AGEFI Luxembourg - Juin 2022

Juin 2022 48 AGEFI Luxembourg Informatique financière M ichael Boel, Head of Local Clearing at tech- led Payments Bank, Banking Circle, examines how Banks, FinTechs, and Payments businesses as well as their custo- mers stand to gain fromRequest to Pay today and in future. Delivering simpler and safer billing, more control over when and how to pay and a simpler alternative to tradi- tional invoicing, Request to Pay is becoming increasingly popular. Request-to-Pay (also known as RtP or R2P) is growing rapidly and is set to become a vital element in the evolution of the newdigital payments landscape. Today, fewer than one in five European banks offer Request-to-Pay solutions, but by the end of 2023 we expect at least half of institutions to have an offering. We have seen payments innovations fast-tracked in the past two years, and that has led to Request to Pay growing more rapidly than initially predicted. Its recent rapid growth suggests enor- mous market appetite. A secure messaging service designed to make payments simpler and more flexible for businesses and consumers, aswell as cheaper and easier tomanage for the financial institutions and mer- chants involved in the payment jour- ney, Request to Pay is a financial inno- vation that is fit for purpose for the future. Request to Pay allows billers to easily request direct account-to-account pay- ments via the payer’s existing online banking account or app, and for the payer to send a real-time payment quickly and easily, query the amount requested, decline to pay, or open a dia- logue with the biller. This brings more flexibility and control over how they manage their finances, increasing finan- cial inclusion. Around the world, Request to Pay is in its early days. According to a recent study1, fewer than one in five European banks currently offer Request to Pay solutions although this is expected to reach one in two by the end of 2023. But as a payments innova- tion that is fit for purpose for the future, it is already showing tremendous growth, indicating the enormous appe- tite for a flexible, low cost and secure new way to manage regular or one-off payments. Low cost but highly secure Request to Pay consumer authorisation happens within a bank’s app or web- site, meaning that transactions are pro- tected by bank-level security. This can include two-factor authentication and the Strong Customer Authentication protocols mandated by the EU’s second payment services directive (PSD2), where appropriate. As a result, Request to Pay is extremely secure, reducing fraud and cutting the cost of risk management. There are also cost advantages for mer- chants. For businesses currently reliant on card payments, Request to Pay offers an alternative that bypasses the card rails and associated interchange fees, dramatically reducing the cost per transaction. Consumers and businesses alike are also attracted to Request to Pay’s poten- tial for instant settlement, although that depends on themethod adopted by the banks involved in the transaction. It is already proving popular for speeding up the cashflow of micro merchants and ‘gig’ economy workers, and for removing the friction in bill payment for the 18-34 demographic. Hurdles remain However, despite the benefits Request to Pay brings, there are some significant roadblocks holding it back from rea- ching its full potential – legislation being the biggest obstacle right now. Currently, theEU’s secondpayment ser- vices directive (PSD2) requires full cus- tomer authentication for each payment request sent. This is what is currently making Request to Pay less attractive. Thankfully solutions are on their way. For example, the minimum transaction value requiring authentication was recently raised from EUR 30 to EUR 50, andautomated customer authentication systems can be employed where authentication is still required. These are all changes that also provide a clearer path for this payments innovation. Another challenge facing banks adop- ting Request to Pay messaging is selec- ting a means of integration and deploy- ment. Most banks opt to offer Request toPaywithin their internet banking and mobile app services, but integration is more complicated. Banks must choose which routewill best suit themand their customers today - and in the future. One route is a single integrationwith a third- party provider.Another option is a one- to-many platform solution. Third-party integration is the simplest to launch but is limited in its capabilities. Another step in the digital shift Request to Pay clearly demonstrates the potential of a flexible payment system based on Open APIs and designed to fit the needs of users in the digital era. It fits perfectly within the industry- wide shift to digital services, providing a more accessible payment solution. Despite rapidly gaining momentum today, itwill undoubtedlybe a fewmore years before Request to Pay reaches its potential. However, once adopted, secu- red and linked to digital and mobile uses, Request to Paywill have the capa- city to become an international payment model anda viable alternative to current international payment schemes. Awhite paper on the opportunities of Request to Pay can be accessed from the Banking Circle website, https://www.bankingcircle.com/ Request to Pay: The next step in the worldwide digital payment revolution By Dr Karl KIRCHGESSER, Executive Vice President at FERNBACH Financial Software S.A. in Munsbach I nterest rates are going to turn around again! But if higher interest rates are the only re- medy – what can builders, sa- vers, and banks expect? Builders who have previously relied on variable terms or are facing follow- up financing, will experience hard times. After mortgage rates have almost consistently been below 2% over the past 6 years, there is now a risk of a considerable extra burden from rising interest rates. Currently, mortgage interest rates are exploding: since September last year, rates for ten-year mortgage loans have almost tripled. One of the reasons is the market’s expectation for the