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Digital wallets in the US get business bump - Industry roundup: 29 May

Digital wallets in the US get business bump

According to a recent survey by Federal Reserve Financial Services (FRFS), US businesses are rapidly adopting digital, faster, and instant payment services to improve customer experience and engagement and their own efficiency. In 2023, the use of digital wallets, many leveraging embedded payment platforms, grew 31% year-over-year to 62%. This was driven by large businesses (>US$100m) and the service industry.

In addition to the rise in digital wallet usage, same-day ACH use grew 13% for businesses of all sizes, with very large businesses (over US$250m in revenue) increasing their use by 17%. Other electronic payment methods, such as next-day ACH (17%) and debit cards (8%), also increased in usage. Overall, 86% reported using one or more faster/instant payment services, up 3% from the previous year. 

Offering new payment options that customers expect while maintaining efficiency in payment operations is both a challenge and an opportunity. Managing cash flow remains a top strategic priority for success, as indicated by 55% of businesses, which is just behind driving operational efficiency (59%). 

Key use cases that benefit from instant payments include business-to-business (92%), business-to-person (71%) and account-to-account (40%) transactions. Significant pain points for business payments include high costs (44%), slow or untimely payments (35%) and lack of payment process automation (30%). Many businesses also believe instant payments will be useful for digital wallet funding (50%) and earned wage access (25%).

The survey also highlighted how digital wallet platforms and instant payments are changing the way businesses conduct commerce. Most businesses (74%) would prefer that faster payment services be provided by their primary financial institution rather than a secondary financial institution or non-bank payment service provider. 

Businesses reported liking the immediacy of account posting (81%), the ability to access funds instantly (80%) and receiving notifications when funds are available (80%). Businesses are primarily using faster/instant payments because it helps them reduce cost (48%), provides flexibility to pay and be paid as customers prefer (39%) and the 24/7 aspect of instant payment services (35%).


Geopolitics primary factor affecting corporate FX hedging

Geopolitics (18%) and central bank policy (16%) were the biggest influences on corporates’ FX hedging in Q1, according to MillTechFX’s inaugural Quarterly Corporate Hedging Monitor.

While geopolitics was the most important factor for UK firms, US firms were more influenced by central bank policy. Around half (49%) plan on increasing hedging length due to upcoming elections.

The survey found that the average hedge ratio is 51%, and the mean hedge length is seven months. The largest corporates are the most risk-averse, with the longest hedge windows and the highest ratio of firms planning on increasing hedge ratios and lengths due to elections.

“In a year where more than half of the world’s population across 80 countries will head to the polls, it’s no surprise to see geopolitics are heavily influencing corporates’ FX hedging decisions,” commented Eric Huttman, CEO of MillTechFX. “Volatility has started picking up in recent months and elections are expected to add more fuel to the fire in the weeks and months ahead.”

MillTechFX’s inaugural Quarterly Corporate Hedging Monitor surveyed 250 senior decision-makers at UK and US corporates to reveal their hedging activity and influential factors.


Is China's rebound for real?

The world's second-largest economy has had a difficult couple of years, plagued by its ongoing property crisis and disappointing economic growth. But more encouraging economic data in recent months and a sharp rally in Chinese equities have begun to catch the eyes of investors.

Better-than-expected economic expansion, government purchases of stock, and new regulatory measures designed to strengthen China's capital markets are among the factors driving equity markets higher, Kinger Lau, Goldman Sachs Research’s chief China equity strategist, said on the Goldman Sachs Exchanges podcast. 

“After the 30% rally in the Hong Kong market and 15% rebound in A Shares, I think the sustainability of the rally will depend on one keyword: delivery,” commented Kinger, who forecasts that the A Shares market will increase by 10% in the next 12 months. “First, it's about delivery of earnings. The second is policy delivery and, in particular, when and how the promised policy easing regarding the housing market, as well as equity market reforms, will be implemented.”

Even as China struggles to stabilise its weak property sector, recent steps announced by the government should help shore up investor confidence from very low levels. But it will take time before fundamentals start to improve materially, according to Hui Shan, Goldman Sachs Research's chief China economist.

“From a fundamental point of view, I would say the good news [is] not that good and the bad news [is] not that bad, meaning [that] at this point, the investor sentiment towards fundamentals may be more in line with reality,” she said. “We feel comfortable with our 5% real GDP forecast this year, and I think the risks at this point are more balanced.”


GRI and IFRS to deliver interoperability for seamless sustainability reporting

The IFRS Foundation and the Global Reporting Initiative (GRI) are deepening their working relationship, building upon the Memorandum of Understanding signed in 2022. This collaboration seeks to provide a seamless, global, and comprehensive sustainability reporting system for companies seeking to meet the information needs of investors and a broader range of stakeholders.

