Internet payment security: everything you need to know about PSD2 and strong authentication
This new European Directive for Internet payment service providers (PSD2) aims to provide consumers with even greater protection against the risk of electronic payment fraud. The aim of this European regulatory framework is to limit bankcard fraud, account hijacking and fraudulent transfers. Although it may seem restrictive at the time of payment, these security steps are really a blessing in disguise! Here’s how it works.
PSD2 for European consumers
This European directive for account management is aimed at all service providers who organise remote payment flows, mainly over the Internet. This may be a bank, a credit institution or even payment service providers throughout the European Union. It therefore applies to the management of an online account or an application.
The European directive proposes a framework for payment services based on two main themes:
The control of consumer information and data between financial and payment service providers, and the organisation of players in the sector in the European Union.
The security of payments for consumers. It is this “customer protection” dimension that is particularly developed here.
Before PSD2, PSD1
The first European Payment Services Directive dates from 2007 and was transposed into French law in 2009. To re-read it is to note the gigantic leap forward made by the banking sector over the last fifteen years. In 2007, PSD1 finally authorised service providers and institutions to manage online payments. This marked the end of the banking monopoly. As far as customer security is concerned, there is mention of the possibility of being reimbursed by a bank as a customer in the event of fraud, with a maximum deductible of €150. In short, it’s the stone age of online payment regulation, but it’s an initial framework.
PSD2 incorporates changes in the online payments market
Validated by the European Union in 2015, the second version of the PSD is partially applicable in France from 2017. The part dedicated to consumers will be made compulsory a little later: it is this new framework that imposes double authentication for transactions of more than €30, followed by enhanced authentication.
The development of fintechs
From 2015, PSD2 provides for the development of fintechs and the arrival of new trusted third parties in the finance and payment sector. Every player in the “payment value chain” is now identified: we are a long way from the days when only traditional banks had the right to manage the online payment services market on the Internet.
The development of service providers… and fraudsters
When you increase the number of service providers and payment services, you increase the number of transactions. In other words, you open the door to fraud. The PSD2 directive aims to strengthen the security of transactions, particularly at the weakest link: the consumer! And thieves have clearly understood this, since they mainly attack this human weakness rather than the networks and systems of payment providers (third parties, aggregators, institutions, etc.). Hacking into the computer code of a bank account or a fintech application is more difficult than recovering a customer’s secret code. Security is an everyday issue for all payment service providers: aggregators, banks, fintechs and advisers.
N.B. A payment system is constantly under attack from hackers, but cybersecurity players are armed to fight this electronic war. But protecting the ” feelings ” of a consumer in the midst of a purchase is less easy to control.
What is strong authentication?
PSD2 lays down standards to be implemented for electronic payments by merchants as well as banks and payment service providers. You can no longer make a card payment or an online account transaction (or even open an account) without strong authentication, sometimes called double authentication. So, yes, it can be a bit restrictive, but it considerably reduces the risk of fraud on your account.
What are the possible methods for authenticating an account?
The main principle to remember is that strong authentication must require two of the three elements proposed by PSD2 (this is where the confusion over “two-factor authentication” comes from):
- An element of knowledge: information known only to you, such as a password,
- An element of possession: a smartphone or a telephone line,
- An element of inherence: fingerprint, facial recognition or even voice (even if this system is not very developed for the general public). As in spy films, perhaps one day we’ll be scanning the iris of our eye to make a payment or log on to our account.
When you are asked to set up a security check from your smartphone, authentication is at the strongest level, since it includes a solution for every possible element.
Good to know: strong authentication is compulsory for any transaction over €30, but increasingly e-commerce and payment service providers are asking for it from the very first euro (or even the first cent). Again, this is for the benefit of the consumer.
Best individual practices for secure payments
The biggest security flaw is the user! And crooks are well aware of this. So the first line of defence against theft is the customer! So there are a few best practices to follow.
- Never give out personal information such as passwords by telephone or message. A payment service representative will never ask for it.
- Avoid validating an authentication request if you have not made a purchase yourself.
- Another piece of advice is not to validate a request for authentication after receiving a request for payment by telephone, even if the person you are speaking to really does seem to know your personal details, or even elements of your private life. Fraudsters are very good at finding the right information on social networks.
