ICC trade report finds a fragmenting world

Trade rebounded last year but was disrupted by the war in Ukraine, lingering Covid-19 restrictions, persistently high inflation and lower economic growth, according to the ICC 2023 Trade Report. The research found that despite growing concerns, globalisation has not reversed but is changing. There is evidence of decoupling between China and the US but also Russia and Western countries. This could reap the benefits of global trade. 

Amid lower growth and high inflation, trade growth is expected to decelerate in 2023. Tight financial conditions will increase pressure on highly indebted governments and businesses, amplifying vulnerabilities and deterring investments and trade flows. 

US and China will continue to decouple some sectors of their economies. Despite an increase of US imports from China in 2022, the relative share of merchandise imports from China, foreign direct investments and scientific collaborations suggest a continued decoupling of both economies. The rivalry between US and China will constrain merchandise trade and could fuel inflationary pressure in the US. 

Europe will continue to reduce its reliance on Russia in 2023 to achieve its energy and climate goals. The war in Ukraine forced European countries to reduce their reliance on Russian coal, natural gas and petroleum in 2022. In the context of high fossil fuel prices, global investments in clean energy will continue to rise, and renewable capacity is expected to almost double in the next five years.  

Demand for services, especially travel and transport, will increase in 2023. Due to the easing of China’s zero-Covid policy, and a strong US dollar, tourism is expected to grow steadily in 2023.  

Agile supply chains will be critical in 2023. Businesses will continue to adapt to this uncertain and volatile event by adjusting their inventory strategy and diversifying their suppliers. Businesses will continue their trade-offs between global and local supply chains. 

One trend that the report particularly identifies is the growing rise of trade fragmentation, driven by a rise of subsidies, export controls and investment restrictions. The number of trade-restrictive measures has significantly increased since the pandemic, indicating a rise in protectionism. Countries are racing to subsidise green industry and restrict the flow of goods and capital. 

At the same time, digital fragmentation is both driving and mirroring geopolitical tensions. Technology is becoming nationalised and weaponised to ensure national security or strategic autonomy, while increased regulations on data storage, usage, transfer and content moderation could constrain trade growth. The report reflects that digital sovereignty could threaten to “break the Internet” without international cooperation. 

Geopolitical tensions are also hindering debt restructuring negotiations. In the context of monetary tightening, prolonged negotiations could increase debt vulnerabilities. Failure to reach an agreement risks another lost decade for several developing economies. 

Then there is payment fragmentation. Although the US dollar remains the main currency for global trade, its role is eroding. The lack of interoperability, regulation and cooperation for payment systems could increase the risk of fragmentation and lead to further financial instability. 

The ICC report estimates that the fragmentation cost could range from 1.2% to 12% of global GDP. Trade and technological fragmentation can affect global growth by reducing trade flows, creating sectoral misallocation and hindering the foreign diffusion of knowledge. Emerging and developing economies will bear the brunt of the economic losses. 

 

Plan to boost large corporate B2B marketplaces in Europe

Societe Generale and pan-European payment institution Lemonway have signed a commercial partnership to deliver payment services to large corporates in Western Europe that launch B2B marketplaces. 

Large corporates are accelerating their digital transformation, essential for their clients and ensuring B2B revenue growth. In this context, launching a B2B marketplace improves the payment experience, supports internationalisation, creates value, and enhances the commercialisation and distribution processes of the e-commerce chain.

Lemonway offers modular and end-to-end solutions for corporate B2B marketplaces. It includes payment and other strategic services such as customer verification and payment account opening, reconciliation of flows for beneficiaries and performance monitoring. This allows marketplace operators to manage complex transaction flows in compliance with the highest regulatory standards. 

The partnership will initially focus on France, Germany, Italy, Spain, Belgium, Netherlands, the UK and Switzerland. Technical implementation of the partnership will be effective soon.

This partnership relies on Lemonway’s professional expertise to manage third-party payments services and the robustness and security of Societe Generale services in cash management

“This partnership enables us to support our clients in their digital transformation, offering ever more complete and innovative payment services, in line with the specific needs of large corporates for their B2B marketplaces,” commented Alexandre Maymat, Head of Global Transaction and Payment Services at Societe Generale.

