2023

For several years, the financial sector across the world has been undergoing a digital transformation. In a socially distanced world, the pandemic created more opportunities to innovate new digital financial services, while also uncovering the gaps in the Indian financial system, such as the inaccessibility of credit to Micro, Small, and Medium Enterprises (MSMEs). MSMEs are vital cogs in the growth engines of the Indian economy, contributing to about 30% of the GDP.

by Lalit Mehta, Co-founder & CEO, Decimal Technologies

However, during the pandemic, numerous MSMEs have suffered due to the absence of access to credit. The MSME credit gap approximately amounts to a monumental $240 billion due to traditional institutions’ lack of flexibility and their inability to effectively leverage the available user data and viably reach the semi-urban and rural areas.

This, however, is not just a problem, but also an opportunity. There is immense potential in the MSME segment for banking institutions as they keep adopting digital and tech innovations. As we step into the year 2022, let’s look at how this opportunity might play out within the financial sector.

Open Banking

Open banking is a solution that is emerging as a way to completely transform the way credit is disbursed, making it more suited to the financial situations of MSMEs. Open banking refers to a system where banks and other financial institutions allow third parties, such as fintech companies, to access user data via secure Application Program Interfaces (APIs). Not only can the APIs enable fintech partners to build new services that are more efficient and accessible, but also allow traditional financial institutions to offer experiences fit for the digital age.

Open APIs have the capability to help financial institutions digitise the process of lending and address the growing credit demand. They can also help with some much-needed customisation in the offerings, thereby catering to specific needs that might not be addressed in their entirety by a single legacy product. Artificial Intelligence (AI)-based solutions offer flexibility that suits the borrowers’ needs that might not always be feasible for traditional processes to identify or address.

Risk Assessment

The value of approved and disbursed loans is mainly determined by how an individual or business is likely to pay it back. This is why risk assessment, or determining how likely an individual is to default is critical for the entire sector, and this is where AI and Machine Learning (ML) can change the game. The AI/ ML components employed by FinTech firms can match the customer with the lender without minimal to zero manual intervention, solving one of the key problems of the lending industry- that of risk assessment. This is done with the assistance of detailed, user-friendly credit assessment memos which allow lenders to practice controlled yet faster risk assessment.

With the help of AI and ML, banks can understand how an individual’s or a company’s recent financial behaviour deviates from past behaviour, and therefore get early insights into potential causes of concern. In this scenario, having early insights enables financial providers to take action with a relevant response – i.e., reassessing the approved loan amount or declining a loan.

Maximising Profits

For years, banks and other lenders have been using computer systems to automate more and more of the loan process. With the massive growth witnessed by businesses on the back of new-age technology, many institutions are now trying to fully automate the process. Adoption of AI results in an enhanced borrower experience and assists in making informed decisions with utmost certainty. It eliminates administrative expenses and delays to maximize the amount of profit for every loan created. Removing human bias, decisions will increasingly be based on verified customer data like their monetary status and accuracy, giving little room for error and helping businesses focus on other aspects of the lending process that still require human attention.

The banks will also have the liberty to consider a more proactive approach towards the onboarding of new customers. During the loan application phase, AI and ML are often used to anticipate credit needs by analyzing credit line usage and understanding historical data patterns. For instance, an agricultural business is likely to have seasonal credit needs; these needs can be modelled to understand typical versus atypical patterns.

Better Banking Experience

An increase in the integration of AI and ML will also mean the elimination of human intervention. Decisions made by humans are almost always influenced by biases which may end in either a poor experience for the customers or losses in terms of loan frauds for financial institutions. AI-driven tools run the available data against a group of rules to work out the borrower’s acceptability, thereby speeding up the process, and also ensuring security for the institution.

By understanding how a company’s recent financial behaviour deviates from past behaviour, banks can detect or create opportunities for expanding their business relationship with the customer – or get early insights into potential causes of concern. In both these scenarios, having early insights enables financial providers to take action with a relevant response – i.e., extending credit proactively or declining a loan.

Conclusion

2022 is set to witness a further increase in the adoption of AI and ML. This will lead to a bridging of the credit gap that the MSMEs are suffering from, resulting in further bolstering of the economy. This will also exponentially enhance customer experience while cutting down on the risks. This New Year will be a better year for banking.

Instant payment processing is expected by today’s customers and clients, and as the world of business adapts to hybrid work, there is no better way to meet this need than with cryptocurrency. Cryptocurrencies allow businesses to make secure, instantaneous transactions while eliminating the middleman.

by Gabby Baglino, Digital Marketing Specialist, Bryt Software

This keeps everyone’s data safe and reduces transaction fees — and those savings can go toward growing the business rather than paying for unnecessary charges. Let’s take a closer look at why cryptocurrency is key to hybrid and remote work and the powerful new technology that makes it possible.

