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Industry roundup: 27 July

Lloyds Bank and Mastercard partner on open banking solution for businesses

Mastercard and Lloyds Bank Commercial Banking have partnered to deliver a new Open Banking payment solution to Lloyds Bank’s business clients. Lloyds Bank’s PayFrom Bank, enabled by Mastercard’s Open Banking Merchant Payment Solution, lets consumers make payments on an organisation’s website directly from their bank account, without having to enter any payment details.

The solution, which is compatible with most retail bank accounts, gives customers greater choice over how they pay and aims to enhance their user experience by providing a secure and seamless payment option without the need to remember passwords or input data. Meanwhile, merchants benefit from a payment method that supports their working capital by settling funds immediately.

PayFrom Bank combines Mastercard’s Payment Gateway capabilities and its Open Banking Connect platform, a universal connection to financial institutions’ Open Banking functionality – to deliver a merchant A2A payment solution that covers around 95% of UK bank accounts leveraging open banking APIs.

Initial interest in PayFrom Bank is coming from charities for online donations and wallet funding use cases such as investment accounts, although it can be used for any payment scenario. United Response, a charity that provides support to people with learning difficulties, autism, and mental health needs, is the first merchant to go live with the proposition.

"Our Open Banking Merchant Payment Solution offers merchants and consumers an alternative to card based payments and even greater choice over how they checkout," said Kelly Devine, divisional president of Mastercard UK and Ireland. "Merchants can now provide their customers with a wider range of payment methods without needing to store payer account details. It also removes friction for consumers as all payer details are automatically populated, meaning there’s no risk of entering the wrong account details. We’re excited to be partnering with Lloyds who has a strong pipeline of merchants waiting to sign up to PayFrom Bank."


Update on upcoming formal recommendation of term SOFR

The Alternative Reference Rates Committee (ARRC) has welcomed the convention switch recommending inter-dealer brokers change US dollar (USD) linear swap trading from USD LIBOR to the Secured Overnight Financing Rate (SOFR).

The Commodity Futures Trading Commission’s (CFTC) Market Risk Advisory Committee (MRAC) recommended the convention switch as market best practice, to accelerate progress in the transition away from LIBOR. The ARRC has said it expects its market indicators for a SOFR term rate to be met upon this convention change, allowing the ARRC to formally recommend the CME SOFR Term Rates very shortly thereafter.

Now that the first business day is complete, ARRC Chairman and Vice Chairman of Institutional Securities at Morgan Stanley Tom Wipf said:

"Today’s convention switch is off to a great start, with brokers and dealers strongly engaged in the work. In our initial outreach to inter-dealer brokers today, the ARRC is hearing that the forward-looking projection for SOFR activity appears to be positive. This should provide strong momentum for the ARRC to recommend the CME SOFR Term Rates. If signs continue to trend as they currently are progressing, we expect to formally recommend the CME SOFR Term Rates very soon. Remember: we’re just five months away from no new LIBOR, so I urge everyone to take action immediately to transition to SOFR."


UK FIs spend an annual average of £374k on preventing financial crime

Financial crime prevention costs UK financial institutions an average of £374,000 every year, according to new research from the global legal business, DWF. The survey of 300 financial crime decision makers working in the financial services sector in the UK, also found that on average, organisations spent £53 annually on financial crime defence for each customer relationship they have. Moreover, they refused an average of £90,240.77 and exited an average of £90,869.52 worth of UK customer relationships for financial crime reasons during the past 12 months.

The financial crime decision makers cited that employee resources in financial crime roles cost their firms an average of £180,000 per year. At the end of their respective reporting periods, respondents said there were an average of nine full-time employed UK staff within their firm performing financial crime roles, spending an average of 46 hours of employee time per week monitoring transaction alerts and reviewing screening alerts. Analysis also showed that every additional 10 hours spent weekly on monitoring transactions and reviewing alerts, result in an additional 1.5 Suspicious Activity Reports (SARs) raised internally.

Technology is key to increasing financial crime detection and prevention - but it is also a significant factor in driving up costs and staff workload. Respondents highlighted that over the last 12 months, £76,000 was spent on financial crime prevention technology, per firm. They also stated that they expect their firms will spend around £800,000 on crime prevention technology in the next five years. Technology usage is widespread - with 82% of firms using an automated system to screen clients and 84% employing transaction-monitoring software for anti-money laundering (AML) and sanctions detection.

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