The increased collaboration aims to optimise how GRI and ISSB Standards can be used together to facilitate reporting on an organisation’s impacts, risks and opportunities, including risks that arise from the organisation’s impacts.

The International Sustainability Standards Board (ISSB) and the Global Sustainability Standards Board (GSSB) have committed to jointly identifying and aligning common disclosures that address information needs under the distinct scopes and purposes of their respective standards for both thematic and sector-based standards. An initial outcome of the collaboration will involve a methodology pilot building on the recently published GRI 101 Biodiversity Standard and the ISSB’s upcoming project on Biodiversity, Ecosystems and Ecosystem Services.

The ISSB and the GSSB will continue to make decisions separately under their established standard-setting due processes, including public consultation regarding any proposed amendments to their respective standards regarding the alignment of common disclosures.


Surecomp showcases collaborative eBL process

Surecomp has announced the completion of successful electronic bills of lading (eBL) transactions, bringing together multiple parties via its collaborative trade finance platform RIVO. In addition to initial transactions processed in September last year, this second phase focused on streamlining the entire eBL workflow to not only enable greater efficiency and transparency but also demonstrate how an error-free process can dramatically reduce the time it takes to process a transaction to only one hour.

Surecomp ran two separate pilot transactions in parallel, with the world’s largest shipping company, MSC Mediterranean Shipping Company (MSC), acting as the carrier generating the eBL in both instances. The first also included MAN Truck and Bus, Commerzbank AG and Bangkok Bank, while the second involved Voith, another German corporate, Bayerische Landesbank and Indonesian bank PT Bank BTPN Tbk (Bank BTPN).

Using an integration with the WaveBL platform to generate the digital bill of lading - a document typically presented under a letter of credit (LC) - the eBL was then attached to the LC transaction in RIVO. Demonstrating a smooth transition from the physical to the digital realm, the document was then centrally accessible and transferable to all parties, including the beneficiary, advising bank, issuing bank, and applicant. The entire process took one hour to complete. With live status updates verified simultaneously on the WaveBL platform throughout the entire process, the clean documents were then presented under an electronically issued LC (eUCP LC).

This secure and seamless eBL ownership transfer via RIVO will ease bank’s adoption, according to Surecomp. Having also partnered with other leading eBL solution providers in the market, the firm is connecting more to RIVO. By eliminating the need for separate onboarding and training for each one, banks can use RIVO as a centralised hub to access all their eBL providers in the same workflow to seamlessly connect their eBLs to the LCs.

“We were able to prove how centralising the eBL management on RIVO can significantly enhance the process efficiency and operational stability,” explains Enno-Burghard Weitzel, Surecomp’s Chief Solutions Officer. “Aggregating digital documents from various platforms represents a significant departure from the traditional, time-consuming paper-based processes that often take days or even weeks.”


BBVA steps up AI plans with OpenAI agreement

BBVA has signed a strategic agreement with OpenAI, the creator of ChatGPT, to start deploying the tool among its employees. The aim is to explore, safely and responsibly, how generative AI can expedite processes, improve productivity and foster innovation thanks to its abilities to create text and images and process information, among other features.

With this latest agreement, BBVA says it is the first European bank to forge an alliance with OpenAI. The bank has already begun deploying 3,000 ChatGPT Enterprise licenses among group employees to increase productivity and process efficiency while stimulating innovation across the group. The enterprise version of ChatGPT delivers the utmost security and privacy, combined with its unique ability to generate content or answer complex business questions, among numerous other features.

OpenAI has also agreed to deliver training and provide the latest updates for its large language models (LLMs), the technology on which ChatGPT is built. By working in close partnership with OpenAI, BBVA hopes to drive forward the most successful use cases for the bank’s business and processes.


Canadian securities regulators announce move to T+1 settlement cycle

The Canadian Securities Administrators (CSA) has announced that rule amendments supporting a shorter settlement cycle for equity and long-term debt market trades have come into force in Canada.

The amendments to National Instrument 24-101 Institutional Trade Matching and Settlement align with the industry’s move to reduce the time institutional trades must be matched from two days after the date of a trade (T+2) to one day (T+1). This is consistent with the associated regulatory rule changes in the United States. The transition to T+1 in the United States occurred on 28 May 2024, one day later than in Canada.

National Instrument 24-101 provides a framework for ensuring efficient and timely settlement of the processing of institutional trades (equity and debt) by registered dealers and advisers (registered firms). It has a number of requirements, including that registered firms establish, maintain, and enforce policies and procedures designed to achieve the matching threshold of institutional trades.

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