The PAYTECH Book The Payment Technology Handbook for Investors, Entrepreneurs, and FinTech Visionaries

The only globally-crowdsourced book on the future of payments (“PayTech”), offering comprehensive understanding of a rapidly evolving industry at the centre of global commerce

The movement of money between individuals, organisations and governments is crucial to the world economy. The payments industry has undergone immense transformation ­– new regulations, technologies and consumer demands have prompted significant changes to the tools, products and use cases in payments, as well as presented lucrative opportunities for entrepreneurs and FinTech professionals. As payment technologies become faster and more efficient, companies and investors are increasingly favouring PayTech innovation due to better customer experience, increased revenues and manageable risks. The PAYTECH Book brings together a diverse collection of industry experts to provide entrepreneurs, financial services professionals and investors with the answers they need to capitalise on the highly profitable PayTech market.

Written by leaders in the global FinTech and payment sectors, this informative volume explains key industry developments and presents valuable first-hand insights from prominent industry practitioners. Contributors include advisors and consultants to the payments and financial services industry, entrepreneurs and business owners utilising cutting-edge PayTech capabilities, academic researchers exploring the social-political-economic impact of PayTech and many others. Detailed chapters cover essential topics such as cybersecurity, regulation and compliance, wholesale payments and how payment systems currently work and how PayTech can improve them. This book:

• Defines PayTech and identifies its key players
• Discusses how PayTech can transform developed markets and accelerate growth in emerging economies
• Describes how PayTech fits into the larger FinTech ecosystem
• Explores the future of PayTech and its potential as an agent of social change and financial inclusion
• Provides diverse perspectives on investment in PayTech and what consolidation and expansion will look like

The PAYTECH Book: The Payment Technology Handbook for Investors, Entrepreneurs and FinTech Visionaries is an indispensable source of information for FinTech investors and entrepreneurs, managers from payments companies and financial services firms and executives responsible for payments in government, corporations, public sector organisations, retailers and users of payments.

SUSANNE CHISHTI is the CEO of FINTECH Circle, Europe's 1st Angel Network focused on fintech investments and Founder of the FINTECH Circle Institute, the leading fintech learning platform offering Innovation Workshops to C-level executives and fintech and entrepreneurship courses. She is also the Co-Editor of the bestsellers The FinTech Book, The WealthTech Book and The InsurTech Book, all published by Wiley. Susanne is considered as one of the leading fintech influencers globally and advisor to top management in financial services.

TONY CRADDOCK is the Founder and Director General of the Emerging Payments Association, the UK's largest payments trade association. Credited with coining the term 'PayTech,' Tony is a popular commentator, speaker and writer on PayTech and is the architect of The Emerging Payments Academy, the Emerging Payments Awards, the EPA Inclusion Accreditation Service, The Inclusion Foundation and the PAY360 conference.

ROBERT COURTNEIDGE is a Payments Lawyer and the CEO of Moorwand, Ltd, an international provider of payment services. He has more than 27 years of experience in cards and payment systems and works closely with The Payments Services Regulator, HM Treasury and the Financial Conduct Authority. Robert speaks and writes extensively on cards payments, financial technology and current legal and regulatory issues.

MARKOS ZACHARIADIS is Full Professor and Chair in Financial Technology (FinTech) and Information Systems at the Alliance Manchester Business School, University of Manchester, a Council member at the World Economic Forum, and a FinTech Research Fellow at the University of Cambridge. His research has been published in top academic journals and books. A board advisor, mentor and international keynote speaker, Markos has been invited to present his research insights to various international conferences, governments and global organizations. He holds an MSc and PhD from the London School of Economics.