- Avoid leaving personal data on “public” sites (social networks, forums, etc.)
- Accept the enhanced authentication services offered by the various payment providers.
- Check the addresses of the sites where you give your bank details. Make sure that the “little padlock” is present and check that the URL (the web address) does not contain any added elements. This is the case, for example, with fine scams that link to fake “ANTS” sites for paying fines.
- One final tip: if you need to contact a payment service provider, use the contact telephone number on their official website.
VeraCash’s DSP2 choices for its customers
VeraCash uses a trusted third-party payment provider that complies with the security standards of the PSD2 directive. That’s why we chose it. It’s also why, at every stage of a VeraCash account, there is strong authentication.
Using your VeraCash account
The online account
The first step is to log in to your VeraCash account. To do this, you need to know your username and password.
Then a third element, a PIN code (or equivalent).
On the VeraCash application
Fingerprint identification is possible. A systematic security alert will be sent by email. You will be informed that a connection is being made to your account. If it’s you, don’t worry: there’s nothing to do.
Please note that, from time to time, fingerprint authentication does not work. In this case, you need to enter your secret PIN or a code received by text message.
In short: authentication on the application is really reinforced! And thanks to it, you can consult your VeraCash account in complete peace and security.
A future gold currency for BRICS?
Although BRICS share the ambition of reshaping the world order and challenging the monopoly of the dollar with a gold currency, they have a long way to go…
The BRICS: an alliance of outsiders against a backdrop of disagreements
The BRICS summit held in Johannesburg from 22 to 24 August 2023 highlighted the complexity and challenges facing this group of emerging countries. While the enlargement of the bloc was at the heart of the discussions, with the forthcoming addition of six new members (Argentina, Egypt, Iran, Ethiopia, Saudi Arabia and the United Arab Emirates), the BRICS are above all the ‘outsiders’. Although these countries account for 42% of the world’s population and 30% 1/4 of global GDP, they are mainly united by a common desire to challenge the dominance of the United States and the European Union on the international stage.
However, despite this shared ambition – which is based more on a common rejection than on a project for a strong alliance – there are still many disagreements within the bloc, notably because of the political, economic and geographical differences between its members.
The BRICS are made up of democracies, authoritarian regimes and everything in between. For example, India is the world’s largest democracy, while China is governed by a single party. Similarly, some members of the BRICS have border disputes or historical tensions – India and China, for example, or Ethiopia and Egypt, who have been squabbling over a dam on the Nile for a decade. Not to mention the fact that the newcomers include Iran and Saudi Arabia, who are hardly the best of friends in the Muslim world.
De-dollarisation: a major challenge
The BRICS’ main aim is therefore to free themselves from dependence on the dollar. Once again, an ambitious goal, but one riddled with pitfalls. Each country in the bloc has its own economic policy. For example, while states such as China and Russia can impose restrictions on their companies (and even then, Putin had great difficulty in forcing Russian companies to abandon the dollar at the start of the war in Ukraine), others, such as India and Brazil, have a more liberal approach. The dollar, as the world’s reserve currency, offers stability and confidence, and convincing companies to move away from it will be no easy task.
Especially as this currency will probably have little connection with the real economy. If it were to see the light of day, this currency would not be usable by private individuals, but would above all enable these countries to conduct their trade without using the dollar (note that Russia is already trading in yuans with China); at best, it would be a sort of unit of account facilitating mutual trade or serving as the basis for a system to secure payments, competing with the Swift system used in the West.
A common currency: a distant dream?
The idea of a common currency for the BRICS, while interesting on paper, seems a distant dream. Firstly, as we have said, the group is extremely diverse. But above all, most of these countries are particularly sovereign and there is little chance that they will be able to agree on who will be in charge of the others. And we can already guess that, with its colossal economic weight (70% of the group’s total GDP), China will be the main player in the management of such a currency. We can bet that all the other countries, including the newcomers, will be rather reluctant to become China’s subjects.
