UK GDP data shows November economic growth

UK real gross domestic product (GDP) is estimated to have fallen by 0.2% in the three months to November 2023, compared with the three months to August 2023, according to the Office for National Statistics data. Services showed no growth, production output fell by 1.5% and construction fell by 0.6% over the same period.

Monthly GDP is estimated to have grown by 0.3% in November 2023, following an unrevised fall of 0.3% in October 2023. Services output grew by 0.4% in November 2023 and was the main contributor to the monthly growth in GDP; this follows a fall of 0.1% in October 2023 (revised up from a 0.2% fall in our previous publication).

Production output grew by 0.3% in November 2023, following a fall of 1.3% in October (revised down from a 0.8% fall in our previous publication). The construction sector fell by 0.2% in November 2023 after a fall of 0.4% in October 2023 (revised up from a 0.5% fall in our previous publication).

Commenting on the UK GDP data, Tim San Wong, Global Capital Markets Associate at Validus Risk Management, said: “Overall, today’s numbers are evidence of an economy in better shape than anticipated. Whilst evidently good news it calls into question markets’ pricing of 120bps of cuts from the BoE during 2024. With core inflation still lingering well above target at 5.1%, housing markets continuing to be robust, and economic data coming out above expectations, it is hard to imagine the BoE beginning an aggressive cutting cycle. Without a downturn in the data, we could well see short term rate expectations move higher which in turn should support Sterling against the US dollar, perhaps moving it back toward its 2023 highs of over 1.30.”

 

Technological advances, tighter regulation will push cybersecurity costs higher

Technological innovation in AI and quantum computing will reshape the cyber risk landscape for issuers over the coming 12 months, according to a report from Moody’s Investors Services. While these technologies will offer significant advantages, they will also introduce new risks and impose high costs on organisations as they build out cyber defences in response, the report notes. These higher costs come when economic headwinds are already straining cybersecurity resources and companies face a thorny adjustment to tightening cyber disclosure rules. New initiatives in generative AI will also compete for IT funds, especially for organisations lacking a discrete cyber budget.

The report states that generative AI build-out will increase cyber risk for cloud providers and their customers. Cloud providers are rapidly expanding their generative AI services, but the complexity of these platforms, the pace at which they are being deployed and a shortage of skilled engineers increases risk of a cybersecurity breach. Additionally, regulators are expanding cyberattack disclosure rules, with many new cyber rules coming into effect in 2024 across the globe. Cyber regulations are generally credit-positive because they generate transparency and raise cyber defence baselines, but Moody’s says that issuers will face a rocky adjustment to meet the new expectations.

Another critical finding in the report is that cyber insurance prices are unlikely to rise significantly. Pricing is softening after several years of significant increases thanks to improved profitability, increased competition, and enhanced cybersecurity controls. Moody’s expects the cyber insurance market to continue to report substantial growth due to robust demand and rising capacity. At the same time, cyberespionage and intellectual property theft will increase. Generative AI and other emerging technologies have intensified technological rivalry, fuelling increased cyberespionage between countries and companies. Cyberespionage will also loom large over national elections worldwide, with more than half the world's population due to vote in major elections in 2024.

 

90% of CEOs waiting for genAI to move past the hype or experimenting in small ways

Generative AI (genAI) exploded into the public consciousness in 2023, promising to transform the way business functions. However, leaders are struggling to convert hype into reality despite the potential, according to a new report by Boston Consulting Group (BCG). 

The research found that two-thirds of executives (66%) are ambivalent or outright dissatisfied with their organisation’s progress on AI and genAI so far, citing three primary reasons for their dissatisfaction: a lack of talent and skills (62%), an unclear AI and genAI roadmap and investment priorities (47%), and absence of strategy regarding responsible AI and genAI (42%).

Some 71% of executives surveyed say they plan to increase tech investments in 2024 - an 11-point jump from 2023 - and even more (85%) plan to increase their spending on AI and genAI. More than half (54%) of leaders expect AI to provide cost savings this year, primarily through productivity gains in operations, customer service, and IT.

Although a small percentage of companies are already reaping the rewards of AI and genAI, others are either playing catch up or standing on the sidelines. More than 60% of executives surveyed say their firms are still waiting to see how AI-specific regulations develop, and just 6% of companies have trained more than 25% of their people on genAI tools so far.

According to the report, “winning” companies acknowledge genAI’s permanence and recognise its potential for enhanced productivity and topline growth. It outlines several characteristics that set the winners apart from observers, including a willingness to invest for productivity and top-line growth, systematically upskilling, being vigilant about genAI's cost of use, building intentional relationships, and implementing responsible AI (RAI) principles. 

