2019 | World Finance

Union National Bank continues to be a beacon of stable growth in the UAE

Posted on February 13, 2019January 29, 2019 by Max Tomlin

In recent years, the geopolitical situation in the Middle East and North Africa (MENA) region has slowed economic growth – a scenario that was exacerbated further by cuts in oil production. Thankfully, we are now seeing a turnaround: in 2018, domestic reforms and rising external demand prompted a long-awaited boost to business and consumer confidence. In turn, economic expansion is now being witnessed among some of the region’s oil importers. According to the World Bank, growth in the MENA region is forecast to have accelerated to 3.1 percent in 2018 and will increase further to 3.3 percent in 2019.

In 2018, domestic reforms and rising external demand prompted a long-awaited boost to business and consumer confidence

Against this backdrop, Gulf economies are expected to take the lead in terms of growth in the region, thanks to an easing in fiscal adjustments, greater infrastructure investment and ongoing reforms to promote non-oil activities. In light of these upcoming developments, World Finance spoke with Mohammad Nasr Abdeen, Group CEO of Union National Bank (UNB), about the UAE economy and the financial sector’s role within it.

How is the UAE’s economy faring amid regional pressures?
It’s relatively diversified, with a steady increase in the contribution of the non-oil segment in recent years. Driven by both oil and non-oil sectors, the UAE economy is expected to grow substantially at 4.2 percent in 2019, while the fiscal deficit will shift to surplus due to higher revenue from both oil and taxation.

Hosting Expo 2020 will further drive the economic activity, as the event will attract a large number of visitors, thereby boosting private consumption and services. Construction will gradually strengthen too, in response to private and public demand growth, as well as increased export-related investments.

Despite rising operating costs for businesses after the introduction of VAT, the UAE will continue to benefit from its ‘safe haven’ status. Off the back of these factors, real GDP growth is expected to average 3.5 percent over the 2018 to 2019
financial year.

How strong is the competition within the UAE’s financial sector?
There is increasingly intense competition among the 49 banks serving the population of nine million. Lower oil prices have resulted in slowing economic and credit growth, thereby reducing lending opportunities. Credit penetration is quite high and the macroeconomic outlook is challenging, resulting in lower margins. The room for meaningful growth for such a large number of banks is therefore limited.

Consolidation of the banking system will diminish the competitive pressure for funding and increase banks’ revenue base, realising synergies through economies of scale and a lower concentration of risk within loan portfolios. It will also increase banks’ competitiveness, reduce pressure on their funding costs and increase their ability to meet sizeable investments. Furthermore, the experience of bank mergers in the UAE has proved that well-executed deals can have desired results.

What other challenges remain in the sector?
Factors such as the implementation of VAT at the beginning of 2018 have, to a certain extent, impacted domestic consumer spending, while the recent strengthening of the US dollar is reducing the external competitiveness of the UAE’s economy, especially in its tourism sector. In addition, tightening monetary policy, higher fuel prices and rising interest rates are impacting activities across all sectors. Fortunately, these challenges are not impacting the UAE’s financial stability: the country is thought to have generated AED 12bn ($3.2bn) in VAT revenue during 2018 and is expected to generate a further AED 20bn ($5.4bn) in 2019.

What’s in store for the coming years?
In September last year, the Abu Dhabi Government announced an economic package of AED 50bn ($13.6bn) to stimulate the tourism sector and create new jobs in a bid to boost growth in the area. The Dubai Government also announced its own set of economic initiatives that include attracting more foreign investment and plans to increase the number of visitors to the emirate. Moreover, the Expo 2020 event in Dubai will drive GDP growth between 2020 and 2021 by boosting job creation, consumption and tourist numbers.

Recovery of the real estate sector is expected in 2019, helped by decisions such as mandatory unified leasing contracts and the classification of all non-freehold plots to improve transparency across the sector. Moreover, the move to grant 10-year residency visas for professionals, investors, scientists and meritorious students, in addition to a new law allowing 100 percent foreign ownership of companies, is expected to have a positive impact on the property market and the economy in general.

What role do employee engagement and wellbeing initiatives play in the sector?
Employee wellness is of paramount importance in propagating a culture of engagement across an organisation. An organisation’s workforce is its most important stakeholder and prized asset. In addition to providing the basics, such as training, development, performance objectives and rewards, employee wellbeing is crucial to an organisation’s success. Healthy employees are more productive and engaged, therefore a focus on quality of life, work-life balance, physical and mental health, and social, financial and spiritual wellbeing leads to a highly committed workforce.

Can you tell us about UNB’s employee engagement and wellbeing initiatives?
Over the years, UNB has consistently met its goals and objectives with regards to employees, customers and shareholders. However, in today’s dynamic and competitive business environment, it has become imperative for UNB to take a transformational approach to ensure its continued success in the years to come.

With the launch of its award-winning HR transformation strategy, Tahfeez, UNB has developed a value proposition with a host of employee engagement and wellbeing initiatives. Some examples are the Steps of Giving initiative, the New Me wellness campaign and monthly employee wellbeing events. These initiatives have been well received and have inculcated a sense of belonging and encouragement among UNB’s workforce.

Why are such initiatives important for the health of the economy more generally?
With a focus on creating happiness and wellbeing across the general population and workforce, the UAE Government has created the Minister of State for Happiness and Wellbeing cabinet position, and has launched the National Programme for Happiness and Positivity. In line with the lead taken by the government, public and private sector organisations have rolled out various initiatives that help drive sustainable productivity and profitability.

What impact has AI and digitalisation had on the banking sector?
The banking landscape is changing at a rapid pace. The fintech revolution is transforming the way customers engage with their money and financial services providers. From social and mobile capabilities to the storage and analysis of customer data, banks are now compelled to rethink the way they do business in order to deliver a better customer experience.

Customers now want a user experience that is specific to their needs. A bank’s success in the digital economy therefore lies in the data it accumulates and processes about its customers. The future is real-time and data-driven. By extracting meaningful insights, banks can create customer segmentation and deliver innovative products in a way that appeals to each individual customer.

What opportunities do they present?
Along with the IT industry, the banking industry has been among the biggest job creators over the past two decades. We are now at a point where technology is more efficient than humans, which is why AI is playing an increasingly important role in automating processes within banks. For instance, AI-powered bots are replacing manual processes, performing the same tasks in a fraction of the time and with 100 percent accuracy.

Traditional teller functions, Know Your Customer details and updates, account services, and salary processing are all going digital. The need for face-to-face interaction is therefore decreasing, but there is an opportunity in reskilling employees towards customer relationship management (CRM). We are also presented with new opportunities in terms of business models that are mobile-first and AI-driven. Due to the meaningful and actionable data available, there is a paradigm shift in lending models, whether it be instant loan approvals or peer-to-peer lending.

How have these technological developments impacted UNB?
Besides adopting emerging technologies, UNB regularly tests new services within the bank. The sales process has now turned digital with the implementation of a mobile-enabled CRM system. AI is being used in predictive analyses of customer transactions, account data and social data in order to make real-time, context-specific offers.

Similarly, some processes have been enhanced with robotic process automation. There’s smart recruitment through robotic interviews, the digitalisation of the onboarding process, welcoming clients at the Customer Care Unit through UNB Robo, chatbot for HR policies, and process automation for information technology and operations services.

Do you have any exciting plans involving these technologies that you can tell us about?
The UAE Government has created a Ministry of Artificial Intelligence to invest in the latest technologies and apply them in various sectors. Taking a cue, UNB has established a dedicated Digital Banking and Innovation team that is working with fintech accelerators in the region to identify emerging technologies and opportunities.

The bank is also working closely with government entities in the areas of blockchain, digital wallets and smart governance. Some of the projects on the anvil include voice biometrics, as well as an omnichannel banking platform that will incorporate retail and corporate banking services over web, mobile, digital branches, ATMs and kiosks. Services will include customer onboarding, instant lending and remittances, and the UNB Mobile Wallet for students. With all this in mind, the future certainly looks bright for the bank and the wider region.

Hungarian Post Life Insurance is harnessing digital value to grow its client base

Posted on February 12, 2019January 29, 2019 by Max Tomlin

Over the past five years, Hungary’s insurance market has achieved almost five percent growth in gross written premiums, on average. This year, the sector is on track to achieve gross written premiums of over HUF 1trn ($3.48bn) for the first time in its history.

Digitalisation is not an end in itself, but it offers the means to provide greater value through higher-quality processes

Anett Pandurics, CEO of Hungarian Post Life Insurance, one of Hungary’s top insurance companies, told World Finance that despite this impressive growth, there is no reason for anyone to rest on their laurels. The market still has plenty of potential for further expansion.

Hungarian Post Life Insurance has always been at the forefront of the digitalisation of Hungary’s insurance industry. Since 2003, the company has aimed to meet clients’ demands by making its services quicker and more efficient. World Finance spoke to Pandurics about the challenges in Hungary’s insurance market and the opportunities the company has found.

What areas could insurance companies in Hungary expand upon?
The Hungarian National Bank’s 10-year strategic plan, which was created in 2017, predicts there will be more than one million new self-care savers in the years to 2027, including those who have pension insurance policies or voluntary pension fund memberships. We expect that more than 300,000 people will have pension insurance policies by the end of this year. There is, therefore, plenty of room for expansion in this regard.

Additionally, in response to recent economic development, households and companies that are already strengthening could and should increase their property damage coverage.