The experience of the euro shows that introducing a common currency is a complex process, requiring deep economic and political integration. A real challenge, even for a geographically and politically unified ‘coalition’ such as the eurozone. So what are we to make of a project for a unified monetary economy for countries with such different political, fiscal and economic systems?
Gold: a solid foundation for a common currency?
Finally, some were already seeing this new international “meta-currency” as an opportunity to give gold back its full monetary weight. But using the precious metal as the underpinning of a common currency for the BRICS once again comes up against a major problem.
Although Russia and China have increased their gold reserves in recent years, the majority of gold held by central banks is in the hands of Western countries. Of the 34,000 tonnes currently held in the vaults of the world’s central banks, the United States, Germany, France, Italy, Switzerland and the IMF already own 21,000 tonnes. Even if we include the six new countries that will join the group in 2024, as well as the forty or so smaller states that support the project, the gold held by the BRICS and consorts will barely exceed 6,000 tonnes (a little more if we consider that the 2,092 tonnes of gold held by China are undervalued).
Consequently, with less than 20% of the world’s reserves at their disposal anyway, creating a gold-based currency would do little to change the economic balance of power that currently pits the BRICS against the West. It might even strengthen the position of the Americans and Europeans, which would ultimately be the opposite of what the BRICS are aiming for.
Bank run: Do we need to worry about a wave of banking panic?
At the moment, there is a new wave that is not talked about as often : the banking panic or ‘bank run’. However, it is a risk that is directly correlated to the loss of confidence in a commercial bank, or on a larger scale in the entire traditional banking system. What would be the consequences of a bank run? And what does it mean for VeraCash account holders? Here are some explanations.
What is a bank run and what are the consequences?
It has happened close to home (almost)
We all remember those images of queues of people in Greece in 2015. Had the new iPhone just come out? Far from it! In the midst of a debt crisis, Greeks rushed to bank branches in their droves to withdraw their funds.
Some just withdrew a little cash, fearing that the cashpoints would be closed, whilst others removed the entirety of their savings to take elsewhere. Several billion euros were allowed to leave the banking system in just a few days (L’Express, June 2015). That’s what a bank run looks like: a panic-driven act to attempt to safeguard your savings in the event of potential bank failures. Because in certain desperate situations, banks can indeed use the funds in their customers’ bank accounts to pay off their debts. The precedent was set in Cyprus in 2013, which gave birth to the French expression: “cypriotisation” of bank accounts.
For the last ten or so years in France, we have also associated the bank run concept with Éric Cantona. The ex-footballer appealed to French citizens to turn up at their banks in a mass protest on 7 December 2010 to withdraw their money. The aim was simple yet ambitious – to bring about the collapse of the banking system. Spoiler alert: it all just fizzled out. Despite managing to mobilise a virtual protest of hundreds of thousands of people on Facebook, the bank run didn’t happen. Cantona himself only managed a single, symbolic withdrawal on the day.
The consequences of a bank run
Fear does not avoid danger, this is particularly true in a bank run situation. When the movement actually occurs, it causes bankruptcy. This is what YouTuber Pierre Ollier says in a video on bank run: “People are afraid for the financial health of their bank, or they are afraid of the behaviour of other users. And they rush to the ATMs, which leads to a bank run”. These emotional decisions, made out of “fear of losing money”, can have a major impact. This is what happened in 2007 in England with the bank run.
A good illustration is the 2007 banking panic in England with Northern Rock. After requesting an emergency loan from the Bank of England, the institution suffered a “massive flight of customers” (Les Echos, September 2007). The result: panicked individuals waiting in line on the pavement to withdraw their assets, and an institution that was subsequently nationalised. It is interesting to note that this bank run is a direct result of the financial crisis in the United States: Northern Rock was then the 5th largest bank in British real estate financing.
Is a new bank run on the brink?
In our current economic system, many people tend to think that a bank run would not be possible. It is a situation that requires a major crisis of confidence in the banks. However, the banks are supported by central banks and the authorities, which do what is necessary to ensure that individuals retain their confidence (and even their money!) in the banks. This situation was already seen in 2008. “Eurozone finance ministers reaffirmed that the European Union would take all necessary measures to ensure the stability of financial markets and support banks”.
