Blog

  • 17 Dec 2017

    Spanish banking giant BBVA has successfully piloted a blockchain solution for paperless trade transactions between Europe and Latin America.

    The blockchain pilot, built on the Wave platform, was carried out to automate the electronic submission of documents for an actual sale transaction between Mexico and Spain in a move to speed up the time required for sending, checking and authorizing cross-border trades.

    The trial saw the time taken for document verification reduced from 7–10 days to 2.5 hours.

    According to Patxi Fernández de Trocóniz, head of global trade at BBVA, the blockchain pilot marks a "leap forward" for effective international trade transactions. 

    He stated:

    "The time it takes to manage the documentation was reduced to a process that lasted just a few hours, in which all parties – the banks, the importer and the exporter – were constantly aware of the status of the documents."

    The payment of the transaction was carried out using a letter of credit for the transport of 25 tons of frozen tuna, bought from Mexico by a company in Barcelona.

    Utilizing blockchain for foreign trade allows the creation of a "safe and digital environment ... as the foundation for a global foreign trade marketplace," says BBVA Bancomer Corporate Banking and Governance head of strategy, Jorge Zebadúa.

    The blockchain pilot forms part of BBVA's effort to digitize aspects of finance with the use of nascent technologies like blockchain, the release added.

    The bank has been investigating blockchain tech for some time, and made its entrance into the Hyperledger blockchain consortium this March, joining 100-plus startups and businesses already involved in the enterprise-focused project.

  • 15 Dec 2017

    The symbiotic relationship between technology and international trade is fast becoming the cornerstone for exporting.

    Not only does technology underpin innovations that make trade more efficient and safer for individual businesses but it is also used to tackle wider issues such as fraud and money laundering that can present a risk to would be exporters.

    With international exports worth £29bn to the Scottish economy, growing beyond our borders is a key priority.

    As one of the world’s largest international banking and financial services organisations, with a presence in more than 67 countries, it is our responsibility to enable small and medium-sized enterprises (SMEs) to export and grow globally. In doing so we’re also supporting the economies in which we are present. With this also comes a responsibility to tackle financial crime, reduce risks and make global trade less challenging.

    Safeguarding businesses

    In today’s sophisticated world, any business or individual is susceptible to financial crime.

    As an international bank, it is incumbent on ourselves, with our international knowledge and financial expertise, to ensure there are safe passages to market for our export-fit domestic businesses. That includes tackling the global issue of financial crime while also developing innovative, world-leading technologies to make international business efficient, safer and easier.

    The rise of online banking means companies are using a variety of digital platforms to do business, bringing international trade closer to home. However, the more digitally present a company is, the larger the risk for exposure.

    Other risks can simply come in the form of understanding the country and landscape in which you are trading. Due diligence is critical to ensure your business is cooperating with possible sanctions and embargoes. This thorough knowledge of the trading landscape will increase vigilance of potential fraud; minimising the risk of inadvertent involvement in illegal activity optimises returns by avoiding unexpected costs and business disruption.

    This is why, at our global centre of excellence for risk and compliance in Edinburgh, we’re investing in our best teams and expertise in developing the technology and skills to fight financial crime.

    In fact, we delivered more than 3.1 million hours of targeted training on financial crime last year to our staff.
    Edinburgh was an ideal location due to its: global reputation in banking and finance; unique pipeline of high-level data science, financial and technical expertise; and the city’s readily available connections to European, American and Far Eastern markets.

    At the centre, a variety of activities are undertaken across financial crime compliance, regulatory compliance, wholesale credit and market risk, operational risk and risk analytics. The building is a hive of technological and human intelligence. Half of our employees here are directly involved in money laundering prevention.

    We have a passion to tackle these issues, which is why earlier this year we held an event with Police Scotland and the Scottish Government, bringing together our senior leadership to better understand how we can work together. Specifically, we see three component parts to our role: the expertise of front line staff; the impact of technology on our capability to detect crime; and the influence of partnership working in delivering results.

    However, we must remember the opportunity to export outweighs any perceived threats.

    Streamlining the export process

    Today, almost everything we do in banking and finance circles back to technology. Since 2015 HSBC has invested US$1bn to ensure we’re driving forward innovation in our sector and delivering better access to international markets for our domestic SMEs.

