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Digital Dollar Project pilot finds CBDC cross-border payment potential - Industry roundup: 7 August

Digital Dollar Project pilot finds CBDC cross-border payment potential

The Digital Dollar Project has announced the completion of a pilot study conducted in collaboration with Western Union, BDO Unibank in the Philippines, and support from Accenture. This collaboration represents the Digital Dollar Project's latest private sector efforts in support of the exploration and experimentation of a CBDC in the US.

Amid an ever-evolving international payments landscape, retail cross-border remittances serve as a critical lifeline for millions who receive payments from US-based customers. The pilot study, executed with a technology-driven global payments player, evaluated the potential benefits of using CBDCs for cross-border remittances. Participants designed and configured a DLT platform to simulate the payment infrastructure necessary to transfer digital dollars to Philippine pesos. The findings have been published in the Digital Dollar Project's whitepaper, ‘Retail Cross-Border Remittance Payments’.

The main benefits highlighted throughout the study include:

  • Reduced risk: Instant settlement across multiple currencies reduces counterparty and credit risk for customers and their financial institutions.
  • Optimised cost: CBDC settlement allows for transferring value and message in a single transaction, settled atomically, thereby reducing the cost of capital in pre-funded accounts.
  • Enhanced customer experience: A digital dollar increases the accessibility and portability of money in a digital form to benefit the unbanked and underbanked. A verified digital wallet can help reduce fraud, enable faster settlement, harmonise jurisdictional requirements, and minimise failed transactions.
  • Improved visibility: Using a permissioned ledger provides institutions and their customers with enhanced transaction visibility, bolstering customer trust.

The Digital Dollar Project says that results from this pilot study serve as a foundation for future experimentation, defining the essential elements of a cross-border remittance within a DLT context, including CBDC issuance, transaction management, hosted customer wallets, and currency exchange. Additionally, the findings will provide government agencies with the design elements necessary for scaling a potential US CBDC in real business contexts.


Fraud driving up annual loss frequency for banks

Global annual operational risk loss figures published by the operational risk association ORX have revealed that despite 2022 being a year of geopolitical and economic turbulence and a time of significant digitalisation of the business, banks have reported the lowest levels of gross operational risk losses seen over recent years.

However, annual loss frequency increased in 2022, with 16,020 more loss events submitted than in the previous year. The increase in the frequency of reported events is partly down to a widespread increase in the number of external fraud events, and as the impact is not seen at the gross loss level, the frequency can be attributed to an increase in low-value fraud. Banks worldwide that took part in the report point to increased use of technology to facilitate fraud and broader economic environmental factors.

In 2022, 76,620 operational risk loss events were submitted, totalling €17.8bn in gross loss. This represents an average decrease of €1.6bn per year and a drop of €8.2bn total gross loss between 2017 and 2022. The 2017 total gross loss was €26bn. The average size of an operational risk loss event in 2022 was €232,166. The largest annual average in the past six years was €360,718 in 2020.


Flux Power secures US$15m credit facility with Gibraltar Business Capital

Flux Power Holdings, a developer of advanced lithium-ion energy storage solutions for the electrification of commercial and industrial equipment, has announced that it has secured a US$15m credit facility from Gibraltar Business Capital (GBC) to fund working capital and to refinance its existing credit facility with Silicon Valley Bank (SVB).

The US$15m credit facility is designed for working capital needs and the repayment of an existing credit facility with SVB. The interest rate on this new facility is tied to SOFR plus 5.50% per annum. The facility, secured by the company's existing assets, matures on 28 July 2025 and includes no warrants. The agreement allows the company to increase the facility to US$20m, in US$1m or greater increments, at the company’s request, subject to approval by GBC. Flux Power has also chosen to work with Bank of America for cash management and other operational banking services.

“GBC is a reliable financing partner to help increase our borrowing power and access to capital, and we are pleased to now be partnering with them on our revolving line of credit,” said Chuck Scheiwe, Chief Financial Officer of Flux Power. “This facility has been used to repay our existing credit facility with SVB, and along with our existing cash, is intended to help meet our anticipated capital resources to fund planned operations to meet the demands of our aggressive growth trajectory for the foreseeable future. We also appreciate the assistance and support of Bank of America to put this facility in place and be our banking partner going forward.”


Settle unveils purchasing and procurement suite for e-commerce businesses

Cash flow management platform Settle has announced a purchasing suite designed specifically for founders of e-commerce businesses. Designed to streamline the challenge of purchasing and procurement, the suite of tools automates back-office tasks like bill pay, purchase order creation, auditing, reporting and more.

The suite includes a streamlined purchase-to-pay process, letting firms quickly create purchase orders (POs) and automatically email them to vendors. The simplified auditing lets users identify errors with a side-by-side comparison view of purchase orders, receipts, and invoices. Customisable tags simplify the ability to search for and track the status of POs.

