Indonesia and India consider cross-border payments pact

India and Indonesia are planning to link their fast payment systems, according to a Bloomberg News report. The collaboration is designed to spur cross-border fund transfers and would allow transactions to be settled in local currencies.

The report, citing a senior Indian official, says finance ministers from the two countries have discussed the proposal, although no agreements have been made.

The two countries are expected to see the biggest growth in real-time payments and both have already fundamentally changed how consumers manage their money.

India launched its real-time payment scheme in 2016 and records more real-time transactions than any other nation in the world, thanks to its 1.43 billion population — now larger than China’s — and high rates of digital literacy.

Last year saw Indonesia’s central bank team with the Monetary Authority of Singapore (MAS) to work on a cross-border QR payment method between the two countries. Bank Indonesia and MAS also agreed to promote the use of local currencies, part of a broader effort in the region to encourage local currency use in trade and investment settlements.

Indonesia’s proposed partnership with India reflects dissatisfaction across a majority of small to medium-sized businesses (SMBs) with existing cross-border payment solutions, with local payment issues often presenting a major hurdle.

PYMNTS.com has reported that cart abandonment is a massive problem for eTailers, and a lack of local payment methods exacerbates the challenge. It recently published a study showing 41% of businesses that sell to the Asia-Pacific region but do not offer local payment options reported cart abandonment rates of more than 60%, while those that did offer local payment methods saw cart abandonment rates drop to 32%.

Many companies mistakenly assume that the major card networks used in North America and Europe are equally as popular among consumers in Asia. “For the US and large parts of Europe, we tend to think of credit cards as the primary method of paying for things, whether that’s in person or online,” said Adrian Burgess, head of strategic growth at fintech company PPRO.

“But that doesn’t work for every individual, every ecosystem, every region on the planet. You’ve got your digital wallets, PayPal, Apple Pay, Google Pay. You have your bank account and direct debit as well.”

 

Renault chief alarmed by supply-chain ‘Chinese storm’

Renault chairman Jean-Dominique Senard has warned that China's recently imposed restrictions on the export of gallium and germanium could badly hamper European electric-vehicle and semiconductor manufacturing.

The chief of the French carmaker told Reuters that the export restrictions expose Europe's overreliance on China for precious metals. He also raises concerns about the need for European automakers to establish costly new supply chains. The country’s ability to limit supplies of gallium and germanium, two precious metals used in the manufacturing of electric vehicles and semiconductors, create a “Chinese storm” for the European automaking industry, he suggested.

“When I talk about a Chinese storm, I’m talking about the strong pressure today related to Chinese (electric-) vehicle exports into Europe,” Senard added. “We are capable of making electric vehicles, but we are fighting to ensure the safety of our supplies.”

The Renault chairman also noted that existing supply chain for raw materials has resulted from years of investment that would cost billions of euros to replicate.

China’s export restrictions for gallium and germanium are escalating a technology conflict with the US, potentially causing further disruption to automotive supply chains, which are only now beginning to recover after the ravages of the Covid 19 pandemic.

Europe’s automakers are caught in the middle of the Chinese and US export restrictions, with no alternative but to seek new suppliers.

“If there’s a real geopolitical crisis, the damage to battery factories solely powered by products coming from outside will be considerable,” Senard warns. “As any careful manufacturer would do, we are looking for alternatives to avoid paralysing the country if, for example, we run out of batteries”.

 

Trade finance resilient as growth slows

Providers of trade finance remain positive despite predictions that growth in global trade will stagnate during the second half of the year.

The latest data from the United nations Conference on Trade and Development (UNCTAD), which promotes the interests of developing countries in world trade, suggests that after the downturn in the second half of 2022, trade in goods rose by 1.9% in the first quarter of 2023.

However, it expects zero growth for the rest of the year, citing factors such as persistent inflation and financial vulnerabilities, along with the ongoing war in Ukraine and geopolitical tensions in other regions.

Marie-Laure Gastellu, head of trade services for global transaction and payment services at Société Générale, acknowledges that cost has impacted demand for funded products. But she also refers to solid demand for guarantees and standby letters of credit, driven by corporate clients’ commitment to international projects and the needs of the energy transition and defence sectors.

