AI: The Inflection Point for Payments
Speaking at EBAday 2025, Peter Hazou, Business Development Director, Financial Services, Microsoft, highlights how the banking industry has adapted to the introduction of AI, where we are seeing the most tangible impact from AI and new technologies, and how banks are currently tackling the conflict of AI being both an enabler and a security risk.
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The Herald Scotland
11 hours ago
- The Herald Scotland
New risks emerge as America becomes less attractive
For decades, international investors have treated US government bonds as the safest place for their money. A long bull market in shares has been supported by American bonds and a sound US dollar. Since the global financial crisis of 2008, the underpinning of a 'safe haven' has helped stock markets to cope with other uncertainties. Now, investors are demanding much higher returns to lend money to the US government long-term. America is becoming less attractive to global investors at a time when its government needs them for finance more than ever. There is plenty to be nervous about. The US government is spending far more than it takes in, with the deficit up this year. Trump's spending and tax cut plans are likely to add to the US national debt over the next decade. And the US dollar has fallen to its lowest level in almost three years. US business confidence is weak, with the full impact of the supply turmoil yet to bite. Many manufacturers had stockpiled goods and components ahead of Trump's tariffs and import controls, but this buffer will soon be exhausted. May's stock market rally might seem reassuring on the surface. Major US technology companies like Apple, Microsoft, Amazon, and Nvidia delivered strong earnings and drove most of the market gains. The biggest seven tech companies alone were responsible for more than half of the US stock market's rise in May. But these trading results do not yet reflect the full impact of the trade war and supply changes. Analysts expect slower earnings growth for these businesses over the next year. Trump still plans further action, and the tariffs to date will produce significant adverse effects; higher consumer prices, lower business investment and lower economic growth. Read more: Perhaps most worrying for investors is the inflation risk building up worldwide. As global tensions rise, governments will spend more on defence, with limited scope for tax increases. Business costs will also increase, as trade disputes continue to disrupt how goods move around the world. Global borrowing costs could force central banks to keep interest rates higher for longer. The Governor of the Bank of England has warned that interest rate cuts are now more uncertain. There are signs that the tension between governments that want to spend more and nervous international lenders is also playing out in the UK, EU and Japan. British government bonds – gilts- are already seeing pressure as investors become more choosy about lending to governments anywhere. The OECD report this month warned that weak consumer confidence and fragile public finances leave the UK vulnerable to shocks. Appeasing lenders by cutting spending or raising taxes would hit economic growth. The end of US exceptionalism, linked to the declining role of the US dollar as a reserve currency, may be a gradual process as it was for the UK. There is still growth in many major US businesses and the US stock market is by far the most liquid globally. Shares have a record of coping better than bonds with rising inflation and there is value is stock markets outside the US. But we may be seeing the end of an era when investors could pay less attention to currency movements. And, although government bonds have a role in diversifying portfolios along with a spread of investments internationally, it is harder now to escape geopolitical risks. The recent stock market rebound may give opportunity to rebalance portfolios. Colin McLean is a director of Barnton Capital
Finextra
14 hours ago
- Finextra
Preparing for BNPL regulation: What firms need to do now: By Ben O'Brien
The arrival of formal regulation for Buy Now, Pay Later (BNPL) products is no longer a question of if, but when. With the Treasury's May 2025 consultation response, the direction is this: by mid-2026, third-party BNPL lenders will fall within the scope of the Financial Conduct Authority (FCA). This change brings with it a full set of regulatory requirements—covering affordability, creditworthiness, redress, disclosures, and governance. While many firms are familiar with the general framework, the pace and detail of implementation demand serious attention. Risk leaders now face a critical window to build a strategy that aligns commercial goals with regulatory readiness. Scope of the new BNPL regime From mid-2026, third-party BNPL providers must be authorised by the FCA and comply with its rules on affordability, creditworthiness, consumer duty, complaints, disclosures, and more: Mandatory, proportionate affordability and creditworthiness checks Firms must demonstrate verifiable checks at the point of decisioning, aligned to individual circumstances, not just product type. Firms must demonstrate verifiable checks at the point of decisioning, aligned to individual circumstances, not just product type. Access to the Financial Ombudsman Service (FOS) BNPL customers can now escalate complaints to FOS, increasing the importance of auditable redress processes and timely resolution. BNPL customers can now escalate complaints to FOS, increasing the importance of auditable redress processes and timely resolution. Tailored disclosure requirements for digital-first products The FCA will introduce a bespoke regime focused on real-world comprehension — not just information delivery. Firms will need to test and evidence understanding. The FCA will introduce a bespoke regime focused on real-world comprehension — not just information delivery. Firms will need to test and evidence understanding. Extension of Section 75 protections to BNPL agreements Providers will be jointly liable for qualifying claims, requiring clear merchant oversight, governance controls, and capital planning to manage new exposure. While third-party BNPL is the initial focus, merchant-offered BNPL products remain outside the perimeter