Mastercard pitches Crypto Credential to bring more trust to blockchain ecosystem

Mastercard has launched Crypto Credential, a set of common standards and infrastructure designed to help verify interactions among consumers and businesses using blockchain networks. The solution aims to provide a foundation for financial institutions, governments, brands, and crypto players, ensuring that those interested in interacting across web3 environments meet defined standards for the activities they’d like to pursue.

There are several use cases that Mastercard says the Crypto Credential can unlock, as types of consumer verification can vary widely based on market and compliance requirements. The solution will define verification levels and provide necessary enabling technology to help bring more use cases to life. Examples of how Mastercard Crypto Credential will work include:

• Providing easy-to-remember, straightforward aliases to help consumers share wallet addresses, improving the consumer experience and reducing the potential for errors.
• Bringing richer information to blockchain transactions through metadata, helping to define criteria for a wallet to help ensure that transactions are completed as intended. 
• Tapping into CipherTrace’s suite of services to help verify addresses and support Travel Rule compliance for cross-border transactions. 

Lirium, Bit2Me, Mercado Bitcoin and Uphold are the first partners to join Mastercard on the solution, working on an initial project to enable transfers between the US and Latin America and the Caribbean corridors. Mastercard is also teaming up with public blockchain network organisations Aptos Labs, Ava Labs, Polygon and The Solana Foundation, who will help bring Mastercard Crypto Credential to the application developers in their ecosystems. Mastercard and these partners will collaborate to enhance verification in NFTs, ticketing, enterprise and other payments solutions.

“Latin America and the Caribbean is among the top regions for digital assets adoption and remittances leveraging digital assets as means of value exchange,” commented Walter Pimenta, executive vice president, Product and Engineering, Latin America and the Caribbean at Mastercard. “Mastercard Crypto Credential could help to address key challenges that have traditionally hindered mainstream usage of this type of use cases, driving more industry players to join this space in a meaningful way.”

 

US and Singapore look to strengthen cross-border cyber incident coordination 

The United States Department of the Treasury (Treasury) and the Monetary Authority of Singapore (MAS) conducted a cross-border cybersecurity exercise from 25 to 27 April 2023. This exercise allowed both agencies to test and strengthen existing protocols for information exchange and incident response coordination for cyber incidents involving banks operating in both jurisdictions. 

Given the rising cyber threats targeting financial services and the interconnectedness of the US and Singapore’s financial ecosystems, timely coordination and cooperation during a cyber incident with cross-border impact is essential in ensuring a swift response and effective recovery of the affected operations. The exercise follows the Memorandum of Understanding on Cybersecurity Cooperation signed between Treasury and MAS in August 2021.

Following the exercise, Treasury and MAS reviewed the lessons gleaned, discussed possible enhancements and involvement of other international partners in future exercises. They explored other opportunities to deepen cybersecurity cooperation, such as holding bilateral cybersecurity policies and protocols workshops.

“This exercise is a significant step forward for the cyber partnership between the United States and Singapore, representing an effort to bolster cybersecurity cooperation and our ability to communicate in response to a significant cross-border incident,” commented Todd Conklin, Deputy Assistant Secretary in the Office of Cybersecurity and Critical Infrastructure Protection at Treasury. “Every day we are reminded that cyber threats cross all national borders as there has been an exponential growth in threat actor activities.  We must have a coordinated international response to the increase in threats, as the interconnectedness of our financial systems makes us only as strong as our weakest endpoints.”

 

Half of businesses are paid late

Half (50%) of businesses surveyed are being paid late by their customers, according to a supplier sentiment survey conducted by Taulia, a provider of working capital management solutions. This is the highest percentage since the annual survey began and a sharp rise from 36% receiving payments late from the prior year.

Taulia’s global Supplier Sentiment Survey, which has been conducted since 2014 and this year collected the views and insights of over 9,600 respondents worldwide, found that only four in ten (41%) are paid on time by their customers.

Adding to business’ financial pressures, the survey found that more than two-fifths (42%) of respondents expect an increase in borrowing costs over the next 12 months. Of which, nearly a tenth (7%) predict their costs to increase by over 10%.

To protect their working capital needs, bridge cash flow gaps, and help support business growth, three-fifths (59%) of respondents expressed interest in taking early payment for a discount at least some of the time. The main reasons for taking early payments include:

• Cash flow gap (48%).
• Working capital need (26%).
• Collections/payment predictability (24%).
• Ease of use (12%).
• Reduce Days Sales Outstanding (9%).

“Amidst high inflation and market turbulence, businesses across the globe are facing financial strain,” said Cedric Bru, CEO of Taulia. “A marked rise in late payments this year is the latest in a longer trend of behaviour, suggesting that businesses are navigating through a tough financial period. In times like these, working capital solutions are more important than ever for businesses looking to financially future-proof themselves. Not only do these solutions allow them to access extra liquidity to optimise their cash flow, but they also keep their businesses running smoothly. At a macro level, working capital solutions also increase global supply chain resiliency and stability.”

