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Surging Digital Payments – Industry roundup: 20 April

Shift towards blockchain adoption by major financial firms

As the financial industry starts to shift their interest towards digital asset services, firms are actively considering blockchain as a viable option – a cryptocurrency trend that was once avoided. Recently, BlackRock, JP Morgan Chase, and Goldman Sachs are some of the major financial institutions responding to the growing demand for digital asset services from clients and suggesting plans to adopt blockchain technology at a larger scale.

Larry Fink, CEO, Blackrock, commented that they are researching digital assets and their related groups such as crypto assets, stablecoins, tokenization and permission blockchains, as they see potential benefits for their clients and capital markets. According to reports, this comment came a few days after Blackrock, the world's largest wealth manager, announced that it had acquired a minority stake in Circle, a global internet payments company, which is also the only issuer of the US dollar coin, a dollar-based fully reserved stablecoin. This may demonstrate a change of heart for Fink, as he called bitcoin “an index of money laundering” in years past. Fink also stated to shareholders that the current war abroad could speed up the acceptance of digital currencies by central banks.

JP Morgan’s CEO, Jamie Dimon, although vague, mentioned there are some financial tech plans to integrate digital assets into its business, specifically a blockchain-type service “to move tokenized US dollar deposits with its own JPM Coin”, to be announced May 23.

Goldman Sachs, Wall Street's top investment bank, is also keen on blockchain technology. They are looking to extend their capabilities within the scope of current regulatory guidelines, but they will not own or trade bitcoin directly. David Solomon, CEO, Goldman Sachs, commented that cryptocurrencies like bitcoin are currently heavily focused as market participants assess their potential as a store of value.

SAP halts sales and operations in Russia after 30 years in the country

SAP, Germany-based enterprise software giant, plans to withdraw from Russia entirely in response to Russia’s invasion of Ukraine. SAP's business in Russia has been in operation for over 30 years and accounts for a small portion of global sales. Business in this region, including Russia, Belarus and Ukraine, accounts for about 1.5% in total.

Reports indicate that Russian users may be able to still operate the software for years without support. Additionally, Luka Mucic, CFO, SAP, told reporters that SAP will not provide any support or updates to sanctioned clients, adding that the full effect may take some time. However, there is no “magic red button” that SAP can press to remove these software licenses from the computer, as SAP software is sold as licensed software or on a subscription basis through the cloud, Mucic added. As part of SAP’s cloud shutdown, SAP has given non-sanctioned companies the option to delete, send or move data to data centres outside Russia.

European digital banking market projected to reach US $2 billion by 2026

According to a recent industry report by Graphical Research, the European digital banking market is expected to generate more than US $2 billion in revenue by 2026. Digital banking has been a trend for quite some time, especially following the pandemic and the increasing demand for these services. The European digital banking market was valued at over $170 million in 2019 and is expected to grow by at least 5% CAGR between 2020 and 2026.

The research study, “Europe Mobile Digital Banking Forecasts 2026”, detailed the top three trends defining Europe’s digital banking market advancements.

The corporate banking segment, which is expected to grow steadily at 5% CAGR, is forecasted to occupy most of the market during this period between 2020 and 2026. Many traditional banks are converting to digital platforms

Transaction segments are projected to grow exponentially as contactless payments become a trend. The non-transactional segment accounted for more than 5% of total revenue in the European digital banking market in 2019. However, the transactional segment continues to gain momentum rapidly due to the increased use of mobile phones for electronic transactions. Additionally, the use of contactless payments made at point-of-sales (POS) have increased significantly, while banks have raised the credit card limits.

The UK is gaining market share due to changing consumer behaviour. Approximately 1.4 million UK customers do not plan to return to brick and mortar bank branches after the pandemic, according to a recent research report by finder.com. Although this shift is not new, as the number of branches in banks has declined since 2012, and more than 25% of the branches have been closed, the customer preferences have changed with the innovative and easy-to-use digital banking apps boosting market growth. Additionally, the emergence of digital-only banks that impose lower fees and higher interest rates could also lead to an increase in Europe's digital banking market share in the future.

For more information, visit Graphical Research Industry Insights.