What is blockchain technology?

A blockchain is a public ledger that contains data from anywhere in the world. This entirely digital database is shared across a network that can include everyone in a company’s workforce, no matter where they’re physically located.

By decentralizing the information, this revolutionary technology ensures the security of financial transactions. When using the blockchain, no third parties are necessary.

Unlike a traditional database, the blockchain collects data and stores it in blocks. When one block is filled with data, it’s closed and linked to the previous block in the chain. Simply put, the blockchain is a chain of digital blocks, and once a block is closed the information it contains cannot be altered or deleted.

In the case of cryptocurrencies like Bitcoin, the blockchain’s decentralized nature allows it to be used as a storehouse of transaction information. All users have collective control over the data, and the changes are irreversible.

Financial transactions can be made securely among an unlimited number of team members located anywhere in the world. And when businesses need to store sensitive transaction information, the data records are protected from any kind of update, deletion, or destruction.

How businesses benefit from using cryptocurrency

Many business owners encourage crypto usage in everyday transactions. Let’s take a look at some ways that this type of transaction benefits small businesses and enterprises alike.

1. It’s more secure

Identity theft can lead to significant personal as well as corporate loss. When you make an online payment, you’ll need to enter credit card information. Your sensitive data is then sent through channels and stored in databases where it may be the target of a cyberattack.

Hackers can gain access to your account details and use them for unauthorized transactions even if your credit card numbers aren’t compromised.

The identification process made possible by the blockchain allows all your personal data to be encrypted in a single place and kept safe by advanced cryptography. With this method, identification is faster and more secure than it would be going through third parties that may be vulnerable to attack.

2. Smarter use of funds

Dependency on third parties can be a challenge for businesses that want to use their finances to expand. Lack of resources and external pressure can get in the way of taking appropriate and timely financial actions.

Though they may have plenty of great ideas, enterprises often cannot expand the way they want due to the lack of funds or the freedom to do what they want with their money. With blockchain technology, businesses have the liberty to use their finances effectively because they have direct access to their money.

3. No dependency on third parties

Cryptocurrency’s ability to allow businesses to avoid the middleman is a primary reason why cryptocurrency is attractive for companies of all sizes.

When a business depends on banks or other payment gateways, each transaction comes with a percentage fee, usually between 1% and 4%. Transaction fees can add up quickly, particularly for larger corporations. This can reduce the efficiency of the business in the long run.

Transaction fees can be crippling for smaller businesses, so it’s natural for small to midsize businesses to turn to cryptocurrency for relief. With blockchain technology, businesses can transact with global markets with little concern about exchange rates and processing fees.

Thanks to the technology, buyers and sellers can now communicate with each other directly without having to go through a bank. As a result, many businesses can afford high discounts to draw customers who can pay using cryptocurrency.

A study conducted in 2020 reports that 40% of customers who pay using digital cryptocurrency are new to the sellers. Clearly, the adoption of cryptocurrency as a mode of payment has increased the client base for many enterprises.

Cryptocurrency and the hybrid work era

As industries find ways to adapt to the explosion of work from home (WFH), the importance of paying employees in cryptocurrency has become central to the conversation. Thanks to remote work, businesses can cultivate hybrid teams, recruiting the best talent from anywhere in the world to work virtually with their in-office team members.

As fiat currencies are subjected to inflation and processing fees, among other things, cryptocurrencies make it easier for companies to pay their employees. When the employees get a combination of digital and fiat currencies as payment, they can later convert the crypto into fiat. 

Workers who are paid in cryptocurrencies have more control over their cash. And since the process uses effective encryption via blockchain technology, hackers have no access to sensitive data.

As hybrid work has become established, digital payment methods are also becoming acceptable in modern society. As an entirely online mode of payment, cryptocurrency offers an advantage over other payment methods with convenience as well as security.

Remote work isn’t going away anytime soon. As hybrid work cements its place in the world of work, digital currencies ensure that businesses run smoothly by offering the best solution to conduct transactions. Hybrid work and cryptocurrency will go hand-in-hand for data security and ease of use in the coming years.

Buy Now Pay Later (BNPL) has seen a surge in growth since the start of the pandemic, but in order for the BNPL industry to sustain its development, it must be underpinned by comprehensive technology designed to optimise experience both for the merchant and the customer.

by Tom Myles, Chief Technology Officer, Deko

The most influential technology for business has been the rise of AI, machine learning and big data, having now permeated almost all sectors. Indeed, recent research highlights the key role that AI is expected to play in the future of fintech as a whole, with two-thirds of fintech firms predicting it to have more impact on the sector than any other tech in the next five years. As for BNPL products in particular, a forecast market of £26.4 billion by 2024 would mean it more than doubling in three years, so there is huge growth potential for AI to help unlock.

