Lack of digital skills among CFOs a pivotal obstacle to autonomous finance

According to a report from Gartner, a lack of digital skills in senior finance leaders will drive half of unwanted staff turnover by 2026. CFOs must accelerate their digital knowledge and better engage with digital-savvy staff to mitigate turnover and disruption.

“CFOs are preparing their teams for a time when finance will operate autonomously, driven by technologies such as AI, yet not many finance leaders are learning digital skills themselves,” said Marco Steecker, research director in Gartner’s Finance practice. “An already-wide digital skills gap between management and their reports will increase in coming years if unaddressed, and digital-laggard CFOs will increasingly struggle to manage staff who are delivering their digital initiatives.”

Gartner’s analysis of talent’s role in delivering an autonomous finance function is partly driven by the changing nature of finance staff. Experts from the research and consultancy firm predict that by 2026, AI and automation will result in 50% of all new employees hired by top-performing corporate finance functions having backgrounds other than finance or accounting. Digitally savvy associates rate people management as one of the most critical factors in choosing where they work.

Even in today’s finance function, 18% of finance staff demonstrate digital competency, compared to 11% of their managers. As demand grows for tech skills and traditional accounting backgrounds wane, this knowledge gap will also grow unless senior management, including CFOs, step up their digital education efforts.

“Our research shows that CFOs who directly champion AI and other digital efforts significantly impact the success of those programs compared to those who take a passive role,” added Steecker. “CFOs who develop greater digital literacy will be able to engage with their most vital talent and mitigate unwanted attrition that could derail their transformation efforts.”

Steecker recommends that CFOs prepare themselves and their senior finance managers for the increasing demands of digital literacy through the following steps:

1. Revisit and update finance manager competency frameworks to prioritise digital competencies.
2. Establish and participate in wider organisational digital upskilling efforts and upskilling explicitly designed for the finance function.
3. Pursue reverse-mentoring opportunities with digitally literate staff.

“The most successful digital upskilling programmes we see are the ones where the CFO is personally visible and involved in the coursework,” concluded Steecker. “This goes beyond just a powerful signalling effect and provides leaders with the fluency to speak the language of their key talent.”

 

MMFs gain from fear of smaller banks

The recent failures of Silicon Valley Bank, Signature Bank, and Silvergate Bank have seen massive deposit outflows in the banking system, especially from small and midsize regional banks, Moody’s Analytics’ Weekly Market Outlook from 30 March noted. 

Estimates suggest that as much as US$550bn in deposits have moved to larger, safer banks or money market funds (MMFs). Inflows to MMFs account for an extraordinary US$250bn of the total money moves over the past two weeks, primarily driven by investors piling into government funds that concentrate on short-maturity Treasury securities. Excluding when the economy shut down during the COVID-19 pandemic, this marks the most significant two-week increase in the data back to 2007.

Significant flows into MMFs began to pick up in November after the policy rate breached 3%, and funds - which invest in short-term securities whose yield closely tracks the policy rate - were finally able to offer would-be investors returns that would turn bank depositors’ heads. Since then, MMF returns have approached 4.5% as about US$150bn has piled into retail prime funds and US$350bn into government funds, including the US$250bn over the past two weeks. That is turning up the heat on banks to offer more competitive interest rates on deposits, which will eat into their margins.

Prime funds, which invest in riskier and less liquid corporate securities, have seen the most growth in the retail segment, with institutional funds seeing only a trickle of inflows. The Moody’s report notes that is probably a good thing, as those funds experienced investor runs during the financial crisis and the early days of the pandemic - despite additional regulations in 2017 that shrank their footprint and decreased their risk. Retail investors tend to be less prone to a mass exodus from funds. However, the research firm comments that it has seen a few billion dollars drain out of retail prime over the past few weeks as financial system fears ratcheted up, suggesting the vehicles may not be entirely immune to runs.

