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Nine in ten CFOs project higher AI budgets in 2024 - Industry roundup: 9 February

Nine in ten CFOs project higher AI budgets in 2024

A vast majority (90%) of CFOs are projecting higher AI budgets in 2024, and none are planning a reduction, according to a recent survey by Gartner. Some 71% of those surveyed plan to boost spending on AI by 10% or more compared to last year. 

“As organisations venture further down the AI path, executives must agree on their ultimate goals for use of this technology,” said Alexander Bant, chief of research in the Gartner Finance practice. “CFOs should complement increased spending on AI with critical C-suite discussions about the organisation’s AI ambition.”

In December 2023, Gartner polled 302 CFOs and senior finance leaders to understand how budgets and spending are changing in 2024. The ‘2024 Budget Priorities for CFOs’ report revealed that technology is at the top of the list for increased budgets in 2024, with 82% of CFOs planning to spend more than last year. A closer look at these fast-growing technology budgets revealed an emphasis on AI. Generative AI plays a significant role in this increase, as 81% of CFOs are projecting to spend more in this area.

“As AI spending increases, CFOs have a unique role to play both in determining how it will impact finance department structure, and - given their holistic understanding of core business value drivers that this technology could put at risk - in establishing proper enterprise-wide governance that balances opportunity and oversight,” added Bant.

To ensure AI funds are spent wisely, CFOs should work with the C-suite to establish an organisation’s vision for the technology. “Establishing an AI vision means working out whether the organisation will use AI to improve existing business or operating models or to go further and create fundamentally new ones,” said Bant. “Moreover, it means deciding whether AI will be an internal operations tool or something facing external customers.”


European Parliament issues 10 seconds rule for instant money transfers

The European Parliament adopted new rules to ensure transferred funds arrive immediately into the bank accounts of retail customers and businesses across the EU. The regulation aims to ensure that retail clients and businesses, especially SMEs, will not have to wait for their money and enhance the safety of transfers. Banks and other payment service providers (PSPs) must ensure that credit transfers are affordable and immediately processed. The text, already agreed with EU member states, updates the current Single Euro Payments Area (SEPA) rules.

An instant credit transfer is supposed to be executed regardless of the day or hour, and the money must arrive into the recipient’s account within ten seconds. The payer should also be informed within ten seconds whether the funds transferred have been made available to the intended recipient. Member states whose currency is not the euro will also have to apply the rules, where the accounts already offer regular transactions in euro after a more extended transition period. There will be a special derogation from making the payment within ten seconds for such accounts outside business hours, given possible concerns about access to liquidity in euros.

To guarantee safety, PSPs should have robust and up-to-date fraud detection and prevention measures in place to avoid credit transfers going into the wrong account due to fraud or error. To this end, PSPs operating in the EU should immediately, and without any additional charges or fees, provide a service to verify the recipient's identity. As a further safeguard against fraud, PSPs should allow their clients to set a maximum amount for instant credit transfers in euros, which could be easily modified before the next transfer.

If a PSP does not fulfil its fraud prevention duties and this results in financial damage, a client may demand compensation by the service provider, according to the new rules. PSPs offering instant credit transfers should also verify whether any clients are subject to sanctions or other restrictive measures related to money laundering and terrorist financing. Charges applied by a PSP in respect to instant credit transfer transactions in euro cannot be higher than the charges applied to “non- instant” credit transfer transactions in euro.


Deutsche Bank and XTransfer facilitate onshore Thai Baht trade in Thailand

Deutsche Bank has successfully executed B2B cross-border trade payment platform XTransfer’s first onshore Thai Baht (THB) trade in Thailand, leveraging the latest version of the Bank of Thailand's Non-Resident Qualified Company (NRQC) rules.

