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Year: 2018
Prudential announces split of global businesses
On March 14, London-based business Prudential, one of the biggest insurance and financial services companies in the world, announced it will split into two separately listed companies, demerging its UK and Europe division from its international operations.
According to the company’s statement, its UK and Europe savings and investment business, M&G Prudential, led by its current division chief, John Foley, will be a standalone entity focusing on more “capital-efficient and customer-focused” financial services. Meanwhile, Prudential will be helmed by the group’s current CEO, Mike Wells, and will operate in the growing Asia, Africa and US markets, but remain headquartered in London.
“The decision to demerge M&G Prudential follows a rigorous review by the board which considered all options, including the status quo, and concluded that it is in the best interest of the group to operate as two separately-listed companies, able to focus on their distinct strategic priorities in their chosen geographies,” said Chairman of Prudential Paul Manduca in the statement. “Both are expected to meet the criteria for inclusion in the FTSE 100 index.”
Both companies will have premium listings on the London Stock Exchange, while Prudential’s primary listing will be in Hong Kong
Shareholders will retain stakes in both companies after the demerger, and both will have premium listings on the London Stock Exchange. Prudential’s primary listing will be in Hong Kong.
Prudential also announced the sale of £12bn ($16.7bn) of its UK shareholder annuity portfolio to life insurer Rothesay Life. Revenue from the sale will support the demerging process.
As part of the split, ownership of the group’s Hong Kong insurance subsidiaries will be transferred from M&G Prudential to its Asia division by 2019.
The company has not given a timescale for the demerger, saying that a number of factors could affect it, including the annuity sale to Rothesay, market conditions and the transfer of the Hong Kong business. It is also subject to regulatory and shareholder approval.
Viriyah Insurance creates opportunities by embracing technology
The Thai economy is in rude health. The country’s stock exchange is recognised as being one of the most sustainable in the region, while the Eastern Economic Corridor initiative will result in the national government investing approximately $46bn in new construction projects over the next five years. However, among these positive developments, it is easy to forget the crucial role that Thailand’s insurance sector plays within the domestic economy.
The Thai insurance industry premium is expected to total around THB 824bn ($25bn) for the entirety of 2017 (see Fig 1), achieving a growth rate of 6.01 percent, the same as in the previous year. Positive trends being seen in the broader economy are also having a knock-on effect. Increased public spending, a booming tourist sector and high rates of private sector consumption are all providing reasons for optimism.
Nevertheless, the Thai non-life insurance industry still faced several risks throughout 2017 and beyond. Difficult situations are likely to emerge as a result of a decrease in premium rates compared with an increase in compensation costs. Other risk factors include a lack of preparation concerning internal technological systems and the emergence of newcomers, particularly insurance technology (‘insurtech’) initiatives.
That being said, technology provides opportunities as well as difficulties, especially if businesses are flexible enough to introduce and master new tools. World Finance spoke with Pravit Suksantisuwan, Deputy Managing Director at Viriyah Insurance, about the Thai insurance sector and how it is coping with the influx of innovative digital solutions.
What are some of the biggest challenges currently facing the insurance industry in Thailand?
The biggest challenge facing the insurance sector relates to innovation, but it is one that the Thai Government is well prepared for. A new economic model, called Thailand 4.0, and supporting policies are helping to reform economic structures and propel the nation towards innovation and intellectual development. This will help create a new digital economy that will increase wealth and help make modern technology more accessible for everyone in the country.
However, new technologies will also increase pressure on the insurance industry to change. Insurtech firms will introduce new business models and cause the sector to move at an increasingly rapid pace. Therefore, existing insurance businesses will need to adapt and transform their business practices to cope with the coming changes and to meet future customer expectations.
How are new technological developments changing the insurance sector?
First of all, I think it’s important to recognise just how tech-savvy the Thai people are. With a population of approximately 66 million and internet usage standing at 67 percent, Thailand is home to the 18th-largest online population in the world. Thai people spend a great deal of time using the internet; they average 4.35 hours of browsing every day. Thai citizens are also happy to conduct online research before they make a significant commercial decision.
Alongside further developments to Thailand’s internet connectivity, a variety of other technologies are set to spur the digital transformation of the insurance industry. GPS tools, mobile devices and other digital platforms are providing new ways to engage with customers, reduce costs, boost accuracy and improve efficiency. These technologies are also enabling the creation of new insurance services and marketing channels. They are forcing insurance companies to respond to a new era of competition through digital transformation. For instance, insurers can now send notifications regarding the claims process via mobile devices, while motor insurance firms are finding that GPS services are already a crucial part of their business.
How is Viriyah leading the way with innovative new digital solutions?
Digital transformation is a long and ongoing journey, but one that Viriyah is keen to lead. Our digital capabilities already include the Viriyah Smart Claim (VSC) project, a notification system that helps customers and claim inspectors alike. Our Electronic Motor Claim Solutions (EMCS) project is also being employed to improve repair work efficiency between Viriyah and repair service centres, resulting in greater accuracy, convenience, price control and repair work approvals. This system eliminates the delays caused by waiting for insurance company adjusters to arrive at repair centres and from receiving pre-arranged incorrect spare parts.
In addition, the programme also helps to standardise prices and damage assessments, allowing us to control expenses more efficiently. Moreover, the company has introduced a mobile application for agents. The application has been made to enhance work efficiency in terms of mobility, agility and flexibility, and also to reduce operating procedures and associated costs. The most important thing is that partners and employees are ready for everything that accompanies the digital transformation.
Are there any regulatory hurdles restricting the introduction of these new innovations?
Even though regulations, in many cases, can cause some difficulties, the Office of Insurance Commission (OIC) has prioritised digital innovation within the industry by announcing new electronic insurance regulations. For instance, the digital insurance policy stipulates that both the insurance company and the agent must comply with certain rules relating to insurance proposals, policies and online claims. Furthermore, they must pass security guidelines signed by an external IT auditor before they can obtain a digital insurance licence. Although regulation may increase operating costs and time to market, it can also help prepare insurance companies to propel their business forward more reliably and efficiently.
