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Industry roundup: 27 September

Firms and banks to benefit from early adoption of green policies - ECB

The European Central Bank (ECB) has published the results of its economy-wide climate stress test. The exercise tested the impact of climate change on more than four million firms worldwide and 1,600 euro area banks under three different climate policy scenarios.

The results show that firms and banks clearly benefit from adopting green policies early on to foster the transition to a zero-carbon economy. The exercise also reveals that the impact of climate risk is concentrated in certain regions and sectors of the euro area. In particular, firms located in regions most exposed to physical risk could face very severe and frequent natural disasters, which would in turn affect their creditworthiness.

Climate risk includes both physical risk and transition risk. Physical risk is the economic impact of an expected increase in the frequency and magnitude of natural disasters. In Europe, physical risks are unevenly distributed, with northern regions being more prone to floods and southern regions more exposed to heat stress and wildfires. Transition risk is the cost of introducing policies to reduce CO2 emissions, particularly for certain high-emitting industries. For example, carbon-intense industries, such as mining or electricity, would incur considerable costs to reduce CO2 emissions, which would increase their probability of default over the short to medium term.

That said, the transition to a greener economy is also a golden opportunity. The exercise shows that the advantages of taking action early on outweigh the initial costs over the medium to longer term, also as a result of energy efficiency gains for firms and cheaper energy prices overall.

Euro area banks could be severely affected under a scenario where climate change is not addressed. The expected losses on corporate loan portfolios are shown to rise significantly over time, driven by ever increasing physical risk, with the potential of becoming critical over the next 30 years. In 2050, the average corporate loan portfolio of a euro area bank is 8% more likely to default under the hot house world scenario than under an orderly transition. When distinguishing between different loan portfolios, the climate-induced impact becomes even more pronounced, and particularly over time. Portfolios most vulnerable to climate risk are 30% more likely to default in 2050 compared with 2020 under the hot house world scenario: this increase is five times larger than the average increase under the same scenario.


Temenos, Vodeno and Aion Bank collaborate on banking as a service in Europe

Banking software company Temenos, Vodeno, a cloud-native BaaS provider and Aion Bank, a European licensed digital bank and credit institution, have announced a strategic collaboration to accelerate Banking as a Service (BaaS) deployment in Europe. 

The first banking services to be launched combine the Temenos Banking Cloud with Vodeno's card management and payment processing services. This is designed to enable banks and businesses across industries to broaden their portfolio of products offered to their customers by automating and embedding new payments and card services seamlessly in their customer journey. The three parties say their collaboration removes the complexities and regulatory overheads of deploying embedded financial services in Europe. Clients could benefit from faster time to market and the business agility to develop new customer propositions. Temenos and Vodeno are already engaged in several proof of concepts with banks and fintechs across Europe. 

The Temenos Banking Cloud combines Temenos Transact and Temenos Infinity banking services, which will connect via REST APIs to the VODENO Cloud Platform. Through the strategic alliance, clients will be able to instantly issue digital debit and credit cards for retail and business banking customers. Additionally, existing Temenos customers can benefit from financial services embedded in personalised customer journeys, delivered in real-time, at the right touchpoint with intelligent and contextual experiences.


Authorised push payment fraud overtakes card scams as UK losses rise by 30%

UK Finance has released its latest fraud report covering the first half of 2021. This report shows the scale of fraud taking place as well as demonstrating how criminals have shifted their focus to exploit weaknesses outside the banking system.

In previous years the largest fraud losses have been unauthorised frauds mainly committed using payment cards. This year, however, criminals focused their activity on what is termed authorised push payment (APP) fraud. In APP fraud a customer is tricked into authorising a payment to an account controlled by a criminal. In these scams the criminal’s activity takes place outside the banking system.

Using tactics such as scam phone calls, text messages and emails, as well as fake websites and social media posts, criminals seek to trick people into handing over personal details and passwords. This information is then used to target victims and convince them to authorise payments. As a result, there was a 71% increase in APP fraud during the first half of 2021 and, for the first time, the amount of money stolen through APP fraud overtook card fraud losses.

The report also highlights changes in how criminals moved stolen money. They targeted people as young as 14 via social media platforms to become money mules, where their bank account is used to launder stolen money. Intelligence shows a notable increase in the use of cryptocurrency wallets being used to take stolen money outside of the banking system quickly.


TransferMate selects ComplyAdvantage for AML and risk screening

ComplyAdvantage, a global data technology company focused on financial crime detection, has announced that B2B payment technology provider TransferMate Global Payments has selected its customer onboarding, transaction screening and monitoring solutions.    

Headquartered out of Kilkenny, Ireland, TransferMate is a subsidiary of Clune Technology Group founded by Terry Clune and is a global B2B payments technology firm enabling companies to send and receive cross-border payments faster and easier. Now more than ever before, fast growing enterprises like TransferMate are implementing the best technologies and processes not only to reduce their risk profile as it relates to financial crimes but also to help accelerate service expansion with greater confidence.  With the ability to onboard clients in over 54 countries, and with a diverse client base, TransferMate needed a solution to support their hyper growth and to enable deployment of laser focused system rules to address the real risk of international payments, and to maximise the best use of internal resource allocation. 

"We selected ComplyAdvantage as they share the same vision as us to use ‘compliance as a competitive advantage’, and they support our mission to develop dynamic rules tuned to specific inherent vulnerability scenarios, ultimately providing a better customer service while keeping the bad guys out of our global payments infrastructure," said Simon McFeely, chief compliance officer of TransferMate. "It’s great to know that we have a risk management solution designed to keep pace with our rapidly growing business demands."

ComplyAdvantage offers an intelligent hyperscale approach to AML and risk detection powered by the company’s proprietary data graph called ComplyData.  Consisting of hundreds of millions of data points that provide dynamic, real-time insights of people and businesses that are monitored against sanctions, watchlists, politically exposed persons, and negative news.  The company says that this reduces dependence on manual review processes and legacy databases by up to 80% and vastly improves the efficacy in how companies screen and monitor clients and transactions.

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