The opinions of experts in the central bank may seem optimistic. According to the bank, there is an opportunity to triple life insurance gross written premiums and double non-life gross written premiums during the 10-year period. If the growth seen in 2018 continues, this goal could be achieved. However, there are also a number of downside risks to consider and many tasks to be done in order to achieve this goal.

Could you elaborate on the current challenges in the market?
Although interest rate increases have already started in the US, Europe is still waiting for this to occur. According to forecasts for Hungary, we must prepare for an extremely low interest rate environment in the medium term.

We should also not forget that as a result of activity over the past decade, the volume of delayed investment on the retail side is fairly significant. People are consuming, restoring or buying new properties, and at such a time it is difficult to attract a large number of new long-term, self-care savers.

With regard to single premium insurance policies, the Hungarian National Bank expects that gross written premiums will expand by only HUF 2bn ($7.1m) this year. And even in the case of regular premium life insurance policies, the Hungarian National Bank estimates growth of only 2.1 percent.
Today, the aforementioned pension insurance is the main driver of the life insurance branch. This is where the 20 percent tax advantage, from which more than 200,000 clients benefitted last year, has a major role.

At the same time – according to a presentation given by Dr. Csaba Kandrács, Executive Director of Financial Institutions Supervision at the Hungarian National Bank, during the 2018 Portfolio Conference: while 85 percent of the respondents agree with self-care, 76 percent of them think money should be spent on something other than pension savings. In the survey, one insurance company questioned people aged 30 or over, out of whom every fifth person said they were too young to consider this issue.

What internal issues are making development more difficult?
Progression relies upon resources. These resources must comply with the new provisions set out by the legal regulatory environment. Before the financial crisis, there were 75 sets of rules regulating insurance companies – today there are 148.

It is telling that in Hungary, the total expense ratio calculation – which was implemented five years ago as a result of the self-organisation of the insurance companies – now runs parallel to the information provided in the key information document. Though the two statements stem from a common source in many aspects, they are not identical. This often causes problems in sales.

New ‘insuretech’ companies bring another element to the challenge. These firms only have to comply with a fraction of the requirements applicable to supervised institutions.

In many cases, digital enterprises like insuretech firms operate in areas where, under the banner of increasing access and improving client experience, they only have to comply with part of the requirements applicable in the classic regulated market. I feel that it is important to level the playing field to all insurance distributors.

What opportunities are created by digitalisation?
The insurance sector in Hungary has been at the forefront of digitalisation. The comparison of insurance premiums through online brokers has become an established practice in third-party liability motor insurance.
Insurance companies are also unique in that they have already been providing a significant discount to those clients who choose an electronic payment method or electronic administration.

Furthermore, digitalisation is also continuous in the acceleration of internal processes. For instance, 100 percent of Hungarian insurance companies keep online claim files. Moreover, even the claims assessment process itself is digitalised at most companies, or the claims inspection is carried out based on the photos taken or video conferences arranged by the client.

These initiatives make our clients’ lives faster and easier. There are also ongoing initiatives at competing firms that provide automotive or accident insurance cover for periods of hours, which may be started whenever necessary. Whether there is an actual demand for such solutions and which innovations will become economically viable are the big questions to consider.

How did Post Insurance begin its digital journey?
We have come a long way since Post Insurance began operating in 2003, when insurance policies were sold only by way of filling out paper-based forms. During the past 15 years, we have had numerous digital development projects aimed at providing better services to our customers, while simplifying our internal processes and facilitating the work of our sales personnel.

For instance, in 2003, a direct digital data connection was developed with the central registry of the Ministry of Internal Affairs in order to process the policies in an accurate and timely manner. Then, in 2005, we launched an electronic support system of insurance mediation at the country’s post offices. Continuous development of this system made it possible for all insurance administration to be carried out electronically at more than 2,300 Hungarian post offices. During the same year, we introduced a document management and file tracking system to support our internal processes. We have been selling insurance policies through our website since 2006.

We launched our e-learning system in 2009, which facilitates the training of our staff at post offices and digitalised our claims-handling processes. This year, we plan to fundamentally renew the system in order to utilise the most recent innovations in this field.

What other digital solutions have you introduced?
In 2011, we entered the social media scene and set up Facebook pages, through which we have been successfully communicating with our clients ever since. Thanks to this early start, we are ranked in first place among Hungarian insurance companies in terms of the number of followers.

We introduced a motor vehicle insurance product based on telematics in 2014, and in 2015 we created the Post Insurance mobile application. Many useful functions have been added to our app since then. For instance, we have added the feature of household insurance claims reporting with photos, and we were one of the first companies on the Hungarian market to make video claims assessments available.

In 2017, our new digital brand Hello was introduced. Through this, we offer our younger clients insurance policies that can be taken out in an easy and simple way. In the case of Hello, contracting and claims-handling processes are fully digitalised, and customer relations take place through online channels as well. In 2018, we continued to implement our digital innovations in order to ensure that a higher-quality, faster service that could become part of our clients’ everyday lives is provided.

Digitalisation is not an end in itself, but it offers the means to provide greater customer value through more efficient and higher-quality processes, alongside a continually improving customer experience.

In order to meet the demands of our customers, we constantly have to work on improving each and every element of the insurance value chain. Agility, for us, means that we have to learn continuously and strive to be faster and more customer-orientated than ever before.

Lombard International Assurance is adapting with the Millennial wealth evolution

Posted on February 11, 2019January 29, 2019 by Max Tomlin

Some of the most high-profile global entrepreneurs we know today enjoyed success very early on in their careers: Sir Richard Branson became a millionaire at the age of 23; Carlos Slim, the telecoms tycoon, became a self-made millionaire at 25; and Facebook founder Mark Zuckerberg made his first million at the tender age of 22. Today, the net worth of these individuals runs into billions of dollars.

In an age of constant innovation and global connectivity, it is no surprise that Millennials also want advisors who are digitally literate

The world we live in is evolving, and so is the face of today’s high-net-worth (HNW) and ultra-high-net-worth (UHNW) individuals. The rapid rise of technology and digital innovation means we are seeing more and more entrepreneurs achieving HNW status at a younger age. According to the Wealth-X report UHNW Millennial Archetype, the number of ultra-wealthy individuals born between 1980 and 1995 currently accounts for 3.2 percent of the global ultra-wealthy population. Although a seemingly small percentage, this group is growing, and growing fast.

This group of individuals – Millennials – are amassing wealth much earlier than previous generations. They are also much more interested in understanding how to use it, while also being more inclined to contemplate the legacy their wealth will create for future generations.

Willing investors
HNW Millennials are eager to become more financially literate and be proactive in understanding where their money is going, in order to take a more hands-on approach to their investments. Almost half consider themselves ‘self-directed investors’, according to Spectrem Group. This means they want advisors who will take the time to educate them about their investment options, as well as wanting access to insights that are specific to their needs and portfolio so that they can make their own decisions.

In an age of constant digital change, innovation and global connectivity, it is no surprise that Millennials also want advisors who are digitally literate. They want easy, digital access to their portfolio information at any time, saving face-to-face meetings with their advisors for major milestones. Accenture’s Millennials and Money report uncovered that 62 percent of Millennial investors want platforms that actively use social media to share financial trends and recommendations.

However, Millennials still expect an on-demand, personal service from their trusted financial advisors. Over half of those with a net worth of more than $1m cited failure to return a phone call and respond to emails in a timely manner as the primary reason why they would change financial advisors, according to Spectrem Group’s research. This reason was closely followed by a lack of proactivity with new investment ideas, solutions and advice.

Today’s wealth planners must recognise that many Millennials expect sophisticated and intuitive technology tools as a basic service requirement, rather than a ‘nice to have’ option. However, they still also expect high levels of responsiveness and a tailored service.
This generation demands options when it comes to how and where their wealth is invested. They enjoy a wider choice of investment options than their parents and grandparents, and are also far more conscious of the broader societal and environmental impact that their investments will have. Of the Millennials surveyed in EY’s 2017 report Sustainable investing: the Millennial investor, 17 percent said they actively seek to invest in companies that use high-quality environmental, social and governance standards, compared with only nine percent of non-Millennial investors. Another 15 percent said they were interested in investing in companies and purchasing products from sustainable brands.

Broader horizons
Having earned their wealth at such a young age, their investment horizons are considerably longer than their older HNW peers, so this generation is also more likely to look at higher-risk speculative investments. Accenture’s aforementioned report showed that they are also more inclined to invest in commodity options, while a third are interested in investing in non-traditional assets, such as hedge funds and private equity companies.

Optionality requires a high degree of flexibility from a wealth planner. Such flexibility is also essential when catering for international individuals. Many HNW individuals of this age group consider themselves ‘global citizens’, having potentially grown up in one country but been educated in another, with business interests and assets now spanning a number of countries. The flexibility of this global citizenship brings added complexity to wealth planning, and so requires portable solutions across multiple jurisdictions.

Providing the optionality required to meet the demands of this new age of investors may prove challenging for some wealth planners. However, it will create opportunities for those who have the expertise and flexibility to tailor their offering to suit this new generation of HNW investors and entrepreneurs.

By 2020, the total net worth of affluent Millennials is expected to double and reach between $19trn and $24trn, so it is crucial for industry players to find a way to engage with this important target audience in order to stay competitive. In the context of greater demand for digital solutions, personalised interaction and a greater desire for investment optionality, there is a clear need for wealth planners to innovate and tailor their solutions to appeal to the new face of private wealth.

