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Industry roundup: 18 November

Australia’s central bank “unconvinced” by digital currencies

The Reserve Bank of Australia (RBA) is following many of the world’s other central banks in stepping up research into a possible launch its own digital currency, but remains unconvinced of the merits, says its payments chief.

Tony Richards, the RBA’s head of payments policy commented on its attitude towards central bank digital currencies (CBDCs) at a financial services conference that follows an Australian Senate report last month that recommended changes in the law that were favourable to digital currencies.

Richards noted that most major economies are now considering whether respective cases for and against issuing their own CBDC, as an internet-only cash equivalent that differs from cryptocurrency since it is not de-centralised. However, while China’s central bank is relatively advanced, none have actually yet gone ahead. To date the only examples have been relatively small scale, such as the October 2020 launch of the so-called Sand Dollar by the Central Bank of the Bahamas.

However, given the possibility that the balance could shift towards a case for issuance of retail CBDCs, the Bank has been stepping up its CBDC research, Richards said in his speech to the Australian Corporate Treasury Association (ACTA).

He commented that outside of China the European Central Bank and Sweden appear to be the most advanced of the major economies to consider a role for CBDCs, while the US Federal Reserve has adopted a more cautious approach.

“Reserve Bank (of Australia) staff have also not been convinced to date that a strong policy case has emerged in Australia for a CBDC,” he said. “Australia's existing electronic payments system already provides households and businesses with a wide range of safe, convenient and low-cost payment services.”

Earlier this month Commonwealth Bank of Australia (CBA), the biggest of the high street banks, became the country's first to offer a platform for retail customers to trade cryptocurrencies, thereby breaking industry ranks in a bid to match offerings from fintech firms.

IFC partners with Absa Bank on trade finance in Sub-Saharan Africa

The International Finance Corporation (IFC) has welcomed South Africa’s Absa Bank to its Global Trade Liquidity Programme (GTLP). 

The partnership’s aim is to boost access to trade finance in sub-Saharan Africa, especially in low income and fragile countries, supporting a vital driver of growth that has been strained by the COVID-19 pandemic.

Through a combined investment of US$250 million, IFC and Absa Bank, one of Africa’s largest financial institutions, will channel credit to a portfolio of trade transactions that is expected to facilitate up to US$1.6 billion in trade over the next three years. The financing will support Absa’s commitment to increase the accessibility of trade finance, with around 80% of financing expected to go to low income and fragile countries.

Under the GTLP risk-sharing model, IFC will guarantee a pool of eligible trade transactions issued by Absa Bank by up to 50%, with the remaining amount being guaranteed by Absa Bank.

IFC’s GTLP programme was established to provide financing to partner banks, helping them minimise risk in trade financing and facilitate increased trade in emerging markets, especially for underserved importers and exporters and small businesses.

Since its launch in 2009, the GTLP programme has supported more than US$75 billion in global trade volume via nearly 27,000 transactions, of which more than US$24 billion has represented trade in low-income countries.

South Africa payments gateway Ozow raises US$48m for expansion

South Africa’s fintech start-up Ozow, which launched in 2014 to drive greater financial inclusion through open banking has raised a US$48 million Series B funding round to help it further develop its product offering and expand into new markets.

Ozow, originally called i-Pay, was founded by the trio of Thomas Pays, Mitchan Adams and Lyle Eckstein, who identified a need for an efficient and secure online payment system in the local market. It rebranded in April 2019 and focused on assisting South Africa’s smaller businesses with payments.

A 2019 report issued by Deloitte found that while about 80% of South Africans have a bank account only 24% make more than three transactions per month.

Unlike other African countries, South Africa also has a functioning credit system with widespread use of credit cards. However, expensive value-added services such as credit cards do not serve the needs of those who are underbanked people.

Ozow’s growth has come from providing merchants and consumers with easy, fast and secure alternative payment solutions, including QR codes, point of sale, e-commerce, e-billing and peer-to-peer payments. The company allows consumers to access their internet banking platform when they make transactions online and it works with major retailers such as MTN, Vodacom, the Shoprite Group, Takealot and Uber.

Having pioneered digital payments gateways, Ozow says that the US$48 million raised will enable it to provide more alternative payment solutions to its millions of merchants and consumers. Chinese internet giant Tencent led the Series B round – which follows the Series A round in June 2019 – with other investors Endeavor Catalyst and Endeavor Harvest Fund participating.

Co-founder and CEO Pays says that before Ozow, manual electronic fund transfer (EFT) processes were the popular options to carry out transactions online. At the time, most fintechs and banks overlooked the need for using bank payments to facilitate online transactions.

Ozow was launched to automate the manual EFT process consumers used to pay across e-commerce, point-of-sale, e-billing or P2P methods. Pays adds that he wanted Ozow to “make it seamless for consumers to pay in three clicks.”

Euronet launches Dandelion for cross-border payments

Electronic payment services provider Euronet Worldwide has announced the launch of a cross-border payments platform, which it says aims to boost business integration

Named Dandelion, the new service offers real-time connectivity to local payment rails in 162 countries. It also provides transparency, a customisable application programming interface (API), integrated compliance capabilities and instant international settlement, according to a Euronet press release.

It also notes that over US$155 trillion in cross-border payments are sent per year, with costs topping $200 billion. The market has seen a glut of new customer expectations due to increased digital payments and regulatory reform. Small- to medium-sized businesses (SMBs) are underbanked because of these shifts.

“No one has really focused on effectively connecting all sides of the transaction — the entire end-to-end experience — with a real-time solution,” comments Euronet Chairman and CEO Michael J. Brown in the release. “That leaves a huge gap in the payments space.

“Most of the new entrants in the payments market focus on the interface and onboarding of end users. And they do a good job of it. But we set out to reimagine cross-border payments from end-to-end. That is where Dandelion fills the void in the cross-border payments world. Dandelion is the platform that financial players have needed to enable rapid global expansion and efficiently process cross-border transactions.”

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