Has the liberalisation of Thailand’s insurance sector hastened the introduction of digital tools?
In 2020, Thailand will liberalise the insurance trade alongside the other nine countries in the ASEAN economic community. This means there are only three years left for the OIC to set rules and prepare Thai insurance firms for such liberalisation.
Work is already underway, however, and the OIC recently allowed foreigners to hold a 100 percent share in Thai insurance if the organisation meets a minimum capital requirement of THB 4bn ($123m) for life insurance and THB 1bn ($31m) for non-life insurance. With a more liberal insurance industry, availability of increased capital and new technologies will intensify business competition. Thai insurance companies need to be ready to transform their businesses into slick, digital operations in order to survive.
How important is mobile technology to improving customer service?
Mobile technology plays an important role in improving customer service. This is largely because most people now use mobile phones for almost every activity in their daily lives, including communicating with others, purchasing things online and searching for information.
Furthermore, mobile technology provides remarkable channel access capabilities, extending the internet and social media to insurance employees, customers, and partners, and bringing 24/7 communication into the mainstream. Customers can now easily access a company website, communicate via a live chat service, send an email or utilise a mobile app. Certainly, mobile technology is already playing a major role in customer engagement.
Could technology introduce new risks into the industry?
The digitalisation of the insurance industry could certainly introduce unexpected risks, with the arrival of disruptive technologies, including driverless cars and the Internet of Things, sure to affect the market. Perhaps the most prominent threat comes from cyberattacks, which are causing increasing concern among insurance companies and costing more to prevent. However, new regulations introduced by the government should help insurance businesses become more aware of new issues as we move into the digital era.
What role do the other ASEAN nations play in Thailand’s insurance sector?
The establishment of the ASEAN Economic Community (AEC) gives Thailand more liberty to expand its insurance sector because of increased international trade. This will boost the number of transport businesses that enable vehicles to cross the border. There will be more hospitals providing better healthcare to the growing number of people living in the areas benefitting from this trade. The sectors that can gain from these developments include motor insurance, carrier liability, health insurance and many others. The AEC unequivocally provides more opportunities for Thailand’s insurance sector.
What are Viriyah’s plans for the future?
Last year marked Viriyah’s 70th anniversary; in that time, the insurance sector has changed markedly. It is also continuing to change, and we have some big plans for the coming months and years. In addition to increasing policy renewal rates, we have set targets to increase the non-motor share of our portfolio from 9 to 10 percent. In doing so, we hope to achieve closer collaboration with businesses and service networks in the medical and health profession within both Thailand and other AEC nations. The V-Total Care Services, a premium health insurance solution, will be developed for customers in the middle and high-income brackets who require higher quality healthcare services.
Moreover, the company will expedite the expansion of any insurance projects involving business partners, such as engineering insurance plans, particularly with infrastructure and transport systems likely to provide the principal stimulus for Thailand’s economy over the next few years. More underwriting tools will also be rolled out for use in the personal line category. As a result, individual agents and brokers can proceed with underwriting work themselves more quickly and efficiently. Collectively, these efforts will ensure that fig is not simply another player in the Thai insurance sector, but the real driving force behind many of its innovative developments.
Trump blocks $117bn Qualcomm acquisition over national security concerns
US President Donald Trump has shown his commitment to economic protectionism once more by blocking the proposed $117bn takeover of semiconductor firm Qualcomm by Singapore-based rival Broadcom.
The deal, which would have been the biggest technology acquisition in history, was thwarted by a presidential order issued on March 12, over fears that it would “impair the national security of the United States”.
Although Broadcom could appeal the president’s decision, Trump’s action looks to have drawn a line under a takeover saga that began back in November. Last month, the Committee on Foreign Investment in the United States requested 30 days to review the acquisition but, in a characteristically impulsive move, Trump acted before the full investigation has been concluded.
The deal, which would have been the biggest technology acquisition in history, was thwarted by a presidential order
The president’s decision is highly unusual and is only the fourth time in the past three decades that a US president has intervened directly to scupper a foreign investment deal. The last instance, however, came just two years ago, when Barack Obama blocked the takeover of Aixtron by overseas investors, also on national security grounds.
In spite of the fact that Broadcom is based in Singapore, Trump is likely to have had another Asian country in mind when passing his presidential order: China.
The US is battling for supremacy in the race for 5G technology and, although Qualcomm is currently considered to be a global leader in the field, the disruption caused by the Broadcom takeover may have provided Chinese company Huawei with the opportunity to take the top spot.
Donald Trump’s presidency is often dismissed as being big on talk and light on action, but his recent moves are likely to have been well received by his core support.
Prior to the Broadcom intervention, his decision earlier this month to impose tariffs on steel and aluminium imports further demonstrated that he is willing to act on the protectionist promises that he made during his election campaign.
How RCBC’s dramatic transformation is benefitting its customers
Rizal Commercial Banking Corporation (RCBC), one of the largest universal banks in the Philippines, recently underwent a dramatic rebranding programme. This culminated in the unveiling of its new corporate logo and tagline, ‘we believe in you’, in July 2017.
RCBC’s efforts to understand its customers made it realise that people want an approachable bank that not only responds to their needs, but also believes in the value of their dreams
RCBC’s transformation has allowed the bank to shed its traditional image and introduce more modern qualities, while continuing to inspire trust among its clientele. RCBC wanted to show its customers that it is moving forward at the same pace of change they are experiencing in their own lives.
To kick the programme off, the bank undertook various preparatory activities, including conducting market research into RCBC’s corporate equity. Analysts concluded that there was an opportunity for RCBC to develop more meaningful relationships with customers. The results also showed that, in the minds of the customers, banks in the Philippines have no clear differentiation in terms of overall service adaptability, trust, networks, access and uniqueness. However, what did stand out was the fact that those who bank with RCBC are actively proud users of the brand. Indeed, this is what the rebranding campaign wanted to build upon, by connecting awareness to actual patronage.
