Proximity emerges as the new value driver for US supply chains

Business executives are strategically reshaping their supply chains to achieve greater efficiencies, according to a report from KPMG titled ‘The Proximity Premium’. Nearly three-quarters of business executives report that strategic shoring has successfully enhanced supply resilience and operational agility.

The globalised and long supply chains have proven vulnerable to disruption. This vulnerability, coupled with geopolitical and ongoing economic uncertainty, is driving businesses to draw their supply chains closer to the Americas to better serve the US market, according to 76% of the survey respondents. This aims to reduce lead times, diversify supply, maximise access to talent and minimise risk. The Americas’ share of supply chains to the US is expected to rise by 16%, according to the research, while the average number of locations in a single supply chain is being consolidated for efficiency measures, falling from 2.7 to 2.4 locations over the next three years.

Supply chain fragility can weaken the larger business ecosystem and exacerbate global inflationary pressures. With 61% of executives reporting that the volatile global trade environment is forcing their business to refocus on regional and domestic sourcing and distribution, it underscores the urgency to balance critical supply chain needs.

Nearly three-quarters (73%) of executives say their company has increased their supply chain’s cost efficiency via strategic shoring, enhancing their operational and financial performance. While still the primary goal in supply chain strategies, cost as an outcome has declined in importance over the past two years by four percentage points. In contrast, less tangible ambitions such as speed, flexibility and sustainability have gained importance by two, three, and two percentage points, respectively. Meanwhile, 61% of executives say strategic shoring will help reduce the carbon footprint attached to products, positively impacting their sustainability efforts.

More than half of executives with higher-performing supply chains (55%) also recognise the importance of navigating the tax and regulatory landscape, while 53% say regulators and tax officials are significant influences in strategic shoring decision-making. By integrating tax strategies early in the process and scenario plan, businesses can realise cash flow efficiencies and competitive advantage, ensuring a sound shift in supply chain strategy. Executives report that the current tax environment (23%) and regulatory policies (31%) are among the top five challenges to achieving certain strategic shoring initiatives, while 43% identify data and analytics capabilities as most important to advancing sourcing.

A focused regional supply chain contributes to a more stable and robust macroeconomic environment. Over half (55%) of executives view resilience and faster time to market as the dominant objectives pushing their companies to nearshore. A majority (75%) of executives say their company has successfully used strategic shoring to strengthen its supply chain resilience.

“Any disruption in the supply chain bears the risk of increased inflation and consequently a potential rise in interest rates,” commented Meagan Schoenberger, Senior Economist, KPMG U.S. “That can impact everyone.”

‘The Proximity Premium’ report from KPMG draws on insights from 250 US-based executives at companies with annual revenues of at least U.S.$1bn and highlights trends and challenges related to strategic shoring.

 

95% of PSPs have had accounts closed or restricted by banks

The vast majority (95%) of payment service providers (PSPs) have experienced their bank accounts being closed or restricted by their banking partners, according to a report from cross-border payments and FX fintech, Neo. Additionally, 71% reported that the closures or restrictions occurred with minimal transparency and no explanation from their bank.

The report, ‘Beyond Banks: The Rise of Fintech Solutions in the Payment Service Provider Industry’, presents findings from a survey of 100 C-suite professionals at PSPs across Europe. It aims to shed light on the challenges they face in their banking relationships and their strategies for overcoming them.

Nearly three-quarters (69%) of PSPs rely on just three or fewer banking partners. A PSP relying on fewer than three banks is in a precarious position, especially since safeguarding banks typically don't make up the majority of these banking partnerships. If a safeguarding bank were to fail, as was seen in 2023’s banking turmoil, these firms would face significant risk.

The research also revealed that only 2% of PSPs have been able to open an account with a traditional bank in under six months, with the average time stretching to nearly a year (11.5 months). As a result, many are now exploring alternative solutions. Over one-third (39%) of PSPs have one to three EMI/PSPs, while almost half (48%) maintain relationships with four to five EMI/PSPs, demonstrating a strong preference for diversified fintech partnerships. Three-quarters (75%) of PSPs are actively exploring fintech solutions as potential replacements for traditional banks.

