Singapore and China enhance digital finance and capital markets cooperation

The Monetary Authority of Singapore (MAS) has announced new digital finance and capital markets initiatives to expand its financial cooperation with China. The initiatives were discussed at the 19th Joint Council for Bilateral Cooperation (JCBC) in Tianjin, which was co-chaired by Singapore Deputy Prime Minister and Minister for Finance, Lawrence Wong, and the People’s Republic of China Executive Vice Premier of the State Council, Ding Xuexiang. 

Three main initiatives were announced, the first being a cross-border e-CNY pilot between the two countries. Following the signing of a memorandum of understanding (MOU) on digital finance cooperation in 2020 between MAS and the Digital Currency Institute, People’s Bank of China (PBCDCI), MAS and PBCDCI are embarking on a pilot that will allow travellers from both countries to use e-CNY for tourism spending in Singapore and China. This aims to enhance convenience for travellers when making purchases during their overseas travel.

A further initiative is the launch of an exchange traded funds (ETF) product link between the Singapore Exchange (SGX) and Shanghai Stock Exchange (SSE).  Building on the ETF product link launch between SGX and Shenzhen Stock Exchange (SZSE) in 2022, SGX and SSE signed an MOU in May 2023 to establish an ETF Product Link. On 1 December 2023, CSOP Huatai-Pinebridge SSE Dividend Index ETF and the CSOP iEdge Southeast Asia+ TECH Index ETF were launched on SGX and SSE, respectively, as the first product pairing under the new ETF product link. The launch is designed to open up greater collaboration opportunities between fund managers in both markets and improve investors’ access to ETF products in each other’s markets. 

Thirdly, SGX and Guangzhou Futures Exchange (GFEX) have signed an MOU to collaborate on information exchange, mutual visits and training, and joint research on products and business areas relating to green development.

Singapore’s local banks and China’s UnionPay International have also embarked on early-stage feasibility discussions on a potential remittance linkage between Singapore’s PayNow and UnionPay under each jurisdiction’s laws and regulations. Such a linkage could facilitate secure, convenient and cost-effective cross-border payments and remittances between the two countries.

Finally, following the establishment of the China-Singapore Green Finance Task Force (GFTF) at the 18th JCBC last year to deepen bilateral cooperation in green and transition finance, the GFTF held its inaugural meeting in April 2023. Under the GFTF, MAS and the People’s Bank of China are working on key initiatives, including a green corridor for green and transition financing products, as well as capacity building.

 

RTGS.global completes instant settlement cross-border transaction between Georgia and Tajikistan

RTGS.global completed the first instant settlement cross-border transaction through its global network. The transaction saw Credo Bank in Georgia and MDO Humo in Tajikistan settle the obligations resulting from two FX trades, Payment vs. Payment, and use the resulting funds to make two onward payments via the digital settlement service in seconds.

By enabling instantaneous movement of funds cross-border between banks, RTGS.global directly connects market participants from individual countries into a global settlement network, creating seamless interoperability across borders and currencies. RTGS.global says that, by transacting through its network, member banks realise significant liquidity benefits and streamline traditionally cumbersome cross-border settlement processes.

As part of the transaction, the RTGS.global settlement network facilitated a payment from Credo Bank to MDO Humo in TJS and from MDO Humo to Credo Bank in GEL. The transaction was executed nearly instantly using direct currency conversion between both currencies.

RTGS.global has announced several pilot agreements with early adopters in developing markets. Alif Bank and Bank Arvand in Tajikistan and Universal Capital Bank in Montenegro joined MDO Humo and Credo Bank in running pilots. These further pilots will be scheduled for the first part of 2024.

 

Citi expands its payments innovation toolkit with investment in Icon Solutions

Citi Treasury and Trade Solutions (TTS), within Citi’s Services organisation, has invested in Icon Solutions, a fintech provider of payments technology and consultancy services. In addition to the investment, Citi plans to expand its use of the Icon Payments Framework (IPF) to enhance its micro-services orchestration architecture. 

The bank is working on a multi-year modernisation effort of its payments platforms. As part of the programme, Citi is working with and has invested in Icon Solutions to expand its innovation toolkit and futureproof its payments services. TTS will use the Icon Payments Framework (IPF) as part of its micro-services architecture.

Citi’s new payment platform will prioritise flexibility and accelerate the bank’s ability to respond to the exponential pace of change in payment infrastructure and the regulatory environment, as well as evolving client demands in an increasingly 24/7, real-time, digital-first environment.

The bank says that the benefits of the payment transformation programme will include true end-to-end ISO native payments that meet evolving industry and regulatory requirements, deliver richer data to clients, and futureproof solutions that are scalable and cloud-ready. It will also provide API-driven interfaces to enhance and accelerate client access to data.

