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Japan officials intervene to support the yen – Industry roundup: 23 September

Liquidity and business disruption risks significantly impact Indian companies during the slowing economy

The two major risks for Indian companies in the upcoming months are business disruption and cash flow/liquidity risks, according to a recent report. Aon, an international professional services firm, reported that companies are less equipped for reputation risks and that 83.3% of businesses in India anticipate an increase in the overall cost of insurance risks.

According to Jonathan Pipe, CEO, Aon India, businesses in India are developing regular insurance assessments and proactive planning to reduce insurable risks.

Pipe added that they have seen “a significant increase in the use of captives to transfer risks as well as greater support of external experts in assessing all possible business risks.”

Companies are reportedly allocating more funds to manage and mitigate potential risks, such as accelerated rates of change in market factors, economic slowdown and business interruption. Most risks, Pipe claims, can be effectively managed with proper management and professional guidance.

Businesses are reportedly changing their emphasis from event-based to impact-based risk assessments. Business disruptions were considered to be a linear risk in the past; however, the pandemic and geopolitical risks have now shown how impacts can spread across numerous industries, nations and businesses synchronously, reports added.

Aon considers businesses to be the least prepared for reputation risks, as none of those that were polled had any plans for risk management or business continuity in that area. According to the report, the highest risk that resulted in losses was economic slowdown/slow recovery, which was referenced by approximately half of the businesses in India.

Digitizing trade finance operations via J.P. Morgan and Cleareye.ai alliance

J.P. Morgan has collaborated with Cleareye.ai, an advanced artificial intelligence and machine learning platform, to introduce ClearTrade, a trade financing digitization solution, for financial institutions. The technology is said to integrate into J.P. Morgan's Trade Processing System, which has already been available in the Asia-Pacific (APAC) region and is expected to launch globally in the near future.

The ClearTrade platform is expected to automate the time-consuming due diligence process associated with trade finance transactions and the plethora of paper documents that are still widely used in the sector today. The trade finance sector is reportedly undergoing digital transformation to assist the financial industry.

Reports indicate that J.P. Morgan, through this initiative, will be able to make greater use of document digitization, utilizing robust image processing solutions that can extract, validate and correctly classify unstructured data.

The productivity of trade finance operations is expected to increase by up to 70% with the ClearTrade solution. Additionally, reports suggest that the solution has the capability to increase trade velocity by 9x (with a substantial decrease in document checking errors), raise accuracy standards by more than 85%, and reduce end-to-end processing time by up to 80%.

According to Stuart Roberts, J.P. Morgan's Global Head of Trade & Working Capital, banks have struggled to resolve the paper and manual data entry in trade finance for many years. This platform would assist in accelerating and future-proofing clients' businesses, while reinvesting savings towards improving controls and risk management, added Roberts.

European fintechs create the Open Finance Association

The Open Finance Association (OFA) is a newly formed group of fintechs seeking to further broaden the financial data and payments landscape for businesses via API technology.

Secure, open APIs, according to OFA, are essential for competition and innovation in this market. OFA plans to unite top fintechs to help accelerate the transition to open finance across Europe in this effort. Nilixa Devlukia, the Chair for the OFA, commented that the financial industry, policymakers and regulators must work together to make open finance a reality. Additionally, OFA aims to foster sustainable and resilient fintech ecosystems through an API-focused agenda in both payments and data.

The following are OFA’s priorities:

  • Enable businesses (and consumers) to access and use their data across all their financial accounts via trusted third-party providers.
  • Create and promote the adoption of a competitive and efficient immediate payment method based on open payments.
  • Foster the development of a thriving open finance ecosystem by balancing requirements and incentives for all participants.

OFA is based in both Brussels and London, where it is said to contribute to important open finance policy developments in both jurisdictions. Yapily, TrueLayer, Plaid, Token, Volt, Worldline, Worldpay from FIS, GoCardless, Crezco, FinAPI, and EML Nuapay are currently members of the OFA.

Global BaaS solution with Visa Direct integration via Finastra and Visa alliance

Finastra and Visa officially confirmed a banking-as-a-service (BaaS) partnership to implement Visa Direct, which enables push-to-account options for connectivity to more than two billion accounts, and to collaborate on the development of new capabilities for its Payments Hub solutions. With the new configuration, bank clients globally can expect to have access to cross-border payout capabilities for small and medium-sized businesses, as well as for individuals, in a variety of currencies and nations. According to Barry Rodrigues, EVP Payments Business Unit, Finastra, this BaaS collaboration will give bank clients more options on transacting cross-border payments by largely integrating Visa products into banks.