Payment optimisation

Lenders can use AI and machine learning to extract more value from BNPL platforms. Machine learning models, for instance, are built on data, and payments systems generate large quantities of data from which potential lenders can gain insights into consumer behaviour.

These data-driven decisions can streamline the process of matching the right lender to the right buyer at the right time, which will be all the more useful for unlocking the potential of platforms that operate on a multi-lender, multi-product basis. AI and machine learning models can match consumers to the right member of a multi-lender roster, enabling an increased provision of credit for consumers.

Delivering a rewarding experience for consumers is just as important as the flexibility of the financial technology involved, as increasingly tech-savvy consumers continually elevate the minimum standard of the online experiences in which they are prepared to engage. In particular, consumers are increasingly reticent to engage in elongated sign-up processes and demand a mobile-first approach. Offering a visibly streamlined, omnichannel payments process will therefore prove to be a vital differentiator in an ever more competitive market.

Moreover, empowering consumers and lenders to make more streamlined transactions will also be beneficial for merchants. AI-enabled technology will enhance the flexibility of retail finance products, enabling platforms to process more transactions at a higher pace. This, combined with reduced rates of basket abandonment, will help retailers increase their sales volume.

Fraud prevention

While merchants may relish the prospect of driving more sales, machine learning can also support them in another critical area that may be somewhat sobering to consider. As commerce continues to migrate online, the threat of fraudulent transactions looms larger than ever.

Leveraging AI and machine learning means that payment platforms can learn to recognise patterns in consumer behaviour, based on analysis of the data generated from previous transactions, so even the smallest changes in behaviour can be identified. These data-driven insights will enable automated flagging of potentially risky transactions, which will reliably protect merchants, lenders and consumers from fraud.

Automating this process is vital in a world where online fraud is increasingly sophisticated. An older, rules-based model might be able to test for numerous different types of fraud that have been recorded previously, but the system would remain vulnerable to as yet undetected types of fraud.

Future of FinTech

Using technology both to streamline payments and to prevent fraud will require FinTech platforms to strike a delicate balance. Security is of course vital, but rigorous fraud prevention processes should not come at the expense of a streamlined, speedy checkout from the user’s point of view. Indeed, for fintech platforms as well as for users, improved security and streamlined payment processes will ideally go hand-in-hand.

FinTech firms must therefore invest due consideration as well as resources into AI-enabled functionality for their platforms. And this investment has already proven well worth making. Given the benefits for both merchants and lenders, it is perhaps unsurprising that 83% of financial services professionals agreed that “AI is important to my future company’s success”. Indeed, these forward-thinking technologies and firms are integral to the development of the payments sector.

Policymakers and regulators around the world have pointed to cyber threats from criminal and state actors as an increasing threat to financial stability. Last month, US Treasury Secretary Janet Yellen – along with finance ministers and central bank chiefs from the Group of Seven nations – conducted an exercise covering how G7 members will seek to cooperate in the hypothetical event of a significant, cross-border incident affecting the financial sector.

by Fabien Rech, EMEA Vice President, McAfee

Such concerns are widespread, with 80% of UK IT professionals anticipating a moderate or even substantial impact by increased demand for their services or products this holiday season. The extra demand is compounded by the reduced size of teams and greater online activity. With cyber threats to the financial industry front of mind, and organisations across the sector coming under scrutiny as to whether they are doing enough to protect themselves, this year’s peak season – and subsequent rise in online activity – is cause for concern.

While this paints a bleak picture, organisations can be proactive in defending their networks, data, customers, and employees, against the anticipated increase in holiday cybercrime by implementing certain security measures.

Using technology to bolster teams

Demand for cybersecurity is surging, and today there are a number of technologies that can help to bolster security measures, providing additional support for often stretched security teams. Threat intelligence can offer unique visibility into online dangers such as botnets, worms, DNS attacks, and even advanced persistent threats, protecting FS organisations against cyberthreats across all vectors, including file, web, message, and network.

In addition, taking a Zero Trust approach to security enforces granular, adaptive, and context-aware policies for providing secure and seamless Zero Trust access to private applications hosted across clouds and corporate data centres, from any remote location and device. This will be particularly useful as more employees choose to work remotely.

