Key developments of interest over the last month include:
- United Kingdom: HM Treasury responds to Payments Landscape Review call for evidence
- Hong Kong: HKMA publishes white paper exploring the idea of a CBDC
- Italy: Bank of Italy, CONSOB and IVASS launch Italian Regulatory Sandbox
In this Newsletter:
For previous editions of the Global Payments Newsletter, please visit our Financial Services practice page.
United Kingdom: HM Treasury responds to Payments Landscape Review call for evidence
On 11 October 2021, HM Treasury published its response to its July 2020 call for evidence on the Payments Landscape Review.
The purpose of the call for evidence was to set out the government’s aims for payments networks in the UK, and to make a high-level assessment of how well the present system is delivering against the government’s aims. The call for evidence asked questions about the opportunities, gaps and risks which need addressing to ensure that the UK maintains its status as a country at the cutting edge of payments technology.
Following feedback to the call for evidence, the government has identified key areas for action in its response:
- Equipping Faster Payments for the future, supported by a New Payments Architecture, and ensuring the right level of protection for consumers to address what happens when a payment goes wrong.
- Unlocking Open Banking enabled payments safely and securely to allow consumers to pay for goods and services in shops and online directly from their accounts, rather than using a debit or credit card, creating competition and choice between payments networks and enabling opportunities for fintechs to build the next generation of payments.
- Enhancing cross-border payments so people and businesses can make and receive cross-border payments seamlessly, quickly and cheaply.
- Future-proofing the legislative and regulatory framework for payments to ensure it (i) is agile and proportionate, (ii) promotes and fosters innovation, (iii) provides the conditions for technology to continue to drive enhancements in payments, and (iv) ensures consumer protection and resilient payments networks.
Hong Kong: HKMA publishes white paper exploring the idea of a CBDC
On 4 October 2021, the Hong Kong Monetary Authority (HKMA) released a white paper exploring potential architectures and design options that could be applied to the construction of the infrastructure for distributing e-HKD. This is the latest publication in relation to the HKMA’s work on Project e-HKD. The project’s aim is to assess the feasibility of a retail or general-purpose CBDC (provisionally called e-HKD), and comprises two components: a technology experimentation study and a study of other relevant issues, including legal and policy considerations.
The white paper provisionally proposes a two-layered architecture for the system. The first layer is a wholesale system for the central bank to issue and redeem the CBDC, and the second is a retail system for commercial banks to distribute and circulate either the CBDC or CBDC-backed e-money.
The HKMA is asking for comments on seven specific areas of the system’s design, relating to privacy, interoperability, performance and scalability, cybersecurity, compliance, operational robustness and resilience, and technology-enabled functional capabilities.
The deadline for submitting comments is 31 December 2021.
Italy: Bank of Italy, CONSOB and IVASS launch Italian Regulatory Sandbox
On 30 September 2021, the Bank of Italy, CONSOB and IVASS announced that the first window for submitting applications to the Italian Regulatory Sandbox would open on 15 November 2021.
Applications to access the Sandbox can be made for innovative technology activities relating to banking, finance or insurance. In order to be admitted to the Sandbox, projects must meet all the eligibility criteria set out under the Decree of the Italian Ministry of Economy and Finance No. 100 of 30 April 2021. Supervisory authorities will publish the application forms to be used as well as further details on the eligibility criteria before the opening date.
The applications for the first cohort of the Sandbox will be open from 15 November 2021 to 15 January 2022.
For more information on this development, take a look at this Engage article by members of Hogan Lovells’ Rome office.
European Union: EBA repeals Guidelines on the security of internet payments
The press release explains that these Guidelines were issued before PSD2 came into force in 2016, and so have now been superseded by the EBA instruments designed to support PSD2 (for example, the Regulatory Technical Standards on strong customer authentication and common and secure communication). Given that the new requirements incorporate and go beyond those set out in the Guidelines, the EBA has taken the decision to repeal them, and has asked national authorities to take the necessary steps at the national level to repeal them.
European Union: EBA publishes report on use of digital platforms
On 21 September 2021, the EBA published a report (EBA/REP/2021/26) on the use of digital platforms in the EU banking and payments sector.
The report gives an overview of market developments in relation to digital platforms. It notes in particular that the EBA has noticed a significant increase in the digitalisation of front and back-office processes in the EU's banking and payment sector and an increase in the use of digital platforms.
In spite of this, the report explains that the vast majority of competent authorities currently have a limited understanding of platform-based business models, particularly relating to the interdependencies between financial institutions and technology companies outside the perimeter of competent authorities’ direct supervision. The EBA is of the view that imperfect understanding could impair effective monitoring by competent authorities.
To address this issue, the EBA has identified steps to better monitor market developments and implement changes where needed. As a priority, in 2022 the EBA will help competent authorities to deepen their understanding of the opportunities and risks of platform-based business models by supporting competent authorities in:
- Developing common questionnaires for regulated financial institutions on digital platform and enabler use. This approach will facilitate tailored and proportionate information gathering.
- Sharing information about financial institutions’ reliance on digital platforms and enablers in order to facilitate coordinated EU-wide monitoring.
Building on the information gained, the EBA then proposes to:
- Develop a framework to facilitate the aggregation of information about financial institutions’ dependencies on digital platforms.
- Establish indicators that could help in assessing potential concentration, contagion and potential future systemic risks and which may therefore be taken into account when considering competent authorities’ supervision of these firms.
Further observations and a set of recommendations relating to the digital transformation of the EU financial sector will be set out in the joint European Supervisory Authorities’ response to the European Commission’s Call for Advice on digital finance.
United Kingdom: PSR publishes statements on consumer protection in interbank payments
On 11 October 2021, the Payment Systems Regulator (PSR) published a policy statement (PS21/2) on consumer protection in interbank payments. The policy statement follows the PSR’s call for views on the topic, published in February 2021. PS21/2 summarises the responses to the call for views and sets out the PSR’s plans to ensure that Faster Payments works for consumers and businesses.
In summary, the PSR:
- Expects industry to prioritise improved coordination between Faster Payments participants to reduce the immediate risk of payment fraud.
- Wants to see industry continue to tell customers about the protections they have.
- Expects all Faster Payments participants to identify and share payment risk levels with other participants and to act responsibly to minimise customer harm.
- Continue to support the Open Banking Implementation Entity, Pay.UK and Faster Payments participants in improving prevention and compensation measures.
