Year: 2022

Permanent residency in Malta: Family is ‘at the heart of our programme’

Posted on by World Finance

Residency Malta Agency is the official management body for the popular Mediterranean island’s residency-by-investment programme. Offering access to Malta’s real estate market, permanent residency for up to four generations from day one of approval, and visa-free travel across the Schengen area, it’s an ideal solution for investors seeking to secure the future of their families. Residency Malta Agency CEO Charles Mizzi explains why Malta is such an attractive destination, the unique features of Malta’s Permanent Residency Programme, and the new schemes recently introduced by the agency for digital nomads and start-up businesses.

World Finance: Charles, I’m sure many viewers will be aware of Malta’s attractions as a holiday destination; but beyond that, what attracts people to become residents?

Charles Mizzi: Yes, Malta is a fantastic destination. We have a wonderful climate with 300 days of sunshine; our outdoor life is fantastic, the nightlife is second-to-none, and our cuisine is top-notch.

We are very well connected, with daily flights to the major airports. Communication is also very easy, because we are an English-speaking nation.

But when looking for somewhere to live, people think about the future of their families. They want to make sure that they give a better education to their children, and they have the comfort in knowing that they are in a country that has one of the top five healthcare services in the world.

People also look for safety and security; and Malta offers all of this.

Of course, they are also thinking about their business. We have a pro-business climate, and government offers full support to entrepreneurs.

World Finance: You offer a permanent residency programme; what benefits does it offer, and what makes it unique?

Charles Mizzi: So as I said, people are often thinking about their families, which are at the heart of our programme.

The MPRP is also one of the few that offers residency from day one. You also get access to the real estate market, by buying or leasing a home. In fact, the MPRP is one of the few that gives the opportunity to lease: it gives you the chance to discover the island.

And of course as a resident of Malta, you will be entitled to visa-free travel across the Schengen area: for 90 days every 180 days.

World Finance: So I need to either lease or buy a property; what other requirements are there for the scheme?

Charles Mizzi: Apart from acquiring a property, you make additional contributions dependent on the property you opt for.

One must also make financial contribution which goes to the government’s consolidated fund.

On top of that, you make a donation to a registered NGO.

We also require residents to have health insurance that offers cover in Malta.

And finally we capture biometric data to issue the residence card.

World Finance: Now, for you as the official government body behind this programme, it’s not enough that people tick all those boxes – there are also some important due diligence checks that you carry out?

Charles Mizzi: Yes, due diligence is the backbone of our programme. It’s the basis of our strong reputation.

It starts with KYC, which is done by the licensed agent. Then once the application is submitted to us, we carry out checks for completeness and correctness of all the documentation we have in hand. We also conduct further due diligence checks on open sources, police checks including Interpol and Europol, and we also look at the source of wealth and source of funds of each applicant. We conduct checks on dependents, donors, benefactors and business associates.

In the meantime we also commission a background verification report from international due diligence companies. And finally our specialised analysts prepare a report which is presented to the board of approvals.

Once an application is approved, the applicant is subject to annual compliance and ongoing monitoring. The agency also has the right to revoke a permit in case of any wrongdoing by the applicants, at any point in time after approval.

World Finance: So if I’m looking at Malta as a residency option, where do I start?

Charles Mizzi: So you start on our website: there is a full list of licensed agents, and you need to choose one from there.

The agents will guide you to fill in an application form. They collate all the required documentation, and then submit an application on your behalf. Then we conduct due diligence; we promise a four to six month timeframe to give a reply on each and every application we receive.

World Finance: Permanent residency is just one of the programmes you offer; tell me about the digital nomad permit, and also the startup residency programme coming later this year.

Charles Mizzi: The nomad residence permit is for non-EU nationals. They can apply for a one-year temporary permit to work remotely from Malta, which can be renewed up to two times. It is designed for those people who work for an employer registered abroad, or are self-employed with a business registered abroad, and also for those who offer freelance services to clients registered outside of Malta.

The Malta startup residence programme will be for third country nationals: non-EU nationals who want to use Malta as a launchpad for business.

Malta is the perfect ecosystem for startups and micro-businesses: government offers a lot of support to businesses, such as financial grants. We are a small country, but a fully developed market. Being an English speaking nation also helps a lot.

Malta is very well connected to other countries; we also have a very strong broadband infrastructure, and we are also blessed to have highly skilled workforce.

HYCM: Rethinking affiliate marketing in FX

Posted on by itsupport

In some ways, affiliate marketing is an unsung hero. Its siblings, SEO, content marketing and PPC have had the spotlight on them for a long time, while this tried and tested marketing mainstay sometimes doesn’t get the attention it deserves. That is why it is hard to find an affiliate program in the FX space that would tick all the boxes of the lucrative scheme. This is not the case with the HYCM’s partnership programme, HY Affiliates, which has been perfected over the years to deliver results to both the broker and its affiliates.

 

The stats
This is despite the budgets for affiliate marketing growing every year with no sign of the trend slowing down. According to Statista, affiliate marketing is estimated to be worth $12bn globally. Another interesting fact is that back in 2020, affiliate marketing came 7th in LinkedIn Learning’s list of top 10 “hard” skills, citing the “decline of traditional advertising and the rise of social media” as reasons for the current desirability of affiliate marketing skills among employers. According to affiliate network AWIN, at the start of 2020, 25 percent of consumers new to brands made a purchase through an affiliate link. By the height of the pandemic this figure was up to 37 percent and has remained above 30 percent since the reopening.

 

Affiliate marketing as diversification
In the forex industry, while we recognise the value of both affiliates and IBs (introducer brokers), historically it has been IBs that have gained the most traction because these partners tended to bring their own traders with them and were thus regarded as a more reliable source of volumes. Even as SEO and PPC have risen to prominence, it’s something of an open secret that a substantial portion of many FX brokers’ volumes continue to be generated through IB relationships for the above reasons.

At HYCM, we’ve found that developing a modern affiliate marketing strategy is a fantastic way to diversify our volume streams and potentially open up our services to segments that may not be reached via other means. This is because the social media technologies that have evolved since the early days of the Internet have created the ideal conditions for affiliate marketing strategies. Whether it be influencers, niches, or localised messaging that’s your priority, the platforms we now have available to us are ideal for developing all three of these different styles of affiliate marketing.

 

Get your commissions right
Market research is important when it comes to setting your commission structure. Spend some time researching what other brokers in your segment are offering in order to see how you can differentiate your own offering. For instance, in our affiliate program HY Affiliates, we opted to offer up to $1,000 per acquisition. Recognising how competitive CPAs are becoming, we decided to offer commissions in the higher tier of what’s commonly available because we’re confident in the ability of our value-added tools, services and support structure to retain incoming clients once acquired.

In order to further make our affiliate offering stand out, we also decided to make our partnership as flexible as possible. This involves giving our affiliates the choice of revenue share and per-lot rebates as well as the standard CPA model.

 

Manage your affiliates properly
With the above settled, it’s important to understand the importance of affiliate management systems. We can’t stress enough how many affiliate programs fail due to inadequate management. Now we’re not here to debate the virtues of in-house developed or third-party management systems. What we will say, though, is that if you talk to affiliates, irrespective of industry, they all seem to value timely payouts and complete transparency when it comes to reporting.

In other words, your affiliates should be able to know exactly what the state of their account is with you at any given time, which includes up to-the-minute conversion data. Also, there should be zero friction for them when it comes to withdrawing their commissions. The easier you make this process for them, the more likely they are to stay with you, and the likelier you are to attract more affiliates to your cause.

