Swift, UBS and Chainlink bridge tokenised assets with existing payment systems

Swift, UBS Asset Management, and Chainlink have successfully completed a pilot for settling tokenised fund subscriptions and redemptions using the Swift network. This initiative would enable digital asset transactions to settle with fiat payment systems across more than 11,500 financial institutions across over 200 countries and territories.

Traditional fund operations often face inefficiencies in subscription and redemption processes, including manual interventions, delayed settlements, and a lack of real-time transparency. These inefficiencies lead to increased operational costs, reduced liquidity, and missed investment opportunities across the $63 trillion global mutual fund market. 

The pilot showed how financial institutions can leverage blockchain technology, the Chainlink platform and the Swift network to settle subscriptions and redemptions for tokenised investment fund vehicles, thereby allowing the straight-through-processing of the payment leg without the need for the global adoption of an on-chain form of payment. This helps in the automation of the entire lifecycle of the fund redemption and subscription process.

The pilot builds on work with UBS Asset Management and SBI Digital Markets to create a digital subscription and redemption system for tokenised funds. This initiative is also part of MAS’ Project Guardian, a global cooperation between policy makers and industry players to enhance liquidity and efficiency of financial markets through asset tokenisation. 

The pilot used existing Swift infrastructure which enables end-to-end payment orchestration capabilities to settle fund subscriptions and redemptions. Swift previously demonstrated how its infrastructure can provide a secure, scalable way for financial institutions to connect to multiple types of blockchain, and this latest pilot with Chainlink’s platform orchestrated the necessary interactions between each of the respective actors to fulfil the pre-conditions for which a UBS tokenised investment fund will automatically mint or burn fund tokens for investors.

“For digital assets to be adopted globally, they must seamlessly integrate with both existing payment systems and digital currencies,” said Jonathan Ehrenfeld, Head of Strategy, Swift. “Our work with UBS Asset Management and Chainlink in MAS’ Project Guardian leverages the global Swift network to bridge digital assets with established systems. This initiative aligns with our strategy to provide our community of financial institutions with a secure and scalable way to transact across multiple digital asset classes and currencies, leveraging Swift’s existing infrastructure.”

 

UK services see weaker growth momentum in October

UK service sector output continued to expand in October, supported by another solid upturn in new work, but the rate of growth eased for the second month running. Moreover, at 52.0 in October, down from 52.4 in September, the headline seasonally adjusted S&P Global UK Services PMI Business Activity Index pointed to the slowest increase in output levels since November 2023.

Survey respondents suggested that improving domestic economic conditions had helped to boost overall business activity in October. However, there were reports citing heightened business uncertainty ahead of the Autumn Budget as a factor delaying spending decisions among clients. Some firms also noted that geopolitical tensions had weighed on willingness-to-spend.

Longer sales conversion cycles contributed to a weaker rate of overall new business growth across the service economy in October. The latest increase in total new work was the slowest since June, but still slightly stronger than seen on average in the first half of 2024. Improving order books were linked to resilient business and consumer spending, despite squeezed budgets and fragile confidence.

Export sales bucked the overall slowdown in new business growth. October data indicated a solid rise in new work from abroad, and the rate of expansion accelerated to its fastest since March 2023. Service providers often noted stronger demand from EU clients despite ongoing trade frictions due to Brexit.

Employment remained a relatively weak spot in October. The latest survey data signalled an overall reduction in staffing numbers for the first time since December 2023. The modest fall in workforce levels reflected the non-replacement of voluntary leavers amid budget constraints, efforts to boost productivity, and difficulties finding suitable candidates to fill vacancies.

Higher salary payments meanwhile continued to push up input costs during October. Some firms commented on upward pressure on business expenses due to rising prices paid for technology services, while there were also reports citing lower fuel costs. Overall input cost inflation edged up to a three-month high, but remained much softer than seen in the first half of 2024.

Efforts to pass on rising wages contributed to another robust increase in average prices charged by service sector firms. Moreover, the rate of output price inflation picked up slightly from September's 43-month low.

Just over half of the survey panel (52%) predict an increase in their business activity over the year ahead, while only 11% anticipate a reduction. Optimism nonetheless eased since September and was the lowest for four months.

