ECB makes third rate cut in four monetary policy meetings

The European Central Bank’s (ECB’s) Governing Council has decided to lower the three key ECB interest rates by 25 basis points. This is the ECB’s second cut in a row, its first consecutive cut in 13 years, and a third rate cut for 2024. Accordingly, the interest rates on the deposit facility, the main refinancing operations and the marginal lending facility will be decreased to 3.25%, 3.40% and 3.65% respectively, with effect from 23 October 2024.

In particular, the decision to lower the deposit facility rate – the rate through which the Governing Council steers the monetary policy stance – is based on its updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission. The incoming information on inflation shows that the disinflationary process is well on track. The inflation outlook is also affected by recent downside surprises in indicators of economic activity. Meanwhile, financing conditions remain restrictive.

Inflation is expected to rise in the coming months before declining to target in the course of next year. Domestic inflation remains high, as wages are still rising at an elevated pace. At the same time, labour cost pressures are set to continue easing gradually, with profits partially buffering their impact on inflation.

In the press conference following the meeting, ECB President Christine Lagarde commented: “We are determined to ensure that inflation returns to our 2% medium-term target in a timely manner. We will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim.” She added that the ECB “will continue to follow a data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction,” and that the central bank is “not pre-committing to a particular rate path.”

“For global investors, the ECB’s confidence in cutting the base rate again, along with signals of another potential cut in December, could act as a catalyst for increased investment,” commented Ben Nichols, Managing Director at RAW Capital Partners. “Borrowing costs are falling, so we may see stronger economic growth in the months ahead, which could, in turn, enhance the appeal of European assets. However, investors should remain mindful of potential market volatility if the ECB cuts rates more aggressively than other major central banks, such as the Federal Reserve and the Bank of England (BoE). Indeed, the BoE next votes on interest rates on 7th November, so this will be an important event to follow.

“In the short term, as the gap in interest rate policies widens, the markets may become more uncertain, especially if geopolitical tensions worsen in the coming weeks and months,” added Nichols. “Therefore, it’s important that investors prioritise agility and diversification as they look to mitigate any potential risks to their portfolios.”

 

Swift cross-border payment processing speed stretches ahead of G20 target

Swift has published data reporting that 90% of cross-border payments made over the cooperative’s network reach the destination bank within an hour. Swift’s data shows that the speed of processing transactions to all but two of the top 40 countries on its network - by volume of payments received - continues to be above the G20’s target of one-hour end-to-end processing for 75% of international payments by 2027, while international payments to six regions are settling in the customer’s account more quickly than they were a year ago. 

However, Swift’s latest data reiterates the need for the industry and regulators to address factors that cause delays between the point when funds arrive at the beneficiary bank and when they are credited to the end customer’s account. Currently, there is wide variation between processing speeds at the domestic stage of a transaction among the same 40 countries, with 43% of all cross-border payments over Swift reaching the end customer’s account within an hour.

High-speed processing countries that are already meeting the G20’s targets have developed real-time systems, with these banks operating 24/7 real-time back offices and with no significant currency or capital controls on incoming payments. Countries that are experiencing continued delays face a combination of issues, such as market infrastructure opening hours, regulatory requirements or local market practices, such as the need to check with the customer that a payment is expected and to confirm the final amount. 

Swift’s data also shows that wholesale cross-border payments made over Swift to six regions are settling in customer accounts more quickly than they were a year ago – with 92% of payments to the Eurozone settling within an hour (+3%), 88% of payments to the Middle East (+1.8%) and 87% of payments to Africa (+1.5%).

 

Trovata and Swift look to modernise global multibank connectivity

Trovata, the pioneering force in corporate bank APIs, announces a new collaboration with Swift, the world’s leading provider of secure financial messaging services, which will extend the benefits of Swift’s tracking capabilities to more businesses through API connectivity.

Connecting to Swift means Trovata can offer its multi-banked corporate customers unparalleled access to their corporate banking data, and on-demand, real-time liquidity monitoring, while positioning Trovata’s data-driven platform as an alternative bank connection method for corporate finance and treasury teams.

The collaboration aims to enhance the relationship between multi-banked Trovata customers and their banking partners by enabling corporates to rapidly gain a consolidated view of their banking data. Trovata has connected to Swift through Alliance Cloud, Swift’s cloud access solution, which provides API connectivity to Swift’s community of more than 11,500 banks, financial institutions and corporates.  

Trovata will also make its Swift Direct product available through its embeddable Multibank Connector, to expand its global footprint to include banks that do not yet use APIs. Trovata will become one of the first service providers with a direct API to Swift.