A growing reach
RCBC’s biggest challenge is converting those who are aware of the bank into actual clients. To do this, an internal relaunch for employees of the RCBC Group was held in Manila, Bacolod, Pampanga, Batangas and Cebu. The activity and event reached more than 2,000 employees of RCBC and its subsidiaries.
As of the first week of August 2017, new signs for branches and ATMs were installed in the Makati central business district branches and on-site ATMs. Currently ongoing are the installations of off-site ATMs.
Press pick-ups of the brand relaunch found their way to key publications and TV stations. Millions of people were reached through Twitter, and organic views of RCBC’s video material on Facebook were high. The relaunch saw RCBC’s television break on July 16, 2017 on cable and free TV shows. Sustained placements will be carried out for the first quarter of 2018, with dominant print ads to be featured in key publications as well.
In terms of digital and social advertising, RCBC’s thematic advertisement had almost four million views, with thousands of reactions and shares. More than just a tagline that pledges faith and full support to customers, their dreams and their needs, ‘we believe in you’ is a call to action for the bank’s employees to further strengthen the already excellent customer service on offer.
As we say at the bank: it’s not about RCBC, but what RCBC can do for you.
Connecting with customers
RCBC’s efforts to understand its customers made it realise that today’s depositors want an approachable bank that not only responds to their needs but, more importantly, believes in the value of their dreams and aspirations.
‘We believe in you’ is a battle cry that shows RCBC’s unwavering support and trust in the indomitable Filipino spirit. At the same time, this new corporate thrust is meant to encourage Filipinos not only to dream, but to turn their passions and dreams into reality; whether it’s travelling to a dream destination, venturing into a new business, or purchasing a new home or car.
RCBC’s new look is embodied by its simpler, fresher, and more minimalist logo, which symbolises RCBC’s goal to continue widening its reach and growing its customer base.
A success story
From its humble beginnings as a development bank in 1960, RCBC’s total consolidated asset value had grown to over PHP 521bn ($10bn) at the end of 2016. Since its inception, RCBC has proven its capacity to meet the demands of its customers, both in the Philippines and beyond. Expanding our reach to nearly 500 branches and close to 1,500 automated teller machines, the bank continues to create a wider network for a better customer experience. Supported by investments in people and technology, RCBC is aggressively reaching out to more Filipinos both at home and in the rest of the world.
As RCBC enters a new era, celebrating its 58th year in 2018, its greatest achievement would be to return the unwavering trust and faith to both its employees and loyal customers. With its new philosophy, RCBC is sending a clear message: it stands firm in its mission to help everyone achieve their dreams.
Macron pledges €700m to solar energy projects
On March 11, President Emmanuel Macron announced that France will pledge €700m ($862m) to solar energy projects by 2022.
The announcement was made during his trip to India at the first ever summit of the International Solar Alliance, an intergovernmental organisation launched in 2015 by Indian Prime Minister Narendra Modi to promote the use of solar energy.
Macron promised to build on France’s existing €300m ($369m) contributions to the body, bringing country’s total donations up to €1bn ($1.23bn).
“This week-end we make Delhi the world capital of the sun,” said Macron via Twitter. “Through our presence we seal an alliance to make the energy of the sun accessible to everyone.”
Nous faisons de Delhi ce week-end la capitale mondiale du soleil. Par notre présence, nous scellons une alliance pour rendre accessible l'énergie du soleil à tous. #ISASummit pic.twitter.com/PZS1XZ3DlN
— Emmanuel Macron (@EmmanuelMacron) March 11, 2018
The overarching goal of the alliance is to generate $1trn to fund solar research across 121 countries by 2030. It places special focus on those countries between the Tropics of Cancer and Capricorn, which receive large amounts of sunlight. So far, 60 countries are signatories to the alliance, with almost half of them having ratified the agreement.
The overarching goal of the alliance is to generate $1trn to fund solar research by 2030 across 121 countries
India, the world’s third-largest emitter of carbon dioxide, has seen rapid advancements in its renewable energy capacity over the last few years, and seeks to nearly triple its capacity to 175GW from non-fossil fuel sources by 2022. Since 2015, India’s renewable energy capacity has risen from 39GW to 63GW.
As part of his India trip, Macron accompanied Modi to the inauguration of the largest solar power plant in the northern Uttar Pradesh province. Costing approximately $76m and built by French energy firm ENGIE, the plant will be able to generate 75MW of energy. For comparison, 1MW could power 1,000 houses for an hour, although number will vary depending on weather conditions.
As with any emerging technology, funding is always a roadblock to implementation. A priority for member countries is to lower the cost of financing solar projects around the world, thereby promoting investment into renewable energy at all stages of the supply chain.
Aristoteles levels playing field for investment into renewable energies
Aristoteles is an innovative digital platform for managing renewable energy assets. Created by asset management company Kaiserwetter, it combines real-time performance data with predictive analytics and powerful risk management software. Kaiserwetter founder and CEO Hanno Schoklitsch explains that in order to achieve the goals of the Paris climate agreement, we need to substantially increase investments in renewable energy. Enter Aristoteles, which makes the technical and financial performance of energy assets more transparent to investors, and so enabling better risk management.
Are you ready to invest in renewable energy? Take the survey.
World Finance: Why did you create Aristoteles, what do you hope to achieve with the platform?
Hanno Schoklitsch: It’s all about how we can achieve the goals that we have set out in the Paris climate agreement. We are currently facing a little bit… lack of financing. And what we would like to provide to the market is really that we can convince capital to invest in renewable energies. So this is the basis and the ideas for Aristoteles.
World Finance: What’s the issue; what are the hurdles in the way of more investment in renewable energies?
