As open banking continues its rapid ascent, nearly 90 percent (87) of banks globally plan to move forward with open APIs, according to new benchmark data, “2018 Global Payments Insight Survey: Retail Banking,” from ACI Worldwide (NASDAQ: ACIW) and Ovum. The benchmark, comprised of responses from executives across financial institutions, merchants and billing organizations such as consumer finance and insurance, also showed that the emphasis on real-time payments has doubled from 31 percent to 62 percent within a 12-month span.
The explosion of activity in real-time payments and open banking has made payments transformation a key strategic initiative for many institutions globally. Although driven primarily by regulatory mandates in Europe, open banking has taken off in North America due to market competition. For banks, the message is clear; customers prefer real-time payments, whether it’s through a mobile app, or through traditional banking services.
Other findings from the study include:
- Banks reporting a clear strategy for developing APIs increased by 47 percent within one year
o European banks led at 92 percent, followed by 86 percent in Asia, and 82 percent in the Americas
- Over 70 percent (73) of banks were willing to open up their APIs to third party developers
o At 79 percent, European banks had the most proactive mindset, followed by Asia at 74 percent, and the Americas at 66 percent; interestingly, 70 percent of banks in the U.S. plan to encourage the use of their APIs
- Banks that now expect real-time payments to drive revenue growth increased by 60 percent in one year
- The number of banks currently investing in real-time payments solutions doubled in a year, with 28 percent planning to make future investments
- Real-time payments drive a new wave of real-time payment hub investment for 43 percent of respondents
Online payment capabilities
- Holding steady at 68 percent globally are banks that currently or recently invested in this area, with many enhancing support for third-party wallet offerings and tokenization
- Real-time is becoming a reality with nearly 80 percent (78) of banks and almost 70 percent (68) of merchants globally stating that the combination of immediate payments and open banking will drive a decline in the importance of payment cards
- As banks prepare for the new payments ecosystem, they’re looking to balance security and compliance alongside innovation
- Security is a chief area of concern around open banking, increasing in Europe by 29 percent, and Asia by 16 percent between 2017 and 2018. However, banks in the Americas with security concerns declined by 25 percent
“The dramatic change in attitudes toward both open banking and real-time payments in just one year is telling,” said Craig Ramsey, head of real-time payments, ACI Worldwide. “The big takeaway here is that real-time payments and open banking are set to reshape the competitive landscape, and banks should stay open to the potential new revenue streams and deepened relationships that will be brought to both consumers and merchants.”
“The results of the study highlight important steps that all retail banks should consider to ensure that they are prepared for current challenges and future opportunities,” said Kieran Hines, head of industries, Ovum. “Real-time payments and open banking initiatives have the potential to bring fundamental change to the retail banking value chain and must be viewed as true opportunities for service enhancement and transformation.”
Take on more risk or taper? BOJ faces tough choice with REIT buying
By Kentaro Sugiyama and Leika Kihara
TOKYO (Reuters) – The Bank of Japan (BOJ) is under pressure to relax rules for its purchases of real-estate investment trusts (REITs) so that it can keep buying the asset at the current pace, highlighting the challenges of sustaining its massive stimulus programme.
The fate of the rules, which limit the central bank’s ownership of individual REITs to a maximum of 10%, could be discussed at the BOJ’s review of policy tools at its March 18-19 meeting, with an industry estimate putting nearly a third of its REIT holdings at close to the permissible threshold.
Given Japan’s fairly small REIT market, the BOJ may struggle to keep buying the asset unless it relaxes the ownership rule or accepts REITs with lower credit ratings, analysts say. The BOJ currently buys REITs with ratings of AA or higher.
“There’s a good chance the BOJ could tweak the rules for its REIT buying at the March review,” said Koji Ishizaki, senior credit analyst at Mizuho Securities.
The issue underscores the tricky balance the BOJ faces at the March review, where it hopes to slow risky asset purchases without stoking fears of a full-fledged withdrawal of stimulus aimed at weathering the prolonged battle with COVID-19.
As part of its stimulus programme, the BOJ buys huge amounts of assets such as exchange-traded funds and J-REITs.
It ramped up buying last March to calm markets jolted by the pandemic, and now pledges to buy at an annual pace of up to 180 billion yen ($1.68 billion).
The BOJ last year bought 114.5 billion yen worth of J-REITs, double the amount in 2019, bringing the total balance of holdings at 669.6 billion yen as of December, BOJ data showed.
The surge of its portfolio has led to the BOJ owning more than 9% for some REITs. An estimate by Mizuho Securities showed the BOJ owned more than 9% for seven out of the 23 REITs it held as of January, including Japan Excellent and Fukuoka REIT.
The BOJ did not immediately respond to a request for comment. The central bank normally does not comment on policy, besides public speeches and briefings by its board members.
BOJ Governor Haruhiko Kuroda has said the review won’t lead to a tightening of monetary policy.
