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AfDB Unveils $10 Billion Response Facility To Curb COVID-19

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Abidjan, Côte d’Ivoire, 8 April 2020 – The African Development Bank Group on Wednesday announced the creation of the COVID-19 Response Facility to assist regional member countries in fighting the pandemic.

The Facility is the latest measure taken by the Bank to respond to the pandemic and will be the institution’s primary channel for its efforts to address the crisis. It provides up to $10 billion to governments and the private sector.

Akinwumi Adesina, President of the African Development Bank Group, said the package took into account the fiscal challenges that many African countries are facing.

“Africa is facing enormous fiscal challenges to respond to the coronavirus pandemic effectively. The African Development Bank Group is deploying its full weight of emergency response support to assist Africa at this critical time. We must protect lives. This Facility will help African countries to fast-track their efforts to contain the rapid spread of COVID-19,” Adesina said, commending the Board of Directors for its unwavering support.

The Facility entails $5.5 billion for sovereign operations in African Development Bank countries, and $3.1 billion for sovereign and regional operations for countries under the African Development Fund, the Bank Group’s concessional arm that caters to fragile countries. An additional $1.35 billion will be devoted to private sector operations.

Commenting on the Facility, Acting Senior Vice-President Swazi Tshabalala said: “The setting up of the Facility required a collective effort and courage by all our staff, Board of Directors and our shareholders.”

Two weeks ago, the Bank launched a record-breaking $3 billion Fight COVID-19 Social Bond, the world’s largest US dollar-denominated social bond ever on the international capital market. Last week, the Board of Directors also approved a $2 million grant for the World Health Organization for its efforts on the continent. 

“These are extraordinary times, and we must take bold and decisive actions to save and protect millions of lives in Africa. We are in a race to save lives. No country will be left behind,” Adesina said.

Press Release provided by the AfDB Group.

Current Affairs

OPEC And Its Allies Are Ready To Boost Production, But Here’s Why An Oil Market Recovery Isn’t Guaranteed

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After record production cuts in April intended to prop up the market amid a demand crisis caused by the coronavirus pandemic, the world’s largest oil producers are expected to ease up on the restrictions and begin to increase their output next month.

KEY FACTS

  • Saudi Arabia, Russia, and the other members of OPEC+ will meet Wednesday to discuss the current market situation and debate future production limits, the Wall Street Journal reported over the weekend, adding that most delegates in the organization support loosening restrictions.
  • As lockdown measures ease across the globe, demand for oil is slowly beginning to rise again as shipping and air travel resume. 
  • Oil prices are still down significantly from pre-pandemic levels, however, with the Brent international benchmark priced at about 30% of January levels. 
  • The International Energy Agency said Friday that while global demand for oil had recovered strongly in China and India in May, world demand is still projected to decline during the second half of the year before recovering in 2021. 
  • The recent spike coronavirus cases and new lockdowns are creating “more uncertainty”: additional lockdowns could discourage travel and international trade, which would put more downward pressure on prices.
  • The risk to the oil market is “almost certainly to the downside,” the IAE said. 

KEY BACKGROUND

In April, the members of the Organization of Petroleum Exporting Countries (OPEC) and its allies agreed to record oil production cuts of 9.7 million barrels a day as the coronavirus decimated global demand for crude oil. The agreement put an end to a weeks-long price war between Russia and Saudi Arabia that added even more pressure to an already-struggling market. 

CRUCIAL QUOTE

“If OPEC clings to restraining production to keep up prices, I think it’s suicidal,” a person familiar with Saudi Arabia’s thinking told the Journal. “There’s going to be a scramble for market share, and the trick is how the low cost producers assert themselves without crashing the oil price.”

Sarah Hansen, Forbes Staff, Markets

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Op-Ed: From Cashless To Digital: The Covid-19 Tipping Point

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People’s safety concerns about transmission through contact has resulted in Covid-19 becoming a catalyst for the adoption of cashless payments globally and even more so in South Africa, with the disruption expected to effect lasting changes in the way people transact with cards and cash.  

While consumers had already begun to embrace digital payment options prior to the pandemic, the health crisis is rapidly accelerating the adoption rate with more consumers seeking safer, contact-free payment methods.

This rapid adoption of digital payments will help shape a new normal as businesses begin to emerge from the more stringent levels of lockdown regulations and attempt to navigate their post-Covid-19 futures.

Derek Cikes, Commercial Director at Payflex, says the pandemic represents a watershed for the payments industry.

“The acceleration towards a cashless society is one of the key opportunities that has emerged from the pandemic, bringing the advantages of digital payments  to the fore including lower fees,  convenience, seamless delivery, greater security, and more flexible payment options,” says Cikes who adds that what makes this trend so interesting, is that historically, people used to hoard cash in times of crisis. Now, the opposite is occurring.