Original Group is offering unique experiences to its burgeoning customer base

Posted on February 8, 2019January 28, 2019 by Max Tomlin

To effectively market an adults-only resort, the most obvious tactic is to focus your message on escapism. But while a sensual escape can certainly turn heads, it is not enough to build a sustainable brand.

Increasingly, travellers are seeking experiential and transformative holidays that go beyond the traditional all-inclusive model. To achieve long-term annual growth, Original Group, the leading expert in adult hospitality in Mexico, has found success by casting its net wider than conventional adults-only vacations.

Travellers are seeking experiential and transformative holidays that go beyond the traditional all-inclusive model

We don’t market nudity; we promote an encounter with one’s body at our clothing-optional Desire properties, and a lively, entertainment-driven experience with our Temptation brand. Our target audiences come from all walks of life, and our concept appeals to the curious, free-spirited and sophisticated traveller.

Desire resorts pride themselves on offering experiential getaways that go beyond typical adult entertainment by providing unique programming. The resort’s carefree, all-inclusive atmosphere presents the perfect setting in which our guests can go on a sensual adventure with themselves and their significant other.

To appeal to this desire for erotic adventure, the brand offers a singular experience presented with tasteful décor, daring programming and a voice and tone that encourages guests to be comfortable in their own skin. Our strategic messaging is always fearless, frisky and non-apologetic. We communicate openly and directly, but always respectfully. The objective is to create the perfect conditions for travellers to express their inner curiosity and let loose.

Finding the niche
At Original Group, our marketing strategy does not differ much from any other segmented business. Launching a niche product is an easier way for a business to get off the ground. Rather than trying to elbow your way into a crowded mass market where the competition can be fierce, niche offerings allow a brand to identify and reach targeted customers. For instance, our business has had great success as a sex-positive company.

Conversely, the challenge with a niche offering is that if it does not develop mass appeal, it can soon reach a limit to its growth. Some specialists will expand to new markets after outgrowing their initial audience, or will launch another niche product to sustain revenue growth.
We decided to widen Original Group’s appeal with the introduction of the Temptation brand, which includes options on land and at sea with the Temptation Cancun resort and Temptation cruises. With this dual offering, we aim to reach out to adults looking for lively entertainment with our ‘playground for adults’. In the context of an adults-only, topless-optional experience, Temptation offers international DJs, adventurous activities and sensational shows.

Customer first
While marketing is important for any unique business, this must be done carefully and strategically in order to protect the brand. A clever message may lure people to a resort, but a bad experience will certainly stop them from ever coming back. A resort’s marketing must be
accompanied by excellent customer service, quality entertainment and aesthetic appeal.

This is why Temptation underwent a multimillion-dollar renovation that enhanced the brand and offering, making it the perfect topless-optional getaway for the chic, confident world traveller. Our Temptation clients seek an all-inclusive experience that offers vibrant, fun parties and performances, while also providing a space in which to mix and mingle with new couples and single friends.

This focus on superb service is key for generating a strong following that really drives growth. By building a base of loyal customers who come back time and time again, Original Group is ensuring its future success.

Without a clear focus on providing high-quality customer service, it is all too easy for long waits, inattentive staff or shoddy service to drive away business, no matter how good the marketing or product may be.

People look at brands like Original Group for a specific experience, whether it is the ambience, customer service, style or feeling it evokes. And that is why we are careful to make sure all of the experiences we offer at our resorts meet the highest of standards. Over our 35 years of experience, we have learned to place a strong emphasis on customer service, regardless of the property.

Ultimately, across all industries, the tried-and-tested recipe for success includes a strong focus on customer service, a unique experience and a premier product.

Driving a digital revolution in the Dominican Republic

Posted on February 7, 2019February 11, 2019 by Max Tomlin

For the past two and a half years, the Dominican Republic, which is situated next to Haiti on the island of Hispaniola, has boasted one of the strongest growing economies in Latin America and the Caribbean. According to data from the World Bank, the nation – one of the largest and most diverse in the region – has grown at an average annual rate of 5.3 percent over the past 25 years (see Fig 1). This strong economic base has allowed the Dominican Republic to achieve a favourable investment climate, as well as social and institutional stability. Together, these factors have helped spur transformative economic growth.

Digitalisation offers banks numerous opportunities to increase financial inclusion by providing customers with better access to financial services

Much of this growth is a result of the country’s financial system, proceeds from which drive resources to different productive sectors like tourism, agriculture, duty-free zones, energy and transportation. The Dominican Republic’s banking sector is one of the largest contributors to the country’s GDP development: the industry fosters the production and export of products and services through traditional financing and capital market structures.

But traditional banking is transforming. Around the world, digitalisation is shaking up the business landscape for lenders, and the Dominican Republic is no exception. World Finance spoke to Arturo Grullón Finet, Executive Vice President of Personal Businesses and Branches at Banco Popular Dominicano, about how the firm is leading a digital revolution in the Dominican Republic.

Inclusive banking
Banco Popular Dominicano was founded in the 1960s as an alternative to the large international banks that had settled in the Dominican Republic. Its mission was to democratise banking services in the country and support its social services to improve living conditions and benefit the wider population.

Digitalisation offers banks numerous opportunities to increase financial inclusion by providing customers with better access to financial services. Digital innovations can facilitate broader financial education in the community and help provide formal credit to a greater number of people. This, in turn, can have a large impact on the economy and the productive development of the country.

But the journey towards digitalisation is not without its difficulties. As Finet explained: “Banking challenges arise because we are always trying to improve our culture and technological infrastructure in order to offer innovative products, channels and services. These are increasingly better adapted and focused on our customers’ needs, making their lives easier and helping them to reach their goals.”

Banco Popular Dominicano strives to be an efficient financial service provider, but over the coming years it has plans to become much more than that. It is increasingly clear that next-generation banks must be able to reinvent themselves, placing greater importance on flexibility and digital banking. Finet said Banco Popular Dominicano will continue to respond to that challenge over the next couple of years: “Throughout 2018, we continued to distinguish ourselves from other entities of the national financial system with initiatives that add value to our different customer segments, based on a strong digital transformation model.

“In 2019, we will dive into richer online and remote service models in order to continue offering the most relevant financial solutions available in the market. We will also continue to foster the country’s different economic sectors.”

Leading the charge
Grupo Popular, the parent company of Banco Popular Dominicano, has been the main support for business growth throughout 2018. Grupo Popular heads capital market operations worth over $100m, attracting foreign investment and providing access to funds in support of local
productive sectors.

In this regard, Banco Popular Dominicano, as the Dominican Republic’s most prominent private capital banking entity, has long been considered a catalyst for social and economic progress in the community. Banco Popular Dominicano plans to continue the progress it is making by leading the digitalisation of the banking sector in the country. Currently, more than 77.5 percent of all financial transactions carried out by Banco Popular Dominicano’s customers are performed electronically. “This figure reflects Banco Popular’s leadership regarding the financial services’ digital transformation strategy throughout the Dominican Republic,” Finet said.

Banco Popular Dominicano in numbers

77.5%

of customers’ transactions are made electronically

556,000

registered customers on tPago

642,000

followers on social media

Through its mobile app, Banco Popular Dominicano offers customers reliable and convenient access to their financial solutions. The app meets the majority of users’ day-to-day needs and, together with the capabilities provided by the bank’s online banking model, makes banking faster and more convenient for customers. Because they do not need to visit Banco Popular Dominicano’s offices or connect to a computer to carry out a transaction, customers can save a lot of time and resources. “Our mobile application has over 450,000 registered customers. It is the most downloaded app for the Dominican financial system, and it has grown exponentially over the past year,” Finet told World Finance.

Banco Popular Dominicano also provides mobile solutions via tPago, a mobile payment solutions provider created by Dominican financial services firm GCS International. On this platform, the bank has more than 556,000 registered customers. Social media is another important tool in attracting digitally focused customers. Banco Popular Dominicano continues to lead the conversation throughout the financial sector’s digital communities, with more than 642,000 followers in total.

Through social media, the bank can develop more direct and convenient ways to communicate with its customers and the public. “We have added other means of communication so our customers can directly contact us through social media,” Finet said. “This includes our online chat, which is integrated in our institution’s web portal, through which we address concerns, complaints and suggestions in a quick and easy manner.”

Lasting change
Banco Popular Dominicano has laid out three key pillars for achieving its transformative vision. First, innovation will help the company introduce new digital solutions, products and service models that meet customers’ needs.

“Innovation is a core value of our financial institution,” Finet said. This focus led the company to launch its first digital centre in September 2018, where customers can make use of interactive tablets and phones. Those who are less experienced with digital tools can be trained to manage their finances through digital channels. “This is something that is completely new to the country,” Finet added. “The centre is part of our service network and is in line with international banking trends, thrusting customers towards digital breakthroughs and fostering self-service.”

Banco Popular Dominicano’s digital centre has focused on users’ new habits and the manner in which they understand and interact with banking services. The platform will also be used to launch the bank’s innovative products and services in the future. The digital centre includes a space where customers can attend educational talks on innovation, digital culture, personal finance, industry trends and more. Additionally, it features a coworking area designed to facilitate business meetings among the bank’s SME customers, entrepreneurs and their customers or partners.

“We believe that a greater acceleration of the digital banking model will occur, increasing our customers’ satisfaction, transforming our services and products, and helping us to achieve higher efficiency levels,” Finet said. This focus on technology plays into Banco Popular Dominicano’s two other key pillars for the years ahead.

