UK’s Digital Securities Sandbox opens for applications

The UK’s Digital Securities Sandbox (DSS) is now open after consultation with industry, which closed in May 2024. The Bank of England (BoE) and the Financial Conduct Authority (FCA) have set out their approach to safely adopt new technologies in the operation of financial market infrastructures. 

The DSS is the first Financial Market Infrastructure (FMI) sandbox created under the FMI sandbox powers conferred on HM Treasury (HMT) by the Financial Services and Markets Act (FSMA) 2023. FMI sandboxes allow firms to experiment with new or different practices and developing technology in the key functions of FMI.

The DSS will facilitate the use of developing technology, such as distributed ledger technology (DLT), in the issuance, trading and settlement of securities by allowing firms to operate under a temporarily modified legal and regulatory framework. As the first FMI sandbox, the DSS is also a test case for this new form of policymaking, where regulators can observe activity and consider whether changes to rules or legislation are required to enable it.

The DSS will allow sandbox entrants to undertake the notary, maintenance and settlement activities traditionally associated with central securities depositories (CSDs) and combine these activities with the operation of a trading venue. The DSS will allow firms to trial new business models. It is important to note that DSS activity will be ‘live’ and the regulators’ intention is that the wider financial ecosystem should be able to interact with a sandbox entrant in broadly the same way they would with a traditional FMI. To protect financial stability however, limits will be placed on the value of securities issued into the DSS.

A statement from the FCA encourages firms that are innovating in financial market infrastructure to apply to join the sandbox, and suggests that the DSS could also lead to a quicker, more effective and collaborative way of delivering regulatory change.

The DSS could support financial instruments such as equities, corporate and government bonds, money market instruments such as commercial paper and certificate of deposits, units in collective investment undertakings (fund units) and emissions allowances.  

“The DSS supports innovation, helps protect financial stability and strengthens the UK’s leading position as a global and vibrant financial centre, built on globally respected high standards,” the FCA statement said.  

 

ASEAN manufacturing output contracts for first time in three years

Only a fractional improvement in the health of the ASEAN manufacturing sector was recorded in September, according to the Purchasing Managers’ Index (PMI) survey data by S&P Global. Notably, output levels contracted for the first time in three years, albeit only with a shallow decline. Meanwhile, growth in new orders slowed on the month, with the latest uptick the least pronounced in the current seven-month sequence of expansion.

Weakening demand trends coincided with a further cooling of inflationary pressures. Cost burdens and output charges rose at the weakest paces in 13 and 15 months, respectively.

The headline S&P Global ASEAN Manufacturing PMI slipped to 50.5 in September from 51.1 in August. While posting above the neutral 50.0 threshold for a ninth straight month, the latest reading signalled only a fractional improvement in ASEAN manufacturing operating conditions, and one that was the weakest since February.

The slowdown was largely owed to cooling underlying demand trends. Growth in new orders eased, with the latest uptick being the softest recorded in seven months. The upturn was hindered by consistently underperforming trade volumes, which have been declining since June 2022. Moreover, the latest drop in new export sales was sharp and the most marked in over three years.

Weaker demand trends led to a fresh decline in output, with ASEAN goods producers experiencing their first drop in three years. However, the overall rate of contraction was minimal. While manufacturers continued to increase their purchasing, the rate of growth also softened from August and was only mild.

More positively, a fresh rise in payroll numbers was noted in September. Months of improving sales volumes supported the modest rise in employment, which was also the joint-strongest (along with February’s reading) in two years.

The rate of input price inflation cooled since August, with cost burdens rising at the weakest pace in 13 months. The rate of charge inflation also softened and was marginal overall.

Lastly, confidence in the outlook for output registered an improvement, with optimism reaching its highest level since the start of the year. ASEAN manufacturers are hopeful that output will grow over the next 12 months.

 

First Abu Dhabi Bank pilots programmable payments with JPM’s Onyx

Building on its earlier participation in JPM Coin Systems through Onyx by J.P. Morgan, the firm’s blockchain business unit, First Abu Dhabi Bank (FAB) completed its pilot using programmable payments.

Programmability is the ability of the system to execute specific tasks based on defined instructions. FAB became the first financial institution to complete the programmable payment pilot with JPM Coin, enabling payments to be triggered at specific times or events.

This pilot opens up the possibility of a dynamic and automated funding and settlement solution to FAB and J.P. Morgan’s mutual clients. This solution will enable clients to benefit from Onyx’s real-time and/or event-based programmable capabilities. As part of the pilot, FAB successfully completed time-based and threshold balance-based account funding into deposit accounts to execute a payment obligation.