A study by MasterCard revealed that since the beginning of Covid-19 in South Africa, 89 percent of South African respondents have been using contactless methods to pay for groceries, 60 percent for pharmaceutical items, 39 percent for other retail items, 15 percent for fast food, and eight percent for transport.

Similarly, recent figures from Bain echo this, with estimates that by 2025, the adoption of digital payments could accelerate by a 5 – 10 percentage point increase globally, above what was previously anticipated at 57% before Covid-19 to 67% after Covid-19.   

Are contactless payments here to stay?

Cash is perceived as a vehicle for the transmission of the virus. As stores, restaurants and other merchants begin to open their doors again, contactless payments are key in providing consumers with a much-needed sense of comfort and reassurance.


“Businesses have no option but to rethink their use of shared payment surfaces, with customers more conscious than ever of what they touch. People don’t want to touch ATM or PIN pads or have to hand their cards to store tellers.  Once viewed as a convenience or nice-to-have, digital payments are now viewed as a critical service, providing a solution to limiting contact with other surfaces,” says Cikes.

Creation of new payment habits

From banking facilities like tap-to-pay, payment apps such as Zapper and Snapscan, to digital banking and e-wallet providers, South African fintech firms have reported significant increases in the use and adoption of digital payment methods since the outbreak began in March. The simple truth is, while these channels provide a convenient way of paying, they are also contactless, allowing consumers to pay for their goods while not having to exchange cash or cards with merchants.

“The perception of cards and cash as vehicles for transferring microorganisms has changed how people physically interact with their payments in favour of contactless options. With health and safety being top priorities, we anticipate this trend to become more permanent with hygiene measures and social distancing likely to become part and parcel of our daily realities for years to come,” says Cikes.

Retailers drive adoption of digital payments

Both online and brick and mortar retailers are helping to accelerate this trend with stores like Mr Price enabling consumers a contactless way to pay in-store pay via their app, and most South African retailers offering tap-to-pay-methods. There is also an expected uptick in omnichannel capabilities (being able to sell your goods through many channels such as website, app, retail, third-party platforms such as Amazon or Shopify) which bridges payments in any environment, physical or digital.

Another contactless payment method driving this trend is e-wallets with over 500 million mobile money users expected on the continent in 2020. In addition, it is anticipated that the capabilities of digital wallets will expand to offer features such as digital IDs and transaction monitoring and reporting, which is expected to create even more growth for this payment mechanism.


Flexibility needed more than ever

According to TransUnion’s Financial Hardship Survey, conducted in the United States, United Kingdom, Canada, India, Hong Kong and South Africa, one in six people lost their job in early May, with defaulting on their bills just seven weeks away. 82% of consumers indicated their household income had been impacted, and on average, consumers who were impacted, expect they will be short by R 7 542.90 when paying bills or loans.

“Many people are financially stretched and need the support of alternative payment solutions to help manage their cash flow without incurring further credit card debt,” says Cikes.

A report by GlobalWebIndex shows that 83% of South African consumers are expecting flexible payment options from brands.

“We have seen this play out in the increased uptake of our Payflex Buy Now Pay Later payment solution, which allows people to make interest-free payments over two paychecks,” says Cikes.

With health, safety and financial security at the forefront of consumer sentiments, companies will need to provide payment options which meet these consumer needs.

“Digital payment solutions provide an avenue which safeguards against physical interaction, enabling both consumers and business to navigate the environment as the economy is restarted.  These digital adoptions will not only help manage the current situation but will also have far-reaching benefits, facilitating a more customer-centric, efficient and resilient economy,” concludes Cikes.

-Derek Cikes, Commercial Director, Payflex

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The World’s Best Banks: The Future Of Banking Is Digital After Coronavirus

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When Citigroup opened 2020, the most ambitious projects at the $2.2 trillion in assets lender involved major partnerships with technology companies best known for their internet, social media and ecommerce platforms. 

In China, nearly 70% of the payments that Citigroup handles for customers are done through AliPay, the payments business spawned by Alibaba. Citigroup’s digital payments technologies are also present on other popular social messaging platforms like LINE and WeChat. The mega-lender recently launched a credit card partnership with fintech Paytm in India and in Singapore it uses chatbots on Facebook Messenger to help answer customer service inquiries. In November 2019, the bank made a big splash in the United States by unveiling a digital checking account with Google Pay.

These partnerships are part of a new reality for the banking industry’s most important players like Citigroup: Innovative and seamless digital banking capabilities are paramount in a business where basic financial products have become commoditized and rock-bottom interest rates make it hard for lenders to differentiate. Consumers are instead voting with their smartphones, demanding the ability to conduct their financial activities safely and easily on mobile phones and their desktops.

