Tax technology specialists Vertex brought together tax professionals, solution experts, and its customers in Munich for its Vertex Exchange Europe event. World Finance interviewed half a dozen delegates for an update on Europe’s latest tax compliant challenges and technological advancements: you can watch them all in our Tax Automation with Vertex playlist on Youtube.
Andy Hallsworth: There are trends in procurement at the moment, and actually it’s about best-of-breed platform. I suppose traditionally procurement has always happened in ERP platforms – and not without difficulty for VAT, for sure. But now there are platforms such as SAP Ariba, such as Coupa, becoming very popular with procurement.
As VAT people, we’ve always had a much clearer handle on the AR side of our business – the sales that we make. We are in control of that.
By definition we are less in control of the AP side of our functions – we are at the mercy of the vendors, of the clerks managing the invoicing for those vendors.
AR clerks from our vendors are literally manually typing VAT amounts into a screen in front of them. What are they basing that VAT amount on? Well, your guess is as good as mine. But with manual input becomes risk of manual error.
This is where the use of a tax engine can apply rigour throughout the lifecycle of an AP process. The content, the power of automation and consistency that you get with a tax engine can ensure that companies aren’t accepting incorrect invoices – or, invoices with incorrect VAT on them – to ensure that they know the true cost of VAT to their business, to not be so much at the mercy of AR clerks.
One of the key business outcomes of applying this kind of rigour to AP is simply not accepting invoices on which the VAT is incorrect! As we know, if you as a business accept an invoice with incorrect VAT, and you recover that VAT, well there’s a chance that you’re going to end up being liable for that VAT.
We often find these errors years down the line, when the tax authorities come and ask the right questions. What we’re looking to do with tax engines is to apply that rigour up front, real time: to weed out those incorrect invoices at source, not accepting them by chance, and living to regret it sometime later.
So for example I know I’ve worked with some businesses that went through an exercise of applying rigour to their AP process. And at the start of that process they believed they were getting 65 percent of their AP invoices correctly coded. By applying rigour, working along with Vertex, they upped that to over 95 percent fairly rapidly.
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Tax technology specialists Vertex brought together tax professionals, solution experts, and its customers in Munich for its Vertex Exchange Europe event. World Finance interviewed half a dozen delegates for an update on Europe’s latest tax compliant challenges and technological advancements: you can watch them all in our Tax Automation with Vertex playlist on Youtube.
Ellen Van Daal: So, Wayfair is a decision by the US Supreme Court, overruling the latest regulations in terms of having Nexus, and taxing companies in the different states in the US.
Before the Wayfair decision, you needed to have a physical presence in each of the states to file your tax returns, and pay taxes. With the Wayfair decision it means doing business in the US, selling to the different states, already means you have Nexus – and thus pay taxes. So European businesses will have filing obligations in each of the states within the US.
The decision was last year, and now all the different states are implementing their own rules. So you have different thresholds in each of the states within the US to comply with tax registrations. So you need to monitor very closely every different state within the US, what are the thresholds, when are they applying it. So you need to monitor it very closely.
So Vertex has the content, so automating your tax processes with Vertex means Vertex will offer you the content. So if there’s a member state that is applying the different thresholds, or has set out their rules and regulations, Vertex will automatically update their content – so it means that you’re already up to date, there’s no need for you to do anything, other than the tax registration within the state.
Tax technology specialists Vertex brought together tax professionals, solution experts, and its customers in Munich for its Vertex Exchange Europe event. World Finance interviewed half a dozen delegates for an update on Europe’s latest tax compliant challenges and technological advancements: you can watch them all in our Tax Automation with Vertex playlist on Youtube.
Aleksandra Bal: In the area of VAT, the pace and diversity of change has always been very high. But having spent over 10 years in the industry, I have never witnessed a magnitude of change like this before.
Let’s take VAT compliance as an example. In the past, things were simple. You just filed a VAT return once per month, or once per quarter. Now, this is no longer sufficient. What is changing is the format, speed, and type of information delivered to the tax administration.
Some countries – for example, Poland and Portugal – have introduced an obligation to submit transaction data on a regular basis. Your invoice data: you have to provide them every month to the tax administration.
Other countries went even one step further, and started requiring real-time transmission of transaction data. Spain was the first country to introduce such an obligation, followed by Hungary.
Shortly afterwards, Italy implemented an invoice clearance model – and this means that you cannot issue valid invoices unless the tax administration has approved them. So you send your invoices to the tax administration, and the tax administration forwards them to the customer.
And we can also see a trend towards digital reporting. The UK is currently implementing its Making Tax Digital initiative. You have to keep your records digitally, you have to submit your returns using certified software, and you have to make sure that your tax information is digitally linked.