“[Societe Generale’s] large account service experience combined with our third-party payment expertise precisely meets the expectations of this fast-growing market,” added Antoine Orsini, Chief Executive Officer of Lemonway. “Together we offer B2B marketplaces a secure, scalable, and compliant payment experience that enables our customers to accelerate their growth.

 

Tokenisation of nature-based assets offers Australian CBDC use case

ANZ has partnered with Grollo Carbon Ventures (GCV) to successfully trade Australian Carbon Credit Units (ACCUs). This marks the completion of the bank’s first use case as part of the Central Bank Digital Currency (CBDC) pilot run by the Reserve Bank of Australia and the Digital Finance Cooperative Research Centre (DFCRC).

For this use case, ANZ and GCV sought to test tokenisation of real-world, nature-based assets, starting with ACCUs. To do this, ANZ tokenised existing ACCUs and issued its stablecoin, A$DC, enabling GCV to purchase tokenised ACCUs with settlement occurring in near real-time via ANZ smart contracts.

The transaction was conducted on a public, permissionless blockchain and demonstrated the use of digital assets to reduce settlement time and help mitigate settlement-related counterparty risk. Pilot CBDC was used as a risk-free asset to support the issuance of A$DC.

ACCUs are issued by the Australian Government’s Clean Energy Regulator to projects compliant with approved emissions avoidance, reduction or removal methodologies. Unlike other commodities, ACCUs possess unique information attributable to their underlying project, including selected methodology, project location, project proponent and additional environmental and social benefits. Tokenisation can help provide accurate records of these attributes and ensure asset integrity.

The purpose of the DFCRC pilot, announced by the RBA in 2022, is to explore use cases for a CBDC in Australia and the potential economic benefits of its introduction.

“When applied to carbon markets, tokenisation has the potential to improve efficiency and transparency, reduce risk and preserve the unique characteristics of underlying projects to incentivise investment in climate solutions,” said Nigel Dobson, ANZ Banking Services Lead.

“As more organisations implement net-zero transition plans the demand for nature-based assets is expected to grow significantly,” added Lorenz Grollo, CEO of Grollo Group.

 

Transcard and Mastercard look to streamline B2B payments data

Payment and data technology firm Transcard has successfully integrated its family of embedded payment solutions, SMART Suite, with Mastercard’s Track Business Payment Service. The Mastercard solution will facilitate data exchange connected to payments made via the Transcard suite.

Mastercard Track Business Payment Service is a global open-loop commercial network that is designed to simplify and automate the exchange of payments data between buyers and suppliers. The network helps facilitate the collection and exchange of data across the payment methods and rails available in SMART Suite. Businesses on the network set preferences for how they would like to make or take payment. Suppliers on the network receive enhanced remittance details, reducing manual processing.

The combination of two solutions should streamline payables and receivables processes for businesses. By embedding SMART Suite in their ERP, TMS or accounting software, businesses can use a single integrated platform to manage payables and receivables payments and automatically disburse payment on approved invoices, initiate requests for payment as invoices are ready to bill, track payments, and reconcile payments with their ERP application or accounting software, without operator intervention.

Additionally, fintechs that want to integrate into Mastercard’s B2B payments solution get access through Transcard’s versatile SMART Suite APIs. Transcard’s onboarding tool enables businesses to electronically identify and connect with trading partners participating in the Mastercard Track Business Payment Service.

 

Citi’s sustainable time deposit solution hits the US

Citi has launched a sustainable time deposit solution to assist its US institutional clients when investing excess cash while supporting their sustainability goals. The bank’s Sustainable Time Deposit (TD) aims to deliver competitive yields and support projects identified under Citi's green and social bond frameworks, expanding the programme launched in Europe, the Middle East and Asia last year.

“Finance and treasury teams are playing an increasingly strategic role in helping their firms to support their sustainability and environmental, social and governance [ESG] goals,” said Stephen Randall, Global Head of Liquidity Management Services, Treasury and Trade Solutions, Citi.