Hanno Schoklitsch: In the end it’s all about minimising investment risk, and also maximising the returns, and creating highest transparency standards. And these three things we can achieve by using the data that we are generating out of the assets, and bringing into Aristoteles.
World Finance: How does Aristoteles actually achieve that? You have all these energy assets feeding data into the platform, what happens next?
Hanno Schoklitsch: Yeah, we are gathering the data, aggregating the data from each of the different power producing assets into Aristoteles. So getting all the technical data, and making there our analysis. We have an algorithm, you know, looking at if this is working at the highest possible levels, and having the biggest energy output. But the most important thing is what we are doing with the financial view, and with the financial data. And therefore we are concentrating ourselves as well, on how we can bring transparency and the insight to the investors on the financial side.
For example, if you would like to invest in a windfarm in Africa. And you are concerned about what’s going on with your capital that you have invested there. We are taking out the technical data, bringing it into the cloud, analysing the data there with our smart data analytics. And we are also taking all the financials, the accounting. And this way, of course we can see what we have on production level, what we have on revenues, and where the cash is finally. And even then, going further on, with predictive data simulation. These are next steps, where we’re out there: how can we predict the future from the data of the past?
So in the end, in such a way we can give transparency to the investors.
World Finance: And with that greater transparency you’ve created a level playing field to invest in renewable energies.
Hanno Schoklitsch: Yeah. What we would like to achieve is to give the investors the possibility to go for renewable energies. Put the money and the capital out there to achieve the goals of the Paris climate agreement. There’s no hurdle existing anymore not to exist in renewable energies. Go for it! Let’s go for the Paris climate goals, and we will achieve a great future.
World Finance: Hanno, thank you very much.
Hanno Schoklitsch: Thanks Paul.
Automation may not decimate the job market, but it does present significant challenges
As labour-saving technologies advance, concerns regarding job security will likely rise in tandem. According to a study by PwC, 37 percent of the 10,000 people surveyed across five countries were worried automation would put jobs at risk. Further, 60 percent believed only a few people would have stable, long-term employment in the future.
From a macroeconomic perspective, the bulk of available evidence seems to suggest there is little reason to worry, as the net effect on employment will likely be small and may, in fact, result in gains. But dealing with the fallout from a large structural shift in labour will inevitably present significant challenges.
Manufacturing change
At highest risk of being automated are low-skilled jobs, particularly those with predictable and repetitive tasks that can easily be replicated by a machine, like fast food preparation and mechanical assembly.
Just because a job has a certain proportion of tasks open to automation doesn’t automatically mean it will become redundant
Meanwhile, occupations requiring more abstract skills – those that are hard to codify and copy – will stand a lower risk of being automated. These jobs tend to involve social interactions or the application of expertise; tasks that cannot easily be mimicked in the absence of truly advanced artificial intelligence.
“One pattern that becomes clear is that there is more erosion at the low end of the income distribution and low end of the skill distribution as opposed to the top of the distribution,” said Grace Lordan, Associate Professor of Behavioural Science at the London School of Economics.
“We do see some erosion at the top end of the distribution, but we expect the net effect to be small or possibly positive as more jobs come on-stream. At the bottom of the distribution, there is going to be much more hollowing out.”
This erosion is extensively alluded to throughout much of the research on the topic. According to a study by McKinsey Global Institute, 30 percent of work tasks across 60 percent of occupations could be automated, while between 400 and 800 million people may need to find new work due to automation by 2030.
A report by PwC, which looks at automation occurring over three overlapping waves between now and the 2030s, suggests machines will encroach further on manufacturing jobs as they become more adept at completing physical tasks that require dexterity and dynamic interactions. The report estimates the resulting job losses could be as high as 44 percent in some countries.
The sky isn’t falling
Despite the high figures in their reports, both McKinsey and PwC maintain the losses will likely be made up for elsewhere in the economy. Even so, many experts argue such figures are exaggerated.
“[The high estimates of ‘at risk’ jobs] just reflect technological potential, so they tell us how much theoretically could be done by machines,” said Ulrich Zierahn, Senior Researcher at the Centre for European Economic Research. “But the actual employment effect is likely to be very different from that because it takes a long time for machines to be adopted, because humans can adjust and actually do adjust to the change, and also because new jobs are created along the way.”
Factors like the high cost of implementation for firms and labour laws are likely to slow the rollout of automated technologies. What’s more, Zierahn’s own research suggests a ‘task-based’ approach to predicting the impact of automation, rather than the traditional ‘occupation-based’ one, could be of greater use. Just because a job has a certain proportion of tasks open to automation doesn’t automatically mean it will become redundant.
“Usually researchers say that if the [proportion of automatable tasks] is above 70 percent then you would regard the job [as] at risk,” Zierahn said. “However, being at risk just [refers to] the level of exposure to technological change, whereas the potential employment effect of that exposure is another question.”
Factors like the high cost of implementation for firms and labour laws are likely to slow the rollout of automated technologies
Additionally, some research shows that even if automation drives down labour demand in manufacturing, mass redundancies would not necessarily follow. “We do not find any systematic evidence that manufacturing firms really fire workers,” said Wolfgang Dauth, Assistant Professor of Empirical Regional and International Economics at the University of Würzburg.
“What we do see is that they reduce the number of labour market entrants that they would otherwise have hired, so younger people then go into the service sector rather than the manufacturing sector.”
New jobs could come as a result of an overall improvement to the economy in terms of income and productivity, as well as a direct result of new technology (i.e. maintenance, research and development). As people pour their new wealth into the economy – investing in, and creating, businesses – a higher demand for specialised labour could offset the job losses directly related to automation. The challenge, therefore, becomes not how to deal with a significantly higher unemployed population, but how to effectively transition the workforce into the new economy.
In the past, disruptive events like the Industrial Revolution have often been referenced as instances where naysayers overreacted. “Throughout economic history there has always been a new wave of automation that made [a] certain kind of work or a certain kind of worker redundant, but overall we don’t really feel that this time might be different,” Dauth said.
