Federal Reserve Chair Jerome Powell said Monday that the U.S. public needs to understand the risks behind Bitcoin and other cryptocurrencies, even as the central bank itself is studying the potential costs and benefits of a digital dollar.
Powell said the Fed prefers to call crypto coins “crypto assets,” because their volatility undermines their ability to store value, a basic function of a currency.
“They’re highly volatile, see Bitcoin, and therefore not really useful as a store of value,” Powell said in remarks to a virtual summit hosted by the Bank for International Settlements. “They’re more of an asset for speculation. So they’re also not particularly in use as a means of payment. … It’s essentially a substitute for gold rather than for the dollar.”
Bitcoin has soared nearly ten-fold in value compared with a year ago, hovering around $57,000 on Monday. That is up from $5,830 in March 2020. It is often seen as a hedge against inflation, and inflation fears have risen as the Fed has kept its short-term benchmark interest rate pegged near zero for the past year. The Fed is also injecting $120 billion into the banking system each month by purchasing Treasurys and mortgage-backed securities.
While Bitcoin is rarely used in transactions, that could change. Electric car maker Tesla said last month that it was buying $1.5 billion of Bitcoin and would soon accept Bitcoin payment for its cars.
Powell also said the Fed is researching the potential for a central bank digital currency, though he added that the Fed is not yet near a decision about implementing one.
“We’re not in a mode of trying to make a decision at this point,” he said. “We are experimenting with technology.”
But Powell added that given the dollar’s critical role as the world’s leading reserve currency, the Fed has “an obligation to be on the cutting edge” of understanding the costs and benefits of a central bank digital currency, or CBDC.
At the same time, Powell said there was no need for the Fed to rush or “be first to market.” Many other central banks are exploring CBDCs, including China’s, and some observers worry China is ahead of the U.S.
Powell said the Fed is conducting research through an in-house technology lab, and also collaborating with MIT through the Federal Reserve Bank of Boston, one of its 12 regional Fed banks.
“The real threshold question for us is, does the public want or need a new digital form of central bank money to complement what is already a highly efficient, reliable and innovative payments oriented system?” Powell asked.
There are risks and benefits to digital currencies, the Fed chair said. The benefits include a “more efficient, more inclusive payment system,” while the risks involve cyber attacks, money laundering and terrorist financing.
There is also the risk that a digital currency could be held by individuals electronically and could therefore bypass banks.
“We don’t want to compete with banks for funding,” Powell said.
Ultimately, Powell said that Congress would likely need to pass legislation allowing a CBDC before the Fed would create one.
“We would not proceed with this without support from Congress, and I think that would ideally come in the form of an authorizing law,” Powell said.
The Fed chair also expressed some concerns about so-called “stablecoins,” which are digital currencies that are pegged to the value of government-backed currencies such as the dollar or euro. Facebook’s Libra, which it now calls Diem, is an example of a stablecoin.
“The potentially fast and wide adoption of a global stablecoin, potentially a global currency governed only by the incentives of a private company, is something that will deserve and will receive the highest level of regulatory expectations,” Powell said. “Private stable coins are not going to be an appropriate substitute for a sound monetary system based in central bank money.”
WASHINGTON (AP) — By CHRISTOPHER RUGABER
Japan’s Paidy BNPL credit provider announces partnership with global PayPal
Paidy, a Japanese “Buy Now Pay Later” (BNPL) solutions provider, which serves 700,000 online merchants in Japan, announced Friday the launch of Paidy Link, a new feature that allows users to instantly link digital wallets with their Paidy accounts.
In parallel, under the launch plan, is Paidy’s partnership with PayPal giving Japanese consumers shopping options through PayPal’s 29 million merchants around the world.
Each purchase will be automatically converted into a Japanese yen purchase with Paidy that can be settled each month with Paidy “Atobarai,” the Buy Now Pay Later service, or 3-Pay. This will allow Paidy users to manage their budgets within the Paidy app.
The 3-Pay service gives customers the option to split charges into three equal, interest-free, monthly installments, which the company said has “been very well received.”
Russell Cummer, Paidy founder and Executive Chairman, said, “I am extremely excited to announce the launch of Paidy Link, offering a great new way for consumers to use their Paidy accounts for online shopping internationally,” adding. “PayPal is an amazing partner for us to launch this functionality with and we are sure that our 5 million account holders will be thrilled to take advantage of the combined power of Paidy and PayPal.”
“We look forward to working closely with PayPal to literally bring the world to our Japanese consumers,” the Paidy founder said.
Paidy’s stated mission is to “take the hassle out of your payment and purchase experiences.” It also aims to create an environment where consumers are shopping within their budget limits.
The app allows customers to shop using their mobile phone number and email address, and then pay the accumulated charges the next month.
Peter Kenevan, VP, Head of PayPal Japan, commented, “We are excited about our partnership with Paidy. This partnership allows Paidy users to have access to PayPal’s 29 million merchants — in fashion, gaming, cosmetics and more — from Japan and around the world.”
By linking their Paidy accounts to PayPal, consumers can enjoy much greater freedom and more choices from the comfort of their home,” He added.
