US central bank chief expected to take wait-and-see approach to economy. Jerome Powell seen as less likely to announce cut to stimulus due to Delta variant affecting growth. (Guardian)

South Korea becomes first major Asian economy to raise interest rates. The Bank of Korea increased its base rate of interest from a record low of 0.5% to 0.75%. The move is aimed at helping curb the country’s household debt and home prices, which soared in recent months. (HSN)

Afghanistan is ‘weeks to months’ from economic collapse, experts say. The Taliban’s new acting governor of Afghanistan’s central bank is relatively unknown, adding to concerns about how the group will handle the country’s economy. (NBC News)

Bitcoin helped tank El Salvador debt. Now it’s rising back. El Salvador’s bonds are rebounding from a rout that extended into early August as the country was downgraded deeper into junk and concern mounted over Bukele’s Bitcoin move and push to change the constitution. (Bloomberg)

The second wave of Covid-19 has worsened the bad loan crisis at Indian banks. There seems to be no end to the bad loan problem for India’s finance industry. (Quartz)

Rising tension due to Gulf maritime security: Possible threat to the global economy? There is a possibility of maritime security breaches in the Gulf of Oman and the Strait of Hormuz. Such developments could lead to a rise in political, economic and security issues, especially if they were to coincide with an Israel-Iran confrontation. (Global Risk Insights)

Malaysia leads Asean GDP downgrades amid Delta’s grip. Malaysia leads growth downgrades by economists across Southeast Asia as the Delta variant forces countries to reimpose pandemic restrictions. (Business Mirror)

China’s boycott of Australia has redirected global flows of coal. Since Beijing instituted an unofficial boycott of Australian coal last October in a major escalation of the two countries’ trade conflict, global flows of coal have undergone a major reshuffling. (Quartz)

Germany's Sept election and why it matters to markets. A momentous German election marking the end of Angela Merkel's 16 years as chancellor is less than a month away and with no clear outcome in sight, markets may start to pay attention. (US News & World Report)

Post-Brexit UK: No milkshakes and fewer chicken sandwiches. A lack of qualified drivers combined with tough visa regulations are slowing down the country's supply chains. Food retailers like McDonald's have been hit. The Christmas season could stretch things to the limit. (DW)

China’s property crackdown stalks credit markets. China’s push to wean property developers from excessive borrowing is spilling over into loan losses at banks and pain in credit markets as cash-strapped builders fall into distress, raising the risk of fallout rippling across the economy. (HSN)

How data literate is your company? As companies rely more and more on data, and it creeps into more parts of business, data literacy is a skill that everyone has to have now. But, evidence suggests that most companies are still struggling to build this skill. (Harvard Business Review)

China reopens terminal at world’s 3rd-busiest port. The Meishan terminal at China’s second-busiest port reopened Wednesday following a two-week shutdown that further snarled already stressed shipping routes in Asia.  (Business Mirror)

IMF $650 billion reserves distribution clears last hurdle in ‘unprecedented’ move. IMF member countries will receive SDRs—the fund’s unit of exchange backed by dollars, euros, yen, sterling and yuan—in proportion with their existing quota shareholdings in the fund.  (Reuters)

Executive leaders should act now in implementing a strategic planning process for future revenue growth, according to Gartner, Inc. Organizations must prepare responses to future disruptions and anticipate change by evaluating and analyzing a number of factors, so they can build planning assumptions for strategic plans, the organization says.

Gartner segments key trends and disruptions into seven major categories—what Gartner refers to as a “tapestry” based on the first letter of each category (TPESTRE):

1. Technological: The evolution, impact and disruption of technology change.
2. Political: Attitudes, institutions and legislation shifting the political environment.
3. Economic: Factors in the local and global economic environment that influence businesses and governments.
4. Social/Cultural: Attitudes, behaviors and lifestyles of individuals and societal groups.
5. Trust/Ethics: Ethical expectations, behaviors, duties and biases of people and companies toward one another and society.
6. Regulatory/Legal: Changes in laws and governmental policies and regulations to reward or punish particular behaviors.
7. Environmental: Technical, political, economic, cultural, ethical and legal changes supporting environmental protection and sustainability.

Organizations should be deliberate about scouting for trends by incorporating trendspotting, which is the acquisition and evaluation of trends that may impact the organization, Gartner explains. A survey of 154 business and IT leaders in February of this year found that only 38% of organizations performing trendspotting had a defined, or formal process. Most used an ad hoc approach.

“A deliberate approach ensures that executive leaders consider trends and disruptions that exist outside of their core responsibilities, where emerging trends might be more familiar,” said Marty Resnick, vice president, analyst at Gartner. “Executives who are not adequately trendspotting already likely will miss critical inputs to their strategic assumptions and planning. This leaves their organization exposed to blind spots and risk, limiting their ability to capitalize on these opportunities.”

