CFOs want tech-savvy successors with operational experience

CFOs currently have a cautious outlook, as most indicate the economy is their most concerning external risk, according to the Q2 2024 edition of Deloitte’s CFO Signals report. This sentiment was perhaps most apparent in CFOs’ risk appetite: only 26% of surveyed CFOs believe that now is a good time to be taking greater risks.

CFOs offer differing opinions in their valuation of US equity markets. Just over one-third (38%) consider US equity markets undervalued. Nearly as many (34%) believe them to be overvalued. A large proportion of CFOs say neither debt nor equity financing is desirable. The lack of enthusiasm for debt financing may be due to high borrowing costs and uncertainty about interest rate cuts.

CFOs are also just as split over their companies' financial prospects, with 38% expressing optimism, while 39% demonstrate pessimism. CFOs’ greatest external and internal concerns reflect a challenging business landscape. While talent remains at the forefront of CFOs’ most worrisome internal risks, GenAI adoption was this quarter's top internal concern. Externally, concerns about the economy, geopolitics, and cybersecurity are the top three worries for CFOs.

Despite the attention paid to succession planning in the C-suite, one in four respondents indicated that their organisations do not have a formal CFO succession plan. This is somewhat surprising given that the survey group consists of businesses with at least a billion dollars in revenue. When asked what items should be the top priority when developing a framework for CFO succession planning, 27% of CFOs point to the creation of a role profile. Only 12% of surveyed CFOs say their companies had already developed such a framework to find a successor.

The top three actions CFOs plan to take to prepare their successor include placing them in managerial training programs (43%), working with successors to create a developmental/transition plan (39%), and mentoring/coaching them on how to do the job (39%).

The skillset desired for CFO successors underscores the changing nature of the CFO role, as a plurality of CFOs (37%) view operational experience as one of the three most important factors in identifying potential replacements. That was followed by familiarity with new technologies (30%) and network leadership (30%). More traditional financial skills, like accounting (28%) and financial planning and analysis (FP&A - 24%), did not make the top three.

Surveyed finance chiefs believe their ability to explain results to board members in clear, simple terms is among the most valued skills by boards when considering a CFO for board membership. A significant number of CFOs on corporate boards cite having a larger say in shaping a company's strategy (22%) as the main reason for their interest - another sign of the evolving role of the CFO.

 

Competition fuels innovation in corporate bond new issuance process

Although technology is transforming the way companies issue corporate bonds, the mechanics of distributing newly issued bonds remain far less electronic and automated than many believe it should be, according to a new report from Coalition Greenwich.

“The buy side continues to want more from their new issuance management platforms, including OMS integration, access to a broad list of dealers and improved reference data, among other factors,” said Kevin McPartland, Head of Research at Coalition Greenwich Market Structure & Technology and author of ‘The Corporate Bond New Issuance Process: A Buy-Side View’.

Overall, investors are divided on the impact innovation has had on the corporate bond new issue process, with 47% of corporate bond investors believing that technology has made the new issue process more efficient over the past year and the remainder saying the status quo has not changed much, despite new technology offerings.

“There are several reasons that investors might question the efficiency gains of recent innovation. For example, much of this market is still managed by spreadsheets shared via email and chat,” McPartland noted. “Our analysis of market structure changes over the past decade suggests that when processes get better, trading desks are very quick to raise the bar - meaning today’s inefficient is yesterday’s efficient.”

Competition among technology providers is the primary driver of innovation in the corporate bond market - and will remain so. While no fewer than seven trading venues compete for corporate bond volume, the fight to manage the buy-side’s new issuance management process is dominated by only three: Bloomberg, DirectBooks and S&P (formerly Ipreo).

“The presence of a smaller and more focused DirectBooks competing with the scale and reach of Bloomberg and S&P has created a competitive landscape that will bring end users quicker innovations at lower prices than would otherwise be possible,” concluded McPartland.

 

International vendors that simplify invoicing are in high demand 

Improving the cross-border B2B payment experience can directly boost customer experience and be an important factor in driving business growth, according to research from Flywire Corporation. The survey details the business advantages of providing a digital, localised and seamless payment experience for a B2B vendor’s international customers. And importantly, those responsible for paying international invoices are eager for innovation, with 94% of those surveyed saying their organisation would embrace a change that eases the cross-border payments process.

Business payers noted that dealing with foreign exchange (FX) market complexity holds back their company’s growth, introduces delays and causes problems in paying invoices to key partners. More than four of every five respondents (82%) have waited to pay a vendor because of FX complexity. Some 88% of respondents said dealing with bills in another currency sometimes delays payment to vendors, while 84% said that when there are no local options to pay, the process takes much longer. Some of the top problems payers experience when making cross-border payments include managing FX (66%) getting refunds (64%) accessing local customer support (57%) and more.

When asked what would help international customers better meet the challenges of paying their invoices, security was top of mind across all regions, with 88% saying they worry about security or fraud when making cross-border payments. Additionally, 48% said better visibility into FX fees and being able to track payments would help them meet challenges, and 55% said they wanted an automated way to make cross-border payments.

Survey respondents showed clear preferences for vendors that pay attention to payment processes. 95% of those surveyed said they pay quickly when a vendor makes the payment process easy. International customers surveyed also said they're more likely to do business with a company that supports local payment methods (89%) payment in local currency (87%) and easier cross-border payment processes (94%).

