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Industry roundup: 12 January

Citi withdraws from Mexican consumer, small business and middle market operations as part of strategic transformation

Citigroup Inc (C.N) announced it will withdraw from its Citibanamex consumer banking business in Mexico and end its 20-year retail presence in Mexico, its last consumer business abroad. Jane Fraser, CEO, Citigroup, commented that the strategic decision to sell or spin off Citigroup's third-largest bank in June for assets was to match Citigroup's profitability and stock performance with its peers.

Fraser’s plan was to simplify Citigroup by withdrawing from non-core businesses, including consumer franchises in 13 markets throughout Asia, Europe, the Middle East and Africa. Fraser further added that Citigroup's withdrawal from Mexico was not part of the announced plan, but it was in line with this strategic update.

As in other overseas markets, Citigroup will maintain its institutional client business in Mexico. The company will focus its consumer banking business on its target US retail presence, global wealth management, payments and loans. According to Citibank, the acquisition of Banamex for US $ 12.5 billion in 2001 was the largest in Mexico's history and occurred in a wave of foreign purchases after the economic crisis devastated the country's banking sector in the mid-1990s.

Fraser's modernization marks the biggest review for Citigroup since it was forced to unload assets after the 2007-2009 financial crisis. Citibank incurred two billion dollars in fees for withdrawing from the Asian market. Fraser was responsible for Citigroup's Mexico business and Global Retail Bank Prior to becoming CEO. Additionally, she worked to build on investments the bank made to revitalize the Mexican consumer business known as Banamex.

Fraser commented that by selling Mexico's consumer business, Citibank can direct resources to opportunities to reflect core strengths and competitive advantages. She further added that Mexico continues to be a priority market for Citigroup’s institutional investors. In addition, Citigroup anticipates that Mexico will be an important recipient of global investment and trade flows over the next few years and is confident in Mexico's development.

The businesses Citigroup intends to exit include Mexican consumer and small business banking operations, which are reported as part of Citi’s Global Consumer Banking segment. Additionally, Citigroup is planning to exit Mexico’s middle-market banking business, which reports through Citi’s Institutional Clients Group segment. Mexican consumer and small business banking operations included in this planned exit represent all of the Latin America Global Consumer Banking unit. In the first three quarters of 2021, the businesses Citi intends to exit accounted for approximately $3.5 billion in revenue, $1.2 billion in pre-tax earnings, $44 billion in assets, and $4 billion in average allocated TCE.

The 2021 fourth quarter earnings report will include additional information about the operations Citi intends to exit in Mexico. This report is expected to be released on January 14, 2022. A link to Citi’s Current Report on Form 8-K regarding these changes is found here.

Citi is still determining the method and more accurate timing for their exit from small business, middle-market, and consumer banking operations in Mexico, which may encompass a sale or public market option. This decision is expected to focus on Citi’s core values of maximizing shareholder value and solidifying the business segments it will retain as well as those it will leave. The process of exiting markets is subject to multiple conditions and approvals, including appropriate approvals in Mexico and the United States.

 

The digital commerce revolution continues to trend upward in 2022

A cloud-based payments platform company, Checkout.com, focuses on unleashing new growth channel efforts that should help promote environmental sustainability, lessen fraud and define e-commerce in 2022. According to Checkout.com, global e-commerce revenues are estimated to exceed US $5.5 trillion.

Furthermore, Checkout.com stated that growth is driven by continued consumer adoption of digital commerce, which has evolved over the last 18 months, and that e-commerce brands should take advantage of this era of change to build a new business model centred on digital payments.

Checkout.com surveyed more than 1,000 European e-commerce businesses and 8,500 consumers. Here are some of the e-commerce and payment trends according to Checkout.com’s 2022 forecast survey:

Sustainability:

41% of retailers placed environmental sustainability and ethical supply chains as a top priority for 2022. Additionally, 73% prefer to purchase from sustainable brands, not just to meet climate-consciousness demands.