 

Final thoughts
Never forget that affiliates are spoilt for choice nowadays irrespective of industry. You’re not doing anyone any favours by merely offering commissions. You must work hard to make your offering competitive, but also to show that you value these people as partners that are part of your organisation’s success.

That is why choosing to partner with one of the most reliable and established global forex brokers such as HYCM by joining our affiliate program HY Affiliates, our affiliates benefit not only from the possibility to introduce their clients to the exciting and fast-growing world of online trading but also from the opportunity to earn high levels of commission and to generate high conversion rates with their traffic.

 

Learn more about HY Affiliates partnership programme

The disruptive recruitment philosophy proving a success

Posted on by itsupport

As the pandemic slowly retreats, it has left countless companies around the world short of the talent necessary to take fast-emerging opportunities that have arisen in its wake.

Simultaneously though, many senior executives are unwilling to leave permanent positions for new opportunities until the economic horizon brightens.

Just as crucially, the economic damage wrought by Covid-19 and, now, the war in Ukraine, means many companies urgently need prompt investment. And none more so than start-ups and SMEs, historically the most vulnerable to crises.

Clearly, the demand for executive talent has never been greater and, in its twentieth anniversary, global recruitment agency CEO Worldwide is rising to the challenge with its iCEO platform. First established in 2007 but now more important than ever, iCEO is dedicated to simultaneously plugging the talent and investment gaps in these fast-moving sectors.

It’s an agile platform that provides carefully vetted executives, often with many years of experience in the sector, who also contribute their own capital of up to $1m. The most common amount is $150,000-350,000 and is deployed by nearly 81 percent of arrivals while more than 12 percent bring $350,000-750,000, three percent between $750,000-$1m, and four percent more than $1m.

The number of openings over the next decade will grow by more than a quarter of a million every year

The result is talent plus capital — skin in the game. “It’s a vote of faith in the future of the company,” explains CEO Worldwide’s founder Patrick Mataix. “And it’s a statement of the executive’s commitment. It is an incredible leverage for companies to get a talented and committed executive on board with a limited impact on their profit and loss.”

Once again, CEO Worldwide looks to be ahead of the curve with iCEO. As the firm celebrates an innovative 20 years, it looks back on one ground-breaking initiative after another. Launched in France in January 2002, at first the firm focused on interim management services dedicated to start-ups and venture capitalists in the EU.

The vision was deliberately disruptive. Founder Mataix recalls: “As an entrepreneur regularly using the services of headhunters and consultants, I had been frustrated by the inadequacy of their answers and timing to solve the international problems I was facing daily.”

So right from the start, the firm concentrated on the values he believed were missing in other executive search functions. Action had to be fast, pricing transparent and behaviour flexible. And now, 20 years later, CEO Worldwide offers a full suite of recruitment services that has played a fundamental and important role in distributing executive talent around the world.

In that time the firm expanded in a series of milestones as it responded to urgencies in the market. In 2005, the firm began finding executives for permanent placement. In 2007, original iCEO started to make a growing difference for capital-short companies. Three years later came the name change from CEO Europe to CEO Worldwide, reflecting the firm’s increasingly global reach.

By then it had on its books over 10,000 vetted executives covering 40 countries. In 2013, headquarters was moved from France to the UK where its Top Executive search engine was launched.

It is an incredible leverage for companies to get a talented and committed executive on board with a limited impact on their profit and loss

And today CEO Worldwide can muster a full array of multi-lingual and multi-disciplined talent with a vetted pool of over 20,000 international executives covering nearly all countries and 84 languages. The firm’s clients comprise companies of all sizes from start-ups and SMEs to multinationals.

It’s a measure of the firm’s global footprint that it recently placed a CEO in India for its 1,351-first executive mandate. The firm also boasts 48 ambassadors covering 32 countries. And the vetted pool of iCEO investor-executives alone now tops 3,000, representing a cumulative potential investment exceeding $1bn.

Over the years the firm remained faithful to the original vision. It had to be nimble-footed and react quickly to the demands of the market – in short, client-led. On average it takes just ten days to submit a short list of candidates to the client thanks to a policy of pre-vetting. An in-house video platform allows the client to conduct interviews remotely, which proved to a valuable service during lockdowns and global travel restrictions.

And the pricing model remains a big attraction. CEO Worldwide’s fee structure is highly transparent – for instance, right from the start fees were not linked to total remuneration unlike most competing firms.

ceo worldwide logo

The firm was also ahead of the game with its female executive platform. Now four years old, it anticipated growing pressure from legislators and lobby groups for a more diverse representation in the C-suite. Indeed the platform was launched before European regulations that imposed gender and diversity quotas on boards and steering committees.

A runaway success, the platform boasts a vetted pool of over 3,100 international female executives covering 86 countries and 64 languages. Client firms were quick to jump onboard. An international corporate with over $8bn in turnover retained CEO Worldwide to provide it with top female talent. Other women have been hired in top-level management jobs and as non-executive directors in the US, UK, Switzerland, Germany, France and India among other countries.

As CEO Worldwide has found, the nations that are hungriest for executive talent are those with fast-growing digitised economies. They are headed by France with 763, followed by USA (399), UK (273, India (228) and Germany (185).

And the hungriest industries are those sitting at the leading edge of the digital revolution. CEO Worldwide has placed 959 executives in e-commerce and internet-based companies, 895 in consumer goods, 766 in software and 698 in IT and computer hardware. All of these industries have been turbo-boosted by the pandemic.

Looking ahead, demand for top executives in most corporates including start-ups and SMEs looks to be almost insatiable. According to the US Bureau of Labor Statistics, the number of openings over the next decade will grow by more than a quarter of a million every year as older executives retire. And that’s just in the US.

With its finger on the pulse of global recruitment, CEO World has plenty of insights into the current state of the market. “Many organisations are challenged when looking for executives,” says Mataix. “And that’s despite offering enticing perks and high salaries.” They urgently need people with experience – and especially in technology, the right balance of men and women, and those from minorities. Unfortunately, not enough candidates meet all three criteria.

“Many people who qualify for the first two criteria lack the necessary experience, which drives the current talent shortage,” summarises Mataix. “The current issue faced by the market is there are too few executives with experience looking for placements.”

And that, he says, is particularly true of women. Although CEO Worldwide’s platform is contributing to the availability of female talent, many women are declining offers in the current uncertain environment.

Age however is no barrier. CEO Worldwide is tapping a steady demand for executives over 55 years of age who often take interim or consulting positions where their knowledge and experience provides a perspective and depth that is often lacking, particularly in start-ups. Some of these placements turn out to be so successful that the executive is asked to stay on in permanently.

So clearly, it’s yet another disruptive move by CEO Worldwide.

 

For more information about CEO Worldwide’s services:
https://www.ceo-worldwide.com/

When two cultures collide – how to ensure M&A success

Posted on by itsupport

The first big milestone of any merger or acquisition is ‘day one.’ It’s important from this day to have a clear blueprint of how the business will operate which everyone buys into, including how the newly formed organisation will work together. Every detail is important and needs to be well communicated. Getting ‘day one’ right is an important step in creating momentum and credibility, and signalling the future culture.

It’s worth therefore also spending time during the merger and acquisition process assessing the two cultures of the organisations to establish how to knit them together. One way to do this is through a steady cadence of visible acts of change or ‘symbols of change’ such as sharing joint success stories, co-creating a new vision and purpose together or creating a joint set of communications.