- Does not rule out the possibility of intervening in the market in future to introduce additional purchase protection. The PSR notes that the reason for not intervening now is that the risk of harm to consumers in Faster Payments is currently low.
Global: FSB publishes final report on quantitative targets for cross-border payments
On 13 October 2021, the FSB published a final report entitled ‘Targets for addressing the four challenges of cross-border payments’.
The report sets out global quantitative targets for addressing the challenges of cost, speed, transparency and access faced by cross-border payments, as these play an important role in the G20’s Roadmap for Enhancing Cross-Border Payments (see the separate item on the FSB’s first consolidated report on the Roadmap below). The final report was published following a consultation launched in May 2021.
The targets for the wholesale payment sector are set out below:
- Cost: No target set.
- Speed: 75% of cross-border wholesale payments to be credited within one hour of payment initiation or within one hour of the pre-agreed settlement date and time for forward-dated transactions and for the remainder of the market to be within one business day of payment initiation, by end-2027. Payments to be reconciled by the end of the day on which they are credited, by end-2027.
- Access: All financial institutions (including financial sector remittance service providers) operating in all payment corridors to have at least one option and, where appropriate, multiple options (i.e. multiple infrastructures or providers available) for sending and receiving cross-border wholesale payments by end-2027.
The targets for the retail payment sector are set out below:
- Cost: Global average cost of payment to be no more than 1%, with no corridors with costs higher than 3% by end-2027.
- Speed: 75% of cross-border retail payments to provide availability of funds for the recipient within one hour from the time the payment is initiated and for the remainder of the market to be within one business day of payment initiation, by end-2027.
- Access: All end-users (individuals, businesses or banks) to have at least one option (i.e. at least one infrastructure or provider available) for sending or receiving cross-border electronic payments by end-2027.
The targets for the remittances payment sector are set out below:
- Cost: Global average cost of sending $200 remittance to be no more than 3% by 2030, with no corridors with costs higher than 5%.
- Speed: 75% of cross-border remittance payments in every corridor to provide availability of funds for the recipient within one hour of payment initiation and for the remainder of the market to be within one business day, by end-2027.
- Access: More than 90% of individuals (including those without bank accounts) who wish to send or receive a remittance payment to have access to a means of cross-border electronic remittance payment by end-2027.
In relation to transparency, all payment service providers are to provide, at a minimum, the following information concerning cross-border payments to payers and payees by end-2027:
- Total transaction costs (showing all relevant charges, including sending and receiving fees, those of any intermediaries, FX rate and currency conversion charges);
- The expected time to deliver funds;
- Tracking of payment status; and
- Terms of service.
Global: FSB publishes first consolidated report on roadmap for enhancing cross-border payments
The report summarises progress during the first year of the Roadmap, bringing together in one place the work under the various initiatives. The report also sets out the next steps in the Roadmap for 2022 and beyond.
Work in 2020-2021 has primarily focused on laying the foundational elements for future Roadmap actions. A key part of that foundation has been the publication of specific quantitative targets at the global level that address the challenges of cost, speed, transparency and access faced by cross-border payments (see the separate item on this above). These targets play an important role in defining the ambition of the work and creating accountability. The targets will be made fully operational in 2022.
The report also highlights that the end-goals of the overall Roadmap remain firmly on track.
The next stage of work in 2022 includes the development of specific proposals for material improvements to underlying systems and arrangements, and the development of new systems. This will require global coordination, sustained political support and investment in systems, processes and technologies. The report notes that the success of this work will depend heavily on cooperation between public authorities and the private sector.
Global: CPMI calls for ideas on expansion of payment-versus-payment settlement
On 8 October 2021, the Bank for International Settlements (BIS) published a press release announcing a call by the Committee on Payments and Market Infrastructures (CPMI) for ideas on solutions to expand payment-versus-payment (PvP) settlement.
The CPMI is developing proposals for increased PvP adoption by encouraging enhancements to existing PvP arrangements and the design of new public or private sector solutions. The CPMI invites interested parties, including commercial banks, e-money operators and other fintech companies, to share their thoughts on existing, planned or possible future solutions to expand PvP settlement to a wider range of transactions.
The call for ideas is made as part of the G20’s Roadmap for Enhancing Cross-Border Payments (as to which, see also the above two related items), and the information provided will assist the CPMI in facilitating the increased adoption of PvP under building block 9 of the FSB’s cross-border payments programme.
The deadline for responses to the call for ideas is 2 November 2021. The CMPI will hold a "Q&A workshop" on 5 November for engaging parties.
Egypt: Central bank approves contactless payments on mobile phones
On 26 September 2021, it was reported that the Central Bank of Egypt has agreed to grant licences to providers of the service of accepting contactless payments on mobile phones. The move is part of the Egyptian government’s strategy to reduce reliance on paper bank notes, and to promote financial inclusion.
Italy: Public consultation on draft decree establishing register of payment services agents, e-money distributors and central contact points for AML supervision published
On 7 October 2021, the Italian Ministry of Economy and Finance published a draft decree containing rules for the establishment of the Italian register of central contact points, payment service agents and e-money distributors operating in Italy.
The draft decree implements Article 45 of Legislative Decree No. 231 of 21 November 2007 on anti-money laundering and is aimed at ensuring a more efficient supervision of the activities carried out by agents and distributors.
In particular, under the draft decree a failure to comply with the new reporting obligation would result in a EUR 4,500 fine, which may be tripled where breaches are serious and repeated.
The public consultation on the draft decree runs until 5 November 2021.
For more information on this development, take a look at this Engage article by members of Hogan Lovells’ Rome office.
Global: BCBS considers cyber security in September meetings
On 20 September 2021, the Basel Committee on Banking Supervision (BCBS) published a press release and a newsletter following meetings held on 15 and 20 September 2021. At the meetings, the BCBS assessed risks and vulnerabilities to the global banking system and discussed supervisory and policy initiatives.
It is hoped that the newsletter will help promote the widespread adoption of measures to strengthen banks' cyber security. It complements previous Committee publications, including the set of principles for operational resilience and operational risk published earlier this year.
The newsletter calls on banking authorities to encourage the institutions that they oversee to adopt tools, effective practices and frameworks (including provisions for testing their efficacy) for cyber risk management that are aligned with widely accepted industry standards. Adopting this approach will allow banks to better identify, assess, manage and mitigate their exposure to cyber risks, including those arising from third-party service providers. It will also allow banks to foster greater resilience to cyber threats and incidents. The BCBS does not endorse any particular tools or frameworks in the newsletter, but does encourage the adoption of tools and frameworks which are aligned with widely accepted industry standards.