for now. This exemption, based on Article 60F(2) of the Regulated Activities Order, is under review and could be revisited if scale or harm increases. What this means for compliance and risk leaders The FCA isn't looking for surface-level compliance. It expects firms to demonstrate that processes are working and that consumers are genuinely protected. Affordability frameworks must evolve Checks must be proportionate and verifiable, with models recalibrated to reflect customer circumstances. Even low-value lending must evidence the potential for harm reduction. Complaint handling will need to be FOS-ready This includes robust audit trails, clear redress pathways, MI reporting on themes, and training on FOS processes. Joint liability introduces new exposure Providers must enhance governance around merchant partnerships, define liability clearly in contracts, and plan for potential claims in their capital models. Joined-up governance is essential Effective programmes will require close collaboration across credit, compliance, legal, product, and ops teams—with clear ownership under SM&CR. Disclosures must reflect real-world understanding It's not just about format. The FCA expects firms to test, monitor, and evidence comprehension—particularly for vulnerable customers. Making best use of the Temporary Permissions Regime The FCA will launch a Temporary Permissions Regime (TPR) to support the transition. Providers must be ready to act quickly when the window opens. Prepare for registration Ensure that internal records, model documentation, and business models are clearly aligned with regulatory expectations. Conduct a readiness assessment Review decisioning processes, affordability checks, complaints management, and financial crime controls. Plan for dual-track execution Meet TPR requirements while simultaneously building toward full authorisation. Engage early with the FCA Establish open communication lines to reduce ambiguity and show proactivity. Plan for contingencies Prepare wind-down plans, customer messaging, and backup procedures in case of registration delays or rejections. Innovation and consumer protection can coexist The decision to exclude some legacy Consumer Credit Act requirements reflects the unique nature of BNPL: short-term, interest-free, and often accessed via digital channels. This creates space for a more relevant, user-centric approach to disclosures but it also raises the bar. Risk and compliance teams should work with product, legal, and design leads to ensure communications are: Integrated into real customer journeys Mobile-friendly and accessible Prompted by user behaviour Supported by outcome-based testing and complaints data Those who treat disclosures as a compliance task may struggle. Those who invest in relevance and usability will have stronger customer engagement and defensibility. Merchant carve-out and the risk of market distortion The decision to exclude merchant-led BNPL from the regulatory scope has sparked debate. Without oversight, merchant-offered credit could create competitive asymmetry and raise consumer protection concerns. Risk leaders should: Monitor merchant product developments and prepare for potential perimeter expansion Review all third-party merchant partnerships for regulatory dependencies Revisit financial promotions and credit broking arrangements, particularly where merchants promote BNPL products without broking permissions Regulatory costs and anticipated market impact The Treasury's impact assessment estimates: An Equivalent Annual Net Direct Cost to Business (EANDCB) of £2.3 million A Net Present Value of -£20.1 million over the assessment period over the assessment period Authorisation application fees: £5,000 to £25,000 Annual supervision fees: £10,000 to £50,000 Technology upgrades: £500,000 to £2 million per provider for systems supporting affordability, reporting, and complaints per provider for systems supporting affordability, reporting, and complaints Section 75 exposure: Estimated at 0.5% to 1.2% of transaction values With the UK's BNPL market valued at £20 billion annually, sector-wide exposure to Section 75 alone could exceed £100 million. Consolidation is expected. Government modelling suggests 20–30% of providers may exit the market post-regulation. But with global BNPL volumes growing rapidly, those who remain stand to benefit from a stronger, more trusted marketplace. How leading firms are responding Some providers have already started adjusting: Klarna Following regulatory scrutiny in Sweden, Klarna UK introduced income verification, real-time spend tracking, and risk-based onboarding. Monzo Flex Built affordability into product design from the outset, with integrated credit reporting and real-time tracking. PayPal Adopted a cross-functional compliance strategy with specialist teams, training, and documentation of governance processes. The clock is ticking and the gap between those who prepare and those who delay will widen fast. For risk leaders, this is a chance to go beyond baseline compliance, strengthening frameworks, improving customer outcomes, and shaping the future of BNPL in a regulated environment.
Sky News
a day ago
- Sky News
Administrators lined up for UK arm of Microsoft-backed Builder.ai
Why you can trust Sky News Administrators are on standby to handle the collapse of the UK arm of a Microsoft-backed start-up which has filed for bankruptcy protection in the US. Sky News has learnt that Alvarez & Marsal (A&M) has been lined up to oversee the insolvency of UK entities. News of the impending appointment comes days after which was founded by Sachin Dev Duggal, collapsed in the US. Mr Duggal stepped down earlier this year. had raised hundreds of millions of dollars from investors, including a Qatari sovereign wealth fund, helping it to achieve a 'unicorn' valuation of more than $1bn. The company said it used artificial intelligence to make the process of building an app "as easy as ordering pizza". In recent weeks, however, media outlets including the Financial Times have alleged that the company used potentially bogus sales figures to attract investment. The newspaper also reported that Mr Duggal had sounded out potential backers to buy the business out of insolvency proceedings. It was unclear on Friday whether any meaningful assets remained within UK corporate entities.
