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China trims lending rates again - Industry roundup: 22 August

Lending rates reduced by China following last week’s unexpected rate cuts

China has reduced its major lending rates once more, according to reports, just one week after cutting two interest rates in an unexpected move. The movement is viewed as an attempt to re-energize credit demand and lift an economy that has been crippled by the prolonged pandemic lockdowns and property debt issues.

Reports indicate that the People's Bank of China (PBOC, China’s central bank) reduced the five-year loan prime rate by 15 basis points from 4.45% to 4.30%, and the one-year loan prime rate was reduced by 5 basis points to 3.65%. The one-year loan prime rate (LPR) is reportedly used for the majority of new loans in China. PBOC also cut the interest rate on the one-year medium-term lending facility (MLF) loans to some financial institutions by 10 basis points last week. The seven-day reverse repo rate was also reduced by 10 basis points to 2%.

According to David Chao, global market strategist for Asia Pacific, Invesco, the recent round of cuts indicates the severity of the property market downturn. He stated that, while the LPR cut may provide short-term relief, easing liquidity alone is unlikely to result in a property market recovery. Lower mortgage rates, he added, have not translated into higher property sales up to this point, owing to skepticism about large developers and the presales model. The central and local governments in China are said to have the financial resources to provide an additional three trillion yuan to uplift the real estate market, according to Chao, who expects additional forthcoming changes to the monetary policy.

Several economists reportedly reduced their growth forecasts for China last week. Goldman Sachs reduced its full-year growth forecast for 2022 from 3.3% to 3.0%, while Nomura reduced its full-year growth forecast from 3.3% to 2.8%. However, according to Clifford Bennet, Chief Economist, ACY Securities, even with 2% GDP growth, China is expected to remain a dominant force as economies in Europe and the United States slow down.

Ranqx seeks to close the US $1 trillion SMB credit and lending gap in North America

Ranqx, a digital lending platform, has introduced its operations in North America in an effort to improve the region's small-to-medium-sized business (SMB) lending system. According to Deloitte research, not a single traditional bank in the US has the online capabilities to offer a simple small business loan application for both unsecured and secured loans with a customer-facing instant decision or offer.

The platform for digital SMB loan origination, decisioning and monitoring now aims to address the region's lending system, which is reportedly estimated to cost the economy nearly US $1 trillion per year.

Ranqx expects to provide banks, credit unions and lenders with access to the small business API first application process, which can be performed electronically. Using real-time accounting, financial and credit data, Ranqx claims the system can digitally underwrite a loan within three minutes.

Ranqx expects to provide a more practical digital application process for SMBs by providing access to real-time, structured SMB loan origination, data points and automated decision-making. The system is said to enable lenders to make more accurate decisions for businesses in a variety of SMB sectors.

Following a partnership with Visa, the company expects to make its digital capabilities available to its network to financial institutions in North America by also partnering with fintech start-ups Uplinq and Mambu.

Dave Lewis, founder and CEO, Ranqx, anticipates that the platform speed will be extremely valuable in the North American market, as credit underwriting in the region can currently take several weeks. The company claims that the digital lending platform has already assisted SMBs and lenders in the Asia-Pacific (APAC) region in achieving cost savings of up to 80% on loans.

MercadoLibre to add cryptocurrency as part of its loyalty program

MercadoLibre Inc, a South American e-commerce giant, launched a new cryptocurrency called MercadoCoin, which is expected to be implemented in Brazil as part of its loyalty program.

Reports indicate that clients can expect to earn MercadoCoins as cash back when making purchases on the e-commerce platform. Customers can then use their digital currency, which adheres to Ethereum's ERC-20 token standard, to make new purchases or trade it on the company's MercadoPago financial services division. The move comes as competition in Brazil's e-commerce grows (Sea Ltd.'s Shopee reported a 270% increase in revenue in the 2Q22 while China's AliExpress is gaining traction).  However, MercadoLibre's country lead Fernando Yunes stated that the company is focused on long-term opportunities rather than short-term market movements.

The cryptocurrency issued by MercadoLibre is expected to have a fixed initial value of $0.10 prior to becoming exposed to market fluctuations. It became accessible to 500,000 clients in Brazil last week and is expected to reach 80 million of the company’s clients by the end of August 2022.

Reports indicate that the digital currency would not be traded on any other exchanges currently other than MercadoPago.  

Caribbean-based NIBank revolutionizes its business units by transitioning to Banking-as-a-Service via Temenos

North International Bank (NIBank) will reportedly use Temenos, a Switzerland-based enterprise software company providing a banking cloud system, to build its own banking-as-a-service (BaaS) platform. The Caribbean bank, which is based in Antigua and Barbuda but also serves clients in Europe and Latin America, recently began operating with its new technology partner Temenos to digitally revamp its retail banking and private wealth business units.

Temenos is providing NIBank with cloud-agnostic technology needed for financial trends such as BaaS. Temenos reportedly supports daily transactions, wealth management, and lending capabilities.

Financial institutions can expect to combine Temenos banking services and third-party solutions with composable banking capabilities. NIBank plans to develop a fully integrated ecosystem of technology and financial services partners via the platform's openness and built-in APIs.

NIBank states that they have built a clientele on the availability of prepaid and credit cards. However, its investment in the Temenos platform has enabled them to reach 25,000 active cards. The business also announced its plans to strengthen ties with card industry giants MasterCard and UnionPay International. Jordán Silva Tugues, CEO, NIBank, commented that the bank’s technology investment and Temenos’ flexibility and expertise will enhance their online customer experience, boost productivity, and accelerate them to the forefront of digital banking.

UPI’s real-time payments solution to operate intact per RBI

The Reserve Bank of India (RBI) stated that the Unified Payment Interface (UPI), an instant real-time payment system developed by National Payments Corporation of India (NPCI), and the Immediate Payment System (IMPS), a fund transfer system, have similarities such that the UPI's fees for fund transfer transactions should be comparable to those charged by the IMPS.

The Finance Ministry clarified on 21 August 2022 that the UPI is a digital public good and that the government has no plans to charge for it. Additionally, the statement alleviates concerns raised by the RBI's discussion paper on payment system charges, which suggests that UPI payments might be subject to a tiered charge based on various amount brackets.

Currently, there are no fees associated with UPI transactions. These transactions reportedly adhere to a zero-fee framework mandated by the government since January 1, 2020. Accordingly, both users and merchants in the UPI incur no fees. The government is continuing to provide financial support for the ecosystem throughout this year by encouraging further adoption of digital payments and the promotion of cost-effective, user-friendly payment platforms.

Klarpay AG introduces more than 70 currencies to facilitate cross-border global payments

Klarpay AG, a Swiss fintech, launched a cross-border business payment solution with management capabilities, available through its payments dashboard or through a single API integration. The firm expects that this will lower merchant clients' costs and accelerate cross-border payments. Klarpay clients can expect to make secure cross-currency outbound payments from their accounts to over ninety countries and over seventy currencies.

Martynas Bieliauskas, CEO, Klarpay, commented that business customers of Klarpay can expect to take advantage of a large network when initiating efficient, quick, cost-effective and secure cross-border international payments. Klarpay offers a single global connection through which businesses can transfer funds directly to a recipient's bank account. Simultaneously, businesses can expect to achieve complete transparency into fees and applicable exchange rates, in addition to the timing information from the initial delivery of funds.

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