Supply chain finance funds face an uncertain future
Supply chain finance funds (SCFs) face an uncertain future following the recent suspension and liquidation of several open-end mutual SCFs with links to the failed supply-chain finance company Greensill Capital, Fitch Ratings has said in a report. Fallout from the situation is likely to damage investor confidence in SCFs and may trigger additional regulatory scrutiny.
The five affected SCFs, four managed by Credit Suisse and one by GAM Investments, suspended redemptions in March 2021 due to uncertainty in the valuation of holdings linked to Greensill through the sourcing and structuring of assets. The uncertainty was heightened by the prior withdrawal of some of the credit insurance that had protected the funds' underlying assets against obligor default. For example, the CS (Lux) Supply Chain Finance Fund's insurance coverage decreased to 63% at end-January 2021 from 100% at end-2020.
SCFs relying on credit insurance face the risk of cover termination, which can trigger a rapid deterioration in their risk profile, especially if the portfolio has exposure to low-quality or unrated obligors. While defaults in trade and supply chain receivables are typically low, the credit quality of issuing entities can vary widely. Some trade finance structures may also be used in an effort to disguise fundamental challenges facing weaker companies.
SCFs may have material reliance on certain counterparties or platforms. The suspended SCFs had multiple layers of relationships with Greensill, according to press reports, which indicates a high degree of reliance. More broadly, SCFs reliant on a limited number of sourcing partners are likely to have heightened sensitivity to changes in asset supply.
The full report, 'Uncertain Future for Supply Chain Finance Funds', is available on the Fitch Ratings website.
Stripe to acquire TaxJar to help internet businesses with tax compliance
Global technology company Stripe has announced that it has entered into an agreement to acquire TaxJar, a provider of sales tax software for internet businesses. Local sales taxes applicable to online commerce have proliferated in recent years, with more than 11,000 different sales tax jurisdictions in the US alone. For internet businesses, accurately tracking, calculating, reporting, and filing taxes is a large and growing burden. Indeed, one of the top requests from Stripe’s users over the past five years has been for assistance in navigating sales tax.
"There’s a reason TaxJar has been a top choice for businesses: their software tools make it incredibly easy to handle sales tax," said Dhivya Suryadevara, Stripe’s CFO. "With TaxJar, we will help millions of internet businesses running on Stripe with their sales tax and make it easier for them to sell internationally. And as a CFO, I’m delighted to welcome so many new colleagues who care deeply about taxes!"
As part of Stripe’s revenue platform, TaxJar will help businesses automate tasks such as:
- Providing accurate sales tax rates at checkout, tied to the exact street address of the customer.
- Automatically submitting tax returns to local jurisdictions and remitting the sales tax collected.
- Producing local jurisdiction reports to show sales and sales tax collected - not only for each state, but for relevant counties, cities, and other special jurisdictions.
- Evaluating a company’s products and intelligently suggesting the right product tax code.
Volt launches end-to-end cash management
Volt, an open payments gateway, has unveiled new cash management functionality providing merchants and payment service providers (PSPs) with complete visibility of open banking payments made through the UK's Faster Payments Service and the European SEPA Credit Transfer and SEPA Instant Credit Transfer schemes.
Available in the UK now and across Europe by the end of May 2021, the company says that Volt Connect puts merchants in greater control of their cash by enabling them to track multi-currency PSD2 payments from the point of initiation to the moment of arrival in their accounts. Automatic reconciliation and reporting provide recipients with instant notification of settlement, allowing them to credit the correct customer account faster.
"Although account-to-account payments can land in recipients' accounts within seconds of initiation, they follow a complex, multi-step process, and there is no guarantee of settlement until the money arrives," said Tom Greenwood, CEO at Volt. "This challenge is exacerbated where banks aren't connected to instant payment schemes. With Volt Connect, we’ve made it possible to make losses from failed transactions a thing of the past by providing total visibility and control throughout the payment journey, regardless of the route taken. Merchants can dispatch goods or credit customer accounts faster and with the certainty of knowing where funds are at all times, minimising the risk of being left out of pocket by reversed charges or payment failure."
Bank Of Africa digitises trade processes via Finastra
Finastra has announced Bank Of Africa, a pan-African financial group, has selected Conpend’s TRADE AI app from its open innovation platform, FusionFabric.cloud. The app extends the functionality of Finastra’s Fusion Trade Innovation technology and enables users to reduce document and compliance checking time. It digitises trade finance processes, using optical character recognition (OCR), natural language processing (NLP) and progressive machine learning to reduce the risk and cost of trade finance operations.
"The solution will improve our trade finance operations by speeding up the approval of trade finance documents," said Leila Bahoum, board member in charge of Trade Finance Operations from OGS Subsidiary of Bank Of Africa. We expect it will digitise manual, paper-based processes, reduce processing time by 30%, and reduce trade finance risk levels by up to 80%. Having access to third-party apps was a clear differentiator when looking at trade finance solutions."
Conpend TRADE AI extracts unstructured data from scanned paper documents and can also process already digitised data. The data is then screened and analysed, using rules and advanced analytics, to empower business users to make informed business decisions quickly and accurately. It is fully compliant with all major global regulations and automatically performs all necessary compliance checks for a trade transaction. This includes money laundering screening and handling alerts during the screening process, which dramatically reduces false positives and time spent on decision-making. The solution also enables vessel checking and voyage tracking to support goods in transit.
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