Information and Analytics about Embedded Finance, BaaS and Open Banking

In the evolving landscape of compliance and risk management, staying current with regulatory demands is a significant challenge. Emerging technologies, however, are reshaping this space. A prime example is 4CRisk’s AI-powered compliance tools, which are revolutionizing how organizations handle assessments and streamline compliance operations, as stated in Fintech Global News. The core of this innovation is the 4CRisk Compliance Map, which allows compliance professionals to evaluate their internal control frameworks against external regulations significantly faster—up to 50 times more efficient than traditional manual methods. This tool matches regulatory requirements with internal policies, pinpointing gaps in compliance and offering a clear and actionable format to manage these requirements. The Compliance Map provides clear traceability of obligations to corresponding elements like policies and controls, transforming complex documents into actionable formats. This is critical for identifying compliance coverage gaps and enhancing overall operational efficiency. Another powerful feature of the Compliance Map is its use of AI language models to analyze vast datasets of regulatory documents. These are then broken down into applicable sections and tagged for relevance, improving both understanding and coverage accuracy of the PRC (Policy, Risk, and Control) framework. 4CRisk’s AI capabilities extend to managing compliance operations effectively by generating language suggestions for controls, risk statements, and remedial actions. This automation ensures that existing GRC (Governance, Risk, and Compliance) systems can auto-populate libraries, making it easier for organizations to maintain framework integrity and stay updated. Key Benefits of 4CRisk’s AI-Powered Compliance Map: Proactive Risk Identification: AI-driven data analytics allow early detection and mitigation of potential risks. Smart GRC Linkages: Automated mapping helps create a clear compliance trail, linking regulations to controls. Streamlined Reporting: Automation speeds up data analysis and compliance reporting processes. Agile Adaptation: The system quickly adapts to regulatory updates, keeping controls and policies current. Internal Audit Support: AI proactively assists internal audit teams in addressing threats ahead of time. This partnership between AI, PRC, and GRC technologies is fundamentally transforming compliance management. By leveraging tools like the 4CRisk Compliance Map, organizations can proactively navigate regulatory complexities and foster a more efficient compliance process. For companies utilizing additional 4CRisk products like Regulatory Research and Ask ARIA Co-Pilot, there is an enhanced advantage. These tools help automate policy updates and provide instant AI-generated responses to complex queries, further simplifying compliance management and reducing time spent on document analysis.

The growth of real-time payments is transforming the global financial landscape, with an increasing number of governments, banks, and corporations striving to make these transactions the new standard, according to PYMNTS. The “Real-Time Payments World Map,” produced in collaboration with The Clearing House, details how technological advances and strategic partnerships are driving this change. Though the United States has lagged behind other nations in real-time payments adoption, American banks are working to bridge the gap. First Citizens Bank, for instance, now offers instant payments through the RTP® network, allowing customers to receive funds in their savings and checking accounts in mere seconds. The RTP network provides 24/7 availability and electronic transaction details, offering a faster alternative to traditional ACH and wire transfers. A recent U.S. Bank study shows that more than half of American businesses are already leveraging both the RTP network and FedNow® Service. In Australia, National Australia Bank (NAB) has taken a significant step by integrating international transfers with the domestic real-time payment system. This allows global institutions to send instantaneous Australian dollar payments, bypassing traditional constraints like time zones and banking hours. This integration ensures Australians have faster access to funds. Europe is also seeing rapid advances in cross-border instant payments. In August, Visa partnered with London-based FinTech Revolut to offer cross-border card transfers for Revolut’s business users across 78 countries through Visa Direct. Payments are processed within 30 minutes, supporting over 50 currencies. In Hungary, the National Bank has introduced a new instant payment solution named «qvik.» Built on Hungary’s domestic Instant Payment System, qvik supports QR code payments, NFC technology, and payment links, aiming to streamline transactions for both physical and online stores. Currently, it is available at 5,000 online retailers, focusing initially on mobile card terminals at brick-and-mortar shops. These global initiatives reflect the rapid growth and widespread adoption of real-time payments, aiming to make transactions faster, more efficient, and accessible across various sectors and regions.