APIs are rapidly transforming the landscape of corporate banking, offering richer data and more flexibility than ever before, but they’re not yet ubiquitous and lack a universal standard, making data difficult to manage for companies with multiple banking relationships. Trovata’s proprietary platform is designed to overcome this hurdle by normalising data across APIs and file-based formats, providing a seamless experience for its users. Meanwhile, as bank APIs proliferate and evolve, Swift Direct gives Trovata customers and partners the best of both worlds.

“By normalising bank data across both new and legacy protocols, we transform raw cash flow data using ML and AI into building blocks for a smarter, cheaper, and faster corporate finance and treasury org,” commented Brett Turner, Founder and CEO of Trovata.

 

Australia launches review of merchant card payment costs and surcharging

The Reserve Bank of Australia (RBA) is commencing its review of the Retail Payments Regulation. This review will examine the costs merchants face when accepting card payments and the framework for surcharging. The RBA has released an Issues Paper inviting stakeholders to provide detailed feedback on the current regulatory framework and to suggest potential regulatory responses. This feedback will be crucial in shaping future reforms to ensure a safe and efficient payments system.

Australians extensively use cards to pay for goods and services. In an environment of heightened concern around the cost of living, card payment costs and surcharging are attracting more attention from merchants and consumers. These issues are linked since merchants would be less likely to surcharge consumers if card payment costs were lower. An RBA statement declared it is timely, therefore, to review whether regulatory settings could be adjusted to put further downward pressure on merchant card payment costs and whether the RBA’s surcharging framework remains fit for purpose. This recognises that many years have passed since these rules first came into effect.

Stakeholders can provide written submissions by 3 December 2024. Detailed assessments of reform proposals would form the next stage of this review. If the Payments System Board forms a view that consultation on regulatory action is in the public interest, the RBA will further consult on any reform proposals prior to any decisions being made.

 

WaveBL completes network connectivity proof of value for electronic bills of lading

WaveBL, a blockchain-based electronic Bill of Lading (eBL) platform, has completed a proof of value (POV) with Swift and the participation of five global banks, including Lloyds, Emirates NBD Bank, and Federal Bank Limited, as well as MSC Mediterranean Shipping Company (MSC), an ocean carrier acting as an eBL issuer on WaveBL. 

The POV demonstrated the transfer of a series of structured electronic document presentations (including eBLs) originated on the platform and sent to and between Swift members and back to the platform, all as part of a letter of credit (LC) transaction. The process was executed utilising a series of Swift FIN messages and FileAct transfers from WaveBL to the different banks while maintaining possession and title management of the electronic trade documents on the WaveBL's ledger of issuance.

The POV involved two eBLs - one straight and one negotiable - both issued by MSC on the WaveBL platform. The eBLs were first sent to an exporter on the WaveBL platform, where commercial documents like a packing list, invoice, and certificate of origin were added. These were then sent to the advising bank by the platform over the Swift network using an MT message and a FileAct document transfer. In turn, the advising bank and the issuing bank exchanged the presentation, while WaveBL's ledger tracked the possession and title of the contained eBLs. 

Ultimately, the issuing bank released the documents to the LC applicant, who is the importer, including the endorsement of the negotiable eBL from the issuing bank to the order of the importer on the platform, all of which was instructed to the platform through a Swift MT message. This streamlined process allows for payments to be received within hours rather than days - as is often the case with transactions that involve the physical transfer of documents. Similarly, with the eBLs surrendered back to MSC on the platform, the importer was able to collect the goods at the port of destination without delay.

In a statement, WaveBL said the POV showed how customers could seamlessly interact with Swift members and among participants themselves. For Swift members, electronic trade documents could soon be exchanged via WaveBL using their existing Swift infrastructure without requiring the installation or use of any specialised software or service.

 

US same day ACH volume up 67.5% in Q3

Same day ACH volume in the US soared 67.5% in the third quarter of 2024, and total ACH Network payment volume rose 7.4% from a year earlier, figures from Nacha have showed. There were 355.2 million same day ACH payments in Q3; the value of those payments rose 38.8% to $844bn. 

Nacha is currently seeking comments on a proposal to expand the operating hours of same day ACH to align with the close of the business day in the Pacific time zone. This would provide an estimated additional 3.25 hours each day for users to submit same-day payments. 

Volume across all major ACH Network payment categories climbed in Q3 this year. Those include business-to-business (B2B) and healthcare claim payments, which increased 12.6% and 7.8% respectively from the third quarter of 2023. Consumer internet-initiated payment volume increased 9% to 2.7 billion. Total third quarter ACH Network volume was 8.4 billion payments valued at $21.5 trillion, respective increases of 7.4% and 8.9% over a year earlier. 

“Nacha has already made several enhancements to same day ACH, including higher dollar limits, expanded hours, and accelerated funds availability,” commented Jane Larimer, Nacha President and CEO. “We will continue working to ensure that same day ACH helps meet the needs of the payments community.”