However, the quickening rate of technological advancement could potentially set this era apart from previous ones. “In honesty, my feeling is that it is different,” said Lordan, pointing to the cratering housing market that precipitated the 2008 financial crisis as an example of an unprecedented event everyone thought impossible. “Things can happen for the first time, and you probably want to encourage policymakers to think about it.”
Smoothing the transition
Net employment effect notwithstanding, public policy will need to reflect the needs of the new job market. If handled incorrectly, even a society made wealthier by technology would see said wealth concentrated in fewer hands.
Higher investment into STEM education and retraining programmes should be an economic priority as demand for high-skill labour increases. Special attention must be paid to mid-career workers who will need to learn new skill sets or significantly expand their existing ones. This adaption will also need to be applied to younger generations, which are currently being brought up through an education system fundamentally designed to complement the last industrial revolution.
“I think that really does require a big restructuring of education,” Lordan said. “Currently, our education system largely teaches children the jobs that robots are going to be able to do, which doesn’t really seem like a good idea. I think what you want to be able to do is teach skills like empathy and character, which robots are not going to mimic.”
Higher investment into STEM education and retraining programmes should be an economic priority as demand for high-skill labour increases
Even in a country like Germany, which has a low risk of net job loss and is well equipped to deal with these labour shifts due to its tradition of investing heavily in retraining, there is a gap between those who benefit from automation and those who do not.
“We do see that there are distributional effects of automation,” Dauth said. “[This] means that we will see differences in that higher skilled people mostly benefit from automation, whereas lower skilled people see reduced earnings and reduced employment prospects, but on the net there is no overall negative effect of automation.”
According to Zierahn, while the negative net effects of technology on employment are not apparent, the structural effects it will have are important. Specifically, the shifts between occupations and industries, as well as the resulting inequality, present significant challenges.
“We have to support workers in adjusting to the change by getting the right training to get the right skills,” Zierahn said. “It seems that inequality is rising due to technological change because it is particularly the low-skilled workers who are most exposed and who suffer most from the change and who also have the hardest time finding new jobs.”
The economic benefits technology will bring are real but, in the race to stay ahead, governments will have to pull off a balancing act between remaining competitive and minimising the impact machines will have on large portions of their workforce. The failure to adequately take care of lower income workers, who may be left behind by the new economy, can bring significant cultural consequences, as well as economic ones.
Why Marx still matters
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Gulfstream Aerospace is setting the standard for business aviation
There is growing evidence supporting the notion that when companies use business aircraft, they tend to grow faster and create more jobs. As companies expand their businesses around the world, the need for efficient travel will grow in turn. Consequently, it is a practical reality that the demand for business aviation will continue to increase as the world’s economy becomes more interconnected. While the advantages of business aircraft are well known and understood in certain regions and industries, some are yet to appreciate the potential.
Whatever the market conditions, the enduring key to success is to listen carefully to consumers while creating products and services that embody quality, reliability and innovation
According to Honeywell’s latest business jet forecast, released in early October, a growth rate of three to four percent is expected from the period of 2017 through 2027. Honeywell projects that during that span there will be up to 8,300 business jet deliveries worth $249bn, and 61 percent of those deliveries will be to North American operators.
The ultramodern experience
As demand picks up for business aircraft, the industry is constantly moving forward with new technological advancements. When it comes to business travel, safety, flexibility, reliability and performance are always crucial. Our newest aircraft, the Gulfstream G500 and G600, are designed with this in mind, and are the latest examples of our long-standing tradition of ultramodern technology.
For one, they can double as an office in the sky, or even a media room, thanks to new high-speed communications and entertainment equipment. On top of this, both aircraft feature the Symmetry Flight Deck, which features several key innovations. For instance, the novel flight deck includes 10 touchscreens, which reduces the number of switches in the flight deck by up to 70 percent. State-of-the-art vision systems, including a third-generation enhanced vision system that boasts four times the resolution of its second-generation incarnation, are also present.
Perhaps most importantly, the Symmetry Flight Deck has received a huge amount of attention for the active control sidestick (ACS) technology it is equipped with. Indeed, the ACS earned Gulfstream, together with our partner BAE, the 2017 Technology Laureate Award from Aviation Week. The new feature increases safety by ensuring that any movement in the control stick by the flying pilot or autopilot can be seen and felt by the non-flying pilot through the stick on the opposite side of the flight deck. In doing so, it is able to greatly improve the situational awareness and coordination between crewmembers. The ACS also frees up room in front of the pilots, enhancing ease of movement in the flight deck.
Listening to you
During the 35 years that I have spent in the aviation industry, I have seen market conditions flip between ups and downs. But whatever the market conditions, the enduring key to success is to listen carefully to consumers while creating products and services that embody quality, reliability and innovation.
To ensure we are delivering the aircraft customers want, we spend a lot of time listening to them. In fact, in late August 2017 we had the 42nd meeting of our customer advisory board (that’s two meetings a year for the past 21 years) and another meeting of our advanced technology customer advisory team (ATCAT).
In March 2017, we flew ATCAT members in the first fully outfitted production G500, and the feedback during and after these flights was all extremely positive. Our customers told us that the combination of added flexibility in the cabin, comfortable new seat designs and the enhanced satellite communications all ensure that the G500 customer experience is second to none.
The sky’s the limit
At Gulfstream, it is important for us to create value for our customers by listening to what they want and ensuring we deliver it. With that in mind, all of our in-production aircraft entered service on time with capabilities that met or exceeded what we promised. The G650, for example, had 1,000 nautical miles more range than we promised (6,000 nautical miles vs 5,000). With the Gulfstream G550, we delivered the PlaneView flight deck with enhanced vision, which was a first for the industry. Similarly, with the G280, we delivered 200 nautical miles more range.
Keeping with tradition, we recently announced that our G500 and G600 will both deliver range beyond our initial projections as we proudly continue to exceed customer expectations.