Never were these growing demands more important than during the coronavirus pandemic, which forced countries around the world to announce lockdowns to combat the spread of the virus. Unable to visit bank branches, consumers turned to mobile apps and online services to get transactions done. In the U.S., Citi saw an 84% increase in daily mobile check deposits in May and a tenfold surge in activity on Apple Pay as quarantined customers used digital and contact-less tools to handle their financial activities. The lender’s Mexican operations saw an 80% increase in mobile app logins in March. Downloads of its mobile app surged 116% from February to April, while digital bill payments rose 78%. 

“Banking has changed irrevocably as a result of the pandemic. The pivot to digital has been supercharged,” says Jane Fraser, president of Citigroup and CEO of its gigantic consumer bank. “We believe we have the model of the future – a light branch footprint, seamless digital capabilities and a network of partners that expand our reach to hundreds of millions of customers.”

Citi’s increasingly digital approach is visibly evident in Forbes’ second ranking of the World’s Best Banks, based largely on customer satisfaction surveys. Citi rates highly in six of the 23 countries where customers were surveyed (Citi has retail operations in 19 countries).

Forbes partnered with market research firm Statista to measure the best banks in nearly two dozen countries. Statista surveyed more than 40,000 customers around the globe for their opinions on their current and former banking relationships. The banks were rated on overall recommendation and satisfaction, as well as five subdimensions (trust, terms and conditions, customer services, digital services and financial advice). Between 5 and 75 banks were identified as top banks in each country, based on the total evaluations collected, the number of banks in the specific country and the scores achieved.

The 2008 financial crisis didn’t just usher in an era of consolidation and low rates that reshaped the banking industry globally, it also coincided with the mass adoption of the smartphone and a shift to digital banking. In the wake, a crop of web-first lenders emerged to challenge the world’s biggest banks and made offering end-to-end mobile banking features a matter of survival. The coronavirus only affirmed that there’s no looking back.

Amsterdam-based ING, ranked highly in eight nations, leading banks worldwide on our list in its reach. The lender, which has a legacy that dates back to the mid-1800s, is a technological pioneer in the banking industry, creating digital bank ING Direct in 1997 at the dawn of the internet age. While ING operates hundreds of bank branches in the Netherlands and Poland, it is known as an entirely web-based bank in markets like Australia, Germany and Spain where it ranks in the top-five. 

ING now handles some 4.5 billion digital contacts a year, according to Aris Bogdaneris, head of challengers and growth markets at ING, and it is embarking on an effort to make its digital services uniform worldwide. “We are inspired by the giant technology platforms and their customer engagement,” says Bogdaneris, who points out that user experiences for technology platforms like Uber are the same, regardless of where a customer is located. “We started measuring ourselves more against these platforms than against traditional banks,” he adds.

Now, with Covid-19 affirming most digital banking trends, Bogdaneris wonders whether ING will go all-digital. Says Bogdaneris, “Where we have physical distribution and literally closed branches, [the question is] do we reopen them again? Do we actually need them?”

The other banks that rated highly in more than five regions include HSBC and Santander at six apiece, and digital bank N26, which rated first in Austria and Italy second in Spain and France, and #29 in Germany. Founded in 2013, N26 stands out because it has no physical branches but offers free ATM withdrawals worldwide and recently raised $270 million as part of a Series D round that valued the firm at $3.5 billion. 

Digital upstart Nubank is the top-rated bank in Brazil, beating out an oligopoly of legacy banks on our list. “The penetration of the internet and the penetration of smartphones created a window of opportunity for us,” says founder and CEO David Velez. “Even as a startup we could compete head-to-head with the big banks. Suddenly, you didn’t need billions of dollars to build bank branches and you didn’t need hundreds of millions of dollars to buy mainframes from IBM. You could use the internet to acquire customers,” adds Velez, “It enables a model that has fundamentally lower costs and a better user experience.”

Growth at Nubank, which operates throughout South America, has been staggering. In 2019, the lender saw its customers surge from 6 million to 20 million and its private valuation now stands at $10 billion.

If there’s any doubt that digital-first banks are the way forward, Velez offers a surprising statistic: Since the pandemic began, Nubank has seen a surge in customers aged sixty and over, the types of clients many bankers once believed would never leave traditional branch networks. Over the past 30-days, for instance, some 300 clients above the age of 90 have become Nubank customers.

Digital banks rated well in the United States as well. Online-only Discover and Capital One ranked #23 and #30, while neobank Chime ranked #36. All three beat out mega-lenders JPMorgan Chase, #36 and Citigroup #71. The other big four lenders, Bank of America and Wells Fargo, didn’t make the top-75.

USAA was the highest-rated bank in the U.S. The bank is open to members of the U.S. military and their families and has more than 13 million members.

Antoine Gara, Forbes Staff, Banking & Insurance

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