International system of “business fingerprints” will slash prices

SMEs can boost supply chain transparency and make trading across borders cheaper, faster, simpler and more sustainable by embracing a unified system of global “business fingerprints” according to a report from the International Chamber of Commerce United Kingdom, the World Trade Board and the Global Legal Entity Identifier Foundation (GLEIF).

‘Scaling the Use of Digital Identities in International Trade’ takes stock of the use cases of 20-digit combinations of letters and numbers called Legal Entity Identifiers (LEIs). Similar to a company number, each unique sequence corresponds to a particular business, creating a global standard for cross-jurisdiction party identification and a shared identity framework for international trade. 

LEIs allow governments, regulators, banks and businesses to better understand global trading ecosystems. This strengthens visibility to supply chain risks and opportunities for businesses of all shapes, sizes and geographies, helping to enhance trust, lower risk, cut administration processes and reduce costs. 

In the current system, banks, companies and governments have to separately verify and authenticate the identity of every buyer or seller in a heavily paper-based, overly complex and fragmented environment. As a result, a single cross-border trade can take up to three months to transact, involving 30 parties, 40 documents and 200 data elements. This outdated way of doing business ultimately passes the financial burdens of inefficiency onto consumers and SMEs, forcing them to pay higher prices to trade and purchase goods.

With the implementation of the UK Electronic Trade Documents Act last year, companies can now eliminate paper-based processes and begin standardising the trading system in ways that were previously impossible. LEIs make it easier to understand the global supply chain, identify trading parties, onboard new businesses seeking to export and import, and closely monitor suppliers of critical goods and services as we move from paper to digital trade processes. Embracing a common identity framework is, therefore, key to strengthening critical supply chains and underpinning the way we trade internationally in the future.

“The passage of the Electronic Trade Documents Act into UK law was a paradigm shift in international trade, but far more must be done to realise the benefits of this long-overdue modernisation,” said Chris Southworth, secretary general of the International Chamber of Commerce United Kingdom. “Current identity infrastructure is not fit for purpose and is stalling trade digitalisation. Governments – in the UK and abroad – must do more to incentivise the uptake of LEIs as business fingerprints across the trading community and their global supply chains. Without a wholesale change in approach to accelerate adoption, creating an efficient, data-driven trade infrastructure fit for the 21st century will be too slow to capture the economic benefits on offer.”

 

Markets may be worrying too much about overheating inflation

The market's reaction over the prospect of sticky inflation is likely overblown, according to David Mericle, Chief US Economist at Goldman Sachs Research. The largest recent upside surprises in the inflation data are examples of lagging indicators or “catch-up inflation,” such as car insurance and owners' equivalent rent. 

“The key point here is that that catch-up eventually comes to an end,” Mericle told the Goldman Sachs Exchanges podcast. “What we are not seeing is a reigniting of overheating inflation. We are not seeing a retightening of the labour market, an increase in wage growth, a worrying rise in inflation expectations,” he says. “The problems that would give you a sustained inflation problem…were solved quite a while ago.”

Meanwhile, the outlook for US economic growth remains relatively solid, according to Mericle, who expects US GDP to grow 2.5% year on year in the fourth quarter of 2024.

Over the medium-term, interest rates are likely to settle at a higher level than in the last cycle. Goldman Sachs economists have long argued that the neutral rate (at which the economy is at full employment, and the policy rate neither stimulates nor slows GDP growth) was not quite as low as the conventional wisdom held during the last cycle. 

For now, the short-run neutral rate might be higher than the long-run neutral rate because fiscal deficits are much wider than usual, resilient risk sentiment has limited the transmission from higher rates to broad financial conditions and the economy, and the most rate-sensitive sectors (housing and autos) have been constrained more by supply than demand. All these factors help the economy remain at full employment despite higher interest rates. Fed officials are likely to raise their estimates of the neutral rate over time, though by how much remains uncertain.

 

EIB and Ukraine to accelerate deployment of financial support and project execution on the ground

The European Investment Bank (EIB) and the government of Ukraine have agreed on a strategic cooperation framework supporting Ukraine’s reconstruction, recovery, and EU integration efforts. This reinforced partnership places future investments within critical public and private sector initiatives that will be supported by funds from the EIB’s EU for Ukraine Fund and the European Union’s €50bn Ukraine Facility, in which the EIB plays a key implementing role.

The memorandum calls for the rapid implementation of ongoing EIB projects in Ukraine, with the country having access to €500m in EIB loan funds and €60m in EU grant funds in 2024. It outlines an envelope of at least €2bn from the Ukraine Facility, which the EIB is prepared to invest in critical public sector projects such as housing and public building renovation, municipal infrastructure, energy, roads, railways, healthcare and civil protection. These include the modernisation of key export routes and railway lines, enhancements in hydroelectric and renewable energy production, and the strengthening of Ukraine's national electricity grid and healthcare facilities.

The memorandum also highlights the EIB’s enhanced support for private sector growth, including for funding and risk-sharing instruments such as partial portfolio guarantees. This will enable local financial intermediaries to provide vital access to finance for local small and medium businesses (SMEs) on favourable terms.