“The current economic climate and supply chain uncertainty have made frictionless procurement and purchasing more critical than ever to the survival of a small e-commerce business,” said Alek Koenig, CEO, Settle. “The problem is most solutions that claim to solve this problem are built for enterprises, cutting out smaller, resource-constrained businesses. As a result, all the office work involved is done manually, creating room for delays and errors. Our new solution aims to level the playing field for these smaller players by giving them enterprise-grade purchasing and procurement capabilities at SMB pricing.”


EIB Group and Banco Santander unlock €990m to support SME ecological transition

The EIB Group - made up of the European Investment Bank (EIB) and European Investment Fund (EIF) - has invested in senior and mezzanine tranches of a new asset-backed securities (ABS) issuance worth €360m with Banco Santander. This investment in the Santander Consumo 5 securitisation fund of consumer loans issued by Banco Santander will support working capital and liquidity needs and address the investment constraints of Spanish small and medium-sized enterprises (SMEs), small mid-caps and mid-caps. The deal will enable Banco Santander to free capital and direct up to €990m (or almost triple the EIB Group’s investment) into the real economy, including up to €300m for green projects.

The EIB’s investment commitment under the transaction totals around €330m, alongside €30m committed by the EIF. The EIB Group’s total investment is executed through a single securitisation with a structure designed to achieve optimal efficiency. Approximately €250m of the notes purchased target SMEs and mid-caps, facilitating access to finance and promoting private sector investment. The transaction will address working capital and liquidity needs, supporting these firms’ economic recovery while helping them overcome investment constraints due to the pandemic, the war in Ukraine, persistent inflationary pressures, high energy prices and rising interest rates.

The ABS securitisation transaction also has a significant green component: Around €110m of the EIB Group’s investment will go to finance environment and climate action projects based on energy efficiency activities, such as the construction of nearly zero-emissions buildings by real estate developers, or the installation of solar photovoltaic equipment in residential buildings. Thus, Banco Santander can commit up to €300m for green projects.

The transaction supports the national and European targets for energy efficiency and renewable energy and helps reduce carbon emissions. This focus on energy efficiency is aligned with the EIB Group’s cross-cutting objective of climate change mitigation and with REPowerEU, the European Union’s plan to reduce dependency on fossil fuel imports and increase Europe’s energy independence. It is estimated that more than a third of the final beneficiaries of this agreement will be based in cohesion regions, where per capita income is less than the EU average. The operation will thus promote equitable growth and convergence between EU regions, which is one of the key aims of the EIB’s lending activities.


Natixis leads financing for US$1.5bn sustainability-linked revolving credit facility for Invenergy Renewables 

Natixis Corporate & Investment Banking (Natixis CIB) has closed a US$1.5bn sustainability-linked revolving credit facility to support Invenergy Renewables Operating I LLC (IROI) and its parents’ growing project development pipeline. This financing upsizes the existing US$600m working capital facility of IROI with the support of existing lenders and several new lenders joining the syndicate.  

This year, Natixis CIB, acting as sustainability coordinator, has worked with IROI to structure sustainability-linked features aligned with the Company’s strategy to deliver clean energy. The facility is tied to two KPIs: the increased GHG emissions avoided related to IROI’s assets and a Health and Safety metric.

Mandated lead arrangers were Natixis CIB, Coöperatieve Rabobank U.A., New York Branch (Rabobank), Export Development Canada, Desjardins Group.  Bank of Montreal, Chicago Branch, Canadian Imperial Bank of Commerce, New York Branch, KeyBanc Capital Markets Inc., Banco Santander, S.A., New York Branch, and National Bank of Canada were named as joint lead arrangers.  BNP Paribas, Societe Generale, The Bank of Nova Scotia were named as senior managing agents.  The other lenders are HSBC Bank USA, National Association, MUFG Bank, Ltd, National Australia Bank Limited and National Westminster Bank Plc. 

“The corporate facility will expedite Invenergy’s stated goal of expanding the share of clean power generation in the US and enable the continued delivery of top quartile renewable assets,” said Yash Anand, Head of Energy Transition & Natural Resources, Americas at Natixis CIB. 


Salve Financial Hub selects Finastra to tackle payment delays for corporates

Finastra has announced that Salve Financial Hub SpA (Salve FH), a European payments processing startup based in San Marino, has selected Finastra Essence to reduce payment delays resulting from overcompliance. 

Finastra’s SaaS solution, integrated with its Digital Engagement Hub, should help Salve FH process rapid, high-value payments for corporates and their beneficiaries by providing stringent compliance checks during the onboarding process and regularly thereafter. The company will also use Finastra’s APIs to build and maintain integrations with custodian and central banks.

“Salve FH is a fast-growing fintech that speeds the flow of payments between its customers, via a hub model operating within a wider ecosystem,” said Siobhan Byron, EVP, Universal Banking at Finastra. “Balancing compliance checks and speed is crucial for the company as it works to remove friction from payments services and deliver a seamless experience to its customers without compromising security or fraud prevention.”

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