And all these new compliance obligations create enormous challenges for businesses. The main challenge is that it all happens at country level – and it’s not supported by EU-wide harmonisation measures.
So companies need to monitor local developments. And when new requirements are announced, there’s often very little time to adapt ERP systems and processes.
Another difficulty is that these requirements are published in local languages, making it difficult for globally operating companies to implement them. And if you don’t know what to do, there’s no one to ask – because even tax administrations are not familiar with the new rules, and cannot provide advice to tax payers.
Two main pieces of advice to businesses on how to handle those emerging compliance regimes. First one is: avoid the over-tooling trap. Over-tooling means that you have too many tools within one organisation. If you do not think well ahead about the new compliance obligations, do not think about all the options, you may end up having different tools that are not compatible with each other, or with other systems used within an organisation.
And having your tax system built from various local pieces is like driving a car that has been assembled with parts coming from different manufacturers. So if you want to change the tyre you go to Toyota, if you change the oil you go to BMW. And this is not very efficient.
Another piece of advice would be, be proactive. Tax departments quite often take a reactive stance – they do just enough to keep up. And this approach is very risky.
If you are not proactive, you may not consider all the options. If you do everything at the last moment, you may end up having solutions that are costly to maintain, and not user friendly.
So be proactive, take this new compliance requirement as an opportunity to take a critical look at your processes, to improve it and generate better business value.
John B Echauz is President and CEO of Standard Insurance – one of the largest non-life insurance providers in the catastrophic event -plagued Philippines – and as such, is always deploying innovative new technologies to reduce the company’s costs and mitigate its risk. He discusses how Standard Insurance is using artificial intelligence and data science to improve its services, and why he wants to create a network for all of the company’s customers.
World Finance: John, I understand your latest advance is using artificial intelligence in claims processing?
John B Echauz: Yes – it is nascent, but it is something that we must do. All global insurance companies of all sizes – whether they’re in developed countries or emerging markets – are all starting to adapt tools like AI, robotic process automation, machine learning. All of these things we try to integrate into our companies’ operations.
These are all becoming more and more available to companies of all sizes thanks to the cloud. What’s important is, we must have a clear idea of what we want to happen, and a good tech team that can integrate the offerings of suppliers in what we need. So we’re very fortunate to have both, I think.
World Finance: Now in your industry, there’s always a certain amount of customer churn, but I understand you’re using data science to help reduce that?
John B Echauz: Yes: we’re very fortunate that we have a very good chief data scientist back home. He began as a CTO of a subsidiary, and he stepped up to take care of our data needs.
What we found was that we used to look in terms of two dimensions – Excel, X/Y axes – and it’s really not possible to make better decisions these days with just two variables. You need seven, eight, nine… 12! How does a human being think in terms of 12 dimensions? That’s where AI and machine learning come in.
So we’re able to more or less predict our expected losses or reserving for insurance. As well as which customers will leave us and which customers will stay.
Once we know who they are, once we know who you are: ‘Oh, you’re about to churn?’ We can give you a call, have a nice conversation, give a better deal if wanted. That’s been working out so far.
World Finance: And you’ve also learned a lesson from Amazon?
John B Echauz: Yes – not so much in terms of tech, because we’re very strong in tech. But in terms of what they do for society. They were able to transform themselves into a company that enables entire industries. Alibaba did the same thing.
What we find at Standard is that we have so many customers – corporates and individuals – from all industries in the Philippines. What if we were able to help our customers plug into this entire network? So, our friends become your friends. That might be of some value to customers – not just purely from an insurance perspective, but as a business development and growth perspective.
World Finance: We’ve talked before about the urgent need in the Philippines to address the climate crisis; what work is Standard Insurance doing around this?
John B Echauz: A couple of things. I read in a UK publication that if we plant one trillion trees, we absorb all the CO2 in our atmosphere that’s excess. And that’s a large number, but not infinite.
At Standard we are looking to reforest about 100,000 denuded mountains, with only endemic and indigenous tree species back home. What are the benefits? Number one, reduced flooding in the lowlands. Number two, water comes for agriculture in the lowlands as well – that’s really good. Number three, our tribal partners are the ones who will be reforesting and protecting the forest. And number four, it’s a great way for us to partner with developed countries. There are companies – energy companies, fleets – that emit a lot of CO2. It’s a way for them to partner with us, and to help them meet their sustainable goals. We think it’s a win-win-win-win-win for so many parts of society.
We’ve been working on this for two years; it took a while to set up the nursery, to set up the land. But we’re ready to plant again, and we’re looking forward to finding more partners in the UK who would be willing to help us in this endeavour.
World Finance: You’re looking for other business partners overseas; what does the future hold for Standard Insurance?
