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UK faces the highest rate of card fraud in Europe - Industry roundup: 5 August

UK faces the highest rate of card fraud in Europe

The Social Market Foundation (SMF) is urging the UK to address its massive problem with bank card fraud in Europe. Reports show that the UK has the highest rate of bank card fraud in Europe, with over 80% committed using stolen card information. According to the SMF's analysis of European Central Bank data figures, there were 134 card frauds per 1,000 people in the UK in 2019. Card fraud cost the UK more than £8,800 per 1,000 people.

Card-not-present fraud, in which a criminal uses card details without the physical card, accounted for 84% of all card fraud in the UK. These criminals employ advanced methods to obtain payment card information, such as malware and phishing scams. Reports also noted comparisons to Germany, which had only 15 card frauds per 1,000 people, while France had 115, Spain had 37, and Italy had 19. Additionally, card fraud cost Germany just under £2,000 per 1,000 people, France £6,000, Spain £2,300, and Italy £965.

The Crime Survey for England and Wales stated that there were 2.3 million bank and card frauds between April 2021 and March 2022, accounting for 51% of total recorded frauds committed against residents during that timeframe. The SMF has reportedly urged the government to take a comprehensive, whole-systems approach to combatting fraud, beginning with the recruitment of more highly trained specialists.

Avaya, Goldman and JPMorgan face lender backlash following loan failure

Investors are reportedly enraged by the rapid demise of a leveraged loan issued in June 2022 and are said to have hired a law firm to investigate legal options regarding what they perceive to be inadequate disclosures during the debt's marketing process.

Reports indicate that the loan, issued by Avaya Holdings Corp., has dropped nearly 30 cents on the dollar last week after the company lowered its quarterly revenue and earnings forecasts and ousted the CEO. Investors who purchased the company's US $350 million incremental first-lien leveraged loan have hired law firm Akin Gump Strauss Hauer & Feld to explore their options. According to reports, some holders of the company's other first-lien loans have also joined the group.

Avaya, a provider of communications software and services that competes with Cisco Systems Inc. and Microsoft Corp., was not an easy sell in the leveraged loan market. The company needed to raise funds in order to refinance convertible bonds due in 2023 that were significantly out-of-date.

As stated by reports, investors rejected a proposed $500 million leveraged loan, forcing the company to split the issuance into a smaller loan and $250 million of privately placed exchangeable notes, both secured on a first-lien basis. In order to close the deal, Avaya agreed to raise the loan's interest rate to 10% above the Secured Overnight Financing Rate (the highest margin of the year), include an upfront fee, and add other investor safeguards, reports added. On 24 June, reports indicate that JPMorgan and Goldman Sachs priced the debt, and a new investor – Brigade Capital Management – purchased $125 million of the new exchangeable notes in July, while multiple investors purchased the rest.

Avaya reportedly cut its third-quarter adjusted earnings forecast by more than 60%, to between $50 million and $55 million, less than a month later, on 28 July. It also reduced its revenue forecast by more than 16%.

Even more concerning to some investors is the departure of Avaya's CEO, James Chirico. Hiring a new CEO typically takes weeks or months, prompting some to wonder why the company did not disclose the transition during the June debt offering. According to various sources, the news caused Avaya's new term loan to fall to quotes in the 60s on Tuesday, from around 89 to 90 cents on the dollar. Its stock and other debt were also down.

Currently, investors are anticipating the company's full earnings report on 9 August. Meanwhile, Avaya's stock closed Tuesday at approximately 82 cents, posing a risk to the company, which must maintain a $1 share price over a 30-day trading period in order to remain listed on the New York Stock Exchange. According to S&P Global Ratings, Avaya is required to be listed on the NYSE or Nasdaq under the terms of its new exchangeable notes. Furthermore, Avaya's credit rating was downgraded by two steps to CCC, citing the company's potential inability to meet listing requirements or seek debt restructuring.

Portuguese cryptocurrency exchanges take massive hit as banks close accounts

Portugal, one of Europe's most crypto-friendly countries, is expected to struggle as some of its largest banks terminate their digital currency exchange accounts. Pedro Borges, co-founder and CEO, CriptoLoja, a Portuguese cryptocurrency exchange based in Lisbon, stated that Portugal's largest listed bank, Banco Comercial Portugues, and Banco Santander, closed all CriptoLoja accounts last week following the account closures by two small Portuguese banks, claiming that no official justification was given by the lenders.

