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Canadian companies experimenting with AI in financial reporting - Industry roundup: 17 May

Canadian companies experimenting with AI in financial reporting

Canadian companies believe artificial intelligence (AI) will enhance their financial reporting, according to a KPMG in Canada survey. Most (87%) companies are already piloting or using AI in their reporting, compared to 72% globally. While more Canadian organisations are exploring the potential of AI, regulatory compliance, skill gaps and data security concerns have the majority (73%) still in the pilot stage, with only 14% using it selectively or widely in their financial reporting, compared to 33%.

Approximately three in five (59%) Canadian corporates are allocating more than 10% of their IT budget to AI, compared to less than half of their global peers (45%). Virtually all (94%) companies expect to grow their investment in AI-related activities, and half (49%) will boost spending by 25% or more in the coming year. Additionally, the use of generative AI is expected to triple in the next year, jumping from 13% to 35%.

Among the many benefits of using AI in financial reporting, Canadian companies put the ability to predict trends and impacts (75%), better data-enabled decisions (66%), and increased data accuracy and reliability (61%) at the top of list. At the same time, the use of AI is translating into greater productivity combined with higher talent acquisition and skills development. Already, more than a third (38%) report greater employee productivity and efficiency expected to jump to 53% in three years.

While more Canadian companies are piloting the use of AI in financial reporting to test and learn, fewer have implemented the technology. The top hurdle to adoption is keeping pace with regulatory and compliance changes (60%) - notably higher than the global average at 44% - followed closely by limited skills and talent (59%) and concerns around data security and privacy (58%).

When adopting AI, companies say transparency (17%) and data privacy (17%) are the most important considerations. Sustainability (45%) and explainability (39%) of AI applications were listed as the biggest blind spots to adoption and receive the least consideration, requiring companies to pay much higher attention when setting up AI governance mechanisms.

Although generative AI is a relative newcomer, the survey finds that Canadian companies are hurrying to implement it in financial reporting. Nearly half (45%) are already piloting generative AI technology, compared to 30% globally. Further, as many as 88% believe that the use of generative AI will become common practice for auditors within two years.

The KPMG report, ‘AI in financial reporting and audit: Navigating the new era’, surveyed 1,800 companies across 10 major markets, including Canada.

“Canadian organisations are ready to take their financial reporting to the next level using technologies like AI, automation and data and analytics to deepen the quality of their reporting for their many stakeholders,” says Kristy Carscallen, Canadian Managing Partner of Audit and Assurance at KPMG in Canada. “The future of financial reporting is here and it's important to embrace it to enable the higher level of insights and transparency that companies and investors expect.”


StanChart completes euro-denominated cross-border transactions on Partior

Standard Chartered has announced the successful completion of euro-denominated cross-border transactions between Hong Kong and Singapore. The bank says this is the first euro settlement bank to go live on Partior, a global unified ledger market infrastructure. This follows from the bank’s investment in the platform in November 2022.

As corporate treasurers and financial institutions demand the implementation of the latest technologies in their treasury operations to achieve optimal efficiencies in their cross-border settlements, it is increasingly important for bank providers to embrace innovation and partnerships that can deliver value-added solutions to their corporate and financial institution clients. 

The client transactions with Siemens AG and iFAST Financial Pte Ltd. took place from 13 to 14 May. It saw the integration and operationalisation of distributed ledger technology (DLT)-based transaction workflows with Standard Chartered’s core banking systems in a real-world commercial setting while making the process transparent to customers’ business-as-usual workflow.

“Siemens AG’s collaboration with Standard Chartered marks a pivotal advancement in the realm of cross-border transactions,” said Heiko Nix, Global Head of Cash Management and Payments, Siemens AG. “Leveraging the groundbreaking Partior platform, we’re not just streamlining cross-bank payments but also covering our geographical footprint for such transactions.”


Profit warnings from UK-listed companies with DB pension schemes finally fall 

The number of profit warnings issued in Q1 2024 by UK-listed companies with a defined benefit (DB) pension scheme decreased for the first time in 12 months, according to EY-Parthenon’s latest Profit Warnings report.

In total, 18 warnings were issued by listed companies with a DB pensions sponsor in Q1 2024 compared to 22 issued in Q4 2023 – a decrease of 4 (18%). However, the 18 warnings in Q1 2024 represent a 29% year-on-year increase from the 14 warnings issued in Q1 2023.

Across all UK-listed companies, 70 profit warnings were issued in Q1 2024, with more than a quarter (26%) of these warnings coming from companies with DB pension schemes. Companies with DB sponsors in the Household Goods and Home Construction sector issued the most warnings in Q1 (three) closely followed by Industrial Support Services and Banks (two).

Almost a quarter (24%) of UK-listed companies with a DB pension scheme have issued a profit warning in the last 12 months. Rising costs, tightening credit and contract issues were cited as the main reasons for warnings for UK-listed companies with a DB sponsor. For the first time since Q1 2022, weaker consumer confidence was not cited as a reason for any warnings from companies with a DB pension scheme. 


Retail investors bullish on Japan in April as anticipation builds for BoJ rate hike

European retail investors displayed bullish trading behaviour towards the Japanese yen relative to the US dollar in April, according to Spectrum Markets SERIX sentiment data. The index reveals sentiment on USDJPY falling to 71, marking its lowest level since November 2019.

