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Venture capitalists continue crypto investments – Industry roundup: 27 July

Point Carbon Zero Programme launched by MAS and Google Cloud to accelerate climate fintech solutions

The Monetary Authority of Singapore (MAS) and Google Cloud have launched the Point Carbon Zero Programme in order to promote the development, testing and expansion of climate fintech solutions throughout Asia.

The programme, an initiative under MAS' Project Greenprint based in Singapore, aims to employ climate fintech solutions to strengthen financial sector access to precise and detailed climate-related data, allowing for more effective capital deployment towards green and sustainable initiatives. The world’s first open-source cloud platform for climate finance will be launched by Google Cloud in support of this programme, facilitating the deployment and adoption of these climate fintech solutions by the financial sector.

MAS reported that despite fintechs comprising more than half of all start-up investments globally, climate fintech is still a relatively new sub-segment. As a result, the programme aims to stimulate the anticipated expansion of climate fintech solutions in Asia over a three-year span.

Fintech companies will be expected to propose cutting-edge technology solutions to a variety of issue statements related to climate financing. One hundred solution ideas will reportedly be selected for further development and evaluated with a pool of 1,000 financial institutions. The programme also intends to provide 10,000 multinational organizations and small and medium-sized businesses with the tools they need to develop, monitor and attain their sustainability goals.

The following are the programme's key features:

  • Mentorship and funding: selected participants will receive mentorship from Google Cloud as well as funding to help them develop their solutions further;
  • Data access: participants can expect to use the aggregated climate disclosure, environmental and public utilities to improve the precision of their solutions for measuring sectoral and corporate-level carbon emissions, as well as the impact of their efforts to reduce these emissions;
  • Manage carbon footprint: participants can track and reduce their personal carbon footprint associated with cloud usage;
  • Make data sharing easier: new climate-related datasets generated by these solutions can be made available to Project Greenprint's partners with the consent of data owners.

Venture capitalists to continue significant investments in cryptocurrency

Venture capitalists (VCs) are reportedly still investing capital into digital currency and blockchain start-ups at a rate that is set to surpass 2021's record, despite the uncertainties in the crypto space. According to PitchBook data, VCs invested US $17.5 billion in these companies in the first half of 2022, resulting in investments to exceed the record $26.9 billion raised in 2021. Meanwhile, Bitcoin has fallen by around 65 percent from its record high of $69,000 set in November 2021 as a result of macroeconomic headwinds and major project failures this year, and the total market value of cryptocurrencies has fallen by almost two-thirds to $1 trillion.

North America saw $11.4 billion in crypto VC deals in the six months ending in June 2022 compared to $15.6 billion for the entirety of 2021. These figures contrast with overall venture capital activity in the US, where transactions decreased to $144.2 billion in the first half of 2022 from $158.2 billion in the same period in 2021 due to the macroeconomic factors and market chaos. Rumi Morales, Director of Investments, Digital Currency Group, a US venture capital firm, commented that the data reflected growing confidence in the crypto and blockchain sectors.

Investor interest in supply chain and logistics is reportedly increasing as industry challenges persist. Soaring global energy prices, combined with growing concerns about energy security, have prompted investors to consider alternative energy and storage options. Investing in electric vehicles, battery technologies and hydrogen is becoming more appealing.

The global uncertainty that has gripped the world is expected to continue into Q3'22, stated reports, keeping the IPO window closed and VC investment low. As businesses are compelled to pursue funding rounds despite the difficult fundraising environment, down rounds may become more prevalent.

Additionally, M&A activity is expected to increase globally as investors seek transactions among companies facing challenges and start-ups in an attempt to consolidate and strengthen their economies of scale and market positions. As many companies struggle to deal with a significant sell-off in assets, the crypto tide in tech is anticipated to shift with increased consolidation among corporations heading into Q3'22.

FedNow Payments Service Provider Showcase to feature Fraud.net

The US Federal Reserve's FedNowSM Payments Service Provider Showcase has launched Fraud.net, a system of customizable fraud prevention and risk management solutions.