Prioritising employee awareness

Beyond technologies, the adoption of an awareness-first approach is vital. Proactive cybersecurity awareness training for all employees – not just those in the security team – is essential, especially when encountering holiday phishing emails. As the cyber threat is always evolving, so too must organisations – ensuring that their team’s knowledge and ability to identify, avoid and negate those threats also grow in turn.

This awareness-first strategy requires leaders to move away from a ‘breach of the month’ approach, instead of using proactive training measures to build security into the fabric of their organisation, breaking down siloes of threat and information intelligence across the business, so that all employees are aware of how they can contribute to the battle against cyberthreats during the peak period and beyond.

Some banks are already taking a proactive approach to testing employee understanding when it comes to cybersecurity, for example, resistance to spam or phishing emails, and knowing not to plug unknown USB keys into their laptop. If employees don’t appear to have sufficient knowledge of threats and best practices, they will automatically be required to take part in further training.

Other key steps to take in this proactive approach include increasing the frequency (and testing) of software updates, boosting the number of internal IT-related communications to keep everybody informed, and implementing new software solutions with due diligence.

Implementing a response plan

It’s also important to recognise that protective measures might not work 100% of the time. As hackers become ever more sophisticated, it’s vital for FS organisations to design a holistic, clearly communicable plan for if (and when) things do go wrong.

Developing a robust incident response plan could mean the difference between being able to respond and remedy a security breach in minutes rather than hours, ensuring the least amount of downtime possible. When asked, 43% of businesses reported suffering from downtime due to a cyber concern in the last 18 months – for 80% this happened during peak season and lasted more than 12 hours for almost a quarter (23%)

Again here, training forms a big part – making sure employees know what to do and who to inform when an incident does occur is at the heart of any effective response plan, as is encouraging a culture of honesty and transparency. An organisation in which employees are wary of acknowledging a mistake or informing someone of a possible accidental breach is not a secure one.

The year is full of challenging peak periods, from the public holidays at the end of the year to summer vacations and various religious/spiritual holidays. The need for vigilance has never been greater or more constant, and financial services organisations, in particular, have a need to protect the data and money of their customers, as well as the resilience of their own organisations.

By using technology, training, and incident response awareness, leaders in the sector can help to bolster teams against the increasing sophistication of cyberthreats, staying safe while staying connected. The peak season offers unique challenges, but ultimately the goal is to develop a resilient and adaptable organisation that can ensure security year-round, allowing employees to thrive, wherever they choose to work without having to worry about threats.

Financial services firms are seeing rapid growth in data volumes and diversity. Various trends are contributing to this growth of available data across the sector. One of the drivers is that firms need to disclose more to comply with the continuing push towards regulatory transparency.

by Neil Sandle, Head of Product Management, Alveo

In addition, a lot more data is being generated and collected through digitalisation, as a by-product of business activities, often referred to as ‘digital exhaust,’ and through the use of innovative new techniques such as natural language processing (NLP), to gauge market sentiment. These new data sets are used for a range of reasons by finance firms, from regulatory compliance to enhanced insight into potential investments.

The availability of this data and the potential it provides, along with increasingly data-intensive jobs and reporting requirements, means financial firms need to improve their market data access and analytics capabilities.

However, making good use of this data is complex. In order to prevent being inundated, firms need to develop a shopping list of companies or financial products they want to get the data from. They then need to decide what information to collect. Once sourced, they need to expose what data sets are available and highlight to business users, what the sources are, when data was requested, what came back, and what quality checks were taken.

Basically, firms need to be transparent about what is available within the company and what its provenance has been. They also need to know all the contextual information, such as was the data disclosed directly, is it expert opinion or just sentiment from the Internet and who has permission to use it?

With all this information available it becomes much easier for financial firms to decide what data they wish to use.

There are certain key processes data needs to go through before it can be fully trusted. If the data is for operational purposes, firms need a data set that is high-quality and delivered reliably from a provider they can trust. As they are going to put it into an automated, day-to-day recurring process, they need predictability around the availability and quality of the data.

However, if the data is for market exploration or research, the user might only want to use each data set once but are nevertheless likely to be more adventurous in finding new data sets that give them an edge in the market. The quality of the data and the ability to trust it implicitly are nevertheless still critically important.

 Inadequate existing approaches

There is a range of drawbacks with existing approaches to market data management and analytics. IT is typically used to automate processes quickly, but the downside is financial and market analysts are often hardwired to specific datasets and data formats.

With existing approaches, it is often difficult to bring in new data sets because new data comes in various formats. Typically, onboarding and operationalising new data is very costly. If users want to either bring in a new source or connect a new application or financial model, it is not only very expensive but also error-prone.

In addition, it is often hard for firms to ascertain the quality of the data they are dealing with, or even to make an educated guess of how much to rely on it.

