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Industry roundup: 11 March

Embedded lending market forecasted to grow to US $200M globally by 2029

According to the embedded financial survey (Q4 2021) by Research and Markets, the embedded lending industry is expected to grow significantly during the forecast period. The report projected a CAGR of 27.5% between 2022 and 2029, and an increase in embedded lending revenues from $52 million in 2022 to approximately $200 million by 2029 globally.

The report stated that the Asia Pacific region, specifically China, dominated extensively with embedded lending providers in a market consisting of advanced fintech innovators globally. Demand for embedded lending options has grown significantly over the last two years in countries such as Australia, India, China, Singapore, Indonesia and Malaysia. Additionally, the report found that large populations of young people in the region are the main drivers of demand and market growth. China has also seen a significant increase in e-commerce sales and rising acceptance of embedded lending options, which attracts investments into the country.

Various other regions are also raising funds to expand their offerings in the commercial lending sector. The European commercial lending sector sees important growth opportunities for embedded lending, enabling lending companies to capitalize on the overall prospects in the market. Embedded lending has helped with financial inclusion in Africa and the Middle East through strategic global partnerships. According to the report, the majority of the young population in this region do not have access to financial services.

Another region where embedded lending can revolutionize the trade financial market is in Latin America (LATAM). The financing system in LATAM makes it almost impossible for small exporters to compete with large exporters. Banks, in particular, often force SMEs to wait almost three months before rejecting 50% of their trade finance applications. In this scenario, embedded credit providers can enable small to medium-sized exporters to profitably increase business in LATAM.

RPA making waves in the financial sector with growth projection to US $22 billion by 2025

As companies around the world are rapidly automating their workflows and moving away from traditional office processes, there is an increased need for enhanced and integrated tools such as robotic process automation (RPA) solutions. According to Forrester’s new survey report investigating the market for RPA, the market is expected to see strong growth, reaching US $22 billion by 2025 sales (an increase from US $13.9 billion in 2021).

Global supply chains have been significantly disrupted due to the pandemic. Consequently, companies are shifting attention to RPA projects to address these disruptions and improve the resilience of their business process operations. The prevalent adoption shows that organizations are increasingly aware of the importance of RPA, leading to increased digital transformations within the workforce.

The integration of artificial intelligence and machine learning into RPA has resulted in intelligent automation, with benefits that are now recognized by organizations around the world according to Forrester. Additionally, it was confirmed by reports that hyper-automation in RPA provides companies a better understanding of the scope of automated mechanisms and how these technologies can work together to address multifaceted use cases. The latest of these use cases include chatbots and RPA integrations, where chatbots can direct a user's natural language commands to RPA and can perform a variety of complex tasks.

Due to the high cost of maintaining and supporting RPA, organizations are reportedly adopting the best automation strategies to build the RPA Centre of Excellence (CoE), which helps to optimize RPA, reduce bot errors, downtime, and loss of business value when a bot is removed from production. The report suggests that 2022 could be a turning point for RPA and automation, solidifying its position as an essential enterprise technology.

Fraud detection service for financial institutions launched by ACI Worldwide

With fraud continuously on the rise, organizations and financial institutions are stepping up and searching for innovative ways to combat it. ACI Worldwide, a global mission-critical real-time payment software company, has recently launched a Fraud Scoring Service (FSS). According to ACI Worldwide, its fraud scoring platform should provide next-generation machine learning capabilities for financial institutions of all sizes, offering them real-time fraud detection and prevention. ACI’s FSS, backed by ACI’s patented increment learning technology, claims to enable banks a reduction of fraud losses by nearly 75%. The service will initially roll out in North America and Europe, with plans to expand globally in subsequent months.

In today's fast-paced, real-time world, machine learning could be important as part of effective fraud prevention, but for most organizations, it is difficult to develop, maintain and update machine learning strategies. Additionally, models that use incremental learning are continually fine-tuned and in production when new behaviour is observed and allow the model to be self-adjusting, which provides extra value or benefits.

Open banking solutions via Visa’s acquisition of Tink

As the banking industry continues to evolve, new innovative financial solutions, such as open banking, also take form, enabling customers access to financial data through third-party APIs. Visa has acquired Tink, an open banking platform that allows financial institutions, fintechs and merchants to create financial products and services and transfer funds.

According to Tink, a platform integrated with over 3,400 banks and financial institutions, it enables clients to transfer funds, access aggregated financial data, and use intelligent financial services such as risk insights and account validation through a single API. The press release reported that businesses, small through large, should have the ability to customize tools, initiate payments, reconcile bank statements and accounts, and facilitate alternative financing in a digitally secure manner.

US Federal Reserve’s FedNow to showcase Euronet’s REN payments system

As the development of FedNow (expected release date in 2023) progresses, Euronet Worldwide, Inc., a global financial technology solutions and payments provider, and its REN payment platform are now included in the Federal Reserve’s new FedNow service provider showcase. The press release described this showcase as an online resource designed to connect financial institutions exploring the adoption and innovation of FedNow services with service providers that provide instant payment solutions.

According to Euronet, the REN payments platform will offer instant payments to financial providers that adopt FedNow. Features include (1) a low-code visual development environment that allows bank or credit union back-office systems standardized to ISO 8583 or other message formats to easily communicate with the FedNow service and its real-time ISO 20022 standard, (2) digital payment overlay services such as payment requests, invoice payments and one-time payments enabling banks and credit unions to quickly deliver seamless, real-time payment experiences to their customers through intuitive apps and other interfaces, and (3) access to the real-time cross-border payment capabilities of Euronet's Dandelions Network. It uses Euronet’s funds transfer companies, Ria and Xe, to initiate real-time payments to bank accounts, digital wallets, and cash locations around the world with full transparency and settlement with compliance integration capabilities.

Nick Stanescu, senior vice president and FedNow business executive, Federal Reserve Bank, commented that now is the time for companies to identify and engage with the partners they need to build the end-to-end solutions demanded by the market. More information can be found at FedNow and Euronet.

Paxos first to receive major approval from MAS to offer blockchain and digital asset payment services

Paxos, a regulated blockchain infrastructure platform, announced it has received in-principle approval to provide digital payment token services under the Payment Services Act of 2019 by the Monetary Authority of Singapore (MAS), the financial regulator in the Asia-Pacific region. According to the press release, Paxos, with this new licensing, will be one of the first blockchain service providers to meet the highest regulatory standards in both New York and Singapore.

MAS, creator of the payment regulation framework, states that financial services companies will be able to securely expand into the digital asset ecosystem. With the payments license, Paxos should be able to offer digital asset and blockchain products and services in Singapore, supporting their current partners as they expand their services into Asia.

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