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Global non-cash transaction volumes to reach 1.3 trillion this year - Industry roundup: 15 September

Global non-cash transaction volumes set to reach 1.3 trillion

The Capgemini Research Institute’s 2023 World Payments Report has revealed that non-cash transaction volumes will reach 1.3 trillion by 2023 globally. As consumers and businesses adopt new digital payment schemes, the report suggests this growth will accelerate to 2.3 trillion by 2027, growing at a rate of 15% annually. At a regional level, digital payments will increase by 19.8% across the Asia Pacific, 10.7% in Europe, and 6.5% in North America by 2027.

The expanding digital payment infrastructure, regulations, and open banking are swiftly changing how customers and businesses pay for goods and services. According to the report, by 2027, new payment methods (instant payments, e-money, digital wallets, account-to-account, and QR code payments) will make up approximately 30% of total volume, with traditional non-cash payments (checks, direct debits, cards, and credit transfers) dropping to around 70% of overall non-cash transaction volumes.

The report reveals over half of corporate treasurers believe the rising globalisation of trade and ongoing supply chain disruptions have driven demand for effective and efficient cash management services (CMS). Another third said evolving risks (geopolitics and cybersecurity) made CMS critical, while nearly 30% call out rising inflation as the cause of their growing need for better cash management.

As corporations navigate economic headwinds, current CMS offerings largely underwhelm multinational corporates despite having more than 27 banking relationships on average to meet treasury needs. Over 70% of enterprise executives said they face issues in dispute negligence, poor credit risk assessment, and delayed or duplicate payment processing. However, the solution is clear, with around two in three (63%) payment executives citing legacy infrastructure barriers as the biggest hindrance to providing efficient CMS.

New payment solutions and key industry initiatives are fuelling the growth of digital payments among enterprises. Expectations are also changing, with 63% of corporate clients demanding a retail-like payment experience from their banks in 2023.

The payments sector has been at the forefront of digitisation. However, it’s coming at a cost, as compliance with local, regional and international regulations (including ISO 20022 and SWIFT global payments initiatives) leaves limited room for investments in future innovation. Payment executives cite nearly 80% of traditional payment revenue sources are stressed, and service providers must rebalance their focus between retail and commercial payments. Globally, more than 50% of payment executives believe commercial payments offer a better profit potential than retail payments.

End-to-end digital transformation in transaction banking requires top-down commitment, cohesive planning, and a unified purpose for structural reforms. Sixty-seven per cent of bank executives acknowledged that strategically partnering with corporate clients reduces the threat of disintermediation by fintechs and paytechs, and 57% of payments executives said strategic banking partners enjoy increased cross- and up-selling opportunities because of these relationships. To nurture strategic cash management relationships with corporate clients, the report suggests banks and payment firms use the following three-layered strategy:

  • Simplify the back office to enable innovation and agility.
  • Perform with platforms to boost cash management efficiency.
  • Engage with corporate clients as strategic partners, not service providers.


HSBC launches multi-market business account opening service

HSBC is launching a digital solution to enable businesses and corporate customers to open accounts for multiple business entities across multiple markets. Using a dedicated portal, the streamlined digital application process is fast, simple, and globally consistent, regardless of the market or markets where accounts are being opened.

The solution can be accessed online and combines application forms, secure document exchange functionality, online tracking and e-signature capabilities to make international account opening a seamless experience. The digital account opening portal supports both primary and subsidiary accounts. Customers using the portal can access direct support tools, including local language, AI-powered virtual assistants, and in-platform communication with local case managers. It allows for tracking of applications and offers transparent and consistent support throughout the account opening process.

The service is set to be rolled out in Australia, Canada, France, India, Indonesia, Israel, Italy, Luxembourg, Malaysia, Mauritius, Netherlands, New Zealand, Philippines, Ireland, Singapore, Spain, Thailand, UAE, UK and the US. An additional handful of markets - Hong Kong, Bahrain, Kuwait and Qatar - are set to receive access to the solution in Q4, while further global expansion of the suite is planned for 2024.

“Helping businesses operate seamlessly, transact and grow across borders is core to HSBC’s purpose,” said David Rice, Commercial Banking Chief Operating Officer at HSBC. “This service will radically simplify the processes behind this ambition and eliminate long-standing pain points for internationally minded businesses looking to expand overseas.”