    Scottish brewer WooHa, known for its award-winning and KeyKeg conditioned beer, is a prime example of how SMEs, no matter their size, can reap enormous reward from overseas trade. The brewer began trading in April 2015, and received HSBC finance to upgrade its facilities through the purchase of a new 6.2 acre farm in Moray and hire an additional four employees.

    Today, the business is able to increase production five-fold and ramp up an ambitious export strategy. The business is forecasting that 80% of its revenue next year will be via exports, with its focus to be on dramatically increasing supply to the US market.

    This year, Scotland’s food and drink exports grew by £421m in 2016, to a record £5.5bn. Exports to the EU countries alone were worth £2.3bn – up £133m on last year. The market for export is buoyant and we must ensure we navigate a clear journey to international opportunities for Scottish SMEs.

    One way is to make some of the complex processes involved in exporting easier. Particularly pertinent for WooHa is the digitising of paper-based processes through innovative technologies. When businesses have an import or export focus, the level of paperwork involved can be enormous and complex – often becoming a drain on company resources.

    HSBC’s global trade and receivables finance team facilitates more than US$500bn of documentary trade for customers every year, and in doing so must manually review and process up to 100 million pages of documents, ranging from invoices to packing lists and insurance certificates.

    To make this easier, HSBC has developed a cognitive intelligence solution devised with IBM, which uses optical character recognition, advanced robotics, advanced analytics technology including intelligent segmentation and text analytics to identify, digitise and extract key data from all of this documentation.

    By digitising this process we will make transactions quicker and safer for both buyers and suppliers, leading our industry forwards, and we will reduce compliance risks through an enhanced ability to manage this volume of data.

    Blockchain

    Another fast-emerging technology, increasingly synonymous with financial technology, is blockchain. Blockchain records transactions in blocks and then forms chains of permanent data. It is the technology behind cryptocurrency bitcoin and is set to revolutionise the financial industry.

    The immutable nature of blockchain helps ensure banking is more secure and transparent and can be applied to a range of financial services.

    When applied to the digitisation of paper-based processes, blockchain could not be a more important asset. Currently, more than US$2tn of global trade depends on the physical exchange of documents, such as letters of credit. These are issued by banks to be used by importers and exporters to reduce the risk of trading with each other and give suppliers certainty over payment.

    Considering the rapid growth in Scotland’s food and drink sector alone, it is critical to our economy to get these processes right.

    We understand that innovation is the lens through which we will truly understand what our customers want and need. And in this world, behind every innovation are the technologies and expertise to give businesses the global launch pad they need for international trade.

  • 01 Dec 2017

    The Internet of Things and Smart Infrastructure

    The Internet of Things enables connected objects and devices containing sensors to share data, information and insights - from industrial machines, infrastructure, buildings and vehicles, to consumer electronics and clothing. The benefits for industry, the public sector and citizens could be huge. For example: wearable monitors can improve personal health care; smart water pipes can warn of falls in pressure; street-level data can improve traffic flows and planning.

    We want the UK to remain an international leader in R&D and adoption of IoT. We are funding research and innovation through the three year, £30 million IoT UK Programme, including:

    • the large-scale Cityverve smart cities demonstrator in Manchester to show how IoT technologies and services can improve the quality and efficiency of services in transport, energy, health and culture
    • NHS test beds, using IoT and health and care innovations to help people with dementia in Surrey and people with diabetes in the West of England
    • the IoT Research Hub led by University College London and partners, to develop UK interdisciplinary research excellence, focusing on privacy, ethics, trust, reliability, acceptability and security (PETRAS)
    • help for IoT entrepreneurs and innovators from the Digital Catapult and Future Cities Catapult; and specialist accelerator schemes for IoT hardware businesses, R/GA and Startupbootcamp.