Nigeria: CBDC launch delayed
On 1 October 2021, it was reported that Nigeria’s launch of its eNaira digital currency, initially planned for 1 October 2021, is being delayed. The Central Bank of Nigeria said that the postponement was because of the country’s Independence Day celebrations. It is not yet clear when the digital currency will now be launched.
Global: IMF chief gives speech discussing crypto
On 6 October 2021, it was reported that the IMF’s managing director, Kristalina Georgieva, had given a speech hosted by Bocconi University. In the speech, Ms Georgieva:
- Revealed that among members of the IMF, 110 countries are exploring central bank digital currencies (CBDCs), and that the key challenge for these countries will be ensuring the inter-operability of the new currencies.
- Questioned how CBDCs would fit into existing regulatory frameworks, such as those developed by the Bank of International Settlements.
- Explained her view that digital currencies issued by central banks are the most reliable form of digital money, and that she finds it hard to view other cryptocurrencies, like Bitcoin, as money.
Global: FSB publishes report on global stablecoin arrangements
On 7 October 2021, the Financial Stability Board (FSB) published a report on the regulation, supervision and oversight of global stablecoin arrangements. The report:
- Discusses key market and regulatory developments since the publication of the FSB’s high-level recommendations in October 2020;
- Considers the implementation of the FSB’s high-level recommendations across different jurisdictions;
- Provides a status update on the review of existing frameworks, standards, guidelines and principles in light of the FSB’s high-level recommendations; and
- Identifies areas for consideration for potential further international work.
The report notes that, overall, the implementation of the FSB’s high-level recommendations across jurisdictions is still at an early stage. The report warns that if jurisdictions diverge too much in their approach to implementation, then this could lead to harmful regulatory arbitrage.
The report also notes that standard-setting bodies, including the BCBS, CPMI, and IOSCO are assessing whether and how existing international standards and principles may apply to stablecoin arrangements and, where appropriate, adjusting them in light of the FSB’s high-level recommendations. The report stresses that a number of issues may not be fully covered by existing standards and principles and that gaps should be addressed in a holistic manner that is coordinated across sectors.
The FSB has identified issues relating to the implementation of each of its recommendations, and suggests that further work in these areas at the international level may therefore be useful. These areas include:
- The conditions for qualifying a stablecoin as a “global stablecoin”;
- Prudential and investor protection, and other requirements for issuers, custodians, and providers of other global stablecoin functions (e.g. wallet providers);
- Redemption rights; and
- Mutual recognition and deference.
The FSB plans to conduct a review into the effective implementation of its high-level recommendations, which will be completed in July 2023, and which will identify how any gaps could be addressed by existing frameworks. If needed, updates to the FSB’s recommendations will then be made.
Global: CPMI and IOSCO consult on application of PFMI to stablecoin arrangements
On 6 October 2021, the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a consultative report on the application of the Principles for Financial Market Infrastructures (FMIs) (PFMI) to stablecoin arrangements.
The report aims to provide guidance on the application of the PFMI to operators of stablecoin arrangements (SAs). For these purposes, an SA is an arrangement that combines a range of functions to provide an instrument that purports to be used as a means of payment or store of value or both.
The view of the CPMI and IOSCO is that the function of an SA in transferring coins (the transfer function) is an FMI function and consequently an SA that performs this function should be considered an FMI for the purpose of applying the PFMI. On this basis, the principles in the PFMI that apply to payment systems will apply in their entirety to an SA performing a transfer function. If an SA provides functions that more closely resemble those provided by other types of FMIs, the SA should consider the relevant principles and observe them accordingly.
In the report, the CPMI and IOSCO set out:
- Considerations for determining the systemic importance of SAs.
- Guidance on how certain aspects of the PFMI could be observed by SAs.
The deadline for responses is 1 December 2021.
United Kingdom: Bank of England Deputy Governor gives speech on the impact of crypto on financial stability
On 13 October 2021, the Bank of England published a speech given by Deputy Governor, Jon Cunliffe, in which he discussed the impact of crypto on the stability of the UK’s financial system.
In particular, Mr Cunliffe noted that:
- The crypto world is beginning to connect to the traditional financial system and he is seeing the emergence of leveraged players. He flagged that this is happening in a largely unregulated space. Financial stability risks are currently relatively limited but they could grow very rapidly if, as Cunliffe expects, this area continues to develop and expand at pace. How large those risks could grow will depend in no small part on the nature and speed of the response by regulatory and supervisory authorities.
- Crypto itself is the underlying technology, but what matters is not the underlying technology but how it is used and for what purpose. In other words, regulators should not regulate technologies but rather the activities the technology is performing. In doing so, regulators need to ensure a consistent approach to risks, regardless of the technology used.
- Broadly speaking, risks in relation to crypto can be broken down into those relating to unbacked cryptoassets used primarily as speculative investments and those relating to backed cryptoassets intended for use as a means of payment.
- In relation to unbacked cryptoassets, there are well-founded concerns relating to investor protection, market integrity and financial crime. More direct issues from a financial stability perspective are the implications of a major price correction, given the unbacked and volatile nature of these assets.
- In relation to backed cryptoassets, regulatory authorities will need to ensure that the standards that apply to current systemic payment systems apply equally effectively to any systemic or likely to be systemic payment system using stablecoins.
- Decentralised finance has grown rapidly in recent years, and the highly decentralised and global structure of the decentralised finance sector, along with the difficulty in tracing end users, provides a unique set of challenges for regulators.
Global: Trade associations respond to BCBS consultation on cryptoassets
On 20 September 2021, ISDA, the Global Financial Markets Association, the Financial Services Forum, the Futures Industry Association, the Institute of International Finance and the Chamber of Digital Commerce submitted a joint response to the Basel Committee on Banking Supervision (BCBS) on its consultation on preliminary proposals for the prudential treatment of cryptoasset exposures.
The letter explains that the industry supports the BCBS’s decision to adopt an iterative approach in relation to the prudential treatment of cryptoassets. However, the paper highlights the need for regulatory certainty on this issue in the near term, especially given the pace of evolution and client demand for cryptoassets. While bank exposure to crypto is currently low, this is not sustainable given the growing relevance of cryptoassets. The industry believes that the existing prudential framework (ie, Basel III) is the best starting point for this.
