Risk free rates (RFRs) represent the cost of borrowing that a borrower would incur without the lender taking into consideration the counterparty risk level of the borrower. They indicate the return that investors should get on zero risk investments and are used by the financial markets as a benchmark upon with risk premiums are added....
The LIBOR rate was believed to be a true reflection of the markets’ cost of borrowing funds independent of government interference. However, investigations by regulators and journalists after the financial crisis revealed that LIBOR had been manipulated by the banks themselves and at times from influence of regulators. Banks had an interest in keeping the...
Reference rates are critical to the financial system. They are the benchmarks that lenders and borrowers refer to when setting the interest rates on credit. They also form the backbone of interest rate derivatives such as interest rate swaps and futures. The London Interbank Offer Rate (LIBOR) has been the reference rate for over 400...
Most of us have been either to a physical store or an online shop and at checkout, been provided with the option of acquiring the product without paying the full price at the point of sale (POS). Sounds familiar? Unbeknownst to many, the ability to own a product and slowly pay for it has been...
Welcome to Starbucks, a “bank” that sells coffee. The luxury coffee maker held about USD 1.5 billion of preloaded funds in the 4th quarter of 2021. And if you think USD 1.5 billion is not a huge amount; more than 85% of banks in the USA have less than USD 1 billion in assets. Starbucks...
The last decade has experienced an upsurge in e-commerce adoption, with the e-commerce market size growing to approximately 4.9 trillion USD in 2021. This growth is expected to hit 7.4 trillion USD by 2025. Closely mirroring the growth of e-commerce and by extension facilitating e-commerce transactions are e-wallets. It is estimated that 49% of the...
Digital technology and the adoption of the internet continues to bring in structural changes to all segments of the economy; and the financial services space has not been spared. Traditional banking processes have been completely transformed, with the relevance of banking halls in the future being questioned. Banks have jumped on the digitization trend by...
Neobanks in the African market are solving two problems for the continent’s population. First, neobanks are bringing banking services and products to populations that traditionally did not have access to them such as savings, investments or capital. Access to capital is one of the key hinderances to economic growth and this is a major challenge...
The 21st century has brought with it advancements in technology that have affected how people work and operate, and this effect has triggered disruptions across different sectors. One sector that is facing the technology onslaught currently is the banking sector. Technology has moved banking from the traditional banking halls to the customer’s mobile phone or...
In the recent years, the global financial sector has experienced rapid development of new financial products and intermediaries such as Decentralized Finance (DeFi). This is in a bid to meet the varying needs for investors and consumers in different demographics; with countries racing to bridge the financial inclusion gap. Decentralized Finance (DeFi) is a fast-developing...