Global manufacturing gathered further momentum in June

For the second consecutive month, the GEP Global Supply Chain Volatility Index — an indicator tracking demand conditions, shortages, transportation costs, inventories and backlogs based on a monthly survey of 27,000 businesses — continued in positive territory. This indicates another month where global supply chains got busier, and capacity was stretched across suppliers worldwide. At 0.13, the index was little-changed from May’s 14-month high of 0.21.

At the forefront of supply chain activity growth is Asia, where input demand jumped as factory activity in major manufacturing and exporting economies — led by China, Taiwan, Vietnam and India — accelerated.

In contrast to Asia, which has seen steady month-over-month growth since April, North America’s suppliers oscillate between under- and overutilised capacity. In June, factory input demand fell slightly, with suppliers experiencing reduced demand. However, on average, since the start of 2024, North American vendors have generally been operating at full capacity.

The European market is still operating with some slack as factory purchasing activity across the continent remains subdued. This suggests the region’s manufacturing recovery still has a way to go, though conditions have vastly improved compared with the end of last year.

An early warning sign of potential overheating ahead is global transportation costs, which rose to their highest level since October 2022 in June as strengthening activity across global supply chains led to higher shipping and container rates. For now, reports of safety stockpiling remain low, suggesting the market is well placed in a “goldilocks” zone and stress levels are subdued.

“Asian manufacturers are gaining momentum, which, if sustained into the second half of the year, will mean a return of increasing costs and price pressures for global companies,” explained Amol Jawale, vice president, consulting, GEP. “Now is the perfect time for a company’s procurement to lock in pricing with key suppliers for 2025.”

 

Payment fears putting businesses off overseas growth

Concerns over international payments are putting many UK businesses off using overseas suppliers or selling to other markets, according to an HSBC UK survey. The survey of more than 1,000 financial decision-makers reveals that 43% are discouraged from doing business internationally because of uncertainty over hidden payment costs. Other concerns include payment security (38%) and dealing with different currencies (37%).

The survey also reveals that age is a factor in confidence levels regarding international payments. Of respondents aged under 35, 60% are reluctant to do business internationally because of payment security concerns, and 58% are put off by dealing with different currencies. In contrast, of those 55 or older, just 27% share the same concerns over payment security, and the same proportion were put off by dealing with different currencies.

Commenting on the survey results, Laurent Descout, CEO and Co-Founder of Neo said: “Unfair pricing continues to be a massive bugbear for businesses when working with banks for cross-border payments. Banks don’t just charge the exchange rate and the FX margin, but they also inflate the overall price. To make matters worse, the more banks involved in the process, which can be many, the higher the fee. This can severely hinder the profits of smaller businesses.”

HSBC UK used the survey release as an opportunity to launch a Global Wallet payment solution, which is integrated into its digital banking platform for small and medium businesses. The solution uses the bank’s global network to tap into local payment systems, which it says cuts out friction as it sends and receives like a local.

“HSBC Global Wallet, our multi-currency business account, offers a simple and transparent solution,” said Tom Wood, Head of Global Payments Solutions at HSBC UK. “By giving businesses different currency wallets and access to HSBC’s global payments network, it provides visibility, reach and control.”

 

Indonesia and South Korea pursue cross-border payment connectivity

Bank Indonesia (BI) and the Bank of Korea (BoK) have signed a memorandum of understanding (MOU) in the area of cross-border payments. The MOU reflects the implementation of the 2022 bilateral cooperation agreement on central banking.

The MOU aims to accelerate closer cooperation on the interoperability of cross-border payments. BI and the BoK also seek to establish a framework to facilitate cross-border payment connectivity between the two countries. The MOU serves as a basis for the two countries to implement cross-border payments with industry players from each country. 

The implementation of the MOU is designed to not only support cross-border transactions between the two countries and promote the digital economy and finance in Indonesia and South Korea but also significantly benefit the tourism sector, especially considering the high number of tourists travelling between the two countries. This cooperation should enhance the economies of both countries, particularly in the tourism sector.

The ongoing efforts of BI and the BoK aim to create cheaper, faster, more inclusive, and more transparent cross-border payments between Indonesia and South Korea. More importantly, they are set to promote the digital economy and finance in both countries, marking a step towards a more interconnected and efficient financial landscape.

 

UK headline inflation stays at 2.0%

The UK Consumer Prices Index (CPI) rose by 2.0% in the 12 months to June, the same rate as the 12 months to May 2024, according to data from the Office for National Statistics. Monthly, CPI rose by 0.1% in June 2024, the same rate as in June 2023.