    Increasingly, new infrastructure is also smart: connected, and operated with data to achieve maximum efficiency and effectiveness. To provide leadership in the roll out of smart infrastructure, the EPSRC has announced £138 million of funding for the UK Collaboratorium for Research in Infrastructure and Cities (UKCRIC) to create a coordinated and coherent national infrastructure research community, spanning at least 14 universities. UKCRIC stated aims are to:

    • build on existing capabilities to establish a network of state-of-the-art large-scale experimental facilities supporting world-leading research in cities and infrastructure
    • establish a unique, national network of local ‘urban laboratories’ to sense, capture, monitor and evaluate new and existing infrastructure in UK towns and cities
    • establish world-leading computation and big data infrastructure for the modelling, simulation, and visualisation of cities and infrastructure
    • we have also asked the National Infrastructure Commission to undertake a new study on how emerging technologies can improve infrastructure productivity

    Sector deals offer another important channel to support specific industries. They offer an opportunity for important players to join together and address shared challenges and opportunities they face. We are therefore pleased to support reviews into the following important and rapidly growing sectors, which could inform potential sector deals.

    Professor Dame Wendy Hall, Regius Professor of Computer Science at the University of Southampton, and Jerome Pesenti, Chief Executive of BenevolentTech, will conduct a review of how industry and government can create the conditions for the artificial intelligence industry to continue to thrive and grow in the UK. The review will consider the core challenges such as skills and access to talent, access to data, and access to finance and investment. This review will build on the work on machine learning by the Royal Society, and it will complement, but remain separate from, the ongoing work by the British Academy and Royal Society on data ethics and governance, which will also cover ethical issues around AI.

    As outlined in the Industrial Strategy green paper, Sir Peter Bazalgette will conduct an independent review into how the UK’s creative industries, such as our world-leading music and video games industry, can help underpin our future prosperity by utilising and developing new technology, capitalising on intellectual property rights, and growing talent pipelines.

    In addition to these reviews, government will consider how it can further support the virtual reality (VR) and augmented reality (AR) sectors in the UK, considering how these industries could seize opportunities for growth. The UK is home to a number of innovative firms working in this sector, including Blippar, Improbable.IO, Ultrahaptics, and a host of world-leading production houses specialising in VR or AR content. As an international hub for the cultural and creative industries, and with our strengths in research and computer science, the UK is well placed to take advantage of global growth in these sectors.

    The Digital Catapult is already helping advance next generation virtual and augmented reality businesses. Earlier this month, it launched Augmentor, an equity free 10-week programme to provide technical and business mentorship to start-ups in this space. Successful applicants will have access to the Digital Catapult Centre in London as a space to work and collaborate, as well as the state-of-the-art Immersive Lab at the centre.

  • 11 Dec 2017

    It will be regulation-led, but make no mistake: 13th January 2018 will see the start of a deep-rooted and long-term transformation of the European payments market. This is when PSD2, the new European Directive on Payment Services in the Internal Market, comes into force, and both financial institutions and fintech firms need to ensure now that they will be PSD2-ready, says Shahrokh Moinian, global head of cash products, cash management, Deutsche Bank

    Payments in Europe have come a long way since PSD2’s predecessor Directive established a modern and comprehensive set of rules for all payment services in the European Union (EU) and the European Economic Area (EEA), laying the legal framework for the Single Euro Payments Area (SEPA). That first payments revolution brought faster, more convenient and safer payments to millions of payment service users (PSUs). Today, however, we are on the cusp of a second, potentially even more significant, revolution that will ultimately affect not just payments, but banking services in general. 

    PSD2 aims to better align payment regulation with the current state of the market and technology, strengthen payment security and enhance consumer protection. Yet it goes further still: its purpose is also to shake up the European payments market by encouraging greater competition, transparency and innovation in payment services. 
    What will bring about this change is PSD2’s requirement to open up the payments market to third party providers (TPPs), obliging traditional account servicing payment service providers (ASPSPs) including banks to give them guaranteed access to the customer account information they need to provide their services.

    While this prospect initially caused concern to some in traditional financial institutions, most are now embracing it as a timely and necessary stimulus to the industry to future-proof itself against a new age in payments and banking services. Given the clear benefits to customers, banks should therefore not delay getting PSD2-ready and instead participate in the consultations and act on the early drafts of the European Banking Authority’s Guidelines immediately in order to ensure smooth implementation projects. 

    Timelines and the 'implementation gap'
    So, what must organisations do now to comply with PSD2? There are several points worth noting concerning the Directive’s implementation timeline. 