Bhutan: Central bank piloting CBDC
On 22 September 2021, it was reported that Ripple, a provider of enterprise blockchain and crypto solutions for cross-border payments, is collaborating with Bhutan’s Royal Monetary Authority (RMA) to pilot a central bank digital currency (CBDC).
The RMA plans to pilot retail, cross-border and wholesale payment use cases.
United Kingdom: HMT publishes economic crime levy consultation response
On 21 September 2021, HM Treasury published its response to its consultation on the introduction of a new economic crime levy. The new levy will be paid by entities subject to the Money Laundering Regulations 2017, and the proceeds will be used to fund government action to tackle money laundering and to assist in the delivery of the 2019 Economic Crime Plan.
Among other things, the response notes that:
- All regulated entities with UK revenue below £10.2 million will be exempt from paying the levy.
- The levy will be collected by the three statutory AML supervisors – HMRC, the FCA and the Gambling Commission. HMRC will also take on collection responsibilities for in-scope legal and accountancy firms supervised by the 22 Professional Body Supervisors.
- Unpaid levy debt will be owed as a civil debt to the Crown, and will incur interest.
Alongside the consultation response, HM Treasury has also published the draft legislation to implement the economic crime levy, and undertaken a short technical consultation on the contents of that draft legislation. This consultation closed on 15 October 2021.
The first levy will be charged on the year 1 April 2022 to 31 March 2023 and will not be due for payment until the year 2023/24.
Germany: BaFin authorises first Bitcoin-based security token offering
On 17 September 2021, STOKR announced that Germany’s Federal Financial Supervisory Authority, BaFin, has approved the first Bitcoin-based security token offering (STO) for the German market.
The authorisation means that German retail investors can now participate in Exordium’s EXOeu offering on STOKR, with the minimum investment starting at $100.
According to the announcement, this authorisation is of wider regulatory significance, because previously BaFin only approved STOs issued on Ethereum. It is also one of the only instances where BaFin has approved cross-border issuances of registered securities.
Global: EU-US Joint Financial Regulatory Forum publish joint statement
On 4 October 2021, the European Commission published a joint statement by members of the EU-US Financial Regulatory Forum following meetings held on 29 and 30 September 2021.
In particular, the following topics were discussed:
- Financial innovation: Participants shared views on recent efforts by the EU and the US to improve operational resilience in the financial sector. Participants also discussed considerations regarding any potential central bank digital currencies and exchanged views on recent developments, including regulatory proposals involving new forms of digital payments, cryptoassets, and stablecoins. Participants acknowledged the importance of ongoing international work on financial innovation and recognised the benefits of greater international supervisory cooperation.
- Anti-money laundering (AML) and counter-terrorist finance (CTF): Participants discussed progress made in strengthening their domestic AML/CTF frameworks. The EU updated the Forum on the Commission’s July 2021 adoption of a new AML/CTF legislative package, and the US provided an update on its ongoing implementation of the Anti-Money Laundering Act of 2020, enacted as part of the National Defense Authorization Act. Participants also exchanged views on the opportunities and challenges arising from financial innovation in the AML/CTF area and explored potential areas for enhanced cooperation to combat money laundering and terrorist financing bilaterally and in the framework of FATF.
United Kingdom: FCA publishes analysis of firms' annual financial crime data
On 7 October 2021, the FCA published its analysis of firms’ 2017 to 2020 annual financial crime data returns (REP-CRIMs). Key observations from the analysis include:
- Firms reported approximately 89,000 Politically Exposed Persons (PEPs) as customers in 2019/20 and 2018/2019, a substantial decrease from approximately 111,000 PEP customers in 2017/18. The FCA attributes this in part to the amendment of their guidance in 2017 to exclude the reporting of certain domestic customers as PEPs.
- The number of Suspicious Activity Reports reported to the National Crime Agency has increased, from 394,048 in 2017/2018 to 480,202 in 2019/2020 (which represents a 22% increase).
- The number of firms reporting automated sanctions screening is increasing year on year, with a 16.5% increase over these 3 reporting periods. However, the investment management sector has the highest number of firms that do not use automatic screening.
- A total of 761,437 customers were exited during the 2019/20 reporting period, which has more than doubled in the last 3 years. This was about 0.16% of total customers across all submissions that year. The retail lending and retail banking sectors have exited the most customers for each of those years.
European Union: EDPS publishes opinion on AML/CTF legislative proposals
On 24 September 2021, the European Data Protection Supervisor (EDPS) published an opinion (12/2021) (dated 22 September 2021) on the legislative proposals adopted by the European Commission to strengthen the EU's anti-money laundering (AML) and counter-terrorist financing (CTF) rules.
The EDPS made a number of recommendations, including the following:
- The AML legislative package should identify the categories of personal data to be processed by the obliged entities to fulfil the AML/CTF obligations.
- The Proposal for a Regulation should provide clear indications on conditions and limits for the processing of special categories of personal data.
- The processing of certain types of personal data (for example in relation to sexual orientation or ethnic origin) should not be allowed.
- A storage limitation period for personal data stored on the central AML/CTF database should be included.
United Kingdom: JMLSG consults on revisions to its guidance on monitoring customer activity
In particular, the proposed changes:
- Require firms to establish an appropriate governance mechanism for the oversight, review and approval of monitoring processes and parameters, which will include documenting their monitoring arrangements and rationale.
- Note that firms which outsource monitoring processes remain responsible for their regulatory obligations.
- Require firms which undertake manual monitoring to have procedures to manage the risk of manual error.
- Add to the list of examples of "transaction characteristics" which should be looked at as part of an effective monitoring process. The additions to the list include known threats and typologies, and networks of connected accounts.
Comments on the revisions should be received by 30 October 2021.
Australia: Calls from industry for AML loopholes to be closed
On 4 October 2021, it was reported that Australian financial institutions have raised concerns with the Australian senate over major loopholes in AML legislation. The comments come as part of a senate inquiry into the efficacy of Australia’s AML laws, which are seen as falling behind those of Australia’s competitors.
The financial institutions in question have also shown support for legislation which would require “Designated Non-financial Business and Professions” (for example, law firms or accountants) to be subject to similar requirements to banks in relation to AML/CTF.