 

Moody’s scenario analysis: Israel-Hamas conflict and its credit effects

On 1 December, fighting resumed between Israel (A1 review for downgrade) and Hamas, ending a week-long ceasefire between the two sides. In a report, Moody’s Investor Services says it expects the credit implications of the ongoing conflict will be limited to Israeli-rated issuers. However, an adverse downside scenario that sees the conflict escalate significantly, though very unlikely, would affect a range of debt issuers in and outside the region through three main channels: heightened security concerns, energy and supply chain disruption, and weak macro-financial conditions.

A contained conflict will have limited effects outside Israel. Moody’s have placed most of the rated Israeli issuers on review for downgrades in October while assessing the impact on the economy, public finances, infrastructure and governance. The ratings agency says it has seen some spillover impact, especially in Egypt (Caa1 stable), which could add to already high debt-repayment risks. The global implications would be limited, especially if oil prices remain in the baseline range (US$80-90/barrel for Brent). Gas prices have risen in Europe and Asia, but Moody’s expects them to settle back down over the medium term.

A multi-front proxy war would have more severe effects on rated Israeli issuers. A military conflict on multiple fronts would likely further weaken Israel's public finances and potentially the economy’s long-term growth prospects. It could also lead to larger-scale disruption to gas supplies that would affect Egypt and potentially Jordan (B1 positive). Further spikes in global oil and gas prices are likely, but prices would probably return to the agency’s baseline forecasts because affected countries are not significant energy producers.

In the most extreme scenario, a significant escalation that significantly disrupts energy supplies would have global implications. Should trade through the Strait of Hormuz (SoH) be disrupted, energy exporters in the Middle East with no alternative routes to the SoH like Bahrain (B2 stable), Iraq (Caa1 stable), Kuwait (A1 stable) and Qatar (Aa3 positive) would be most affected. However, fiscal buffers limit the impact for Kuwait and Qatar. Nevertheless, less trade and tourism, weaker consumer and investor sentiment would hit economies and companies across the region, the report states. Globally, tighter financial conditions would make it harder for some low-rated issuers to refinance maturities. Higher gas prices would also significantly affect energy-intensive sectors, such as chemicals and manufacturing, especially in Europe and Asia. Weaker global macro-financial conditions would pose challenges for cyclical sectors like retail and commercial real estate. Conversely, defence, energy companies and oil-exporting sovereigns not affected by transport disruption would stand to gain.

 

Charting the next frontier for electronic execution in corporate bonds

Despite the corporate bond market’s big move towards electronic trading over the past decade, 90% of the market’s biggest trades are still executed via phone or chat. This represents a huge opportunity for trading platforms that offer new tools to facilitate the trading of block orders on the screen.

A majority of the buy-side corporate bond traders participating in a study by Coalition Greenwich believe chat continues to provide the best outcomes when trading block-sized orders, defined as those with a notional value of US$5m or more for investment grade and US$1m or more for high yield.

“Trading via phone and messaging platforms is seen by many traders as the best way to maintain important dealer relationships,” commented Kevin McPartland, Head of Research at Coalition Greenwich Market Structure & Technology and author of ‘Electronifying Corporate Bond Block Trading’. “But this approach does not allow access to the broader set of liquidity providers found on the largest trading venues.”

Approximately 80% of study respondents say maintaining their dealer relationships plays a big role when deciding how and where to trade. As a result, only 10% of buy-side block trade orders are executed electronically, and more than two-thirds of buy-side traders manually select the dealers to include in their request for quotes (RFQs).

This continued reliance on chat and phone for block trades presents a significant opportunity for trading venues. The potential benefits of executing more block orders on screen, coupled with new tools that help keep dealer relationships intact, suggest change is on the way.

“With market-wide e-trading growth roughly flat over the past two years, bringing more block trades onto the screen could be the catalyst needed to move e-trading forward,” added McPartland.

 

HSBC goes quantum to safeguard AI-powered FX trading

HSBC has begun exploring how quantum cryptography can safeguard sensitive trading data against cyber threats as powerful as future quantum attacks. In a trial, the bank deployed quantum key distribution on its AI Markets trading terminal to safeguard a €30m trading scenario from euros to US dollars. The trial used technology from BT, Toshiba and Amazon Web Services (AWS). 

Electronic trading has transformed financial transactions, with HSBC processing 4.5 billion payments for their customers last year, worth an estimated value of £3.5 trillion. The increasing threat of cyber-attacks and the emergence of quantum computers pose a real threat to the financial sector. 

Waiting until quantum computers become a reality to address this issue risks leaving financial systems vulnerable, as the transition to quantum-resistant encryption takes time. HSBC says it is committed to proactive research and development in this area to ensure the continued resilience of its financial systems in an increasingly quantum future.

This work represents a step towards the UK government’s ambition to enable the commercial viability of quantum communications as outlined in the recent National Quantum Strategy.

 

Extend announces virtual-card-as-a-service integration with Concur Invoice

Virtual card and spend management platform Extend has embedded its virtual card functionality into Concur Invoice. It claims this is the first fully embedded virtual card experience that immerses customers in Concur Invoice from registration through payment. 

