How does BNPL work?

 Follow the diagram and see how BNPL (Buy Now Pay Later) works.

Why Bond Yields Are a Key Economic Barometer

U.S. government bond yields aren’t just a barometer of the economy, they also influence the cost of borrowing, from mortgages to student loans. WSJ explains how they work and why they’re so crucial to the economy.

Kenya Looks to FinTech, Credit Union Convergence to Advance Growth

Credit unions have served as a financial backbone to millions of households in Africa for decades, with some 39,000 organizations across the continent providing small installment loans and credit lines. Now, the industry is embracing technology to accelerate growth and bring about expanded financial inclusion.

The savings and credit cooperative organization (SACCO) sector in Africa is aggressively stepping up its digitalization efforts to not only drive financial inclusion to the last mile, but ensure that underserved consumers have access to financial services that had been previously unavailable to them or hard to obtain.

The Kenyan FinTech Kwara, founded in 2018 by Cynthia Wandia and David Hwan, was developed to help the unbanked and underbanked build wealth in a frictionless way. Kwara also strives to assist credit unions in East Africa transition to digital platforms.

Read the full story on PAYMENTS. com - click HERE.

Citi loses legal battle to recover mistaken payments

The recipients of about $500m that US banking giant Citigroup wired erroneously will get to keep the money. So ruled US judge Jesse Furman.

Judge Jesse Furman said that Citi was not entitled to recover its funds, even though they were "indisputably transferred by mistake".

The bank was supposed to have sent interest payments on behalf of its client, Revlon, but instead fully repaid the cosmetic company's loans. 

Citi has said that it would appeal the decision. "We believe we are entitled to the funds and will continue to pursue a complete recovery of them," a spokeswoman for the bank said.

Citi, which was acting as an administrator for Revlon's 2016 loans, was supposed to send $7.8m in interest payments on behalf of the firm. Last August however, it wired nearly $900m to the firm's lenders - paying off its debts.

Citi recognized its the mistake, and managed to recover some of the money. However 10 firms, including Brigade Capital Management and Allstate Investment, refused to return the funds, prompting Citi to sue.

Judge Furman said he was bound by New York law, which has previously found that funds received to repay a debt do not need to be returned, if "they discharge a valid debt, the recipient made no misrepresentations to induce the payment, and the recipient did not have notice of the mistake".

"The non-returning lenders believed, and were justified in believing, that the payments were intentional," Judge Furman wrote.

"To believe otherwise - to believe that Citibank, one of the most sophisticated financial institutions in the world, had made a mistake that had never happened before, to the tune of nearly $1bn - would have been borderline irrational."

Fintech's World

The fintech industry welcomed multi-billion dollar investments in 2019. Where is the most growth, and how are incumbents dealing with digital disruption?

Since the introduction of the first credit card with a magnetic stripe in 1966, financial technology has come a long way. Silicon Valley may not have birthed the term “fintech”, but it has certainly helped catapult its applications into the mainstream.

Leveraging everything from basic apps to the blockchain, the changing dynamics of fintech are creating new investment opportunities every day, growing its appetite with every new megadeal.

Check out the graphic which highlights the global growth of the fintech industry, the services with the most staying power, and major M&A developments of the past year as traditional institutions scramble to deal with this digital disruption.

Read more HERE

How Banks Create Money and the Money Multiplier

Money does not grow on trees, but it does grow in banks. Watch Jacob Clifford explain how banks create money and how to use the money multiplier. You can visit his website at www.ACDCecon.com or watch the unit playlist videos.

Cash is King

From GARP –

“Cash flow is at the center of a convergence between financial valuation models and risk models that could dramatically alter the credit risk modeling landscape.

Credit risk measurement will soon undergo a sea-change as a result of the growing importance of cash flow analysis, which has been buoyed by new valuation rules.

The traditional credit risk model that has served many FRM practitioners well during the past decade is the PD/LGD/EAD model. Basically, the riskiness of a loan is expressed in three parameters: the probability that the client will default on his obligations (the probability of default, or PD); the financial loss that is incurred in case of a default as a percentage of the exposure (the loss given default, or LGD); and the exposure at default (EAD) – i.e., the remaining principal of the loan, including missed interest payments.”

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How Banks Lost Their Groove In Small Business Finance... And Why They May Never Get It Back

From Forbes Magazine –

“Prior to the Great Recession, easy credit conditions prevailed for small businesses. Cash was free flowing, and relaxed lending practices made it relatively easy to secure financing.

After the Lehman Brothers crash and during the ensuing “credit crunch,” volume fell roughly 19% from 2008 until 2012. This general slowdown in lending coincided with stricter requirements placed on borrowers. Financing simply became less available — even for “creditworthy” companies. For the first time in U.S. business history, small business owners frequently were unable to secure credit even from their own banks.”

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