Market data collection, preparation and analytics are also historically different disciplines, separately managed and executed. Often when a data set comes in, somebody will work on it to verify, cross-reference and integrate it. That data then has to be copied and put in another database before another analyst can run a risk or investment model against it.

While it is hard to gather data in the first place, to then put it into a shape and form, and place it where an analyst can get to work on it is quite cumbersome. Consequently, the logistics don’t really lend themselves to faster uptime or a quick process.

The benefits of big data tools

The latest big data management tools can help a great deal in this context. They tend to use cloud-native technology, so they are easily scalable up and down depending on the intensity or volume of the data. Using cloud-based platforms can also give firms a more elastic way of paying and of ensuring they only pay for the resources they use.

Also, the latest tools are able to facilitate the integration of data management and analytics, something which has proved to be difficult with legacy approaches. The use of underlying technologies like Cassandra and Spark makes it much easier to bring business logic or financial models to the data, streamlining the whole process and driving operational efficiencies.

Furthermore, in-memory data grids can be used to deliver a fast response time to queries, together with integrated feeds to streamline onboarding and deliver easy distribution. These kinds of feeds can provide last mile integration both to consuming systems and to users, enabling them to gain critical business intelligence that in turn supports faster and more informed decision-making

Maximising Return on Investment

In summary, all firms working in the finance or financial services sector should be looking to maximise their data return on investment (RoI). They need to source the right data and ensure they are getting the most from it. The ‘know your data’ message is important here because finance firms need to know what they have, understand its lineage and track its distribution, which is in essence good data governance.

Equally important, finance firms should also ensure their stakeholders know what data is available and that they can easily access the data they require. Ultimately, the latest big data management tools will make it easier for finance to gain that all important competitive edge.

The last 10 years have seen significant changes in the debate around what the most important channel for business is – brick and mortar or digital channels. But in the shadow of the pandemic, and the accelerated shift towards digital it spurred across the world, that debate has been well and truly put to rest. We’re now in the digital-first era, and this has meant financial organisations such as banks have needed to significantly transform business models.

by Amir Nooriala, Chief Commercial Officer, Callsign

Banks have traditionally relied on branches to drive loyalty and deliver experiences to customers. But with digital channels such as websites and mobile apps now becoming the most important avenues for business, old methods of driving experience and loyalty have been replaced by digital factors, such as app ratings.

So, it’s no surprise that in a digital-first world, businesses must leverage digital-first solutions. But if satisfaction levels are judged by the quality of a digital experience, then businesses not only need to ensure smooth and seamless access to services but also make sure security is a top priority.

However, analogue solutions that many organisations in finance still use for customer authentication – such as one-time passwords (OTPs) – fall short of achieving these goals.

The pressure is on for businesses to find new, truly digital-first solutions that make their customers’ lives easier and differentiate their experience from competitors. But this is a balancing act that needs to also ensure the safety and security of every online interaction because if ease comes at a cost to security, businesses risk losing customers altogether.

Vulnerable systems built on outdated foundations

When it comes to financial institutions, in particular, the ability to adapt to the times has always been part of their success. Some banks are centuries old, and to remain relevant they’ve had to adapt their business models, services, and cultures countless times, all while maintaining the integrity of the sensitive information they hold.

However, over time, that imperative to maintain the safety of their data has led to the accrual of legacy systems for most organisations. While this has been a long-standing problem, in a digital-first world, legacy systems present a particularly glaring vulnerability when it comes to authentication.

Throughout the pandemic, hackers and ransomware attackers took advantage of global uncertainty and thousands of people faced a barrage of text message-based scams over this period. This highlighted the already significant problem with commonly used authentication methods that so many businesses rely on.

In fact, almost a quarter of people questioned for a recent Callsign survey said they received more texts from scammers than their own friends and family.

Organisations’ unwillingness or inability to stop utilising outdated authentication processes such as OTPs are fuelling a worsening crisis in scams and fraud. Businesses developing their digital transformation strategy need to see it as a chance to approach everything they do with a digital-first mindset, and not simply try and recreate digital versions of existing solutions.

And to make this a reality, organisations must rethink their systems in line with how their customers actually behave online and build their solutions accordingly.

The verified path to digital-first innovation

There are a number of technologies that are ideal for financial organisations looking to elevate their authentication methods to digital-first levels that seamlessly and frictionlessly integrate into their customer journeys.

One such solution is passive behavioural biometrics, software capable of taking into consideration millions of data points when verifying the identity of a user. The key difference between behavioural and physical biometrics – and why behavioural biometrics is the superior authentication method – is that it isn’t reliant on a single device (it’s device agnostic).