ABN Amro registers first digital green bond on the public blockchain

Dutch bank ABN Amro has registered a digital green bond on the public blockchain. With this bond, Vesteda raised €5m from DekaBank. The transaction proceeds will be used to (re-)finance green assets in line with Vesteda’s Green Finance Framework.

The entire process of preparing, placing and documenting the bond was digital. Ownership was recorded on the blockchain as tokens that the investor acquired after they had paid for the bond. To ensure custody and security of the investors’ unique keys, ABN Amro uses a wallet for accessing the digital bond. For the contemplated transaction, the bank also provided digital custody services.

ABN Amro had previously gained experience with digital bonds, including purchasing and reselling a digital bond from the European Investment Bank (EIB) and placing a digital bond for APOC (a Midcorp client of the bank). With the latest transaction for Vesteda, ABN Amro has now taken several steps in developing its digital proposition, which will support ABN Amro to continue working towards a digital future.

For this issuance, ABN Amro engaged the services of Tokeny and Fireblocks for the digital wallet. Allen & Overy and Clifford Chance provided legal services.

“For Vesteda it was a great learning experience to arrange a digital green bond by means of public blockchain,” commented Frits Vervoort, Chief Financial Officer of Vesteda. “We have gained valuable knowledge and experience on how blockchain can help us with financing solutions, and the advantages it offers.”


Legacy technology and regulation stopping FIs from capturing growth opportunities

Nasdaq has published the results of a global survey across the post-trade ecosystem, including over 300 decision-makers from exchange groups, custodians, brokers, and other service providers. The report was produced in partnership with the ValueExchange.

The study reveals that 78% of financial market infrastructure (FMI) investment budgets are dominated by maintaining and upgrading legacy technology platforms. Keeping the lights on is taking up 44% of infrastructures’ investment capacity, while 34% is allocated to the transition and replacement of these systems. Alongside intense regulatory oversight and mandated change, operating models are being pulled in multiple directions. This leaves minimal scope for spending on growth initiatives and highlights an ever-increasing risk for the industry.

“Over decades technology debt has built up amongst infrastructure providers across financial markets,” commented Roland Chai, Executive Vice President and Head of Marketplace Technology at Nasdaq. “With more than a third of firms planning a major system overhaul over the next five years, alongside responding to an unprecedented wave of regulation, the need for refreshing core technology is a challenge that is core to most industry participants. As the backbone of the industry and global economy, operators must differentiate themselves and remain relevant for the next generation of investors.”

This spending constraint leads to a substantial difference in investment allocations between FMIs and their participants. For example, for over ten years, RPA has been proving highly effective in facilitating the quick and tactical automation of core processes and yet today, only 4% of FMI spend is on RPA and AI initiatives, compared with over 28% by market participants.

A third of firms surveyed operate with legacy platforms over ten years old, with 37% of respondents planning a major system overhaul in the next five years. The need to undertake significant projects is particularly prevalent in the post-trade space, where 47% of clearing firms expect to trigger an upgrade, while in settlements, 44% of firms see a transition as imminent. This comes at the same time as they look to remove time from their processing and increase their settlement efficiency, meaning an inevitable ‘distraction effect’ at a critical time.

The study finds the reach of mandatory regulatory change is the central concern for 64% of our respondents. As the global securities industry continues to contend with the impact of the Shareholder Rights Directive II and Central Securities Depositories Regulation, project teams are now faced with the added complexities of the transition to T+1 settlement cycles in North America in May 2024. In parallel, the UK Securities Financing Transactions Regulation has forced securities finance firms to profoundly rationalise and accelerate their data reporting capabilities – as will the Securities Lending Transparency: Rule 10c-1 in the USA. In the context of multiple local market regulations centred on client asset segregation, client monies and other areas, the regulatory agenda increasingly requires significant, enterprise-wide change across the entire trade cycle.