However, we must also put things into context. The 2008 financial crisis was an example of the systemic risk that shadow banking presents to the global banking system. Since 2008, the situation has not really improved. Even if some banks have shown the control systems in place, no institution is safe, and none which are “too big to fail”. Many observers have their eyes on the European systemic banks, especially Deutsche Bank, which really suffered from the financial crisis. A fragility that was dramatised in the “Bad Banks” series. Of course, in a crisis, the authorities do what is necessary to preserve trust capital… but how far? And can we “do what is necessary” with the assets of individuals?
What would happen in the event of a bank run? No need to panic for your precious metals
Let’s take a worst-case scenario, for example a system collapse due to a health crisis. Everyone seeks to withdraw their assets from their bank, both to ensure daily survival and to keep their money safe. The state can then decide to cap – or even freeze – withdrawals, limit account-to-account transfers and transfers abroad. To go even further, it can levy a tax on individuals’ savings.
But don’t panic about precious metals purchased from your VeraCash account. Even if the banking system is blocked and cash withdrawals are impossible, you can stilluse your VeraCash account to transfer money from individual to individual, or from individual to business (and vice versa). The VeraCash model is entirely physical and allows us to manage transactions without using the payment card. This means that your precious metals could still be used as a means of payment, thanks to the asset shipment functionality. Better yet, they would remain accessible on your account: they are stored in a free zone at the Geneva Free Ports in Switzerland and the French State has no possibility to confiscate them to pay back any debt. So you can always keep your precious metals in the meantime, or withdraw your RCVs from anywhere in the world, free of charge.
How can we prepare for the currency war?
On 31 July, the Fed, contrary to all (or almost all) expectations, lowered its policy interest rates by 0.25 points (to below 2.25%). This decision was made as a result of constant pressure from Trump, who had himself accused Europe and China of manipulating the dollar by devaluing their own currencies.
Trump does not like to be in the hot seat (whereas Mario Draghi, President of the ECB, positively denied any attempt to compete with the dollar), so when Trump feels like he is on the spot, he takes action accordingly. By weakening the dollar through low policy interest rates, he imagines that global exchanges in dollars will flow more freely. This makes sense in theory, since the currency does become more accessible, but in practice, things are more complicated than that.
Reduced policy interest rates alone are not enough to lower the value of the dollar: in fact, it is at its highest since 2002, and a simple look at The Economist’s Big Mac index reveals that (nearly) all currencies are below the dollar.
Invented in the 1980s by the magazine The Economist, that index compares purchasing power in different countries in relation to the Big Mac, probably the most popular hamburger at the fast food giant McDonald’s. By comparing the cost of that burger in the US ($5.74) to its cost in other countries, this index identifies currency values in relation to the dollar.
As you can see, the euro was valued at 20.3% less than the dollar in July 2019. If competition was perfect around the world then, based on this index, $1 would be equivalent to €0.71, although in reality it is €0.89.
To weaken the dollar, the United States would need two things to happen: the US Treasury would have to sell off dollars in bulk (something which has not occurred since 1995), and the other countries would have to play along in a coordinated effort, because the foreign exchange market (Forex), traded at $5 trillion per day, is too extensive for the United States to have any unilateral impact on it. But the other countries will not play along, because none of them want a strong currency. We saw this only recently when China enacted the law of talion (an eye for an eye) by depreciating its currency, the renminbi, even further, which destabilized the markets and increased the price of gold to $1,472 per ounce.
Thanos Vamvakidis, global head of the Forex branch of Bank of America Merrill Lynch, spoke out on this subject: “They cannot affect the borrowing cost because interest rates are historically low, so the only way they can ease further monetary conditions is to weaken their currency. However, it’s about equilibrium because when everybody is doing it, then currencies don’t really move, you don’t benefit anything because you end up wasting very limited monetary policy ammunition without much of a result. So in a way, we are in a currency war, although nobody has admitted it.”
What are our alternatives?
Once you realize that the States can wage war against one another by means of liquidity injections and quantitative easing, you will find there is cause for concern. This is all the more true given that certain alternatives are based on the currencies in question: just think of Facebook’s Libra, whose underlying asset is a basket of fiat currencies. In the event of a currency war, what would happen to the Libra?
