Fed minutes reinforce softened stance - Moody’s

A report from Moody’s Analytics notes that the Federal Open Market Committee softened its tone in May’s post-meeting statement, a sentiment reinforced within the meeting minutes released Wednesday. Additional rate changes will depend on the lagged effects of monetary tightening on financial and economic conditions.

In the post-meeting press conference, Federal Reserve Chair Jerome Powell detailed those conditions and signalled that the central bank will balance inflation risks and a resilient US labour market against fallout from the banking crisis and the potential of a US debt limit breach. Moody’s notes that slowing, albeit stubbornly, inflation and stronger economic headwinds make the May hike the Fed’s last for now, though policymakers have left the door open for future adjustments if needed.

May’s minutes again stressed the committee's confidence in the soundness of US banks. The liquidity crisis that began with the abrupt failure of Silicon Valley Bank and ultimately took down First Republic Bank has eased meaningfully. Lending from the Fed’s emergency facilities has stabilised in recent weeks as deposit outflows from smaller banks have subsided.

This is crucial for the Fed, the Moody’s report underlines. The central bank’s “separation principle” means the Fed’s lender-of-last-resort activities can be done in isolation from more traditional monetary policy manoeuvring. Despite the theoretical commitment to this principle, lending at favourable rates to banks while also working tirelessly to tighten financial conditions was an incongruity that the central bank is happy to see abate. Moody’s says it is difficult to accurately estimate the tightening that banks are undergoing in response to the banking turmoil, but the waning crisis will better allow the Fed to pause and evaluate the economy’s reaction to its restrictive policy and the heightening lending standards at banks.

The Fed is now more likely to overtighten than to do too little, especially as liquidity problems in the banking system could reignite, the report continues. On the fiscal side, Congress’ failure to raise the debt limit would cause economic fallout beyond the Fed’s ability to contain. Moody’s Analytics expects the fed funds rate to have reached its terminal level for this cycle. The agency’s latest outlook calls for the Fed to start cutting rates in early 2024. Monetary policy will be restrictive through the end of 2025 when the policy rate will return to its neutral rate. Moody’s predicts that credit conditions will remain tight with the 10-year treasury yield averaging 3.7% in the second quarter and peaking in the second quarter of 2024 at 4%. It estimates that yields will then decline.

 

Barclays invests in working capital technology for corporates

Barclays has announced that it is further developing its working capital offering by investing in and implementing Trade Ledger’s working capital orchestration platform. This platform will provide end-to-end credit management automation for Barclays’ corporate clients in the UK and around the world.

Working capital finance solutions such as invoice discounting, asset-based lending and selected debtor finance are crucial credit solutions for businesses, and lenders, during periods of growth and downturn. However, the bank says there has been very little innovation in the working capital finance industry in the past few decades, which has slowed access to this type of finance.

By implementing the Trade Ledger platform, Barclays says it will allow corporates to unlock cash flow with quick access to working capital. By using API-driven SaaS technology, the bank will offer a client-centric onboarding and loan management user experience, eliminating time-consuming and labour-intensive manual processes with access to real-time data - including a client’s accounting platform.

“Businesses need access to reliable, flexible finance now more than ever,” commented James Binns, Global Head of Trade and Working Capital at Barclays. “Investing in and implementing the Trade Ledger platform will allow us to make lending decisions faster and more efficiently, using real-time data drawn from a rich variety of sources, and powerful workflows. This drives faster time-to-money, reducing the cost of funding in supply chains, which has huge benefits for our corporate banking clients and the communities they support.”

 

Coupa updates aim to help businesses reduce financial risks

Volatile macroeconomic environments have exposed vulnerabilities in the banking industry, requiring businesses to have greater visibility into liquidity and mitigate risks more quickly. Updates announced by Coupa Software aim to support this by allowing treasurers to gain full visibility, efficiently manage cash, and proactively monitor liquidity risks at scale.

The updates for Coupa Treasury are designed to improve connections between teams, providing real-time visibility into approved invoices and purchase orders (POs) through automation. With a unified system, finance, treasury, AP, and procurement teams are more informed, can execute effectively, and make timely decisions to redirect payments, the vendor claims.

As soon as a PO is created and an invoice is approved, they appear in the cash projection worksheet. This saves treasurers' time and reduces errors, risk, and resourcing requirements when having to manually track and forecast every outgoing payment. These innovations aim to help businesses leverage more accurate data, make more informed decisions, and move quicker.