“We see a strong demand from clients to work with them on sustainability-linked trade finance facilities as well as green guarantees,” adds Gastellu.

“The longer interest rates remain high, the more adverse the impact on trade finance for those players looking for funded trade finance, as the cost of funds will bear on the cost of debt and hence the profitability of companies. The less dynamic growth of the Chinese economy and the expected slowdown of the US economy are also likely to induce a cooldown in global demand.”.

SocGen expects companies active on international projects to underpin demand for guarantees and standby letters of credit to secure recurring trade corridors while the defence industry is also predicted to be dynamic.

 

Trans-Pacific trade pact mulls further growth as UK joins

The UK has signed a treaty to become the 12th member of the Trans-Pacific Partnership (TPP), becoming the first to join since its formation in 2018 between 11 countries; Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Members of the trade pact said they are gathering information on China, Taiwan, Ukraine, Costa Rica, Uruguay and Ecuador, which are also applicants to join the agreement to see whether they were able to meet the group's “high standards” taking into account their experience on their trade commitments.

The comments followed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) meeting in Auckland, New Zealand. At the meeting, the UK formally signed the treaty to become a member and a decision to review and update the agreement was taken.

“We continue to discuss how to move forward collectively on accession processes in a way that reflects all our interests and maintains the high standards,” the CPTPP statement said. China’s application to join the pact is now next in line if they are dealt with in the order they were received, but the country faces various hurdles to be overcome before it is included. China has opposed Taiwan's application to the TTP.

The CPTPP requires countries to eliminate or significantly reduce tariffs, make strong commitments to opening services and investment markets and has rules around competition, intellectual property rights and protections for foreign companies. Its trade zone represents a combined GDP of US$11.8 trillion and a population of more than 500 million people.

Damien O'Connor, New Zealand's trade minister who chaired this CPTPP meeting, said at a press conference there was no time frame for when any decisions on future membership would be made. “It’s a complex area,” he added.

The UK’s Business and Trade Secretary Kemi Badenoch said at the signing that her country was delighted to become the first new member of the CPTPP.

“This is a modern and ambitious agreement and our membership in this exciting, brilliant and forward-looking bloc is proof that the UK's doors are open for business,” Ms Badenoch added.

As a result of the UK’s membership in the CPTPP, increased investments from the bloc’s nations, amounting to £182 billion in 2021, are anticipated due to the investment protections guaranteed. 

Ian Stuart, CEO at HSBC UK, said, “The UK’s formal accession to CPTPP marks a significant milestone for UK trade, enabling ambitious British businesses to connect with the world’s most exciting growth markets for start-ups, innovation and technology. At HSBC UK, we are incredibly excited about the opportunities this agreement presents; as the world’s leading global trade bank we will support UK businesses to achieve their full potential and open up a world of opportunity.”

 

More cash-strapped European consumers turn to BNPL

Embedded banking adoption across Europe is significantly boosting brand loyalty for companies, with consumers more likely to use embedded banking products from brands as a result of the cost-of-living crisis, according to research from Vodeno partnering with Aion Bank.

The European Banking-as-a-Service (BaaS) provider's study revealed that 37% are more likely to seek out brands that offer Buy Now, Pay Later (BNPL) and flexible payment options due to the high cost of living, with this figure rising to 50% in the 25-34 age range. Competitive prices are cited as the most important factor to 44% of consumers when it comes to their brand loyalty, closely followed by a good selection of products (43%).

Based on responses from 3,007 European consumers based in the UK, Belgium and Germany, the results highlight that the availability of embedded banking products directly in the websites and apps of consumer brands are starting to make an impact on customer loyalty. Two in five consumers say they will only stay loyal to brands that offer financial benefits like BNPL and cashback, with this figure rising to 50% among 25-34-year-olds. Asked about engagement with loyalty programmes, 46% said they are more likely to use a brand's loyalty card to make purchases if it included BNPL. This figure was highest amongst the youngest consumers surveyed, rising to 53% for those aged 16-24 and 65% in the 25-34 demographic.

Asked how often they shop with their favourite brands, 19% of respondents said 'monthly' and a further 16% said 'once every two or three weeks'. However, among those who have used a brand's embedded banking product, 36% said they return to that brand's app or website between three and five times a month, with this figure rising to 43% among the 25-34 age group.