Facit Bank, a digital-first institution specializing in deposits and consumer loans, has partnered with Neonomics to implement open banking solutions into their invoicing and payment systems, as stated in Fintech Finance News. This collaboration aims to improve the customer experience by streamlining the payment process and offering highly competitive loan rates through a fully digital platform. «Being a digital-only bank, we’re continuously seeking innovative solutions to deliver a great experience for our customers,» said Christer Nilsson, CEO of Facit Bank Norway. He emphasized that the introduction of Neonomics’ payment services, combined with Link Mobility’s Mobile Invoice, will simplify the payment process and create savings on each transaction. With Neonomics’ open banking Checkout, Facit Bank customers can make payments directly from their bank accounts. Additionally, the «Pay Date» feature allows them to schedule payments in advance, reducing the occurrence of late payments and offering more convenience and security. Christoffer Andvig, CEO of Neonomics, commented, «Facit Bank is a forward-thinking bank, and we’re pleased that they have chosen Neonomics as a partner to implement our Pay by Bank solution, which enhances the user experience by making it more convenient to schedule payments when needed.»

TreviPay, a global leader in B2B payments and invoicing, has introduced significant enhancements to its dealer management systems, as highlighted in The Fintech Times. These upgrades are designed to make payment processes for commercial equipment dealers more efficient, particularly those serving fleet clients. Using advanced API integration, the upgraded systems aim to capture real-time transaction data, reducing manual processes and streamlining dealer operations. The improvements are expected to enhance transaction speed and accuracy, helping both fleet drivers and dealers manage payments with fewer delays and disruptions. Dan Zimmerman, Chief Product and Technology Officer at TreviPay, highlighted the benefits of these changes, saying, «From our long history working with commercial equipment manufacturers, dealerships, and fleets, we recognized reduced friction and increased efficiency are essential in today’s dynamic and fast-paced business landscape.» TreviPay’s technology allows deep integration into existing dealer systems, reducing administrative costs and manual entry efforts. It also focuses on providing greater payment flexibility—a growing need according to a TreviPay study, which found that 78% of global business buyers see invoicing options as crucial, and 51% would switch merchants for more flexible payment terms. One major truck manufacturer adopted TreviPay’s tools to scale a $50 million program across its dealer network. Since integrating the system, the company has reported a 42x increase in scalability and a 90% improvement in invoice accuracy across $2 billion in program volume in the US and Canada. For industry leaders interested in enhancing payment efficiencies, TreviPay is hosting the TreviPay Crossroads event from October 2-4, 2024, in Kansas City. The event will cover best practices and innovations in payment processes.

The financial services sector is calling for clearer and proportionate regulations on artificial intelligence (AI) and environmental, social, and governance (ESG) to fully harness their benefits, according to new findings from global law firm DLA Piper, as outlined in The Fintech Times.  In their report, «Financial Futures: Disruption in Global Financial Services,» DLA Piper reveals that optimism is strong among financial institutions, with UK and US organizations expressing high confidence in the industry’s growth prospects. Notably, advancements in technology (71%), new products and services (55%), and changing consumer and investor behaviors (38%) are the main drivers of optimism. However, complex regulations remain a challenge for 58% of respondents, and 73% believe these regulations stifle innovation efforts. AI’s role in transforming financial services is widely acknowledged, with 86% of respondents expecting significant impacts. However, 53% also consider AI a major challenge. Notably, only 39% are actively hiring AI experts or establishing governance structures, and only 56% are developing ethical frameworks for AI use. As Mark Dwyer, global co-chair of the financial services sector group at DLA Piper, explains, «It is vital for businesses to have a clear plan and direction in place before they start their AI journey.» Regarding ESG, 46% of firms aim to position themselves as sustainability leaders, but regulatory complexity creates hurdles. More than half of respondents want further ESG regulation to help meet objectives, and concerns about non-compliance are the biggest drivers for ESG efforts. As Dwyer puts it, «Both ESG and innovation will be key to business success long into the future.»