Under the NRQC programme, XTransfer can now receive local payments from Thai buyers on behalf of export companies. In a seamless process facilitated by Deutsche Bank, THB payments are converted to HKD and RMB before being transferred to XTransfer’s international accounts. From there, XTransfer can distribute the funds to its export clients, ensuring smooth cross-border transactions.

Deutsche Bank helped XTransfer (as a non-Thai company) receive approval for NRQC status through its Bangkok branch. Benefits include a higher THB limit for accounts (more than THB200m) and shorter FX settlement time.


Pagaya closes five-year US$280m credit facility 

Pagaya Technologies, a global technology company delivering AI-driven product solutions for the financial ecosystem, has announced the closing of a credit facility with participation from funds and accounts managed by BlackRock U.S. Private Capital, UBS O’Connor, JPMorgan Chase, Valley Bank, and Israel Discount Bank.

The facility, consisting of a US$255m term loan and a US$25m million revolver, will provide the capital and liquidity needed to support the company’s future growth and extend its corporate debt maturity to 2029. 

Proceeds from the facility will be used to pay off outstanding borrowings from the company's previous facility, invest in product innovation, and grow its network with both existing and new lending and investor partners. Jefferies served as the sole arranger on the transaction.

“The capital commitment demonstrates our ability to access new and diverse capital sources, bolstering our financial flexibility and fortifying our business as we consistently pursue further scale,” commented Evangelos Perros, Interim CFO of Pagaya.


ICD sees annual growth hit 37% in 2023

ICD, a provider of institutional investment technology, closed 2023 with money market fund (MMF) assets on ICD Portal eclipsing US$250bn. The company says its 37% year-over-year increase outpaced the market’s 18% increase in institutional MMF assets tracked over the same period by the Investment Company Institute (ICI).

The platform's community of over 500 invested clients increased 17% in 2023 versus 2022, while ICD maintained a 99% client retention rate. In October last year, Crane Data ranked ICD the largest US investment portal by assets for institutional money market fund investments.

ICD also launched its AI-driven ICD Portfolio Analytics solution in 2023 to automate the process of creating a comprehensive view of a company’s entire investment portfolio for reporting and managing portfolio risk, including counterparty risk.

“ICD Portfolio Analytics incorporates our underlying fund holdings with other investment positions, making it possible to see our true exposures across all of our investments,” said Bill Lundeen, Treasurer at Indivior. “This is invaluable given the heightened focus on exposures due to the 2023 bank failures.”


UK SME recession concerns drop by a third in a year 

SME anxieties regarding a potential recession have eased by a third (32%) since Q4 2022, though inflation concerns remain, according to iwoca’s Q4 2023 SME Expert Index. Under half (49%) of SME finance brokers surveyed report their SME clients having any recession fears––a significant drop compared to 73% in Q4 2022. Nonetheless, economic fears persist: inflation remains disquieting to SMEs going into 2024, with nearly half (45%) of brokers suggesting it is SMEs’ primary concern, compared to just a third (32%) in Q4 2022. 

As concerns around a recession fall, over a quarter (26%) of SME finance experts say that small businesses are mainly seeking higher-value loans of over £100,000 - up from 15% the previous quarter -  suggesting the UK’s enterprises may be tending to growth ambitions. Demand for smaller loans is waning in line with SMEs’ focus on larger loans, indicating growing demand for longer-term funding instead of smaller loans to ease short-term cash flow concerns. In Q4, just two in five (40%) brokers said loans of up to £50,000 were SMEs’ most popular choice, an 8pp drop since Q3.

Despite growing demand for high-value finance, SME financing options at traditional banks are being scaled back - three in four (77%) brokers note that high street lenders are reducing their appetite for funding SMEs. In response to the tightening lending environment, almost three-quarters (71%) of brokers now submit most of their SME clients’ loan applications to alternative lenders. 


MSCI solution centralises private market climate and sustainability disclosures

MSCI, a provider of mission-critical decision support tools and services for the global investment community, has launched its Private Company Data Connect. This centralised hub provides general partners (GPs) access to private companies’ sustainability and climate data and disclosures.