But many BOJ officials are wary of relaxing rules for an unorthodox programme like J-REIT purchases, which critics say distorts prices and exposes the bank’s balance sheet to risk.
“Unless markets are under huge stress, it’s hard to relax the rules,” said an official familiar with the BOJ’s thinking.
($1 = 107.0200 yen)
(Reporting by Kentaro Sugiyama and Leika Kihara; Editing by Muralikumar Anantharaman)
German watchdog puts Greensill Bank on hold due to risk concerns
By Tom Sims and Tom Bergin
FRANKFURT/LONDON (Reuters) – Germany’s financial watchdog warned of “an imminent risk” that Greensill Bank would become over-indebted on Wednesday as it imposed a moratorium on the lender making disposals or payments.
BaFin’s move is another blow to the bank’s owner, Greensill Capital, which said on Tuesday it is in talks to sell large parts of its business after the loss of backing from two Swiss asset managers which underpinned key parts of its supply chain financing model.
Greensill, which was founded in 2011 by former Citigroup banker Lex Greensill, helps companies spread out the time they have to pay their bills. The loans, which typically have maturities of up to 90 days, are securitized and sold to investors, allowing Greensill to make new loans. Greensill’s primary source of funding came to an abrupt halt this week when Credit Suisse and asset manager GAM Holdings AG suspended redemptions from funds which held most of their around $10 billion in assets in Greensill notes, over concerns about being able to accurately value them.
Two sources told Reuters on Wednesday that SoftBank-backed Greensill Capital is preparing to file for insolvency, adding that the sale talks were with U.S. private equity firm Apollo.
Greensill and Apollo did not immediately respond to requests for comment on Greensill’s insolvency preparations, which were earlier reported by the Financial Times, or on the sale talks.
Japan’s SoftBank, which has invested $1.5 billion in recent years in Greensill, also declined to comment.
BaFin said an audit found that Greensill Bank could not provide evidence of receivables on its balance sheet purchased from mining tycoon Sanjeev Gupta’s GFG Alliance. GFG did not respond to a Reuters request for comment on BaFin’s findings.
“The moratorium had to be ordered to secure the assets in an orderly procedure,” BaFin said in a statement, adding that the Bremen-based bank would be closed for business with customers. It declined to elaborate.
Greensill Capital said in a statement that Greensill Bank always “seeks external legal and audit advice before booking any new asset.”
Greensill Bank had loans outstanding of 2.8 billion euros and deposits of 3.3 billion euros at the end of 2019, rating agency Scope said in an October report, which did not detail the bank’s exposure to GFG.
The bank is a member of the Compensation Scheme of German Banks which means deposits up to 100,000 euros ($120,740) are protected. The German regulator said withdrawals were not currently possible, but gave no further detail in a statement.
Prosecutors in Bremen said earlier they had received a criminal complaint from BaFin regarding Greensill Bank, but did not provide further details on it.
In Britain, meanwhile the financial regulator took action against GFG’s own trade finance arm Wyelands Bank. The Bank of England’s Prudential Regulation Authority said it had ordered Wyelands to repay all its depositors. It said in a statement that it had been engaging closely with Wyelands, but did not say why it had taken the action.
GFG said Wyelands, which had over 700 million pounds ($979 million) of deposits according to its latest annual report, would repay deposits and planned to “focus solely on business advisory and connected finance”.
A GFG spokesman declined to comment on the BoE statement.
Credit Suisse said on Wednesday it is looking to return cash from its suspended funds dedicated to supply chain finance, which is a method by which companies can get cash from banks and funds such as Greensill Capital to pay their suppliers without having to dip into their working capital.
“Given the significant amount of cash (and cash equivalents) in the funds, we are exploring mechanisms for distributing excess cash to investors,” Credit Suisse said in a note to investors on its website.
Credit Suisse said that more than 1,000 institutional or professional investors were invested across its funds.
($1 = 0.8282 euros)
($1 = 0.7153 pounds)
(Reporting by Tom Sims and Patricia Uhlig in FRANKFURT and Tom Bergin in LONDON; Additional reporting by Brenna Hughes Neghaiwi and Oliver Hirt in ZURICH; Editing by Alexander Smith)
Britain to review surcharge on bank profits
LONDON (Reuters) – Britain’s finance minister Rishi Sunak has said the government will review the surcharge levied on bank profits, in a bid to keep the UK competitive with rival financial centres in the United States and the European Union.
Sunak said in his Budget statement on Wednesday he was launching the review so that the combined tax burden on banks did not rise significantly after planned increases to corporation tax.
Leaving the surcharge unchanged would make UK taxation of banks “uncompetitive and damage one of the UK’s key exports”, the government said in its Budget document.
Changes will be laid out in the autumn and legislated for in the forthcoming Finance Bill 2021-22, the document said.
The surcharge on bank profits raised 1.5 billion pounds for the government in 2020, the document showed.
It is separate to the more lucrative bank levy on bank balance sheets, which raised 2.5 billion pounds.
(Reporting by Iain Withers, Editing by Huw Jones)
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