    Firstly, although the regulation comes into force on 13th January 2018 across all member states, not all are likely to meet this deadline. To date only Denmark, France, Germany and the United Kingdom have transposed PSD2 into national law, with a number of other member states having draft legislation in place.

    Secondly, due to the way the various European bodies elaborate and scrutinise legislation, there is going to be a significant ‒ even a problematic ‒ gap in implementation of different parts of PSD2. 

    As said, the regulation as a whole comes into force on 13th January 2018, but the provisions introducing the third party interface have been delayed by discussions between the European Banking Authority (EBA) and the European Commission over its content. However, the final version of the EBA’s Regulatory Technical Standards (RTS) on Strong Customer Authentication (SCA) and Common Standards of Communication (CSC) was provided by the European Commission on 27th November, providing a solution that should address the interests of all market participants. Once adopted, the RTS have an eighteen-month implementation period, so the relevant provisions of PSD2 are likely to become applicable around September 2019.

    So can ASPSPs put off building their third party interface, and implementing 2-Factor authentication until later next year? The answer is a resounding no. No organisation should use the “implementation gap” as an excuse to delay any of their PSD2 preparations. One minor exception is that it would be premature to publish amended terms and conditions for customers in member states that have not yet transposed PSD2 into their national law (though these can of course be ready in draft).

    There are a number of reasons why preparations for all parts of PSD2 should advance at full speed. The first is that a number of important provisions in PSD2 that are closely bound up with interface requirements will be mandatory from 13th January 2018, irrespective of whether an organisation has a live interface or not. 

    One example concerns errors in payments involving a TPP. From 13th January 2018, the legal position concerning payments involving a TPP, and consequently their risk profile for ASPSPs, will change entirely. A PSU complaining of an erroneous payment initiated by a TPP will no longer be able to claim reimbursement from the TPP, but only from the ASPSP, who must recover from the TPP. However, an ASPSP without 2-Factor authentication in place dynamically linking a transaction to the amount and the payee specified by the payer initiating the transaction may not have sufficient means of demonstrating who was responsible for the error.

    A second example is cancellation of payments. From 13th January, PSUs will no longer be allowed to cancel payments involving a TPP. An ASPSP without a dedicated interface for TPPs will not be able to tell whether a transaction was initiated by a TPP or not. It will of course incorporate into its terms and conditions of acting for its PSUs that they are not entitled to cancel transactions involving TPPs. The really effective and practical solution, however, will be to have the interface in place.

    Quite apart from these considerations, getting the interface and strong customer authentication up and running will benefit customers immediately, and ensure readiness and functionality when it is required. Additionally, those dragging their feet will miss out on prime mover opportunities in the new environment of Open Application Programming Interfaces (APIs). Widely seen as front runners among ways of implementing the third party interface that PSD2 requires, the wide introduction of Open APIs is also predicted to stimulate the ASPSPs and TPPs they connect into generating new and convenient products and services tailored to changing user needs. This will benefit both PSUs and all payment service providers involved, helping them retain existing and win new customers and build new revenue streams.

    Preparation, preparation…
    Clearly, building (or buying in) a third party interface and implementing 2-Factor authentication require substantial investment in time and resources. But these are not the only areas needing attention. Many organisations may be surprised to learn how much work is involved in complying with the Guidelines on security measures for operational and security risks, and the Guidelines on major incident reporting, under PSD2. Both are more detailed and more comprehensive than the previous Guidelines on the Security of Internet Payments. 

    TPPs arguably have even more to comply with, as they have to comply with Guidelines on authorisation, registration and professional indemnity insurance, as well as all those applicable to ASPSPs. PSUs, on the other hand, need make no major adjustments, but will reap benefits from Day 1, for example through changes concerning value dating, and enhanced consumer protection.

    More than just regulatory compliance 
    PSD2 is set to revolutionise the European payments market, opening it up to new players and technologies. The widespread use of standardised Open APIs will eventually result in a multitude of new value-added services for customers. Payments, across an array of devices and platforms, will become faster, safer, more reliable and convenient. Payment customers will have routine convenient access to information from their accounts with different institutions. 

    And soon, similar developments will extend to other banking services, with customers for example accessing stock portfolios, monitoring online securities transactions and managing borrowings all in one place.