“Across our client base there is an increasing recognition of the need to undertake major change programs, having adopted a patchwork approach for decades” said Magnus Haglind, Senior Vice President and Head of Products, Marketplace Technology at Nasdaq. “The need to respond to regulatory change is also seen as significant factor, which increasingly demands re-engineering entire platforms, rather than tactical initiatives. This underscores the importance of modernisation initiatives across infrastructure operators, where growth should form a key part of legacy upgrades.” 


Vanuatu’s new payment system to support digital economy and financial inclusion

People in Vanuatu are set to benefit from a new national digital payment platform, part of an ongoing transformation of the nation's financial infrastructure to build a modern, resilient financial system which can support the digital economy and drive inclusive economic development.

Launched by the Reserve Bank of Vanuatu, the VANKLIA system is expected to increase access to banking and financial services and encourage more people to open a bank account. The VANKLIA system has two main components: a real-time gross settlement component which carries out high-value and high-priority payments and settlement in real-time, and an automated clearing house component which facilitates the clearing of low-value, high-volume electronic fund transfers for batch payments such as salary payments and instant fund transfers for retail payments.

The new system's launch addresses Vanuatu’s payment system inefficiencies that have negatively impacted everyday business and economic activity. Transfers between banks relied on the manual clearance of cheques, which often led to significant delays. This new digital platform aims to enhance Vanuatu’s financial stability and efficiency, bringing new capabilities to make transactions quicker and safer. It should also enable new innovative financial services to be added.


MGM Resorts’ confirmed cybersecurity incident is credit negative - Moody's

On 11 September, MGM Resorts International (B1 stable) identified a cybersecurity issue affecting some of the company's systems. A report from Moody’s Investors Service states that the cybersecurity incident is credit negative for the company and highlights critical risks related to business operations’ heavy reliance on technology and the operational disruption caused when systems need to go offline or are inoperable.

The Moody’s report says that additional risks to MGM include potential revenue losses while systems were down, reputational risk and any direct costs related to investigation and remediation. Litigation expense or liability that the company may have because of compromised data, to the extent there is any, is also a risk. While the company's casino floors are back online and operational, its website is currently unavailable.

MGM in 2020 disclosed that it was a victim of a 2019 data breach that involved unauthorised access to a cloud server containing guest information. The incident pointed out key risks to entertainment and hospitality companies that handle large amounts of personal data on customers.

In a cyber risk heat map that Moody’s published in September 2022, the gaming and gambling industry was identified as carrying moderate cybersecurity risk, mainly because of their highly digitised nature and the large amount of valuable personal data the companies maintain. In some cases, data on guests may include personal information about US executives and government officials with security clearances, which is particularly prized by nation-state hacker communities. For sectors that scored moderate overall, the primary driver is their average exposure to cyber risk and average mitigation practices. A moderate cyber risk exposure reflects a sector’s material reliance on digitisation to operate their businesses, but whose more localised, less interconnected nature with other sectors would guard against a successful cyber attack on one not have wide-ranging knock-on effects to the rest of the economy.


Robeco launches climate global high yield bonds

Robeco has launched its first sustainable climate high yield fund. The Climate Global High Yield Bonds strategy aims to actively lower carbon footprints via high yield investments, measured against a Paris Aligned Benchmark by Solactive. The strategy harnesses the potential sustainability impact of asset owners from a bondholder's perspective. Robeco says this means the fund is, therefore, particularly suitable for the strategic asset allocation of pension funds, insurance companies as well as retail investors.

The fund has already raised 125 million seeding customers and expects more asset raising in the coming years. An increasing number of asset owners are committing to the Paris Agreement, striving to reduce carbon footprints through their managed assets. The high yield sector traditionally tends to have a higher carbon footprint than investment grade bonds due to its sector composition and industry focus. 

The strategy aligns with the European Union's Sustainable Finance Disclosure Regulation (SFDR) and is classified as Article 9 under SFDR. The strategy also contributes to a 7% reduction in overall emission intensity in the portfolio yearly. Moreover, it starts with a 50% lower carbon intensity than the current investment universe and excludes fossil fuel [related] activities.


Corpay cross-border launches live payment tracking tool

Corpay has announced that its cross-border business has launched Payments GPS, a proprietary tracking technology that allows clients and partners to monitor payments in real-time.