Nowadays, many investors looking for safe ways to protect their capital are turning towards gold, which pays no interest, unlike bonds which lose them money if kept until the expiration date.
If fiat currencies were to experience a radical drop in value tomorrow, that would have no impact on gold, because gold and currencies are two types of assets which are completely unconnected: only the value of gold is expressed in a currency. It does not take long to understand that the difference between gold and paper money is that gold possesses virtues which paper money never will: it has an intrinsic value, it is non-oxidizing, it has a limited quantity, etc. If fiat currencies lose value, it is likely that consumers will naturally abandon the euro, the dollar, and so on, and they will turn their trust towards another instrument for their exchanges. No one can do without money: we all have to eat, clothe ourselves, and so on. In this case, you can bet that we will turn to gold. The proof lies in the fact that, when we need cash money, we sell off our gold jewellery first.
Who creates money?
Useful definitions
Fiat money is cash money, i.e. reserves of banknotes and coins whose value is based solely on the trust which is placed in them.
Bank money refers to the sums deposited in bank accounts. It circulates by means of bank payments, either via completely digitised methods (bank transfers, standing orders, direct debits and bank cards) or by cheque. When you withdraw funds from a cash machine, your bank money becomes fiat money.
The money supply is the total value of all monetary assets in circulation in an economy at any given time. It comprises various aggregates (M1, M2 and M3) that indicate the level of liquidity of economic agents.
Who creates money?
Money is ordered by central banks and produced by either state-owned or private banknote printing offices.
Reserves of banknotes and coin—fiat money—are currently dependent on the system of supply and demand. If commercial banks need liquid money for their transactions and their cash machines, they simply order it from central banks, against the value of their reserve accounts. It is important to bear in mind that money does not have its own intrinsic value, other than the paper on which it is printed, so it is relevantly unimportant if a bank’s reserve account is just a number on a computer screen or if it takes the form of tokens, because they still represent an asset for the bank. Its only value is the one attributed by the trust placed in it.
The money supply however is something altogether different. Governments and central banks can control the money supply by raising and lowering interest rates. For example, low interest rates encourage the creation of credit, or bank money, in practice increasing the money supply. Conversely, high interest rates discourage the creation of credit and so reduce the money supply.
In conclusion, it is important to realise that just 7% of the euro money supply is made up of banknotes in circulation, i.e. fiat money. As a result, more than 90% of transactions involve completely virtual bank money. The risk is that, if a bank run were to occur, you would undoubtedly have trouble withdrawing fiat (liquid) money using your bank card and, accordingly, would not have access to the money in your account.
The “printing press” effect: how do banks create money?
In case you didn’t know, money is created through the extension of credit. In other words, debt. This process of generating money through debt is what is referred to as money creation ex nihilo (“out of nothing”). 90% of the money issued by banks is nothing more than the acknowledgement of debt.
Many believe that customers’ deposits are used to finance credit. And while that was true for a time, it is no longer the general practice today. Banks create both money lent and money deposited, a process known as double-entry bookkeeping. When the bank records an asset (a loan) on its balance sheet, it must also record a corresponding liability (a debt). As a result, a deposit does not give rise to credit, but rather the opposite. And even if, once repaid, the initially created money is cancelled out, the interest still remains in the system. As economist Joseph Schumpeter put it, “It is much more realistic to say that the banks ‘create credit,’ that is, that they create deposits in their act of lending, than to say that they lend the deposits that have been entrusted to them”.
And if a loan is not paid back in full by the borrower, the bank repays itself, either by seizing the assets that the loan was used to purchase or by making a claim against the insurance paid for by the borrower in addition to the interest charged by the bank.
By means of these credit lines, the banks create deposits, which themselves create more credit via the banks’ capital. To illustrate this concept, just think of a snake biting its own tail, or the paradox of the chicken and the egg…
In short, debt is created out of nothing.
Money creation ex nihilo is an anomaly
For millennia, money was used merely as a means of exchange and communication. It was becoming sedentary and the state taking control of our money, now fiat money (from the Latin, ‘so it shall be’), that distanced us from that.