John B Echauz: Well, we love our global partners. We love working with them, we learn so much from them. And I like to think that it’s a mutual appreciation of what each party brings to the table. And we want to look for more partners.
We always try to map out what do the world’s very good insurance companies look like? What do they do? And we benchmark what are we missing. Every day we try to think, what are the things that we can do better? Not just in our risk management, processes; not just in claims, or sales. But even tiny things – what does our office look like, how do people speak, how do the facilities look to customers? Little things like that; it all adds up.
It’s an interesting job, being an insurance company head. We have to watch about a hundred different things, making sure they all work together.
The foreign exchange market moves faster than any other financial market in the world – so how do brokerage firms make sure they’re offering their clients and partners the best solutions? Mario Singh, founder and CEO of Fullerton Markets, explains his approach.
World Finance: Mario, what innovative programmes and solutions are you bringing to your partners?
Mario Singh: Thanks so much for asking that question Paul – here’s the key thing I find, you know, for us to really advance all over Asia. We really have got to take care of our partners. So I’ll split partners in about three different categories.
Category one is what I would term as the traders and the investors. They are at the forefront of what we do.
What do these clients really want? Every single day we are asking ourselves, how could we better our product offerings for all our clients? Well, traders essentially want a couple of things. They want fast news at their fingertips. They want to be able to access webinars, videos, training programmes. So we have that for traders.
Now, what about investors? Investors don’t really want to spend the time to go and learn how to read charts, how to put the indicators on the platform. So they are fairly hands-free. Now, for the investors, Paul, we’ve got an innovative product, which we term as CopyPip. Basically a system where we rank different top expert traders within Fullerton Markets, and the investors can then pick and choose all these expert traders that are able to manage the money for them.
Now the second category would be the IEBs – essentially the introducing brokers or agents who bring clients to us.
How do we help our IEBs to advance and increase their reach throughout the entire ecosystem? We’ve got a programme – we term it as PipBox. So PipBox is basically an affiliate tool, Paul: they’re able to automatically send out content tools from Monday, Tuesday, Wednesday, Thursday, Friday and the weekend. We will be the ones giving them this content, Paul: and all they’ve got to do is to syndicate the content worldwide, and anybody who opens an account then will be tagged automatically to our IEBs.
And the third group are what I would term as the white labels – partners that would want to launch their own branding, and we power the white labels from behind.
For our white labels, because they run their own brokerage platforms, management of data and analytics is so important. So we’ve got something called the Fullerton Suite that is able to help customise the different analytics for our white labels.
World Finance: But as you’ve said before, the FX market moves more rapidly than any other in the world – how are you making sure you’re hearing what your customers and your partners are asking for, and continuing to adapt and evolve what you’re offering into the future?
Mario Singh: You know, we have four core values in the company: passion, excellence, commitment and sustainability. And within those four core values, Paul, we really want to hear from the ground as much as possible.
And this can come in a variety of ways, you know. Number one, they’re able to live chat through the entire company to find out and give us that feedback. We’ve got so many staff all over the ground in 10 countries worldwide that are able to meet them and have that personal connection. In fact even for myself, Paul: I go down to the ground as well. I started as a trader. I love this game. I understand it totally, I understand there are wins, there are challenges. And I think this is something our clients and partners can really identify with.
So we really want to be there with them. We truly believe, and we expound on that, in terms of how to provide personalised service to all our partners worldwide.
In September 2018, New Zealand’s Fullerton Markets announced its move to St Vincent and the Grenadines. Mario Singh, Fullerton’s founder and CEO, explains why.
World Finance: Mario, why the move?
Mario Singh: Well Paul it’s a great question – I get that question a lot. Many people will be saying: Mario, you’re one of the forefront in leading the entire brokerage industry. Why would you move from a regulated environment to a less regulated environment? Which is essentially what St Vincent and the Grenadines is.
And here’s the real answer, Paul. The key thing is that the entire financial world is moving in lightning seconds every single day. To some extent I do find that regulation – while it has its place – has become what I would term as fairly restrictive and fairly reactive. So I wanted to take a proactive stance in how we would engage the markets.
So by moving to a little bit more relaxed jurisdiction, it allowed the business to keep our competitive edge, for us to be fairly nimble in how we move, and provide more innovative solutions for all our clients worldwide. But at the same time Paul, with our Fullerton Shield, we’re able to raise the standards of fund safety.
World Finance: I understand it also gives you a good platform to do more work in Asia – where World Finance has recognised you as Best FX Broker, 2019. Tell me about the potential in that market.
Mario Singh: Paul, absolutely immense. Asia today commands about 4.5bn in terms of population. Now that is easily 60-70 percent of the entire world population.
