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The World Bank significantly lowers its growth forecast for 2023, warning that a global recession is imminent – Industry roundup: 11 January

The World Bank significantly lowers its growth forecast for 2023, warning that a global recession is imminent 

The World Bank organization revised nearly all of its projections for developed nations downward, lowering its growth outlook for the world economy to 1.7% for 2023 in its most recent report, Global Economic Prospects. The organization had previously predicted that the global economy would grow by 3% in 2023. The downgrade in the outlook for the US economy from an earlier projection of 2.4% to 0.5% was reportedly the main driver of the adjustment. 

Additionally, China's growth outlook was reduced by the World Bank from 5.2% to 4.3% for 2023, as well as Japan's from 1.3% to 1% and Europe and Central Asia's from 1.5% to 0.1%. The World Bank commented that the reason for the slowdown in global growth is the “unexpectedly rapid and synchronous” tightening of global monetary policy, potentially leading the world economy into a recession. The revised estimates would reportedly represent the third slowest rate of growth in nearly three decades, trailing the pandemic and the global financial crisis.  

According to the World Bank, tighter monetary policies implemented by central banks worldwide may have been required to regulate inflation, but the global financial situation may have worsened. In addition, the international financial organization reportedly reduced its 2024 forecasts from a 3% growth expectation to 2.7%. 

UPI in India and PayNow in Singapore collaborate to simplify cross-border payments 

India’s current real-time payment system, Unified Payments Interface (UPI), which was developed by the National Payments Corporation of India and enables fund transfers between bank accounts on a mobile platform, has announced its plans to expand its cross-border payment capabilities with the integration of PayNow, the Singaporean version of UPI. 

The merger, which is expected to begin soon, will reportedly reduce transaction remittances to 10%. Sopnendu Mohanty, Chief Fintech Officer, Central Bank, Singapore, made the announcement during a G20 meeting in Kolkata. Reports indicate that one billion Singapore dollars are currently remitted to India, while 200-300 million Singapore dollars flow out of the country.  

The Bharat Bill payment system of India has reportedly enabled acceptance of all payments, with UPI now adding new features to assist clients. Furthermore, the collaboration with Singapore is expected to be only the beginning of an equivalent system that is reportedly being created between India, the UAE and other countries. Currently, Singapore and Indonesia have an alliance through PayNow and PromPay. Additionally, India plans to provide UPI technologies and codes at no cost for nations establishing infrastructures to support digital payments, said reports. 

Visa and Mastercard attempt to participate in India’s UPI payment scheme 

The Reserve Bank of India (RBI) may reportedly permit Mastercard and Visa credit cards to connect to India's UPI payment system. Currently, only a limited number of credit cards issued by RuPay, the card payment system introduced by the National Payments Corporation of India (NPCI) in 2012, are approved for use on the UPI network. 

Although UPI has reportedly been available in India since 2016, the RBI just recently approved the integration of credit cards into the rapidly growing payment system. The RBI's action reportedly raises the possibility of enhanced monetisation of UPI transactions. The Ministry of Finance considers UPI to be a public good with minimal scope for monetising UPI transactions, which has reportedly been a source of concern for UPI-enabling apps and fintechs that have invested heavily in developing the UPI QR-based payment platform. 

Currently, UPI transactions backed by debit cards reportedly do not generate any merchant discount rate (MDR) or interchange fees, which are fees assessed by intermediaries in payment systems. The integration of RuPay credit cards with UPI, however, would include a clause stating that transactions exceeding Rs 2000 will be subject to MDR, similar to traditional credit card transactions.  

Prior to NPCI’s launch of RuPay cards, Mastercard and Visa reportedly controlled the Indian card network. NPCI's operations as a non-profit organization are aimed at developing an effective domestic payment platform in India that is independent of overseas competitors. Additionally, Mastercard was reportedly forced to comply with an RBI restriction on adding new customers in 2021 due to non-compliance with India's payment data storage standards, which was lifted in 2022. However, RuPay has since expanded its presence in the card market, accounting for up to 20% of the country's credit card network. 

Another setback for Visa and Mastercard arose in 2022 when RuPay's credit cards were reportedly granted exclusive access to the UPI network. However, global card companies plan to expand their credit penetration in the Indian market with the proposed inclusion of Visa and Mastercard into UPI's scope. Reports indicate that it is still unclear whether RuPay will be able to capitalize on its early advantage or if the major card issuers will be able to maintain their dominant position in credit-based UPI transactions. 

Canadian fintech, Nuvei, to pay US $1.3 billion to acquire US-based payments firm, Paya 

Nuvei, a Canadian fintech firm, has agreed to acquire Paya, a US payments and commerce solutions provider, for approximately US $1.3 billion, offering to acquire all of Paya's outstanding shares for $9.75 per share. The deal is expected to be finalized by the end of the first quarter of 2023. Nuvei, a Montreal-based company founded in 2003, reportedly serves businesses in more than 200 markets and provides technology that enables businesses to accept payments and provide various payout options in addition to card issuance, banking, risk and fraud management services. 

With the acquisition, Nuvei plans to capitalize on domestic and global payments opportunities, as well as expand its operations across high-potential markets covered by Paya. Additionally, the company plans to enter the expanding B2B payments middle market industry, which Nuvei predicts will reach a market size of $2.3 trillion by 2026 in the US. 