Opening other commerce opportunities:

40% of companies are investing in improving social commerce services to meet the increasing consumer demands searching for enhanced brand experiences on their social media platforms. Additionally, the authenticity of brands is a critical element companies must incorporate into their processes to minimize consumer scepticism.

Superior payments performance:

68% of companies are actively investing in new and improved payments technologies. According to Checkout.com, payment optimization should be at the core of e-commerce strategies. Companies recognize the importance of optimized payments in their venture to expand into new markets while generating revenues and minimizing fraud and chargebacks.

 

Digital Banking making waves: OneConnect partners with Chengfang to provide cutting-edge technology in the banking sector

OneConnect Financial Technology Co., Ltd. (OneConnect), a technology-as-a-service platform, has entered into a partnership agreement with Chengfang Financial Technology Co. Ltd., (Chengfang), a fintech established by the People’s Bank of China (PBOC). The companies aim to collaborate to address weak areas in the financial industry, provide innovative technology solutions and enhance data processing and governance.

With this new partnership, OneConnect and Chengfang will leverage cutting-edge technologies such as AI, cloud computing and big data to explore new applications for data protection technology in bank surveillance systems, adopting and sharing new data standards. Additionally, partnership will identify financial information and models that enterprises need to meet the requirements of secure cloud computing. Both companies will conduct research and development in secure computing technology, blockchain, and graph data.

Chengfang, a subsidiary of PBOC, will be responsible for building, operating and maintaining the digital banking system of the Central Bank of China. The company manages resource planning and operations for PBOC networks and data centres. Additionally, they operate a data transfer management platform to provide services from network communication and infrastructure to system maintenance and data transfer throughout the system. The partnership with OneConnect promises to accelerate the digitization of China's banking sector and strengthen OneConnect's position in digital financial development.

OneConnect uses state-of-the-art technology to improve efficiency and services for banks, government agencies and exchanges while decreasing costs and risks. It supports providers accelerating digital transformation on four key pillars: developing a digital ecosystem, fostering green finance, integrating the Greater Bay Area, and further developing the fintech sector. OneConnect has built strategic alliances with the China Securities Regulatory Commission’s Technology Supervisory Bureau, China’s Insurance Asset Management Association and China Insurance Asset Registration and Trading System Co., Ltd. It plans to continue seeking new partnerships and accelerating digitization of the global financial services sector.

 

Revolut starts as a bank in 10 countries in Western Europe

Revolut launched as a bank in 10 countries in Western Europe and provides deposit insurance to clients in these markets. The financial super-app, with over 18 million customers globally, has utilized its Lithuania-based European specialised banking licence to develop a bank in Belgium, Denmark, Finland, Germany, Iceland, Lichtenstein, Luxembourg, Netherlands, Spain and Sweden.

The company's customers in these markets can switch to the bank instantaneously within the Revolut app for deposit protection of up to € 100,000 guaranteed by Lithuania's State Deposit Investment Insurance. Since March 2021, customers in other countries – Bulgaria, Croatia, Cyprus, Estonia, Greece, Latvia, Malta, Romania, Slovakia and Slovenia – have been able to upgrade.

Revolut states that the introduction of their banking status can make a big difference in the way customers use their services. According to a survey conducted in late 2020, an average of nearly 50% of respondents said they would deposit their salary with Revolut, and 54% would spend more on the app if the deposit was insured. Joe Heneghan, CEO, Revolut Bank, stated the launch of banks in ten new markets in Europe would provide more confidence and reassurance to their customers, enabling Revolut to develop and provide a variety of new products and services to market in the near future.

 

Accounts receivable digital transformation opportunities: HighRadius and GenPact partnership

A strategic alliance to develop long-term opportunities for innovation, digital transformation and improved customer outcomes was launched between Genpact, a global professional services company focused on digital transformation, and HighRadius, an artificial intelligence-based software provider for order to cash, treasury management, and record to report solutions.

The partnership will better serve customers by integrating the autonomous software platform with Genpact's global accounts receivable and digital process and delivery expertise, resulting in influential and quantifiable business results. Furthermore, the collaboration will enable HighRadius to focus on the next generation of autonomous software, and Genpact will increasingly lead the execution of customer projects for end-to-end business processes. Genpact leverages its ability to support HighRadius solutions, data configurations, technology integration, and reporting to deliver productive and tangible business outcomes to its customers.