In recent years, money funds have benefited from access to the Federal Reserve’s reverse repo facility intended to keep the policy rate above the lower floor of the Fed’s target range. The facility allows funds to park cash with the Fed - typically overnight - and receive collateral in the form of Treasury securities and an overnight interest rate just a little under the federal funds rate. The outstanding transactions in the reverse repo facility have grown from almost nothing in early 2021 to around US$2 trillion in recent months, driven mainly by MMF holdings. Access to the facility provides them a cheap way of managing their liquidity and enhances their ability to compete with bank deposits. It also parks a large chunk of liquidity with the Fed that would otherwise reside in the banking system. At the margins, this adds to the pressure on bank deposits.

 

Singapore and Malaysia launch cross-border QR code payments connectivity

The Monetary Authority of Singapore (MAS) and Bank Negara Malaysia (BNM) have launched a cross-border QR code payment linkage between Singapore and Malaysia. This payment linkage will allow customers of participating financial institutions to make retail payments by scanning NETS QR and DuitNow QR codes. It will support in-person payments through the scanning of physical QR codes displayed by merchants and online cross-border e-commerce transactions. 

The NETS-DuitNow QR code payment linkage is a critical step in the ongoing collaboration between Singapore and Malaysia to enhance cross-border payments connectivity. With pre-pandemic annual traffic between the two countries averaging 12 million visitors, the payment linkage will provide merchants and consumers with a more seamless and efficient means to make and receive payments. 

This cross-border QR code payment linkage is made possible through the collaboration of various industry players from both countries, including Network for Electronic Transfers (Singapore) Pte. Ltd (NETS), the Association of Banks in Singapore, Payments Network Malaysia Sdn. Bhd. (PayNet), and participating financial institutions from both countries.

In the next phase, MAS and BNM plan to expand the payment linkage to enable cross-border account-to-account fund transfers and remittances. This will allow users to make real-time fund transfers between Singapore and Malaysia using just the recipient’s mobile phone number via PayNow and DuitNow. This service is expected to go live by the end of 2023.

“These linkages will help boost cross-border commerce and enable our merchants, especially small businesses to tap on a wider pool of consumers,” commented Ravi Menon, Managing Director of the Monetary Authority of Singapore. “This QR code linkage between Singapore and Malaysia is an important milestone in ASEAN’s journey towards seamless regional payments connectivity.”

Proactis and Finexion look to optimise AP cash flow

Proactis, a source-to-pay software solution provider for mid-market organisations, and Finexio, a digital accounts payable (AP) payments-as-a-service company, have announced a strategic partnership that expands Proactis’ software platform offerings to include an AP payment solution that controls and optimises AP spend and cash flow while eliminating manual processes from business-to-business (B2B) payments. 

Enabled by Finexio's B2B payment technology, the payments solution will be added to the Proactis suite of solutions for mid-market organisations. The pair say the tool’s goal is to help companies optimise spend and see their supply chains reach full potential. Proactis Rego Payments eliminates fraud-prone paper cheques, manual processes and lower payment costs. 

Concerning the payment lifecycle, Finexio's integrated payment solution also offers Proactis customers supplier enablement, fraud and risk detection, payment-specific strategic account relationship management, payment operations and settlement support, and payments and banking data security capabilities.

“Mid-market organisations are facing many of the same AP challenges as larger enterprises,” notes Michael Ereli, US Managing Director at Proactis. “Providing an easy-to-implement, secure, and reliable Payments-as-a-Service offering differentiates us from other mid-market procurement providers. Extending our AP automation offering to include payments to suppliers allows our customers to enjoy the same cost savings which much larger entities are able to enjoy through traditional banking relationships.”

 

Swift board completes leadership transition with a new chair and deputy chair

The Swift board of directors has announced new leadership, with the election of J.P. Morgan’s Graeme Munro as non-Executive Chair and Samantha Emery of Lloyds Banking Group as non-Executive Deputy Chair.  

Munro is a Swift board director nominated by the US Swift community, and Emery is a board director nominated by the UK Swift community. The appointments complete a transition initiated by the retirement of the previous Board Chair in December.