Leveraging technologies such as SWIFT gpi, the tracker provides an infrastructure for clients and partners to monitor payments continuously. It provides an intuitive user experience, API Suite, and push notifications – in a way designed to make payment tracking more convenient.

Payments GPS provides real-time payment status from initiation to settlement and allows clients to monitor each step of the journey. Clients can access secure, thorough, and reliable information about the movement of payments across banks, including BIC codes, payment received and released dates, deductions, FX rates, and credited amounts.

The tool also provides detailed insight into bank fees and other charges upfront, enabling clients to make more informed decisions. Real-time tracking ensures up-to-date information and gives clients confidence that the payment was successfully delivered to the recipient. It also allows a self-serve option for clients and partners, which aims to provide better exception handling and reduce investigation time and cost.


Episode Six launches B2B BNPL offering for SMEs

Episode Six (E6), a provider of enterprise-grade payment processing and ledger infrastructure, has launched Business Now, Pay Later. This solution enables commercial banks to capture new revenue streams by meeting the working capital needs of small and medium-sized enterprises (SMEs) through tailored instalment offerings within their business banking channel.

According to Capgemini’s 2022 World Payments Report, 89% of SMEs feel underserved by their primary banks and are considering a shift to a new provider. It’s clear there is an increased demand from SMEs for more flexible working capital solutions, and the economic headwinds that have led to rising rates are only strengthening the need.

Business Now, Pay Later aims to directly address this need by industrialising the conventional buy now, pay later (BNPL) model and making it fit-for-purpose for commercial banks and their customers. 

The solution enables financial institutions to tap into an underserved market and solidify business relationships by providing SMEs with the products to better manage their cash flow with increased flexibility and control. Furthermore, it provides banks with the ability to tailor loan products based on client need and risk profile, which should enable commercial banks to strengthen and grow their balance sheet.

Business Now, Pay Later lets banks offer instalment loans to businesses at any point in their buying journey, including before, during and after payment. Payments can be made through real-time payments, ACH, wires, or cards. From there, repayment options vary based on customer need and risk profile, all set and managed by the bank through simple configurations.


Broadridge launches cloud-based reconciliation and matching solution

Broadridge Financial Solutions has launched BRx Match, a cloud-based reconciliation and matching solution. The solution was developed as an all-in-one reconciliation platform designed to solve complex and simple reconciliations. The platform automates the entire reconciliation process from the earliest point, which should result in improved efficiency, transparency and accuracy, while reducing risk and total cost of ownership.

BRx Match provides core sets of matching rules for various common reconciliations. Having acquired the data, a choice of matching engines can be used to obtain the optimum output. Business users can design, build, test, modify, and deploy their own reconciliations with self-build capability. The solution is data agnostic, which Broadridge says allows it to perform the widest variety of reconciliation for securities, cash, derivatives, reference data, card services, financial, and insurance data. The platform provides control and consistent user experience across the enterprise with full exception management, workflow, consolidated audit trail, and holistic reporting capabilities.

In a statement about the product launch, Broadridge says that all existing clients will receive the BRx Match UI and product enhancements as part of their roadmap and will have the option to introduce the new self-service capability.


Finastra solution aims to help banks combat financial crime in instant payments 

Finastra has announced the launch of payment solution Compliance as a Service on Microsoft Azure. The service includes Fincom’s real-time AML transaction screening and ThetaRay’s AI-powered transaction monitoring as a pre-integrated packaged solution with Finastra Payments To Go. The end-to-end solution enables US and European banks to streamline and automate compliance processes to deliver instant payments effectively. The service will soon be integrated with Finastra Global PAYplus.

Finastra says the solution helps banks take advantage of and comply with various instant payment infrastructures, including the FedNow service in the US and TIPS in Europe, while mitigating the increased financial crime risks. With real-time compliance screening by Fincom and real-time AI-powered transaction monitoring from ThetaRay, the service is designed to allow financial institutions to accelerate business growth, increase risk coverage and reduce operational costs.

“The introduction of any new payment rail brings new risks, and especially when that rail operates in real-time,” said Mike Vigue, Chief Product Officer, Payments at Finastra. “By pre-integrating Fincom and ThetaRay with our solutions, our customers will reduce the time and risks of launching instant payment services while benefiting from a new level of security, scalability and flexibility.”

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