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Industry roundup: 1 March

SG, Credit Suisse halt Russian commodity trade finance deals

Société Générale and Credit Suisse Group have halted the finance of commodities trading from Russia, according to a Bloomberg News report. It said that the two banks, key financiers to commodity trade houses, are no longer providing the money needed to move raw materials such as metals and oil from Russia.

They have been joined by Dutch banking firms ING Groep and Rabobank, which are restricting lending to deals involving movement of commodities from Russia and Ukraine, while latest reports state that Singapore’s DBS Bank, OCBC Bank and UOB have stopped issuing letters of credit involving Russian energy deals due to uncertainty over the course of sanctions.

Visa and MasterCard, which together handle 90% of all debit and credit card payments outside of China, have blocked several Russian financial institutions from their networks. Both companies confirmed that they had moved quickly to comply with US sanctions imposed on Russia. “We will continue to work with regulators in the days ahead to abide fully by our compliance obligations as they evolve,” Mastercard said in a statement.

The disruption of the commodity markets triggered by Russia’s invasion of Ukraine on 24 February has steadily worsened in recent days with liquified natural gas (LNG) orders paused, finance for trade in raw materials evaporating and a freeze on Black Sea wheat sales. Over the weekend, the US, Canada, Europe and the UK moved to block Russia's access to the SWIFT international payment system in an escalating campaign of sanctions against Moscow as it continues its assault against Ukraine.

As sanctions increasingly cut Russia off from the global financial system, disruptions to shipments of raw materials from palladium to wheat are mounting. Russia produces 10% of global oil and supplies 40% of Europe’s gas. It is the world's biggest exporter of grains and fertilisers, the main palladium and nickel producer, third-largest exporter of coal and steel, and fifth-largest wood exporter.

Buyers have paused purchases of Russian LNG as they await clarity on restrictions against banks and companies. The cost of shipping raw materials is soaring, while the impact of the invasion is reverberating in the world’s main financial centres as international investors ditch Russian commodities assets.

Russia’s top steelmakers are reported to have experienced a steep fall in exports since the incursion began, while nickel shipments have also been affected. The response to Russia’s actions differs from country to country, with Germany believed to have halted almost all steel purchases. 

Reduced metal shipments threaten to further tighten a market that was already experiencing supply shortages before the outbreak of war. Although metals have yet to be directly targeted by sanctions, prices are surging on concern that the latest measures will obstruct payments to suppliers and spur banks to rein in financing for purchases of Russian goods. 

A note issued by analysts at Goldman Sachs noted that metal shipments are falling and buyers are “hesitant in the context of sanction uncertainty and escalation. With materially reduced export volume out of Russia, Kazakhstan and Uzbekistan, all the base-metal markets will face accelerated tightening in the near-term,” they predicted.

With Russia’s commodities trade facing immediate threats, the country’s producers also fear longer-term risks arising from sanctions targeting its imports of high-tech products. Russian mining companies are reported to be reliant on equipment and software licenses from overseas vendors. 

 

Paga Group launches Ethiopia Online payment gateway

Mobile payments and financial services provider Paga Group has announced a partnership with the Bank of Abyssinia (BoA), and its receipt of regulatory approval from the National Bank of Ethiopia to launch its online payment gateway in Ethiopia.

In a release, the group described the partnership as both a milestone and a core, strategic development in Paga’s growth strategy. BoA was established in 1996 and has nearly 700 branches and over five million customers. It is also regarded as a pioneer in Ethiopia of digital finance and payment solutions.

“Ethiopia is on the cusp of a digital transformation. Paga has a long history working in Ethiopia, and we are very excited for this next phase of our involvement, where we can provide innovative payment and financial services to the market,” said Adam Abate, CEO of Paga Ethiopia.

“We are equally excited to be partnering with BoA, which has demonstrated its commitment to and capabilities in driving Ethiopia’s digital economy forward. Combined with Paga’s innovation and technology, we believe our offering will be very exciting for Ethiopian consumers and businesses.”

In its release, the group pledged: “Through its online payment gateway and other capabilities, Paga will help drive the digital economy in Ethiopia by enabling sellers to pay and get paid easily online. Paga will leverage its experience and international partnerships to deliver world class online payment services.”

Paga’s move follows a series of reforms introduced by the government to liberalise Ethiopia’s banking and telecoms sectors. Most recently, Addis Ababa launched a fund that aims to attract investment for at least US$150 billion of state-owned companies and assets.

Last September BoA announced a partnership with Xpert Digital (XD) to implement the Temenos Infinity digital banking platform. The bank aims to accelerate customer growth with XD revamping its retail and corporate banking to offer digital banking services across both segments.