 

European banks’ corporate lending criteria tightened substantially in Q1

According to the ECB’s April 2023 euro area bank lending survey (BLS), credit standards - i.e. banks’ internal guidelines or loan approval criteria - for loans or credit lines to enterprises tightened further substantially (with the net percentage of banks reporting a tightening standing at 27%) in the first quarter of 2023. From a historical perspective, the pace of net tightening in credit standards remained at the highest level since the euro area sovereign debt crisis in 2011. 

Banks also reported a further substantial net tightening of their credit standards for household loans for house purchases, while the further net tightening became less pronounced for consumer credit and other lending to households (net percentages of banks at 19% and 10%, respectively). The tightening for loans to firms and for house purchases was stronger than banks had expected in the previous quarter and points to a persistent weakening of loan dynamics. 

The main drivers of the tightening were higher perceptions of risk and, to a lesser extent, banks’ lower risk tolerance. Against the backdrop of increases in ECB key interest rates and decreases in central bank liquidity, banks’ cost of funds and balance sheet conditions also had a tightening impact on credit standards for loans to euro area firms. In the second quarter of 2023, euro area banks expect a further, though more moderate, tightening of credit standards on loans to firms and for house purchases. For consumer credit, euro area banks expect a further net tightening of credit standards at a similar pace as in the first quarter of 2023.

Banks’ overall terms and conditions - i.e. the actual terms and conditions agreed in loan contracts - tightened further for loans to firms and households in the first quarter of 2023. Widening margins on riskier loans and rising interest rates accounted for the main tightening effect, reflecting the ongoing pass-through of higher market rates to lending rates for firms and households.

Banks reported a strong net decrease in demand from firms for loans or drawing of credit lines in the first quarter of 2023. The decline in net demand was more substantial than expected by banks in the previous quarter and is the strongest since the global financial crisis. The general level of interest rates was reported to be the primary driver of reduced loan demand in an environment of monetary policy tightening. Fixed investment also had a strong dampening effect on loan demand. The impact of inventories and working capital turned broadly neutral, after having previously had a positive impact on loan demand. This may reflect the easing of supply bottlenecks and a moderation in energy input costs. In the second quarter of 2023, banks expect a further though smaller net decline in demand for loans to firms.

According to the banks surveyed, access to retail and wholesale funding deteriorated in the first quarter. For money markets and debt securities, the deterioration reverses the improvement in access to these markets registered at the end of last year, possibly reflecting the March 2023 market turmoil and the lower overall level of excess liquidity. For retail funding, the deterioration in access reflects the continued increase in bank deposit rates and shifts towards more highly remunerated types of savings.

Banks reported that the ECB’s monetary policy asset portfolio - for which changes can arise as a result of any transactions, including less than full reinvestments from maturing securities - had a negative impact on their market financing conditions, liquidity positions and total assets over the past six months. The reported impact on profitability was broadly neutral. Developments in the ECB’s monetary policy asset portfolio and the related tightening of monetary policy had a net tightening impact on terms and conditions for loans to firms and households and a negative impact on bank lending volumes across all lending categories.

Euro area banks indicated that the ongoing phase-out of the third targeted longer-term refinancing operations (TLTRO III) had negatively impacted their liquidity positions, profitability and overall funding conditions over the past six months in the context of TLTRO III funds maturing or being voluntarily repaid early. The phase-out of TLTRO III had a tightening impact on credit standards. The impact on lending volumes is expected to turn negative across all categories of lending over the next six months.

In response to a new question introduced in this survey round, euro area banks have indicated that the ECB key interest rate decisions have had a marked positive impact on their net interest margins over the past six months. At the same time, while the impact on overall bank profitability was positive, the positive impact on banks’ interest margins was partially offset by a negative volume effect on net interest income. This aligns with the substantial weakening of loan and deposit dynamics over the past six months. Additional negative impacts stemmed from capital losses and net fee and commission income.

The euro area bank lending survey, which is conducted four times a year, was developed by the Eurosystem to improve its understanding of bank lending behaviour in the euro area. The results reported in the April 2023 survey relate to changes observed in the first quarter of 2023 and expected changes in the second quarter of 2023, unless otherwise indicated. The April 2023 survey round was conducted between 22 March and 6 April 2023. In this round, the size of the sample of banks surveyed was increased to 158 banks, mainly reflecting the enlargement of the euro area to include Croatia on 1 January 2023. The response rate was 100%.

 

76% of US small businesses feel well-equipped to survive a recession

Most US small business owners (72%) are concerned about the impact of a potential recession, however 76% are confident their business could withstand the downturn, according to the Bank of America 2023 Small Business Owner Report. The survey of more than 1,000 business owners across the country found that, despite the continued impact of inflation and supply chain issues, 65% anticipate revenue growth in the next 12 months.