At the same time, difficulty paying vendors can create business risks, with 82% of survey respondents saying this difficulty impacted their ability to grow, strained relationships with colleagues (60%) and made it harder to do their jobs (74%). 70% of companies buying from international vendors even stopped doing business with them because of a poor cross-border B2B payment experience.

 

€100m SACE push facility provided to TDB 

The Eastern and Southern African Trade and Development Bank Group (TDB Group), SMBC Group (SMBC), Citi, and Italian export credit agency SACE have announced a €100m SACE Push Facility. This syndicated facility aims to support TDB’s mission of fostering regional growth and integration while increasing Italian procurement through the involvement of TDB and its clients.

This long-term facility, guaranteed by SACE to a multilateral development bank, includes SMBC and Citi as the mandated lead arrangers, SMBC as bookrunner and SACE agent, and SACE providing the ECA cover (insurance).

The facility aims to support various sectors across TDB’s member countries, promoting economic growth, job creation, and sustainable development. By encouraging the involvement of Italian companies in projects within member states, the agreement aims to foster cross-border cooperation and economic integration in alignment with the African Continental Free Trade Area (AfCFTA) and the Sustainable Development Goals (SDGs).

In addition to supporting member countries, the SACE Push Facility aims to facilitate Italian procurement by involving TDB’s borrowers in matchmaking events with Italian suppliers and encouraging participation in bidding and tendering for services and products.

 

ACI Worldwide and STET hit record high for European instant cross-border transactions 

Instant cross-border payments processed by STET, a European clearing and settlement system (CSM), and ACI Worldwide have reached a record high. STET, which processed more than 35 billion transactions in 2023, representing a daily average of more than €25bn, processed more than 50 million cross-border real-time transactions over the last 12 months, a number that is expected to increase by more than 50% in 2024.

STET and ACI Worldwide have been working together since 2017, offering banks and payment service providers (PSP) across Europe a seamless, end-to-end solution for the Single Euro Payments Area (SEPA) Instant Credit Transfer (SCT Inst) scheme. This facilitates the transfer and settlement of instant payments and contributes to making instant payments a strong foundation for a unified European payments system. 

STET’s platform uses ACI Low Value Real-Time Payments as a SaaS service, offering routing and processing capabilities to enable its 20 member banks to connect directly to the European schemes TIPS and RT1. This provides full pan-European reachability and interoperability for instant payments.

According to ACI’s 2024 Prime Time for Real-Time report, European transactions are expected to rise from 17.2 billion in 2023 to 38.6 billion in 2028. By 2028, instant payments are forecast to account for 13% of all electronic payments in Europe, up from 8% in 2023.

 

UAE and Czech Republic look to foster bilateral trade

Etihad Credit Insurance (ECI), the UAE federal export credit company, has signed a strategic partnership agreement with the Czech Republic’s Export Guarantee and Insurance Corporation (EGAP) to create a framework for bilateral reinsurance obligations and provide insurance facilities to companies within the UAE and the Czech Republic. This will contribute to promoting bilateral trade between the two countries during the next phase. 

The agreement calls for robust cooperation across a broad spectrum of duties, such as addressing risks related to sovereign and quasi-sovereign debtors, exploring innovative avenues in improving flexibility for private sector debtors, and offering insurance facilities for export agreements that are per the official guidelines of the Organisation for Economic Co-operation and Development (OECD) Arrangement on Officially Supported Export Credits. Furthermore, this agreement cultivates a strong foundation for bilateral cooperation in areas of common interest, which is beneficial to both countries’ export and foreign trade industries.

“The UAE enjoys growing and developing economic relations with the Czech Republic, where the two countries have succeeded in their joint efforts to build sustainable and diversified partnerships and agreements in many economic and investment sectors,” said Abdulla Bin Touq Al Marri, UAE Minister of Economy and Chairman of ECI Board of Directors. “The new partnership agreement with EGAP complements these efforts as it comes within the framework of the distinct economic partnership between the two countries.”

 

Fed in no rush to expand operating window of large-value payments services

The Federal Reserve Board has announced that it will extend the comment period on its proposal to expand the operating days of the Federal Reserve Banks' two large-value payments services until 6 September this year.

The proposal extends the operating days of the Fedwire Funds Service and the National Settlement Service (NSS) to include weekends and holidays. The Board said in a statement that it had extended the comment period to allow the public more time to analyze the proposal and prepare their comments. Comments on the proposal were originally due by 8 July 2024.

Currently, the Fedwire Funds Service and the NSS operate Monday through Friday, excluding holidays. Under the proposal, both services would operate every day of the year. The operating hours would remain the same, with the Fedwire Funds Service open 22 hours per day, and NSS open 21.5 hours per day.

 

Lloyds Banking Group re-ups card contract with Visa

Lloyds Banking Group and Visa have announced the renewal and expansion of their 40-year partnership in the UK. Visa is becoming Lloyds Banking Group’s leading scheme provider for the Lloyds Bank, Halifax, Bank of Scotland and MBNA brands.

Under the partnership, Lloyds Banking Group and Visa plan to launch a series of products and services across the Group’s brands designed to help customers best manage their financial and lifestyle needs with the agreement also enabling even greater use of Visa’s fraud prevention capabilities.

Visa will continue to provide all Lloyds Banking Group’s business and consumer debit cards, including over 30 million Visa credentials already in issue, as well as the majority of commercial and consumer credit cards, with around 10 million cards migrating to Visa by the end of 2026.