From VRPs to AI: Innovation takes centre stage at day two of Fintech Talents
Even a rainy, windy London morning could not stop the fintech industry from gathering on the second and final day of the Fintech Talents Festival, which was hosted at The Brewery in the heart of the UK capital.
Payments innovation was a hot topic of discussion at the Fintech Talents Festival
Panel discussions filled out the agenda for the day, and to no one’s surprise, artificial intelligence (AI) took home the crown for being the most talked-about topic at the venue, with delegates and attendees taking an enthusiastic and positive outlook on the technology.
Industry experts sat down to discuss how AI could potentially transform specific areas within financial services, including embedded finance, customer experience, financial crime, credit risk and regulation, as well as to discuss the state of play in areas including open banking, payments and digital identity.
For day two, FinTech Futures has zoomed in on two conversations in particular – the “paradigm shift” in payments through the introduction of variable recurring payments (VRPs), and of course, the intersection of AI and regulation.
VRPs – changing the game?
Introduced around two years ago, VRPs leverage open banking technology and allow people to move money automatically in two ways – sweeping and non-sweeping. Sweeping involves moving money between accounts that belong to the same person, and non-sweeping is when the sender and the recipient are different.
At Fintech Talents, a panel consisting of executives from Wise, Plaid, NatWest and Secure Trust Bank took to the stage to discuss why there are plenty of reasons to be excited about VRPs – especially with its non-sweeping use cases.
Raffaele Brusco, senior API commercialisation manager at NatWest, notes that the “cool thing” about VRPs is how they put the customers in control, allowing them to set up limits and be notified of payments while also offering more security and flexibility and enabling a “one-click payment experience”.
For Andrew Norman, lead engineer of UK and Europe product at Wise, VRPs are a way to “unbundle” and reduce friction when using banking services.
When compared to direct debit, which is functionally similar to VRPs, Chris Higham, head of payment and cards at Secure Trust Bank, highlights how “painful” the data collection process can be for direct debits, with the need for paper or electronic letters and advance notices, despite the method being “very cheap”.
“In my view, VRPs are particularly for customers who want to pay more often, and we’re in a world where people are having to carefully manage their budgets – and VRPs as a middle ground provide a great way to do that.”
In highlighting the current and future use cases of VRPs, all panellists shared that they were either already working on business use cases or were planning to work on them in the future.
While Higham notes that Secure Trust Bank is aware of businesses finding it tough to set up VRP consents and having “more hoops to jump through”, which is why they would like to start working on a number of business use cases, for NatWest, the work has already begun.
The bank says it is piloting VRPs with internal charities as payments made to charities constitute an “almost risk-free scenario” where the likelihood of people asking for a refund is very low. This is alongside investments being made to improve the user experience and future plans to test e-commerce use cases.
An additional step NatWest aims to take with VRPs is to check the likelihood of fraud and see whether it is possible to carry out affordability checks.
For Wise, beyond foreign currencies, business use cases are not quite the priority yet.
“We’re spending a lot of time trying to make it easy for customers to top up at the moment,” says Norman, “and a lot of the work we do goes down to communication and getting customers to understand what they’re signing up for.”
Regulating AI and the role of AI in regulation
In another panel discussion happening across the room, experts sat down to discuss both the role of AI in regulation and how the space is evolving to regulate AI.
Panellists agreed that while keeping up with compliance can be an expensive and time-consuming affair, its importance cannot be understated.
According to Peter Morgan, CEO and founder of Deep Learning Partnership, AI tools, when utilised correctly, can help keep costs from spiralling out of control and ultimately automate the compliance regulatory process.
But while this takes humans out of the loop, he says, it immediately raises the question of “technological unemployment”, hinting that while AI comes with benefits, it also brings in a new set of issues.
However, Morgan lauds the early involvement and action taken by governments when it comes to regulating this breakthrough innovation. Referring to the recently conducted UK AI Safety Summit, he says the conversations around AI made him “happy that the government has taken this very, very seriously”.
Morgan explains that governments have the “frontier role” to play when it comes to regulating AI, acknowledging the launch of the AI Safety Institute, led by the UK, and with involvement from the US.
“We’re hoping that other countries will do the same, because at the end of the day, we want global regulation, but because of data privacy reasons, we need each and every country in the world to have an AI Safety Institute,” he says.