Unlike traditional cash concentration structures, which often lack real-time features or event-based configuration controlled by a bank, this innovation delivers more forward-looking possibilities where programmability can be used to provide flexibility to the client. Conditions for payment initiation and execution can be replicated on the bank’s side, resulting in improved execution response times with finality and traceability. Banks, with their rich transaction data, are in a better position to build a wide range of programmable scenarios, including instructions within payments and obligation-linked payments that are settled in an all-or-none manner.

With programmable payments, treasurers may be able to transition from cash forecasting to dynamic or just-in-time (JIT) funding 24/7, maximising yields on surplus cash and minimising fees and opportunity costs. Unexpected payment failures or drawing on credit lines can be minimised. The successful pilot will also pave the way for more use cases, such as automated and conditional invoice payments, margin funding, and settlement solutions.

 

Mastercard and Amazon to enable digital payment acceptance across MEA

Mastercard and Amazon Payment Services have signed a multi-year commercial partnership agreement to digitise payment acceptance in the Middle East and Africa across countries including Bahrain, Egypt, Jordan, Kuwait, Lebanon, Oman, Qatar, South Africa and UAE.

As part of the collaboration, the payment service provider (PSP) will adopt Mastercard Gateway – a single touchpoint for payment processing – as a payment solution available in 40 markets in the region. The integration of the solution will enable merchants to offer fast, seamless, and secure transactions as well as convenient payment choices to customers.

In line with the rapid increase in digital payments, the partnership will benefit thousands of Amazon Payment Services merchants, including Amazon online stores for shoppers across the UAE and Egypt. In addition, it will open new opportunities for building synergies with entities such as telcos and governments to enhance their checkout options, driving a faster and more secure transaction rate for their customers.

According to the Mastercard Payment Industry Insights Index, 95% of consumers in the Middle East and Africa are considering using emerging payment methods, such as wearables, biometrics, digital wallets, QR codes, and contactless payments. Additionally, 61% of consumers would avoid businesses that do not accept electronic payments, while banks in the region that have migrated to digital channels have also seen the share of digital transactions increase from 70% to 90% over the course of approximately two years.

The two organisations have also signed an innovation agreement to develop Secure Card on File, Click to Pay, and token authentication services to provide multi-rail checkout options to merchants, and a faster checkout experience to end customers.

 

EPI launches European digital payment wallet in France

The European Payments Initiative (EPI) has announced the launch of Wero, its European digital wallet, in France. The European instant account-to-account payment solution will be available to French customers of BNP Paribas, Groupe BPCE, Crédit Agricole, Crédit Mutuel Alliance Fédérale, Crédit Mutuel Arkéa, La Banque Postale and Société Générale, as well as many of their subsidiaries. 

While most banks will initially offer Wero via their applications, La Banque Postale customers will be able to make payments using the Wero application. It will be available in all smartphone app stores from the second half of October 2024. 

The launch of the person-to-person (P2P) service will enable users with a French bank account to send and receive money instantly using just a telephone number or email address. Wero will take over from Paylib, whose 35 million registered users will be offered a simple switch to the European payment service before Paylib is discontinued in early 2025. The plan is to integrate new functionalities later, such as the ‘Money Request’ function and the generation of individual QR codes so that users do not have to give their phone number when making a person-to-person payment.

Following the start of the solution in Germany in July 2024, users from both countries will now be able to make cross-border payments between the already rolled-out participating banks and their customers. In Belgium, all member banks will have deployed the solution by the end of the year. Luxemburg and the Netherlands will follow in a subsequent step.

 

Visa to acquire AI financial crime firm Featurespace

Visa has signed a definitive agreement to acquire Featurespace, a developer of real-time artificial intelligence (AI) payments protection technology that prevents and mitigates payments fraud and financial crime risks. The acquisition of Featurespace is planned to complement and strengthen Visa’s portfolio of fraud detection and risk-scoring solutions used by clients around the world to grow and protect their businesses.

Since its inception out of Cambridge University’s engineering department, Featurespace has developed innovative algorithmic-based solutions to analyse transaction data and detect even the most elusive fraud cases. The combined expertise of Visa and Featurespace should enable clients to manage fraud in real-time and further protect the payments ecosystem using AI-fuelled solutions.

The transaction is subject to customary closing conditions, including receipt of applicable regulatory approvals. The transaction is expected to close in fiscal year 2025.

“Over the past 12 years we have served the financial services industry, building a company that has gone from strength to strength, and we are thrilled to become a part of Visa,” said Dave Excell, Founder of Featurespace. “With Visa, we can bring the innovation, integrity and purpose of our platform and our team to more payment service providers and ultimately, stop more people from becoming victims of financial crime.”