HSBC arguing that mid-market businesses are missing out on huge exporting opportunities, 3D printing being predicted to cut global trade by 23% in 2060 and the blockchain community launching a voluntary transparency project all hit the latest headlines in the world of treasury this week.
Global mid-market businesses could be taking far more advantage of huge opportunities from international trade, a report from HSBC stated this week.
In fact, exports currently account for only 15% of mid-market enterprise (MMEs) revenues.
HSBC Commercial Banking, in conjunction with Oxford Economics, explored the views of 1,400 MME senior executives in 14 countries in addition to economic analysis.
The findings reveal more leaders are focusing their growth strategies on domestic markets (18%) rather than international expansion (11%).
Only 3% expect global operations will contribute to their business’ financial performance in the next three years.
This is despite domestic market volatility (55%) being their top concern.
Regulatory changes (52%) and skills shortages (50%) were also identified as key concerns that are tempering MME growth appetites.
MMEs are the backbone of the economy, making significant contribution to growth and employment.
It is estimated that the 433,000 MME companies across 14 countries covered by this study directly employed 208 million people – equivalent to the population of Brazil – and support $3.4trn in exports.
It is estimated that in just two years the direct contribution of MMEs to global GDP increased by 9% and the number of jobs they support grew by 3%.
Further economic analysis predicts that if mid-market enterprises (MMEs) boosted their export-based revenues by just 1%, they would increase their economic impact by $12.5 billion across the14 economies.
Half of all MMEs are estimated to be in China; a further quarter in India but per capita they have a larger profile in countries like Singapore, the UAE, Canada and Germany.
At current growth levels of investment in 3D printing, it is estimated to wipe out 23% of world trade by 2060, according to an ING Bank report.
By this time, up to half of all products could be produced by 3D printers, which have seen a growth in investment of 29% over the past five years.
This is 19% higher than global investment growth into traditional manufacturing machines; based on this trajectory, the capital stock of 3D printers will equal the output of traditional machines by 2060, cutting trade in goods by almost a quarter.
Raoul Leering, head of international trade analysis at ING and author of the report, says: “The consequences of 3D printing for cross-border trade are currently marginal, but the growth of investment in 3D printing over the past five years has been three times higher than in traditional machinery. We are expecting high-speed mass production to become a reality in the next decade.”
“Assuming growth of investment at the current rate continues, the capital stock of 3D printers will equal that of traditional manufacturing machinery by 2060, producing around half of all manufactured goods.
“This is good news for countries, like the US, that are concerned about their trade deficits. In particular, if they import a relatively high number products from 3D printing frontrunner industries, like the US does,” he adds.
Industrial machinery, automotive, aerospace, medical/dental devices and consumer products are the five main industries that have been using 3D printing and are the largest buyers of 3D printers and related services, responsible for 75% of all investment in 3D printers.
These industries are also responsible for 43% of world trade and a significant shift in their production patterns has the potential to exert the most pressure on cross-border trade in the near future.
‘Project Transparency’ was launched this week by a consortium of blockchain firms as they promise voluntary disclosure to gain greater industry accountability.
The voluntary initiative aims to encourage disclosure of wallets controlled by a project and provide a voluntary explanation of any expenditure greater than 0.5% of the funds collected.
The consortium is made up of a number of ethical, industry leading digital asset industry players including, Santiment, Aragon, Cofound.it, District0x, Encrypgen, Etherisc, Hcash, Iconomi, Indorse, Lykke, Dappbase, GATCOIN, IconiqLab, Virgil Capital, Musiconomi and Maecenas.
The group’s long-term ambition is to provide potential investors and the community with greater transparency and accountability for funds raised as the initial coin offering (ICO) space sees greater regulatory scrutiny in many markets and even legal restriction in China and Korea.
Maksim Balashevich, CEO and founder of Santiment, says: “With the rapid rise of digital currencies and proliferation of ICOs, investors increasingly want security regarding their funds and transparency on how they are administered.
