Here are the week’s main news stories in the world of small business and digital payments:
Small firms call for emergency Brexit budget
The Federation of Small Businesses (FSB) is urging chancellor Sajid Javid to produce an emergency budget aimed at supporting small firms hampered by a struggling pound, weak economic growth and the prospect of a chaotic no-deal Brexit on 31 October. The government has set aside around £6 billion for no-deal preparations, with only £108 million dedicated to supporting the small businesses that make up 99 per cent of the economy. To avoid a shock to the jobs market, the FSB is calling for an Emergency Budget to include a blanket cut to Employer NICs (National Insurance contributions). A reduction from 13.8 per cent to 12 per cent, at a cost of £11 billion, would help small employers manage the surge in staffing costs which has taken place over the last four years.
UK set to delay Strong Customer Authentication requirements until 2021
The UK’s Financial Conduct Authority (FCA) is reportedly preparing to delay its enforcement of the EU PSD2 regulatory requirements for Stronger Customer Authentication (SCA) for electronic online payments due to take effect on 14 September. SCA requires that consumers confirm their identity using at least two of the following three criteria: something only they know, like a password; something they possess, like a phone; and something they are, like their fingerprint. According to the Financial Times, the FCA asked a trade group to rework the timeline for its implementation, with recommendations including a March 2021 compliance date for technical requirements, followed by another six months to add more advanced authentication.
Starling Bank on course for one million customers in 2019
Starling Bank is set to break even in the UK by the end of 2020, its founder and chief executive Anne Boden has said in her annual letter. Boden said the fintech firm’s account total – spanning both business and retail users – had risen to 775,000, up from 385,000 at the end of 2018. The bank is now on track to reach 1 million accounts by the end of this year, while deposits are expected to surpass £1 billion over the same period. It reported a loss before tax of £26.9 million last year. Starling, which is one of the digital banking sector’s three largest players alongside Monzo and Revolut, has now entered “hyper growth”, according to Boden.
Daimler, Commerzbank pilot blockchain digital cash for machine payments
Daimler Trucks and Commerzbank have run a pilot to use the Daimler Truck Wallet to make payments with e-euros from Commerzbank. Commerzbank’s payments use the Corda blockchain, the same technology that the bank has used for many of its blockchain pilots. Once the e-euros are used for payments, recipients can request Commerzbank to convert the digital cash back to their bank accounts. Daimler envisages several applications of the system, including fuel payments, meaning drivers can focus on other tasks.
Late payments still on the rise
One in five businesses flag late payments as a challenge, rising to 24 per cent for SMEs, representing an increase from last year, according to the latest ICAEW Business Confidence Monitor (BCM). The ICAEW has urged the government to help businesses with the increasing problem of late payments faced by SMEs. The latest BCM showed that business outlook remains negative, with late payments from customers a key and growing concern among businesses, particularly SMEs. Six out of nine sectors (property, business services, manufacturing & engineering, construction, retail & wholesale and banking, finance & insurance) are finding late payments a growing issue.
Swedish fintech Klarna hits $5.5 billion valuation
Online payments firm Klarna has raised $460 million in a funding round that makes it Europe’s most valuable fintech startup. Investors led by San Francisco-based Dragoneer Investment Group put new money into the Swedish company, giving it a valuation of $5.5 billion and additional financial firepower to expand in the US. Founded in 2005, Klarna enables consumers to buy online without having to provide payment details to the merchant they are buying from. Instead, Klarna pays for the order, which is then dispatched. It invoices the buyer, who typically gets 14 or 30 days to settle. Its core products are interest-free in the US and UK with merchants paying for its services.