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ChatGPT can predict future interest rate decisions - Industry roundup: 25 October

ChatGPT can predict future interest rate decisions

An academic study has demonstrated the ability of large language models like ChatGPT to predict future interest rate decisions by central banks. The study, conducted by researchers from Sheffield Business School at Sheffield Hallam University, analysed speeches from Bank of England Monetary Policy Committee members before interest rate voting decisions. 

Using ChatGPT, the researchers classified each speech as dovish, neutral or hawkish based on the tone and content. This classification was then used in an econometric model which could successfully predict how each member would vote at the next one or two policy meetings.

The results showed that ChatGPT sentiment analysis of the speeches was a statistically significant determinant of future voting behaviour. Committee members who gave more neutral speeches were likelier to vote for interest rate hikes at subsequent meetings.

By leveraging natural language processing and textual analysis, ChatGPT demonstrated proficiency in classifying the nuanced language of central bankers. The technology was able to grasp the intricacies of ‘Fed speak’ and relate speech content to eventual policy actions.

The researchers suggest this approach could be extended to study other aspects of central bank communications, like forward guidance. It also illustrates how publicly available AI like ChatGPT can empower economic analysis and financial decision-making.

Dr Drew Woodhouse, senior lecturer in economics at Sheffield Business School and lead author of the research, said: “Our findings highlight the predictive potential of tools like ChatGPT for processing human beliefs and expectations. This has major implications for forecasting policy decisions and modelling economic expectations.

“As generative AI capabilities expand, these tools hold promise for gaining insights from complex communications and texts across many fields. Our findings reveal new opportunities at the intersection of technology, language and economics.”


Visa solution aims to simplify commercial virtual card acceptance

Visa has announced the forthcoming pilot launch of its AR Manager, an innovation that is designed to reduce the friction commercial merchants experience with virtual card acceptance.

A recent study from the Institute of Commercial Payments found that 84% of commercial merchants cited getting paid more quickly as a critical reason for utilising virtual cards as a preferred acceptance mechanism. Today, however, virtual card acceptance can be a manual, time-consuming and costly process – potentially occurring dozens of times each day and often with different protocols for each bank a merchant receives payments from.

Visa AR Manager automates the virtual card transaction process by retrieving card account details, initiating the authorisation and clearing steps on the supplier’s behalf, and then providing meaningful and timely reconciliation data to close out invoices in the supplier’s enterprise resource planning (ERP) system.

The solution will be available for pilot customer onboarding beginning in November, with availability expanding more broadly into the new year.


Casey’s General Stores wins the AFP 2023 Pinnacle Awards

Casey’s General Stores has won the AFP 2023 Pinnacle Awards Grand Prize for excellence in treasury and finance. The Pinnacle Awards Grand Prize, sponsored by U.S. Bank, was presented during AFP 2023 in San Diego, California. The Grand Prize was chosen through a vote by treasury and finance professionals.

Casey’s General Stores’ submission centred on improving its antiquated branch banking model, which was consuming valuable resources and having a profound impact on both store operations and the Store Support Center.

Casey’s implemented a smart safe program in its 2,550 stores across 16 states. The fully scalable bank-agnostic solution uses just one platform partner and enables a standard, consistent process. As a result of this solution, Casey’s has seen a store labour reduction of six hours per store per week, annual labour savings of approximately US$10.4m, and US$2m in annual bank fees saved.

The runners-up for the Grand Prize were Delta Air Lines, Inc. and Ultradent Products, Inc. Along with Casey’s General Stores, AFP says these organisations were selected as finalists for their ability to demonstrate innovative solutions that advance their organisations and the treasury and finance profession.


Euroclear launches DLT solution for the issuance of digital securities

Euroclear has launched its Digital Securities Issuance (D-SI) service, part of its Digital Financial Market Infrastructure (D-FMI) strategy. The service enables the issuance, distribution and settlement of fully digital international securities - digitally native notes (DNN) - on DLT.

The inaugural DNN was issued by the World Bank (International Bank for Reconstruction and Development - IBRD), raising €100m to support the financing of the World Bank’s sustainable development activities and was listed on the Luxembourg Stock Exchange. Citi’s Issuer Services acted as the issuing and paying agent, TD Securities as the dealer, and Euroclear Bank as the issuer Central Securities Depository.

The D-SI service operates as part of Euroclear’s D-FMI DLT platform. The D-FMI is connected to the traditional settlement platform of Euroclear for secondary market operations on the DNN, granting investors full access to trading venues and liquidity management facilities. A key benefit of this service is full CSDR compliance.