Additionally, the agreement outlines stronger advisory support for Ukraine by opening up the highly-rated advisory services programme JASPERS (Joint Assistance to Support Projects in European Regions) to help prepare significant investments and improve capabilities to meet EU standards.

 

Mastercard launches mobile virtual card app to simplify T&E expenses

Mastercard has announced a mobile virtual card app that enables virtual commercial cards to be seamlessly added to digital wallets. The app is designed to offer financial institutions more choice in how they deliver the secure and sustainable contactless payment solutions that companies increasingly expect.  

The app leverages Mastercard’s virtual card and tokenisation platforms, enhanced data, and spend controls all within one interface. Accessing Mastercard mobile virtual cards is seamless through the app, so users can quickly experience the benefits of tap-to-pay. Mastercard mobile virtual cards can be used by organisations spanning a range of sizes and industries, including healthcare, insurance, fleet, higher education, and corporate travel.  

HSBC Australia and Westpac will be the first financial institutions to offer organisations and corporate customers mobile wallet functionality through the Mastercard app. The app will be available in other key markets for users with a commercial virtual card issued through an organisation by a participating financial institution. Once registered for the app with an invitation code, users will find their commercial virtual cards automatically linked and ready to be added to select digital wallets for use across Mastercard’s global network.

 

Cognizant and FICO look to help banks prevent real-time payments fraud

Cognizant and FICO are to launch a cloud-based real-time payment fraud prevention solution powered by the latter’s Falcon Fraud Manager. The joint offering would leverage both firms’ artificial intelligence (AI) and machine learning (ML) technology to help banks and other payment service providers in North America protect their customers from fraud in the growing world of instant digital payments.

While real-time payments have ushered in a new era of speed and convenience, they have also opened the door for scammers. The Cognizant and FICO offering would tackle this challenge by providing real-time fraud prevention with a seamless integration of the real-time payments rails. The offering is expected to enable the detection and blocking of fraudulent transactions with greater accuracy, minimising losses, and creating a secure and seamless consumer experience.

For banks of all sizes, the proposed cloud-based solution can be implemented on a pay-per-use or licensing basis. Additionally, the proposed solution will handle complex compliance requirements and integration tasks, allowing businesses to focus on their core operations.

 

Acre Capital export finance fund snags US$100m

Acre Impact Capital, a private-debt impact investment manager, has announced the first closing of its Export Finance Fund I, with commitments of approximately US$100m, with a target size of US$300m.

The Fund has attracted a diverse group of investors including institutional investors, major development finance institutions (DFIs), family offices and impact-first investors such as Trimtab Impact and Ceniarth. DFIs include the European Investment Bank and FSD Africa Investments. The Fund has also secured significant commitments from several African investors, reflecting the attractive risk-return profile and expected impact of the strategy.

The fund leverages the transaction facilitation role of export credit agencies (ECAs) for impact. Export finance delivers long-term debt financing guaranteed by official ECAs, allowing project sponsors to significantly reduce the cost of debt by obtaining attractive funding on ECA-backed financing and extending tenors up to 22 years. In doing so, ECAs significantly enhance project affordability and crowd-in private capital.

The fund addresses a financing gap for African climate-aligned infrastructure. While commercial banks typically fund the tranche guaranteed by an ECA (worth 85% of the project value), funding for the remaining 15% commercial debt tranche has been increasingly scarce. By providing specialist funding for this tranche, the fund should unlock transactions and mobilise US$5.6 of private sector capital for each dollar invested.

 

U.S. Faster Payments Council releases QR code report 

The U.S. Faster Payments Council (FPC) has released a report called ‘How QR Codes Address ‘the Last Mile’ Adoption of Faster Payments at the Point-of-Sale’. Authored by the FPC QR Code Interface Work Group, this study provides insights into the role of QR codes in accelerating faster payments adoption, particularly at the point-of-sale.

“What struck me about our work is that while we started with a relatively narrow question, we found that answering it meant we needed to explore several domains,” said Scott Green, Manager, Product Innovation at SHAZAM and FPC QR Code Interface Work Group Chair. “During the process, we benefited from the diverse backgrounds of our work group team members, who came from many different perspectives, roles, and regions. While we identified challenges for the US to achieve widespread adoption of QR code for payments, we were able to frame questions around them that will influence our continued work.”

The report offers an analysis of QR code adoption, focusing on five critical factors:

• Oversight: A single QR code standard with robust oversight is essential for promoting interoperability and consumer confidence, facilitating QR code usage across different payment networks and devices.
• Payment schemes supported: QR codes should support various payment schemes, including open-loop and closed-loop, to provide consumers with greater choice and flexibility.
• Functionality: Beyond retail purchases, QR codes must support a range of use cases such as bill payments and person-to-person transfers, enhancing versatility and appeal.
• Usability: Ensuring QR codes are easy to use for both consumers and merchants is crucial for widespread adoption, including factors like size, placement, and scanning process.
• Security: QR code payments must be secure from fraud and other risks, requiring robust encryption, authentication methods, and oversight.

The report delves into international and US payment solutions using QR codes, exploring key market drivers for implementation. It highlights successful QR code implementations from around the globe, identifying commonalities and best practices for QR code adoption. The report also addresses challenges and opportunities for QR code adoption in the US.