United Kingdom: FCA CEO delivers speech on FCA's future priorities
On 22 September 2021, Nikhil Rathi, the FCA’s CEO, delivered a speech at the Lord Mayor’s Banquet at Mansion House in which he outlined the FCA’s priorities and challenges for the future.
Among other things, Mr Rathi noted that:
- Through the Global Financial Innovation Network, the FCA re-launched their Testing initiative last October for firms testing innovative products or technology cross-border. 23 regulators across 5 continents are participating. Mr Rathi was particularly pleased that in the last year, partners at the Reserve Bank of India and the Australian Prudential Regulation Authority have joined the Network.
- The FCA’s regulatory sandbox is in its sixth year and now open all year round. It allows firms to experiment, and recently supported the first authorised investment firms using Distributed Ledger Technology to tokenise securities. It also recently supported Digital ID solutions and more than 20 Open Banking tests.
- The FCA is investing to become as much a data regulator as a financial one.
United Kingdom: DIT publishes digital trade objectives
On 20 September 2021, the UK’s Department for International Trade (DIT) published a five-point plan to help the UK become “a global leader in digital trade, with a network of international agreements that drive productivity, jobs, and growth across the UK”.
The five key areas covered by the plan are:
- Open digital markets: The DIT aims to secure access for British businesses, including those in the financial sector, to overseas digital markets by (i) securing agreements with trading partners to establish predictable and open regulatory principles, (ii) securing market access for UK service providers, and (iii) using free trade agreements to support the mobility of UK professionals in international markets.
- Data flows: The DIT aims to champion data flows internationally, preventing unjustified barriers to data crossing borders while maintaining high data protection standards. It will do this by seeking to minimise data localisation, requiring trade partners to commit to establishing or maintaining domestic legal frameworks that protect personal data (while ensuring that personal data from the UK will continue to be protected by UK domestic data protection legislation), and working with the UK’s partners to publish transparent, anonymised, and open government datasets, providing opportunities for businesses to offer innovative services.
- Consumer and business safeguards: The DIT aims to champion consumer benefits and necessary business safeguards in digital trade by advancing digital consumer rights and ensuring effective and balanced intellectual property frameworks. The UK will also seek to ensure that trade partners do not make unreasonable or unjustified data requests (for example, requiring the disclosure of source code as a condition of operating in certain markets).
- Digital trading systems: The DIT aims to develop and agree digital trading systems with trading partners which will cut red tape, including by promoting customs and border processes that are "digital by default" and the use of digital technologies such as paperless trading, electronic contracts, electronic authentication and electronic trust services.
- International cooperation and global governance: The DIT will collaborate with international partners to ensure that the rules and structures that govern digital trade are free, fair and inclusive.
Italy: Bank of Italy launches initiatives on AI and financial services innovation
On 27 September 2021, the Bank of Italy launched a Call for Proposals to submit fintech projects to the Milano Hub. The Milano Hub is the Bank of Italy hub established with the aim of supporting the development of innovative projects and fostering the digital evolution of the Italian banking and financial markets.
The Call for Proposals focuses on the role of Artificial Intelligence in improving the provision of banking, financial and payment services to businesses, households and public administrations, with a particular focus on financial inclusion, adequate consumer protection and data security.
The Milano Hub has three different hubs for different types of participant:
- Fintech Hub: for non-banking/financial undertakings (e.g. technology solution providers);
- Innovation Hub: for banking, financial and insurance intermediaries; and
- Research & Development Hub: for universities, research institutes, or other bodies.
Applications to the Milano Hub Call for Proposals may be submitted from 27 September to 29 October 2021. A maximum of 10 projects will be eligible for support from the Milano Hub.
For more information on this development, take a look at this Engage article by members of Hogan Lovells’ Rome office.
European Union: EBA publishes 2022 work programme
On 5 October 2021, the EBA published its work programme for 2022. The EBA's five "vertical" strategic priorities for 2022 relate to:
- The prudential framework for supervision and resolution. The EBA's work will focus on, among other things, supporting the transposition of the final Basel III standards and strengthening the effectiveness of the resolution framework, including supporting the European Commission in the crisis management and deposit insurance (CMDI) review.
- The EU-wide stress-testing framework. The EBA will focus on putting into practice the revised new framework for the EU-wide stress test and to work on the new methodology for the next stress test.
- Banking and financial data. The EBA will continue its work on its data strategy to leverage the European centralised infrastructure for supervisory data (EUCLID) to bring more value to the EBA's stakeholders through data. Among other things, in 2022, it will start collecting from the ECB payment fraud data under the EBA guidelines on fraud reporting for all member states, as well as data stemming from reforms to the Capital Requirements Regulation (575/2013) and the CRD IV Directive (2013/36/EU) and data relating to investment firms.
- Digital Resilience, fintech and innovation. Among other things, the EBA will begin preparations for the mandates for technical standards and guidelines deriving from the proposed Regulations on digital operational resilience for the financial sector (DORA) and on markets in cryptoassets (MiCA).
- Anti-money laundering and countering terrorism financing (AML/CTF). Among other things, the EBA intends to use information from its database proactively to ensure that money laundering and terrorism financing risks are addressed by competent authorities and financial institutions in a timely and effective manner. This information concerns AML/CTF weaknesses identified by competent authorities in the processes and procedures, governance arrangements, fitness and propriety, business models and activities of individual financial sector operators.
The EBA’s two "horizontal" priorities are: providing tools to measure and manage risks relating to ESG issues, and monitoring and mitigating the impact of the COVID-19 pandemic. The EBA intends to consult on a report on a potential prudential treatment of assets associated with environmental or social objectives.
The work programme also lists 25 specific activities that the EBA intends to undertake in 2022, including the timings for the main outputs of those activities.
European Union: ESMA publishes 2022 work programme
On 27 September 2021, the European Securities and Markets Authority (ESMA) published its 2022 Annual Work Programme, setting out its priorities over the next 12 months.
Among other things, ESMA plans to contribute to the implementation of the Digital Operational Resilience Act (DORA), the Markets in Crypto-Assets Regulation (MiCA) and the regulation on a pilot regime for market infrastructures based on distributed ledger technology. ESMA also intends to further its understanding of the impact of financial innovation on capital markets and foster a co-ordinated approach, and work with national competent authorities and market participants to counter cyberthreats and other operational risks.