As digital adoption grows, traditional banks are increasingly facing competition from agile FinTechs, as stated in PYMNTS. Many younger consumers are opting for personalized services offered by FinTechs instead of the one-size-fits-all approach of established financial institutions (FIs). To stay competitive, banks must rethink their offerings. A report by PYMNTS Intelligence, titled “Modular Design: Can Composable Banking Find Favor With FIs?,” highlights composable banking as a possible solution, enabling banks to mix and match services to provide a more customer-centric experience. The competition for consumer loyalty is shifting rapidly, especially among younger demographics. According to the report, 36% of individuals aged 18 to 24 prefer FinTech services over traditional banks for online payments. Moreover, over 75% of consumers are now willing to switch financial institutions for better services, up significantly from 52% three years ago. This trend is evident not only among Millennials but also among 67% of baby boomers. The migration to FinTechs is largely driven by their lower fees and better financial conditions. Consumers who hold their primary accounts with digital-only banks are also more likely to use these banks for credit services. For traditional banks, this trend indicates an urgent need for innovation to retain customers or risk losing them to more adaptable alternatives. Many traditional banks are hampered by outdated systems, with 53% of bank executives citing «technology debt» as a barrier to modernization. This inhibits their ability to innovate and affects customer satisfaction—nearly 40% of customers are frustrated with slow payment processing. Maintaining these legacy systems could cost banks $57 billion in losses by 2028. Despite understanding the need for digital transformation, fewer than a third of banks are investing in new digital ecosystems. Composable banking is emerging as a solution to help traditional banks keep up with FinTechs. Through an API-driven approach, it allows banks to integrate new services seamlessly while maintaining their current systems. This flexibility lets banks offer personalized, competitive features such as instant payments and robust fraud protection. Almost 60% of banks plan to integrate services like Zelle, and 57% are adopting the FedNow instant payment service. API banking forms the backbone of these efforts, facilitating real-time capabilities without significant disruptions. This modular approach positions traditional banks to better meet changing consumer expectations, offering personalized experiences to compete with FinTechs.

Swedish fintech giant Klarna has entered into a significant partnership with Dutch payments company Adyen, allowing Klarna’s popular buy now, pay later (BNPL) services to be available in physical retail stores, according to CNBC. While Klarna’s BNPL option has been primarily associated with online shopping, this partnership marks a major step in extending the service to brick-and-mortar locations. Under the agreement, Klarna’s BNPL payment option will be integrated into over 450,000 Adyen payment terminals across Europe, North America, and Australia, with future plans for a broader global rollout. Klarna’s BNPL service enables consumers to split their purchases into interest-free installments, a model that has gained considerable traction in the e-commerce sector. According to Klarna, BNPL currently represents around 5% of global e-commerce transactions. However, the company’s ambition is to expand beyond the digital realm and capture the in-store consumer market as well. David Sykes, Klarna’s Chief Commercial Officer, said of the partnership, “We want consumers to be able to pay with Klarna at any checkout, anywhere.” This expansion builds on Klarna’s existing relationship with Adyen, which has previously involved e-commerce payment solutions. The move to physical stores aligns with Klarna’s broader goal of reaching a wider consumer base. Alexa von Bismarck, Adyen’s head of EMEA, also highlighted the importance of flexibility in consumer payments: “Consumers care deeply about the in-store touch point and value brands which can allow them to pay how they want.” The partnership comes as Klarna continues to make strategic moves within the financial landscape. Earlier this year, Klarna sold its online checkout service, Klarna Checkout, in order to focus less on competing with payment gateways like Adyen, Stripe, and Checkout.com, and more on building out its BNPL offerings. Klarna is also reportedly exploring a potential IPO. While no specific timeline has been set, Klarna’s CEO, Sebastian Siemiatkowski, has said that a public offering in 2024 is “not impossible.” However, the BNPL industry has faced criticism from consumer rights groups and regulators. There are concerns that the BNPL model encourages excessive spending, particularly among young consumers, by making it easier to delay payments. In response to these concerns, regulators are working on introducing regulations to bring more oversight to the growing BNPL sector. In the U.K., for example, the newly elected Labour government is expected to introduce regulatory plans soon, following several delays under the previous Conservative administration. Beyond the Adyen partnership, Klarna has been expanding its product lineup in a bid to encourage consumers to use more of its financial services. In August, the company introduced a checking account-like service called Klarna Balance, as well as cashback rewards to attract more users to its platform.