Wall Street’s bull market reaches ninth birthday
The second-longest-running bull market on Wall Street turned nine years old on March 9, and is on track to beat the all-time record of nearly 10 years.
Bull markets have a life cycle, and this one is certainly reaching maturity, but with the fundamentals looking good, it is not ready to die yet.
The current bull began its life in March 2009, when stocks stopped dropping and began inching back up in the aftermath of the financial crisis.
A stock rally after a crisis is defined as a bull market when it rises by 20 percent relative to the low point. Conversely, they cease to exist when they fall by 20 percent relative to the high point.
Bull markets have a life cycle, and this one is certainly reaching maturity
If the current rally can go the next six months without seeing a 20 percent fall from its high point in January, it will break the record set by the ‘great bull’ that began in October 1990 an ended when the dotcom bubble burst in 2000.
Despite the bull’s lengthy existence, it is showing signs of slowing. The stock market, which has produced headline after headline of shattered records, has been aided by a very generous monetary policy that saw near-zero interest rates during the recovery.
Scheduled rate increases by the Federal Reserve are set to tame the stock market, but are not likely to be the source of a severe downturn.
The looming trade war brought on by President Trump’s tariff hikes has also caused jitters among investors, and could adversely impact stocks depending on how strong the retaliation from foreign governments is.
The success of this market is due in no small part to the pessimism that set in after the financial crisis, which prevented investors from paying too much for stocks.
Bull markets tend to die when shoppers, investors and businesses become too optimistic and begin overspending and over-borrowing.
However, this does not yet seem to be the case, and some have actually predicted that the rally could continue for years before disappearing.
Cutting through the data jungle with Infinox
Fortunately, data is now one thing all investors – both private individuals and professionals – have access to in abundance. However, the sheer volume of information from official channels or social media rumours, both structured and unstructured, can be overwhelming.
As such, there is a real danger of drowning in data. Smart investors may well be able to filter out the noise and focus on actionable information, although there is no guarantee of success. But for many, the overload of information and the inability to access the true value of this information lends to a dilemma where over-analysis leads to paralysis, or simply the blind leading the blind. So, how can we separate the wheat from the chaff?
Not all news is created equal
The days when financial news was the exclusive preserve of a few august newspapers now look as distant as the time when no self-respecting City trader would be seen dead without a bowler hat.
12 seconds
Average human attention span in the year 2000
8 seconds
Average human attention span in the year 2015
In the modern day, no two publications will provide the same information on a currency pair. While they may conclude the same, their explanation and perception of factors will all differ.
Financial analysis is no longer defined by a set of principles, but is rather open to the interpretation of multiple opinions (some of which are unsubstantiated). Given the widely available access to financial markets, who is to say which opinion is grounded in fact? What really matters is the effect of those opinions.
According to a 2015 study conducted by Microsoft, in 2000, the average concentration span of a human was 12 seconds – probably about enough time to read the first couple of sentences of a financial news report. Since the mobile revolution, however, the concentration average has fallen to eight seconds. Bear in mind that a goldfish can concentrate through its fish bowl for nine seconds!
The challenge, therefore, is to be able to provide financial information to participants in an eight-second time frame, taking into account that the modern day is less about what is actually said and more about the effect of what is said.
The secret ingredient: sentiment
Infinox aims to deliver information to clients in short, direct quantities that allow them to respond to financial and political news without getting bogged down too much in the details.
In a world where the media focuses on trending topics, traders who are most exposed to breaking news need to be able to access all news in just a few words. Through the Infinox Lab, modern day media and technology is put to work.
Data mining is the concept of scouring countless sources of information to seek out key words and sentiment analysis, which is able to link the key words with the tone of words surrounding them. This process produces an opportunity for traders to become appropriately receptive to information delivered across an infinite number of resources.
Brexit serves as a case in point: it was a close referendum, with the polls appearing to give the edge to ‘remain’ camp in the final days and hours. However, data mining and sentiment analysis scoured the vast number of worldwide news sources – from the established and respected to tweets shared across Twitter and social media – and put the ‘leave’ campaign ahead.
By 1:49am UK time, Sunderland’s vote to leave the EU was registered and Brexit became a reality. This was something the media all over the world had been saying, but it just couldn’t be heard.
Trading in an uncertain world
It’s never been truer that political events have a significant impact on markets. And given the level of volatility in markets, the level of political uncertainty and moves towards protectionism, tracking sentiment has become vital.
The last 18 months have seen the rise of populist leaders in various countries promising to erect barriers to trade and prevent the free movement of people. Those who champion free, open and global markets have been brushed aside by those who, in the case of the UK, want to leave the biggest free trade market of them all.
Meanwhile, US President Donald Trump is reportedly hellbent on imposing huge tariffs on steel imports to bolster domestic industries, despite warnings that doing so may spark a global trade war. Indeed, he is also threatening to tear up the North American Free
Trade Agreement.
In Europe alone, we have seen the rise of the far right and other breakaway movements springing up across the continent; Catalonia’s recent independence movement being just the latest example. Indeed, those people who feel the global economy is under attack have much more they can point to in order to evidence this. For many, it is hard to believe that the political agenda has become so far removed from the previous consensus of globalisation and shifted to a climate of far more polarised opinions.
Fortunately, the Globalisation Index, a unique index created by Infinox, tracks the sentiment of economic, social and political news. With this tool, traders can get a snapshot of the effect of the shifting political landscapes, and the resultant volatility in financial markets.
Forbes reveals the five richest people on Earth
There are more billionaires around today than ever before, according to Forbes. Together, they are worth $9.1trn, with an average fortune of $4.1bn.
Forbes’ 2018 ‘billionaires list’ features many of the same names as last year, as well as one newcomer, a new frontrunner and fatter wallets all round.
For aspiring billionaires, the main takeaway is that all you need to do to make the list is control vast corporate conglomerates or create technological innovations that change the way people live their lives. Easy.
