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Africa’s Fintech culture transforming continent’s FX landscape

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Africa’s Fintech culture transforming continent’s FX landscape

Africa’s fragmented markets and lack of legacy foreign exchange trading infrastructure means that the continent has become a melting pot of fintech activity and innovation.

The evolution to electronic foreign currency trading in Africa, whilst slow to start, is today gaining tremendous traction.

In South Africa only five years ago almost 90% of foreign currency trades happened over the telephone. “Today, despite challenges around illiquidity and complicated political and capital control environments, approximately 75% of trades are conducted digitally with a mere 25% conducted on the phone,” says Tim Hutchinson, Head of Digital for Financial Markets, Standard Bank.

Tim Hutchinson, Standard Bank Group

Tim Hutchinson, Standard Bank Group

With 57.6% of the world’s 174 million active registered mobile money accounts in Sub-Saharan Africa, the continent is becoming a world leader in fintech generally – and mobile money in particular. As African citizens and business people transact globally Africa’s highly developed fintech culture is not only deepening on the continent, but is also migrating out of Africa.

The foreign exchange flows that Africa’s expanding fintech culture supports are very important to the continent’s financial services providers, most of whom are developing fintech capabilities or partnering with the most popular or effective home-grown African fintech’s to ensure that they capture this flow.

Standard Bank has been an integral part of driving this rapid evolution to digital in Africa’s foreign exchange trading landscape.

“In order to function as an effective market maker, we need to source liquidity in market. We also need to, instantly, formulate risk-based pricing in an ever-changing world. Thereafter we need to distribute price,” explains Mr Hutchinson.

In Africa this requires developing solutions that allows retail, corporate and institutional customers to access foreign exchange markets across multiple jurisdictions. At the same time in most markets, “we also need to show central banks what we are doing,” adds Mr Hutchinson. All transactions need to be transparent and electronically traceable so that local authorities are prepared to approve digital trades.

Today, however, banks are not only expected to provide the systems and networks to facilitate basic transactions but are, “also required to provide insight and guidance beyond pure execution by offering additional value-based services across research, hedging and, most importantly, settlement capability,” says Mr Hutchinson. Currency research for example, is increasingly a big client requirement. Having on the ground experience and local expertise as well as the ability to deliver this digitally, “differentiates Standard Bank’s distribution capabilities in this regard,” he adds.

In addition, banks are also increasingly required to inform and guide clients through the broader economic, legal and political landscapes in which transactions occur. For example, one of the considerations in developing Standard Bank’s digital capability was how to combine market intelligence and research with real-time pricing, trade execution and post-trade services. Today it is not enough just to execute trades. “It is equally important that we advise and inform the broader universe in which trades happen,” says Mr Hutchinson.

From a technology point of view Regulatory Technology (Regtec), for example, is assisting Africa to manage new regulatory developments in heavily currency-controlled environments. Similarly, the rise in robotic process automation (RPA) and artificial intelligence (AI), “has allowed Standard Bank to develop solutions that leapfrog traditional business problems,” explains Mr Hutchinson.

Digital trading in Africa is also evolving in its own often very different way. “We have found that it is not just a question of importing developed world systems,” says Mr Hutchinson. “Our approach with clients is to work with them to help understand their internal needs in terms of governance and operational efficiency,” he adds. “We then partner with clients to develop and implement digital solutions that talk to the heart of their business need.”

Standard Bank’s own Business Online (BOL) platform provides an example of how the bank has built digital transaction capabilities that exactly meet client need. BOL, for example, allows clients to view balances across the continent while making third party currency payments and also supporting general cash management. This kind of broad, business-wide digital cash view and capability puts control back in the hands of the clients while also allowing clients, rather than the bank, to manage their own cash flow.

From an Institutional perspective it’s very important to be able to offer customisable solutions to clients managing money on behalf of their investors. Standard Bank’s investment in Application Programming Interface (API) technology, for example, is tracking exactly its client’s growing ability to build these capabilities into their own systems.

On the retail side Standard Bank’s SHYFT app – a digital wallet allowing global transactions in USD, EUROS, GBP and Australian dollars has extended this control element to the man in the street. SHYFT has been recognised both globally and locally for its innovation.

“Standard Bank presents a very compelling, unique and globally competitive digital trading proposition to local and developed world clients seeking to access Africa,” says Mr Hutchinson. “Our footprint across 20 territories – most at different levels of digital development – provides a compelling pan-African proposition for global and local clients alike,” he adds.

While Africa’s record in digital adaptation and innovation is impressive, the technology part is often the easier part to implement. “The human and cultural systems, and client behaviour changes, required to give this digital evolution life – like getting customer analogue systems to start pricing electronically to make trades visible 24/7 – is often a lot harder to achieve than the technology upgrade,” says Mr Hutchinson. In short, bank employees, customers and regulators all need to undergo fundamental cultural shifts in how they do things and understand the world.

It is often these broader cultural and market shifts that Standard Bank as a pan-African bank is called on to advise as clients seek to understand and engage Africa effectively.

Given the rapid pace of digital evolution within Africa’s varied market, customer, legislative and cultural landscapes, “we need to balance customer value and efficiency – and regulatory pressures to be more transparent – with what is, in the long run, best for the market,” says Mr Hutchinson.

As a pan-African bank inextricably committed to the growth and success of the continent, Standard Bank’s digital journey requires a judicious blend of developed world technology with African insight and innovation. “This blend should be capable of balancing customer need and legislative oversight in the development of efficient and inclusive markets that sustain long term growth,” says Mr Hutchinson.

