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Faster payments a top priority for US banks - Industry roundup: 19 January

Faster payments a top priority for US banks

More than three-quarters (78%) of US financial businesses say that faster payment networks are a “must-have” for their organisation, according to Volante Technologies’ third annual mid-tier bank payments modernisation report.

With the FedNow Service launch in July 2023, most institutions have firm FedNow plans, with a 50% year-over-year uptick in respondents who said they plan to connect within the year or sooner. More than a quarter of those planning to connect to TCH RTP Network expect to do so within the following year. Connecting to either network or both is the top modernisation priority across all asset tiers.

Replacing legacy wire payment processing systems ranked second in modernisation priority, likely due to the Federal Reserve’s rapidly approaching deadline for institutions to adopt the global ISO 20022 messaging standard by March 2025. In the ACH realm, respondents were less focused on system replacement, but one-third of institutions identified rising ACH volumes as their biggest challenge, with reporting and fraud as associated problem areas.

The report also highlights the growth of cloud and payments as a service (PaaS). Today, PaaS is on track to displace bank data centres as the preferred method for payment processing. Half of all mid-tier institutions are either already using or implementing it, a significant increase from only 11% in 2021. This is not a surprise since ubiquity and cost remain top challenges. In fact, 92% see payment system interoperability as a top issue, consistent over the four annual surveys.


European retail investors show signs of cautious optimism on US economy

Spectrum Markets, a pan-European trading venue for securities, has published its SERIX sentiment data for European retail investors for December, revealing signs of a cautious recovery in sentiment towards US indices after America saw an economic boost. December sentiment towards the three major US indices improved noticeably following November’s sharp dip, though it fell short of bullish territory. 

The S&P 500 increased from 89 to 95, the NASDAQ 100 grew from 93 to 98, and the DOW 30 marginally increased to 96 from 95. The SERIX value indicates retail investor sentiment, with a number above 100 marking bullish sentiment and a number below 100 indicating bearish sentiment. 

The growth in confidence followed a rare drop in US inflation after 3.5 years, which led to increased spending, subsequently boosting financial market expectations. The Federal Reserve's indication to cut interest rates for the first time since 2020 likely contributed further to this positive shift in sentiment.

The improvements in the US economy were most notably driven by a service sector boost, with retail also seeing a turnaround, as December data from the US Department of Commerce showed retail sales surpassed expectations. Several economists raised their growth projections for the fourth quarter in response.


EBA issues guidance to crypto-asset service providers on managing ML/TF risks

The European Banking Authority (EBA) has extended its guidelines on money laundering (ML) and terrorist financing (TF) risk factors to crypto-asset service providers (CASPs). The new guidelines highlight ML/TF risk factors and mitigating measures CASPs must consider, representing a significant step forward in the EU’s fight against financial crime. 

CASPs can be abused for financial crime purposes, including ML and TF. The risks of this happening can be increased, for example, because of the speed of crypto-asset transfers or because some products contain features that hide the user’s identity. Therefore, CASPS must know about these risks and implement measures that effectively mitigate them.

The amendments aim to help CASPs identify these risks by providing a non-exhaustive list of different factors, which may indicate the CASP’s exposure to higher or lower ML/TF risk levels due to its customers, products, delivery channels and geographical locations.  Based on these risk factors, CASPs can develop an understanding of their customer base and identify which part of their business or activity is most vulnerable to ML/TF.  The guidelines also explain how CASPs should adjust mitigating measures, including using blockchain analytics tools. 

Given the interdependence of the financial sector, the new guidelines also include guidance addressed to other credit and financial institutions that have CASPs as their customers or which are exposed to crypto assets. This risk is increased when credit and financial institutions engage in business relationships with providers of crypto-asset services which are not authorised under EU law.


Sainsbury’s to exit banking business

Ahead of the company’s 7 February strategy update, Sainsbury’s has completed a strategic review of its Financial Services division. As a result, the firm plans to make a phased withdrawal from its core banking business. There will be no immediate changes to the products or services that we provide to customers as a result of this decision.

Sainsbury’s issued a comment stating that to improve the financial services offered to its customers and consistent with the clear focus on its retail businesses, the company is exploring many options. Financial services products that Sainsbury’s will continue to offer will be provided by dedicated financial services providers through a distributed model. The firm pointed out that it already does this with its insurance products.

Jim Brown will retire from his role as CEO of Sainsbury's Bank, and Robert Mulhall has been appointed as his successor. Mulhall is an experienced retail banker with a strong track record of delivering successful transformation. Until 2022, Mulhall was the CEO of Allied Irish Bank's (AIB) UK division, having previously led AIB’s Irish retail banking division. Mulhall will take up the role as CEO of Sainsbury’s Bank at the end of March after a handover period, and his appointment is subject to regulatory approval.