All fiat money is subject to manipulation by a small group of eminent individuals: their values rise and fall, soar and burst… And when a new revolutionary financial technology emerges, the same compromised traits are attributed to it.
Our money should not be an instrument of speculation. Our financial system should not be a gamble.
To show the impact [of compound interest] on money in the long run, we may use the famous example of Joseph’s cent invested at 5% interest in the year 0. In the year 2000 this cent would be worth over 500 billion balls of gold of the weight of the earth, at the price of gold in that year. Without the compounding of interest, the sum accumulated would have been €1.01.
– Margrit Kennedy, on the subject of compound interest
A central currency out of step with its users
It’s a fact: our central currency, the euro, is showing signs of weakness. After the wonderful promises of the early 2000s (low-interest loans, simplified trade, etc.), the reality today is less appealing.
Nowadays, some countries, such as Latvia, are seeing their population emigrating, thus decreasing by close to 15%, while others, like Greece, are finding themselves overindebted. In the past, the solution would have been to devalue their currency so that inflation could eat away at that debt, but now, with the eurozone, where a single currency is used by 19 different countries, that process is much more complicated.
Since the adoption of the euro, the most fragile countries have found themselves under a mountain of debt, inevitably dragging down those economies that serve as props for the rest, creating a house of cards that is bound to collapse.
How can we cope with this situation? There are two obvious solutions:
- All of the countries in the eurozone agree to merge into a single ‘United States of Europe’, which seems unlikely.
- Each country reclaims its financial independence and adopts a national currency specific to itself, which could be extremely costly.
But what if there was another solution? What if that solution did not come from our governments and our banks, which have proved time and again that they are light years away from understanding the financial reality of their people? What if the people could come up with their own alternative?
How can money creation be limited?
With the advent of cryptocurrencies and open-source money, it seems clear that these alternatives are capable of countering the phenomenon. Let’s not allow the richest 1% of the population decide yet again what should happen to these new means of exchange.
38% of French survey respondents think that gold could be a better currency than the euro, as:
- It provides savings security in the event of a crisis (63%)
- It is environmentally-friendly (60%)
- 56% of French survey respondents believe the euro is a currency that encourages financial speculation.
- 74% of French survey respondents who consider cryptocurrencies to be better than the euro would be interested in a gold-backed currency in addition to the euro.
- 71% of French survey respondents who consider cryptocurrencies to be better than the euro think that gold would be a better currency than the euro in the face of Bitcoin.
As proved by the OpinionWay survey for VeraCash®, the euro is perceived to be a currency which encourages financial speculation, and more than one-third (38%) of those French respondents believe that gold could be a better currency than the euro. The precious metal thus represents a real symbol of security.
However, in order to be attractive and usable on a daily basis, a new gold-based currency based should address the weaknesses in traditional currencies, such as issues relating to environmental conservation, while allowing the French populace to maintain their usual payment habits (virtual payments, in particular). This is precisely what VeraCash is striving to do: to provide a forward-looking currency that is viewed positively by its users and has strong values.
A safe asset in high financial demand
Despite official discourse seeking to discredit investment gold and to keep it away from savers, institutions are displaying an obviously growing appetite for gold as a safe investment, which they have been stockpiling for several years now.
Worldwide demand for gold for industrial purposes has risen by 2% to 3% annually in recent years in response to new technological needs but jumped by a whopping 20% in terms of central bank investments.
In other words, most of the world’s central banks have considerably ramped up their physical gold holdings, particularly in emerging economies seeking to consolidate their foreign exchange reserves while splitting away from the increasingly struggling US dollar. This includes India, Mexico and Turkey, but also and above all China and Russia, which aim to create a real monetary counterweight to the dollar in the years to come.
Closer to home, here in Europe, the Germans are also proving to be major buyers of gold, although interest in it is highest among private individuals. It should be noted that the country was hit hard by a terrible monetary crisis between the two World Wars, and memories endure of the consequences of the overuse of money printing presses, as the ECB seems to be doing today. Last year, more than €6 billion were put into gold investment products by German citizens looking to protect their savings.
