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Industry roundup: 18 May

CBDCs may disrupt financial systems, Fitch report finds

The broader adoption of general-purpose central bank digital currencies (CBDCs) will present authorities with trade-offs between the associated risks and benefits, says Fitch Ratings in a new report 'Central Bank Digital Currencies: Opportunities, Risk and Disruption'.

The key benefits of retail CBDCs lie in their potential to enhance authority-backed cashless payments with innovations in step with the wider digitalisation of society. For central banks in some emerging markets, a key driver for researching CBDCs is the opportunity to bring underbanked communities into the financial system, and improve the cost, speed and resilience of payments.

Some advocates see CBDCs as a way of addressing challenges presented by the declining use of cash. The rise of digital payment systems, which have strong network effects, can create oligopolies among payment-system providers, often from the private sector. Widespread use of CBDCs could erode these providers’ control over payments-related data and improve central banks’ capacity to track financial transaction data, aiding the prevention of financial crime. However, if CBDCs offer less privacy than cash, or severely cap amounts held in electronic wallets, some may be deterred from using them.

A CBDC may open up new policy options, such as transfers into CBDC accounts as part of disaster relief or stimulus efforts. The programmability of CBDCs offers further avenues for flexibility - including the potential to influence social behaviour. However, attaching such features to CBDCs may make them less attractive to users, relative to cash.

Widespread adoption of CBDCs may be disruptive for financial systems if associated risks are not managed. These include the potential for funds to move quickly into CBDC accounts from bank deposits, causing financial disintermediation, and for heightened cybersecurity threats as more touch points are created between the central bank and the economy.


Nomura to launch Singapore e-FX pricing and trading engine

Nomura, an Asian global investment bank, has announced the launch of an electronic foreign exchange (e-FX) pricing and trading engine in Singapore, with support from the Monetary Authority of Singapore (MAS). The initiative, which is expected to go live later this year, is designed to help support the bank's clients with better infrastructure for execution, improved access to liquidity and effective price discovery.

The launch is aligned with MAS’s strategic plan to strengthen Singapore’s standing as a major trading and corporate treasury hub, and develop its FX market to serve the growing trading and hedging needs in the region.

"MAS welcomes Nomura’s establishment of its FX pricing and matching engine in Singapore," said Lim Cheng Khai, executive director, Financial Markets Development at MAS. "It will bolster the build-up of a critical mass of market participants in our FX e-trading ecosystem, and strengthen Singapore’s proposition as a leading FX hub in the Asian time zone."

This will be Nomura’s fourth e-FX pricing engine following others in Tokyo, London and New York. Nomura says its ability to plug into Singapore’s e-FX infrastructure will benefit its Asian client base, as the group continues its focus on non-deliverable forwards and G10 FX in the region.


ABN Amro offers businesses invoice financing solution

Starting this month, business owners can use the ABN Amro internet banking environment to select and assign individual invoices to the bank. If an invoice is selected, 90% of the invoice amount will be credited to the business’ account within one day of the invoice being approved. The remaining 10% follows when the debtor has paid the invoice. 

The business owner pays an average fee of 2.4% per invoice and the rest of the debt collection process is taken care of for them. The maximum fee is 4%. The bank says that the Snel Betaald service is particularly interesting for startups and small businesses, as factoring solutions or loans are often less suitable for their cash flow management.

"The advantage of the Snel Betaald solution is that businesses can decide on a per-invoice basis and at a transparent fee whether they need advance financing," said Patrick Pfaff of ABN AMRO’s Commercial Banking Management Team. "This puts them firmly in the driver’s seat in terms of their cash flow position. One participant in the pilot phase of Snel Betaald was a delivery company that grew from 1 to 12 delivery vans in 8 months. With the payments due from customers coming in immediately, the business was able to finance the purchase of the vans with its own money."


ADIB partners with FIS on instant payments

Abu Dhabi Islamic Bank (ADIB) has partnered with FIS to modernise its digital payment services and to provide instant payments to its customers. ADIB aims to expand and streamline its range of payment services through the FIS Open Payment Framework (OPF), a payments infrastructure hub. The hub will consolidate and modernise ADIB’s payment operations, facilitating end-to-end execution across the full payment lifecycle, while reducing the payment processing costs, improving straight-through processing (STP) and adhering to changing regulatory compliance requirements. OPF will support all payment services and schemes that ADIB provides.

"Through the partnership with FIS, we will be able to provide our customers with an instant streamlined payment experience," explained Philip King, group head of Retail Banking at ADIB. "This means customers will be able to initiate all types of end-to-end transfers via any of ADIB’s channels and be informed in real-time of their progress through the payment value chain."

ADIB has recorded high levels of digital adoption across its retail and corporate banking services in 2020, and nearly 78% of its retail customers are now active on digital channels. During this period, 94% of retail financial transactions, including payments and fund transfers, were conducted digitally.

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