Core CPI (excluding energy, food, alcohol and tobacco) rose by 3.5% in the 12 months to June, the same rate as in May; the CPI goods annual rate fell from negative 1.3% to negative 1.4%, while the CPI services annual rate remained at 5.7%.

The most significant upward contribution to the monthly change in the CPI annual rate came from restaurants and hotels, where prices of hotels rose more than a year ago; the largest downward contribution came from clothing and footwear, with prices of garments falling this year having risen a year ago.

Andy Mielczarek, Founder and CEO of  Chetwood Financial, said: “After years spent hiking the mountain of inflation, it’s good to be back on solid ground. Inflation is finally under control, and this gives Britain a platform to begin rebuilding itself, putting behind the challenges of the past two or more years. It will be interesting to see how quickly interest rates fall, and by extension how much confidence the Bank of England has in the rate of inflation, but for the moment we can enjoy some long-awaited stability.”

Reflecting on what the news might mean for potential interest rate cuts, Jatin Ondhia, CEO of Shojin, said: “The expectation remains that the base rate will be cut twice this year, probably starting at the Bank of England's next meeting on 1st August. But that is not a given - the Bank may fear another uptick in inflation over the coming months. So, investors need to remain vigilant, consider broader economic factors, including any new policies bought in by the new government, and then adapt their plans accordingly.”

 

Improvements seen in understanding and preparedness of expanded US Treasury Clearing

The Depository Trust & Clearing Corporation (DTCC), a post-trade market infrastructure for the global financial services industry, has issued the white paper “The US Treasury Clearing Mandate: An Industry Pulse Check” to further enhance the industry’s knowledge of the U.S. Securities & Exchange Commission’s (SEC) expanded clearing rules. 

The paper, which reports on findings from a recent industry survey conducted by DTCC’s Fixed Income Clearing Corporation (FICC) subsidiary, provides updated estimates on the volume of transactions required to be submitted for central clearing, the planned usage of FICC’s various access models, and how margin and liquidity risk management resources may be impacted.

Specifically, the findings confirm:

• Volumes: Treasury clearing activity is expected to increase by more than US$4 trillion each day, bringing the total daily volume to over US$11.5 trillion. Over half (58%) of respondents forecasted that the additional clearing activity would be driven by indirect participant Repo activity clearing.
• Access models: FICC’s Sponsored Service remains the preferred access model for indirect participant activity (74% of respondents). However, survey respondents showed increased interest in the Agent Clearing Member (ACM) Service (43%). FICC expects to set up 7,000+ new intermediary-indirect participant relationships.
• Done-away clearing: FICC anticipates the growing adoption of a done-away clearing model for indirect participants. 28% of respondents say they expect to facilitate Treasury clearing activity through a business area that offers done-away execution.
• Margin: Margin is expected to increase but is anticipated to be proportionate to the additional volume of activity. Treasury repo and buy/sell activity estimates indicate an increase in aggregate margin (VaR) for the respondents’ portfolios of approximately US$58.4bn, with approximately US$27bn (or 46%) of the aggregate incremental VaR representing segregated indirect participant margin. The results underscore FICC’s current efforts to provide margin efficiency through expanded end-user customer cross-margining opportunities.
• Liquidity: Survey results indicate a potential maximum daily liquidity need of US$84.5bn, which would point to a total Capped Contingency Liquidity Facility (CCLF) size of US$109.9bn under current parameters and the outlined assumptions. Since 2021, the CCLF facility has ranged between US$71.0bn and US$128.4bn. FICC will leverage these responses to diversify additional, cost-effective liquidity resources further.

“Providing updated and transparent information is critical in supporting firms as they get ready for expanded central clearing of Treasuries,” said Laura Klimpel, Managing Director, Head of DTCC’s Fixed Income and Financing Solutions. “We remain committed to guiding and informing our members and the broader industry about the impact of the SEC’s new requirements, to collaborating with market participants on continuously enhancing our offerings, and to supporting a smooth and orderly implementation.”

 

PSR and FCA launch joint call for information on big tech and digital wallets

The UK’s Payments Systems Regulator (PSR) and Financial Conduct Authority (FCA) are seeking views on the benefits and risks of digital wallets for people and businesses. Digital wallets have grown rapidly over the last few years, and the pair say it is likely that more than half of UK adults now use one. 