European Central Bank (ECB) to be forced into an even earlier and more pronounced interest rate turnaround. Due to another significant key rate hike by the US Federal Reserve as well as the high inflation rate, many market participants foresee interest rates to rise to 1% by the end of the year. The tur- naround in interest rates on the capital market is also reflected in the rapid rise in government bond yields. The mar- ket expects to see a 3% interest rate for mortgage loans with a 10-year fixed interest rate in the near future. And as if rising interest rates were not problematic enough, the situation is exacerbated by other aspects: on the one hand, a high inflation rate gobbles up the disposable income of house- holds. On the other hand though, the demand boom in the real estatemarket could stall if fewer and fewer prospec- tive builders and buyers can afford their own real estate. Experts fear that this will cause real estate prices to drop. This, in turn, means lower loan values for properties that serve as col- lateral. Example: In the case of a fully repayable loan of EUR 300,000, 0.85% p.a., the annuity increases from EUR 2,608 to EUR 2,896. While the disposable income was at EUR 1,000 in the beginning of 2022, given an inflation rate of 7.3%, these EUR 1,000 will only have a purchasing power of EUR931 by the endof the year. There is no doubt that the general conditions for mortgages have deterio- rated considerably within a very short period of time. In this respect, it is important for banks to recognise the risk at an early stage and to be able to estimate the extent of the threat. To this effect, the use of arti- ficial intelligence (AI) can prove very useful: AnAI is able to determine whe- ther and to what extent the individual loan portfolio will be affected by an increasing default risk. For this calcula- tion, the revenue and expenditure account for each mortgage loan plays an important role. The free income cal- culated at the time of the loan applica- tion is currently significantly reduced by inflation. Even if, contrary to expec- tations, the price drivers ease off or even disappear in the near future, the princi- ple of cost stickiness will cause a per- manently reduced disposable income. Using AI, the combination of disposa- ble income on the one hand and consi- derably increasing expenditure for loan interests on the other hand can be analysed and evaluatedwith regard to the expected increase in default risk. Based on this, an action plan to reduce the default risk can be developed early on for individual borrower units. For example, a reduction in the monthly loan burden can be achieved by exten- ding the term. * Dr Karl Kirchgesser has 25 years of experience in the financial services industry. He specialises in the lending business as well as IFRS, risk & compliance. FERNBACH Financial Software S.A. 6c, rue Gabriel Lippmann, L-5365 Munsbach Tel.: +352 40224422 www.fernbach.com Risks from turnaround in interest rates threaten mortgage business Source :https://www.interhyp.de/ratgeber/was-muss-ich-wissen/zinsen/zins-charts.html# Development ofmortgage rates for the past year 4.00% 3.00% 2.00% 1.00% 0.00% Jul21 Sep21 Nov21 Jan22 Mar22 May22 J UMP Technology, éditeur eu- ropéen d’une plateforme lo- gicielle unique et modulaire Data + Front-to-Back + Reporting de gestion des investissements, et Lingua Custodia, Fintech experte duMachine Learning appliqué à la linguistique financière, annon- cent un partenariat technolo- gique innovant. Ce partenariat devrait apporter aux uti- lisateurs de la solution JUMP une tra- duction instantanée de leurs reportings clients, réglementaires et digitaux. Pleinement intégré à la plateforme de JUMP Technology, le module JUMP Reporting permet d’automatiser l’en- semble des processus de reporting des Asset et Wealth Managers : acquisition des données en multisources, contrôle de la qualité des données, calcul d’indi- cateurs de risque et de performance (attribution de performance en Equity et en Fixed Income), validation des reportings, gestion des commentaires, génération et diffusion multicanal des reportings. Grâce à la connectivité native via API REST entre les deux solutions, les uti- lisateurs de la plateforme logicielle JUMP peuvent désormais bénéficier de la technologie Machine Learning de la solution de Lingua Custodia pour automatiser la traduction des reportings clients (factsheets, rapport mensuel mandats, ...), réglementaires (KID, PRIIPS, ESG...) et internes. Cette collaboration innovante permet aux gestionnaires d’actifs de réduire les coûts de production et les risques opé- rationnels, ainsi que d’améliorer la performance des équipes reporting. «La solution de linguistique financière Lingua Custodia s’intègre rapidement et parfaitement à notre module first-in class JUMP Reporting, grâce à notre architecture ouverte reposant sur les technologies Cloud, Web et API REST.» Emmanuel Fougeras, CEO de JUMP Technology «Notre expertise en Traitement Automatique des Langues (NLP) nous permet d’apporter la dernière brique d’automatisation afin de renforcer la fluidité et l’efficience opérationnelle de la production de reporting». Olivier Debeugny, CEO de Lingua Custodia JUMPTechnology et Lingua Custodia nouent un partenariat Abonnement aumensuel (journal + éditiondigitale) 1an(11numéros)=45€abonnementpourLuxembourgetBelgique-55€pourautrespays L’édition digitale du mensuel en ligne sur notre site Internet www.agefi.lu est accessible automatiquement aux souscripteurs de l’éditionpapier. NOM:....................................................................................................................................................................... ADRESSE:.............................................................................................................................................................. LOCALITÉ:............................................................................................................................................................ 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