The hub is designed to drive transparency and a common language for investors in private markets considering companies’ sustainability and climate data by enabling GPs to execute due diligence and risk management processes, respond to client and regulatory sustainability reporting requirements, and develop sustainable value creation strategies, such as engagement and target-setting for their portfolio companies.

Companies retain ownership of their self-reported data and can directly approve or decline data requests from GPs and lenders on the platform. MSCI Private Company Data Connect also allows companies to search for institutions and market participants that are active on the hub to provide access to their data proactively.


Sabre and Revolut go virtual for B2B travel agency payments

Sabre Corporation, a software and technology provider for the global travel industry, has partnered with Revolut to improve the B2B payment process for travel agencies. The two tech companies were able to onboard over 40 customers in less than a year. Revolut’s virtual cards are now generated within the Sabre Virtual Payments platform, allowing customers to pay airlines, hotels and other travel suppliers with enhanced flexibility and security. This enables travel agencies using Sabre Virtual Payments to enjoy more streamlined and agile practices, personalisation and speed to market.

Some of the pain points this partnership is addressing for travel agencies that use Sabre’s virtual payments offering include:

  • Rapid onboarding process that was reduced from months to just days, allowing customers to start transacting and paying suppliers swiftly and efficiently.
  • Seamless integration of a flexible and secure virtual card technology into their existing workflows.
  • Access to a suite of commercial card products that improve payment acceptance rates.
  • Preferential rates in converting one country’s currency into another and real-time insights through streamlined FX management, providing them with transparency and visibility across international payments.
  • Allow the agencies to provide a better experience for travel suppliers, who now can get paid on time in their preferred currency, using negotiated payment acceptance rates.

Through its platform, Sabre Virtual Payments facilitates a single integration point between travel agencies, Revolut and various booking tools. It automates payment reconciliation and delivers payment data reporting.


FIS open banking drive adds more data networks

FIS has announced new agreements to make secure open banking more accessible to its clients and their customers. The agreements are in place with data networks including Akoya, Envestnet | Yodlee, MX and Plaid to integrate into FIS’ Open Access platform, an open banking solution, that enables consumers to securely and seamlessly share their financial information with a greater number of third-party financial apps and services of their choice.

The shift to open banking is accelerating, and last year, the Consumer Financial Protection Bureau (CFPB) proposed a Personal Financial Data Rights rule establishing consistent industry standards for consumer data access and protection.

FIS’ Open Access platform lets consumers access and share their financial data in a secure and controlled manner. It provides the flexibility of working with third-party financial services app providers, controlling what information is shared and who it is shared with while giving the ability to revoke access at any time. 

The solution provides banks with visibility and reporting on where their customers share financial data, which fintechs they interact with, and how frequently. The platform also allows for secure and reliable data sharing through Financial Data Exchange (FDX) standardised APIs.


Westpac upgrades invoice financing with Dancerace

Westpac has chosen Dancerace to upgrade its invoice finance system, which the bank says aligns with its commitment to simplify operations. Dancerace technology should enable Westpac to provide its customers with a seamless invoice finance experience, making it easier for Australian businesses with unpaid invoices to receive their cash faster. 

Westpac will replace its current systems with Dancerace’s c3 Backoffice Control, f3 Client Onboarding and e3 Client Access systems. The upgrade is designed to enable Westpac to simplify and streamline its entire lending process – from application to approval and settlement – while introducing automation to improve how the bank’s customers manage their finance facilities. 

The deal is a validation of Dancerace’s vision for lending technology, according to Alexis Barresi, the firm’s Head of APAC Operations: “Westpac understands the value that Dancerace can offer today and the power of what we’re building for tomorrow. It’s this appetite for innovation that sets the Australian invoice finance sector apart, and we’re happy to be working with a provider like Westpac to help drive change.”

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