The FedNowSM Service Provider Showcase, according to the Federal Reserve, is a source of information for linking financial institutions and businesses with service providers who can help them develop and integrate instant payment products using the FedNowSM Service. The Fed serves as the US central banking system, advising financial institutions and promoting payment and settlement system safety through services to banks.

The Federal Reserve banks are expected to introduce the FedNowSM Service, a new instant payment platform that will give financial institutions of all sizes access to reliable instant payment services in real time, around-the-clock in 2023. For global digital banking and commerce companies, Fraud.net claims to operate an end-to-end ecosystem for managing digital risks. By automating customer onboarding and compliance operations, the platform expects to enable businesses to identify and stop financial crimes like money laundering, cybercrime and digital fraud.

Digital fraud costs merchants €80 billion according to recent study

Fraugster, a payment intelligence firm, has just released its first Payment Intelligence report, which details the key compliance, fraud risk and revenue uplift trends that reportedly dominated the market in 2021. The firm’s findings are based on 60 billion data points and an additional 80 million transactions.

The findings highlight the most recent fraud tactics used against payment service providers (PSPs), buy now pay later (BNPL) suppliers, and merchants in the travel, physical and digital goods industries. The research, according to the firm, also examined the numerous challenges and opportunities confronting players in the emerging BNPL market, as well as insights into the most significant chargeback patterns, prevalent fraud types, PSD2 implications, and projected trends for 2022 and beyond. The examination into fraud tendencies yielded the report's most concerning results, which highlighted the fact that in 2021, online fraud cost €80 billion in lost sales of physical and digital goods as well as e-tickets.

Below are some of the report’s key findings:

  • Investigations into fraud attacks: 2021 saw a sharp rise in fraud cases across the industry, including a significant 109% increase in identity fraud, a 70% increase in gift card-related fraud, and a 52% increase in account takeover attacks.
  • Checkout/basket information: as international travel progressively resumed operation after the pandemic, travel received the highest average order value by vertical at €580. Physical products came next at €147, followed by BNPL at €146, and then digital goods at €20.
  • Anti-money laundering (AML): 80 institutions across the industry received a total of €2.5 billion in fines in 2021.
  • Unrecoverable debts: as a percentage of total outstanding debt for credit cards stood at 5.3% in 2021 but rose significantly to an estimated 9.55% for BNPL providers, in conjunction with the growing acceptance of alternative financing platforms.

Testing the full capabilities of retail and wholesale CBDCs at Barclays Rise Hackathon

UK fintech hub Barclays Rise is expected to host an opportunity for industry participants to code and showcase solutions that explore the future of money, including a digital pound. Although CBDCs are still in their infancy, central banks around the world, including Barclays, are actively testing their capabilities through a series of experiments, proofs-of-concept and pilots. The research is said to be currently focused on both retail CBDCs for general public use and wholesale CBDCs for financial institutions.

According to PwC's 2021 analysis, Europe is said to be further ahead of the rest of the world in terms of CBDC development, with the UK emerging as a regional leader in this space. There is currently a strong emphasis on how CBDCs are designed to mitigate the risks associated with their adoption while seizing appropriate opportunities. The Barclays Rise Hackathon is expected to explore many possibilities in this space.

In order to participate in the Barclays CBDC Hackathon 2022, participants connect to a Barclays simulation of both a central bank and a commercial bank in order to complete a series of coding tasks. This simulation is anticipated to adhere to the Bank of England's platform model for retail UK CBDC provision, which entails a central bank running a core ledger and providing access via APIs to authorized and regulated payment interface providers (PIPs) that give users access to CBDCs. Participants, according to the report, will also discuss how industry platforms can be used to address these issues for both traditional and emerging payment methods, such as retail UK CBDC deposits and business bank deposits.

The Barclays Rise Hackathon is in collaboration with Digital Asset, IBM and EY. Digital Asset is expected to provide participants with access to and technical assistance on the DAML platform, while IBM will provide participants with access to and technical assistance on the Hyperledger Fabric platform. EY is said to serve as an independent observer and is expected to publish a report following the event. The event is scheduled to take place at Barclays Rise London on 27-28, September 2022.

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