But don’t feel you have to resolve every culture difference or issue immediately. It’s impossible from a leadership perspective, and situations inevitably evolve and change over time.

Finally, invest time in building great relationships with the organisation that’s being acquired. This can pay dividends later and will ensure the transition is as seamless as possible. Too often, leadership teams turn inwards and fail to build relationships with their new colleagues. Settling leadership roles early on is key so leaders can help stabilise the rest of the organisation.

Mergers and acquisitions are always a challenge from the perspective of people. But organisations that pay close attention to the culture aspects greatly increase their chances of the deal achieving its full potential.

The current global landscape surrounding mergers

Posted on by itsupport

Early in the Coronavirus pandemic, the European Commission (EC)’s Directorate-General for Competition sent the daunting message to businesses that parties should delay their merger notifications where possible. Despite initial obstacles, legislators responded quickly, adapting to the challenges of the pandemic by making merger notification submissions electronic and simplifying procedures to fast-track the review process. In March 2021, the EC launched an impact assessment on policy options for further simplification of merger procedures.

In a September 2020 speech, the European Commissioner for Competition, Margrethe Vestager, covered the pressing issue of EU notification thresholds, a hot topic in competition circles, as national competition authorities had begun advocating for and adopting value-based notification thresholds. The goal of these new mechanisms is mainly to catch so-called ‘killer acquisitions’ — incumbent firms acquiring innovative targets to preempt future competition before the targets are big enough to reach turnover-based thresholds.

Vestager confirmed that value-based thresholds would not be among future measures to prevent this type of deal. Instead, the EC’s Article 22 EUMR new referral policy, effective from March 2021, might be used to address this perceived enforcement gap, as it allows member states to refer to the EC transactions that raise potential competition concerns when the EU notification thresholds are not met. In September 2021, the EC published the policy brief ‘Competition Policy in Support of Europe’s Green Ambition,’ which flagged a particular concern about ‘killer acquisitions’ of companies active in green innovation and suggested the use of the new Article 22 referral policy to tackle the issue.

The EC also appears to be increasingly stringent when it comes to the enforcement of procedural rules. Decisions such as Facebook/WhatsApp, Canon/Toshiba Medical Systems Corporation, GE/LM Wind and Altice/PT Portugal have been characterised by the imposition of hefty fines for procedural violations such as gun jumping or the provision of incorrect or misleading information.

European national level
At the national level, the activity of the French Competition Authority (FCA) and of the German Federal Cartel Office (FCO) provides a good example of the developments in competition policy and enforcement. The FCA has recently shifted the focus of its merger control activity toward digital issues. One particularly innovative example is the novel approach of modernising its market definitions to consider the development of online sales in the retail sector. This trend was unequivocally confirmed in the new FCA merger guidelines introduced in July 2020, which now contain a specific section dedicated to online sales.

As for the German FCO, recent practice has shown a trend to extend Phase II proceedings, leading to a significantly longer total review period than the four months German law currently stipulates.

Meanwhile in the UK, the Competition and Markets Authority (CMA), has taken a rather interventionist approach to merger control. This is evident from its approval of Roche’s takeover of Spark, in which the CMA found that the share of supply test was met, despite the fact that Spark did not have any sales in the UK.

The US focus
On the other side of the Atlantic, antitrust agencies have largely adapted to the challenges created by COVID-19. The US Federal Trade Commission (FTC) and DOJ have continued to be active in merger investigations and successfully introduced a Hart-Scott-Rodino (HSR) Act e-filing system. In the first quarter of 2021, senators from the Republican and Democratic Parties introduced legislation to alter existing antitrust laws. While from different ends of the political spectrum, the new bills share many similarities. Both create rebuttable presumptions of illegality or harm based solely on the size of the acquirer and increase the focus on enforcement of vertical mergers. While it remains to be seen whether these bills will become law, there has been increased debate on Capitol Hill about overturning existing antitrust laws, exacerbated by the current discourse on under-enforcement in dynamic industries like big tech and pharma.

Nevertheless, both the FTC and the DOJ began 2021 with heightened merger enforcement activity. In January, Visa and Plaid abandoned their planned merger following a DOJ lawsuit alleging Visa had nefarious incentives for the acquisition. The new administration’s first vertical merger enforcement move occurred in February when the DOJ issued Second Requests to Slack and Salesforce. The US agencies have demonstrated a continued focus on transactions involving nascent competitors, as evidenced by the FTC’s challenges to Edgewell Personal Care’s acquisition of razor manufacturer Harry’s, as well as the life sciences merger between Illumina and Pacific Biosciences.

These cases reflect that the agencies are still focused on killer acquisition theories, with the DOJ alleging that Sabre’s acquisition of Farelogix was an attempt to neutralise or eliminate an innovative competitor. Despite the pandemic, the US agencies also released new vertical merger guidelines, which reflect the agencies’ approach to investigating the competitive impact of vertical mergers. Although COVID-19 has been at the forefront of people’s minds, the development of merger control policy and rules worldwide shows that companies looking to take advantage of the disrupted economic environment need to make sure they are abreast of the changes to navigate their way through the uncertainty that still lies ahead.

How Axxela is transforming Nigerian industries with natural gas

Posted on by World Finance

Through its four subsidiaries, Axxela Group provides natural gas to commercial and residential customers across southern Nigeria – and in the process, is helping the country’s industries to transform and grow. Bolaji Osunsanya is Axxela’s CEO; he explains why so many industries are embracing the natural gas advantage, how Axxela’s combination of physical and virtual pipelines are helping extend that advantage outside of the richer south, and what the future holds for the company as it looks to expand across western Africa.

World Finance: Bolaji, Nigeria’s industries often depend on diesel, so gas really can be a game changer.

Bolaji Osunsanya: Yeah, you’re correct Paul. Most industries in Nigeria are dependent on the very dirty fuels. We have in the last 20 years been trying to introduce much cleaner natural gas to the system. We’ve made significant progress introducing natural gas to them, and today they’ve all agreed to take the gas advantage. They’re very keen on its clean nature and the comparative cost advantage.

We have customers in most of the industrial groupings, so we have customers in cement, food and beverage, textiles. Today in total we provide gas to about 200 of the blue-chip industrial concerns in Nigeria. And they’re beginning to use it for more than just their power requirements: they’re also using it for their process needs. So today we have people using gas for their furnaces, for their floor lines, for many other process requirements that we then start to see.

World Finance: Of course you operate traditional pipelines, but also a virtual pipeline for customers out of reach of normal infrastructure – why is this solution so important for Nigeria?

Bolaji Osunsanya: As I’m sure you know, the grid in Nigeria is still very limited – largely in the southern part of Nigeria. And the virtual pipelines get to those stranded customers who are not currently on the pipeline infrastructure. So we’re targeting a large part of the north, and a large part of the middle belt, where the resource is not available, and where there are no linkage pipelines yet.

So we liquefy or we compress the same natural gas, and we put them on wheels – either on trucks, or on rail – and wheel them to the customers wherever they are in the hinterland.

We expect that ultimately all nooks and crannies of Nigeria will have the pipeline infrastructure; but while we adapt, there should be production possible on the tracks of virtual pipelines. So we expect that it will be a forerunner, it will be a door-opener for most of the market. And will probably switch seamlessly away from virtual pipelines back into the pipelines when we get there.