Jeff Bezos
Net worth: $112bn
Having added $39.2bn to his net worth over the past year – the largest gain in history – Jeff Bezos leapfrogged Warren Buffett and Bill Gates to take the top spot for the first time. The Amazon founder is the first person to crack the $100bn mark.
Forbes’ 2018 ‘billionaires list’ features many of the same names as last year, as well as one newcomer, a new frontrunner and fatter wallets all round
Despite owning only 16 percent of ‘the everything store’, which he built from scratch out of a garage in Seattle, Bezos can now call himself the richest person in the history of the planet. Bezos also owns The Washington Post and has entered the space race with Blue Origin.
Bill Gates
Net worth: $90bn
Bezos may wear the crown, but when people think of the richest person on Earth, it will always be Bill Gates. Cushioning his fortune with an extra $4bn since 2017, Gates was never going to fall too far on this list.
Having quite literally changed the world by founding Microsoft in 1975, Gates is now best known for his prolific philanthropic work through the Bill & Melinda Gates Foundation, tackling issues from poverty and malaria to women’s empowerment and education all around the world.
Warren Buffett
Net worth: $84bn
The 87-year-old “Oracle of Omaha” is another perennial powerhouse on any ‘world’s richest’ list. As Chairman and CEO of Berkshire Hathaway, Buffett rules over a sprawling empire that took in over $242bn in 2017.
Known for his financial prudence despite his vast fortune, Buffett co-founded the Giving Pledge in 2010 with Bill and Melinda Gates, wherein billionaires promise to give away the majority of their money to worthy causes. Signatories include Mark Zuckerberg, Richard Branson and Michael Bloomberg.
Bernard Arnault (and family)
Net worth: $72bn
As Chairman and CEO of French luxury colossus Moët Hennessey Louis Vuitton – which owns brands such as Christian Dior, Marc Jacobs and TAG Heuer – Arnault is a newcomer to the top-five stratosphere.
Adding $30.5bn to his coffers last year, Arnault’s meteoric rise has seen him become the richest man outside of the US.
Arnault is also an avid art patron and collector, boasting works of Claude Monet, Andy Warhol and Pablo Picasso in his collection.
Mark Zuckerberg
Net worth: $71bn
At 33, Mark Zuckerberg is by far the youngest person on Forbes’ list. Although he remains in fifth place on the list, Zuckerberg’s pockets are nonetheless $15bn heavier than last year.
Still a teenager when he founded Facebook in 2004, Zuckerberg has since seen his dorm-room project grow into the biggest social network in the world, with over a quarter of the world’s population actively using it each month.
Though Zuckerberg receives a one-dollar salary, his net worth rises alongside Facebook’s stock. The self-made billionaire has pledged to give away 99 percent of his stake in the tech-giant over his lifetime.
Trump’s tariff proposal provokes global retaliation
Donald Trump’s campaign promise to deliver tariffs on steel and aluminium imports came to fruition on March 1, causing markets to dwindle and igniting widespread international criticism.
The US President has threatened to impose a 25 percent tariff on steel and 10 percent on aluminium imports, which he claims will protect domestic industries against unfair competition from China and other countries. “This wave of globalisation has wiped out totally, totally our middle class,” Trump told voters in the Rust Belt town of Monessen, Pennsylvania.
An own goal
The IMF hit back following the tariff announcements, stating that the Trump administration’s intentions to protect domestic markets could do quite the opposite, raising costs of steel and aluminium. The negative impact could extend to the US manufacturing and construction sectors, major users of the materials.
Stephen Woolcock, Associate Professor at the London School of Economics agreed, adding: “Most job loss in older industries such as steel is due to productivity increases. This may in part be in response to increased international competition, but the current Trump administration’s position on trade appears to be driven more by domestic politics than any considered assessment of the impact on employment in US industry. As a number of commentators have pointed out, there will be increased costs for US steel and aluminium users that are likely to further undermine US competitiveness.”
The EU is considering responding with a 25 percent tariff on $3.5bn of imports from the US
In terms of domestic employment, the move would not significantly benefit the working class, a group that has supported Trump’s criticisms of trade agreements.
“The overall consequences would be a slight rise in employment in the US steel sector, but a larger loss of employment in other sectors,” argued Julius Sen from the Department of International Trade Policy Unit at the London School of Economics. A study published on March 5 outlined that the net impact on US jobs would negatively affect the services industry the most, including construction and trade and distribution.
Repeating history
This is not the first time steel trade has been threatened, however. During his second year in office, George Bush implemented foreign steel tariffs of eight to 30 percent. The move backfired, raising costs for steel users and drawing retaliatory tariffs from the EU, Japan, South Korea and others. This, along with a ruling of violation by the World Trade Organisation (WTO), drove Bush to withdraw the tariffs in late-2003.
The current administration doesn’t appear to have taken note of the WTO’s previous stance, a move that could cause significant problems. “If all WTO members did the same, the rules-based trading system would revert back to a power-based order. Trump seems to welcome this, but if each major WTO [member] determines what is fair it will mean reduced trade and a loss of world welfare. Small countries and developing economies will be especially vulnerable,” added Woolcock.
Retaliatory tariffs
According to Bloomberg, the EU is considering responding with a 25 percent tariff on $3.5bn of imports from the US. European Commission President Jean-Claude Juncker cautioned Trump with consequential tariffs on American products such as Harley-Davidsons, Levi’s jeans and Kentucky bourbon.
He called Trump’s tariffs “a blatant intervention to protect US domestic industry and not to be based on any national security justification”. German manufactures, which are the biggest EU-based exporters of steel to the US, annually exporting approximately 951,000 metric tonnes, could take a significant hit.
Canada and Brazil, which own the largest shares of steel imports to the US (16 percent and 13 percent respectively), are set to be hit hardest by the change.
