Sometimes change is the only constant. The growing digitalization of treasury services is the latest example of that. So is the proliferation in payment types we process, as clients transition more aggressively away from paper checks to electronic methods.
Another transformation we’re seeing is the double-digit growth rate in the number of broker dealers and non-banks paying firms to service their consumer clients directly with checks and debit cards, proving that the concepts of open banking and banking-as-a-service are trends to watch.
The changing geopolitical winds are also impacting our clients, specifically the flow of currencies into different markets.
There has been a steady increase in clients (banks and corporates) using our application programming interfaces (APIs) to access and manage their payments and liquidity. Year-to-date, clients have made twice the number of payment requests from a year earlier on our APIs. These tools aim to improve the end-customer experience by providing real-time domestic payment execution, streamlining the way that low-value FX payments move from payors to receivers, as well as providing reporting capabilities, status updates and data validation.
We think that by providing banking clients one point of access to a full suite of payment solutions, which can be integrated into their own banking APIs, mobile apps and online portals, we can help them better compete with fintechs. These solutions should give end-users 24x7 payments to multiple markets, seamless delivery and instant response on notifications, as well as other benefits. Our new Bankify solution gives consumers more ways to pay for small-value items using apps that take money directly from their bank accounts, instead of debit or credit cards.
Digital transformation is also a top client concern as our clients undergo payment-method transitions, according to our surveys. At a client event in Asia, 31% of attendees we surveyed said digital transformation was one of the topics they were most interested in, tied with payments and behind trade finance.
Much of the money entering T-bills, where rates recently became attractive especially in two- to 13-week paper, is coming out of the Fed’s RRP, which has fallen to $1.5Tr in early September from $2.4Tr in March.
Treasurys of all stripes have been in extremely high demand. Our Pershing clearance platform saw a 147% year-over-year increase in the par value of U.S. Treasurys traded by more retail-oriented broker dealers and registered investment advisors in the secondary market during the first half of 2023 versus the first half of 2022 ($219bn versus $89bn). The year-over-year increase for more institutional-oriented dealers and hedge funds was only 20%.
In addition to cash moving from RRP to T-bills, we are also seeing money market funds moving cash from the RRP into cleared repos that we sponsor into FICC, where rates are competitive. We have seen balances of these cleared sponsored FICC repos rise 300% from year-ago levels, which may be due to an expected clearing mandate for Treasury-backed repos coming this fall.
Overall, there remains considerable uncertainty over what the Fed will do next—whether it will raise rates again and how long they will stay there—meaning that a lot of the short-end money is moving from one Fed meeting to the next.