The second pillar will see the firm continuing to ensure that technological and operational excellence is upheld throughout the development and maintenance of new services. This, Finet said, will instil the bank’s customers with a sense of trust, as well as boosting efficiency and speed. Finally, the bank will continue to strengthen risk management and develop the skills of its employees. “Our staff allow us to have the expertise to achieve the profitable growth we seek and keep us the best company to work for in the country,” Finet told World Finance.

Banco Popular Dominicano has been a catalyst for social and economic progress in the Dominican Republic for more than 54 years. In this respect, it has continued to differentiate itself from other financial institutions with initiatives that add value to the different customers it serves, fostering business growth, innovation and financial inclusion to transform the lives of many Dominicans.

Finet concluded: “In the years to come, Banco Popular Dominicano will continue to support the dreams and aspirations of thousands of Dominicans as it pursues a transformative digital strategy that contributes to the growth of productive and commercial sectors within the country.”

Latin America must diversify beyond commodities to expand regional trade

Posted on February 6, 2019February 6, 2019 by World Finance

Bladex, the foreign trade bank of Latin America, has been working to support and promote Latin American trade since the political and economic troubles of the 1970s and 80s. As Bladex celebrates its 40th anniversary, CEO N Gabriel Tolchinsky explores the economies of Brazil, Mexico and Argentina, and discusses the prospects for trade growth in the region. In the first half of this interview N Gabriel Tolchinsky talks about the bank’s origins and the role it will play helping Latin America overcome its current challenges.

N Gabriel Tolchinsky: When we look at Latin America and the opportunities in the region, we first need to focus on the top three economies.

Brazil, after a very significant recession in 2015 and 2016, had very little growth in 2017 and 2018, because of the political uncertainty. With the election behind us, and a bit more of a pro-market approach out of this government, we think Brazil could actually be poised for growth.

And interestingly, we don’t think we are dealing with a banking sector able to deal with an increase in credit demand if we start seeing genuine economic growth out of the country. We’re expecting around a 2.5 percent growth for 2018; if that were to be the case, Bladex expects to do some very good business there.

Mexico is going through a period of uncertainty, because the new administration needs to prove that it’s not going to deviate from what the world has believed to be established policy over the last 20 years.

Two specific things we were going to be following: the project to build an airport outside of Mexico City, and the continuation of the energy reforms. So far, the airport construction was essentially stopped, and the energy reforms – what we’re hearing out of the country has not been encouraging. For the time being, we’re not curtailing our exposure. But we’re going to be monitoring that very closely.

Argentina has gone through a significant crisis of confidence in 2018, that the country is trying to deal with, with the establishment of an IMF programme and a more austere policy with respect to expenditures and the curtailment of fiscal deficits on a go-forward basis. The problem with that is that a diminished expectation for economic growth in the country will result in some political uncertainty.

That said, there are some good opportunities in the Argentine private sector, because companies have been able to deal with macro uncertainties for quite a while, and they are prepared to endure such volatility. As such, we believe that there is some business to be done there as well.

From a trade perspective, Latin America continues to be very much a commodities story. Under a more stable commodity price environment, trade in Latin America could grow about six percent per annum, which is below what it used to be during the commodity price bubble, but still very respectable to provide for a basis of overall solid economic growth.

It’s really up to the individual countries in the region to be able to take advantage of that, and be able to do the type of long-term investments it needs, in order to diversify its economies beyond commodities – and have more of an industrial and knowledge base, so it can provide value to the world economy.

Bladex celebrates 40 years of supporting Latin American trade

Posted on February 6, 2019February 6, 2019 by World Finance

Bladex, the foreign trade bank of Latin America, has been working to support and promote Latin American trade since the political and economic troubles of the 1970s and 80s. As Bladex celebrates its 40th anniversary, CEO N Gabriel Tolchinsky discusses the bank’s origins, the challenges Latin America faces today, and the role Bladex has to play in helping overcome those challenges. In the second half of this interview N Gabriel Tolchinsky explores the economies of Brazil, Mexico and Argentina, and the prospects for trade growth in the region.

N Gabriel Tolchinsky: Over the last 40 years, Bladex’s mission has been remarkably consistent. One: the strengthening of Latin America’s capacity to be engaged in foreign trade through the financing of specific trade transactions; and two: aid and promote Latin American integration so that Latin America could be eventually a source of value-added product to the world’s economy.

The 1970s and 1980s were a time of significant political upheaval, economic upheaval. And in that context, it was very important to create a bank with regional footprint that is able to lend to the local banks so that they in turn can lend to corporates that are engaged in foreign trade; and also be directly involved in the financing of trade transactions.

Latin America faces quite a few challenges – particularly as they relate to trade. We’re seeing winds of change coming out of Washington; a little bit of unhappiness with the established world economic order. About 50 percent of the trade that Latin America does with the rest of the world is with North America: the US and Canada.

So, Latin America needs to diversify its trade channels. Relationships already started with China, Europe – those trade channels are growing and will continue to grow. But it’s also important to develop the capacity for Latin American to trade with itself.

Right now, trade among Latin nations represents about 16 percent of the overall trade that Latin America does. We expect that to grow to around 23 percent, but we need it to be more than just trading in commodities, and start providing value-added from one country to the next.

Today’s economy is very much a function of not only what we can tap out of the ground, but also what we can get out of an educated workforce that can add value in terms of technology, in terms of manufactured industrial capacity. And the challenge for the next 40 years is for Latin America to be able to tap not just natural resources, but human resources as well.

We believe that Bladex has a role to play in terms of being able to provide the right financing when trade takes place from one Latin American country to the next. Why? Because we know Latin American credit risk. Bladex, being in Panama, has a very strong presence in Central America. We know the countries, this is our back yard, and are able to endure the cycles of each one of these countries.

Bladex has the experience and know-how in lending to Latin America across border, because we’ve been doing business in the region for the last 40 years.

When a Peruvian company sells, for example, to a Brazilian company, and gives them 90 day terms for payment: we know the credit of the Peruvian company, we know the credit of the Brazilian company, and are able to be the most efficient financial intermediary. And in such a manner, be able to assist in the development of regional trade growth.

Emerging markets’ shifting bottom line

Posted on February 6, 2019September 11, 2019 by Max Tomlin

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Bac Credomatic is facilitating digitalisation in Central America

Posted on February 5, 2019January 23, 2019 by Max Tomlin

After many turbulent decades of civil conflict, social unrest and political upheaval, Central American countries are now in a period of significant transformation. Since the turn of the millennium, these nations – Costa Rica, El Salvador, Honduras, Nicaragua, Panama and Guatemala – have made great strides in quelling violent conflicts to usher in an era of improved social and political stability. This increased constancy has had a largely positive impact on the economies of Central America, with most nations enjoying consistent economic growth in recent years. Indeed, prior to the 2008 global financial crisis, Central American GDP per capita grew at an average rate of three percent annually, marking a strong and stable period of growth for the region. While the financial crash initially had an adverse effect on these emerging economies, Central America is once more experiencing steady growth, bolstered by flourishing free trade agreements and practical regulatory changes.

The demand for secure online payment options places greater pressure on financial institutions to keep up with rapidly evolving customer expectations

Alongside this remarkable social and economic transformation, the region is also currently undergoing a significant digital revolution. Internet and smartphone usage has exploded throughout Central America, with households across the region coming online at an impressive rate. Thanks to lower internet costs and a boom in mobile internet connectivity, internet penetration rates have almost doubled since 2010, with dramatic spikes seen in countries with previously limited connectivity, such as Nicaragua, El Salvador and Guatemala.

As the number of Central American internet users continues to grow by the day, the region is beginning to open itself up to a wealth of exciting e-commerce opportunities. Online sales are booming, with customers increasingly opting to make purchases from their mobile devices. However, despite its considerable growth across the region, e-commerce faces many challenges in Central America, ranging from online security issues to substantial regulatory hurdles. The demand for secure online payment options also places greater pressure on financial institutions to modernise their systems and keep up with rapidly evolving customer expectations. World Finance spoke with Juan Carlos Páez, COO of BAC Credomatic, about the challenges and opportunities of Central America’s digital transformation.

How has the e-commerce space evolved in Central America in recent years?
Over the course of the past decade, e-commerce has grown exponentially in Central America. There are many exciting opportunities for this new market to develop and evolve, and online sales continue to boast double-digit growth throughout the region. Considering the recent spike in both internet penetration rates and mobile phone usage, we can fully expect the e-commerce sector to increase in value over the coming years, as more customers are persuaded of the benefits of e-payments and online shopping.

70%

of BAC-Credomatic-owned point-of-sale systems are contactless-ready

80%

of BAC Credomatic’s card base is now contactless

Central America is made up of six small, open economies, each of which depends on imports for most of their consumer goods. As such, e-commerce has proved particularly appealing to customers, as it enables them to purchase goods that might otherwise be unavailable to them, or only available in limited quantities at their local department stores. Often, large retailers are simply unable to stock certain items due to limited customer demand, but these goods can be easily obtained online by those who want to purchase them. What’s more, online retailers also offer customers competitive prices, large product inventories and the convenience of shopping from the comfort of their own home. This is proving increasingly enticing for many time-strapped Central Americans.