IMF forecasts a substantial slowdown in the world economy

The International Monetary Fund (IMF) said on Tuesday that the Russia-Ukraine conflict will significantly slow down the recovery of the world economy this year. In addition to lowering the growth outlook for Eastern European countries, the IMF warns that countries globally will also experience commodities market turmoil as a result of the war.

According to the IMF, they expect global GDP to increase 3.6% in 2022 (a reduction from January’s forecast of 4.4%) and another 3.6% in 2023 (reduced forecast from 3.8%). Pierre-Olivier Gourinchas, Economic Counsellor, IMF, commented that the crisis is unfolding while the global economy is recovering, but not yet fully recovered from the pandemic.

The IMF reports that Russia has experienced the largest downgrade, and its economy is expected to shrink 8.5% this year (compared to the 2.8% growth forecast before the invasion). Western sanctions on the country blocked trade with Russia, and other measures severely separated Russia's central and private banks from the global financial system. Moreover, the world economy will continue to feel the effects of higher prices in commodities and imbalances in supply and demand. The IMF stated that the supply turmoil in both countries (Ukraine’s contribution of wheat/corn, and Russia’s exports of energy and metals) is likely to exacerbate the already high inflation seen in countries like the United States.

Additional forecasts from the IMF predict US GDP growth of 3.7% this year, downgraded from the 4.0% forecast in January. The IMF described the US exposure to Russia as "limited," but this outlook reflects the high inflation and the Federal Reserve’s rate hikes.

The IMF also noted the ongoing risk of pandemic-related turmoil. China's strict pandemic policy has blocked major economic hubs such as Shanghai. Additionally, the IMF has lowered its world's second-largest economic growth outlook to 4.4% this year (compared to forecasts of 4.8% in January).

Ant Group acquires 2C2P, Singapore-based payments platform to boost global digital payment ecosystem

Ant Group, Alibaba's fintech subsidiary, has built a global cross-border payment network by partnering with or investing in electronic wallets, banks, money transfer services and other ecosystem players according to recent reports. Ant Group is partnering with 2C2P, a Singapore-based global payments platform provider, to support Southeast Asian companies moving funds across national borders. Acquisition figures have not been disclosed.

Reports indicate the partnership between Ant Group and 2C2P should connect 2C2P's merchant network to Alipay+, Ant Group’s cross-border payment platform. This collaboration is said to expand 2C2P’s current 250 payment options to include more e-wallets and payment methods.

The Ant Group chose the partnership path rather than building its own country wallet from inception and having to obtain the regulatory approvals needed to operate such services. Ant Group launched Alipay+ in 2020, with many third-party payment methods including banks and electronic wallets.

The Ant Group described Alipay+ as useful for users who travel, work or study and need to pay local merchants, online or offline, in their own currency. Furthermore, if the retailer supports e-wallets that work with Alipay+, users should reportedly be able to use Alipay+'s partner wallets to pay for transactions, saving them the hassle of exchanging money at the bank.

While Alipay focused on domestic consumers and merchants in China, its sister company, Alipay+, appears to be Ant group’s ambition to serve non-Chinese users with similar cross-border payment needs. According to Ant Group, Alipay+ serves more than 1 billion users in Asia and 1 million offline merchants in Europe and Asia. Alipay+ online has connected payment providers to customers on platforms such as Apple, Foodpanda, Google and TikTok.

The Central Bank of Russia to roll out new payment system, HELLO, into the National Register of Credit Institutions

The Central Bank of Russia has included a new payment system called HELLO in the National Register of Credit Institutions. TASS reports noted that the operator of the system's payment infrastructure services will be TransKapital Bank, a Russian commercial bank, which includes shares of foreign financial institutions such as the European Reconstruction and Development Bank, the German investment company DEG, and the International Financial Corporation.

HELLO is said to be a set of payment services and institutions that facilitates money transfer transactions. According to reports, the transfer tariffs within Russia, cross-border and transit are posted on the official site. However, the report indicated that cross-border transfer tariffs will be from 0-6% of the transfer amount or a fixed amount from 0 ruble/USD/Euro/Yuan to 6,000 rubles/300 USD/300 Euro/300 Yuan. 

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