World Finance: Now, how do you ensure your operation is both safe and sustainable?

Bolaji Osunsanya: Well, we deal with natural gas, and natural gas already has conditions under which you would operate safely. And as much as possible we try to keep to those regulations, and as much as possible also we try to pass that on to all our customers. So there’s a lot heavy dose training, heavy dose inspection, heavy dose supervision, that we ensure makes our operation safe.

On the sustainability point, we’re subscribers to the ISO integrated management system, and with that we’re constantly operating according to the guidelines, and ensuring that we have a system that looks at our operations.

Additionally, we’re also subscribers to the Sustainable Development Goals objectives, and each of those principles we’ve embedded in our operations to ensure that we’re working in a sustainable manner.

World Finance: And what does the future hold for Axxela Group? Where are you planning your own growth?

Bolaji Osunsanya: Well I think we’ve used the last 20 years to demonstrate what is possible in the African clime, using Nigeria as the guinea pig, if you like. Now I think we’re confident enough to continue to do that in Nigeria and extend it to the rest of the region. So Togo, Benin, Ghana, and all the other west African states should be beneficiaries of our service in the coming years.

And additionally we will be looking at taking on a lot more in the power space. We’re a gas and power company; we’ve predominantly done more in the gas side. I think it’s time now to push the boundaries into the power space, and in that regard we are already registered on the west African gas pipeline and on the west African power pool. We expect to be able to trade power into these same markets within Nigeria and the region in the coming years.

Additionally, we will be trying to expand the solutions that we have in the gas space. Supply security’s a big part of the strategy going forward; and so we will be getting into processing plants and all the other ways that assure our supplies over time.

The transition to sustainable construction

Posted on by itsupport

After many years of stagnation, the construction industry is finally expected to grow significantly in the next decade according to the Future of Construction, a report published by Marsh & Guy Carpenter. The report envisages a solid rebound from the COVID-19 outbreak this year, with worldwide construction production increasing by 6.6 percent. Construction spending contributed to 13 percent of global GDP in 2020 and this is expected to rise steadily over the next few years. By 2030, global construction output is expected to increase by 35 percent from today’s levels.

Thanks to governmental measures aimed both at reaching environmental targets and kick starting the economy, construction, which has always lagged behind other sectors from a growth perspective due to critically low margins and consequentially low R&D spending, is seeing a renaissance. Italy, for example, has a commitment to reduce CO2 emissions by 55 percent by 2030, and to zero by 2050 within the European ‘green new deal.’ The construction sector will be pivotal in achieving this goal, as the built environment must be upgraded to be more sustainable.

Meanwhile, the European Union’s ‘next generation EU’ fund will help support recovery of construction in Western Europe with growth forecasts suggesting the sector will expand by 7.9 percent in 2021. Italy will benefit from over €196bn, and 48 percent of this will be spent on construction projects. For example, €68.9bn is destined for ecological transition and 40 percent of this sum (€29.3bn), is intended for energy efficiency and the upgrade of existing buildings.

On the other side of the pond, the US have established the ‘build back better’ programme, which is a projected $7trn COVID-19 relief and stimulus package designed to accelerate economic recovery and for investment in large infrastructure projects proposed by President Joe Biden. It is projected to create 10 million clean-energy jobs.

Sustainability and the circular economy
Climate change and the race to net zero are arguably the greatest challenges that the construction industry is facing. The building and construction industry as a whole is responsible for 40 percent of worldwide greenhouse gas emissions and produces 30 percent of Europe’s waste.

The industry is finally waking up to the importance of proactively addressing climate change concerns and embracing responsibility for its direct and indirect carbon emissions. The major contributors to these emissions are the materials used, as well as the heating, cooling and lighting of buildings and infrastructure. Sustainability is not just a matter of corporate responsibility, but it is good for business – and many companies are investing heavily in sustainable practices not just to be good global citizens, but also because it makes great financial sense.

As construction entrepreneurs, we have a responsibility to lead our industry’s evolution towards the practice of maximum respect for the environment, both in terms of construction methods and the life cycle of the built environment. To achieve this goal, the sector must focus on innovation, sustainability, and the circular economy.

The impact of sustainable objectives
To meet sustainability objectives, it is important to positively impact the life cycle of each project as well as improving building methods. There are many construction techniques available that are less damaging to the environment, and technology and materials choices that make long-term management of an asset more sustainable. The circular economy, for example, is creating added value in the construction industry. According to data from the Italian ‘national association of building constructors,’ the transition to the circular economy system is increasingly becoming a fundamental value for construction companies, with 81 percent of respondents to a recent poll stating that it is key to their future goals.

In Italy, the 110 percent super-bonus is giving a positive boost to the industry as it encourages the private sector to invest in energy efficiency by funding upgrades to existing buildings at no actual cost to their owners. In addition, the use of eco-friendly materials as a standard practice is hugely beneficial in the long term as they do not have an adverse impact on the environment when used and can easily be recycled.

Finally, the use of technology is essential for reducing emissions and preserving the ecosystem. The sector has responded to the COVID-19 outbreak by focusing more heavily on innovation as it is fundamental to respond to the evolving needs of the construction market to ensure the industry’s transformation. The sector will have to adapt to a changing environment and create resilience to the serious effects of climate change. For its part, the construction industry has all the credentials to meet this challenge, enhance its evolution to a green economy and contribute substantially to the revitalisation of the global economy.

Opportunities abound in open banking

Posted on by itsupport

The pandemic unleashed unprecedented disruption, a level of global disorder not seen since the Second World War. To put it simply, without the internet, the global economy wouldn’t have survived the pandemic. During all of this, financial services have been at the forefront of a transformation of everything from payments to banking and commerce, as businesses have moved or deepened their online presence.

In our latest research report, The open banking revolution, we found the attitude of European financial executives mirroring this shift, as positive sentiment towards open banking increased from just over half (55 percent) in 2019, to 71 percent in 2021. Its impact at this point should not be understated – 82.8 percent of financial executives also believe that open banking is causing ‘a revolution in the industry.’

But there should be equal parts uncertainty and confidence at this time, as it still remains to be seen how the future will shake out. Many institutions are struggling to implement open banking initiatives at pace. While nearly a quarter (23 percent) believes their business will have completed its open banking objectives within the next five years, the most common view is that it could take up to a decade (39.9 percent) or even beyond (36.9 percent). Institutions that can translate open banking into concrete strategy will be in an optimum position to start realising its benefits sooner. So how can financial institutions best embrace the open banking revolution?

Improving the customer experience
There has never been a better time than the present for businesses to move their open banking strategy beyond compliance efforts. With a revolutionary opportunity at hand, the risk of doing the bare minimum may perhaps be bigger than the risk of experimenting, failing and trying again. Enhanced banking through external APIs can optimise existing product offerings and is the safest and most strategic direction a financial institution can take beyond compliance.

The risk of doing the bare minimum may perhaps be bigger than the risk of experimenting, failing and trying again

Third-party providers (TPPs) continue to play a crucial role in this area – many have developed specialist solutions for micro-segments along the customer journey, from customer acquisition to loyalty. They can therefore provide ample inspiration for banks looking to embrace open banking and strengthen customer experience, whether solo or through working with technological partners.

Stop looking for the killer app
I’ve said multiple times on industry panels and I’ll say it again: the killer app that will disrupt the industry as we know it doesn’t exist – don’t waste time looking for it. The killer app that will drive the adoption of open banking use cases won’t be an app, it will be a collection of services that will enable intuitive and strong customer authentication journeys. Using open banking for a wholesale reinvention of a process or the launch of a new product can be risky, and shouldn’t be the first port of call for financial executives looking to take the plunge.