    In this new innovative ecosystem, the winners will be those who can exploit the full potential of Open APIs, leveraging their existing assets and collaborating with new partners. To get onto this springboard, however, they must be PSD2-ready.

  • 11 Dec 2017

    Connected and Autonomous Vehicles

    Connected and autonomous vehicle technologies are set to transform our roads and could offer huge benefits including improved road safety, traffic flow, efficiency and mobility, together with significant opportunities for UK industry. We want to ensure the UK is at the forefront of these developments and we will work with industry and road network managers to understand the changes necessary to make this a reality, including improved connectivity on the road network.

    Our regulatory framework already supports real-world testing of automated vehicle technologies, and our world-leading ‘test anywhere’ approach, which encourages co-operation between a variety of organisations, is helping to attract international companies to test their vehicles on our roads. We are keen to ensure that we are acting at speed to put in place the necessary regulatory framework to enable the safe sale and use of this technology, and will be taking forward a rolling programme of reform, engaging with industry and international partners to identify where to focus our efforts.

    We have also provided over £100 million of funding to support research, development and real-world demonstrations of connected and autonomous vehicles, matched by industry. Our driverless car trials have commenced public demonstrations in Milton Keynes, and projects in Bristol, Greenwich and Coventry will go live soon. In February 2016 we awarded £20 million to 21 new collaborative research and development projects, and in August 2016 we launched a further £35 million research competition, one part of which involves a grand challenge demonstration of a highly autonomous vehicle operating in a variety of conditions on public roads.

    We are consolidating this effort to assert a world leadership position in the demonstration and deployment of connected and autonomous vehicle technologies. In his 2016 Autumn Statement, the Chancellor announced £100 million for new connected and autonomous vehicle testing infrastructure. The funding will be used to develop a high impact programme (to be matched by industry up to £200 million) over four years to provide a globally competitive testing ecosystem for these technologies by strengthening and integrating our existing centres of excellence.

  • 02 Dec 2017

    With Christmas on the way, the government has embarked on a B2C marketing campaign with American online marketplace Newegg, which will promote British tech products to US consumers.

    The campaign from the Department for International Trade is a first of its kind, with the B2C initiative to help UK tech companies with exporting plans.

    Launched 16 years ago, Newegg is a tech-centric US ecommerce site that boasts 32m registered users worldwide. As of Friday 1 December, the Department for International Trade will run a pilot programme with Newegg to reach US customers in a bid to make them aware of products from UK tech firms.

    The move is part of the Department for International Trade E-Exporting Programme, which is designed to help UK businesses access overseas markets via the web through online campaigns.

    The programme offers support with an overseas selling tool, something that enables connectivity and sale of items through the likes of Newegg, Amazon, eBay and Tmall. It also comes with built-in discount options and marketing packages to make things easier for companies involve.

    “Online marketplaces are making it much easier for small businesses to sell their goods and services to customers overseas,” said minister for Trade and Export Promotion, Baroness Rona Fairhead.

    “At the Department for International Trade, we are committed to supporting businesses by opening doors for exciting British tech innovators to sell their products on new platforms. This partnership with Newegg and other e-retailers forms an important part of our E-Exporting programme. I’d encourage small businesses to take a look.”

     

    Blue Maestro is among the 20 plus companies that have tied up with the Department for International Trade and Newegg collaboration. The 2013-launched business offers digital health support with Bluetooth sensors for items such as baby monitors, and hopes it will be able to break into the US through the scheme, having tackled other overseas markets.

    Kristin Hancock, co-founder, Blue Maestro, said: “Newegg is a platform which has been really easy to be involved with and we’re excited at the prospect of expanding into the US market.

    “The support from DIT has made the process easy and we’re already seeing more traction as a result of the advertising.”

    Elsewhere, London drone business Extreme Fliers is also hoping to crack the US. The business’ latest Micro Drone 3.0 product raised $3.5m on Indiegogo, so it will be banking on achieving a high level of interest with American consumers.

    Vernon Kerswell, CEO, Extreme Fliers, added: “Out of our small design studio in South London, we have built one of the UK’s leading drone technology companies. By combining the best high tech engineering with global supply chains, we are able to develop products and scale very fast.

    “With DIT’s E-Exporting programme our products can quickly reach exciting new markets and customers around the world.”