Reports indicate that implementing a specially designed cross-border payment solution in the current climate may be costly and time-consuming. Banks can expect to avoid these challenges with the Visa network integration through Finastra's FusionFabric.cloud open development platform that is available on premises or in the cloud as SaaS. Additionally, they can expect to provide their clients with transparent, quick and affordable payments. Ruben Salazar Genovez, SVP, Global Head, Visa Direct, commented that innovative developments in cross-border funds movement are rapidly increasing, placing more pressure on banks to provide customers with fast, efficient and seamless systems.

The UK proposes legislation to seize, freeze and recover cryptocurrency

The UK government introduced legislation to simplify the process for regulatory agencies to seize, freeze and recover crypto assets that are used for illicit purposes such as money laundering and cybercrime, according to reports.

The legislation, a 250-page Economic Crime and Corporate Transparency document, was reportedly introduced by the Home Office, Department for Business, Energy and Industrial Strategy, Serious Fraud Office and Treasury. It is said to include provisions for more than just cryptocurrency, with the next analysis expected on 13 October.

Reports indicate that, for years, domestic and international malicious actors have used the UK company structures to launder the proceeds of their crimes and corruption, and they are now increasingly turning to cryptocurrencies for this purpose.

According to the BBC, London's Metropolitan Police seized a record 180 million British pounds (US $200 million) of cryptocurrency linked to international money laundering in July of 2021, subsequent to a 114-million-pound seizure in June 2021.

The new legislation is reportedly intended to build on the previous Economic Crime Transparency and Enforcement Act, which assisted regulators in imposing sanctions on Russia and freezing relevant assets in the nation. However, regulators have become more concerned that cryptocurrencies are being used by Russia to avoid sanctions imposed during the conflict.

In efforts to follow other countries’ regulatory actions, the Treasury reportedly updated their guidelines earlier this month to require crypto exchanges and wallet providers to report any suspected sanction violations. The United States and the European Union also clarified that their sanction rules apply to cryptocurrency.

Japan officials intervene to support the yen, first time since 1998

The Bank of Japan intervened in the market by selling USD/JPY to the market at approximately the 145.70 level for the first time in 24 years, attempting to strengthen the value of its currency by buying yen and selling US dollars. According to the Ministry of Finance, intervention is now reported bimonthly with the next data release scheduled for 30 September. Masato Kanda, Vice Finance Minister, Japan’s International Affairs, commented that the government has recently taken definitive measures in response to its concerns regarding the excessive volatility.

Reports indicate that the yen had previously fallen to its lowest level since 1998 after the Federal Reserve aggressively raised interest rates, while the Bank of Japan maintained its rates negative in order to support Japan's fragile economic recovery. Furthermore, the yen has reportedly lost about 20% of its value against the US dollar this year.

The central bank reportedly kept interest rates at minus 0.1%, subsequent to the Fed raising its US benchmark rates between 3% and 3.25% for the third consecutive time. The yen initially fell to 145 to the US dollar as a result. However, following the intervention, those losses were reportedly reversed, and the yen was last trading at around 141, up 2%. Shunichi Suzuki, Finance Minister of Japan, stated that the currency intervention had some effect and that Japan would not tolerate excessive market volatility. It is unknown whether the intervention was supported by the US, but Suzuki stated that Japan was in communication with the countries involved.

Deutsche Bank to designate risk score to merchant transactions to combat fraud

Cybersource, a Visa subsidiary, has developed artificial intelligence technology that Deutsche Bank plans to use to rate the likelihood of fraud for specific transactions from merchant customers.

Using risk models and global intelligence from billions of data points on the Visa network, the "Decision Manager" application is said to enable the acceleration of legitimate transactions and the blocking of transactions that may be fraudulent. The service is intended for small, medium-sized and large businesses. According to Denise Burkett-Stus, Head of Cybersource Europe, Decision Manager managed to prevent over US $22 billion in fraudulent transactions globally in 2021.

Cybersource plans to assist Deutsche Bank in resolving the conflict between making payments simple and protecting their clients' businesses. Payment security and convenience integrated with critical insights from risk analysts and a fully tested decision system can provide merchants with a simplified and more effective risk management method through a single source, said reports.

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