Tried and tested use cases like automated onboarding, income verification and personal finance management have already been proven to help accelerate and streamline decision-making processes, risk analysis, and the verification of identity, assets and liabilities. Taking advantage of these use cases will ensure that businesses can unlock more value, before pursuing riskier and lengthier use cases that have a longer lead-time for companies to reap the rewards.

Embrace smart partners
The open banking journey is one that financial institutions and fintechs have embarked on hand in hand, and there has already been so much progress. However, it’s not guaranteed that the industry will continue along the same vein. That’s why institutions must continue to partner with specialist fintechs rather than seek solely to develop new competencies in-house. These partnerships can serve a strategically important role for both partners, so it’s important that they are done right. A potential technology partner needs to be carefully scrutinised to ensure they can be onboarded smoothly and securely.

Open banking’s core values of empowering choice, competition and innovation by democratising access to data across financial services are now something the financial services industry has begun to embrace with both hands – whether out of necessity or otherwise. Over the coming decades, it’s safe to assume that these conversations will continue and open finance and open data will become more topical – producing a tailwind for open banking and innovation. We are still at the beginning of the open journey. The institutions set to prosper are those able to translate the open banking opportunity into concrete strategy. Only then will this have been a successful revolution.

The rise of Banking-as-a-Service

Posted on by itsupport

For years, we have witnessed the steady rise of fintech companies and neo-banks as financial services are increasingly becoming digitalised. Demand for open banking is growing as more people discover how free access to their banking data can generate innovative embedded finance solutions. Tier one banks that hold pride of place on the high street remain at the heart of financial services. Yet with the commoditisation of banking services, other players can now operate within the space once reserved for these giants.

There is no shortage of firms that want to offer ‘greener banking,’ entrepreneurs that want to build more innovative banking apps, or retailers that want to explore novel ways to lend money to buyers and simplify the customer journey.

The appetite for digital transformation is strong across financial and non-financial businesses alike, and the realisation of these bold plans no longer needs to be constrained by regulatory hurdles. This is where Banking-as-a-Service (BaaS) providers come in. They can build bridges between banks and businesses while negating the need for the two to compete with one another. But while opportunity has come knocking, there are important points to consider as banks, brands and BaaS providers form new partnerships.

Don’t sleep on BaaS
The technology behind digital banking is complex, and developing it from scratch is prohibitively expensive for many businesses. This, along with the difficulty of obtaining a banking licence, is a key obstacle for those trying to embed financial services into their digital channels. BaaS allows businesses to develop sleek, customisable financial products that suit their users, and leave the balance sheets and regulatory considerations to the licensed banks. This way the customers get what they need, the innovators are free to pursue their ideas, and the banks benefit from the value chains created. Everybody wins.

The best BaaS providers have the capacity and modular architecture to offer totally bespoke products to different clients

One benefit of this shift is that banking services become more engaging to the end user. Businesses with strong customer loyalty can offer credit during the purchase journey, improving both the experience and the customer’s relationship with the brand through embedded banking services. Demand for these services is being driven in part by the rise of ‘buy now, pay later’ (BNPL) services that are growing at a staggering rate – 39 percent a year – with almost 10 million shoppers in the UK stating they avoid retailers that don’t offer split payment options at checkout. The demand for these services is clear, and it’s up to BaaS providers to keep up momentum.Solutions like no others

A misguided concern with BaaS is that it will eliminate differentiation from the market – that constant intermingling of partnerships and white-label solutions will homogenise all banking products into one. This couldn’t be further from the truth: while third-party solutions enable anyone to offer banking products, the innovation of competing brands and the varying demands of users will lead to a boom of novel products tailor-made for every corner of the market. The best BaaS providers have the capacity and modular architecture to offer totally bespoke products to different clients, cherry-picking the functions they need to meet the demands of their own unique customer base.

This is why now is the time for BaaS providers to shine – those with the best functionality and most agile solutions can fuel major change across multiple sectors. They must be designed to offer easy access to the bank’s critical functions while remaining scalable and extensible. Onboarding clients, creating financial products, and thereafter orchestrating and servicing these products must all be easily achieved through the core banking system. Giving businesses the functionality they need while carefully protecting the bank’s data and adhering to strict compliance requirements is a tight line to walk, but the best BaaS providers are equipped to do it. The industry is crying out for smart, scalable solutions, and BaaS is the tool that will power innovation well into the future.

Closing the digital gap to empower a generation

Posted on by itsupport

My mandate is simple: we need to take older people with us into the digital future. I feel that this is a mission that we hold a responsibility to fulfil as a society. What may sound theoretical at first glance has a practical background. Consider how we take for granted many everyday tasks that now require the use of a smartphone, things such as ticketing, banking and retail shopping. We now live in a world that is hard to navigate without a smartphone and as the Internet of Things (IoT) expands, the adoption of smart tech will continue to grow exponentially in all scenarios, leaving those without the use of such devices increasingly excluded.

Further impacted by lockdowns
Across Europe, there are more than 50 million over-65s who are excluded from this new form of always-on communication, and it is our socio-political responsibility to close this widening digital gap between the young and old. The impact of lockdown on this demographic further demonstrates the need for us to do so. As countries across Europe fell into chaos from the pandemic, older people were left feeling isolated and disconnected. Without the right tech and know-how, simple things that are ingrained in everyday life for the younger generations – such as video calls – were not accessible to this important group. The absence of smart technology also meant that when in-person contact was out of the question, online shopping for groceries and ordering prescriptions was not an option for a large segment of this age group. That was a real tragedy.

From my past experience and my journey at emporia I have developed a formula for success. The first step to ensuring continual success is to regularly question your company, its products and services. This is the only way that you can be certain you are serving the end user to the highest standard. My second driver is to set out clear goals and stick to them. This prevents me from ever losing track of my mission. I’ve also found it is so important to be brave and to believe in yourself and your company. For example, before the COVID-19 crisis, I said that we would have a turnover of €100m in 2023. I also repeated this during the crisis. And now, as we start to move forward from the pandemic, I’m holding on to this target. My final step is to define and work to a core set of firm values. I lead emporia on three key principles, which I believe are essential to achieving success: respect, discipline, and competence.

Know your market
In line with this, I am committed to continuously improving our products in ways that will work towards my mission of closing the digital divide. We are committed to research and have numerous collaborations with universities and international academic institutions including Cambridge University. We also invest heavily in local market consumer and behavioural research in all the areas in which we operate. This allows us to better understand the ever-changing wants and needs of our target audience and identify any issues that we need to address.

It is our socio-political responsibility to close this widening digital gap between the young and old

In addition to creating the products best-suited for older users, the emporia strategy also includes training and support. For five years now, we have been developing training methods such as our training books, which are included with every product, and the smartphone driver’s licence to introduce older people to new technology. Prior to the pandemic, 1,000 training courses were held in Germany on a single day by emporia and our retail partners – how amazing is that? We also work with several large banks across Europe to share best practice in training this audience to adopt digital channels such as banking apps.

I feel that I hold my own in an industry that is largely dominated by men. There are few female CEOs and business leaders, especially within the telecommunications space. However, in Europe I am in good company with two amazing women: Ursula von der Leyen, President of the EU Commission, who is the political head of over 447 million EU citizens, and Christine Lagarde, head of the ECB, who is responsible for a balance sheet volume of €569bn.