The research highlights the commercial and loyalty benefits of embedded banking, with 23% saying they are more likely to recommend the brand to friends and family, while the same number said they are more likely to spend money with the brand over competitors.

Kim Van Esbroeck, Country Head for Aion Bank Belgium and Chief Revenue Officer for Vodeno/Aion said: “The benefits of embedded banking cannot be ignored, and our research offers strong evidence that consumers are not only using these products, but it is also positivity influencing their loyalty to BaaS-enabled brands.

Competition for the consumer has never been fiercer, particularly in these difficult financial times, and brands that offer flexible payment and lending options provide more choice, which can boost consumers' spending power when they need it most. Embedded banking is also making an impact on brand loyalty, with 43% of 25–34-year-olds saying they shop more at brands that offer an embedded banking product. We have already seen how BaaS-enabled embedding banking is helping to innovate customer journeys, and it is clear the next area of disruption will be to supercharge brands' loyalty programmes.”

 

Lebanon’s central bank to phase out Sayrafa exchange platform

Lebanon's central bank will decommission the controversial exchange platform known as Sayrafa once longtime governor Riad Salameh’s 30-year tenure ends later this month, one of the institution's vice governors has told Reuters.

Salim Chahine said the bank’s leadership was in talks with policymakers in government and in parliament, as well as the International Monetary Fund (IMF), about the need to move away from the platform given its lack of transparency and governance.

“It's about the way Sayrafa will be phased out,” he said.

Lebanon’s prime minister confirmed that he will not reappoint Salameh as governor of the Banque Du Liban when his fifth term ends on July 31, but said he will not appoint a successor. The law states that one of the four deputy governors would then take over the role in an acting capacity. However, all four deputy governors issued a statement on July 6 saying they would resign unless ministers appoint a new governor.

 

UK CFOs cautious as inflation and borrowing costs bite: Deloitte

Confidence among the finance leaders of the UK’s largest firms has dipped in the second quarter, partially unwinding the sharp improvement in sentiment seen in Q1 2023, according to Deloitte’s UK CFO Survey Q2 2023. A net-10% of chief financial officers (CFOs) are more optimistic about their firm’s financial prospects now compared to three months ago, down from a net 25% in Q1 2023.

With growing concerns over persistent price pressures and the potential implications of further interest rate rises, CFO perceptions of uncertainty have risen. Almost half of respondents (45%) now rate the levels of external financial and economic uncertainty facing their businesses as high or very high, up from 39% in Q1 2023.

Meanwhile tight monetary policy is seen by CFOs as the top threat to their business, outweighing the concerns around geopolitics and energy prices that have dominated for the past two years. With recruitment difficulties and supply chain pressures easing significantly since the start of the year, labour and supply shortages have slid down the CFO risk list.

Conducted between 15 June and 27 June, Deloitte’s latest quarterly CFO Survey captures sentiment amongst the UK’s largest businesses. A total of 69 CFOs participated, including the CFOs of 13 FTSE 100 and 21 FTSE 250 companies. The combined market value of the 37 UK-listed companies surveyed is £317 billion, or approximately 13% of the UK quoted equity market.

The three months since the Q1 survey have been marked by a series of unexpectedly high readings for UK inflation and earnings growth. These numbers appear to signal a more prolonged period of high inflation, with CFO expectations for inflation in two years’ time rising from 2.9% in Q1 2023 to 3.6% in Q2 2023.

CFOs have raised their interest rate expectations and expect the Bank of England’s base rate to be at 4.5% in a year’s time, up from an expected 3.75% in Q1 2023. They also report tighter credit conditions, with a net1 86% rating new credit as costly. On this measure, the cost of credit is at a 14-year peak – its highest level since the credit crunch.

CFOs have sharpened their focus on cost reduction and increasing cash flow. They are now placing greater emphasis on these defensive strategies than their long-term average, with 55% of CFOs rating corporate cost reduction and 46% of CFOs rating increasing cash flow as a strong priority for their business in the next 12 months.