In which areas in particular have you seen the most change?
In recent years, the app economy has begun to drive significant changes in the e-commerce market. Popular apps, such as Uber and Uber Eats, have made major inroads in the region, quickly becoming a part of everyday life for many smartphone users. Costa Rica – which boasts an impressive internet penetration rate of 86 percent – now has the highest percentage of Uber users in Latin America, gaining almost 800,000 users in just three short years. In-app purchases, such as Uber rides, have spurred e-commerce transactions across the region, substantially increasing the number of ‘card not present’ payments processed in Central America. Furthermore, a number of innovative payment options are beginning to flood the market, as financial institutions look to make card transactions more convenient and time-efficient for their customers. At BAC Credomatic, we have recently introduced the innovative payment solution MiPOS, which is a small, Bluetooth-enabled device that turns any smartphone into a card-processing device. Innovations such as these will help to make card transactions and e-payments more practical and secure for customers throughout the region.

It is also important to recognise that the very definition of e-commerce itself is constantly changing. On the one hand, face-to-face card transactions have evolved from magstripe to contactless, improving security and transaction speed. This improvement in ‘card present’ transactions is rivalled by the convenience of face-to-face e-commerce transactions, which include those provided by Uber and Compass, BAC’s automated RFID payment device for car parks. As these new e-payment technologies become increasingly more mainstream, they are set to redefine the world of e-commerce as we know it.

Have you had to overcome any regulatory hurdles in order to compete in this space?
Regulations can certainly pose a challenge for financial institutions looking to modernise their services, as technology often moves faster than regulators are able to legislate. For instance, when a new customer wants to join a bank or open up a new account, they are required by Central American legislators to provide a physical signature.

This time-consuming step significantly slows down the customer onboarding and verification process, and could greatly benefit from the introduction of digital signatures.

Once customers have successfully opened their account, there are further regulatory challenges to overcome. In one of the countries we currently operate in, the law requires that we take a signature to compare with a customer ID for every transaction – even low-level, commonplace ones. This is proving to be a significant barrier to introducing contactless payments, as customers are still obliged to sign for every transaction that they make, thus prolonging the payment process. As we look to further digitalise our operations and modernise our payment methods, we will be working closely with regulators across Central America to find effective solutions to these issues, and to further explore the benefits of innovative digital payment methods.

What are some of the innovative services that BAC Credomatic offers?
As the first company to offer credit cards and a native mobile banking app in the Central American region, BAC Credomatic has long been at the forefront of financial innovation.

More recently, we have been quick to adopt and take advantage of emerging technologies. In just two years, 70 percent of our BAC-Credomatic-owned point-of-sale systems have been upgraded to contactless-ready, while 80 percent of our card base is now also contactless. In order to capitalise on the recent boom in contactless transactions across Central America, we have also made sure to enable contactless payments on our innovative mobile banking app. Set for launch in early 2019, our newly redesigned app will include a digital wallet feature, allowing our customers to effortlessly make e-payments and complete in-store transactions using their smartphone.

In 2016, we launched Viajes BAC Credomatic, an exclusive travel platform where customers can redeem loyalty points, earning rewards such as discounted flights, hotels and tourist packages. This innovative website not only taps into the recent e-commerce boom that is sweeping through Central America, but also helps to strengthen our relationship with our valued clients, as their loyalty to BAC Credomatic is recognised and rewarded with a range of exclusive offers. Our rewards website has received more than 1.3 million visits in the past year alone, enabling customers to make use of our membership rewards scheme to redeem points and receive exclusive discounted travel opportunities.

How does BAC Credomatic manage to continually innovate in the competitive world of digital financial services?
At BAC Credomatic, we are constantly gathering crucial information that allows us to make practical decisions about investing in new technologies. In this endeavour, we have developed a three-pronged strategy based on how we combine the use of internal and external resources. Within BAC Credomatic itself, we have a team of almost 300 highly skilled developers who are engaged with improving all aspects of the bank’s active digital platforms, from our mobile app to our social media presence. This dedicated team has already proved successful in growing BAC Credomatic’s digital competencies, and there are many more exciting developments in the works as we look to ramp up our modernisation efforts.

Externally speaking, meanwhile, we are working with a number of innovative fintech companies and other suppliers of cutting-edge technologies. At BAC Credomatic, all of our external partnerships are subject to careful consideration, and we are committed to seeking out the most talented and forward-thinking companies to collaborate with.

Finally, we have also created an ecosystem of non-bank companies to serve as our internal fintech. These companies benefit from independent stewardship and are given a level of flexibility in their operations, allowing them to prioritise innovation and forge ahead with their digital development projects. This seamless and efficient three-pronged strategy has established BAC Credomatic as a leader in financial innovation, facilitating mobile payments and e-commerce opportunities as Central America continues its digital transformation.

MoraBanc continues to set the digital pace in Andorra

Posted on February 4, 2019February 4, 2019 by Max Tomlin

At MoraBanc, we always strive to be market leaders and to set an example for the digital banking sector in Andorra. For years now we have understood that, just as in most markets, both the present and future of banking hinges on the integration of digital culture with business. Confident of this significance, we were the first in Andorra to adapt through the introduction of the MoraBanc Digital project.

Both the present and future of banking hinges on the integration of digital culture with business

One of the cornerstones of our transformation is maintaining our position at the forefront of a financial sector that’s in a constant state of flux. This investment has given us optimal results, leading World Finance to name MoraBanc the best digital bank and best mobile banking app in Andorra in 2017 and 2018.

The first steps in our digital transformation have been a success, but what are the next challenges? When you make it this far, you know you can’t stop; you know that evolution continues and that if you do not move at the pace of the modern world, you get left behind. This is MoraBanc’s greatest challenge – to remain a leading bank in terms of technological innovation.

Forward-thinking approach
A company’s digital mentality involves more than just technology – it’s also about its people. We know that to be digitally competitive, we need our banking team to take part in the transformation. In this regard, MoraBanc has changed a great deal over the last few years: in order to reach our digitalisation goals, we have incorporated technically trained individuals into specific digital banking tasks, and we have involved everyone in the bank in this transformation in one way or another. This way we can ensure the change will be a part of our DNA forever.

The transformation of MoraBanc began on the inside, so that we could be different on the outside. We use agile methods to be more decisive and flexible. Consequently, we are able to put together specific tactical teams whenever needed in order to develop an across-the-board project with the necessary resources, at a faster rate than before.

24%

Increase in online banking entrances

43%

Increase in money transfers

This ability to adapt has also been applied to our internal tools, including applications and programs such as Smartsheet, Jira and Trello, which allow the different players involved to follow each project while managing both technological and non-technological demands simultaneously. The MoraBanc team is now more digital than ever, and of course this feeds through to the products and services we offer our clients, as well as how we communicate with them. The use of multiple channels ceased to be an option and became a necessity some time ago.

Accordingly, we have built and developed various new tools and platforms, such as MoraBanc Direct, which give clients the autonomy to manage their account without having to travel to a branch. They do not lose contact with the bank at any point either, as a personal manager attends to any needs through a range of contact options (telephone, safe chat and email).

Our online banking system and app for smartphones and tablets are constantly being improved: in 2018 alone, over 25 projects were completed. Among them were the implementation of advanced digital signatures, an internal notification management module connecting clients and managers, and online chats. In addition, there is a mobile broker for smartphones, a push safety and account alert service, and the option to pay for card operations in instalments.

All around the world, bank clients are becoming digital. This is an unstoppable process, but MoraBanc is working hard to support and enable the change.

Innovative ecosystem
Digital evolution never stops. New technologies soon cease to be innovative, while incorporating or developing the structures to promote their application is not easy, and is often not even viable. In order to be digital leaders, MoraBanc keeps contact with the groups, entrepreneurs and companies that are already a step ahead of the pack. With them, we pay close attention to potentially game-changing technologies that may help our business stand out. We work to offer the best service available today and prepare the tools that will make a difference in the future.

In terms of innovation, we are developing a support programme for entrepreneurs in partnership with the prestigious project accelerator Ship2B, which is based in Barcelona. We do so partly because this project is essential to our commitment to the development of both entrepreneurs and society, and partly because it allows us to stay in contact with Andorra’s entrepreneurs and to benefit from their ideas and vitality.

We also look for partners that can respond to the bank’s specific projects and needs without expanding the organisation’s permanent structure more than is necessary. We work with fintech firms such as: Inbenta, which helps us to use artificial intelligence in our search engines; QuickBlox, which provides us with the latest proposals to improve client-manager chats; and the Web Financial Group, which acts as a motor for our Broker Online project.

We are also in the Andorran ANDBlockchain commission, which is dedicated to blockchain technology. Meanwhile, we are present in various business associations in Andorra, including the ACTinn initiative – promoted by the Andorran Government in its Smart Country project. Indeed, we can’t do it all in such a specialised world, and it is often valuable to surround yourself with the most notable and innovative profiles in each area in order to apply the best, most up-to-date proposals in each case.

Confirmation by numbers
MoraBanc Digital is a project that we could not successfully introduce without the global transformation of the bank and its teams. We have redesigned the way we do banking, responding to the demands and expectations of today’s clients; the figures prove our success in this respect.

The numbers show that our clients have welcomed our digital service and multiple channels, as we have seen a 24 percent increase in online banking entrances and there has been a 43 percent increase in money transfers following the launch of the projects. Indeed, when comparing indicators, we see that the most frequent transactions have all increased significantly.

We can no longer say the future is digital: for some time now, the present has been digital. At MoraBanc, we have made digital culture a part of our day-to-day routine, with a permanent investment in both technology and people. The results show that all this is worthwhile: the world is digital, and so is MoraBanc.

Fresh goals
Having adopted this culture, MoraBanc plans to keep up the trend of profit growth, which began in 2017. This is the main objective of the new strategic plan for the next three years, which the bank has recently unveiled. Growth continued in 2018 and, thanks to this new strategic plan, it will be reinforced over the coming years.

