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Citi uses artificial intelligence to tighten controls on digital payments – Industry update: 12 December

The Bank of London participates in Bacs, broadening its financial ecosystem

The Bank of London has joined the Bankers' Automated Clearing Services (Bacs) payment network, which enables UK banks to make account-to-account transfers. The network supports transactions of less than £20 million in the UK and its Crown Dependencies, including the Isle of Man, Guernsey, Jersey and Gibraltar, with 6.5 billion payments totalling more than £5 trillion last year. In addition to direct debits, the primary users of this service are reportedly businesses that make payments for salaries, benefits, dividends and suppliers.

The Bank of London has become a Directly Connected Settling Participant (DCSP) of Bacs, which Pay.UK owns and operates. Felipe Hillard, Chief Customer & Product Officer, The Bank of London UK, commented that the Bank of London is one of only 31 Bacs participants in the UK and one of only a few DCSPs, gaining access to a broader financial landscape as the bank integrates with other rails, including CHAPS, SEPA and others in the coming months.

Pay.UK, a recognized operator and standard organization, is also tasked with overseeing the Faster Payment System, which permits round-the-clock instant GBP transfers between UK bank accounts. The Bank of London reportedly joined the Faster Payment System as DCSP in March 2022.

TreviPay's acquisition of Apruve aims for flexible and effective payments for SMEs

TreviPay, a US-based payments provider, has acquired Apruve, a Minneapolis-based B2B payments processor, to provide its clients with faster and versatile payment options as part of its continuous expansion plans. TreviPay aims to use Apruve's suite of payments technology to enhance its own systems while satisfying the trade credit requirements of the manufacturing industry, stated Brandon Spear, Chief Executive Officer, TreviPay.

Spear claims that by extending TreviPay's reach to sellers and buyers in Asia and globally, the acquisition will help speed the company's efforts to improve the efficiency of B2B payments. The TreviPay platform reportedly supports trade credit with up to 90-day net terms, managed receivables, managed payments, and fraud and risk management. Spear adds that business clients in the B2B space expect to pay on terms and spend more frequently when they have a committed financial relationship and credit line with a company.

As a result of demand for TreviPay’s order-to-cash technology, the company gained 30% organic growth in its business in 2022. The collaboration with Apruve is expected to enhance TreviPay's acquisition of Baton Financial Services earlier in the year. Smaller buyers, a crucial segment of the economy that is reportedly underserved, can now be served by TreviPay due to the collaboration with Baton and the establishment of the company’s Small Business Supplier Network, commented Spear. Additionally, TreviPay has been able to transform the outdated B2B trade-credit market and provide small businesses with efficiencies to regain their stance in the US economy, added Spear.

Finastra and Veem partner to help banks offer AP and AR services through a digital platform

Finastra, a global financial services software applications provider, has partnered with Veem, an SMB accounts receivable and accounts payable network, to offer business payments through an integration with Finastra's Fusion Digital Banking Platform.

Veem's collaboration with Finastra will reportedly enable banks and other financial firms to offer sophisticated payment services for SMBs by leveraging automated electronic invoicing and bill-pay capabilities. Through digitization, this partnership aims to simplify the accounts payable and accounts receivable processes, increasing productivity and efficiency. Users can expect to access AP and AR services as well as complete transactions through Finastra's Fusion Digital Banking. Marwan Forzley, CEO, Veem, commented that financial institutions are continuously seeking ways to assist their SMB clients in digitizing the processes for invoicing and bill payment. The new partnership claims to provide SMBs with the ability to pay and receive payments both domestically and abroad.

EU regulators caution: some banks may be challenged to repay ECB loans

The European Union’s banking regulator warned that some banks in the euro zone may find it difficult to repay funds borrowed from the European Central Bank, as unstable markets are reportedly making it more difficult to raise money. Reports indicate that banks have been holding cash totalling 2.1 trillion euros (US $2.21 trillion) in the Targeted Longer-Term Refinancing Operations. However, subsequent to the increased borrowing costs imposed by the ECB, banks are now beginning to repay those funds.

Banks reportedly have until 2024 to pay back sizable amounts of central bank loans. According to a report by the European Banking Authority (EBA) on banking risks for the year ending June 2022, several banks expect to rely on current liquidity buffers, including central bank deposits, to repay central bank loans. However, some banks might need to raise deposits or issue more debt, as the cost of replacing central bank funding is still unknown, according to the EBA. Additionally, the EBA states that some banks may find it challenging to meet the separate minimum standards for issuing debt that can be written off in a crisis.

