August services expansion offsets manufacturing weakness

August Purchasing Managers’ Index (PMI) data from across the world pointed to a widening disparity between the manufacturing and service sectors. Service providers saw an accelerating upturn, with activity levels rising at one of the fastest rates since mid-2023. In contrast, conditions in the manufacturing sector deteriorated further, with output, new orders and employment all contracting.

The J.P.Morgan Global Composite PMI Output Index – produced by J.P.Morgan and S&P Global in association with ISM and IFPSM – posted 52.8 in August, up from 52.5 in July and above the neutral 50.0 mark for the tenth month in a row.

Of the fifteen nations for which August PMI data were available, only three registered declines in combined manufacturing and services activity. The exceptions were downturns in Germany and Canada and stagnation in Kazakhstan. India saw the strongest growth overall, followed by the US. Rates of expansion were relatively mild in China and the euro area as a whole.

Twelve of the nations covered (the exceptions being the UK, Canada and Kazakhstan) saw their service sector outperform manufacturing in August. The difference of 3.9 between the Global Services Business Activity Index (53.8) and the Global Manufacturing Output Index (49.9) was the widest in favour of services since June 2023.

Global service sector output increased for the nineteenth consecutive month in August, supported by the steepest gains in new business since June 2023. Financial services remained the strongest performing sub-sector, despite seeing activity growth ease sharply to its weakest since February. Business services activity rose at the fastest pace in 16 months, whereas consumer service providers saw activity stagnate following a six-month sequence of expansion.

Signs of weakness continued to build in the manufacturing sector, however, with production and new order volumes both contracting. Mild contractions in the intermediate and investment goods categories were only partly offset by a slight increase in consumer goods output.

 

How investors could use generative AI for a financial edge

For generative AI models largely trained on “stationary” data - unchanging over time - the financial markets present a unique challenge. Companies and markets change rapidly. Given this, traders and investors may eventually ask: Can AI provide alpha - a fresh edge in financial markets? In a note published by the Goldman Sachs Global Institute (GSGI), Dimitris Tsementzis, the head of Goldman Sachs' Applied Artificial Intelligence team in the engineering division and a 2024 member of the GSGI's fellows program, identifies some potential sources of alpha.

Generative AI can digest more raw and diverse data than financial models have traditionally used. “Instead of creating a ‘sentiment factor' by counting positive vs. negative mentions of a company in news articles,” Tsementzis writes, an AI model might directly imbibe raw news articles, and even the images and data in those articles, to learn how to gauge market sentiment beyond just positive and negative mentions.

One AI model could carry out all tasks performed by many separate specialised financial models. Instead of having a pricing model predicting the price of a security, a separate market impact model to compute the slippage of trading that signal, and yet another model that suggests a hedge, a single AI agent could compute it all.

With AI, discretionary portfolio managers could use the kinds of technological capabilities usually employed by systematic funds, such as large-scale analyses of data through code, while retaining their own existing human edge.

Generative AI could lead to more specialised foundation models, such as for analysing financial time series. “You can imagine a future when the idea of pricing a security is purely a matter of technology vs. math,” Tsementzis writes. The human edge - the “art,” as he calls it - would then lie in the particular kinds of data selected for the model to work on, rather than the equations that the model employs.

 

Jaggaer Pay and Bottomline partner to bolster procure-to-pay offering

Enterprise procurement firm Jaggaer has partnered with Bottomline to integrate the latter’s Paymode payment network and Premium ACH offering, along with virtual card and other payment modalities, into the Jaggaer Pay B2B payment solution.

Traditional payment methods can be inefficient, prone to fraud, and fail to capture rebate opportunities. Bolstered by Paymode, Jaggaer Pay hopes to address these challenges by significantly reducing the manual and repetitive tasks that AP teams typically handle throughout the invoice lifecycle. This optimisation streamlines the entire payment process and enhances cash flow management. With end-to-end automation - from supplier onboarding and invoicing to payment execution - Jaggaer’s platform leverages business process automation and seamless platform integrations for B2B payments.

Paymode uses over 300 data points to validate suppliers and prevent fraud, including common vectors such as business email compromise. Additionally, network suppliers can choose to accept virtual cards and Premium ACH, providing payers with maximum rebate opportunities.

Beyond the benefits to Jaggaer Pay customers, the Paymode network offers potential benefits to suppliers. By accepting more payments digitally, suppliers can enjoy a reduced risk of financial fraud, enhanced reporting, and lowered overall acceptance costs. 

 

Magnetiq Bank to offer Visa B2B Connect service

AS Magnetiq Bank, a Latvian bank dedicated to fintechs, startups, and e-commerce service providers, has become one of the early European adopters of Visa B2B Connect.

Visa B2B Connect is a multilateral network solution for financial institutions and their corporate clients, offering banks an alternative to the traditional correspondent banking network to facilitate business-to-business cross-border payments.

E-commerce merchants and standard bank customers will now be able to make outbound payments to their business partners over the network in various currencies, including GBP and USD.

In a statement, Antons Kononovs, Acting Chairman of the Board of Magnetiq Bank, said that this innovation will provide the bank’s clients with expanded opportunities for international payments, fostering business growth and enhancing competitiveness in the global market.

 

IATA and Outpayce help airlines accept account‑to‑account payments

IATA and Outpayce are partnering so airlines can now accept payments made with IATA Pay through Outpayce’s Xchange Payments Platform (XPP).

IATA Pay is an alternative account-to-account form of payment for travellers to pay for air tickets purchased online by directly debiting their bank account. It leverages the new account-to-account rails and regulations developed by countries around the world, such as India (UPI), the Netherlands (Ideal), Brazil (PIX) and the Philippines (QR Ph). Currently available in over 30 countries, IATA Pay improves the speed and security of payments while reducing payment acceptance costs.

When a traveller reaches checkout on an airline’s website, the new account-to-account payment service allows them to select their bank or scan a QR code depending on the country. IATA uses the payment and bank details or the QR code’s approval to request a transfer from the passenger’s account, and the funds are transferred using the banking rails. IATA settles the funds with the airline the following day. Philippine Airlines has become the first carrier to implement IATA Pay through Outpayce’s platform.

“Outpayce's XPP system helps us to intelligently accept a wide range of payment methods used by travellers across the international markets we serve,” commented Anna Isabel Bengzon, Chief Financial Officer, Philippine Airlines. “Moreover, we can access various payment methods and partners through XPP, with detailed analytics on the performance of payment flows and back-end reconciliation support.”