“We are using Coupa Treasury to modernise cash management processes,” said John Reilly, Amatus Health vice president of finance. “The platform provides unmatched transparency into company spend. We're able to act swiftly with greater accuracy to optimise working capital, which is our top priority in today's unpredictable economic environment.”

“CFOs and finance teams must be better prepared to respond deftly to macroeconomic challenges and liquidity risks," added Raja Hammoud, Coupa executive vice president of products. “By bringing more AI and automation into Coupa's BSM platform and connecting cash management processes, we're continuing to deliver on our mission of providing treasurers with the best technology to be successful.”

 

IntellectEU becomes AWS Services Delivery Partner for Swift connectivity

IntellectEU is now an Amazon Web Services (AWS) services delivery partner. The firm will support migration of Swift infrastructure to AWS cloud and provide integration and deployment of API channels, along with ISO 20022 advisory services.

The payments industry migration towards a richer data standard, based on ISO 20022, will allow banks to move closer to instant payments, enabling them to offer an improved customer experience to both consumers and corporations. As well as being a requirement, the arrival of ISO 20022 is an opportunity to transform and modernise banking processes by moving them to the cloud.

Standing in the way of this is the need for financial institutions to implement substantive changes to their core processes and supporting systems. As an AWS services delivery partner, IntellectEU says it is uniquely positioned to assist with payment and infrastructure modernisation, and migration programs. The company aims to engage with the wider payments community during Swift Connect Africa in order to gain clarity on the specific needs of the market.

“By working with AWS and IntellectEU, customers can capitalise on their ISO 20022 adoption, to benefit from the processing and exploitation of rich, structured data, while at the same time optimizing their Swift infrastructure costs,” said Sigrid Wiley, ISO20022 Global Lead at IntellectEU.

 

Visa plans global technology and product hub in Poland

Visa plans to open a new global technology and product hub in Poland that will be the first of its kind for Visa in Central and Eastern Europe. The hub will house as many as 1,500 new tech and product hires over the next few years, as Visa invests worldwide to support its 24/7 development model for innovation and drives continued rapid growth in digital commerce and payments.

Poland will serve as Visa’s fifth major strategic global technology and product hub. As a growing location for top technology talent, it builds on Visa’s commitment to innovation and investment in the European region, and in Poland, in particular. Visa says it will find new ways to harness emerging talent in the region, accelerate product development and innovate at scale to bring value to consumers, clients, buyers and sellers around the world.

“Poland’s highly skilled workforce and vibrant IT sector make it an ideal location for us to recruit and collaborate with partners and businesses to develop new payment solutions,” said Rajat Taneja, President, Technology, Visa. “The next wave of our product and innovation roadmap is even more exciting as we focus on the next generation of AI, cybersecurity and the resilience and availability of our network for all who depend on it.”

 

ComplyAdvantage deploys AI to take on payment fraud 

Criminals have never had more avenues through which to defraud people. This has been fuelled by the proliferation of technology ranging from instant messaging to new forms of remittance, like P2P and real-time payments. In an attempt to combat this, ComplyAdvantage has launched Fraud Detection, a solution that uses machine learning algorithms to detect and prevent the menace of transaction-related fraud. 

Fraud Detection identifies over 50 of the most prevalent payment fraud scenarios faced by banks and other financial institutions through the millions of transactions they process every day. The product detects and flags fraud typologies including Account Take Over (ATO), Authorised Push Payment Fraud (APP), Synthetic Identity, and Relationship Fraud. Fraud Detection’s advanced capabilities can also identify “unknown unknowns,” such as fraud typologies that do not match current rule-based scenarios.

When businesses receive an alert to suspicious activity, it comes with a full explanation, streamlining the transaction’s resolution. For example, a transaction could have been flagged because it followed a failed password attempt or because it was at a time of day that wasn’t in keeping with the customer’s location. 

The solution also uses AI and machine learning algorithms to monitor monetary and non-monetary events and look for patterns that indicate possible risks. This includes identity clustering, using behavioural and personal characteristics to identify accounts that are, for example, controlled by a single individual. It also combines financial and non-financial events with natural language processing and machine learning, meaning factors such as location and time can be used to identify suspicious transactions in real-time.

“Fraudsters are fast and creative, always looking for new vulnerabilities they can exploit,” noted Oliver Furniss, Chief Product Officer for ComplyAdvantage. “That’s why fraud is one of the most commonly experienced crimes affecting people every day, causing billions in losses to consumers and businesses. Banks and other financial institutions are constantly playing catch-up. Fraud Detection gives them an effective new way to monitor the millions of transactions they process every day and stop criminal activity in its tracks.”