 

 

The need for greater reliance on digital interactions and remote banking in 2020 underscored the advantages of banking as a service (BaaS) for many industry analysts. BaaS links crucial digital banking services, including loans, payments or deposit accounts, to nonbanks through application programming interfaces (APIs) from licensed financial institutions (FIs). BaaS could allow an airline, for example, to offer its customers mobile bank accounts, debit cards with rewards for flying, loans for flights or payment services, with- out requiring a banking license of its own. The beauty of BaaS is that it makes financial products accessible to users at the point of need rather than within the constraints of traditional FIs. Its use has led to an empowering shift in the consumer banking experience.

Consumers are not the only ones who stand to benefit from BaaS. Following the seismic shift to consumer eCommerce and increasing demand for digital payments is an equivalent transformation in B2B financial services. Businesses of all sizes stand to benefit directly from leveraging APIs to tailor offerings to their business clients and consumers. Moreover, the transactions that BaaS enables do not represent solely money movement, but rather offer rich data that can be analyzed to provide organizations with greater financial transparency and control as well as improved user experiences.

This month’s Deep Dive examines how the use of BaaS in consumer-facing applications is forging a path in the world of B2B payments and why the specific benefits to businesses of taking this path no longer can be ignored.

The Rise of BaaS

It was close to impossible for brands to design banking services to support their customers before the inception of BaaS. Retailers and service providers would have to jump through hoops, such as securing a banking license, meeting specific regulations and building an infrastructure to support financial products. Even technology giants Amazon and Apple, for example, two companies with ample resources to create their own banking divisions, chose not to do so. Instead, Apple partnered in 2019 with Goldman Sachs to launch the Apple Card, with the FI’s financial license enabling the tech giant to add its own data to offer credit to customers. BaaS is expected to become a $3.6 trillion industry by 2030, and 81% of global FIs in a recent survey saw BaaS as a way to increase business, shorten time to market, improve distribution channels and streamline operations.

The capacity for more speed, flexibility and convenience in consumer payments has been effectively implemented into the B2B world through the BaaS model. Proponents say BaaS makes it easier for businesses to develop tools for sending and receiving B2B payments and managing financial data through APIs, artificial intelligence and cloud-based technologies. These models allow firms to implement payment and banking solutions such as digital invoicing systems.

Why BaaS Makes Sense for B2B Payments 

The pandemic has cleared a path for businesses to offer some semblance of banking services and payments not just to their end customers but also to their value chains, including vendors, intermediaries and suppliers. The B2B eCommerce market reached almost $7 trillion in 2020 and is anticipated to exceed $20 trillion globally by 2027, according to a B2B market assessment report.

Big Tech companies are leading the way in bypassing both the B2C and the B2B payments industries to drive their own growth. Uber is developing financial products to help drivers buy vehicles, handle payments and extend gas credit cards. Amazon, meanwhile, has distributed about $5 billion in loans to small- and medium-sized businesses (SMBs) while collecting credit data. In addition, 42% of U.S. SMBs surveyed have observed their online transaction volumes increase during the pandemic, so BaaS is likely to be required of smaller companies as well. One study found that nearly 70% of business buyers expect buying from their vendors to be “Amazon-like.”

BaaS is expected to become the major business model for the banking sector within five years because consumers and businesses alike want instant financial services digitally or through open interfaces. Businesses will need to catch up on the B2B side as digital payments and remote work environments continue to rise in popularity in the years to come.

Reprinted with permission from PYMNTS.com.

Governments worldwide pumped massive amounts of money into the economy in an effort to help businesses survive the pandemic and now that support has come to an end, for the most part. All of the government aid has distorted the marketplace, said Fred Dons, director at Deutsche Bank (Amsterdam), during FCIB’s members-only Global Expert Briefing last week. 

“It is difficult to gauge how a client or company is doing right now and how sound they are financially,” Dons added. “That means banks are not as willing to take on new clients.” So, creditors that take on new clients or markets could face situations where banks are not willing to partner on trade transactions.

“There is some mistrust in the market, and it is driving the current situation,” Dons added. He suggests contacting a bank as early as possible to find out if it has any reservations about doing business within a certain market, country or currency today. “The market is opaque right now,” he said. “It is difficult for anyone to see exactly what is happening in any one country right now.”

In addition, it has become increasingly difficult to predict the probability of collecting payment in a business’s desired currency. For example, in order to get U.S. dollars out of Nigeria, companies have to go to an auction, Dons said. A customer may have sufficient funds in its local currency, but it may not have the ability to pay its contracts in other currencies. 

Current instability and fluctuations in the value of different currencies also affect the probability of payment. Dons used fixed interest rates as an example. If a currency rate changes on a fixed interest rate, it can cause “major losses,” he said. For example, a loan of $8 million with a 100th of a cent difference over two days would equal a $50k loss. 

So, imagine the potential loss on a standard 60-, 180- and 360-day terms, while currency values are so unpredictable, Dons said. “Banks are willing to take some risk, but only short-term.” India, Bangladesh and Turkey pose some of the greatest FX and currency risk today due to their inability to control COVID-19 and high inflation, he pointed out. Dons recommended working closely with your bank, obtaining letters of credit and getting bank guarantees to help mitigate some of these risks. 

Story first appeared in eNews.

 

 

 

 

Week in Review Editorial Team:

Diana Mota, Editor in Chief and David Anderson, Member Relations