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Industry roundup: 31 July

ASC X9 Corporate Banking Committee to focus on real-time payments initiatives

The Accredited Standards Committee X9 (X9) has announced that it has expanded the scope of its X9C Corporate Banking Committee to add focus on faster/real-time payments. The group is newly empowered to track all faster payments activity in the financial industry, and the intent is for it to become X9's central point of contact for industry standards related to this area.

Corporate banking is an umbrella term for treasury, finance and cash management functions within a corporation and for banking services offered to corporations. Corporate banking is separate from capital-raising, mergers advice or risk mitigation. It encompasses the workaday matters of a corporate treasurer. X9C's new mission states that, as payments evolve from a batch-oriented process to a real-time 24/7 service, X9C is committed to supporting faster payments initiatives to ensure a robust and secure end-to-end payment system.

Through ISO 20022 XML formats, payment origination and reporting can be greatly standardised across payment systems worldwide to simplify processes for identifying and booking payments. X9C says it will work closely with the Federal Reserve, The Clearing House, the Faster Payments Council, SWIFT and other prominent clearing and standards organisations as they introduce these payment methods to the corporate community.

The new X9C agenda incorporates working on and supporting standards for both business-to-business and business-to-consumer payments activity, building on work that includes developing the recently revised codes list for the X9.121 Balance and Transaction Reporting Standard (BTRS). The revision provides financial institutions and service providers with a common specification to ensure that real-time payments are reported in a consistent format across the industry. As an example of the collaborations that will occur, the updates were created to match the latest version of The Clearing House's real-time payment standard.

 

Deutsche Bank to invest in financing platform Traxpay

Deutsche Bank has announced its investment in the Frankfurt-based fintech Traxpay. The bank is using the fintech’s platform technology to expand its supply chain finance offering. Traxpay offers its corporate clients dynamic discounting and reverse factoring solutions to enable them to manage their cash flows flexibly. Other banks are being encouraged to join as investors and cooperating partners to further expand the platform. Traxpay will maintain its existing cooperations with other banks.

“The current crisis acts like a catalyst to the market," said Daniel Schmand, global head of Trade Finance and Lending at Deutsche Bank. "Numerous companies are reviewing their strategic relations with their suppliers and are identifying substantial potential in terms of financing. Recent developments we’ve seen as a result of COVID-19 show how important liquidity is for our clients. With Traxpay we have an experienced partner with a good track record. We can work with them to offer our clients further solutions in this area.” 

For Traxpay, having Deutsche Bank on board as an investor is a strategic step: “With Deutsche Bank, we have gained a strategic investor with a leading role in supply chain financing across the globe,” says Traxpay founder and CEO Markus Rupprecht. Traxpay also wants other banks to become shareholders. Many companies are looking for a reliable platform. “Using a single platform means greater transparency and more efficiency for our clients, suppliers and our financing partners,” Rupprecht explains.

Buyers and sellers who use the dynamic discounting solution that Traxpay offers can benefit from flexible payment terms for goods and services, which means buyers get a discount depending on when they decide to pay. Retailers and suppliers can use the Traxpay platform to decide whether they want to settle a payable earlier and receive a discount in their individual case or whether they would like a bank to offer them interim financing. Traxpay already processes volumes of more than €1bn every year.

 

ADB and HSBC finance US$1.2bn to facilitate trade of pandemic products in APAC

The Asian Development Bank (ADB) and HSBC have launched a programme to support up to US$1.2bn a year in trade by companies in Asia and the Pacific producing goods crucial to the ongoing fight against the COVID-19 pandemic.  

The targeted financing available through the programme is designed to support trade in multiple sectors affected by the pandemic, including pharmaceuticals and apparel as well as critical medical supplies that might not otherwise be available. 

“Partnerships, like this one with HSBC, are critical to closing market gaps, ensuring that we fuel growth necessary to build back the global economy, and creating jobs and prosperity,” said ADB Trade and Supply Chain Finance Program head Steven Beck. “This partnership will complement ADB’s own ground-breaking efforts to map the supply chain for products critical to the fight against COVID-19, and to support trade flows that will drive the recovery.”

The move comes shortly after the World Trade Organization, the International Chamber of Commerce, and B20 warned in a joint statement of a trade finance shortfall totalling between US$2 trillion and US$5 trillion that could impede the ability of trade to support the global economic recovery.

“Trade has a critical role to play in both the frontline fight against COVID-19 and in supporting the global recovery,” said global head of Trade and Receivables Finance at HSBC, Natalie Blyth. “This agreement will help ensure that trade finance gets to where it is needed and when to support the production and distribution of essential medical supplies and the return to growth.”

 

Banks must reinforce their trust role in the digital economy, says EBA report

The EBA Open Banking Working Group (OBWG) has released a report entitled “Digital Trust and the Banking Sector: Towards a Trust Advantage in the Digital Economy”. The report explores how digital transformation and increasing openness impact both trust in the financial sector and the trust relationship with customers. Offering recommendations on what financial institutions can do to build and leverage their trust advantage now, the working group identifies points of action in the age of digital transformation.

In the pre-digital era, financial institutions drew from the trust in the financial system and its institutions to build their unique role in the financial well-being of their customers. Now, however, this trust alone is not enough. In the digital age, customers build trust in their financial institution based on five principle success factors: security, user experience, degree of customer control, use of data, and openness.

“Banks need to combine the principal success factors of the digital economy in a way that allows them to leverage their core assets and re-enforces customer trust,” said Vincent Brennan, Chair of the OBWG. “On the individual level, building that digital trust advantage comes down to implementing technology and processes that ensure advanced data security, customer control, and the user experience end-users want.”

The working group says that the financial industry as a whole needs to complement individual institutions’ efforts by defining common technical standards for using customer data and by aligning on principles around the responsible and trustful treatment of customer data, the report finds. “Individual efforts in combination with collaborative efforts in the non-competitive space, will allow financial institutions to leverage their trust advantage and build services around trust itself, for example provisioning and managing digital identities. By doing so, banks could strengthen trust-creation in the digital economy, which would bring significant benefits to consumers,” Brennan added.

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