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First FX transaction made using Australian CBDC - Industry roundup: 19 May

20% increase in global cybercrime digital attack rate

LexisNexis Risk Solutions has released the results of its annual Cybercrime Report, an analysis of data from 79.8 billion transactions processed through its Digital Identity Network throughout 2022. The report, Trust and Collaboration as Foundations to Fight Fraud, shows that the global digital attack rate increased 20% year over year (YOY) compared to 2021, continuing the trend of digital fraud rising as economies re-open following the pandemic.

The LexisNexis Identity Abuse Index, which records the percentage of attacks per day, shows attack rates fell in the fourth quarter of 2022, although the picture varies by region, with sizeable spikes in Asia Pacific, Latin America and North America at the end of the year. 

Despite the effects of economic uncertainty, inflation and the war in Ukraine, digital transactions in 2022 went up by 24% YOY, primarily driven by increasing transactions in financial services (29%) and e-commerce (17%).

Organisations seek to establish consistent digital identity insights across all digital channels and end-customer touchpoints to mitigate rising fraud levels. They strive to increase the level of trust with their customers and identify risks more efficiently. The report showed that the percentage of transactions classified as trusted in the Digital Identity Network platform increased by 9% YOY, allowing organisations to provide a smoother customer journey.

The report also found that mobile channels are increasingly popular. Mobile transactions have reached a record high of 77% of all observed transactions in the Digital Identity Network, with the mobile app channel making up 82% of all mobile interactions.

Meanwhile, the global attack rate continues to increase, driven by an uptick in the financial services and e-commerce industries at 31% and 29%, respectively. The report shows that criminals target the communications, mobile and media industries more than any other sector. However, a noticeable decline of 27% YOY in the overall attack rate suggests criminals are changing focus. 

Across all desktop and mobile channels, attack rates on digital payments increased 27% YOY. Alternative payment methods, such as digital wallets, QR code payments and peer-to-peer transfers, continue to gain popularity, particularly in Asia Pacific. The shift has contributed to the 32% YOY growth in payment transactions in that region, yet criminals are also fast at exploiting vulnerabilities. The report shows a 50% YOY increase in Asia Pacific’s payment attack rate.

Automated bot attacks in the e-commerce space have grown 195% globally. Almost half of these attacks focused on the US, where e-commerce-focused bot attacks increased by 127% YOY. Bot attacks increased 112% in the US gaming and gambling industry, while the sector grows due to legalisation in more states.


First FX transaction made using Australian CBDC

The first foreign exchange transaction using an Australian CBDC has been made, facilitated by the fintech Canvas. The historic trade was part of the Reserve Bank of Australia’s (RBA) and Digital Finance Cooperative Research Centre (DFCRC) CBDC pilot. Canvas was selected to test FX transactions and international remittances with the RBA’s CBDC - the eAUD.

The first FX transaction was successfully completed between Australian Securities Exchange-listed DigitalX and fund manager TAF Capital, to trade eAUD to USDC stable coin on Wednesday 17th May.

The transactions were settled atomically (instantaneously) and demonstrated the benefits that CBDC’s can bring to financial markets, institutions and governments, such as 24/7/365 FX trading, no cut-off time for international remittances, and improving a financial institution's capital efficiency.

Canvas’ CBDC exchange facilitates trade between eAUD and foreign currencies on its privacy focused layer 2 blockchain with assurances of confidentiality, compliance, scalability and low cost transactions.

Canvas is one of a handful of selected use case providers in the RBA eAUD project alongside ANZ Bank and The Commonwealth Bank of Australia (CBA) and MasterCard. Canvas is showcasing tokenised FX and the benefits of using CBDC and digital currencies in place of traditional fiat currencies and legacy networks. 

“The eAUD, as a CBDC, holds the potential to address crucial challenges in both FX and international remittance markets such as improving transaction times, reducing fees, and providing more open access,” commented David Lavecky, Canvas Digital CEO. “We believe that CBDCs, tokenised bank deposits, and digital securities will radically transform finance and markets over the next decade. Our use case demonstrates the benefits of using CBDCs in tokenised FX transactions and how our privacy focused Layer 2 blockchain provides improvements over traditional markets by eliminating market inefficiencies, errors, and settlement risks.”


Airwallex and Modifi look to smooth cross-border B2B payments

Airwallex has partnered with Modifi, a global commerce platform for business payments, to launch a solution for transferring money across multiple regions. Using Airwallex’s global payments and financial infrastructure, Modifi has created Global Account Solutions, a payment tool that facilitates a seamless payment integration for exporters in China and large buyers around the world by addressing the complexities and high costs of cross-border payments and invoice financing. 

Cross-border payments are associated with high costs, longer payment terms, limited access and lack of transparency. The pair say that banks, typically dominant in global business payments, tend to favour larger companies, leaving many emerging SMEs struggling to find affordable and flexible global payment services. As a result, there is a growing demand for more efficient and cost-effective cross-border payment and financing solutions.