It also represents the first time SAP Concur customers can register for virtual card services within Concur Invoice while keeping their existing corporate or purchasing card. There is no need for a new card, contract, or settlement process. BMO will become the first issuing partner bank to offer this option to its corporate card customers using Concur Invoice.

Users can use virtual cards to settle payments after registering their corporate card in the cloud-based Concur tool. Using Extend’s virtual-card-as-a-service capabilities, Concur Invoice automatically generates a virtual card linked to the user’s registered corporate card, including a 16-digit number, spend limit, validity date, and invoice number corresponding to the invoice. This integrated service is accessible throughout all of Concur Invoice’s features.

 

DBS and H&M Group partner on collaborative financing solutions for climate action

H&M Group, with support from DBS, is establishing collaborative financing solutions that enable the necessary decarbonisation of fashion supply chains. To realise this ambition, the partners have initiated a collaborative finance tool – a green loan programme facilitating supply chain decarbonisation in the apparel sector.

In line with the Group’s ambition to achieve net-zero CO2e emissions by 2040, H&M Group has focused on making funding available to reduce greenhouse gas emissions across and beyond its own supply chain. Its Green Fashion Initiative enables supplying factories to invest in the technologies and processes needed to reduce energy demand and replace fossil fuels across the fashion industry.

The collaborative finance tool was developed to help accelerate the adoption of green initiatives across the supply chain. Through the programme, suppliers get access to financing from DBS and technical support from sustainability consultant Guidehouse to embark on factory upgrades to decrease their climate impact. Unlike traditional banking solutions, which seek to encourage such green activities indirectly, this programme directly provides financing with highly favourable terms to suppliers for specific GHG emission reduction activities, as approved by H&M Group.

Earlier this year, the collaborative finance tool completed the first transaction with a manufacturer in India to fund capital expenditures to reduce scope 3 greenhouse gas emissions. With the support of the loan, supplier Raj Woollen financed the installation of solar panels, energy-efficient motors, and water conservation technologies to conserve resources and reduce carbon emissions.

“H&M Group has been engaged in climate mitigation for years and we continuously push ourselves to demonstrate climate leadership within our industry,” commented Ulrika Leverenz, Head of Green Investment, H&M Group. “We see that our industry is committed to tackle its negative climate impact. But we also see that impactful climate action requires collaborative financing. For us, sustainability investments are not only a responsible approach but a strategic necessity for future success.”

 

Paymerang expands product line with receivables automation

Finance automation firm Paymerang has expanded its product line to include Receivables Automation. The tool aims to simplify accounts receivable and provide businesses with real-time insights into cash flow. 

The solution is designed to streamline and accelerate invoice-to-cash processes to save time, increase efficiency, and minimise the risk of errors. Real-time insights and analytics support decision-making and enhance cash flow. Paymerang says its team will assist corporates throughout the adoption process to help finance professionals work smarter, focusing on strategic financial goals.

The product is driven by a strategic integration with Fiserv, which allows Paymerang to offer credit card merchant processing capabilities to businesses across the US. By leveraging the expertise and ISV payments engine of Fiserv, Paymerang says it is now equipped to seamlessly integrate credit card processing into its suite of financial automation tools.

 

Enfuce launches Visa fleet solution

Enfuce is expanding its partnership with Visa with the launch of Visa’s mobility card solution, dubbed the ‘Visa Fleet 2.0.’ Through the certification, Enfuce can now deliver the Visa Fleet 2.0 solution to joint prospective customers. The partnership will target fleet management across Europe, offering rich data and insights and cost reductions, focusing on sustainable transportation and mobility budgets.

Unlike traditional closed-loop cards used by most fleet operators worldwide, the new solution is not restricted to specific fuel retailers or specific types of products like petrol or diesel. It can be used at any location accepting Visa cards. This should allow drivers to choose the most efficient routes and access optimal fuel prices while providing the convenience of a card accessible by both physical and digital wallets, removing the need to carry multiple fuel cards.

This fleet and mobility card can be used for all expenses the issuer chooses, beyond fuel-related payments, accommodating the evolving landscape of electric vehicles (EVs). Visa reports that 70% of fleet managers will transition to electric, hybrid, or hydrogen cell vehicles within the next five years.

A statement from Enfuce notes that conventional fuel cards designed for fossil fuel fleets lack the flexibility to accommodate EV charging without substantial investment on the issuer’s part. Visa Fleet 2.0 addresses these needs by including various use cases such as EV charging, tolls, mass transit, and micro-mobility. 

It also includes comprehensive financial reporting, consolidating detailed transaction data such as purchased items, unit prices, and associated VAT on a single card. Real-time data, including driver identification, vehicle identification, and vehicle mileage, can also help with fraud prevention. Cards can be restricted for specific purchases, giving companies greater control over card usage and mitigating the risk of inappropriate spending. Enfuce also uses EMV technology and authentication methods like 3DS to secure every issued card.