Euroclear’s development of its D-FMI platform is an integral piece of the group’s overall strategy to advance digital infrastructure across financial markets. Recognising the potential of DLT to transform global capital markets, the launch is designed to support the expansion of digital capabilities in the post-trade space.

“A transition to digitisation is underway in the capital markets,” commented Anshula Kant, Managing Director and Chief Financial Officer, World Bank Group. “Euroclear’s new service offers issuers and investors an opportunity to take another step along this journey. The World Bank, as the issuer of the world’s first blockchain bond, is pleased to now be the first issuer to participate in this new service which offers full scalability and transparency.”


Nium product aims to solve transparency challenges of global money movement

Nium has announced Global FX, which it says allows guaranteed and competitive FX rates. This includes the ability to lock and hold an FX rate for up to 24 hours and settle FX conversions on a future scheduled date, which should help businesses mitigate the risk of currency fluctuations and improve cash flow.

Global FX allows businesses to hold funds in over 60 different currencies, enabling instant payments to employees and vendors worldwide. Nium says its transparent pricing structure ensures businesses can conduct FX trades with a simple, single markup. The company also introduced the FX rate comparison calculator, which enables real-time access to the last interbank rates and historical rates so costs from other providers can be compared and potentially reveal the hidden markups and fees.

Additionally, Nium announced a suite of products and features focused on transparency, predictability, and reliability. These include the Chronometer, which optimises payment routing for time, market availability, and cost efficiency with artificial intelligence and machine-learning-driven payment delivery estimation. The payment routing solution is designed to address the challenges of managing manual payment processes through multiple intermediaries. 


China Construction Bank and Thunes collaborate on cross-border payments

B2B payment infrastructure platform Thunes and China Construction Bank (CCB) have announced a partnership to collaborate on cross-border payments. Thunes will support the bank to enable international payment acceptance for Chinese small to medium-sized businesses (SMBs) and introduce outbound cross-border payments for CCB’s consumers. Both products are expected to be launched in 2024.

In June 2023, Thunes inaugurated its Beijing office and deepened its commitment to empowering Chinese businesses and consumers with faster and more affordable transactions with key international markets.

“Financial institutions like China Construction Bank play an increasingly vital role in providing financial services in China and beyond,” said Peter De Caluwe, CEO, Thunes. “Our collaboration with CCB will help the bank better support their customers by working interoperably across currencies and borders.” 


BNY Mellon launches white labelling service for liquidity platform

BNY Mellon has announced the launch of LiquidityDirect’s white labelling service offering, providing financial institutions a liquidity management solution for their end clients. Financial institutions seeking to include short-term investments in their suite of offerings can now leverage LiquidityDirect's technology and services through a single sign-on for their clients.

The bank’s liquidity platform supports almost US$15 trillion in annual transaction flow for more than 6,000 institutional investors, offering various solutions to meet dynamic investment and risk criteria.

It was also announced that Morgan Stanley Investment Management (MSIM) will be the first financial institution to use the white labelling service offering. The collaboration between BNY Mellon’s platform and MSIM’s global client base is the first of its type. BNY Mellon says it will set a new industry standard for delivering efficient cash management solutions to clients.

“The strategic collaboration between BNY Mellon and Morgan Stanley Investment Management is designed to deliver a highly differentiated combination of technology, seamless connectivity, and dedicated client service to treasury groups globally,” said Fred McMullen, Co-Head of Global Liquidity, Morgan Stanley Investment Management. “This will allow us to increase the depth of our platform technology solutions and widen the reach of our offering to our client base.”


Basware completes Glantus acquisition

Basware has announced the completion of its acquisition of Glantus, which brings together two forces in AI-driven accounts payable (AP) automation and financial technology.

Earlier in August, Basware made an offer to purchase the entire share capital of Glantus Holdings plc, which was sanctioned by the High Court of Ireland on 10 October 2023 and completed and became effective on 18 October 2023. Following the successful acquisition, Glantus has been delisted from the London Stock Exchange. The Glantus board and shareholders welcomed the acquisition.

A statement said that Basware and Glantus will create a joint offering, delivering customers complete coverage and a data-driven view of their invoicing and financial operations. Basware will benefit from Glantus' expertise in audit recovery and fraud prevention software, providing demonstrable customer value for finance and accounting teams. This could add cost-saving opportunities and an extra layer of security through fraud detection, overpayment error reduction and reconciliation reporting. 


Modern Treasury adds AI to increase speed and efficiency of cash reconciliation

Modern Treasury has revealed how its AI Reconciliation Suggestions tool will enhance reconciliation, increasing the efficiency of its platform and speed of cash reconciliation for customers. Deploying AI for specific use cases, especially those that involve massive data sets that machines are better equipped to parse than humans, should help the company’s customers and their finance teams improve speed and efficiency to achieve business outcomes such as 100% same-day cash reconciliation while maintaining the necessary human oversight.