Paya reportedly offers integrated payment solutions that help clients receive and send payments, accelerate incoming funds and improve operational productivity. Additionally, the company reportedly processes over $40 billion in payments annually (which includes credit/debit cards, ACH and checks), while providing services to more than 100,000 clients. 

The proposed transaction, according to Nuvei's chair and CEO Philip Fayer, will help speed up the implementation of their integrated payment strategy, diversify into high-growth industries, as well as improve its business operations. 

Broadridge and LiquidX unveil the industry’s first end-to-end BPO solution for trade finance, dubbed InBlock TradeOps 

Broadridge Financial Solutions and LiquidX, a global fintech platform for trade finance automation, revenue growth, and risk management, have partnered to launch InBlock TradeOps, a new business process outsourcing (BPO) service for trade finance.  

The collaboration is expected to offer a fully integrated middle and back-office operations solution for trade finance with LiquidX’s technology and Broadridge’s outsourcing capabilities. Jim Toffey, CEO, LiquidX, stated that InBlock TradeOps is the first comprehensive solution that focuses on lending and investing in this multi-trillion-dollar credit asset class while removing all operational challenges.  

Significant segments within a company’s workflow process could reportedly be automated using InBlock TradeOps. As a result, trade finance investors, including banks and asset managers, can expect to make better investment, risk and compliance decisions while realizing cost savings. 

Matt Connor, COO, Broadridge's Global Technology and Operations Business, stated that InBlock TradeOps can significantly reduce operational costs for the sector within the next ten years, potentially reducing operational costs for many organizations by 30% to 50%. 

BSP prioritizes the use of digital payment systems as a primary goal for 2023 

The Bangko Sentral ng Pilipinas (BSP) work program for 2023 will reportedly concentrate on the introduction of new digital payment system while preparing for the introduction of a central bank digital currency, stated Felipe Medalla, Governor of the Philippines.  

The bank also intends to introduce supplementary digital payment channels this year, such as InstaPay Debit Pull and Request to Pay. Medalla added that the bank plans to publish a licensing framework for merchant acquiring and aggregation, as well as a framework for collaborative oversight. The licensing framework will reportedly support the digitization of merchant payments, which account for approximately 70% of all monthly retail payments in the Philippines, according to the BSP.  

Mr. Medalla also stated that the BSP and the financial industry have begun a pilot wholesale CBDC or central bank digital currency program, which is expected to help promote cross-border transactions. 

Hitachi Payment and BharatPe received RBI’s approval to operate as payment aggregators 

The Reserve Bank of India has granted Hitachi Payment Services and BharatPe, a full-stack service app for merchants, in-principle approval to function as payment aggregators. As a payment aggregator, Hitachi will reportedly be able to offer value-added services, such as EMI, PayLater, BBPS and loyalty programs, to its B2B clients. BharatPe would be able to expand its market and offer solutions for accepting digital payments. 

Furthermore, the central bank has given its in-principle approval for fintech companies like Razorpay, PineLabs, Stripe, 1Pay, Innoviti Payments, MSwipe and Infibeam Avenues to function as payment aggregators, with more businesses awaiting approval for payment aggregator licenses. Only companies that the RBI has authorized may acquire and provide payment services to merchants, according to guidelines the RBI issued in 2020. Banks do not require separate authorizations, but non-bank entities that provide payment aggregator services were required to apply for authorisation from the RBI by June 2021, which was reportedly later extended.  

However, the central bank had permitted them to carry on with their business until the regulator advised them of their application. Payment aggregators that were in operation as of March 2020 were reportedly given another window by the RBI to submit a license application. Payment aggregators had until 30 September 2022 to submit their license applications. 

The requirements that must be met by the entities in order to obtain this license have reportedly been outlined by the central bank, and while many companies have had their applications denied by the RBI, many others have received approval. 

RBC GAM introduces the RBC emerging markets ex-China equity fund in the US 

The Royal Bank of Canada’s Global Asset Management (RBC GAM) group has unveiled the RBC Emerging Markets ex-China Equity Fund, a new mutual fund that reportedly offers US investors with the ability to invest in a variety of equities across emerging economies. 

The RBC Emerging Markets ex-China Equity Fund, which was launched in December 2022 by a team based in London, aims to invest predominantly in a specialized portfolio of top-tier mid-size and large multinational corporations with operations in emerging market economies, with the exception of China. The fund will reportedly exclude Chinese companies while adhering to the same philosophy and methodology as RBC GAM's current RBC Emerging Markets Equity Fund.  

Reports indicate that the fund is intended for investors who seek to diversify their holdings by adding long-term growth opportunities in emerging markets to their portfolios. The investment strategy was developed by the Emerging Markets Equity team at RBC GAM using a research base that reportedly integrated environmental, social and governance factors. 

Philippe Langham, Senior Portfolio Manager and Head of Emerging Markets Equities, RBC Global Asset Management (UK), commented that China's sizable market and investors' uncertainty on the country's structural forecasts reportedly led to the rapid rise in investor demand seeking an emerging markets ex-China solution. The RBC Emerging Markets ex-China Equity Fund is reportedly available in three classes of shares: Class I, Class A and Class R6. 

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