Funds deposited into Sustainable TDs are allocated toward financing or refinancing assets in a portfolio of eligible green and/or social finance projects, based on criteria set in the Citi Green Bond Framework, Social Finance Bond Framework and Social Bond for Affordable Housing Frameworks, including projects for renewable energy, energy efficiency, water quality, and conservation as well as in social projects that expand financial inclusion for women and traditionally under-represented communities.

In addition, the funds may be allocated to finance or refinance affordable housing projects in the US, including the construction, rehabilitation, and/or preservation of housing for low and moderate-income populations who are generally restricted to 60% or below of area median income tenants. Those projects may include many housing communities with distinct social impacts and benefits.

The solution is also available in the UK, Ireland, Abu Dhabi, Hong Kong and Singapore and Citi says it is working to expand this capability to additional countries. The bank’s frameworks align with the recommendation of the International Capital Market Association's Green Bond Principles and Social Bond Principles.

 

BNP Paribas enlists Worldline to reduce SEPA direct debit fraud

BNP Paribas Cash Management has selected payments services provider Worldline to reduce SEPA Direct Debit (SDD) transaction fraud. Worldline’s solution, which combines the electronic signature of SEPA mandates with open banking-based account validation, has been implemented by the bank in Germany, Italy and France, with additional countries to follow in the coming months.

The SDD is an automated payment method via a signed mandate for one-off or recurring invoices in the SEPA zone. The fraudulent use of someone else’s IBAN during the mandate signature process was responsible for over 60% of defrauded direct debits in recent years, according to the Banque De France in a 2019 report. 

BNP Paribas Cash Management is implementing Worldline’s Account Validation solution into its white-label product EasyCollect. By combining the e-signature of SEPA mandates with account validation using open banking, Worldline enhances its SEPA Payment Suite and proposes an extension, using strong customer authentication and providing advanced security that eliminates the risk of IBAN misuse during the mandate signature process.

The solution aims to provide companies and merchants with a secure and low-risk payment method while giving consumers a better user experience.

“We were seeking an innovative solution to reduce IBAN fraud in SEPA Direct Debits,” said Bruno Mellado, Global Head of Payments and Receivables at BNP Paribas. “We found it with the new account validation functionality of Worldline’s SEPA Payment Suite which is based on the latest innovative technologies through open banking opportunities. By implementing it in our existing SEPA Mandate and Direct Debit solution EasyCollect, the risk of SDD fraud will be reduced and customer loyalty will be strengthened, which is a huge benefit for our clients and their customers.”

 

Offering Ukrainian women a new start in technology

NatWest Group is launching a ‘Women in Tech’ pilot - delivered with Code First Girls and the Capital City Partnership – which will see 60 displaced Ukrainian women re-trained in technology with the opportunity for some to work at Royal Bank of Scotland. The bank says the programme is a first of its kind in Scotland and will provide valuable career opportunities for displaced women in coding and software engineering.

The pilot was showcased to Ukrainian women aboard MS Victoria, a cruise ship serving as temporary accommodation for families from Ukraine currently docked in Edinburgh.

The bank will sponsor 60 women to complete introductory classes in technology. Ten Ukrainian women will be able to complete the Code First Girls Degree. If they complete the training and pass the learning outcomes, they will be offered a permanent role at the bank as Trainee Software Engineers.

The Capital City Partnership will provide wrap-around support to the cohort during their learning journey, while Equate Scotland, the national expert in gender equality throughout the STEM sectors, will provide a career support programme.

“This initiative builds on our commitment to supporting Ukrainian families and recognises the capability and talent of these women, who have been through so much,” commented Wincie Wong, Head of Workforce Technical Capability at Digital X. “I have met many of these women who are highly skilled engineers, lecturers, and mathematicians who have had to do lower paid jobs, if they find one at all, after they’ve arrived. Digital technology is the second fastest growing sector in Scotland, growing at a rate of 1.5 times the entire economy.

“We also know that women are only filling 23% of all the digital technology roles in Scotland so there is a need to increase the gender balance of this sector,” Wong added. “It made perfect sense for us to be able to provide greater opportunities for this population to find gainful employment in one of our most important areas of the bank.”