With Apple Pay, Google Pay and PayPal being three of the most widely used digital wallets in the UK today, digital wallets have become an increasingly important touchpoint between big tech firms and UK consumers. The regulators are therefore keen to understand better the impact on consumers and businesses that digital wallets’ increasing popularity creates, including: 

• The range of benefits that digital wallets bring for service users.
• Whether any features mean payments don’t work as well as they could for consumers or businesses.
• Their role in unlocking the potential of account-to-account payments and how they could impact competition between payment systems.
• Whether digital wallets could raise significant competition, consumer protection or market integrity issues, either now or in the future. 

“Digital wallets are steadily becoming a go-to payment type and while this presents exciting opportunities, there might be risks too,” David Geale, the PSR’s Managing Director, said. “Collaboration between regulators and working with industry is crucial to ensure we’re on the front foot to support innovation and competition, making sure everyone benefits from access, protection and choice in payments.”

 

BBVA Colombia and IFC issue world’s first biodiversity bond in the financial sector

BBVA and the International Finance Corporation (IFC), a member of the World Bank Group, have issued a US$15m first tranche of the world’s first biodiversity bond that will amount to US$70m. The objective of the bond is to finance projects that address the key drivers of biodiversity loss, mainly focused on reforestation, regeneration of natural forests on degraded lands, climate-smart and regenerative agriculture, restoration of wildlife habitats, among others.

BBVA in Colombia is the issuing bank, and IFC is acting as structurer and investor. The operation includes advice to establish eligibility criteria and reporting indicators for activities that help protect, maintain, or improve biodiversity and ecosystem services and promote optimal sustainable management of natural resources. Additionally, IFC will build technical capabilities within BBVA and raise awareness among its clients about financing opportunities for biodiversity in Colombia.

During 2023, BBVA in Colombia financed more than 214.8 billion Colombian pesos in areas aligned with biodiversity, such as land use, terrestrial habitat, ecotourism projects, smart agriculture and conservation of marine habitats, mammals, and birds.

Due to its geographical location, Colombia integrates diverse ecosystems. With more than 50,000 plant species, Colombia is home to 14% of the world's known plant species, second only to Brazil. In addition, nearly 4,500 species of birds, a third of the world's bird species, can be found in Colombia, making it the country with the greatest diversity of birds on the planet.

With more than 1,400 species of mammals, Colombia is the second country in the world with the greatest diversity of mammals, after Indonesia. In addition, it has nearly 1,500 species of amphibians, which represents 14% of these species in the world, making it the country with the most diversity of this species in America.

Climate change not only affects biodiversity in animal and natural species but also affects communities, leading them to situations such as displacement due to floods and crop losses due to droughts and fires. According to data from the World Bank, climate change could generate up to 10 million refugees in Colombia by 2050.

 

Netgain tool targets effortless bank reconciliations

Netgain has launched a new way to modernise and streamline cash management for accounting teams. The tool, NetCash, offers real-time automated bank imports and reconciliations directly within NetSuite.

The firm says that NetSuite users can seamlessly connect their bank accounts and import cash transactions via APIs, providing real-time visibility into a company's cash position. By partnering with multiple open banking providers, NetCash claims it has a greater number of bank connections than any other cash management solution.

With daily automation and optimisation of cash transaction imports, application, and matching, accounting teams can now proactively and efficiently stay on top of cash transactions and balances throughout the month. The solution might mean that they can also spend less time at month-end being reactive and chasing down supporting details via manual processes.

 

Partior closes US$60m+ Series B funding round 

Partior, a fintech with global unified ledger-based interbank rails for real-time clearing and settlement, has announced the first close of a US$60m+ Series B round led by Peak XV Partners and supported by Valor Capital Group and Jump Trading Group as new investors, and J.P. Morgan, Standard Chartered and Temasek as existing shareholders. 

DBS, J.P. Morgan, and Standard Chartered are using Partior to facilitate payments for their customers. Companies, including Siemens and iFAST Financial, have used Partior’s platform through Standard Chartered for better access and control of their working capital, around-the-clock availability, and faster, more seamless payment flows.

The fintech says this new round of funding will enable new capabilities such as intraday FX swaps, cross-currency repos, programmable enterprise liquidity management, and just-in-time multi-bank payments. The investment will significantly support Partior’s international network growth and the integration of additional currencies, including AED, AUD, BRL, CAD, CNH, GBP, JPY, MYR, QAR, and SAR, into its network. Partior is currently live with USD, EUR and SGD.