Modifi has embedded Airwallex’s payment infrastructure to provide Global Account Solutions for exporters around the globe who are seeking sustainable growth in their international business. This solution is designed to simplify buyers and sellers' financing and collection process across multiple regions, including North America, Europe, and Asia. It is designed to address the financing pain points of B2B exporters and meet the cash flow needs of e-commerce marketplace vendors and non-traditional businesses. 

This news comes hot on the heels of another partnership Airwallex has entered, this time with Expedia in a bid to help global business travellers. The two have launched a joint promotion to help customers save when booking hotel stays. Airwallex customers can now receive a 10% discount on hotel stays when booking on the platform.


The e-HKD pilot programme kicks off

The Hong Kong Monetary Authority (HKMA) has announced the commencement of the e-HKD Pilot Programme. A total of 16 firms from the financial, payment and technology sectors have been selected to participate in the first round of pilots for 2023. The pilots will take deep dives into potential use cases in six categories, including full-fledged payments, programmable payments, offline payments, tokenised deposits, settlement of Web3 transactions and tokenised assets.

The e-HKD Pilot Programme is a critical component of Rail 2 under the HKMA’s three-rail approach in paving the way for the possible implementation of a retail central bank digital currency (CBDC), the e-HKD, in the future. Under the programme, the HKMA will conduct a series of pilots in close collaboration with various stakeholders to examine the use cases and implementation and design issues relating to e-HKD. Through this iterative process, the outcomes and insights gained from each pilot should help enrich the HKMA’s perspective and refine the HKMA’s approach to the possible implementation of e-HKD. The HKMA stated it is not yet at a point where a firm decision can be made to introduce e-HKD.

In the next few months, the HKMA will closely engage with the selected firms in conducting the pilots and monitoring the progress. While the actual outcome and results of the pilots may evolve over time, the HKMA aims to share the key learnings with the public at Hong Kong FinTech Week 2023. The HKMA expects to conduct more rounds of pilots with the industry in the future.

To facilitate collaboration between the government, industry and academia on CBDC research, the HKMA also plans to establish a CBDC Expert Group. The Expert Group will comprise leading academics from local universities who will contribute valuable insights to support Hong Kong’s future exploration on key policy and technical issues surrounding CBDC, such as privacy protection, cybersecurity and interoperability.


BofA accelerator programme for entrepreneurs from underrepresented communities

Bank of America has launched its Breakthrough Lab impact accelerator programme with a call for applications for the September 2023 cohort. The six-month programme provides tailored mentorship, digital expertise, networking with industry experts and access to potential investors to Black, Hispanic-Latino, Native American and other entrepreneurs from underrepresented communities so that they can scale-up their technology-related businesses.

Founders of early-stage startups from underrepresented communities are encouraged to apply to the programme that promotes financial inclusion and financial technology development with the goal of increasing the number and growth of small businesses. The deadline for applications is 8 June 2023 for a September 2023 start date.

In 2021, the bank launched a pilot programme with five startups from the New York area. Following the initial success, in 2022 the bank expanded the pilot with 17 companies from the US, Mexico, UK and France.

That year, the bank also launched the Access to Capital Directory to help connect women-owned businesses to resources on navigating the capital landscape and identifying potential sources of funding. This directory has now expanded to encompass Black and Hispanic Latino entrepreneurs.

To date, Bank of America says it has committed US$421m to more than 130 minority and women-led funds. Those funds will in turn invest in an estimated 2,000-plus minority- and women-led companies over five years.

The next Breakthrough Lab runs from September 2023 to March 2024. Pre-seed stage companies with ideas related to fintech or tech-enabled ideas promoting inclusion such as healthtech, wealthtech, edtech, and housing are encouraged to apply. While the aspirational goal of the programme is to increase access for underrepresented groups, all eligible entrepreneurs regardless of background are encouraged to apply.


RMB stays as fifth most active global currency as payment values decrease

In April 2023, the RMB retained its position as the fifth most active currency for global payments by value, with a share of 2.29%, according to SWIFT’s RMB Tracker. Overall, RMB payments value decreased by 21.55% compared to March 2023, while in general, all payments currencies decreased by 22.69%. Regarding international payments, excluding payments within the Eurozone, the RMB ranked 7th with a share of 1.93% in April. 

The tracker uses data from live and delivered MT 103 and MT 202  - customer initiated and institutional payments - and ISO equivalent messages exchanged on Swift. RMB’s fifth place out of all international currencies in April saw it behind the US dollar (42.71% of all global payments value), the euro (31.74%), the British pound (6.58%) and the Japanese yen (3.51%). 

As a global currency in the trade finance market, based on live and delivered MT 400 and MT 700 messages exchanged on SWIFT, RMB ranked third based on value, accounting for 4.72% of April’s trade finance transactions. This field was dominated by the US dollar (83.95%), while the euro also placed higher (6.54%).

Looking at FX spot transactions, the RMB was April's sixth most used currency for FX confirmations. The US dollar was the most used, followed by the euro, pound, yen and Canadian dollar. In terms of the top economies carrying out FX spot transactions in RMB, the UK came out on top in April (35.2%), followed by Hong Kong (12.08%), the US (11.85%), China (10.67%) and France (7.65%). 

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