This year has also seen the closure of at least two other cryptocurrency exchanges in Portugal. Executives of Mind the Coin and of Luso Digital Assets have stated that they have had some of their accounts closed or have been unable to open accounts for months.

Because of its 0% taxation on digital currency gains and low living costs, the southern European country became a haven for crypto during the pandemic. However, with large lenders expressing concerns about the sector's anti-money laundering and know-your-customer regulations, cryptocurrency companies around the world have struggled to open and keep bank accounts. Banco Comercial stated that it is its responsibility to alert the appropriate authorities whenever it notices questionable transactions, which may result in the termination of banking accounts with specific businesses. In addition, Banco Santander commented that it must act in accordance with its risk perception, and that any choice to keep an account open is dependent on a number of variables.

The exchange must now be managed using accounts outside of Portugal, according to Borges, whose business was the first to be granted a license by the central bank in Portugal in 2021. Furthermore, Borges claims that CriptoLoja had always alerted authorities to suspicious activity and that all compliance and reporting requirements had been met.

Reports show that it is unclear whether any other crypto companies have had their accounts closed this year. Still, the moves are said to affect three out of five virtual coin exchanges that have a central bank license, signalling a difficult digital-assets sector in Portugal.

India-based fintech seeks UAE investors for high-growth digital start-up companies

As financial services expand up to the full potential of the digital space, an India-based fintech, Beams Fintech Fund, is reportedly looking to attract investments from the UAE and the Gulf. Reports show that fintechs are rapidly spreading in India for everything from remittances and consumer financing to digital wallets.

Beams Fintech Fund, an early investor in payments portal BharatPe, expects to capitalize by acquiring stakes in companies with high growth potential. As stated by reports, Beams' strategy is to invest US $15-$20 million in start-ups in the growth stage, Series B and C rounds, led by high-quality founders, with a target size of $120 million and an eco-friendly option. According to reports, Beams intends to build a concentrated portfolio of a dozen fintech companies in a market (India) currently valued at $80 billion and expected to reach $250 billion by 2030. Beams is said to be supported by Venture Catalysts, which has nine unicorns and a $120 million early-stage accelerator fund in its portfolio.

Anuj Golecha, Co-founder and Partner, Beams, commented that the fintech opportunity in India is vast – it is the only tech segment in India that has created over $80 billion in value and $8 billion in M&As. Beams' founders stated that they returned 90x to investors on the BharatPe exit, which became a unicorn (worth $1 billion or more) in 2021, and are creating more unicorns in this space.

Following this year's trade and investment agreement between the UAE and India, there are reportedly new opportunities to channel funds. Deepak Ahuja, Fintech Expert Partner, Beams, commented that the UAE plays an important role in India's tech ecosystem. Investors are not only actively investing in India, but also assisting companies in their expansion into the Middle East. ADGM and ADIO (Abu Dhabi Investment Office) have reportedly devised special incentives to encourage Indian companies to invest in the Middle East and contribute to the region's fintech ecosystem.

Acquisition leads to larger blockchain B2B fintech platform serving the United States and Latin America

Paystand, a blockchain-enabled accounts receivable and B2B payments provider, has acquired Yaydoo, an accounts payable, cash flow management and liquidity solutions provider in the Mexican and Latin American market. The companies say this will result in the largest blockchain B2B fintech platform serving the United States and Latin America.

Paystand and Yaydoo both claim to provide a comprehensive suite of technology-enabled B2B solutions for automating transaction, payment, and bill collection processes. The two companies say they have created best-in-class AR/AP solutions for businesses of all sizes in the US and Latin America.  

The combined company, according to Jeremy Almond, CEO, Paystand, is expected to be one of the first large-scale global B2B blockchain platforms across the continent. Almond says the combined enterprise has “processed over $5 billion in payments, hired 300 new employees, and built the world's largest commercial B2B blockchain network of over 500,000 connected businesses,” and went on to say that DeFi-enabled B2B payment networks that are on-chain, such as Paystand’s and Yaydoo’s networks in the US and Mexico, can unlock transformative working capital efficiencies and make financial services fairer and more open, particularly in developing markets like LATAM.

Industry disruption across borders and the use of DeFi blockchain is said to shift the balance of power away from traditional financial institutions and governments and toward buyers and sellers. Paystand and Yaydoo have reportedly established global integrations with Oracle NetSuite, Sage Intacct, Xero, and CONTPAQi in Mexico.

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