MoraBanc’s plan for the future is ambitious, but it is still feasible because of our very clear direction and talented team. Over recent years, the team has shown that it is capable of achieving established objectives. Now we are working to expand, particularly within the Andorran market.

The strategy is based on three main pillars. The first relates to business growth: in Andorra, the market in which MoraBanc’s main commitment and focus lies, new client segmentation, ongoing improvement of our value proposal, the granting of loans and the management of private banking clients are the main aspects of this line of growth.

International growth is also forecast, in line with the trend set over recent months: between January 2017 and June 2018, client funds of our Zurich and Miami subsidiaries rose by 14 percent, and now represent 30 percent of the group’s total funds.

Productivity and investment in technology are two other key features. In 2017, MoraBanc reduced its costs by 22 percent compared with 2016. Over the next few years, digital banking will be strengthened further and processes will be simplified in order to become even more efficient.

In 2015, the banking industry in Andorra experienced some of its most challenging times, with a change in strategy and subsequent increase in international prominence. At the time, MoraBanc began a transformation plan to adapt to this new reality. With significant investment and personal effort, we committed to digitalisation, cost optimisation and adaptation to regulatory requirements with the utmost speed. The results for the 2017 financial year supported this decision, with profits rising by 3.6 percent, proving that we have a strong foundations. Now, a new stage is under way, with ongoing growth being the main objective.

Top 5 least affordable cities for real estate development

Posted on February 1, 2019March 22, 2021 by Max Tomlin

With this in mind, World Finance looks at the least affordable cities for real estate across eight major housing markets. Just as property markets reached a peak around 2009, a global recession hit. This was followed by years of quantitative easing and artificially low interest rates. With depressed mortgage rates and borrowing costs, increased investment into property has once again caused housing prices to reach record highs. However, as the global economic outlook darkens heading into 2019, house prices are beginning to fall – sparking fears once again that values have peaked and a recession is on the horizon.

For the majority of young people around the world, purchasing property remains a pipe dream

Still, for the majority of young people around the world, purchasing property remains a pipe dream. The 15^thAnnual Demographia International Housing Affordability Survey: 2019 ranks the least affordable cities for real estate based on median household income in the eight major housing markets of Canada, the US, Hong Kong, Singapore, Australia, New Zealand, the UK and Ireland. Here is the top five:

1 – Hong Kong
To counterbalance Hong Kong’s low-tax ‘laissez-faire’ economy, the government owns virtually every piece of land in the autonomous region, generating 27 percent of its revenue from land sales. Auctions have seen plots sell for as much as HK$17.3bn ($2.2bn) in a sector dominated by a few major – and controversial – tycoons.

However, house prices have fallen since July 2018 following a 28-month consecutive rise. The US-China trade war, combined with rising mortgage costs, has slightly dented investor confidence. In addition, a vacancy tax is looming. It’s well known that developers sometimes hoard properties as prices appreciate. Now, the impending law will encourage developers and landlords to sell their properties, increasing supply.

2 – Vancouver
Like Hong Kong, Vancouver has felt the impact of foreign money – particular from China – with overseas investors snapping up property. “In every one of these cities, the market is being driven by something other than owner-occupiers,” geography professor David Ley told MoneySense. “Not just new immigrants, but investors, including offshore investment”.

The inflow of foreign money is a result of ineffective regulations: real estate agents have found that the fines and suspensions for wrongdoing are paltry compared to the sizeable commissions earned on real estate transactions. Similar to Hong Kong, Vancouver has become a haven for money laundering, again often from China. Even the wealthiest and most influential Chinese citizens have fallen foul of Xi Jinping’s anti-corruption campaign, so thousands are looking for a safe place to store their money.

3 – Sydney
Between 2016 and 2017, Sydney’s house prices surged by nearly 20 percent. However, it was recently reported that in 2018, Australian house prices dropped 4.8 percent nationwide. In fact, Deutsche Bank has identified a potential Australian housing crash as one of the top 30 risks to the global economy. In Sydney alone, values dropped 11.1 percent.

Even so, living expenses in Sydney remain 11.7 times higher than the city’s average income. Due to the concentrated nature of Australian settlements, with a higher proportion of Australians living in cities than anywhere else except Hong Kong and Singapore, land supply in major cities is surprisingly low.

4 – Melbourne
As with the rest of Australia, Melbourne – despite being the country’s fastest growing city – is experiencing a drop in prices. Still, living costs remain high: like Sydney, Melbourne suffers from a similar supply-side issue. The Australian population’s penchant for larger detached properties also compounds the problem. Nevertheless, the nation’s falling interest rates, which have consistently declined over the past six years, have meant that demand for housing has remained high.

5 – San Jose
Located on the southern shore of the San Francisco Bay Area, San Jose’s house prices have rocketed due to the success of Silicon Valley, situated on the city’s western tip. With houses being consistently purchased by the city’s high-earners or budding entrepreneurs – once more aided by low-interest rates – the average low-income resident spends 62 percent of their paycheck on rent. In the Santa Clara district, a typical family house is valued at roughly $1.2m. While this increase in value has led to more homes being listed on the market, many of them are out of reach for the average citizen.

The importance of navigating the structural deficiencies of tax systems

Posted on February 1, 2019January 25, 2019 by Max Tomlin

Hardly anyone enjoys paying taxes. It’s easy to see why: when you pay money out, you want something back. But, by definition, those individuals paying tax have no personal claim to anything in return, leading many to believe that there is nothing in it for them when they pay taxes to the government.

When a country’s tax system fails to offer the protection that it should, the wealthy look around for more stable environments

At the turn of the 20th century, Oliver Wendell Holmes Jr, an associate justice of the US Supreme Court, said: “I like to pay taxes. With them, I buy civilisation.” Holmes enjoyed popular support for his pragmatism and distinctive language. His quote is as illuminating today as it was then, clearly demonstrating that individual taxpayers in modern countries actually do get something back. According to Holmes, paying taxes is about paying for everything we appreciate about living in a civilised world.

The social dividend
Today, taxes in various countries pay for energy grids, roads, schools, public administration and sometimes a basic telecommunications service or certain social services. They also pay for the police force that keeps us safe. But how did this agreement between the state and its citizens first arise?

At the beginning of the modern age, philosopher Thomas Hobbes opposed the accepted natural order that governed the ‘God-ordained’ relationship between rulers and their subjects. He was convinced that this order was also based on a more earthly reason: when people lack an authority above them, they become mistrustful. And because a ruler guarantees the observation of a common set of rules, they create trust among people. So, according to Hobbes, our taxes do not merely pay for tangible infrastructure, but help shape the very foundation of society.

Essentially, taxes are our investment in society and in its rules. This results in an interesting contradiction: we accept restrictions for us as individuals, but still gain freedom from this order. Complex transactional systems in which states flourish and economic activity blooms can only succeed if their participants trust that everyone is playing by the same rules. That applies to money especially, and to more besides.

Sustainable models
Compared with other countries, Liechtenstein has a unique approach to taxation. It does not fund its public spending at the expense of future generations – instead, the state has balanced its books for many years. The country’s entire spending is paid for by tax – most recently amounting to some CHF 800m ($790m) each year – along with other state revenues. And as a modern country, it lives up to its responsibilities; the United Nations confirms that Liechtenstein is one of the world’s most highly developed nations.

40%

of Liechtenstein’s GVA is produced by industry

28%

of Liechtenstein’s GVA is produced by general services

24%

of Liechtenstein’s GVA is produced by financial services

Liechtenstein has established an excellent reputation as a place to do business. A diversified, mostly export-orientated economy has developed alongside confidence in a reliable, liberal economic order – a key component of which is a competitive tax system. Following a complete overhaul of the system in 2011, Liechtenstein’s businesses, wealth structures and private individuals have benefitted from attractive conditions, which are simultaneously compatible with both international and European law.

The Liechtenstein financial market is often the poster child for the country’s economy. Innovative, filled with award-winning companies and boasting a fantastic international network, it plays a truly significant role. Profiting from a sound state financial position, it also has a particularly unique selling point: investors seeking to combine the stability of the Swiss franc with the investment opportunities of the European Economic Area find ideal conditions in the principality.

Despite the financial sector’s qualities, however, the most important area of Liechtenstein’s economy is its industry. From small, niche businesses to global corporations, industry produces the lion’s share (40 percent) of the country’s gross value added. This compares with 24 percent from financial services and 28 percent from general services. It is evident, therefore, that Liechtenstein’s environment is beneficial to businesses from many different sectors.

Liechtenstein’s path
It takes a great deal of courage to completely overhaul the tax system like Liechtenstein did, and other countries are less keen. Many attempts to unpick Byzantine tax structures and put in place new, more practicable solutions often fail. When it comes to tax matters, historical baggage can result in strange effects: for instance, sales of cowboy boots in Texas are tax-free, while other shoes are taxed at the standard rate. And in Germany, drinkers of sparkling wine have paid for the privilege through a specific luxury tax since 1902. Levied originally to fund defence spending, the tax was scrapped temporarily but then reintroduced, and still applies today. Regardless of whether any of these individual measures are sensible or not, every additional tax increases the complexity of the system as a whole.

What we can learn from these examples is that taxes that are introduced for a specific purpose are hardly ever abolished when that purpose ceases to exist. Instead, individual groups are granted special exemptions or tax allowances, making the system even more complicated. Welcome to the tax jungle.