The global population continues to grow and age. This means that by the year 2051, around 10 billion people will populate this planet, of whom more than two billion will be over 60 years old. I believe that communications technology will leap further forward, and it is possible that smartphones will no longer exist, with our transactions and dialogues made via wearables or other such gadgets. Nobody can foresee the future, but at emporia we are confident of closing the generational digital divide. And I believe we will do so. My motto for life and business is: ‘failure is not an option.’

Robot wars

Posted on by itsupport

It was in 1921 that Czech writer Karel Capek coined the term ‘robot’ when writing his play Rossum’s Universal Robots. It is perhaps from these early beginnings that we have developed a general wariness towards technology and a fear of things created in our own image, for in the play, and now a common trope in science fiction, the machines rise up against their masters and bring humankind to the brink of extinction.

We marvel at robots and AI that can mimic lifelike behaviour, but also find them just a little bit disconcerting. Capek’s play, set around the year 2000, was a vision of the future that did not come to pass, though industrial robots were in widespread use by then, having first appeared in the early 60s. It is only in recent years that we have been edging closer to more nuanced applications of robotics and its associated field, AI, that lean towards the kind of mimicry that Capek envisioned.

Holding up a mirror to the face of human existence is fine, so long as it’s not the side of it that engages in war or ethnic cleansing

In June 2020, Boston Dynamics, under ownership of SoftBank, offered up its first commercial product, Spot, a four-legged inspection robot, capable of navigating terrain with ‘unprecedented mobility, allowing you to automate routine inspection tasks and data capture,’ according to the promotional material. A majority stake in the company was then purchased by car manufacturer Hyundai in December that year, so there is a lot of jostling for position in an industry that has the potential to influence a great many markets.

Over a year later, in August 2021, when introducing the Tesla Bot as part of the company’s AI day, Elon Musk said: “Tesla is arguably the world’s biggest robotic company because our cars are like semi-sentient robots on wheels.” He goes on to make the case that the work his company has done to provide his cars with the ability to understand and navigate the world is transferable to a humanoid form, joking to a reception of nervous laughter that the Tesla bot will be designed so that “you can run away from it” and “most likely overpower it.” It introduced just the slightest hint of apprehension when stepping into a future that could be right out of those well-trodden sci-fi storylines. If life does imitate art, then I would hope that artificial life does not imitate us.

A trip to the uncanny valley
For just as we are aware of our capacity for benevolence, we are aware of our shortcomings. Perhaps we are fearful that we will unwittingly teach these to an AI. In building robots we are holding a mirror up to ourselves and to the world. Therefore, when we see four-legged robots moving around as an imitation dog, or Boston Dynamic’s Atlas, a humanoid bipedal robot, perform parkour in a pre-programmed sequence, or even observe the ‘muscles’ of a robot arm flexing, we get a sense of the ‘uncanny valley’ – that feeling of something eerily similar to us, but not necessarily frighteningly so. Because holding up a mirror to the face of human existence is fine, so long as it’s not the side of it that engages in war or ethnic cleansing.

When Spot is mounted with a tactical assault rifle, or when the parkour performing Atlas robots are suited up with Kevlar, then perhaps we might start worrying. Because then, it is less uncanny, and more the stuff of science fiction nightmare.

Prof Stuart Russell, the founder of the Center for Human-Compatible Artificial Intelligence at the University of California, Berkeley, speaking to The Guardian newspaper said; “The use of AI in military applications – such as small anti-personnel weapons – is of particular concern” because “those are the ones that are very easily scalable, meaning you could put a million of them in a single truck and you could open the back and off they go and wipe out a whole city.”

Perhaps any anxiety about the machines taking over is premature, but a lean towards adapting robots for military use does set alarm bells ringing. Boston Dynamics has stated in its ethical principles that it is firmly against weaponising robots, but it is not the only robotics company to have built a robot dog. In October, Ghost Robotics unveiled its version with a special purpose unmanned rifle (SPUR) affixed to the top of it, making the unnerving case that dogs are not necessarily a man’s best friend. The module, designed specifically for these robots, comes courtesy of a company called Sword International and has an effective range of 1,200 metres. Of course this does not prove that we are moving towards a future of autonomous killing machines, but it is a worrying development.

The Biden administration has proposed an increase in R&D spending for the Department of Defense to the tune of $112bn, according to figures in the Pentagon’s fiscal year 2022 budget request, the largest such increase on record. A total of $874m would go towards development of artificial intelligence to keep up with its adversaries.

And this is where I believe the crux of the problem lies. Government defence agencies are engaged in a never-ending game of one-upmanship in order to maintain the edge in any future engagement. Many envision robot labour transforming the economy and rendering physical labour a choice for us.
I’m certain that those enthusiastically enlisting for this future hope that it ultimately wins out against our innate predisposition for self-destruction.

Free your mind: mastering psychedelic chemistry

Posted on by itsupport

Evidence for the use of plant-based psychoactive drugs can be found in texts spanning hundreds, if not thousands, of years. In book IX of Homer’s Odyssey, Odysseus’s scouts eat what is described as the fruit of the lotus and experience not just a release from all their troubles, but a strong desire to remain where they are, absconding from all sense of duty on their return home from Troy. Over 2,000 years later, Thomas De Quincey’s Confessions of an English Opium-Eater, in which he documented his opium addiction following a bout of toothache while studying at Oxford, said of the drug, that it took him to a place where “the hopes which blossom in the paths of life” are “reconciled with the peace which is in the grave.” Since the ripe seed pod of the opium poppy “resembles the pod of the true lotus” according to the Encyclopaedia Britannica, it is possible that both the people of ancient Mesopotamia and De Quincey were experiencing the effects of the same narcotic.

In 1970, President Nixon signed the Controlled Substances Act, which labelled psychedelic drugs such as lysergic acid diethylamide (LSD) and Psilocybin (both of which can be derived from fungi) as Schedule I, which defines them as having ‘no currently accepted medical use and a high potential for abuse’. Opium remains a Schedule II drug, the difference being that while still being highly prone to abuse it does have accepted medical uses. The act brought to an end a leading component of the counterculture movement of the 1960s and effectively closed the door on the psychedelic research that started with LSD in the 1940s and 1950s. The revival for research into the uses of those illicit Schedule I drugs began two decades later and it is only now that we are looking seriously at the potential for the regulation of administering psychedelics for the treatment of depression and post-traumatic stress disorder (PTSD).

Psychedelics are set to have a major impact on neuroscience and psychiatry in the coming years

In the past few years, clinical trials, such as those that have taken place at Imperial College London, and that involve testing the effects of synthetic forms of Psilocybin, MDMA and LSD, have increased in number as interest from scientists and investors alike has taken hold. What was once considered a scourge on society and what Nixon described as “public enemy number one” is now enjoying something of a renaissance in the field of psychiatry.

In April 2019, Imperial College London opened the world’s first Centre for Psychedelic Research. The centre is led by Dr. Robin Carhart-Harris, who said of the opening: “This new Centre represents a watershed moment for psychedelic science; symbolic of its now mainstream recognition. Psychedelics are set to have a major impact on neuroscience and psychiatry in the coming years.”

Buying back in
The vaccine heroes of the global pandemic, AstraZeneca and Pfizer, among others within Big Pharma, were once more heavily invested in neuropharmacology, helping to bring antipsychotics to the market, which, coincidentally or not, coincided with the first revival of scientific interest in psychedelics in the 1990s.