Munro brings extensive experience in technology, operations and risk management across payments, securities, FX and trade finance developed over a 30-year career at J. P. Morgan. Currently, he serves as Managing Director and Chief Controls Manager for its Corporate & Investment Bank, and previously held senior leadership roles in both the bank’s derivatives and payments operations, where he oversaw the execution of over US$10 trillion in transactions daily. He has contributed to and led industry bodies convened through the US Federal Reserve, Bank of England and Association of Financial Markets in Europe.

Emery will serve alongside Munro as the Swift Board’s Deputy Chair. Currently Director of Payments Industry and Development at Lloyds Banking Group, she has vast experience leading payment strategy and digital innovation. As well as strategy, her current role oversees industry engagement, settlement and scheme management.  She is a respected change agent with deep expertise in regulatory frameworks, corporate governance and risk management. She has previously led payments supervision and fintech strategy portfolios at the UK’s Financial Conduct Authority. Emery is a prominent industry thought leader in the UK market and a strong advocate for diversity, equity and inclusion across the financial sector.

 

Increased running costs dominate UK SME concerns

Small business lender iwoca’s latest SME Expert Index data – based on UK finance brokers who submit over 2,000 SME finance applications a month – reveals a third of experts (32%) report increased business running costs as small businesses’ top concern. The recent Budget statement from the UK Chancellor Jeremy Hunt contained several measures which touched on these worries.

Also featured in the top concerns list were higher interest rates, and having to close the business (according to over 1 in 10 brokers respectively).

Top SME concerns:

1. Increased business running costs, 32%

2. Recession, 12%

(=)3. Having to close their business, 11%

(=)3. Higher interest rates, 11%

4. Access to finance, 9%

5. Ability to hire or retain staff, 7%

While inflation is set to fall over the course of the year, SME owners may see other costs rise as Corporation Tax increases to 25%. 

Fifth on the list of concerns was the ability to hire and retain staff (according to 7% of brokers). The Chancellor introduced a raft of measures encouraging workforce participation in the Budget, through expanded access to childcare and skills training for over-50s. Although this could be a concern for some SME owners (and is a priority for the Government), it doesn’t seem to be as much of a priority for the segment of business owners when surveyed for iwoca’s Q4 SME Expert Index. 

Colin Goldstein, Commercial Growth Director at iwoca, said: “Small and medium-sized businesses across the country are searching for financial support as they endure uncertainty. Whilst forecasts tell a more positive than expected story for the UK economy this year, the reality on the ground for many SMEs will still be difficult, characterised by high costs and reduced consumer spending. Access to finance during this period becomes even more vital to keep them on track.”

 

Digital supply chain provider scores US$5m equity funding 

Finverity, a digital ecosystem for trade and supply chain finance, today announces it has raised US$5m in a heavily oversubscribed equity funding round from new and current investors. 

New investors include London-based fintech specialist Outward, Amsterdam-based Acrobator Ventures, and US-based s16vc founders fund with follow-on investments from MENA-based B&Y Venture Partners and a range of ultra-high-net-worth individuals. The funding round comes on the back of 15 times revenue growth in 2022 across the Middle East and Africa and the recent expansion to Eastern Europe.

Founded in 2017 by Viacheslav Oganezov and Alex Fenechiu, Finverity’s mission is to bridge the $1.7 trillion global trade finance gap by channelling capital to where it’s most needed.

Finverity has a dual offering:

• Funding Platform – this brings together corporates seeking working capital and funders looking to deploy capital into quality mid-market assets on a single platform. The platform provides a suite of services and technology to enable trade and supply chain finance deals to be executed seamlessly and at scale.
• Software-as-a-Service solution – this technology system for banks and non-banking financial institutions (NBFIs) aims to completely revolutionise their trade finance and working capital operations, client experience and risk capabilities.

The funding raised in this round will be used to immediately increase the headcount from the current 40 to 60 employees to meet rapidly growing demand for Finverity’s solutions and complete office openings in Dubai, Poland and Kenya.