AI technology brain background vector digital transformation concept Mastercard has introduced significant upgrades to its Consumer Fraud Risk (CFR) solution, aimed at helping UK banks combat increasingly sophisticated Authorised Push Payment (APP) fraud, as stated in FinTech Magazine. APP fraud occurs when scammers deceive individuals into transferring funds to fraudulent accounts, often through fake websites, emails, text messages, or phone calls. In 2023 alone, UK consumers lost £460 million (US$615 million) to these scams. To address this growing problem, the UK’s Payment Systems Regulator (PSR) will implement new rules starting on October 7, 2024. These rules will require banks to reimburse most victims of APP fraud, creating a stronger incentive for financial institutions to adopt advanced fraud prevention technologies. Mastercard’s CFR solution, launched in early 2023, uses artificial intelligence to analyze multiple data points in real time. By assigning a risk score to a transaction, the system alerts the sender’s bank to potential fraud, allowing them to block the transaction before it is processed. With the latest enhancements, receiving banks can now also access real-time risk scores, enabling them to detect when a payment is being sent to a ‘mule’ account—an account used by fraudsters to collect illicit funds. Johan Gerber, Executive Vice President of Security Solutions at Mastercard, explains the importance of this development: “Fraudsters have long sought to deceive the consumer through scam websites and fictitious deals. That’s why, at Mastercard, we are turbocharging our technology, providing banks additional lines of defense—helping them better identify and stop scams in their tracks.” Early tests of the enhanced CFR system have been promising. Mastercard reports that ‘inbound risk’ alerts have led to a 60% improvement in banks’ ability to identify high-risk mule accounts. The announcement comes as the PSR revealed a 12% reduction in APP fraud losses across 14 major UK banks, with the total amount falling from £389 million (US$520 million) in 2022 to £341 million (US$456 million) in 2023. Mastercard plans to expand the CFR solution to global markets over the coming year, aiming to offer enhanced protection to consumers worldwide and build a more secure digital ecosystem. This initiative follows the launch of Decision Intelligence Pro, a generative AI tool released by Mastercard earlier in 2024. Decision Intelligence Pro assesses transaction risks by analyzing relationships between multiple entities, further demonstrating Mastercard’s commitment to strengthening consumer safety. As APP fraud continues to rise, solutions like Mastercard’s Consumer Fraud Risk tool will play a critical role in the ongoing fight against financial scams.

Cross River Bank has teamed up with Forward, an embedded payments company, to tackle payment challenges hindering the growth of Software-as-a-Service (SaaS) providers, according to PYMNTS. This collaboration aims to offer payouts-as-a-service solutions that cater to the unique financial needs of SaaS platforms. “We are proud to join forces with Forward to offer payouts-as-service, a solution that caters to the unique financial requirements of SaaS providers,” said Adam Goller, head of FinTech banking at Cross River. He added that this venture supports the growth of innovative businesses while ensuring safe and responsible fintech practices. Through the partnership, SaaS platforms will gain access to embedded payment features such as same-day ACH payouts. These offerings are expected to help boost revenue, enhance customer experiences, and strengthen product loyalty. Forward selected Cross River for its advanced API technology, which enables faster payouts than traditional institutions. This partnership comes at a pivotal moment as embedded payments become a driving force in B2B commerce, improving efficiency and collaboration between trading partners. Brandon Lloyd, founder and CEO of Forward, highlighted the growing demand for embedded payments, especially as many software companies struggle to fully realize their revenue potential from integrated payment systems. “We believe many software companies who have ‘integrated payments’ should be generating greater revenue from these products, and Forward is here to help them do that,” he said. Forward recently secured $16 million in seed funding to meet the growing demand for embedded payments and integrate AI into its risk management functions.

The automotive industry is undergoing a major transformation, accelerated by the electric vehicle revolution and the push towards connected experiences. At CES 2024 in Las Vegas, car manufacturers are showcasing their latest vehicles, equipped with new electric technologies and enhanced digital features aimed at standing out in a competitive market, according to Mastercard Newsroom.  One area ripe for innovation is in-vehicle payments. Car owners today expect the same level of convenience they enjoy in other aspects of their lives, whether it’s ordering a coffee or paying a toll. In-vehicle payments can transform experiences like fueling, parking, or paying for tolls, making transactions seamless and accessible directly from the car’s cockpit. This not only saves time but also eliminates the hassle of managing multiple merchant apps. Beyond routine transactions, carmakers can leverage in-vehicle infotainment systems to offer occupants products or services such as branded items, booking a tire change, or even temporary vehicle upgrades like extended battery range. This further extends opportunities for brands to enhance their value propositions. A key enabler of this change is security. Traditional authentication methods, such as entering a password, aren’t suitable for drivers on the move. Biometric technologies, such as fingerprint or facial recognition, are emerging as ideal solutions to ensure both security and convenience. As highlighted by Will Judge, partnerships like the one between Mastercard and Mercedes-Benz, which enables fuel payments directly via a vehicle’s fingerprint scanner, illustrate this trend. The future of the automotive experience involves a collaborative effort among automotive, technology, and payment industries. By combining their expertise, they can develop innovative in-car payment systems that cater to the digitally savvy consumer.