So, when combined with device and threat intelligence, the solution can circumvent the single point of failure issue that so many other authentication methods fall foul of.

This makes it ideal for our modern, digital-first world where customers want to use a variety of devices and channels to access online services. By making your authentication method device-agnostic, user experience can be ensured in a secure and non-disruptive way, whatever device is being used.

And as this solution can be seamlessly integrated into any point of the customer’s journey, it’s a much more fitting solution for a sector that has always been on the cusp of innovation.

Re-building for a new era of authentication

In order to thrive, organisations in the financial sector need to be prepared to interrogate every aspect of their operations to make sure they are delivering the most convenient and secure service to customers online.

To achieve this, organisations need to be prepared to re-lay their technological foundations. Elevating the importance of digital identity authentication is one such vital change, and businesses need to realise it will only continue to grow as a priority for customers going into the future.

Because the threat from bad actors and cyberattacks is only worsening. So, while innovation is key to attracting customers, security must be at the core if businesses are to retain loyalty. And it will take collaboration both internally and with partners to ensure that customers have the security they deserve.

Adopting digital identities could provide a significant boost to not only the future of open finance, but also across the economy more broadly.

by Brian Costello, VP Data Strategy, Envestnet | Yodlee

One challenge that is evident following the introduction of Open Banking in the UK is consumer hesitancy to share financial data, which is required to access the Open Banking-powered products and services the consumer wants or needs. For the next step beyond Open Banking – open finance – to be a success the industry needs to overcome the data sharing trust challenge to unlock the benefits personalised open finance services can provide.

To show the scale of the challenge, an independent survey of UK adults, commissioned by Envestnet | Yodlee, found that two-thirds of consumers in the UK would find it easier and desirable to view all of their financial information in one place, highlighting the huge demand for open finance. However, when it comes to actually sharing the data, the challenge presents itself. While more than a third of respondents said they would be willing to share their financial data, which would enable these kinds of services, a similar number said they would not be willing to, and a quarter were uncertain.

Open finance stands to benefit everyday users in many ways. The Citizens Advice Bureau noted that in the UK, consumers are overpaying £3.4 billion in key areas including mobile, broadband, home insurance, cash savings and mortgages. A well-managed open finance initiative has the potential to drive innovation in financial wellness platforms, helping users understand their financial behaviours and how they could make improvements. This would also enable accessible financial advice, as advisors are able to gain a view of a person’s overall financial picture in a fraction of the time it currently takes.

Transparency and control are two key principles for any data sharing economy, and therefore essential for an effective and safe open finance environment. As it stands, users are required to grant separate consents to both the recipient and provider of their data, and sometimes to a third party as well. Though these levels of protection are laudable, the current user experience is highly procedural and can confuse the user to the point they abandon the consent experience. The requirement to grant multiple consents is at odds with the user experience of trying to achieve a singular cohesive outcome.

Could digital identities simplify the consent process and align consent with desired outcomes?

The UK’s National Data Strategy found that for data to have the most effective impact, it needs to be appropriately collected, accessible, portable, and re-usable. However, achieving this would likely involve enabling consumers to provide more overarching consent for data-sharing, whilst still maintaining stringent protections and avenues for redress. This is no easy feat, and there is still discussion between regulators and the industry on the best ways to achieve this.

The ideal situation is a single digital identity artifact with consent attributes that provides all parties in the data sharing transaction with enforceable evidence of the user’s explicit instructions. Once a digital ID is verified, data-sharing consents attributable to a person’s digital identity could enable them to assign consent to multiple parties involved in the data sharing process without experiencing the confusion and disruption that the current user journey typically entails.

Beyond simplifying the user journey, standardisation of certain consumer consents could enable users to incorporate ongoing consents to their digital ID, which would enable them to give permission to share their data with organisations in real-time or when they were not active in the user experience.

Another option is to leverage the current system of federated identity management providers by having those data providers become the sole identity provider for the transaction.  The Global Assured Identity Network is proposing just that, with ambitions to open the framework up across all sectors.

While this is a great opportunity with many upsides, there are many things standing in its way encompassing technical infrastructure, regulations, and conflicting points of view.

Provided there was a regulatory framework in place, these ongoing consents could also enable users to automatically share their data with new providers under specific circumstances. These sort of outcome-focused smart consents would enable many consumers to benefit from the data sharing economy and reap enormous benefits, without needing to engage too heavily with the procedural elements of data sharing.

