ecosystem, and adoption of new technologies.

Open APIs are simply APIs that are made publicly available for developers to use and connect to their platforms, or build products from. The public nature of open APIs helps improve interoperability of new apps and services — allowing more developers to build products and more customers to access services backed by the same APIs, while giving banks easy consolidation of customer data.

Open Banking remove screen scraping

Emerging Payments Association Asia

A healthy fintech ecosystem of consumers, financial institutions, and regulators can benefit from lower costs and improved products via open banking. Open banking offers a competitive and innovative environment through the transfer of consumer data.

With developers constantly innovating products with open APIs, banks will be introduced to new technologies, which they can in turn can leverage to create better products and services.

Traditional banks and stakeholders must build out their own open banking initiatives — or form strategic alliances — if they don’t want their lunches eaten by new fintech startups.

Digital transformation is no longer a ‘maybe’ proposition. It is a ‘must.’ It’s a defensive move to avoid being left behind in the open finance arena. Banks that embrace open banking while protecting customer privacy and data stand a decent shot of building digital moats.

Featured image credit: Unsplash

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Source: https://fintechnews.sg/50484/indonesia/open-banking-impact-emerging-asia/

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