Michael Plouffe, Lecturer in International Political Economy at the University of Central London, addressed the potential response from Canada and Mexico, which are involved in NAFTA talks with the US: “Both the unplanned announcement and unilateral nature of these potential tariffs are likely to lead to doubts on the part of the Canadian and Mexican teams that the US is negotiating NAFTA reforms in good faith.”
The global trading system could face challenges if the EU and China retaliate. “[They] would be hard-pressed to justify retaliation under WTO rules, so would either need to break these rules or step out of the system using national security prerogatives. Both would be extremely bad for the wider trading and political system,” Sen said.
The tariff could see the global trading system performing under tense conditions if Trump goes ahead. Given the immediate international and domestic backlash, plus lessons learnt from his predecessors, Trump may rethink the tariff, particularly if he deems it not worth the duties that could be imposed on American goods. This may be the case if a ‘fair’ NAFTA agreement is signed. Otherwise, ‘America First’ may leave the US in last place.
What PSD2 and open banking means for financial services in 2018
In 2018, the financial services industry will undergo a transformation that will fundamentally change the relationship between consumers and retail banks. By giving consumers the choice of new direct-to-account payment methods and the ability to share their transaction data more freely with third parties, the EU’s Second Payment Services Directive (PSD2) and its UK implementation, ‘open banking’, will alter the structure of retail banking for good.
Although the received wisdom is that open banking will lead to a loss of market share for established players as they are forced to make data available to other companies – in particular fintech startups and digital specialists – forward-looking banks are thinking much more positively.
In fact, they see open banking as an opportunity to create new business models and revenue streams based on a real competitive advantage, built on long established trust and a large-scale customer base.
Seamless experiences
Open banking will certainly see the acceleration of digital innovation. Banks are rethinking their business models to go beyond just compliance with the new laws by expanding their digital offerings and creating a seamless customer experience in mobile and web.
Smarter digital identity systems will be essential to making digital banking part of a positive customer experience. Intelligent and contextual authentication processes – from the use of one-time passcodes to biometric identification – can be the key to creating the genuinely seamless and secure customer journeys that users expect.
A new payments business model will become available to banks once open banking takes effect. By opening up the traditional structures that have dominated financial services, open banking and PSD2 create opportunities to condense the payments value chain. This enables the in-app, one-click purchasing options that are threatening the dominance of card payments.
New payments initiation service providers will prompt innovation in the retail environment, enabling apps to connect directly with their customers’ bank accounts. This allows the customer to seamlessly make payments, with authentication options such as facial recognition and fingerprint sensors ensuring payments remain secure.
By opening up the traditional structures that have dominated financial services, open banking and PSD2 create opportunities to condense the payments value chain
This kind of low-friction, high-assurance experience will disrupt more traditional payment methods, especially as retailers keep an eye on in-store innovation from the likes of Amazon.
With the need for explicit consent from the consumer for such payments, there come opportunities to personalise the shopping experience with real-time contextual services and offers.
Providing consumers with dashboard options for managing their consent will be an early differentiator, showing respect for privacy whilst enabling access to a wider ecosystem of partners for loyalty, rewards and extended services.
Turning data into insight
Another new entity enabled by PSD2 and open banking is the account information service provider, which is focused on the vast potential of transaction data to provide real insights about customers. This offers an opportunity for a deeper level of customer engagement, delivering a different experience from the online bank statement and inviting customers to engage with their own financial wellbeing.
Among challenger banks there are already examples where real-time spending insights, saving goals and relevant offers are being presented to customers through a modern interface.
With such vast amounts of customer data in their possession, banks will not pass up on a new way to offer value, especially as this will increasingly be the focus of competition and differentiation.
The potential to collect data from accounts the customer holds at other banks and then provide the customer with a data dashboard for a 360-degree view of their financial status is a tremendous development.
Businesses have invested heavily into analytics capabilities to gain a better understanding of their customers’ needs and preferences. Technology platforms such as Facebook and Google are certainly dominating this market, but banks have a major advantage in that the data they hold concerns real-world purchasing behaviours.
As such, insights gleaned from this information can be acted upon more successfully than those gained from the non-specific data provided by likes and clicks. Of course, this raises very important issues concerning the acquisition and management of consent.
In 2018, two further laws will come into force: the Guide to the General Data Protection Regulation and ePrivacy Regulation – both designed to make digital life more human-centric through further use of consent.
Earning trust
In order to lay the groundwork for stronger, more trust-based customer relationships, banks should focus on convenience, choice and control.
Time wasting and duplication of effort need to be swapped out for convenience if organisations are to take advantage of open banking. It’s all about redesigning the customer journey and delivering a seamless, context-aware customer experience, enabled by secure methods of authentication, biometrics and authorisation. At every point, teams need to be asking how easy and secure the service is for the customer.
Choice is also vital. Open banking is designed to give customers greater flexibility. Banks should embrace this and use it to gain an edge over their competitors. This means not just complying with regulations at a surface level, but going beyond that and offering real value and choice to the consumer.
The development of new propositions and the positioning of new partnerships is well served by secure access to application programming interfaces, and banks have a distinct opportunity to extend identity assurance to a wider system that covers customers’ different life stages and needs.
Lastly, putting customers in control of their own finances is essential. Banks should establish a system and culture that treats customer data as a shared asset, giving users transparency and control over how and under what circumstances their information can be used.
Customers knowing they can turn their consent on and off at their convenience will build trust and result in more data being shared. It opens the door to new journeys that are contextually rich, based on location, activity and intention – all fundamental to personalisation.
Opportunities abound
Open banking and PSD2 will undoubtedly bring huge changes to the financial sector. However, these changes should not be viewed as a threat to banks and financial service providers.
Established players should face new compliance demands with agility, greater collaboration with partners and a firm focus on delivering a first-class digital experience.
The ambition of legislators is to put citizens firmly in control of their digital lives. In 2018, there is first-mover advantage to be gained by institutions that can securely leverage the decades of knowledge and trust they have built up and deliver greater value to customers.