Efforts to improve fairness become lost in the undergrowth of multiple interests and demands from all sides. Ultimately, however, it can mean that Ed Sheeran is suddenly paying more tax than Amazon. But surely this jungle is better than a barren desert?

The 58 countries named by the OECD as fragile states in 2018 could indeed be classed as a barren deserts: whether in Africa, Europe or Asia, all are unstable and have various problems of their own. What unites them is the fact that they are all massively dependent on outside help. According to the OECD, one of the major reasons for this is the lack of a functioning tax system. Many of these states exploit their natural resources as a means of obtaining capital, chopping down forests and ripping up the ground in search of raw materials and literally leaving a desert behind. It seems that the exploitation of raw materials in these cases is often better organised than the tax administration.

The OECD recommends that weak states abolish tax exemptions and introduce measures to improve tax payment rates. It also believes that empowering the tax administration in weak states is a way of improving the situation. As such, the experts are convinced that the more these states rebuild their capacity to generate funds from taxes, the better their prospects for positive growth will be. It is easy to see why an international organisation would issue such a recommendation. The question is, however, whether a country that engages in such a process can rebuild the people’s trust to the extent that these measures truly succeed in improving tax revenues.

Beware the risks
Many wealthy people are just like everybody else in their desire – or lack thereof – to pay tax. However, deficits in the tax systems as already described can have direct and unpleasant consequences for them. And it’s not simply about foregoing some of their wealth in order to contribute: according to Philip Marcovici in his book The Destructive Power of Family Wealth: A Guide to Succession Planning, Asset Protection, Taxation and Wealth Management, taxes may well be a political risk for the wealthy. When a country’s tax system fails to offer the statutory and political protection that it should, the wealthy start to look around for more stable environments. After all, the risks that these deficiencies represent to them are tangible.

Countries demand all kinds of confidential information to determine how much tax should be paid – information that has the potential to be misused. Marcovici, who sits on the board of directors for Liechtenstein-based wealth manager Kaiser Partner, gives the following examples: when confidential information falls into the hands of populist politicians, they may introduce arbitrary taxes that target specific groups or individuals. In addition, confidential information feeds a culture of corruption in unstable countries. The international exchange of tax information may have a particularly problematic impact in this respect. For example, if such a process results in sensitive information ending up in the hands of countries that are not yet set up to handle it confidentially, the scenarios described could cross borders. This is why advisors to wealthy clients need to address these risks in detail through proactive tax and wealth planning.

Marcovici strongly urges that wealthy individuals and families make sure they understand their own tax affairs. This can help reduce an unhealthy dependency on an advisor, while also allowing them to better evaluate the advisor’s service. Knowledge of tax affairs can also have practical relevance. For instance, increasingly mobile lifestyles may result in them becoming a tax resident in a country simply by spending a certain number of days there in the year.

Marcovici believes that wealthy clients need to be aware of such tax intricacies for some decades to come. It will take a long time until all nations have a tax system that is free of corruption, in which tax information is not misused for political advantage, and in which the authorities handle the taxpayers’ data in true confidence. While these deficiencies persist in some countries, tax and wealth planning must continue to address the risks for high-net-worth individuals and their families.

European countries register a mechanism to trade with Iran

Posted on January 31, 2019 by Max Tomlin

On January 31, France, Germany and Great Britain registered a European mechanism that facilitates non-dollar trade with Iran, sidestepping US-imposed sanctions. It will allow monetary transfers between Iran and the EU, initially focusing on small transactions of a humanitarian nature.

The deal brokered in 2015 restricted Iran’s nuclear ambitions in return for ending sanctions on Iran’s tattered economy

The system, which has encountered various delays, has been in preparation for months and is unlikely to become operational until later in the year as technical details are still to be finalised. France and Germany have taken up the responsibility of running the system, which will be managed by a German banker, based in France. Britain will be a shareholder, and the trio hope that other countries will join.

The European Special Purpose Vehicle (SPV) will be dubbed the Instrument In Support Of Trade Exchanges, according to German broadcaster NDR. It is hoped that the vehicle will boost the likelihood of Iran honouring the divisive 2015 nuclear deal that the US pulled out of last May.

The SPV will not cover transactions related to the oil sector, which was one of the hardest hit by US sanctions, and may also struggle to achieve its initial short-term goal of enabling Tehran to import vital food and drugs at affordable prices.

The deal brokered in 2015 restricted Iran’s nuclear ambitions in return for ending sanctions on Iran’s tattered economy. Though Europe has been keen to show continued good faith towards Iran in order to maintain the deal, relations have worsened recently. This month, the EU re-imposed its first sanctions on Iran since 2015 in response to Iranian ballistic missile tests and assassination plots on European soil.

Trans-Atlantic relations between the US and EU have been unpredictable ever since Trump took office in 2017, with the two parties consistently clashing over trade tariffs and foreign policy. While the EU will hope the move will not inflame relations with the US, it is never easy to anticipate Trump’s next move.

Ceylinco Life is breathing life into Sri Lanka’s life insurance space

Posted on January 31, 2019January 25, 2019 by Max Tomlin

Sri Lanka is a nation transformed. The island nation has ushered in a new era of accelerated growth, with its economy consistently expanding at a steady rate over the last decade (see Fig 1).

From boosting school enrolment to cutting unemployment rates, Sri Lanka has made significant strides to improve the lives of its citizens. It has also reduced the percentage of its population living below the poverty line from 23 percent in 2002 to 4.1 percent in 2016.
Sri Lanka’s commitment to investing in education and training programmes has yielded decidedly positive results. Thanks to its well-funded education system, Sri Lanka now boasts the highest literacy rate in South Asia, which has resulted in a host of highly skilled workers flooding the jobs market. The Sri Lankan labour force is now expanding steadily, posting an impressive employment rate of 96 percent for 2018.

However, as a growing number of educated Sri Lankans enter the workforce, disposable incomes are beginning to shrink as a result of high inflation and erratic price hikes on essential commodities, such as fuel. This squeezing of household incomes poses a significant challenge to the nation’s fledgling life insurance market. With less money in workers’ pockets at the end of every month, the number of life insurance policies among working citizens dropped from a high of 37.6 percent in 2016 to 35.4 percent last year.

To avoid becoming a casualty of shrinking disposable incomes, insurers must act fast to connect with untapped customer bases and to raise awareness of the immeasurable value of life insurance policies. World Finance spoke to Rajkumar Renganathan, Managing Director and CEO of Ceylinco Life Insurance, about the growing importance of life insurance products and effective retirement planning among working Sri Lankans.

A necessary investment
In Sri Lanka, the informal economy continues to thrive. With thousands of workers engaged in small, informal businesses, the sector plays an essential role in the nation’s economy, generating an estimated 40 percent of GDP. While cash-in-hand work can foster entrepreneurialism and provide easy-entry employment opportunities for low-skilled workers, it is also precarious by its very nature, with informal employees often earning unpredictable salaries and working erratic hours. What’s more, the absence of government protection for workers involved in the informal economy leaves many Sri Lankans in a vulnerable financial position. If an employee in the formal economy falls ill, for instance, they are protected from any serious risk to their income by an extensive buffer of state benefits, whereas informal workers lack this crucial protection. Many Sri Lankans involved in the informal sector have also been left out of structured pension arrangements, leaving them largely dependent on their families for financial support in their retirement and later life.

Thanks to its well-funded education system, Sri Lanka now boasts the highest literacy rate in South Asia

“Life insurance is particularly important in a country like Sri Lanka, where the informal economy is large,” said Renganathan. “The majority of the population has no safety net to protect them in the event of a crisis and, as such, the current low levels of life insurance penetration are a real cause for concern.”

Although they could stand to benefit from investing in life insurance products, many informal workers are simply unaware that such services exist. It is crucial, therefore, that key players in the insurance market connect with these untapped consumers and effectively communicate the countless benefits of life insurance and retirement planning to Sri Lanka’s informal employees. Furthermore, there is a sense of urgency behind this awareness drive, as the island nation is facing a significant demographic shift.

Like many of its Asian neighbours, Sri Lanka is home to a rapidly ageing population, and this ‘silver tsunami’ is creating a number of substantial socioeconomic challenges for the nation. By 2041, one in every four Sri Lankans will be aged 60 or over, marking a seismic shift for a country once blessed with a large working-age population. As life expectancy continues to rise, the importance of efficient retirement planning and reliable life insurance options simply can’t be ignored. It is never too late to begin planning for later life, and for Sri Lankans hoping to enjoy a happy and comfortable retirement, life insurance products such as pension plans and endowment policies are set to be crucial investments.

Spreading the word
Despite the steady progress made by insurers in recent years, Sri Lanka still remains an underpenetrated market. While many Sri Lankans could benefit from investing in life insurance products and retirement solutions, a lack of public awareness of these services has resulted in a modest uptake of policies, particularly among rural communities. In order to combat this knowledge gap among its citizens, Sri Lanka’s government has designated September 1 as National Insurance Day, while the entire month of September has been dedicated to a collective effort by competing companies to promote the importance of life insurance to the Sri Lankan public.

“This government-led effort has helped to create greater awareness of life insurance throughout the country,” said Renganathan. “Previous awareness drives have tended to feature an individual insurance company looking to raise awareness through branded promotion and product advertising, but this collaborative effort has proved far more successful.”