A day in the crypto market is often the equivalent of a week in real life, due to its volatile, unpredictable nature. So what could a whole new year bring to the big table?

by Vlad Faraon, CBO and Co-founder, Coreto

Plenty of changes, we hope, as cryptocurrencies are now becoming mainstream. But their popularity doesn’t come without risks. The crypto market value blew past $3 trillion, according to CoinGecko pricing, but the scams are on the rise as well. In just 6 months, between October 2020 – March 2021, over 7,000 people lost more than $80millions by investing in altcoins according to The Federal Trade Commission (FTC). The amount was 10 times smaller in the previous year.

Despite its rapid growth and severe caveats, the crypto transactions aren’t currently regulated by the Financial Conduct Authority (FCA) or covered by the Financial Services Compensation Scheme. This means that the industry is a minefield, full of unethical players. Under these circumstances, people should never invest more than they’re willing to lose.

This month, regulatory agencies issued a joint statement driven by the concern that ‘the emerging crypto-asset sector presents potential opportunities and risks for banking organisations, their customers, and the overall financial system.’ The Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC) analysed various issues regarding crypto assets and are aiming to provide coordinated and timely clarity. They believe that it’s necessary to use a common vocabulary, identify the key risks and analyse the applicability of existing regulations and guidance. This sets expectations for more consumer protection and a standard the whole industry can adhere to.

In addition to this, the OCC published a letter about how national banks and federal savings associations should implement safety measures before undertaking certain cryptocurrency and stablecoin activities. They suggested controls that include engaging with their supervisory office to show written notification of their proposed activities, alongside the criteria that the OCC will use for the evaluation, with a view to providing a supervisory non-objection.

All this progress is welcome, as at a macro level they’re meant to protect the interests of the investor. But the way things developed with the US Securities and Exchange Commission (SEC), which has the same goal, makes us want to take this with a pinch of salt.

On one hand, the SEC is looking after people’s money, but on the other, it wants to make the market more efficient. Catering for both is a challenging job, and some might say that it became too protective as an institution and got in the way of progress. See what happened to Basis, for example, designed to keep its price stable. This would have been an innovative solution for the crypto space, coming from a place of accountability and transparency. The project was however shut down because of strict, old regulations applied to a novel system. In its desire to go after scams, frauds and manipulative activity, it discourages entrepreneurs from launching new projects. This is one of the reasons why London, not New York, is the centre of fintech investments now.

With the industry’s rapid advancement there is a growing need for regulations that are agile and flexible. As the SEC might be directing its enforcement actions against DeFi, NFTs and even stablecoins, revising its modus operandi is required sooner rather than later.

While policy-makers are slowly devising their roadmaps to a healthier ecosystem, the industry could regulate itself by relying on trust and knowledge. The harsh reality is that in the crypto space there are many bad actors. We believe there is little to no chance that there are retail investors out there who didn’t experience scams or at least somebody trying to scam them. For the retail investor to have more confidence in this space, there is a high need for a tracked record system for projects, influencers, and anyone with a voice in this space. We can’t trust someone with our investment decisions just because they have a big following. Retail investors shouldn’t base their confidence on that. It’s important to understand that a tracked record of past performance, immutably stored on the blockchain, is a step forward towards building the trust bridge in 2022.

The same trust and knowledge lie at the heart of Coreto, our reputation-based research hub, which is a secure environment for crypto communities. Here, members have to prove their influencer status by building a history of accurate analysis and market predictions. This will elevate critical thinking, reasoned argument, shared knowledge, and verifiable facts. Only when they’ll have a good enough reputation score will they be able to influence the newcomers, and also monetise their knowledge. This is significantly different from what happens currently online, with some so-called crypto influencers misleading masses into faulty investments and then fleeing the scene. This creates a win-win situation: the goodwill influencers will be able to shine on a digital stage, while the community will be able to make more educated investment decisions.

If we all remain loyal to these guiding principles – trust and performance – the whole crypto community can benefit and evolve from it.

Cryptocurrencies are one of the biggest Ponzi schemes in history. More stringent regulation and the rise of state-backed digital currencies look set to cause the speculative market for cryptocurrencies to crash. Within a few years, all non-state backed cryptocurrencies could reach their true monetary value: zero.

by Bambos Tsiattalou, Partner at Stokoe Partnership Solicitors

Although cryptocurrencies are still involved in white collar crime, the writing is on the wall for them. Dedicated regulatory regimes for cryptocurrencies are now being developed worldwide. The European Commission has launched a proposed regulatory regime for cryptoassets. The US Senate looks set to require cryptocurrency exchanges to report the details of each transaction. This is expected to be in force by 2023. In the meantime, regulators are making greater use of their existing powers to regulate cryptocurrencies. For example, the UK’s the Financial Conduct Authority (FCA) was appointed as the major regulator of the cryptocurrency market in January 2021.