 

Mastercard developing inclusive AI tool for small businesses

Mastercard is developing a new initiative to support small business owners globally with personalised guidance to help them grow and thrive. Acknowledging the crucial contribution of small businesses to the worldwide economy - and the impact of mentorship on their success - the company is piloting Mastercard Small Business AI. This inclusive AI tool delivers customised assistance for all small business owners anytime, anywhere, as they navigate their unique and varied business hurdles. 

In partnership with Create Labs, a social venture offering technology access to underserved communities, the tool is being crafted to limit biases and cater to diverse entrepreneurial needs. The tool incorporates genAI features to provide a conversational experience, drawing on emerging techniques and inclusive design standards to promote a relevant user journey.  

The genAI tool created by Mastercard and Create Labs will be responsibly built on diverse and inclusive content, a statement from Mastercard said. It will deliver data from Mastercard’s existing repository of content – from the Small Business Community, Digital Doors, Mastercard Trust Center, Strive USA, and elsewhere – while a newly formed global media coalition will contribute to that by licensing their business content - such as articles, podcasts and interviews. Blavity Media Group, Group Black, Newsweek, and TelevisaUnivision are slated to be the inaugural participants.

The tool is scheduled to be piloted in the US later this year, with the goal for international markets to follow. Mastercard plans to have additional partners join worldwide to drive critical local relevance as the tool expands globally.

 

Fiserv launches US small business performance index 

Fiserv has launched the Fiserv Small Business Index, an indicator for assessing the performance of small businesses in the US at national, state, and industry levels. The index will be published during the first week of every month and aims to deliver deeper insights more rapidly than existing measurements, empowering users to respond to emerging trends.

The index is differentiated by its direct aggregation of consumer spending activity within the US small business ecosystem. Rather than relying on survey or sentiment data, it is derived from point-of-sale transaction data, including card, cash, and check transactions in-store and online, across approximately 2 million US small businesses.

Each month, the Fiserv Small Business Index will provide information and analysis to help business owners, lenders, policymakers, economists, analysts and investors quickly understand the trajectory of certain sectors within the small business ecosystem, benchmark sales performance, make well-informed decisions, and adapt to an ever-changing market.

According to the December 2023 Fiserv Small Business Index, spending at small businesses ended the year with a modest upswing. Spending advanced one point in December 2023 with an index of 138, a +0.6% month-over-month increase from November and a +2.6% year-over-year increase compared to December 2022.

 

Global Payments and Commerzbank announce Germany joint venture

Global Payments and Commerzbank have announced a joint venture to offer digital payment solutions to small and medium-sized business customers across Germany. The new entity, Commerz Globalpay, is expected to launch in the first half of 2024. It will provide a suite of omnichannel payment and software solutions at scale, aiming to provide a one-stop shop for merchants to run and grow their businesses more efficiently.

Global Payments will hold a 51% stake in the company, which will be based in Frankfurt am Main, Germany, while Commerzbank will hold the other 49%. Commerz Globalpay GmbH will offer digital payment capabilities, including Global Payments’ smartphone-based payment applications that enable merchants to accept mobile payments without a separate card reader, modern card terminals and e-commerce/mobile payment solutions, all integrated to deliver seamless omnichannel experiences.

Further, business customers can access various value-added services, including cloud-based point-of-sale software, customer loyalty programs, an analytics and customer engagement platform, and more. The completion of the transaction is subject to the approval of the responsible supervisory and antitrust authorities.

 

Riskified details expanded chargeback management system

Riskified has announced further expansion of its Dispute Resolve platform that streamlines chargeback operations for merchant teams, particularly as they face the typical surge in chargebacks after the holidays. The solution uses expanded gateway and artificial intelligence integrations to auto-compile and format compelling evidence for every chargeback, saving teams time and enabling them to dispute more chargebacks.

A credit card chargeback is a process by which a card owner contests a purchase directly with their issuer, which can force a merchant to reverse the transaction. This process can be abused by a consumer who makes a legitimate purchase but then falsely claims harm or fraud to obtain a refund. To recover the revenue, chargeback managers must evaluate the legitimacy of a chargeback and dispute the false claim by gathering and submitting “compelling evidence”. However, compiling compelling evidence and disputing chargebacks is often a manual, time-consuming process, fragmented over several platforms. The result is that most merchants recover less than half of chargebacks, according to a forthcoming study by Riskified. 

Built to streamline and speed up revenue recovery, Dispute Resolve allows merchants to centralise and manage all chargebacks, increase automation to minimise manual effort and customise workflows to enhance existing operations.

Using the platform, merchants should be able to efficiently manage many of the manual processes typically associated with the chargeback dispute process. For example, they can automatically gather intelligence about the individual’s purchase history and their order details before deciding which chargebacks to dispute. After building their case, merchants can submit their disputes to issuing banks automatically and monitor the status of those disputed transactions in real-time. Additionally, merchants can leverage customised compelling evidence letters for their disputes.