While service providers typically commented on positive sentiment regarding their sales pipelines and broader market conditions, many also suggested that political uncertainty ahead of the Autumn Budget had dampened business confidence.

Private sector output growth moderates again in October, as the seasonally adjusted S&P Global UK PMI Composite Output Index registered 51.8, down from 52.6 in September and the lowest reading since November 2023. Weaker private sector growth reflected slower rates of expansion in both the manufacturing and service sectors.

October data indicated the least marked rise in total new work for four months, which contributed to a modest decline in employment. The rate of job shedding was nonetheless the fastest since September 2023. Finally, input price inflation eased in October, reflecting much softer cost pressures in the manufacturing sector.

“The wait for clarity on government policy ahead of the Autumn Budget was widely reported to have weighed on business confidence and spending,” commented Tim Moore, Economics Director at S&P Global Market Intelligence. “Broader geopolitical concerns and forthcoming US elections also added to a sense of wait-and-see on business investment decisions in October. At the same time, cost of living pressures remained a constraint on household spending.”

 

Rate cut and election posturing boosts US debt revenue

The global securities finance industry generated $818m in revenue for lenders in October 2024, according to DataLend, the market data service of fintech EquiLend. The figure represents a 9% increase from the $751m generated in October 2023.

Global broker-to-broker activity, where broker-dealers lend and borrow securities from each other, totalled an additional $202m in revenue in October, down 7% year-over-year.

Equity revenue increased globally by a margin of 3% due to a 6% increase in global balances relative to 2023. Despite a lack of deal names or standout ‘specials’, revenue in the US rose 7%, with the healthcare and industrial sectors being the biggest contributors. Equity revenue in EMEA ticked up by 2% as a 13% increase in balances offset a 9% decline in fees year-over-year. In Asia-Pacific, equity revenue was roughly flat. 

As the market has adjusted for the introduction of the rate-cutting cycle in the US, government debt was the standout asset class in October. Global revenue generated by government bonds increased 39% year-over-year largely due to a 22% increase in balances. With the US presidential election looming in October, lending revenue for US-issued sovereign debt was up a massive 59% as both fees and balances climbed relative to 2023.

Corporate debt lending saw moderate annual gains, with revenue increasing 2% globally. Fees for corporate bonds fell 20% year-over-year, but revenue increased due to a 24% jump in balances. 

 

Insurance sector leads Asia’s activity growth in October

Unchanged from that seen in September, activity growth was observed in 13 of the 18 monitored sectors, the latest S&P Global Asia Sector PMI showed. Growth was primarily concentrated in the services sectors, with Insurance coming in as the leading sector for the first time in ten months. The upturn marked the strongest performance recorded in the year-to-date. Banks and Real Estate, the remaining two-sub sectors of the broader Financials category, also noted stronger upticks in activity.

Software & Services, which held the top rank in each month from June through to September, however, saw its position slip in the rankings table, as growth in activity cooled notably to a 12-month low.

The only service sector which failed to record any growth in activity was the Healthcare Services sector, which in fact emerged as the weakest performer among the 18 sectors monitored. A notable and fresh decline in demand trends during October led the sector to reduce activity, resulting in the sharpest contraction since June 2023. This downturn also caused a decrease in the overall Healthcare category, marking its first reduction in output since March. Healthcare was the sole broad category to report a contraction among the seven monitored.

Growth of new business was once again confined to two-thirds of the monitored Asian sectors. However, the employment landscape weakened, with job creation reported in only ten sectors — the lowest number since April. Moreover, in instances where payroll expansions occurred, the increases were modest at best. Consumer Services posted the strongest rise in workforce numbers, followed closely by Software & Services and Technology Equipment, which shared second place.

 

BdF and MAS conduct post-quantum cryptography experiment

The Banque de France (BdF) and the Monetary Authority of Singapore (MAS) have announced the successful completion of a joint experiment in post-quantum cryptography (PQC) conducted across continents over conventional internet technologies. The PQC experiment aims to strengthen communication and data security in the face of quantum computing advancements, and the successful experimentation marks a milestone in the evolution of the protection of international electronic communications against the cybersecurity threats posed by quantum computing. 

