Episode 3

Through The Grapevyne

02 105 grape Vyne blog header B v 03

Jun 30, 2022 · 5 minutes

Each month we weigh in on hot topics, buy-outs, new mandates, latest tech buzz and sometimes even news teetering on bizarre. We bring together voices from the industry to share insight and shed light on what’s happening in the world of fintech.

Ep 3: The one where dSterling enters the chat and we dedicate Abba’s ‘Money, Money, Money’ to UK banks

*dSterling has entered the chat*

Once upon a time there lived a man named Rishi. Eager to position the UK as a leader in the fintech space, he set in motion steps that would change things forever (no, not the time he pretended to own a Kia Rio and tried paying for petrol with a Coke can. A 5p cut in fuel duty he said 👀).

Earlier this year, The Bank of England (BoE) launched a consultation in association with HM Treasury (HMT) to look into a digital version of the pound.

House of Lords, Economic Affairs Committee

“The Bank of England and HM Treasury have created a Joint Taskforce to explore the potential of a ‘retail’ central bank digital currency (CBDC). A retail CBDC is different to privately issued cryptocurrencies such as Bitcoin. Instead, it would be a form of electronic money issued by the Bank of England that could be used by households and businesses to make everyday payments—in essence a ‘digital banknote’.”

Chancellor Rishi Sunak also asked the Royal Mint to create the UK government’s first ever non-fungible token (NFT) set to launch this summer even though there are no further details. The Treasury said it plans to “ensure the UK financial services sector remains at the cutting edge of technology, attracting investment and jobs and widening consumer choice”.

So, we do have a few questions …

  1. Can we exchange the Royal Mint NFT for a Crazy Cat or Bored Ape?
  2. Will it involve a can?
  3. Will dSterling become the next big thing?
  4. Are we living in the matrix?

Back to dSterling

Following the BoE’s consultation, a private-sector led initiative (maybe for the best) called ‘Project New Era’ led by fintech paywith.glass and supported by The Payments Association as well as financial institutions, regulators, commercial and central banks will launch their pilot in September.

The project will look into the validity of a retail Central Bank Digital Currency (CBDC) called dSterling in the UK. One of their big aims? Financial inclusion that would usher in ‘Compliance-as-a-Service’.

Speaking at Money 20/20 Europe last week, Kaj Burchardi, managing director at Boston Consulting Group Platinion shared an example of a ‘payment on delivery’ use case where a customer is given the option of utilising smart contracts and only paying for their purchase once it’s in their hands.

Finastra payments head Anders Olofsson added that this venture “combines everything we talk about when it comes to open banking, it’s a service that combines a capability for cross border payments, it addresses a lot of topics around security”.

“We invest heavily in something called payment orchestration. So, with the existing legacy infrastructure for clearing specified in real-time, we see how the need for orchestration is increasing for banks to be able to monetise their payments,” Olofsson said.

Nick Daniel, Co-founder & Director of Business Development @ Vyne

“By going beyond the “simple” introduction of a CBDC and starting with an ecosystem approach the potential for the dSterling pilot, starting in September, looks both interesting and promising.

Concentrating on real-life use cases beyond the obvious benefits of payments with instant settlement and guaranteed value, such as conditional payments based upon smart contracts, will help to clearly articulate the value and benefit to consumers and will encourage engagement and adoption.

Embedding the contributing technologies such as identity and compliance from the outset will assist the regulator and the Bank of England to build an informed framework for the operation of dSterling. I’ve not come across a holistic approach like this and it deserves success in achieving fundamental change in how we think about, and execute financial transactions.”

Money, money, money

We’re thinking of a version of Channel 4’s show SAS: Who Dares Wins featuring UK banks. This aptly describes a series, which could definitely tackle the question "How can banks monetise Open Banking?".

Earlier this month, Vyne’s CEO Karl MacGregor was part of a panel at Money20/20 in Amsterdam that looked into what banks could be missing.

“There are good use cases showing the huge opportunities banks have to monetise through open APIs or Commercial APIs.

VRPs are the first big opportunity in the UK for banks to monetise their APIs. They should look beyond sweeping VRPs, which are great for financial services but not retail and commerce, and focus on Commercial or non-sweeping VRPs.

It opens opportunities for a Direct Debit replacement for subscriptions and 1-click account-to-account payments similar to card on file and Amazon 1-click.

Banks generally need to up their game on managing the payment lifecycle to make these opportunities truly viable. The focus should be on maximum payment thresholds with greater flexibility on risk models.

There's an opportunity for banks to get ahead of the curve and create differentiation rather than wait for regulation. Ideally, there could be widespread support for a charging model that not only supports a truly exceptional proposition but keeps both banks and TPPs like us happy.”

Get an exclusive insight 🔥

Our monthly newsletter is a light-hearted easy read curated by our team on the topics we think you're going to enjoy. From our take on industry developments to previews of our future plans at Vyne, the newsletter is perfect for those wanting to stay in the know.