United Kingdom: Bank of England writes to FMIs on cloud outsourcing expectations
On 29 September 2021, the Bank of England published the following Dear CEO letters setting out its supervisory expectations in relation to public cloud material outsourcing:
- A Dear CEO letter to central counterparties (CCPs);
- A Dear CEO letter to recognised payment system operators (RPSOs) and specified service providers (SSPs); and
- A Dear CEO letter to central securities depositories (CSDs).
The letters note the increased reliance of financial institutions on outsourced cloud service providers (CSPs), and the risks of reliance on a small number of CSPs.
In particular, the letters highlight that:
- Financial market infrastructures (FMIs) should continue to comply with their existing regulatory requirements in relation to outsourcing.
- FMIs should notify the Bank of England of changes to their outsourcing arrangements. For RPSOs and SSPs, this means seeking the Bank of England’s non-objection if they are proposing a change to their businesses that could materially alter their business model or risk profile. This includes entering into, or significantly changing, any material outsourcing or sub-outsourcing arrangements. It is also recommended that firms engage with the Bank of England early to confirm whether a proposed change falls within the scope of these expectations and, if so, to discuss the information that the Bank will require to consider a non-objection in each case.
- The letters also explain that RPSOs and SSPs are expected to notify the Bank of England, and seek the Bank’s non-objection, when there could be a material change in their risk profile and that of the payments eco-system as a result of participants considering outsourcing their connectivity gateway or security solutions that are used to access their services in the public cloud. RPSOs may also need to introduce new control standards (or enhance existing standards) in their scheme rules to manage risks arising from such outsourcing arrangements to the payments eco-system. This may include requiring participants to secure the RPSO’s agreement to any such move.
The letters also state that the Bank of England intends to consult on its proposed expectations and policies for FMIs on outsourcing in due course. This consultation will contain specific reference to the use of cloud.
Nigeria: Central bank published new Know Your Customer framework
On 12 October 2021, the Central Bank of Nigeria published a Revised Regulatory Framework for Bank Verification Number (BVN) Operations and Watch-List for the Nigerian banking industry. The Central Bank of Nigeria hopes that the new framework will enhance the effectiveness of customer due diligence and Know Your Customer checks. The new framework sets out the role of bank verification numbers and the watch-list in Nigeria’s Know Your Customer system.
China: Central bank governor warns of further anti-monopoly measures relating to fintechs
On 8 October 2021, it was reported that the governor of China’s central bank is planning to further strengthen supervision of the online payments industry and continue its anti-monopoly measures. The comments were made in a speech at a Bank of International Settlements conference.
In particular, the governor stressed that any "inappropriate connection" between the financial and business information systems in fintech companies should be cut off to prevent monopolies developing. He also pledged to participate in the development of international rules about the digital economy and increase coordination with the Bank for International Settlements and other countries' regulators on antitrust situations, financial regulation and data protection.
United States: Connecticut introduces new cybersecurity standards law
On 1 October 2021, Connecticut’s new cybersecurity standards law took effect. The new law, An Act Incentivizing the Adoption of Cybersecurity Standards for Businesses, protects companies from punitive damages in certain data breach actions where an organisation has a cybersecurity program that conforms with an enumerated “industry recognized cybersecurity framework.”
To benefit from Connecticut’s new law, businesses must conform to the current version of one or more of the following frameworks:
- The National Institute of Standards and Technology (NIST) Cybersecurity Framework;
- NIST Special Publication 800-171, which governs controlled unclassified information;
- NIST Special Publications 800-53 and 800-53a;
- FedRAMP Security Assessment Framework, which applies generally to cloud-based services;
- Center for Internet Security Controls; or
- ISO 27000-series information security standards.
The law also extends to businesses that handle payment cardholder data if they comply with the current version of the Payment Card Industry Data Security Standard (PCI-DSS) and the current version of one of the above frameworks.
In addition, entities regulated by the following frameworks are eligible to benefit from the law where their programs conform to the relevant cybersecurity requirements:
- HIPAA Security Rule (as applicable either to HIPAA covered entities or business associates);
- Title V of the Gramm-Leach-Bliley Act (GLBA); and
- The Federal Information Security Modernization Act (FISMA).
The new Connecticut law is the latest in a series of U.S. state efforts to incentivise companies to demonstrate that their cybersecurity programs are aligned with recognized frameworks and therefore meet a reasonable standard of care.
For more information on this development, take a look at this Engage article by members of Hogan Lovells’ Washington D.C. office.
European Union: Joint Committee of ESAs publishes work programme for 2022
On 30 September 2021, the Council of the EU published a cover note attaching the 2022 work programme of the Joint Committee of the European Supervisory Authorities (ESAs) (that is, the EBA, EIOPA and ESMA) (JC 2021 34) (dated 29 September 2021).
Among other things, in 2022 the Joint Committee will:
- Closely monitor and assess emerging cross-sector risks and vulnerabilities for financial stability arising from the COVID-19 pandemic and its economic impact.
- Continue to focus on consumer and investor protection, retail financial services, retail investment products, prudential analysis of cross-sectoral developments, risks and vulnerabilities for financial stability, cyber security, financial conglomerates and prudential consolidation, as well as accounting and auditing.
- Continue work on artificial intelligence (AI) and the use of behavioural finance findings for supervisory purposes.
- Through the European Forum for Innovation Facilitators (EFIF), further promote co-ordination and co-operation among national innovation facilitators to foster the scaling-up of innovation in the financial sector across the EU in line with the Commission's FinTech Action Plan.
- Increase its efforts on the Digital Finance Package, including the proposed Regulation on Digital Operational Resilience (DORA). There will also be an emphasis on monitoring and analysing technological innovations, including SupTech.
- Continue to monitor the impact of the UK leaving the EU.
United Kingdom: PSR policy statement and final updated guidance on UK Interchange Fee Regulation
On 29 September 2021, the Payment Systems Regulator (PSR) published a policy statement on updating its guidance on its approach as a competent authority for the EU Interchange Fee Regulation ((EU) 2015/751) (EU IFR) (PS21/1), together with the final version of the updated Guidance on the PSR's approach to monitoring and enforcing compliance with the Interchange Fee Regulation.
The new version of the guidance applies immediately, replacing the previous version, published in 2020. The new version reflects changes arising from the UK's withdrawal from the EU, in particular, the main differences between the EU IFR and the UK Interchange Fee Regulation ((EU) 2015/751) (UK IFR), as well as other changes to the UK regulatory framework.