 

J.P. Morgan Asset Management expands diverse asset class access

J.P. Morgan Asset Management has announced an enhancement to its open architecture, short-term investment management platform, Morgan Money, through a strategic partnership with GLMX, a global money market trading platform. Morgan Money clients can now access GLMX's advanced money market trading technology directly on Morgan Money. 

The integration aims to broaden short-term investment options and offer a suite of money market instruments, including money market funds, repurchase agreements, time deposits, certificates of deposit, commercial paper, and government securities.

“Cash as an asset class and access to diverse liquidity pools in a single application are consistent themes we hear across the global front-end markets,” said Glenn Havlicek, CEO and Co-founder of GLMX. “This collaboration with J.P. Morgan Asset Management is a result of investors’ desire to access the entire investable universe of short-term instruments with a seamless experience.”

 

Environmental and social issues influence ESG ratings of ICT Sector

The operations of companies in the information and communication technology (ICT) sector have a material impact on environmental and social issues, which can have a sizeable influence on these companies’ ESG ratings, a report from Sustainable Fitch states. The report is part of the Sector Insights series examining material sustainability issues across selected sectors and the drivers of ESG ratings, which assess the sustainability characteristics of entities in those sectors.

ICT companies play a critical role in the global economy in fostering economic and social connectivity, with most Sustainable Fitch-rated companies obtaining either an average or good ESG rating. The industry consists of several sub-sectors with varied material sustainability factors. Technology, hardware and semiconductor manufacturing have impacts related to supply chain, material sourcing and circularity. For companies providing software, information technology and telecommunications services, key issues include energy efficiency, security and customer welfare.

Of the rated ICT companies, 55% have an average entity ESG rating of ‘2’, indicating a good sustainability profile and impact, and 45% have an ESG rating of ‘3’, indicating an average profile and performance.

Telecommunications entities benefit from a better environmental impact than technology firms and the positive social impact of delivering essential communications infrastructure that improves connectivity in emerging markets and rural communities.

Generative artificial intelligence (AI) plays a transformative role in the ICT sector, but its growth increases the carbon and natural resource footprint of these companies. Running AI models is highly energy and water intensive, mainly at the data-centre level, which will have implications for ESG performance and associated ratings.

 

Mastercard looks to South Africa on the path toward real-time card payments

To further Mastercard’s vision of bringing immediacy to card payments, the company has announced that South Africa will be the first market in the world to benefit from the security and speed of immediate Mastercard card payments. Through product innovations, enhancements to its network and strategic partnerships, Mastercard says it will enable acquiring banks to process real-time card payments.

All merchants in South Africa who accept Mastercard payments will receive faster payouts, which may help businesses achieve better cash flow management and faster funds availability. This, in turn, can provide merchants with more visibility and control over their funds, free up capital and increase the velocity of money in the economy, driving growth and innovation. 

In the future, Mastercard says it will enable issuing banks in South Africa – and around the globe – to process real-time card payments, empowering consumers with increased transparency, faster payments, and real-time insights into their funds. The enhancements and new standards will enable same-day payouts for South African merchants through the introduction of real-time clearing and more frequent settlement cycles.

This initiative aligns with the South African Reserve Bank’s (SARB) National Payments System Strategy Vision 2025, which underscores the importance of evolving payment systems to meet the needs of people and businesses to drive financial inclusion. South Africa – where Mastercard laid the groundwork for these changes last year by enhancing its network and enabling transactions to be processed locally – will be Mastercard’s first market to experience real-time card payments.

Mastercard is partnering with ACI Worldwide on this project, to enable acquirers in South Africa to quickly adopt real-time transaction processing standards.

 

Instantia partners with ION FX for trade execution and risk management

ION has announced that Instantia has selected ION Foreign Exchange (FX) for trade execution, trade management, risk, and settlement management for its FX business.

Based in Australia, Instantia is a digital FX, risk management, and payments company offering a client-centric way to manage currency exchange, FX strategies, and cross-border payments. The company offers a risk management intelligence tool, providing insights to key business decision-makers.

Instantia chose the ION FX solution for its end-to-end processing functionality of FX cash and derivative products, including trade execution and risk management. Using ION APIs, Instantia developed custom client- and dealer-facing user interfaces to enhance the user experience.