With Reconciliation Suggestions, an AI algorithm makes suggestions in ambiguous cases when the core Modern Treasury reconciliation engine, which is entirely deterministic, can’t proceed because it can’t achieve 100% certainty. In these cases, the AI narrows down reconciliation choices for a human to review and make. This AI plus human approach reduces the time spent on reconciliation, especially when operating at scale.

“Fast, accurate cash reconciliation is the foundation of all financial reporting and business insight,” said Sam Aarons, CTO and co-founder of Modern Treasury. “At its core, reconciliation is a math problem very well suited to AI. We built AI into a workflow humans oversee because we’re reconciling billions of dollars, where matches have to be 100% accurate. We only introduce technology to our platform that retains or improves those standards. Appropriate guardrails are always important when using AI, but are must-haves for financial data and money movement.”


PIMFA continues to urge for FCA to have a role in combatting fraud

PIMFA, the UK trade association for wealth management, investment services and the investment and financial advice industry, has repeated its call for the Financial Conduct Authority (FCA) to have a more significant role in combatting fraud in response to a call for evidence from the Home Affairs Committee.

In May 2022, PIMFA, giving evidence to the parliamentary committee scrutinising the Online Safety Bill, urged that the FCA should have the authority to act over fraudulent user-generated content that appears on social media and search engine platforms. 

The establishment, through the Online Safety Bill, of a ‘Duty of Care’ on social media websites and search engines in the UK is a hugely important principle and a victory for all those, including PIMFA, who have campaigned over the years for this principle to be established in law. It will help prevent fraudulent content from appearing on websites and reduce scam adverts and fake celebrity endorsements. But the Bill means such communications will be regulated by Ofcom.

PIMFA believes the FCA should be allowed to provide strategic support to Ofcom to prevent harm being introduced to financial services consumers and prevent scam adverts swiftly. Such a partnership between the FCA and Ofcom would ensure that Ofcom has the expertise to identify breaches, making the Online Safety Bill more effective in preventing fraud.

PIMFA is also calling for the Government to create a single body responsible for fraud across the country to ensure a more holistic and organised approach to tackling what is the UK’s most widely reported crime. This would help to resolve the overly complex approach to tackling fraud that currently exists with multiple agencies and government departments holding various responsibilities. While the recently announced ban on cold calling is welcome, PIMFA also called for much greater international cooperation in combatting fraud given its global nature.


TDB and ITFC to promote trade finance between common member states in Africa

The Eastern and Southern African Trade and Development Bank (TDB) and the International Islamic Trade Finance Corporation (ITFC), a member of the Islamic Development Bank (IsDB) Group, have signed a memorandum of understanding (MoU) to strengthen trade between Organisation of Islamic Cooperation (OIC) member states and those of TDB, during the World Bank Group and International Monetary Fund Annual Meetings in Marrakech, Morocco.

Under the MoU, TDB and ITFC will harmonise their efforts to provide robust trade finance solutions to serve their respective African member countries better. These solutions encompass financing products such as Murabaha, syndications, co-financing, risk-sharing, and Islamic factoring. Additionally, this relationship will explore opportunities for technical assistance and capacity building for the private sector and SMEs based in common member states.

“Our reinforced cooperation will enable our institutions to optimise the impact of our financing,” said Mary Kamari, TDB Group Corporate Affairs and Investor Relations Executive. “We also look forward to cooperate on capacity-building and technical assistance, so as to support our private sectors in harnessing existing opportunities.”


BBVA to integrate its tech companies

BBVA has announced the creation of BBVA Technology. This new company is to gather the experience and talent of the Group's three tech firms: BBVA Next Technologies, BBVA IT España, and Datio. The new company will have a more strategic focus while offering career development opportunities for the bank’s tech teams.

With offices in Madrid, Barcelona and Bilbao, BBVA Technology will start operations next year with some 3,000 employees from the three previous BBVA firms. Current CEO Ricardo Jurado will be CEO of the new company once the integration process has concluded.

BBVA Technology's primary focus will be on software development transformation, one of the strategic priorities of BBVA Engineering for the coming years. The new company will consolidate the teams’ technical expertise, with access to new career development opportunities and professional growth, while concentrating the company’s processes into a single model. A statement issued by the bank said that the evolution towards a single brand intends to foster the attraction of new talent and the creation of a new value proposition, aiming to reinforce the satisfaction and loyalty of current teams.

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