Perhaps the greatest long-term threat to cryptocurrencies is the creation of state-backed digital currencies. China is now trialling its digital Yuan. The EU is considering a digital euro.  The chair of the Federal Reserve calls its proposed digital dollar a “high priority project”. These will have both the security of blockchain and a stable value.

Despite these developments, for now, cryptocurrencies continue to provide opportunities for criminal activity, including white collar crime. The global cryptocurrency market is now worth some US$1.5 trillion annually. New types of cryptoassets and cryptocurrency exchanges launch regularly.

The determination of global leaders to regulate cryptocurrencies should not be underestimated.  Ransomware attacks are now a geopolitical issue, with many linked to Russia. Russia has been accused of involvement in attacks such as the 2020 SolarWinds attack. The 2021 G7 meeting issued a final communique that promised that the G7 nations would collaborate “to urgently address the escalating shared threat” of ransomware attacks. The greater anonymity of cryptocurrencies facilitates ransomware attacks.

Frauds involving cryptocurrencies, such as the PlusToken Ponzi scheme, have cost billions internationally. The PlusToken fraud defrauded investors of an estimated $2.9 billion. Cryptocurrencies have facilitated money laundering on a global scale. Until serious regulatory regimes are put in place globally, the use of cryptocurrencies in white collar crime looks set to continue. In 2020, in the UK alone, around £113 million was lost in fraudulent cryptocurrency investments.

A great deal of white collar crime goes beyond money laundering and relates to the cryptoasset markets themselves. It involves misrepresentations regarding the value, stability and viability of cryptoassets and related financial instruments.

People are lured into investing online in cryptocurrencies or their derivatives. This is despite the clear warnings issued by regulators such as the FCA. The FCA’s clear advice is that “Cryptoassets are considered very high risk, speculative purchases. If you buy cryptoassets, you should be prepared to lose all your money.”

The appetite for cryptocurrencies is rarely dented by their remarkable volatility. Earlier this year, the cryptocurrency Ether dropped 22% in a single day while Bitcoin lost over 40% of its value in a single week. The FCA has thankfully now banned the sale of crypto derivatives to consumers on the basis of its “concerns surrounding the volatility and valuation of the underlying cryptoassets.” Yet UK consumers can still buy them internationally online.

The UK has no regulatory regime dedicated to cryptocurrencies as of yet. However, the FCA has become active in regulating the cryptocurrency market. Firms must now register with the FCA before operating in the UK. Cryptoasset platforms which registered with the FCA in December 2020 were able to continue to offer services in the UK under a Temporary Registrations Regime while the FCA assessed their application. However, many applicants have been abandoning their applications to the FCA, due to difficulties meeting the anti-money laundering requirements.

The FCA has not been sitting on its hands while it assesses applications. In June, it banned the cryptocurrency exchange Binance from conducting regulated activities in the UK. The FCA’s head of enforcement and market oversight, Mark Steward has admitted that 111 unregistered cryptocurrency providers were operating in Britain and that “they are dealing with someone: banks, payment services firm, consumers”. This is a pointed warning to those banks and other white collar service providers involved.

The British legal system has proven itself adaptable to the rise of cryptocurrencies. In 2019, the English High Court considered whether cryptoassets could be legally regarded as property. The case of AA v Persons Unknown [2020] 4 W.L.R. 35 involved an application for a proprietary injunction to recover Bitcoins, which had been extorted during a ransomware attack on a Canadian insurance company. The company’s British insurer paid q ransom of $950,000 in Bitcoin through an expert intermediary. At the time this amounted to 109.25 Bitcoins.

The consultants who had made the payment found the extorted Bitcoins at a cryptocurrency exchange.  They discovered that 96 of the 109.25 Bitcoins were still in an account and asked the High Court to grant a proprietary injunction to recover them. The English High Court held that Bitcoins were “property” under English law and granted the injunction.

The court favourably cited the UK Jurisdiction Task Force’s report entitled “Legal statement on cryptoassets and smart contracts”.  The report concluded that cryptoassets have the legal characteristics of property and that their novel technological features did not prevent them from legally being property. This judgment brings cryptoassets within the purview of the English courts.

Regulators and the courts are actively using existing laws to tackle cryptocurrencies and white collar crime. State-backed digital currencies look set to arrive in tandem with a coming wave of regulation which will tackle the misuse of crypto assets. These developments will create a perfect storm that will sweep away cryptocurrencies as we have known them.

People will be much more likely to place their trust in a digital dollar or a digital euro instead of a cryptocurrency like Dogecoin – which literally started off as a joke. It may well also end up as one.