For their part, the banks are resolved to avoid the return of gold as an investment, or even as underpinning a currency. As a result, they are continuously ramping up their manoeuvrings in an effort to make precious metals as unattractive as possible. For example, the creation of gold-backed ETFs (exchange traded funds) has considerably diluted the value of the metal by artificially inflating the quantity in circulation. Nonetheless, demand for physical gold continues to rise, and pressure is becoming too strong to keep prices perpetually depressed.
Although up until now, gold’s behaviour has tended to be counter-cyclical to the stock market, we have seen its value firmly on the upswing over the last three years, whether the markets have been bullish or bearish. In parallel, the profitability of mining operations has been crumbling (penalizing ETFs) while the quantities extracted have stagnated year after year, leading certain experts to postulate that we are on the other side of peak production, meaning gold could well become more and more rare going forwards.
Consequently, and bolstered by an increasingly uncertain financial situation, demand for gold will soon be high enough to break through the mechanical barriers that have been erected. The price of the precious metal is then likely to soar, to the detriment of anyone who neglected not only its role as a hedge against stock losses but also its role in preserving capital.
VeraCash Youth Accounts: the stars of the 2nd edition of VeraCash AfterWork ?
On Friday, 30 November 2018, the second edition of the VeraCash AfterWork event took place at the Paris Centre Eiffel Hotel. Attendance was up threefold from the first edition, with members eager to listen to the presentations by Dany Lang and the VeraCash team. Of course, it was also an opportunity for you to share your questions, ideas, suggestions and feedback with us. The discussion was terrific and so, since we’re always thinking about all of you, we decided to report back on the evening for those members who were unable to attend, focusing in particular on one of the key products showcased that night: the VeraCash youth account!
VeraCash youth account? What’s that? ?
As the name suggests, VeraCash is now available to young people aged 13 to 17! We’d been talking about it for a while, many parents having expressed an interest in this type of product to us. We listened, and now it’s a done deal!
Just like our personal accounts, VeraCash youth accounts make it possible to pay for expenses using the VeraCash and build up savings in precious metals. Naturally, some transactions will have limits: VRC cannot be transferred between accounts, and payments by card will be capped at VRC 140 per week. In addition, the card won’t work in certain places, like bars and tobacconists, or on gambling, dating or betting websites.
Why should you open a VeraCash account for your child? ?
Because it isn’t always easy to manage pocket money, VeraCash gives you a better way to keep it under control. Just imagine, your kids go to the cinema after school and need €7 right away to buy a ticket. A free, instant transfer of VRC 7 to their VeraCash account, and they’re good to go! No wait, no fees. In addition, your child will have their own IBAN, allowing you to make one-off or recurring transfers to their account… once again, free of charge! ?
Not to mention the fact that an account backed by precious metals is a truly empowering experience which makes sense of asset management, even for young children. It encourages them to familiarize themselves with gold and silver and to gain a better understanding of their capital.
But also… ?
Aside from announcing the launch of youth accounts, the VeraCash AfterWork event also reviewed the past decade since the financial crisis, as well as the 2018 year now coming to a close – a thrilling year indeed at VeraCash! From AuCOFFRE . VeraCash transfers to ICO projects, our team decided to be transparent and to explain all these changes, plus our new products and services.
In addition, Economics Professor Dany Lang of Paris University 13 joined us to talk about the lessons learned from the Stock Market Crash of 1929, from a financial, banking and monetary perspective.
Payment institution or an agent, VeraCash assumes its choice!
Episode 1. How does VeraCash work? Why are you an Agent for a payment institution? Is a payment institution a bank? The same questions come up over and again. So we decided it was time to explain the how, why and wherefore of our links with our partner and our Mastercard payment card.
VeraCarte revolutionises payments by gold
What exactly to we expect from a means of payment today? To be able to pay quickly and easily, at any time of the day or night, without losing money and without paying a commission when changing currency… This is exactly what you can do with the VeraCarte, as with many other means of payment today. The account used to fund your card combines the advantages of gold – which backs the card – and those of a payment card that turns your gold into cash.
The VeraCarte removes international borders for transactions. It can be used worldwide wherever Mastercard© is accepted. In other words, you can use it in 35.9 million acceptance points, in over 210 countries and 1.5 million ATMs. Not only that, but because it is outside the financial system, it also allows you to make payments overseas with the lowest possible exchange rate charges, from the cash machine to the payment terminal.