Paidy is an innovator with its use of BNPL, offering monthly-consolidated credit to consumers by enhancing shopping flexibility through split payment and purchase experiences.
Paidy uses proprietary models and machine learning to underwrite transactions quickly and guarantee payments to merchants.
BNPL solutions are branded as having the potential to increase revenue for merchants by reducing the number of incomplete transactions, increasing conversion rates, boosting average order values, and facilitating repeat purchases from consumers.
Mastercard, Geidea team up to bring contactless payments to Saudi Arabia
Global financial services company Mastercard, and Geidea, the largest fintech company in Saudi Arabia by market share, announced earlier this week a strategic partnership agreement to accept Mastercard payments using a Tap-on-Phone solution in Saudi Arabia.
Geidea is the first fintech company to roll out contactless payments acceptance technology across the Kingdom, which will enable businesses to use smartphones as payment acceptance devices.
Tap-on-Phone is an innovative, intuitive, and cost-effective app-based solution that allows small businesses to quickly embrace electronic acceptance through their smart mobile or tablet device.
With smart phone penetration of more than 70 percent in the Kingdom, Tap-on-Phone has the potential to reach over 300,000 small and medium enterprises (SMEs) and merchants in the first year alone.
“The COVID-19 pandemic has forced a shift in consumer behavior towards digital and contactless payments channels, making it imperative for businesses to adapt and shift to a more online based model. We are therefore proud to partner with Mastercard and provide businesses with a relevant solution that offers the ability to accept safe, secure and seamless contactless payments through Tap-on-Phone technology,” said Abdullah Al-Othman, the Founder and Chairman of Geidea.
Presently, the Geidea network provides payment and e-commerce solutions to more than 100,000 merchants – covering 600,000 payment terminals and ATMs within the Kingdom.
As one of the many use cases, Tap-on-Phone enables more SMEs to accept secure card payments on delivery, in lieu of cash-on-delivery (COD) which is often the only on-delivery payment option.
According to Bain.com, around 62 percent of MENA online shoppers choose COD as payment method when buying online, compared with less than five percent in the UK and France. Cash conversion is key to developing a new payment landscape and improve consumer experience.
“Through our partnership with Geidea, we can help small businesses expand their ability to accept digital payments and grow their earning potential. The solution will also help Saudi Arabia to transition safely into a secure digital payment ecosystem, without the risks associated with a large cash pool,” said J.K. Khalil, Country Manager, Saudi Arabia, Bahrain & Levant, Mastercard.
Tap-on-Phone makes it easier for SMEs to use their compatible smartphones to accept quick, easy, and secure, payments from their customers for goods or services. It saves businesses money and time, because all they need to receive electronic payments is an NFC-enabled Android device on version 7.0 or newer.
Geidea also recently became the only non-bank institution in Saudi Arabia to be granted an acquiring license from Saudi Central Bank (SAMA). The license enables the fintech company to process secure, fast, and seamless end-to-end payment solutions directly to merchants.
Facial recognition for payments to reach 1.4 billion users by 2025
Contactless payments have been one of FinTech’s most prized innovation, silently growing in popularity within all types of commerce and shopping, with the pandemic skyrocketing its adoption across the board.
As such, facial recognition for payments is on track to become the new norm of payment methods as the number of users of software-based facial recognition to secure payments will exceed 1.4 billion globally by 2025, from just 671 million in 2020, a new study by Juniper Research found.
This rapid growth of 120 percent demonstrates how widespread facial recognition has become; fueled by its low barriers to entry, a front-facing camera and appropriate software.
“We identified the implementation of FaceID by Apple as accelerating the growth of the wider facial recognition market, despite the challenges to facial recognition during the pandemic with face mask use,” the research highlighted.
Seeing that technological innovation tend to trickle down toward other uses, all indications point toward the inevitable growth toward facial recognition for payments.
However, researchers at Juniper recommend that facial recognition vendors implement robust and rapidly evolving AI‑based verification checks to ensure the validity of user identity, or risk losing user trust in the authentication method as spoofing attempts increase.
Fingerprint sensors dominant, facial recognition growing
The new research – called ‘Mobile Payment Authentication: Biometrics, Regulation & Market Forecasts 2021-2025’ – found that fingerprint sensors will feature on 93 percent of biometrically equipped smartphones in 2025.
This compares favorably to hardware-based facial recognition, with just 17 percent of biometrically equipped smartphones featuring these capabilities in 2025.
“Hardware-based facial recognition is growing, but the ability to carry out facial recognition via software is limiting its adoption rate. As the need for a secure mobile authentication environment grows, smartphone vendors will need to increasingly turn to more robust hardware-based systems to keep pace with fraudsters’ evolving tactics,” research co-author Susan Morrow explained.
Voice recognition for payments growing, but limited in scope
In parallel, the report also found that the use of voice recognition for payments is increasing, from 111 million users in 2020, to over 704 million in 2025. The research identified that, at present, voice recognition is mostly used in banking, and will struggle to grow beyond this, due to concerns around robustness.
“Juniper Research recommends that vendors adopt a multi-method biometric strategy, which encompasses facial recognition, fingerprints, voice and behavioral indicators to ensure a secure payment environment,” the report authors noted.
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