This development is also noticeable in other yen currency pairs, such as against the euro and UK pound. The retail investor sentiment index directly correlates with the yen price, which recovered at the end of April after a record low, equivalent to the value of 0.0063 US dollars on 26 April. Additionally, Spectrum’s retail investor sentiment index saw bullish trading behaviour towards the leading Japanese index, Nikkei 225.

The SERIX value indicates retail investor sentiment, with a number above 100 marking bullish sentiment, and a number below 100 indicating bearish sentiment. (See below for more information on the methodology).

“In recent months, the yen experienced a notable decline against the US dollar, but towards the end of April, it showed a brief recovery, possibly in response to early indications of upcoming interest rate hikes by the Bank of Japan,” commented Michael Hall, Head of Distribution at Spectrum Markets.


Small business owners optimistic about future growth

Small business owners demonstrate continued optimism, according to a survey from Chase for Business. Business owners said they are poised for growth through product diversification, increased marketing efforts, and additional hiring. They cited improving economic conditions, increased consumer spending, and innovative business strategies as drivers of their positive outlook.

More than half (58%) of small businesses surveyed said they plan to expand in the next 12 months by introducing new products, increasing marketing efforts, or hiring more staff. This percentage is even higher among Chase clients with 69% saying they plan to expand, versus 47% for Chase prospects.

Despite ongoing challenges, such as supply chain disruptions and labour shortages, a notable percentage of small business owners indicated plans to invest in their businesses in the near term. This includes investments in technology, data analytics, marketing, and employee training to enhance productivity and competitiveness.

The majority of small business owners surveyed indicated they are likely to rely more on data to make decisions, especially for competitor analysis, studying customer buying habits, or finding qualified candidates. The majority (89%) of Chase clients expressed a willingness to use data, versus 78% for Chase prospects.

The survey also highlighted the increased importance of digital transformation for small businesses, with a growing number of respondents saying they plan to leverage artificial intelligence (AI) to streamline decision-making, strengthen their competitive position, reach new customers, and enhance the overall customer experience.

Chase for Business clients showed a higher inclination toward AI compared to prospects with customer support and operations emerging as primary areas of interest. A majority (61%) of Chase clients said they plan to use AI for customer service and support, compared to 45% for Chase prospects. Small business owners are predominately in the exploration phase with AI, though close to half (47%) are in the planning and implementation stages. 

The survey also found small business owners put a high premium on digital platforms for both receiving and making payments and said they would strongly consider switching banks in order to receive same-day ACH payments. Electronic or digital payments are the most preferred method for receiving and making payments, although a notable portion still opt for paper checks. 78% of small business owners surveyed said they prefer to pay employees electronically and 90% said they prefer to receive payment from vendors electronically.

There is a strong preference for prompt invoicing, with 86% of respondents saying timely invoicing was either extremely important or very important to them. Businesses receiving paper cheques said they experience a typical turnaround time of three or more days. Many small business owners (54%) said they would switch banks to receive faster ACH payments, and one out of two (50%) small business owners said they would switch banks to receive digital invoicing online or through a mobile app at no additional cost.


Emirates Development Bank launches cash management solutions

Emirates Development Bank (EDB) has announced the launch of ‘EDB Smart Connect’, a cash management platform that is designed to deliver a seamless omnichannel experience for the bank’s clients across the UAE.

The platform provides a secure relationship banking channel with tailored solutions that aim to put the clients in control of their cash and working capital requirements. It offers a complete overview of all accounts, deposits, and loans with EDB as well as transparency of assets and liability position with the bank.

By offering near real-time status on payments, EDB’s Cash Management solution allows clients to make quick money transfers, including intrabank transfers within a client’s EDB accounts or to an account within the EDB network; domestic transfers within the UAE through a system facilitated and regulated by the Central Bank; and cross border transfers through the Swift network.

The platform’s features include the option for single or bulk payments to suppliers and vendors worldwide; online validation of Swift, IBAN, and SORT codes; advanced security measures; an authorisation matrix; access to banking statements and reports; and actionable insights into loan schedules, account balances, and transactions. The platform also offers real-time access to account information, transaction history, and pending items from any location at any time. 


Paymentology and audax to provide cards-as-a-service solution

Global issuer-processor Paymentology has announced a strategic partnership with audax Financial Technology, a digital banking technology solutions provider backed by Standard Chartered Ventures. The collaboration allows financial institutions (FIs) to seamlessly launch and manage their own branded card programme. 

Billed as cards-as-a-service, or CaaS, banks and FIs can deliver frictionless payment experiences without the complexities associated with traditional methods, including technical integrations into incumbent systems such as core banking, and reduce the total cost of ownership. 

By leveraging audax’s digital banking and banking-as-a-service (BaaS) solutions alongside Paymentology's card processing capabilities, this partnership aims to address a market gap and niche for CaaS in Southeast Asia and the Middle East. It presents a scalable and quick-to-market model that should simplify the initiation and management of the card-issuing process.

“By leveraging audax and Paymentology’s combined expertise, banks can navigate economic uncertainty and bolster their bottom lines by offering innovative payment solutions,” said Michael Breen, Head of Commercial at audax.

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