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Managing the trends- Challenge accepted?

Michal Smida, Founder & CEO, Twisto gave us beautiful tips to manage the trends of 2021 and answered few questions of to how to tackle the crisis and manage the risks. 

 He said that the Q2 was mainly characterized by a conservative approach and a protected reaction to manage the credit risk and that is one of the key trends that we are seeing in lending. “There was substantial tightening in approval rates for onboarding new clients – this in part is due to the uncertainty of the potential impact of unemployment, as well as the increased challenge of gaining access to capital markets. We saw as much as 50% reductions in approval rates across the industry.” Meanwhile, there was also a much larger focus on managing the risks in the existing portfolios which included frequent communication with the clients. “Q3 has seen an easing of the above measures as prime client portfolios in the EU have recorded positive non-performing loan (NPL) performance. In some cases, customer payment behavior has improved vs. pre-COVID, with some lenders recording their best performance to date.” 

When asked about, if the Corona Pandemic would also act as a catalyst for the innovation as the 2008 crisis did and what might be the future’s looks, he shared that there was already a digital transformation on going theme since 2008 which had given rise to many great fintechs and at the same time pushed the banks to digitalize very quickly. He added, “What the current crisis has brought is increased customer adoption of what has already been in the market for some time. So we don’t see the change in the product offerings of financial institutions, but rather a change in customer behavior and their willingness to use digital channels, which are not only much more convenient, but also safer and quicker to use in comparison to traditional offline processes.”

The biggest challenges for lenders in the coming 12 months would be maintaining and managing the further risk performances and Q4 might be in the critical situation to prove its resilience of the customer base. He also added, “As governments have stepped in to support businesses and the wider economy, the possible impact on unemployment has been delayed. This in turn can lead to credit deterioration once the support stops. Venture capital and debt markets effectively shut down in Q2, with reopening noted in Q3. As many lenders require additional capital to sustain growth momentum, the key challenge will be attracting capital from investors who became even more selective and cautious,” when asked about the risk and challenges which might be seen in the coming year.

Creating a payment card would be the logic step he said when asked about the transitions to lending 3.0 and what was the intention behind it. “We started with simple deferred payments “Buy now. Pay later” for e-commerce. This was demonstrated in our recent launch of the Twisto app and card offering in Poland, which has been well received by customers, with over 70,000 sign ups and over 20,000 cards ordered in the first 30 days from launch.”

Mr.Smida shared the Twisto’s vision for the card program and how they are facing the challenges and yet delivering a better customer experience. “At Twisto we believe that having a plastic card in your wallet is already outdated. Because of this, we’ve committed to our goal to stop issuing plastic cards by 2025. We believe that the future is paying with mobile phones. Thanks to Marqeta and our Digital First certification from MasterCard, we’re one of the first companies in Europe, or even the world, who doesn’t have to issue physical cards.”

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LexisNexis risk solutions study reveals sharp rise of financial crime compliance costs

Decision makers inside banks, investment firms, asset managers and insurance firms identify the drivers impacting financial crime compliance. LexisNexis® Risk Solutions revealed that the results of its annual True Cost of Financial Crime Compliance Study for the U.S. and Canada. The total projected cost of financial crime compliance for the region is approximately $49.9 billion. The survey illustrates the sharp increase in financial crime compliance costs.

The study projects the average annual cost of financial crime compliance for U.S. financial institutions with $10 billion. Pandemic Continues to Spur Growth. The pandemic continues to negatively impact compliance operations. Sixty eight percent of U.S. respondents report longer times required to complete due diligence. Fifty five percent of U.S. respondents report reduced productivity compared.

More U.S. financial institutions now rank real estate and hospitality as top money laundering risk segments. Crime involving digital payments, trade-based money laundering and money mule schemes are on the rise. Digital currency is a growing problem for Canadian firms. Crimes involving digital payments have the greatest impact on compliance costs. Cryptocurrency crimes have the greatest impact on compliance costs for Canadian firms. The survey results demonstrate that financial institutions are battling a broader set of issues.

Survey respondents indicate that a lack of current and extensive data tops the list of Know Your Customer (KYC). Leslie Bailey, vice president of financial crime compliance strategy for LexisNexis Risk Solutions stated that the study shows clear linkages between the pandemic, digital crime and increasing regulations. Hence, financial institutions need to prepare for expanded compliance obligations and risks from emerging financial crime. Bailey added that digital transformation is a game-changer for financial crime compliance operations.

This will require a sophisticated approach that incorporates insight into digital behaviors. This study surveyed 145 decision-makers in the U.S. and Canada. Responses were collected in June 2019, August 2020 and June 2021. Organizations such as banks, investment firms, asset management firms and insurance firms. The total annual cost of compliance across firms was calculated using survey data. The spend amount was generated by multiplying the average percent allocated to financial crime costs.

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COP26 delegates agree on need to deliver on $100 BLN climate finance pledge

Delegates heading to the COP26 U.N. climate summit in Glasgow. These delegates agreed that they must deliver on the $100 billion per year pledge. COP26 president Alok Sharma said that, it is to help most vulnerable nations for tackling the climate change.

After many days of meetings at the pre-COP26 climate event, which happened in Italy, Sharma said that there was a consensus to do more. Which is to keep the 1.5 degrees Celsius target within reach, adding more needed to be done collectively in terms of national climate plans.

The COP26 conference in Glasgow aims to secure more ambitious climate action. This is from nearly 200 countries, those all that have signed the 2015 Paris Agreement for limiting the global warming, well below 2.0 degrees Celsius. And to 1.5 degrees, above pre-industrial levels.

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City’s exposure to Evergrande is very minimal-Hong Kong finance Chief

Hong Kong’s exposure to debt-laden developer China Evergrande Group is very minimal at 0.05%. This is of banking assets, South China Morning Post reported, citing the city’s finance minister. Financial Secretary Paul Chan told the newspaper that it is very minimal and won’t cause them any systemic risks. He added that he had arrived at the conclusion after a recent audit of the local banking sector’s exposure to the company.

Chan also said that the Hong Kong’s stock market was inevitably subject to some volatility. This is amidst a recent mainland crackdown on some industries. But still he believed any setback would be temporary. With liabilities of $305 billion, Evergrande has sparked concerns its cash crunch could spread through China’s financial system. This may reverberate globally and that is a worry that has eased with the Chinese central bank’s vow, to protect homebuyers’ interests. Evergrande has missed two bond interest payments. Bondholders have said this and its offshore debt, amounting to about $20 billion, trades at distressed levels.

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