Preface viii

About the Editors xi

Acknowledgements xiii

1. Payments Explained

Payments are Getting Political Again 6

Money: A History of Gods and Codes 11

Payments Explained 14

From Barter to App – How Payments Have Changed 17

Do We Still Need to Pay? 21

How ACH and Real-Time Payments Clearing and Settlement Works 23

Payments as a Service 26

The New Emerging Banks and Their Role in Payments 28

The Payments Race 31

PayTech Regulation Trends 34

An Innovative Local Payments Method in an Ancient Land 37

2. Payment System Infrastructures and Money Transfer Technologies

The Convergence of Card Payments and Bank Payments 46

Instant Payments: A New Deal for the Payments Market? 49

PIN on Mobile – A Pivotal Moment for Payments 51

PayTech in the Cloud 54

The Rise of a Super-Correspondent Banking Network 56

Why Distinctions within Mobile Wallets and Tokenization Matter 59

The Future is Already Here; It is Just Not Evenly Distributed 61

PSD2 Open Banking: The Challenges of Third-Party Provider Identity and Regulatory Checking 64

Taking PayTech to the Villages of India 68

3. Payments Regulation and Compliance

How Payments Regulation and Compliance Can Create a Better Future 74

Refining the Collective Responsibility for Compliance 78

Can Operational Agility Grow Payments in the New Online Platform Marketplaces? 81

The Hidden Value of Greater Standardization for the EU-Wide FinTech Market 84

Is Europe a Good Example of Open Banking? 86

Taking Back the Power: Regulations in the EU are Changing the Face of Banking 88

Achieving Control Effectiveness and Sustainable Compliance Using Nine Factors 91

Money Laundering Laws, Technology and Keeping Up with Criminals 94

Dynamic Regulation Readiness – Implementing the 5th Anti-Money Laundering Directive 97

eKYC: The Next Mountain for e-Businesses to Climb 100

AML Systems After Madoff: Ponzi-Identification Using “Complexity” 102

4. Blockchain Regulation Around the World

Understanding Cryptocurrencies, Blockchain Technology and Regulations 110

Blockchain, Cryptocurrencies and How They Fit Within Current Payments Regulation 114

Blockchain and Beyond 117

Will Central Banks Adopt the New World Economy of Cryptocurrencies? 119

The Case for a National Cryptocurrency 122

Regulation and the Future of Blockchain: Which Approach Will Succeed? 124

Web 3.0 – The Internet of Value 127

Blockchain – An Elixir for Anti-Money Laundering? 129

Facilitating Online Crypto-Payments Now and in the Future 132

A New Law for Derivatives Markets and the Use of Smart Contracts 134

PayTech and Blockchain: Adjusting for Security and Risk 137

Cryptocommodities: An Essential Element of Decentralized Payments 140

5. Payments in Practice

The Perspective of a Passionate Payments CEO 148

Plugging the Data Black Hole: How Mobile Self-Checkout Can Help Revive the High Street 152

How UnionPay Quick Pass is Beating Alipay and WeChat Pay in China 155

How Payment Agility and Cash-for-Carbon Can Solve a Global Problem for Mankind 158

Revolutionizing the Retail Industry Through Integrated Payments Systems 162

Asset Management and Payments in India – So Near and Yet So Far 164

Exploiting the Value of Data Embedded in Payments Systems 167

Reinventing the Customer Experience by Focusing on the After-Payment Emotional Experience 170

How Open Banking and Payment Touchpoints Will Save Banks 172

Why Personal Financial Management Will Be Embedded Into the Next Generation of Payments 175

How Helping Microbusinesses Accept Digital Payments Could Transform Kenya’s Economy and Enhance Inclusion 178

How Decentralization Can Create a Customer-Centric Ecosystem 182

6. Blueprint for Change

A Blueprint for Change 188

Accelerating the Adoption of PayTech Innovations 192

How to Build a Successful PayTech Product 195

The Future of Digital Payments Market Infrastructures 198

It’s Money, Jim, But Not as We Know It 201

Payments as Open Business Banking Enabler for the Gig Economy 206

The Financial Arms Race: The Game with No Rules 209

How Network Paradigms Can Lead to New Payments Innovations 212

It’s the Ecosystem, Stupid! Keeping Ahead in a Payments Ecosystem 215

Mobile Money: Creating a Cash-Light Africa to Solve the Financial Inclusion Problem 217

Back to the Future: A Miraculous Time-Trip Through the Future, Present and Past of Payments 222

Fifteen Ways in Which Our Digital Future Will be Shaped by PayTech 225

List of Contributors 229

Index 236

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