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Industry roundup: 6 August

Interac introduces instant digital payments for Canadian businesses

Interac Corp., with the support of 13 Canadian financial institutions, is launching Interac e-Transfer for Business, a solution that builds on the widespread adoption of the Interac e-Transfer service. The solution enables real-time digital payments to personal and commercial bank accounts with confirmation of funds received within seconds.

With more than eight in 10 (83%) business leaders calling for new commercial payment products as part of their post-pandemic digital transformation, according to recent research from Interac, this is designed to allow Canadian businesses to send and receive payments faster and more efficiently than ever before from the safety and security of their financial institution. Businesses are still reliant on cheques, with over 389 million commercial cheques in market in 2019 representing an average value of C$9,000 each. With higher limits of up to C$25,000, Interac e-Transfer for Business transactions have the potential to displace upwards of 200 million of these cheques.

"The launch of Interac e-Transfer for Business in collaboration with Canada’s banking and credit union community marks a milestone in the modernisation of Canadian payments and provides a timely solution as businesses embrace financial transformation to aid their recovery and growth plans," said William Keliehor, chief commercial officer at Interac. "It reflects an increasing focus from Interac on the commercial market as we respond to the accelerating need for secure, data-rich, real-time business payments, made especially evident during the pandemic."

Interac e-Transfer for Business alleviates the need to follow up with suppliers as payment confirmation is provided within seconds, while also reducing manual reconciliation processes through data-rich payments. With higher transactional limits of up to C$25,000 and flexible payment routing options, this solution aims to give commercial users more choice, a higher level of efficiency and control in managing receivables and cash flow. Users will also have the added flexibility of sending funds directly to account numbers they have on record, in addition to traditional Interac e-Transfer payment routing options of an email address or mobile number.

 

Supply limitations constrain development of green MMFs

Fitch Ratings believes European green money market funds (MMFs), defined as funds investing primarily in instruments with environmental, social or governance (ESG) characteristics or sustainability-linked securities, are most likely not feasible in the near-term and may be challenged to achieve 'AAAmmf' ratings longer-term, unless there is a material increase in the supply of eligible securities, according to a recently published special report.

Fitch has identified 15 green commercial paper (CP) programmes to date, most domiciled in Europe, with an aggregate total size of approximately €38bn. CP typically accounts for the largest portion of European non-government MMFs’ assets. Most of the green CP issued to date has been either unrated, or rated below 'F1', meaning that it is unlikely to meet the minimum credit quality standards for short-term MMFs. Even if such a fund were constructed, the portfolio credit quality distribution would imply a rating significantly lower than 'AAAmmf'. Furthermore, Fitch considers it unlikely that current volumes would allow a MMF to diversify sufficiently to meet the 'AAAmmf' rating guidelines.

Nonetheless, supply of green CP has increased, and MMFs may be able to access other green instrument types. For example, some banks now offer green deposits, although MMFs may not be eligible depositors. The green bond market may also offer some potential for MMFs, either through acquiring roll-down bonds in the secondary market, or through green reverse repurchase agreements. However, Fitch believes that until a viable green short-term market exists, MMFs focused on this segment will face material supply constraints, compounded by potential differences in liquidity between green securities and the materially larger and more established conventional short-term security market.

 

EXIM approves US$832.5m financing to support Boeing exports to Turkish Airlines

The Board of Directors of the Export-Import Bank of the United States (EXIM) has approved two transactions totalling US$832.5m in loan guarantees to support exports of US-manufactured Boeing 787-9 aircraft, B737 MAX 8 aircraft and B737 MAX 9 aircraft, respectively, to Turkish Airlines in Istanbul. EXIM’s loan guarantees are estimated to support an estimated 4,500 American aerospace jobs at The Boeing Company’s manufacturing facilities in Washington State and South Carolina, and at Boeing’s suppliers throughout the United States.

The board vote followed the referral of the transactions for a 35-day congressional review period that began on 24 June and expired on 29 July. Notification of the transactions was also posted on the Federal Register for a period ending 19 July. Comments received in response to the Federal Register notice from the National Association of Manufacturers (NAM) and a Boeing supplier, Kildeer Mountain Manufacturing, in Kildeer, North Dakota, strongly endorsed EXIM’s support for the exports to Turkish Airlines. The North Dakota small business supplier noted that the company provides nearly 300 jobs in three North Dakota towns: Kildeer, Dickinson, and Hettinger.

"As the aerospace industry emerges from the difficulties brought on by the COVID-19 pandemic, EXIM Bank’s support, where necessary, remains more important than ever," noted Ali Aafedt, director of Trade Facilitation Policy at NAM in a letter to EXIM. 

For the first transaction, Natixis is arranging an asset-backed lease for the B787-9 aircraft. Natixis, BPCE (parent company of Natixis), and J.P. Morgan Chase in Germany will serve as the guaranteed lenders. For the second transaction, BNP Paribas is arranging an asset-backed lease for the B737 MAX 8 aircraft and B737 MAX 9 aircraft. BNP Paribas, Citibank, Bank of America, and Caixabank will serve as guaranteed lenders. All aircraft are expected to be delivered by the end of 2021.

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