Ian Stewart, chief economist at Deloitte, said: “The burst of business optimism seen in the spring has faded under the weight of inflation and rising interest rates. Corporates have responded with an increasing focus on cost reduction and cash control.

“Businesses have negotiated a series of major challenges in the last four years, including the UK’s departure from the EU, the pandemic and supply shortages. The legacy of those earlier shocks, in the form of inflation and high interest rates, is now the central challenge.”

 

BEA Union debuts Hong Kong’s first impact bond fund

Hong Kong’s BEA Union Investment Management has launched the BU Asia Impact Bond Fund, the first Hong Kong-domiciled impact bond fund to primarily invest in Asia investment-grade green, social and sustainability bonds with proceeds being allocated to generate measurable, positive environmental, social and governance (ESG) impacts.

The fund is repositioned from the BU APAC Bond Fund under the authorisation of the Securities and Futures Commission (SFC) of Hong Kong. With this conversion, it will introduce retail share classes on July 26, with an eight-day initial public offering subscription period for Hong Kong retail investors and distribution via the Wealth Management Connect (WMC) scheme.

“As climate change intensifies and social inequality exacerbates, many investors want to see how their investments can create measurable benefits to the environment and society, while seeking financial returns,” says Eleanor Wan, the company’s CEO. “Impact investing will serve their investment needs.

“Investor demand for impact bonds is growing across the world, including Asia. Hong Kong, rising to becoming the region's centre for green and sustainable finance, is also the gateway to the Greater Bay Area (GBA). As a Hong Kong-based asset manager, we are committed to contributing our part in fostering the growth of ESG investment in the region.”

 

Taiwan’s InfoHubs aim for one-stop service platform

The Taiwan Stock Exchange (TWSE) has launched the ESG InfoHub and Investment InfoHub websites under plans to establish a one-stop information service platform. The Exchange said this will strengthen its services for international investors, improve the information transparency of listed companies, enhance its competitiveness among international markets, and continue to attract foreign investment to Taiwan.

The Investment InfoHub website offers integrated information services for investors to facilitate their investment decision-making. The ESG InfoHub website consolidates environmental, social and governance (ESG) data and products from listed companies, making them easily accessible and valuable to investors as an investment reference.

This year, Taiwan's capital market, the TWSE notes, has shown tremendous strength with resilient fundamentals, high dividend returns, and a complete upstream and downstream supply chain in the information and communication technology industry.

The recent artificial intelligence frenzy, together with the expected end to US rate hikes has attracted the foreign capital flow to return to Taiwan’s stock market. So far, in 2023, the proportion of foreign capital in Taiwan stocks exceeded 40%, which has driven up stock prices in Taiwan.

Taiwan's stock market, as of June 20, according to TWSE data, was up 19.65% for the year, ranking fourth among the world's major stock markets and, among those in Asia, second only to Japan’s, up 27%.

“Taiwan's stock market has sound fundamentals,” says Sherman Lin, the TWSE’s chairman and CEO. “We hope the foreign capital will keep coming to Taiwan and the launch of the ESG InfoHub and Investment InfoHub will help investors better understand the advantages of listed companies in Taiwan so as to continuously attract foreign investment.”
 

Gnosis launches two new product offerings

Gnosis, a well-regarded blockchain project and sidechain to Ethereum, says a pair of new product offerings could let consumers with crypto wallets pay for online purchases using stablecoins and Visa’s payment system.

Gnosis announced the release of Gnosis Pay and Gnosis Card, described respectively as the first decentralised payment network integrating with a traditional payment processor and the first Visa-certified consumer debit card directly connected to an on-chain self-custodial wallet, according to a Gnosis press release.

Gnosis Card, which uses the Visa payment system, will be a debit card directly connected to a user’s on-chain account, built on the Gnosis Pay decentralised payment network, according to Gnosis. Users’ wallets – in this case Safe wallets – will act like a bank account, and every Gnosis Card will be connected to the user’s Safe account.

Gnosis Pay will also operate as a layer 2 to the Gnosis chain, thereby enabling faster and cheaper transactions. “From a user experience point of view, it's exactly the same experiences everyone's used to but under the hood of using crypto to settle your payments,” said Stefan George, co-founder of Gnosis and chief technology officer of Gnosis Pay.