Supply chains are shifting between Asia and the US

Asia’s supply chains are shifting. In December 2023, combined exports from Korea and Taiwan to the US exceeded their exports to mainland China for the first time in two decades, according to Goldman Sachs Research (GSR).

The changes are taking place amid several important shifts, the GSR report notes. China’s unit labour costs have risen (from 30% of US levels in 2000, based on purchasing power, to nearly 70% in 2019), and its industrial structure is becoming more sophisticated. As China moves up the value chain and drives for greater self-sufficiency, it has reduced imports of intermediate goods (notably chemicals, automobile parts, and electronic components) while increasing its imports of final consumer goods. 

China’s supply chains for the electronics industry are potentially vulnerable to these changes, the report suggests. Some tech imports into China are still used mostly for re-export - for instance, 57% of China’s microchip imports in 2023 were re-exported. The large portion of imports for re-export in the electronics industry means that relocation of factories assembling technologies such as smartphones from China to elsewhere in the region could redirect both imports and exports of tech products away from China.

Companies’ post-pandemic focus on supply chain diversification and the US’s supply chain resilience programmes are also reshaping regional trade. Supply chains around advanced microchips have been shifting away from China since the pandemic outbreak in early 2020. Notably, changes in trade flows for smartphones have accelerated since the pandemic, with rapid declines in imports of made-in-China smartphones in the US and Europe. However, the report notes that smartphones made in other countries might still use key components from Chinese factories.

Moreover, accelerating innovation in AI and the US drive for supply chain resilience have boosted US demand for AI chips. All these developments have led to sharp increases in US-bound exports from Korea and Taiwan of AI servers and their advanced chip components.

 

Digital transformation in financial services reaches new level of maturity

As the digital revolution accelerates, financial institutions are racing to create enterprise value by investing heavily through the economic cycle, according to a study by Broadridge Financial Solutions. The study found that 75% of executives are confident in their tech transformation roadmap, but a digital maturity gap is growing between leaders and non-leaders. While more than two-thirds say they have made meaningful progress in modernising their core IT platforms, organisations must make progress against multiple tech and talent frontiers as they grapple with new technologies like GenAI, rising cybersecurity challenges, and accelerating needs for seamless digital customer experiences.

The 2024 Digital Transformation and Next-Gen Tech Study gauges the perspectives of 500 global C-suite and senior executives across the buy and sell sides, illuminating the forces driving the industry’s technology modernisation. The study categorised firms as digital “leaders” versus “non-leaders” based on their advancement levels across ten essential aspects of digital transformation, including modernised core IT, the use of automation tools, innovation culture, data management, and digital customer experiences.

Regarding areas of focus, more than 80% of all executives indicate that they are making the most significant day-to-day investments in cybersecurity technology and building an advanced IT cloud platform. Meanwhile, the majority expect to maintain or increase their investment in next-gen technologies like AI, quantum computing, crypto/digital assets, and blockchain over the next two years.

Personalised and seamless digital customer experiences have become an expectation in the financial services industry. In fact, 40% of respondents indicate that being customer-obsessed with priorities deeply rooted in client needs is the top accelerator of digital transformation.

AI is fuelling many of these changes in the customer experience paradigm. Some 70% of leaders (52% overall) indicate that they prioritise their AI investments in customer interaction to fuel stronger and more meaningful customer engagement. When it comes to GenAI, leaders are more likely to make large or moderate investments in technology (44%), more than twice the level of non-leaders.

Despite the higher levels of investment by leaders, the lower cost of entry to deploy GenAI may allow non-leaders to get in on the action more easily, enabling them to catch up in their efforts to deploy the technology to both customer-focused and internal use cases.

As financial organisations accelerate digital customer experiences, they continue to put enormous effort into strengthening trust and security. Over the next two years, financial institutions plan to boost their investments in cybersecurity by 28% on average, impacting their internal security protocols and also how they engage with third-party technology vendors. According to the study, cybersecurity is the top capability executives say they expect from their technology vendors, outpacing their ability to deliver projects on time and budget and building next-generation technologies into their solutions. Executives also cited cybersecurity risks as the top challenge currently inhibiting the pace of digital transformation at their company.

 

GTreasury extends API connectivity suite into APAC

GTreasury has announced that its ClearConnect Gateway - a global bank API connectivity suite - has launched new and instant data integrations with several global banking partners. Treasury teams and CFOs can now conveniently use the suite to access current-day balance and transaction reporting and prior-day balance and reporting from banks such as DBS, OCBC, ICBC, Barclays, and BNP Paribas.

The addition of these banks adds to GTreasury’s growing list of global ClearConnect Gateway integrations, which already includes Bank of America, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase, PNC, U.S. Bank, Citibank, and Wells Fargo, among others. Additional bank connectivity integrations will continue to roll out this year, with Standard Chartered, UOB, Nordea, and SocGen. 

ClearConnect Gateway replaces enterprises’ legacy banking connections with out-of-the-box API connectivity and data integration into their preferred banking partners. The solution is designed to help treasury teams quickly use API connectivity for real-time synchronisation with banks, ERPs, and third-party platforms.  

“The addition of several large banking institutions in the [APAC] region into our API connectivity suite —with more on the way—will significantly streamline the daily workflows for treasury organisations partnered with these banks,” commented Vincent Casanova, Managing Director, APAC, GTreasury. 