Small business owners were also asked about future plans, sustainability, employee retention and labour. Conducted in March and April, other findings include:

• 79% of business owners raised prices over the last 12 months.
• 53% added benefits and perks to retain talent.
• 49% plan to use automation and artificial intelligence (AI) tools for their business in 2023.
• 34% believe the US economy will improve in the next 12 months.

Inflation (79%) and a potential recession (72%) top business owners’ concerns over the next 12 months. These entrepreneurs also expressed anxiety around commodities prices (68%), the US political environment (68%), rising interest rates (67%) and supply chain (57%).

Despite these concerns, the bottom line remains strong for many entrepreneurs. Some 56% of business owners reported increased revenue in 2022 compared to 2021, and looking ahead at the next 12 months, 48% plan to expand their business (vs. 37% last spring). Additionally, 82% intend to obtain financing in the year ahead (vs. 70% last spring).

Struggling with labour shortages and a competitive job market, business owners are increasingly focused on employee retention. Over the past 12 months, 53% have added additional benefits and perks to existing compensation packages, including remote/hybrid work (34%), cost-of-living bonuses (34%) and more vacation time (33%). And 75% of these business owners said their efforts meaningfully impacted employee morale and retention.

Additionally, 34% of business owners plan to hire in 2023, up from 26% last spring. Over the past 12 months, 51% implemented additional perks and benefits to attract new talent, such as increased base pay for new employees (54%), remote/hybrid work (30%), new employee training or resource groups (27%) and additional healthcare benefits (27%).

Three-in-four small business owners have already implemented sustainable business practices, such as reducing paper usage, establishing environmentally friendly habits in their work environment and working with sustainable vendors. While implementation challenges exist - 82% of entrepreneurs cited challenges such as increased costs (49%), limited supplier options (29%) and variable quality of sustainable products/services (26%) as primary obstacles - 78% of business owners plan to implement sustainable practices over the next 12 months.

In the past year, 80% of small business owners adopted digital tools for their business, leveraging digital banking to manage their finances and social media to reach their customers. Business owners also embrace AI and automation, with 49% planning to use AI tools to enhance their business in 2023.

Looking ahead, 55% of entrepreneurs anticipate accepting exclusively digital payments at some point in the future, and 90% say digital tools help make their operations more efficient, helping them save time and stay organised.

“While the dual pressures of inflation and supply chain disruptions continue to incumber operations, small business owners remain bullish about their prospects for the year ahead,” said Sharon Miller, President of Small Business and Head of Specialty Banking and Lending at Bank of America. “Small businesses are poised for growth, implementing strategies to retain and attract talent and exploring new tools including artificial intelligence to gain an edge in a highly competitive market.”

 

A third of businesses worldwide already hit by voice and video deepfake fraud

The rise of AI-generated identity fraud like deepfakes is alarming, with 37% of organisations experiencing deepfake voice fraud and 29% falling victim to deepfake videos, according to a survey by Regula, a global developer of forensic devices and identity verification (IDV) solutions. The increasing accessibility of artificial intelligence technology for creating deepfakes makes the risks mount, posing a significant challenge for businesses and individuals.

Artificial intelligence can be used to create increasingly realistic and convincing deepfakes, making it more difficult to distinguish between genuine and manipulated content. Fake biometric artefacts like deepfake voice or video are perceived as real threats by 80% of companies, according to Regula’s survey. And businesses in the US seem to be the most concerned: about 91% of organisations consider it a growing threat.

The increasing accessibility of AI technology poses a new threat: it may become easier for individuals with malicious intent to create deepfakes, amplifying the threat to businesses and individuals alike.

“AI-generated fake identities can be difficult for humans to detect, unless they are specially trained to do so,” commented Ihar Kliashchou, Chief Technology Officer at Regula. “While neural networks may be useful in detecting deepfakes, they should be used in conjunction with other antifraud measures that focus on physical and dynamic parameters, such as face liveness checks, document liveness checks via optically variable security elements, etc. Currently, it is difficult or even impossible to create deepfakes that display expected dynamic behaviour, so verifying the liveliness of an object can give you an edge over fraudsters. In addition, cross-validating user information with biometric checks and recent transaction checks can help ensure a thorough verification process.”

At the same time, advanced identity fraud is not only about AI-generated fakes. According to the survey, nearly half of the organisations globally (46%) experienced synthetic identity fraud in the past year. Also known as “Frankenstein” identity, this is a type of scam where criminals combine real and fake ID information to create totally new and artificial identities. It’s usually used to open bank accounts or make fraudulent purchases.

The banking sector is the most vulnerable to such kind of identity fraud. Nearly all the companies in the industry (92%) surveyed by Regula perceive synthetic fraud as a real threat, and almost half (49%) have recently encountered this scam.