The integration of the two companies enables a new level of predictive intelligence that can provide meaningful insights and effective action for customers.

Currently, HighRadius and Genpact plan to focus on the order to cash and accounts receivable cycle to optimize organizational efficiencies and create further growth through digital professionals placed into their businesses.

 

Trulioo improves Ireland's identity verification service

Broader data coverage ensures that companies can validate over 5 million consumers in the Irish market. Trulioo announces improvements to Ireland's identity verification services through the Trulioo GlobalGateway, the world's largest identity data and services network. GlobalGateway enables organizations to securely access over 450 different types of data to perform identity checks for consumers that comply with Know Your Customer (KYC) and Anti Money Laundering (AML) regulations.

The advanced identity services cover a variety of Ireland-specific datasets, providing deeper insights into a market that is difficult to enter. The expanded scope will ensure that companies can validate attributes such as age, identity and address within the parameters of data privacy laws such as the General Data Protection Regulation (GDPR).

Steve Munford, CEO, Trulioo, stated that through close partnerships with identity data providers around the world, Trulioo has accumulated the world's largest collection of identity data and tools. Additionally, by enhancing digital onboarding for consumers, Trulioo is able to continue to meet the evolving needs of customers globally.

Identity solutions are an integral part of digital companies operating in Ireland, Europe and around the world. Trulioo continues to be a trusted partner for these companies, helping them build consumer confidence and accelerate their time-to-market plans.

 

Biometric payment cards to include fingerprints: Fingerprint’s new module passes Mastercard’s security parameters

Global biometric company Fingerprint's Card AB second generation T-Shape sensor module and its software platform for biometric cards are compliant with Mastercard's new fingerprint sensor evaluation process. Additionally, Fingerprints, having passed 2021’s specifications, has proactively secured this up-to-date approval to simplify the system for card producers to release second generation technology in biometric payment cards.

The significant advancement in these biometric payment cards provides consumers with convenience and safety with in-store purchase. On the business side, this development will reduce the time to reach market availability along with associated costs. The testing phase was carried out in accordance with Mastercard's stringent security features for biometric cards released in 2021. The performance of features that improve the security, privacy and ease of use of cardholders are confirmed using the Fingerprint Test Assessment Summary (FTAS) for sensor vendors.

Michel Roig, President, Fingerprint Cards Switzerland AG - Payment & Access, commented that by strengthening the security capabilities of the solution, card partners can save time and funds on deploying and scaling second generation biometric cards. Additionally, consumers can relish a convenient and secure in-store payment experience.

In order to launch a successful second-generation T-Shape technology, the combination of investing in extensive research and development and gaining key acumens from successful pilots and business rollouts provide high overall performance and efficiency. Additionally, this enables the maximum cost-effective biometric payment cards to be produced and incorporated utilizing standard manufacturing processes.


Bank of America has announced significant changes to overdraft services: elimination of Non-Sufficient Funds (NSF) fees and reduction in overdraft fees

The new change in fee structure, scheduled to commence in February 2022, will significantly reduce Bank of America’s (BOA) overdraft fee income by 97% compared to 2009. Beginning May 2022, BOA’s overdraft charges will reduce from $35 to $10. Additionally, BOA plans to remove transfer fees associated with BalanceConnect for overdraft protection service, scheduled for May 2022. With these and previous changes over the last decade, along with industry-leading solutions that help customers avoid overdraft fees (such as the no overdraft fee SafeBalance Account and Balance Assist), BOA’s overdraft revenue stream will be reduced.

Holly O’Neill, President of Retail Banking, Bank of America, commented that BOA has made substantial changes to overdraft services and solutions to reduce customer dependence on overdrafts and provide resources to assist customers in managing their deposit accounts and total finances. BOA collaborated with the National Community Advisory Council (NCAC) to achieve guidance and feedback on the revisions to further support and empower clients with long-term financial wellness.

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