 

Trafigura scores US$5.6bn European RCF

Trafigura Group has announced the closing of its new 365-day European multi-currency syndicated revolving credit facilities (the 365-day ERCF) totalling US$1.9bn billion, as well as the extension and increase of its US$3.7bn three-year facility (three-year ERCF). The new 365-day ERCF, initially launched at US$1.5bn, was substantially oversubscribed. 

The 365-day ERCF will be used to refinance the maturing 365-day facility dated 7 March 2023 and for general corporate purposes. In addition, the company decided to exercise the second extension option available on its three-year ERCF dated 2 March 2022, extending the facility by 365 days to maintain a three-year tenor while simultaneously increasing the size of this tranche by US$160m. 

In line with recent years, the company structured these facilities as sustainability-linked loans (SLL). The SLL are linked to key performance indicators (KPIs) to improve Trafigura’s sustainability performance, aligned with material issues for its business. This renewed SLL structure includes three KPIs, with the progress towards each target evaluated annually and verified by an independent assurance provider. The KPIs relate to cutting operational greenhouse gas emissions (Scope 1 and 2), including a new intensity reduction target on Trafigura’s shipping business (Scope 1 and 3) starting in 2026; growing Trafigura’s renewable power portfolio; and implementation of the Voluntary Principles on Security and Human Rights at Trafigura’s operations. A penalty or discount on the margin will be applied, depending on the number of targets met each year. 

The 365-day ERCF was arranged by a group of seven mandated lead arrangers and bookrunners (MLABs), including Bank of China, London Branch, ING Bank., Société Générale, Sumitomo Mitsui Banking Corporation and UniCredit Bank as active MLABs, and Coöperatieve Rabobank as a passive MLAB. Société Générale acted as global coordinator, while Sumitomo Mitsui Banking Corporation and Natixis acted as sustainability coordinators. In addition to the MLABs, 47 financial institutions joined the ERCF during syndication and/or extended their participation under the three-year ERCF. 

“The successful renewal of our flagship European revolving credit facility, which is a key pillar of our funding model, is a vote of confidence from our banking partners,” commented Christophe Salmon, Chief Financial Officer, Trafigura Group. “We are maintaining the company’s liquidity at record levels following this refinancing and extension process. As a result, Trafigura is well positioned to manage potential bouts of volatility, as commodity markets remain uncertain in the near-term.” 

 

KPMG and Databricks look to boost AI innovation

KPMG UK has formed a strategic alliance with Databricks, a data and artificial intelligence firm. The alliance aims to help the firm’s clients get the most out of their data and AI and empower them to innovate faster.

According to KPMG estimates, generative AI could add an additional £31bn to the UK economy per year. The Databricks alliance is designed to assist its clients in unlocking this opportunity and reaching their wider business objectives.

KPMG’s technical expertise, in combination with the Databricks Data Intelligence Lakehouse Platform, will help clients innovate using an open, scalable platform to meet all their data-driven requirements. Databricks’ data intelligence platform forms an open data management architecture that enhances data analysis and helps foster greater collaboration.

KPMG’s Audit practice is also embedding the Databricks Data Intelligence Platform within KPMG Clara, its global audit technology platform. By using this technology, KPMG says its auditors can analyse billions of financial transactions across thousands of audits, driving enhanced audit quality and deeper insights into audit-related risks. The alliance will further accelerate the adoption of AI within KPMG’s audits, with the Databricks platform providing a backbone for reliable data and AI solutions that support audit delivery.

 

BMO taps Elavon to deliver innovative payment solutions platform for US clients

Elavon has announced a partnership with BMO to provide a payment solutions platform to the bank’s clients in the US. The partnership allows for the acceptance, enablement and optimisation of credit, debit, and digital payment transactions. Additionally, it will provide secure, scalable payment capabilities and technologies tailored to the needs of BMO’s US small business, corporate enterprises, and capital markets clients.

Services offered by the platform include core acquiring and processing, omnichannel acceptance, dynamic and multi-currency conversion, and fraud management.

“Our partnership with Elavon aligns with BMO’s digital first strategy supporting progress for our clients through significant enhancements in technology capabilities that enable speed, scale, and elimination of complexity,” said Hugh McKee, Head, BMO Partners. “With Elavon, we’ll continue to accelerate high-value service and convenience to meet the diverse needs of our clients.”

 

FedNow User Group aims to promote collaboration among service participants

Federal Reserve Financial Services (FRFS) is introducing a FedNow User Group to continue promoting collaboration among the more than 600 financial institutions and their service providers (off-site) on the FedNow Service network. This new group will facilitate regular engagement between FRFS and FedNow Service participants to promote innovation and inform the service's continued evolution.

Following the service launch in July 2023 with 35 participating institutions, FedNow Service adoption and network volume continue to gain traction as participants enable instant payment processes, identify in-demand use cases, and raise awareness of instant payment products and services among their customers. Through the FedNow User Group, all participating financial institutions and their service providers can:

• Get a detailed look at ongoing service enhancements.
• Share feedback to inform future development of the service via working groups, roundtables and webinars.
• Identify innovative use cases to serve businesses and consumers looking for faster and more efficient ways to send and receive payments.

Use cases currently enabled by FedNow Service participants are expanding and include account-to-account payments, digital wallet funding, instant insurance disbursements and business-to-business payments.

“The strong adoption and engagement surrounding the FedNow Service reflects our collaboration with the industry since day one, and this remains a priority as we pursue our shared mission of ubiquitous availability of instant payments,” said Mark Gould, chief payments executive for Federal Reserve Financial Services. “This new user group will provide institutions on the network and service providers who support them the opportunity to advise on new developments that further enhance the value of the FedNow Service for all participants.”