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Swift finds tokenisation potential in blockchain experiments - Industry roundup: 1 September

Swift finds tokenisation potential with blockchain experiments

Swift has released results from a series of experiments that show its infrastructure can seamlessly facilitate the transfer of tokenised value across multiple public and private blockchains. The findings can potentially remove significant friction slowing the growth of tokenised asset markets and enabling them to scale globally as they mature.

One issue challenging investors and institutions has been that tokenised assets are managed on different blockchains, each with its own functionality and liquidity profile. Interoperability between these blockchains is crucial, otherwise financial institutions must build connections to each platform, creating significant operational challenges and costs.

Swift collaborated with several major financial institutions on the experiments, including Australia and New Zealand Banking Group Limited (ANZ), BNP Paribas, BNY Mellon, Citi, Clearstream, Euroclear, Lloyds Banking Group, SIX Digital Exchange (SDX) and The Depository Trust & Clearing Corporation. Chainlink was used as an enterprise abstraction layer to securely connect the Swift network to the Ethereum Sepolia network, while Web3 services platform Chainlink’s Cross-Chain Interoperability Protocol (CCIP) enabled complete interoperability between the source and destination blockchains.

In addition to demonstrating that existing Swift infrastructure can provide a secure, scalable way for financial institutions to connect to multiple types of blockchain, they advanced their understanding of the technical and business requirements for interacting with business and public blockchains. The experiments also explored the value of a blockchain interoperability protocol for securely transferring data between existing systems and a potentially unlimited number of blockchains.

The experiments looked at a solution's design and technical development and considerations around data privacy and governance, operational risk, and legal liability. Transfers of simulated tokenised assets took place - between two wallets on the same public Distributed Ledger Technology network, between two wallets on different public blockchains, and between a public and private blockchain network.


Half of Australian businesses plan to invest in digital payments

According to research from the University of Sydney Business School and Stripe, nearly half of Australian businesses plan to invest in digital payments over the next 12 months. The report surveyed more than 1,000 Australian business leaders to understand their adoption of and attitude toward digital payments, which include tap-to-pay, buy now pay later services, and digital wallets such as Google Pay and Apple Pay.

It found that 46% of businesses surveyed now accept four or more payment methods, and 45% want to improve their current payment systems. Among emerging digital payment technologies, digital wallets are the most common methods adopted by Australian businesses, reportedly accepted by 34% of surveyed businesses.

At an industry level, 57% of businesses in retail and 49% in the finance and insurance services sector are adopting digital wallets.

Security concerns, along with cost and reliability, are the main factors preventing businesses from investing in digital payments. 54% of businesses identified fraud and scams as their primary concern when adopting new payment technology.

“The pandemic accelerated adoption of alternative payment methods, but Australia still lags behind its Asian neighbours in meeting consumer demand, so it’s reassuring to know businesses are planning to invest in this technology,” said co-author Dr Wei Li, lecturer in International Business at The University of Sydney Business School. “While the progression may manifest incrementally and there are barriers to overcome, the findings show businesses are gravitating towards a more sophisticated and inclusive digital payment framework, paving the way for a transformed and resilient economic future.”


ESMA sees prevailing market uncertainty as downside risks rise

The European Securities and Markets Authority (ESMA) has published the second Trends, Risks and Vulnerabilities (TRV) Report of 2023. ESMA sees financial markets adapting to the new economic environment of durably higher inflation and interest rates. However, risks remain high in ESMA’s remit. Markets are set to remain very sensitive to potential deteriorations in economic fundamentals or risks in the financial sector.

Financial markets rebounded in the first half of 2023 against the background of lower energy prices and expectations of a slower pace of monetary tightening. However, this improvement remains fragile. The downside risks have increased while there remains a high degree of market and investor nervousness.

The report found that equity markets rose in 1H23, even though the market stress related to US banks led to increased volatility and bid-ask spreads in March and April. Credit risk indicators showed mixed signals, with early signs of deterioration, such as increasing corporate high-yield defaults and sovereign downgrades, but limited movements on sovereign credit spreads.

In asset management, the EU fund sector partly recovered after the historical decline experienced in 2022, primarily due to valuation effects. Bond funds received inflows, which contrasts with the outflows in 2022. Fixed income funds, which reduced their maturity and interest rate sensitivity during the monetary tightening, are now positioned to benefit from higher yields. Fund risks remain high due to prevailing credit, valuation, liquidity and interest rate risks, especially for funds combining several vulnerabilities, such as in the real estate fund sector.

The ability of non-financial corporations to raise funds through capital markets slightly increased in 1H23 from the lows observed in 2022. Corporate bond issuance peaked, concentrating on shorter-term maturities given monetary policy expectations. Meanwhile, the EU market for ESG products and sustainable investments has grown robustly. The demand for funds with a sustainable investment objective remained strong.