 

Sweden gets first biometric payment card

Norwegian biometrics company IDEX Biometrics ASA has announced that the Swedish banking challenger Rocker is teaming up with IDEMIA and IDEX Biometrics to launch Rocker Touch, stating that it would be the first in Sweden and one of the first in the world to scale deployment of biometric cards to consumers. A pilot of the initiative was reported on in December.

As a bank challenger, we are constantly testing new technology to develop smarter financial services that are easier to use and that help our customers improve their everyday financial lives,” said Andreas Norberg, VP Save & Spend at Rocker. “Launching Rocker Touch is part of our strategy to offer smart and secure payment solutions across platforms, whether you wish to pay with your mobile, a card or with a transfer.”

IDEX commented that tens of thousands of consumers worldwide have beta tested biometric cards with a customer satisfaction of up to 95%. In a global market survey 76% of consumers expressed interested in using contactless for high value payments and 81% were ready to use their fingerprints to authenticate instead of PIN code.

Norberg added that with Rocker Touch, the bank challenger is “revolutionising and simplifying the way our customers authorise their payments. This premium product will be offered as a new service in our comprehensive and growing offering of retail financial services that are easier to use, more flexible and better priced.”

Catharina Eklöf, Chief Commercial Officer at IDEX Biometrics added: “The biometric payment card is certified by Visa and Mastercard and Rocker Touch will work seamlessly with any payment terminal.”

“These cards allow authorising payments via a fingerprint sensor embedded into the card,” commented Aaron Davis, SVP Europe Region, Financial Institutions at IDEMIA. “Biometric data is securely stored in the chip and never leaves the card. In addition to making our means of payment more secure, customers would also be able to pay contactless whatever the amount of the transaction.”

 

SWIFT veterans unveil cross-border payments service

Three former SWIFT staffers have unveiled a global payment addressing service for banks and fintechs that is promoted as making the transfer of money around the world as easy as sending a text message.

Singapore-based International Payments Identity (iPiD), which was established last May, has built a service with partner Palo IT, the innovation consultancy and agile software developer that enables users to make cross-border payments anywhere in the world using only a simple proxy, such as phone number, for the payee’s identity.

The addressing service uses the proxy to retrieve all the other data that is required, including an account number and bank name, without the payee needing to provide financial details they may be unfamiliar with.

The service is platform agnostic and uses APIs, meaning that it works on current payment rails and can be integrated by banks and fintechs, while tapping existing regulatory compliance processes.

Running on Microsoft Azure, the concept was tested in late 2020 and will now be operated by iPiD as it looks to bring onboard partner firms.

iPiD’s co-founders are former SWIFT managing director Edward Haddad, Dutch entrepreneur Geertjan van Bochove and Damien Dugauquier, who commented: “This solution makes sending payments anywhere in the world as simple as sending a text message. As well as making the payment experience much easier, it will drastically reduce the cost of failed payments, which was estimated at US$118.5 billion in 2020.”

 

IDBI Bank offers liquidity management tools

India’s IDBI Bank has launched two liquidity management tools that it says offer institutions enhanced visibility of liquidity positions across the organisation, helping them in forecasting and projecting the cash positions instantly.

Mumbai-based IDBI, a subsidiary of Life Insurance Corporation of India (LIC) and established in 1964 as Industrial Development Bank of India, names the two new products Corporate Liquidity Management Solution (C-LMS) and Government Liquidity Management Solution (G-LMS).

“The purpose of C-LMS and G-LMS is to provide real time, web based and formula driven liquidity management solution,” stated the bank in a release, “ It provides tools to institutions for enhanced visibility of liquidity position across the organisation, helping them in forecasting and projecting the cash positions at a glance.

“Additionally, C-LMS helps corporate customers to automate the transfer of funds across various accounts of the entity. It also helps corporate customers to manage liquidity efficiently, thereby helping in efficient working capital management.”

IDBI Bank’s MD and CEO, Rakesh Sharma commented: “We have built this Liquidity Management Solution keeping in mind the needs of our institutional customers in the corporates as well as Government institutions to manage their liquidity requirements under one integrated system. It provides a unique solution towards consolidating funds and managing the liquidity seamlessly within the organisation.”

Separately, the Indian government recently started working on a virtual roadshow with potential investors for a stake sale in IDBI Bank and Sharma was reappointed as the bank’s CEO for a further term of three years. LIC currently has a 49.24% stake in the bank, while the government holds 45.48%.

According to reports, the government has also sounded out the Reserve Bank of India on potentially easing private bank ownership guidelines to permit a complete stake sale. A partial or complete stake sale is seen by the government as a pre-requisite for the planned initial public offering (IPO) of LIC.

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