The PSR consulted on proposed changes to the guidance in April 2021 and it has also published a document setting out the responses received. In light of the comments received, the PSR has made minor additional changes to the guidance, set out in chapter 1 of PS21/1. A version of the guidance marked up to show the amendments the PSR has made is set out in Annex 1 to PS21/1.
The PSR is monitoring compliance with the UK IFR and will take action where appropriate.
European Union: Delegated Regulation supplementing PSD2 with RTS on framework for home-host co-operation and information exchange published in OJ
On 28 September 2021, Commission Delegated Regulation (EU) 2021/1722 supplementing PSD2 with regard to regulatory technical standards (RTS) specifying the framework for co-operation and the exchange of information between competent authorities of the home and the host member states in the context of supervision of payment institutions and electronic money institutions exercising cross-border provision of payment services was published in the Official Journal of the European Union (OJ).
The Delegated Regulation establishes the framework for co-operation and for exchanging information between the competent authorities of the home member state and the host member state under Title II of PSD2. It also establishes the framework for monitoring compliance with national law transposing Titles III and IV of PSD2.
It entered into force, and applied, on 18 October 2021.
United Kingdom: Charles Randell to step down as FCA and PSR Chair
On 15 October 2021, the FCA published a press release announcing that Charles Randell will step down as FCA and Payment Systems Regulator (PSR) Chair in spring 2022.
It has also published a letter from Mr Randell to Rishi Sunak, Chancellor of the Exchequer, requesting him to begin the process for appointing Mr Randell's successor as Chair of the FCA and the PSR, along with the Chancellor's response.
United Kingdom: Government publishes National AI Strategy
On 22 September 2021, the Department for Digital, Culture, Media & Sport (DCMS) published its National AI Strategy. The strategy paper sets out the government’s intended 10-year agenda for making the UK a “global AI superpower” and includes an acknowledgment of the need to introduce new legislation in order to regulate AI technologies.
There are three ‘core pillars’ to the National AI Strategy. The paper sets out how the UK government intends to invest in the long-term needs of the AI ecosystem, how they can ensure that AI technology benefits all sectors and regions, and what steps can be taken to ensure effective AI governance.
The strategy’s section on AI governance sets out the objective of establishing a governance framework that addresses the unique challenges and opportunities of AI, while also emphasising the need to be sufficiently flexible and proportionate. This will be achieved by taking a number of steps:
- Publication of a white paper in early 2022.
- Developing an ecosystem of AI assurance tools and services through work with the UK Centre for Data Ethics and Innovation.
- Growing the UK’s contribution to the development of global AI technical standards.
- Working alongside the Alan Turing Institute to build the capacity of UK regulators to be able to use and assess AI technologies, so they can effectively supervise compliance of new products and services when they come to market.
For more information on this development, take a look at this Engage article by members of Hogan Lovells’ London office.
United Kingdom: FOS publishes latest complaints data and press release on rise in fraud and scam complaints
On 24 September 2021, the Financial Ombudsman Service (FOS) published issue 164 of its Ombudsman News publication, focussing on the following complaints data published by FOS:
- Data on complaints received in the first quarter of the 2021/22 financial year (that is, between April and June 2021). During this period, the FOS received 50,906 complaints. Fraud and scams complaints increased by 66%, with the FOS seeing cases concerning fraudsters posing as customers' banks or consumers failing to receive the goods paid for by bank transfers. There was also an increase in complaints about fraud and scams involving cryptocurrencies.
- Current accounts were the most complained about product, with 6,911 complaints, an increase of 55% compared to the same period in 2020/21. Complaints about fraud and scams accounted for around half of the current account complaints received.
- Data on complaints received in January to June 2021 about individual financial businesses and the uphold rates.
- Quarterly data and half-yearly data on complaints concerning claims management companies (CMCs).
The FOS also published a press release on the increase in fraud and scam complaints.
In its response to the FOS fraud data, Which? has called for the PSR to "urgently work with the government to introduce mandatory and robust rules to ensure that banks do more to protect consumers against these scams, and that they swiftly and fairly reimburse all those who lose money through no fault of their own.”
The FOS has also consulted on a temporary amendment to the reporting of outcomes of proactively settled complaints by firms. The consultation was open until 18 October 2021 and the FOS will publish its next steps and implement its plans by 1 November 2021.
United Kingdom: National Data Strategy – latest DCMS developments
Marking the first anniversary of the National Data Strategy (NDS), in September 2021 the Department for Culture, Media & Sport (DCMS) updated its related guidance, published the National Data Strategy monitoring and evaluation framework and provided an update on the National Data Strategy Forum.
The updated NDS guidance now refers to:
- The government consultation on proposed reforms to the UK's data protection regime, which is a key part of delivering mission 2 of the NDS (to secure a pro-growth and trusted data regime).
- The National Data Strategy monitoring and evaluation framework, aimed at ensuring that the government drives progress and that the NDS remains fit for purpose.
- An update on the National Data Strategy Forum.
On the National Data Strategy monitoring and evaluation framework, in particular research on tracking and evaluating data use is at an early stage and the DCMS is calling for evidence on NDS indicator suites, which will track data use in the UK to put it in a real-world context to work out the opportunities that it can help to unlock. The closing date for responses is 3 December 2021 and the DCMS will report back in 2022.
Regarding the NDS Forum, the DCMS is establishing a Data Horizon Scanning Knowledge Hub for future focused working across NDS workstreams and invites interested parties to join its network.
Payment Market Developments
India/Singapore: Countries to link faster payment systems
On 14 September 2021, it was reported that the Reserve Bank of India and the Monetary Authority of Singapore are working together to link their faster payment systems. It is expected that the new system will be operational by July 2022.
United States: Clickatell and Visa's Cybersource launch Chat2Pay
On 14 September 2021, it was announced that Clickatell, a chat commerce specialist, and Cybersource, a global payment management platform, are partnering to offer a new product called Chat2Pay. Chat2Pay allows consumers to ask a retailer to send a payment request, make the payment, and receive acknowledgement, all from chat channels on a mobile device.
United States: Revolut becomes first WeWork customer to pay in bitcoin
On 17 September 2021, it was reported that Revolut had become WeWork’s first customer to pay in bitcoin.
United Kingdom: JP Morgan launches Chase digital bank in the UK
On 21 September 2021, it was reported that JP Morgan had launched its digital bank in the UK. Among other things, the new digital bank will offer cashback and money management features. It will also offer a “numberless” debit card made from recycled plastic. The current account rewards programme also offers 1% cashback on certain card spending, and there will be 24/7 customer support.