Large pharmaceuticals may have shied away from central nervous system (CNS) drugs in the past, but according to a report by S&P Global referencing CB Insights, investment in CNS has been on the rise in the last decade: “The second fiscal quarter of 2019 saw $321m in funding toward mental health and wellness companies, a quarterly record for the therapeutic area.” I wonder whether the renewed interest in psychedelics will provide an investment path back into this broad area. Dr. Kaitin, a professor at Tufts University, is quoted in the report, saying: “A better drug for depression or psychosis, or the first real drug to treat Alzheimer’s, that’s going to be a mega, mega blockbuster.” The findings of clinical trials exploring the use of Psilocybin as an effective treatment for major depressive disorders (MDD) suggest that we might be quite close to this.

A research article titled The Economic Burden of Adults with Major Depressive Disorder in the United States (2005 and 2010) by Greenberg, Fournier, Sisitsky, Pike and Kessler has estimated the economic burden of MDD in 2010 at $210.5bn, up from $173.2bn in 2005. This gives some indication of the effect of the 2008 global financial crisis, though of course this is difficult to quantify and one can only imagine what the global pandemic has done for our collective mental health. With MDD estimated to affect over 300 million people worldwide, it might be considered a pandemic within a pandemic. A report on the findings of a randomised clinical trial by Davis, Barrett and May entitled Effects of Psilocybin-Assisted Therapy on Major Depressive Disorder states that: “current pharmacotherapies for depression have variable efficacy and unwanted adverse effects. Novel antidepressants with rapid and sustained effects on mood and cognition could represent a breakthrough in the treatment of depression.”

I’m tempted to conclude that maybe the ancient Mesopotamians were on to something, though perhaps it would be wise to exercise caution. After all, De Quincey suffered with addiction for the rest of his life and Odysseus’s scouts had to be dragged back to their boats. But my concerns are less about regulation or abuse, and more about the mechanisms by which our brain chemistry is altered. As Kaitin said: “the crux of all this is, we don’t have an understanding of the basic mechanism… of a lot of diseases…there are no good models.” This is why continued research and renewed interest and investment from Big Pharma is so important, but I’m quietly optimistic that these new therapeutic drugs could be the mega blockbuster that MDD sufferers are looking for.

Banorte: Banks must ignite a sustainable recovery for Mexico’s economy

Posted on by World Finance

As COVID-19 swept the globe, financial institutions with a digital-first strategy stepped to the fore. Marcos Ramírez and Carlos Hank-Gonzalez are respectively CEO and Chairman of Grupo Financiero Banorte; they discuss how Banorte’s customers responded to the lockdown-enforced switch to digital, the future for Banorte’s digitisation, and the bank’s mission: to renew Mexico’s economy with sustainability at its heart.

World Finance: Carlos, how have Banorte’s customers responded to switching to digital through the pandemic?

Carlos Hank-Gonzalez: Our customers are in the heart of everything we do. When social distancing made branch visits difficult, they switched to digital with remarkable ease. At Banorte we had been working on our digital transformation for many years before, so we were ready to serve them through whichever channel they preferred. Today, almost six million of our clients are digital, and only 3.1 percent of transactions take place in branches.

World Finance: Now Marcos, what’s next for Banorte’s digitalisation?

Marcos Ramírez: Thank you. We believe that hyper-personalisation is the key to the best banking experience. In 2021 we signed an alliance with Google Cloud to continue improving our platforms through cloud technology, artificial intelligence, and analytics. But we have all options available. Some still value traditional banking, so we’re combining branch services with our digital offer. In this regard, we are continuously enhancing processes across the organisation to improve efficiency. So our collaborators better input their time to provide value-added offerings to our customers.

World Finance: Carlos, is this transformation the bank’s top priority?

Carlos Hank-Gonzalez: Digital transformation is a part of our commitment to people. But it must come alongside a sustainable recovery of the economy that banks must ignite. So our mission is very clear. Mexico needs a bank that works as the engine to that recovery; and that bank is Banorte.

World Finance: And how are you making sustainability a part of that mission?

Marcos Ramírez: Sustainability is a key element of Banorte’s DNA – especially during the pandemic. We have kept our ESG strategy at the core of our operations. We just became a founding member of the United Nations Net Zero Banking Alliance, committing to decarbonise our operations and portfolios by 2050. And we have pioneered social and environmental risk management in credit portfolios for years. So we will continue to do so in the years to come.

The future role of AI in finance

Posted on by itsupport

The general consensus appears to be leaning towards the idea that artificial intelligence can replace the role of human financial advisors and therefore, those in the industry must adapt or risk getting left behind. But before jumping to that conclusion, it’s worth exploring some important questions: what’s next, what is needed and who needs it? And, perhaps crucially, whether AI will ever remove the need for human advisors in the financial industry.

AI transforming financial sector
Business leaders have revealed that the use of technology including AI plays a significant role in filling gaps within financial services offerings. Jim Pendergast, Senior Vice President and General Manager at AltLINE by The Southern Bank, has said that AI can improve the consistency of financial advice. “AI is inherently consistent, so it can provide a much narrower picture of what will work and what won’t based on previous information. When it comes to investing, having this level of consistent understanding of the market can help investors make the right choices.”

Cliff Auerswald, the President of All Reverse Mortgage, said in a recent interview that AI could solve questions about potential financial problems and solutions. “While human financial advisors do have some of the best options for financial solutions based on past experiences, AI can provide more research-based information on how people can succeed financially,” Auerswald said. It’s clear that with advancements in technology, even the financial sector has become less human dependent. Personal mobile applications powered by AI and machine learning algorithms have started flourishing in the market, providing additional value over traditional approaches.

AI use cases in finance
As highlighted by Pendergast and Auerswald, the rapid expansion of AI application areas is having a huge impact in the environment that firms are operating in, both externally and internally (see Fig 1). Externally, AI is making it possible to carry out tasks faster and at a lower cost. Internally, AI is shaping companies’ relationships with their customers, other firms and society at large. Pendergast said that some of their clients rely on AI to improve their finances. “We work with small and mid-sized businesses, so we often recommend software that will help them keep track of their finances successfully,” he elaborated.

Auerswald mentioned that his own company occasionally uses AI for their financial advisory. “We don’t know any major organisations that rely solely on AI. Other organisations should give it a shot since they can likely improve their metrics and customers’ experiences over time.” Of course, the pandemic has further accelerated digital transformation in the banking sector, with several financial firms racing to adopt cloud-based technology to deliver a much better service for their clients. An increasing number of financial companies use various different technologies to offer digital online services that have traditionally been provided by mainstays of the financial industry. According to Pendergast, many financial services firms are using AI to detect fraud, predict cash-flow events, create invoices, fine-tune credit scores, conduct cost and benefit analysis, as well as for account creation and goal setup. Other uses include recommendations for investing, rebalancing of portfolios and retirement planning, communication between users for mutual investments, and trading and investing in stocks, bonds and ETFs.

Robo-advisory helps to simplify customers’ user experience and make advisory services accessible to both wealthy customers and investors with lower investable amounts. Robo-advisors are increasing investment activity, especially with the low-budget investor, who generally doesn’t have access to investment advisors.

Continuous 24/7 accessibility, automated rebalancing, and monitoring differentiate robo-advisors from traditional investment advisory services. Customers can access their accounts via user-friendly websites or smartphone applications and make adjustments to their portfolios any time of the day and recalibrate their investments.