VeraCash now also offers all its customers a virtual IBAN, making it easier to credit their VeraCash account. Just like the VeraCarte, this new product is offered by our partner PFS.
Payment institution or PFS agent?
Only officially recognised payment institutions are authorised to issue a means of payment such as the VeraCarte Mastercard, or to process financial transactions. Since VeraCash is not a payment institution, the company operates as a direct agent for the English company Prepaid Financial Services (PFS). Agent reference number: 6337638.
Why this partnership? The first reason is simply that given our size today we are not currently able to become a payment institution. The procedure would be too expensive and requires considerable means both in terms of staff and technical capacity, notably in order to comply with banking regulations. Our core business is the purchase and sale of gold, not operating a payment card.
The second reason is one of flexibility. Continuing innovation means that VeraCash needs to optimise its costs and its human and technical resources, to ensure the long-term future of its activity. This flexibility is best achieved through strategic partnerships. As a result, we can change our payment institution tomorrow (as we can change any other supplier) or add a new one to extend our means of payment beyond Europe.
Anecdote: our first payment institution was the French company “Aqoba”, unfortunately declared bankrupt in 2014. As soon as this happened, we very rapidly changed to a reliable partner, PFS, meaning that our service continued and remained completely transparent for our customers, for whom this change had very little impact. Gold not being a commodity handled by the payment institution, the capacity to buy or resell gold for their VeraCarte account remained intact even if the VeraCarte itself could not be used for a fortnight. Proof, if any were needed, of our rapidity, flexibility and capacity to adapt, should a problem arise at this level.
Preconceived ideas and false information on the web…
1) Using a payment institution in order to offer a card backed by gold means a return to the banking system.
FALSE.
The Mastercard is purely a means of payment; it is VeraCash that is responsible for the gold transactions and that guarantees the secure storage of the gold in the vaults of the Geneva Free Ports.
The client’s ability to buy or sell gold remains intact even if they are unable to use their VeraCarte for a few days. Moreover, our customers have access to other means to use their gold: the mobile app to exchange grams of gold between individuals (this will soon be possible with professionals as well) and transfers to their bank account if they need liquid assets.
2) Only a payment institution is able to buy/sell gold as proposed by VeraCash.
FALSE.
Gold is not classified as a financial product. It can be freely bought, sold and stored in France. We rely on the Customs to keep the “Police register” and the Autorité des Marchés Financiers (AMF – Financial Market Authority) because we operate as an intermediary in various commodities.
3) A payment card backed by gold is extremely costly for the customer.
FALSE.
Although VeraCash pays a commission to its partner PFS for each transaction made with the card, the company does not pass this cost on to its customers, which makes it a particularly inexpensive prepaid card to use. Even better, it is more competitive than a traditional bank card when used abroad! Finally, there is no subscription charge to obtain the card, this is now totally free.
4) The payment institution manages the physical inventory.
FALSE.
Our payment institution has no access to our physical stocks of precious materials. This is simply because the core business for VeraCash is managing physical stocks of gold, silver and diamonds on behalf of its customers. The payment institution only communicates with the VeraCash server to ensure that the balance available on the customer’s account is sufficient to cover the requested card payment.
100% compliant with banking regulations
Strict regulations apply in each country, at European and international level, whenever a financial transaction is carried out.
PFS is an English payment institution and is therefore subject to the English financial payments authority: the FCA (Financial Conduct Authority) registered under the number 900036.
In France, the banking sector is regulated by the ACPR (Autorité de Contrôle Prudentiel et de Résolution – Prudential Supervision and Resolution Authority). PFS benefits from the European passport, which means it is allowed to operate in all the European SEPA zone countries, including France, and is therefore recognized as such by the ACPR. VeraCash thus operates its “VeraCarte payment card” activities totally legally.
Finally, PFS is accredited by both Mastercard and VISA to issue payment cards within the SEPA zone.
And the future?
VeraCash does not exclude the possibility of becoming a payment institution itself, once the company becomes large enough and has a sufficiently high volume of transactions.