In addition to contributing to this government-backed initiative, Ceylinco Life has been engaged with boosting public awareness of life insurance for over a decade. As the nation’s leading life insurance provider, Ceylinco Life is committed to increasing policy penetration in Sri Lanka. It therefore runs a variety of island-wide campaigns to address the lack of knowledge of life insurance offerings. Combining door-to-door visits with social media blasts, Ceylinco Life’s Retirement Planning Month and Life Insurance Week are two of the company’s most celebrated campaigns.

“Life Insurance Week is a high-intensity, nationwide operation, which sees our entire sales force engaging in in-branch promotional activities and door-to-door visits across the nation,” said Renganathan. “Retirement Planning Month is a similar operation, but it is primarily focused on demonstrating the importance of planning for later life.”

These interactive, customer-focused campaigns have allowed Ceylinco Life to effectively engage with urban and rural communities alike, and have contributed significantly to increasing life insurance penetration through the island nation. Before the launch of Ceylinco Life’s Life Insurance Week initiative, less than 10 percent of the Sri Lankan population was covered by life insurance policies. Today, 14.3 percent of Sri Lankans are protected by active policies, demonstrating an increased public awareness of the value of life insurance products.
During this year’s Life Insurance Week, Ceylinco Life reported higher-than-average sales of policies, reflecting the hard work of its nearly 4,000 sales professionals who took to the streets during the campaign. By reaching out to uninsured Sri Lankans and educating them on the benefits of life insurance products, Ceylinco Life is helping citizens effectively plan for the future.

Invaluable advice
While awareness campaigns certainly play a vital role in educating the public on the life insurance market, the important work of life insurance advisors is just as valuable. These dedicated and experienced team members are always on hand to answer any queries that potential customers might have, and often serve as the first point of contact between an insurer and a new client. In 2016, 87.4 percent of the total premiums generated industry-wide in Sri Lanka stemmed directly from business brought in by life insurance advisors, demonstrating the indispensable role that these professionals serve in the insurance industry. With a comprehensive knowledge of wide-ranging insurance products – in addition to a sound understanding of current economic and financial trends – Ceylinco Life advisors are well equipped to explain life insurance concepts and highlight their importance to potential customers.

“Since life insurance is not considered a priority by many in Sri Lanka, our life insurance advisors play a crucial role in appealing to new customers,” said Renganathan. “In most instances, these experienced professionals are also the main contact point between the company and the customer, and the service levels offered by advisors can thus help to build loyal, long-term relationships with clients.”

Indeed, in addition to bringing new customers onboard, life insurance advisors also play a vital role in helping to retain current clients. If a customer is sold a life insurance policy that doesn’t quite suit their needs or their financial situation, then they are likely to abandon this policy in favour of other options. It is therefore vital that customers are accurately matched with a policy that meets their present and future requirements, as correctly sold policies are the key to retaining loyal customers.

“Life insurance advisors need to be adept at conducting in-depth needs analyses on prospective customers, taking care to factor in a potential client’s current earnings and future earning capacity,” explained Renganathan. “A correctly sold policy has a higher chance of being kept active, so this needs analysis is crucial to building long-lasting relationships with our customers.”

With a dedicated advisory team committed to establishing new customer relationships and attentively maintaining existing ones, Ceylinco Life is succeeding in its mission to improve Sri Lanka’s understanding of life insurance and retirement planning.

Mind the Value is guiding its clients through the digital transformation process

Posted on January 30, 2019January 22, 2019 by Max Tomlin

Digital transformation has quickly become the hot topic everyone in the business world is talking about. In the past few years, we have witnessed how the trend has not only impacted the business world, but also the public sector, government initiatives, national expenditures, customer behaviour and even healthcare.

Digital transformation can be defined as a change that takes place in any organisation that is willing to leverage opportunities created by technology

Generally, the process can be defined as a profound change that takes place in any type of organisation that is willing to leverage the new opportunities created by technology. It is referred to as a transformation because it integrates digitalisation in all areas of a business and, in doing so, changes the way it operates. For this reason – and because it also constitutes a cultural adjustment – digital transformation is likely to look different for every company, particularly as there is no one-size-fits-all rule that can be applied worldwide.

Since it has such a large impact on business, it goes without saying that the process carries a multitude of questions when it comes to implementation: is it for businesses of every size? How is it different to innovation more generally? Does my company need to change into something new? How much return will this investment generate?

The doubts are as infinite as the possibilities. As a matter of fact, at this stage, it is now more important than ever to take a step back and understand the difference that digitalisation can make to each individual firm, and how.

The tide of progress
Within the scope of this profound technological change and its impact, companies are predominately interested in understanding how to generate more sales through the use of digital means, while also ensuring they achieve consistent growth. This usually becomes urgent in the event of innovation being caused by a technology push. When an organisation’s system becomes obsolete, for instance, it risks losing decades’ worth of work if it does not consider updating to a new one. The process could also arise when a new ecosystem is encouraged on an industry-wide scale, such as the CRM software that has taken over the fashion world as of late. Customers themselves, who nowadays demand tailored experiences, could even raise the proposition. Personalising Nutella jars is but one recent example.

In light of this urgency, our clients are more inclined to begin evaluating different strategies in order to enter new markets and overcome barriers with their competitors and end users. As a result, marketing, go-to market techniques, channel evaluation and social media management have become important pillars within the scope of digitalisation, leaving CEOs with a lot of work and a bitter truth: digital transformation doesn’t happen overnight (and it’s not all about Instagram).

Over the years, what is becoming clearer is that this transformation does not interest simply one part of the value chain, and it is not solely connected to go-to market techniques and sales channels. Innovation, as well as the integration of automation and digitalisation, is leveraged to serve the whole business, thereby affecting production, logistics, stock management, accounting and all the core processes that characterise a firm.

In the flesh
As clients continue to seek the support of professionals who can guide them through the best solution for their business, Mind the Value – a Milan-based consulting firm with offices in Italy, Australia, the US and Moldova – has developed a signature methodology to assist during this delicate phase. Created in 2011 by like-minded entrepreneurs with years of experience in the field, the company combines the managerial style and skills of big business, with the flexibility and attention to detail that characterises small to medium-sized firms.

In order to respond to the complexity of the topic, Mind the Value has created Go.Disrupt, a digital transformation methodology that can respond to different needs with dedicated solutions, while also supporting a client’s objectives with experience and the latest technological tools.

“Our methodology has been built upon the business challenges that every firm faces in its lifetime,” said Inga Biondi Ivanov, Co-Founder of Mind the Value. “Starting from the analysis performed on its issues and objectives, we can optimise the processes at the core of the business and propose innovative means that add value and efficiency to the identified solutions. Digital transformation is therefore prescribed to every function of the business: from logistics to marketing techniques, from suppliers to customers – it covers all aspects in order to deliver innovation through an integrated approach.”

A fresh approach
“If we truly want to transform a company, we need to start thinking about the idea of a ‘smart business’,” said Giuseppe Zagami, President of Mind the Value. “So far, we have successfully worked with many clients to transform their firms. We believe that strong results can also be achieved in companies that are not digital in the traditional sense, such as the work we have done with one of our biggest clients: a leader in the electric power transmission and telecommunications systems sector worldwide.”

The firm has set itself the objective of becoming the first smart business in Italy through the review and automation of its internal processes. “To change a business that is already striving for excellence so profoundly has been a real challenge,” Zagami continued. “The results had to be measurable and evident in order to make a real change for this telecommunications client. It was also important to consider the size and complexity of a business that is expanding every day as we speak.”

The new methodology focused on simplifying operations for workers on the industrial side of the company in order to make their jobs faster and more efficient. This would also allow the company to improve its customer experience without undermining the quality of its final product. Leveraging the new technology available on SAPUI5, Mind the Value has built a solution that can work both online and offline in order to adapt to the situation under which workers perform maintenance, namely by connecting mobile platforms to their SAP ECC platform.

Precision, ease of usage and multimedia content production are just some of the additional features of this one-of-a-kind solution, which was developed on the SAP Hana Cloud Platform to assist the business from installation all the way through to the reporting process. The app is currently used to train workers, guide them through installation phases, list materials and instruments, and support operators with images and videos, thereby making the whole process trackable and measurable.

As the telecommunications client is undergoing a radical transformation, Mind the Value has also focused on the last part of its value chain by creating a tool that could empower the sales team during its contracting phase with customers. “The new app can support the sales team in checking product availability, simulating pricings, verifying state of orders and more,” said Massimo Sorrenti, Co-Founder of Mind the Value. “The tool has dramatically improved the life of the sales team and its customers, making complex applications such as SAP usable, with an e-commerce-like experience.”

Does transformation change businesses in the same way, regardless of their size and industry? As discussed, there is no golden rule when it comes to this process – neither is there just one unique type of business that can be impacted. “When we started our latest project, the objective of our client was to internationalise its brand and to make it available on online platforms throughout Europe,” said Lilian Biondi Ivanov, Co-Founder of Mind the Value Tech Labs. “After careful analysis, we decided to implement a standard Magento platform that would fit perfectly with the needs of our client. The goal was to open a new market for a company that was already a national leader in sport nutrition, and to offer it new possibilities in unexplored sectors with a solution that is intuitive, structured and flexible.”

It is clear that digital transformation is not limited to innovative technology alone, nor is disruptive technology a standalone concept – it is not even about being ready at the same level as others in the digital era. In recent years, it has become more evident that digital transformation is a means through which a firm can grow according to its own path and time frame, and that those who can assist the firm in identifying the best solutions based on its individual needs play a crucial role. Zagami concluded: “We need to think about what our customers value the most, and start from there to create a sustainable, long-term solution, while also helping them to understand how far and how efficiently they can go down this path.”