Robots can’t replace human interaction
There has been lots of hype about AI and its potential application in the investment advisory process, but implementing such a service model must be evaluated in strict terms that take ethical questions about transparency and responsibility into account. Both Pendergast and Auerswald admitted that the use of AI for personal finance and planning is gaining in popularity and is seen as more accurate as a forecasting tool. However, when it comes to things close to people, they disclosed that financial firms still prefer human financial advisors – this includes buying a house, buying a car and planning for retirement.

Pendergast asserted that AI will likely never truly replace financial advisors. He stated that financial advisors have tools to help increase finances and often explore routes that most people don’t consider, and AI often won’t have the ability to make those distinctions.

Auerswald appears to be in agreement on this point, explaining that human advisors are better able to adapt than AI, though machine learning is narrowing that gap. “Even with all the research that goes into AI, human intelligence can make decisions that are not based on previous activity in the market, making them invaluable,” he stated. In other words, the industry experts don’t believe that AI can replace the role of human financial advisors. They agree that human financial advisors continue to play an important role in counselling individuals about managing expenses in accordance with their income and ways to increase their savings for better investments.

For instance, Pendergast stated that technologies such as AI are better suited to handling day-to-day functions such as opening an account or executing trades than giving advice to clients. AI advisory systems are currently based on products that require little or no active portfolio management. An example of this is ETFs, which do not require active decision-making by portfolio managers, thus making their cost structure more manageable. Despite the cost savings that AI services provide to customers, such services seem to struggle with customer adoption.

Customers appear to prefer hybrid models where they can search for information and compare products online, but are still able to contact human advisors before completing the final investment. AI advisory services do have some value, and the proof of this is measured by those willing to test out a robo-advisory service when they discover that one exists. They just aren’t willing to use it to make actual investments via online platforms. Pendergast and Auerswald admit that this is an area in which more work is needed in order to design AI so that the end result is more accessible for customers.

AI can support human advisors’ success
For now though, the industry experts believe that human financial advisors will still be needed alongside AI, both now and in the future. Pendergast said that AI is vastly more efficient than most other techniques, and therefore it can help financial advisors save a lot of time. Auerswald agrees that time delays when it comes to market analysis can be solved with AI. “One of the problems with the traditional way of working is the time it takes to analyse information. AI can make information more reliable, but the resources will be easier to see overall,” he stated.

Typically, a financial advisory role is a pretty hectic job. Accounting for clients’ income, expenditure, loans, taxes, and investment is not a straightforward task for a financial advisor. The calculations, and therefore the results, can be imperfect at times. All the above shortcomings can be easily overcome by using a mobile application backed by AI. In other words, financial advisors should be supported by technology – AI could be used to make sense of the research and other data that advisors don’t have time for. The very best technology is that which acts as a natural complement to our lives. That is what AI can do, because breaking down a variety of product options is a mammoth task that we are not necessarily best equipped to carry out.

Auerswald signalled that AI is likely to take over many organisations, as many people may choose this option over a paid financial advisor, since it’s much easier. He did mention, however, that people who don’t know how to make the correct financial decisions are destined to fail, even if they do use AI metrics. “Remember that AI is not exact, so it’ll become more popular, but coupling it with human financial advisors will continue to be the future of artificial intelligence,” he stated.

Healing the economic scars of the pandemic

Posted on by itsupport

The global finance industry may have survived the pandemic more or less intact, but now it finds itself in the forefront of a long recovery as gaping economic scars heal. And the wounds are deepest in those regions that were struggling even before the pandemic for what the International Monetary Fund describes as “strong, sustainable, job-rich and inclusive growth.” By general consent, the hardest-hit were the Middle East, North Africa and central Asia, most of which are burdened by large, relatively inefficient state-owned enterprises (SOEs) that were idled throughout the pandemic, draining state coffers and raising compelling issues for governments. Some countries in these regions have hundreds of SOEs while at least one, Azerbaijan, with a population of 10.25 million, has several thousand.

As global output collapsed by roughly three times more than during the financial crisis of 2008 (as well as in a much shorter period), the banks also found themselves supporting millions of privately owned companies, notably those in smaller tourism-dependent economies. As these regions fight back from the economic ravages of the pandemic, the finance industry has a huge window of opportunity. These institutions will be expected to back sovereign loans as governments raise money to restore their nations to a more secure footing while also providing finance for privately owned firms that, it is hoped, will emerge from the wreckage to take over the SOEs’ role and do it better. As an IMF study released in September points out, the recovery provides a golden opportunity to reform SOE-dominated economies. “These organisations are used for a wide range of purposes, including supplying basic goods and services, advancing strategic interests, addressing market inefficiencies, and meeting social objectives,” the IMF explains. “They are also involved in a wide range of activities that are often carried out by private firms in other regions – and they often act as the employer of first and last resort.”

An absence of information
In short, many of these sprawling organisations suffer from bloated staff numbers, endemic inefficiencies, poor corporate governance and confused functions, causing considerable damage to public finances. Overall, argues the IMF, the absence of proper information about non-financial SOEs, which is most of these organisations, means it is difficult to know whether “they contribute to economic development or impose a drag on the economy.”

But reform can start now. Starting with a forensic examination by each country of the role, functioning and cost of its SOEs, a consensus of economic organisations such as the IMF, European Bank for Reconstruction and Development, World Bank and OECD recommend a wholesale spring clean of these unwieldy organisations. ‘Know what you own,’ is their collective advice.

As individual functions of SOEs are hopefully hived off to private enterprise, banks will be in a better position than government to provide start-up credit. And, given the vast sums of public money unconditionally sunk into support for SOEs, the banking industry will also be better placed to manage them out of debt.

Thus the industry faces nothing less than a societal mission in these regions. By rescuing SOEs and funding privately owned alternatives, the scars are forecast to heal more quickly. “Without resolute measures to address a growing divide between advanced and emerging economies, COVID-19 will continue to claim lives and destroy jobs, inflicting lasting damage to investment, productivity and growth in the most vulnerable countries,” fears IMF economic counsellor Gita Gopinath.

The most vulnerable countries are those with the least resilient economies. The numbers tell the story. The average fiscal deficit in the most advanced economies – generally, those that can tap cheap credit – rocketed to 9.9 percent, to 7.1 percent for emerging ones and to 5.2 percent for low-income nations. Yet, the most indebted countries will bounce back the soonest. Indeed they already are.

As a governor of the US Fed, Lael Brainard, rejoiced recently; “The economy is reopening, consumer spending is strong, and hundreds of thousands of workers are finding jobs in the hard-hit leisure and hospitality sector each month.” But the US can tap the cheapest credit and boasts the highly resilient, private sector-dominated economy that SOE-burdened countries lack. That’s why India, Malaysia, Taiwan and Thailand all announced an extra fiscal stimulus towards the end of 2021 that must be paid back eventually.

More vulnerable countries have been given lifelines. The IMF handed emergency funding of $117bn to 85 countries and another $50bn is speeding up lagging vaccination programmes, the essential first step to economic recovery. The Next Generation European Fund is boosting struggling EU member states with a further €750bn. And in August, $275bn out of the IMF’s general allocation of $650bn in Special Drawing Rights, the largest in history, was earmarked for emerging and developing countries. In the long run though, there is only so much that these lifelines can do without root-and-branch reform of many thousands of SOEs.