“We have been clear since we launched our Food First strategy in 2020 that we would concentrate our efforts on our core retail businesses and today's announcement reflects that strategic focus,” commented Simon Roberts, Chief Executive Officer, J Sainsbury plc. “It’s business as usual for now at Sainsbury's Bank and there will be no immediate changes to products and services as a result of today's announcement. We will of course communicate directly to customers well in advance of any changes to their products and services.”


Mastercard promotes virtual cards to unlock efficiencies in B2B healthcare payments

Fragmented, slow and inefficient payment processes have long been challenging in the healthcare ecosystem. Just as a patient may be frustrated by cumbersome insurance claims, healthcare providers also experience their own holdups when dealing with claim approvals and payouts. 

To support healthcare providers and insurance companies, Mastercard is pioneering a medical claim payment solution with partners using its virtual card technology. Mastercard is introducing this solution with an Indian financial institution and Remedinet. This cloud-based health-tech platform aims to simplify the back-end of cashless claims by connecting hospitals, insurers and third-party administrators in India.  

The solution is available to all insurance-network hospitals in India on the Remedinet platform and aims to bring relief to healthcare providers and insurance companies strained by the current cashless claim settlement process. It seamlessly embeds virtual cards within the health tech platforms that connect payers and healthcare providers, such as Remedinet, using API connectivity. 

Through this embedded experience, when the authorised claim is submitted to the insurance company, a virtual card is generated by Mastercard and issued to the healthcare provider by a financial institution. For hospitals or other specialty healthcare centres that previously spent months waiting to receive claim payments, virtual cards provide a critical working capital solution by making the payout process nearly immediate.


Barclays establishes energy transition group to support clients

Barclays has announced it is establishing an Energy Transition Group within its Corporate and Investment Bank. The new group will provide strategic advice to clients as they explore potential energy transition opportunities. 

The new team will be comprised of industry sector specialists from within Barclays’ global Natural Resources, Power, and Sustainable and Impact Investment Banking teams. It aims to provide a broad spectrum of expertise regarding the energy transition, including hydrogen, energy transition finance, carbon capture, renewables, nature-based solutions, and renewable natural gas.

Mike Cormier has been appointed Global Head of the Energy Transition Group, reporting directly to Cathal Deasy and Taylor Wright, Global Co-Heads of Investment Banking, and working closely with Daniel Hanna, Global Head of Sustainable Finance. Cormier has over 20 years of experience supporting clients in the Power and Energy sectors and has led Barclays’ Energy business in the Americas since 2021.  


Temenos AI-powered offering aims to help banks modernise faster

Temenos has announced the launch of LEAP, a holistic modernisation program designed to enable Temenos clients to move to the firm’s latest platform, accelerating their journey to the cloud and software-as-a-service. The tech company says LEAP offers banks a fast, low-risk route to a modern cloud-native architecture to future-proof their business.

LEAP aims to allow clients to launch more personalised products to their customers quickly and iteratively and improve customer engagement. Temenos’ platform should make it easier to expand into new sectors and markets, stay ahead of competitors and ultimately take advantage of the benefits of Temenos Banking Cloud and SaaS. The Temenos Value Benchmark - a benchmark, consists of 70,000 data points from 146 banks globally across segments and interviews with 1300+ C-level executives - shows that core banking clients using its modern banking platform benefit from 24% higher growth and innovation share of their IT spend.

The new banking capabilities support the creation of new products, with a focus on product design, launch, servicing, and retirement, in addition to Temenos Payments Hub, which gives the opportunity to add new payment rails and to adopt a 24 x 7 x 365 STP approach. 


Allied Banking Corporation migrates core banking operations to the cloud 

Finastra has announced that Allied Banking Corporation (Hong Kong) has successfully migrated its core banking operations to the cloud while upgrading from Finastra’s Equation core banking solution to its next-generation Essence solution. Allied Banking Corporation has also gone live with Finastra’s Retail Analytics solution to support its reporting capabilities.

“Replacing our core system and migrating to the cloud at the same time was a significant decision, but Finastra worked closely with our team to enable a smooth transition for our customers,” said Lourdes A. Salazar, Chief Executive, Allied Banking Corporation. “Acting boldly has enabled us to reap the benefits of a cloud-based SaaS model, letting us refocus our business teams towards customer management and growth activities whilst Finastra takes care of our technology.”

The Retail Analytics solution is a system that enables the bank to generate operational, management and regulatory reports with historic data and trends analysis. It transformed the bank by automating and generating reports quickly and easily, with the ability to allow its internal and external auditors to view historic data and reports, without the need to print and maintain physical reports from the core banking system.

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