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Oversight of digital lending application services – Industry roundup: 11 August

Thunes' expansion into Saudi Arabia brings the nation closer to achieving its Vision 2030

Thunes, a global cross-border payments company, has plans to expand its services in the Middle East and North Africa (MENA) region by opening an office in Saudi Arabia and by appointing Country Head Ahmad Yaacoub. Reports also indicate that Thunes is in the process of forming alliances with local money transfer operators, e-wallet service providers and banks.

The digital payments market in Saudi Arabia is said to be rapidly evolving in order to stay abreast of Saudi Arabia's "Vision 2030", which has as one of its goals the increase of cashless transactions to 70% by 2025. Thunes aims to become a part of their Vision 2030 initiative by collaborating with local partners and enabling instant borderless payments for their retail and business customers globally.

According to reports, Ahmad Yaacoub has prior expertise in the mobile payments and e-commerce industries. He previously worked for, an Amazon company, where he oversaw business development and commercial strategy for the market, and Tiqmo, a Saudi Arabian mobile payment service provider. Simon Nelson, SVP for MENA, Thunes, commented that the country is a thriving economy with a rapidly developing digital infrastructure and an emerging financial technology landscape focusing on increasing global access to financial and payment services.

Reports indicate that Saudi Arabia's economic expansion in Q1 2022 was its fastest rate during the last decade. This has been attributed to higher oil prices and business reforms.

Simultaneously, considerable changes have been sought to revolutionize the digital economy of the region. Government initiatives that support digital transformation, such as Saudi Arabia's "Vision 2030", the UAE's "Projects of the 50", and Egypt's "Digital Egypt", have reportedly increased the number of fintechs and mobile payment players in the region, thereby expanding access to digital financial tools.

India foregoes the US dollar in trades with Russia

New Delhi is using the Chinese yuan and Emirati dirham to pay for coal from sanctioned Russia, as stated by recent reports. India's imports of Russian coal rose significantly last month, with the South Asian country switching to non-dollar payments to secure deals. Moscow is avoiding dollar transactions in the face of US sanctions.

Russia became India's third-largest coal supplier in July 2022, with imports increasing by more than a fifth to a record 2.06 million tons over the prior month. Indian buyers reportedly paid for at least 742,000 tons of Russian coal in June 2022 using currencies other than the US dollar, accounting for 44% of the 1.7 million tons of Russian imports in the same month.  Additionally, Indian steelmakers and cement manufacturers purchased Russian coal in recent weeks using the UAE dirham, Hong Kong dollar, Chinese yuan and euro.

In July 2022, the Chinese yuan accounted for 31% of non-dollar payments for Russian coal, while the Hong Kong dollar accounted for 28%. According to trade data, the euro accounted for less than a quarter of the total, with the Emirati dirham accounting for roughly one-sixth.

The Reserve Bank of India approved payments for commodities in Indian rupees last month, which New Delhi anticipates will increase trade relations with Russia. The proportion of non-dollar transactions for Russian coal is expected to rise as banks and other parties look for ways to protect themselves from further sanctions tightening, stated reports.

UK establishes strategic working group for development of open banking

The Joint Regulatory Oversight Committee (JROC) is a strategic working group (SWG) taskforce now expected to run the long-term regulatory framework to advance the development for open banking and open finance, succeeding the Competition Markets Authority (CMA), which convened the taskforce and serves on the Committee alongside the Treasury. The Open Banking Implementation Entity (OBIE) will be expected to provide a more governmental approach, such as administrative support and diversified funding for the SWG. JROC looks to oversee OBIE’s transition to a future entity.

Bryan Zhang, co-founder and executive director of the Cambridge Centre for Alternative Finance at the University of Cambridge Judge Business School, has been appointed chair of the strategic working group by the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) to assist with the oversight of open banking. Other industry representatives, subject matter experts and stakeholders, such as consumers and businesses, are expected to be represented. Reports also indicate that the FCA and PSR have also given the OBIE the role of assisting the working group’s establishment by securing the required funding from its current transition budget.

As the OBIE prepares to transition to a new state, Charlotte Crosswell, the head of the OBIE, commented that it will be crucial for them to collaborate cloely with JROC to define and deliver a future entity that not only complies with the ongoing requirements of the CMA order but also assists with the priorities outlined in the Joint Regulatory Statement.

Cogo’s carbon tracking tools proving successful for NatWest

NatWest Group reported their first half of the fiscal year 2022 results, noting that 300,000 NatWest customers have currently accessed their carbon footprint via Cogo’s carbon tracking capabilities on the NatWest banking app.

With hints and recommendations conveyed through the app, the carbon footprint feature shows customers the carbon impact of their day-to-day spending decisions and encourages them to choose the greener option. Additionally, it is said to enable users to also keep track of their commitments and changes in behaviour.

Emma Kisby, EMEA CEO, Cogo, commented that their early pilot with NatWest discovered that the average user saved approximately 11kg of CO2 emissions per month. Furthermore, Kisby added that it would save more than one billion kilograms of CO2 emissions per year (equivalent to planting 17 million trees) if this change in behaviour is replicated among NatWest's eight million mobile app users.

David Lindberg, CEO of retail banking, NatWest, stated that using Cogo's expertise in carbon tracking in the NatWest app is a critical “first step in making it easy for everyone to live and spend in a greener way - using the power of their money to influence change.” Because of the success of its new financial services partnership model, Cogo expects to have three million banking customers using its carbon management features by the end of 2022.

ISDA releases survey results on increased clearing in the US Treasury Market

The International Swaps and Derivatives Association, Inc. (ISDA) has released the findings of a research study on the US Treasury market, which provides perspectives on the potential benefits and drawbacks of increased clearing of cash Treasury securities and repos.

The study, pursuant to policymakers’ and market participants’ discussions and reactions, includes the advantages of further clearing of US Treasury securities as well as determining the market’s resiliency during adverse shocks. One recommendation from the Group of 30 (G-30) Working Group on Treasury Market Liquidity is the clearing of all Treasury repos and trades in Treasury securities made on electronic interdealer trading platforms. The G-30 also recommended that market players and authorities evaluate the clearing of dealer-to-client cash Treasury deals.

According to the ISDA study, there are many different opinions on whether or not more clearing would significantly strengthen the robustness and effectiveness of cash Treasury securities and repos. Although the majority of respondents were generally in favour of clearing, there was minimal support for wide clearing mandates due to concerns that it might cause certain participants to reduce their activity or leave the market, which could potentially reduce liquidity.

The study indicated that the majority of respondents emphasized the significance of incentives to promote more clearing, such as relief from the supplemental leverage ratio, improved clearing access for clients, better access to direct clearing for businesses that meet applicable membership requirements, and the capacity to post client margin to a central counterparty (CCP).

The survey concluded that there is currently minimal agreement on the impact of increased clearing in the US Treasury market, implying that more research on the costs and benefits is required. Responses were collected from 25 ISDA member and non-member institutions, including primary dealers, principal trading firms, asset managers and CCPs.

RBI to stiffen its oversight of digital lending application services

Following several allegations of fraud against digital lending apps, the Reserve Bank of India released a comprehensive framework that is said to strengthen monitoring and supervise digital lending apps and lenders who use them. The central bank stated that only regulated organizations, such as banks and shadow banks, would be permitted to disburse loans and collect loan repayments.

The central bank stated that they are concerned about data collection. The RBI’s guidelines state that data collected by digital lending apps (DLAs) should be based on the borrower’s specific needs, ensure data integrity and obtain borrowers’ explicit consent. Additionally, it stated that interest rates and other fees must be made transparent to borrowers, and it barred automated credit limit increases without their approval.

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