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Sterling holds above $1.39, rises vs euro after Sunak’s generous budget

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Sterling holds above $1.39, rises vs euro after Sunak's generous budget 1

By Joice Alves

LONDON (Reuters) – Sterling held above $1.39 against the dollar on Thursday and gained versus the euro after British finance minister Rishi Sunak unveiled an expansive annual budget designed to prop up the economy.

Sterling is the best-performing G10 currency this year, with investors expecting Britain’s speedy vaccination programme will help the economy to recover from its worst annual contraction in 300 years.

As the locked-down country prepares to re-open, Sunak delivered what he hopes will be a last big spending splurge to get the economy through the COVID-19 crisis.

The UK economy will return to its pre-pandemic size in mid-2022, six months earlier than previously forecast, Sunak said.

ING analysts said in a note to clients that the “generous budget” was well received and it was seen “to strike the right balance and support the spring recovery.”

Sterling edged 0.2% lower against the dollar to $1.3921 in early London trading,. Versus the euro, it gained 0.1% to 86.41 pence.

“Sterling is performing well …My sense is the budget measures bode well in the eyes of overseas investors,” said Neil Jones, Head of FX Sales at Mizuho Bank.

He said the measures and progress on vaccinations “add weight to the view the UK will stand at the forefront of the global COVID recovery”.

(Reporting by Joice Alves; editing by John Stonestreet)

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FTSE 100 falls as high yields, inflation worries return to fore

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FTSE 100 falls as high yields, inflation worries return to fore 2

(Reuters) – London’s FTSE 100 fell on Thursday, dragged by miners and bank stocks on concerns about rising bond yields and volatility in U.S. markets, while engineering company Meggitt fell after its annual profit halved due to the COVID-19 pandemic.

The blue-chip FTSE 100 index slid 0.5%, with mining stocks, including Rio Tinto, Anglo American, and BHP, leading the declines.

Resurgent worries about rising U.S. bond yields hit global shares as investors waited to see if Federal Reserve Chair Jerome Powell will address concerns about the risk of a rapid rise in long-term borrowing costs. [MKTS/GLOB]

Meanwhile, Bank of England policymaker Silvana Tenreyro said there was no good evidence that cutting interest rates below zero would, past a certain point, weaken Britain’s economy rather than boost it.

The domestically focused mid-cap FTSE 250 index fell 0.5%.

Ladbrokes owner Entain fell 2.0% after it held back declaring a dividend despite reporting a jump in 2020 earnings. It also said it was expecting online volumes to ease when shops re-open after surging during lockdowns.

(Reporting by Shivani Kumaresan in Bengaluru; editing by Uttaresh.V)

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World’s biggest wealth fund puts Japan’s Kirin on watch list over Myanmar link

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World's biggest wealth fund puts Japan's Kirin on watch list over Myanmar link 3

By Terje Solsvik

OSLO (Reuters) – The Norwegian central bank said on Wednesday it had put Japan’s Kirin Holdings Ltd Co on a watch list for possible exclusion from its $1.3 trillion sovereign wealth fund over the beverage giant’s business ties to Myanmar’s military.

Kirin on Feb. 5 said it would end its partnership with Myanma Economic Holdings Public Company Limited (MEHPCL), a company run by Myanmar’s army, after a military coup deposed the democratically elected government.

As part of its decision on whether to maintain its ownership in Kirin, the Norwegian fund will monitor the implementation of the company’s plan to end the ties, Norway’s central bank said in a statement.

Kirin’s decision effectively scraps the Myanmar Brewery joint venture, in which the Japanese firm’s controlling stake was valued at up to $1.7 billion, although Kirin also said it still wanted to keep selling beer in Myanmar.

Norges Bank Investment Management (NBIM), which manages the world’s largest sovereign wealth fund, held a 1.29% stake in Kirin Holdings at the end of 2020 with a value of $277.1 million.

“We remain focused on urgently implementing the termination of our joint-venture partnership with MEHPCL,” Kirin said in an emailed statement to Reuters.

“As part of this, we hope to find a way forward that will allow Kirin to continue to contribute positively to Myanmar. We value opinions and feedback from all of our stakeholders and are open to constructive engagement on this matter,” it added.

The Norwegian sovereign fund, formally called the Government Pension Fund Global and set up in 1996 to save petroleum revenues for future generations, owns about 1.5% of all globally listed shares.

Holding stakes in around 9,100 companies worldwide, it has set the pace on a host of issues in the environmental, social and corporate governance (ESG) field, and its decisions are often followed by other investors.

The bank separately said it would allow the wealth fund to invest again in Poland’s Atal SA, which had been excluded since 2017 for risk of human rights violations through its use of North Korean workers at Polish construction sites.

“As a result of a resolution in the United Nations Security Council, all North Korean workers have now been sent out of Poland. Therefore, there are no longer grounds for excluding the company,” Norges Bank said.

Atal did not immediately respond to an email seeking comment.

A third firm, Germany’s Thyssenkrupp AG, will be the subject of an “active ownership” process as the fund’s management seeks to probe the company’s anti-corruption work, Norges bank said.

“Norges Bank has been in dialogue with the company over a long period of time. We therefore have a good foundation for active ownership on the issues to which this matter relates,” the central bank said.

The fund held a 1.3% stake in the German firm at the end of 2020 valued at $147.1 million.

Thyssenkrupp did not immediately respond to an email seeking comment.

(Editing by Gwladys Fouche, Richard Pullin and Gerry Doyle)

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