“Santiment was developed to provide insight and transparency to investors looking to enter illiquid and highly volatile markets, Project Transparency affirms our commitment to improving governance in the blockchain sector,” Balashevich says.
Large banks are struggling with implementing the fixed income aspect of MiFID II regulation, according to Excelian Luxoft, the financial services arm of tech firm Luxoft.
Excelian Luxoft’s large sell side clients all have implemented Markets in Financial Instruments Directive (MiFID II) programs, but they’re still a work in progress, according to Aaron Lipeles, global head of service transformation at Excelian Luxoft.
Given the state of these programs many, if not most, are going to have trouble meeting the deadlines, he argues.
“The problem banks are having isn’t in getting a system together that sends the data to the regulators; that’s the easy part. The hard part is with specific problems in departments like fixed income, where almost two thirds of trades are still done by voice,” says Lipeles.
“Traders still make trades over the phone in an ad-hoc way. A trader jotting the details on a slip of paper and handing it to an assistant is not going to cut it with the regulator from next year. A bank will have to report every trade to the regulator within 15 minutes.
“So there is frankly still a huge amount of effort ahead for the industry. These challenges may or may not be framed under the MiFID II umbrella. They’re often called something like ‘trading system remediation’ or ‘data quality improvement’,” says Lipeles.
MiFID will usher in a new age of price transparency in fixed income, according to Lipeles.
Buy side firms in particular will have information about deals to the very lowest level, even with structured products, he argues.
“The big winners will be those who make this information available to their traders and then their clients quickly,” says Lipeles.
Luxoft works with Deutsche Bank (worked on $180mn dollars’ worth of projects for DB in 2015), UBS, Credit Suisse and Citi – as well as other major investment banks, FTSE 100 firms, retail banks and wealth management firms – on regulatory projects and technology strategy.
Banks will have to significantly change their business models due to profound shifts in the international payments industry, a Boston Consulting Group and SWIFT whitepaper argues.
The situation of mid-sized banks is the most problematic, according to the report.
“As banking becomes more automated and regulated, their costly branch networks and lack of scale is putting them at a serious disadvantage. These banks may perhaps need to consolidate and transform their business models in order to maintain relevancy in tomorrow’s international payment landscape,” says the report.
Global transaction banks, though well-positioned to address change because of their size and scale, still need to ensure successful integration of new technologies, the report argues.
Smaller banks will need to continue to maximise their close relationships with preferred customers while outsourcing their subscale international payments operations to larger players, according to SWIFT and Boston Consulting Group (BCG).
Stefan Dab, global head of BCG Transaction Banking Practice says: “If banks want to continue to be successful in international payments, they will have to transform their back offices, service offerings and technological capabilities.
“Mid-sized banks will face the most difficult strategic choices and change their business model depending on where their competitive advantages lie,” he adds.
The whitepaper, “International Payments: Accelerating Banks’ Transformation”, reviews the new forces reshaping the international payments landscape, including the emergence of fintech competition, globalisation of trade, digitalisation of interfaces, client expectations for more transparency, increasing regulatory activism, new technologies like open APIs, and cybersecurity.
A mobile cash management service for corporate treasurers has been launched by the B2 Group, a payments software and consultancy firm.
The Mobile Cash Management (MCM) app provides smartphone or tablet direct access to the B2 Multi-Bank Integrator™ cloud-based automated banking integration service.
Outgoing payments and incoming statements are processed automatically via secure links with the banks.
The tool enables automation of incoming statements, “smart” reconciliation of credit and debit payments, real-time enterprise-wide cash visibility, automation of complex business processes such as supply-chain finance, cash pooling and sweeping, and controlled automation of outgoing payments via a real-time portal.
B2’s MCM was developed in response to Multi-Bank corporate treasury subscribers emphasising their need to conveniently access cash position and transactional information across the entire enterprise.
MCM will be showcased on The B2 Group stand at the EuroFinance International Treasury Management conference in Barcelona (to be held 4-6 October 2017).
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