As the economy weakened and consumers were hit by a cost-of-living crisis, revenues from "non-performing" or weak loans have reportedly increased significantly in the first half of 2022, pushing banks to increase their guidelines. Currently, banks are reportedly maintaining capital levels that far exceed regulatory requirements.

Citi uses artificial intelligence to tighten controls on digital payments in the Philippines

Banking giant Citi is reportedly using artificial intelligence to achieve tighter restrictions in payment initiation, advocating stronger digital payments in the Philippines. Citi states that its new payment outlier detection solution identifies payment outliers, resulting in stricter payment initiation controls.

Clients who use digital payment solutions in the Philippines can reportedly request electronic generation of creditable withholding tax to be submitted to the beneficiary, who can then use the documentation to substantiate its own tax returns. Additionally, clients can also use PESONet to collect official receipts, facilitating a smooth transition from paper-based check payments to digital payments. Arlene Nethercott, Head of Treasury and Trade solutions, Citi Philippines, stated that the bank continues to promote value-added digital solutions by collaborating with the sector.

Deven Somaya, Head of ASEAN and Singapore Treasury and Trade Solutions, Citi, commented that a key trend in the development of digital payments is the “miniaturization” of payments and the significant rise in payment volumes.

In addition, banks must facilitate funds transfer transactions in real time while maintaining security in order to meet the needs of their customers for future commerce, said reports. Citi aims to continue investments in digital payment capabilities, such as additional payment methods like mobile wallets and regional instant payment systems. Furthermore, Citi reportedly ranks first in terms of outgoing payments under PESONet, with over P100 billion processed each month.

UK-based fintech, Tide, goes live with its app and business account in India

Tide, a UK SME banking provider, has officially launched in India, its first international market, releasing an app for Android smartphones on the Google Play Store and accepting applications for its business account. As part of its £100 million investment in the country, Tide plans to onboard 500,000 SMEs in India over the course of the following two years.

Reports indicate that all businesses will be expected to go through a thorough Know Your Customer (KYC) process prior to obtaining access to their accounts and conducting transactions. Tide plans to offer a basic account initially to include spending, expense tracking and card payments. However, it will reportedly add a complete current and savings account including bank transfers and invoicing in 2023.

Airwallex partners with Plaid to help simplify ACH transactions for US merchants

Airwallex, an Australian fintech company with operations in Asia-Pacific, Europe and North America, has teamed up with Plaid Inc. to help US merchants simplify transactions initiated through ACH. Merchants will reportedly be able to authorize the transfer of funds from external bank accounts to their Airwallex wallet or to accept payments from customers within Airwallex's payment-acceptance business via Plaid’s open-banking technology.

Ravi Adusumilli, Global Head of Partnerships and General Manager for the Americas, Airwallex, stated that customers will be able to authenticate payers' bank accounts through this integration, without the hassle and long queues associated with conventional ACH processing.

Citi predicts the slowest annual global economic growth in 40 years

The global economy is reportedly at its slowest pace in forty years, with the exception of the world's economic crisis and pandemic closures, stated a recent Citi Global Wealth Investments (CGWI) report. In addition, the Eurozone is expected to experience a greater impact to its economy, whereas the US may have a milder recession.

However, the report contends that if the Fed does not pause rate hikes until the contraction is seen, the US could enter a deeper recession. The CGWI forecasts that US inflation will continue to decline and end 2023 at about 3.5%.

Reports indicate that Asia may not experience a recession in 2023, anticipating that real GDP growth in Asia's emerging markets is expected to rise to 5% in 2023 after falling to 4% in 2022. Additionally, China is expected to grow as it begins to loosen its pandemic restrictions, with a predicted recovery of between 3.5% and 4.5%, said the report.

Global earnings per share are expected to decline by 10%, according to CGWI, but they are expected to increase in 2024.

The following are some potential growth areas identified by CGWI:

  • Short-term US investment grade fixed income in the current environment of higher interest rates.
  • Defensive equities, such as strong dividend payers.
  • Non-cyclical growth equities to bottom before cyclicals once the Fed pivots to cutting rates.
  • A subsequent entry point into more cyclical stocks.
  • "Deep value" in certain non-US assets and currencies once the US dollar peaks.
  • Alternative strategies for positioning for distressed and other opportunities in the aftermath of the recession.

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