United States: Robinhood test crypto wallet
On 20 September 2021, it was reported that Robinhood is testing a new cryptocurrency wallet and transfer feature on its app. Robinhood is hoping to allow its customers to send and receive digital currencies, including bitcoin, without having to first convert them into dollars.
United Kingdom: Stripe to open London fintech development office
On 20 September 2021, it was reported that Stripe is planning to open a fintech development office in London. The new office will focus on open banking, embedded finance and bank partner integrations.
India: Yes Bank partners with Visa to offer credit cards
On 20 September 2021, it was reported that private lender Yes Bank is partnering with Visa to offer credit cards to customers on its payment platform. The Visa cards will also give access to loyalty programmes, and certain FX services.
Europe: Western Union to integrate Salt Edge's PSD2 compliance solution
On 23 September 2021, it was announced that Western Union will be using Salt Edge’s PSD2 solution in its multi-currency bank pilot in Europe. The aim is that use of Salt Edge’s product will allow Western Union to ensure its compliance with PSD2.
United Arab Emirates: Abu Dhabi Islamic Bank partners with Spotii to launch BNPL card
On 22 September 2021, it was announced that Abu Dhabi Islamic Bank has partnered with Spotii, a digital payments provider, to launch the UAE’s first virtual prepaid Buy-Now Pay-Later card. The new product will allow customers to make instore and online purchases and spread the cost of the purchases with flexible instalment options.
United Kingdom: Revolut to launch crypto token
On 27 September 2021, it was reported that Revolut is planning to launch its own cryptographic token. The planned token is thought to be an exchange token as opposed to a stablecoin. The timing of the launch is said to be subject to approval from the UK’s Financial Conduct Authority. Revolut has declined to comment on the rumours.
Australia/United Kingdom/United States: Mastercard launches BNPL program
On 28 September 2021, it was reported that Mastercard had launched a Buy-Now Pay-Later (BNPL) program. Mastercard hopes that the program will make BNPL available to millions of consumers and merchants worldwide, and will enable banks, lenders, fintechs, and wallets to offer a variety of flexible instalment options to consumers (including a zero percent interest, and a pay-in-four model) without the need for potentially onerous integration into the merchant’s infrastructure.
United States: Paysafe and Shelby Financial partner to safeguard US airline payments
On 29 September 2021, it was announced that Paysafe, a specialised payments platform, is partnering with Shelby Financial Corporation, a provider of escrow solutions for the aviation industry, to support its safeguarding procedures in relation to US airline ticket payments. Paysafe’s safeguarding trust model was rolled out in Europe in July of this year, and was launched in the US last month.
United Kingdom: PayPal, Amazon and Visa to participate in Bank of England CBDC advisory group
On 30 September 2021, it was reported that PayPal, Amazon and Visa will be among the corporate representatives on two advisory groups exploring a possible Central Bank Digital Currency (CBDC).
In early 2021, the Bank of England set up two advisory groups. The Technology Forum will help the Bank of England in understanding the technical challenges of designing and implementing a digital fiat currency. The Engagement Forum will help the Bank of England and the Treasury to understand practical challenges related to a potential CBDC.
Germany: congstar partners with giropay for mobile top-ups
On 5 October 2021, it was reported that congstar, the German mobile communications provider, is partnering with giropay to offer new payment options for its phone tariffs. Customers can now top up using giropay.
China: WeChat Pay opens up to UnionPay
On 4 October 2021, it was reported that Alipay is opening up its payments ecosystems to state-owned UnionPay. The move comes following a push from the government for tech companies to increase access to their platforms.
Vietnam: Wirex launches crypto platform
On 7 October 2021, it was reported that Wirex has launched its crypto platform in Vietnam, and also increased its range of services in 81 other jurisdictions. The move comes as part of the fintech firm’s wider expansion into the APAC region.
Surveys and Reports
Global: McKinsey Global Payments Report 2021 considers co-evolution of stablecoins and CBDCs
In October 2021, McKinsey published its Global Payments Report 2021.
Key areas explored in the report include the co-evolution of stablecoins and CBDCs. The report explains that regulators in countries with dramatic reductions in cash usage are preparing strategies to ensure continued availability of central bank currency, driving increased attention towards the use of CBDCs. The report notes that there is likely to be some form of coexistence between CBDCs and stablecoins. The report encourages payments market players to prepare for the changes ahead.
Among other key findings in the report are the following:
- Payments industry revenues totalled $1.9 trillion during 2020, a 5% decline from 2019. The overall 5% decline manifested at slightly different rates depending on the global region: APAC was 6%, LATAM was 8%, EMEA was 3% and North America was 5%.
- There is an expectation that global payments revenue will recoup 2020’s declines during 2021.
- Cash payments declined 16% globally during 2020, but are expected to partially recover during 2021.
United States: Citi reports that mobile customers have grown 24% in 2 years
On 14 October 2021, it was reported that Citigroup’s worldwide digital and mobile customer numbers have increased from before the COVID-19 pandemic. More specifically, Citigroup revealed that:
- It had 14% more digital customers, and 24% more customers accessing their accounts via mobile devices.
- Digital deposits have grown 26% in the last year.
- About half of deposits now come from account holders with whom Citigroup have no prior retail relationship.
- Over 80% of Citi’s loans are now originated digitally.
- In the past 12 months, 57% of statements have been e-statements, up from 51% in 2019.
- In the past 12 months, 84% of payments have been e-payments, up from 75% in 2019.
United Kingdom: Samsung Pay reports that 40% of people are concerned about contactless limit increase
On 18 October 2021, it was reported that Samsung Pay has commissioned research into the increase in the UK’s contactless limit. The new limit is £100, and came into force on 15 October 2021.
The research showed that:
- 36% of people were not aware of the limit increase.
- 75% of people agree that the future is more mobile payment friendly.
- 40% of people expressed concern at the increased possibility of card fraud associated with the new contactless limit.
- Almost 60% of people still lean towards physical card payments.
United Kingdom: Research reveals role of KYC compliance
On 21 September 2021, it was reported that customers who have a better than expected compliance onboarding experience are more likely to remain loyal. More specifically, customers who reported a better than expected compliance onboarding experience describe themselves as:
- More likely to recommend their provider.
- More likely to buy more products.
- Less likely to make a complaint.
- Less likely to switch providers.