The joint BdF-MAS initiative trialled its first use of quantum-resistant cryptographic algorithms for the signing and encryption of emails. The goal was to strengthen the current level of security for electronic communications in the future while retaining compatibility with existing Internet standards, technologies and communication channels. In this context, emails are particularly sensitive, as they may carry confidential information, making them a prime target for cyberattacks. This experiment not only demonstrates the practical feasibility of these new security methods but also their effectiveness in widely adopted application environments.

The project followed a hybrid approach, combining the robustness of current algorithms with post-quantum algorithms to ensure security and compatibility with existing systems, while preparing for the cybersecurity threats posed by quantum computing. 

A technical report that details the results and takeaways from the experiment was published today. The key findings of the report include:

• Using Microsoft Outlook as the email client coupled with a PQC email plugin, BdF and MAS successfully exchanged digitally-signed and encrypted emails using PQC algorithms, namely CRYSTALS-Dilithium and CRYSTALS-Kyber.
• Standardising PQC cryptographic algorithms and libraries for digital signatures and encryption, is not enough. Application protocols and standards like public key infrastructure, digital certificates, key exchanges and secure emails must also be standardised to incorporate PQC cryptographic algorithms to facilitate adoption and interoperability of PQC.
• There is potential to integrate this technology into payment networks. By integrating PQC algorithms into payment networks, financial institutions can future-proof their security measures against the looming threat of quantum computing, ensuring the long-term integrity and confidentiality of sensitive financial data.

BdF and MAS will continue to collaborate in the next stage of experimentation, to extend PQC to critical financial transactions, particularly cross-border transactions on payment networks.

 

StraitsX, Grab, and Ant International further cross-border payments partnership

‍StraitsX, a payments infrastructure for the digital assets space in Southeast Asia, has announced an initiative with Ant International and Grab that aims to enable more efficient funds transfer via purpose bound money (PBM) when inbound tourists use Alipay+ payment partner apps for payments at GrabPay merchants in Singapore. 

The partnership, first outlined in a memorandum of understanding (MOU) at the 2023 Singapore Fintech Festival, has now culminated in the deployment of a cross-border, stablecoin-powered payment system. The payment system has been made possible through the use of blockchain technology, including the Avalanche network, to power backend payment acceptance flows with PBM.

International users across Alipay+ payment partners can then transact at participating GrabPay merchants in Singapore. The use of PBM is also expected to keep payment processing costs consistent for GrabPay merchants in Singapore and international payment apps in the Alipay+ ecosystem.

 

Impact of quantum computing on payments under scrutiny 

Nacha’s Payments Innovation Alliance, a membership programme bringing together diverse global stakeholders seeking to transform the payments industry, has published Protecting Payments in the Quantum Era: What You Need to Know.  

This publication outlines the basics of quantum computing, explaining key concepts and how it differs from classical computing. It explores the potential applications of quantum computing in the financial sector, particularly in payments, highlighting opportunities for innovation and efficiency. The report also addresses the significant threats quantum computing poses to current cryptographic standards and discusses recent developments in quantum technologies, the urgent need for quantum-safe cryptographic solutions and the next proactive steps to prepare payments industry leaders for the quantum era.  

Quantum computers process information in fundamentally new ways, offering a different computational approach that promises to tackle challenges and solve problems that classical computers cannot address. By the decade’s end, quantum computing could impact computing strategies across industries, providing substantial innovation in finance, payment networks, fraud detection, anti-money laundering detection and behavioural analysis. However, quantum computing also threatens the core cryptography used to secure website connections, banking transactions, email exchanges, virtual private networks (VPNs), e-commerce, digital signatures and more.  

“As the quantum era approaches, leaders in the payments industry must prepare for the impending changes and challenges,” said Jennifer West, AAP, APRP, Senior Director, Payments Innovation Alliance, Education & Accreditation. “The quantum threat to cryptographic security is real and imminent, potentially disrupting the foundations of digital transactions. That’s why the Alliance created a Quantum Payments Project Team and made its first task to develop an introductory document that explains the current state of play and calls for immediate action to future-proof our payments systems and ensure the continued protection of financial operations.