Crypto-asset valuations rebounded in early 1H23 but remained far below their historical peak. Persistently elevated cyber risks remain an essential concern for the EU financial sector. Financial markets have started exploring the potential implications of artificial intelligence after the launches of various generative AI tools in 1H23.


Surecomp and Pelican AI to enhance digital trade risk management and compliance

Surecomp has announced that it is partnering with Pelican AI to drive the digital transformation of trade-based risk management. The collaboration will specifically address the need for more streamlined and readily accessible data from within trade documents. 

By intelligently automating trade documents and accurately extracting and validating data from the trade finance process, financial institutions using RIVO will be able to improve trade productivity, reduce risk, ensure compliance and ultimately boost scalability to process burgeoning trade volumes.

The complexity and paper-based nature of the trade finance process means that scaling up an industry-compliant operation requires a level of automation and efficiency provided only by digital solutions. The biggest concern for many financial institutions is ensuring regulatory compliance while driving growth without draining resources.

“Compliance is probably the number one challenge for banks worldwide and by partnering with Pelican we are enabling them to alleviate the regulatory burden and provide the necessary data and reports on demand,” said Enno-Burghard Weitzel, SVP Strategy, Digitization and Business Development at Surecomp. 


ESG Book and Sustainable Finance Institute Asia to pilot ESG data disclosure initiative

ESG Book has partnered with Sustainable Finance Institute Asia (SFIA) for a pilot initiative to address ESG data requirements and disclosure gaps in ASEAN markets. SFIA has identified ESG Book as one of its potential technology partners for the Single Accesspoint for ESG Data (SAFE) Initiative, which brings together industry stakeholders to enable sustainable finance across ASEAN markets through accessible, comparable, and transparent ESG data.

With financial institutions increasingly required to collect sustainability-related data from corporations to meet growing regulatory demands, the SAFE Initiative has been launched to help address data and disclosure gaps by providing credible, comprehensive, and consistent information for better and more informed ESG decision-making.

ESG Book says its SaaS-based solution enables SAFE participants to benefit from seamless and digitised disclosure workflows, with full ESG data ownership, control, and privacy with permissions functionalities. Users can disclose once and share publicly or privately with multiple financial institutions, materially reducing a company's reporting burden. The tool provides pre-populated disclosure ESG data based on publicly available information and continuous compatibility with the leading global disclosure requirements, including the International Sustainability Standards Board (ISSB) standards.

UK open banking passes 11 million payments milestone

Open banking has reached a milestone in the UK, surpassing 11.4 million payments in July 2023. This reflects a 9.3% increase in total payments compared with the previous month, highlighting the growing adoption of open banking services. Year-to-date (YTD) data for 2023 against 2022 demonstrates that total payments have doubled, showing a 102.4% growth. 

In July 2023, active payment users grew to 4.2 million, up 10.5% from June 2023 and 68.2% compared to July 2022. Among the growth drivers are single domestic payments, which recorded 10.5 million transactions in July, marking an 8% increase from June. Drivers for this growth included government payments solutions and onboarding UK financial institutions and investment platforms. These institutions have introduced ‘pay by bank’ options, allowing users to fund a variety of savings and investment products. These transactions align with the top three use cases for open banking transactions, which were account top-ups, credit card bill payments, and e-commerce.

Variable recurring payments (VRPs) also grew substantially, with 872,000 transactions in July, representing a 28.7% increase on the previous month. All-time data shows that single domestic payments have now reached 163.2 million. For the year-to-date, the growth is more pronounced. Single domestic payments have grown to 65 million, showcasing an increase of 95.6% compared to last year.


Airwallex and Public to minimise FX costs for UK investors purchasing US-based equities

Airwallex has partnered with Public, a US-based multi-asset investing platform, to minimise conversion costs for UK investors when purchasing US-based equities on the Public app.

With this launch, UK members can create a portfolio with over 5,000 US-listed equities, with low FX fees and zero commission trading during US stock market hours, while accessing Public’s deep data and insights. 

Airwallex says its financial infrastructure and global payment capabilities create a seamless investment journey for Public’s customer base. Through Airwallex’s API and developer toolkit, Public can create a frictionless experience for UK investors when they convert their GBP into USD to invest in US stocks.


Atlantic Money launches fixed fee international transfers for businesses

Atlantic Money is offering its service to businesses for the first time, meaning that companies in 29 countries can send up to £1m abroad at the current exchange rate for a flat fee of £3.

Atlantic Money expects that entering the business-to-business (B2B) and business-to-consumer (B2C) sectors will significantly increase the impact of flat-rate international transfers. In its first year, Atlantic Money transferred £160m for its users abroad. At that time, Atlantic Money did not offer payments for businesses or the largest target currency for international transfers, the Indian rupee. 

The firm notes that its flat-rate pricing structure is particularly beneficial for larger transaction amounts, which businesses naturally carry out more frequently. For transactions up to £1m, the differences amount to several thousand pounds.

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