And Asia is slightly different in the sense that in all the countries within Asia, different people speak different languages. So I think getting the local culture right is absolutely of paramount importance. So a lot of things that we do, Paul – we tend to localise them. That’s including hiring local trainers, it includes translating all our materials. It includes even our support team that are able to type in the local language.
This is where it gets a little bit complicated, but anyone who is able to pay the price in terms of engaging local knowledge and local culture will win the game. And we are absolutely at the forefront of doing that in Asia.
World Finance: So how are you going to be approaching that challenge – what does the next five years look like in terms of your footprint in Asia?
Mario Singh: So, one of the key things I think, is really to identify in terms of how the area itself is currently growing.
People in Asia, they’re very driven. They’re very hard working, they’re very ambitious. They definitely want to get to the next level. So, trying to design innovative products that’s going to allow our clients to basically increase their financial knowledge is of paramount importance – number one.
Number two, I feel that many of them in Asia today are having high disposable income. So at the same time Paul, having personalised service in ensuring that we can cater to give them certain solutions of how they are able to park their disposable income. This two-pronged approach I think is absolutely necessary for us to win the game over the next five years.
World Finance: We’ll catch up in five years – Mario, thank you very much.
Foreign exchange may be the world’s largest and most liquid market, but it also seems to be the one most plagued by corporate scandal and criminal prosecution. Mario Singh, founder and CEO of Fullerton Markets, explains why he thinks this is the case, and the lengths Fullerton has gone to in order to protect its own clients’ funds.
World Finance: Mario, why is the forex industry so susceptible to scandal?
Mario Singh: Well Paul, you hit the nail right on the head; I mean precisely the reason is essentially because of its size.
The forex market today trades essentially over $5trn in one day. And because it is the world’s largest money market, that’s part of the reason why there are so many scams that come into the financial sector.
That sounds I know a little bit negative, Paul, but – one of the key things that I find has been very good industry-wide has been something called the FX Working Group. Which is essentially a committee that is born out of the BIS – the Bank of International Settlements. And they have a code of conduct that basically says, these are some of the industry’s best practices.
So with that, I do hope as an industry practitioner as well, that we will be seeing lesser and lesser of such forex scandals and scams throughout the world.
World Finance: Fullerton Markets has really committed to fund safety and transparency; tell me about your Fullerton Shield.
Mario Singh: So the Fullerton Shield is basically our triple-level fund safety programme.
Level one is that we have a segregation of bank accounts between the corporate fund and the client fund. So that there’s a clear segregation, that means the directors of the company will not be able to put their hands into the coffers, and to start pilfering off client funds.
Level two Paul is what I term as a third party fund administrator. Once we segregate the funds out, we then appoint a third party custodian that actually helps in the administration of withdrawals and deposits of the client funds.
And if that is still not enough Paul, we have the third level – now this is unparalleled fund safety. So the third level, we actually have an insurance policy that is taken on the custodian, in two areas. Number one, what we term as professional indemnity – in the event that some of the employees or directors of the custodian were to encourage in wrongful or criminal acts – and number two, we took the policy on cyber-crime.
World Finance: How does this commitment set you apart in what is really a ruthlessly competitive market?
Mario Singh: I would zero that in on basically one word. It’s what I would term as a proactive stance. Now this is what I mean – and don’t get me wrong, I feel regulation is a good thing. But having said that, I do find that regulation can be a little bit reactive – reactive meaning to say, it’s only when problems happen that the regulators step in. And by and large, at that moment, the client funds have already disappeared.
So by taking a proactive stance in ensuring that on day one, the client funds are not even sitting in the brokerage firm, we have raised that benchmark.
World Finance: What do you see as the future for this conversation in the industry? Do you see your competitors, or even the regulators, adopting a more proactive stance?
Mario Singh: Well I would love to see that, quite honestly. I think at this moment there needs to be a balance from the regulatory perspective, on how they would massage that one-two step between a reactive stance and a proactive stance.
So I would dare say that we are one of those that’s actually leading the industry, by taking such a bold, proactive stance, in ensuring that client funds are segregated on day one itself.
Carlos Oliveira is the Executive Customer Lab Director at EVO Banco – one of the key challenger banks disrupting Spain’s banking industry. In May 2018, EVO Banco made headlines by launching the first Spanish language banking voice assistant; one year into the project, Carlos tells World Finance how the EVO Assistant was received, what the bank has learned about its customers and their priorities, and EVO Banco’s position as a disruptive force among Spain’s large legacy banks.
World Finance: So first Carlos – one year into the project, how has the EVO Assistant been received, and what have you learned?
Carlos Oliveira: Well, we received it with very great engagement by customers, because at the end if you analyse, almost in one month 10 percent of the customers are using it – and also they spend around two minutes using it. So for us it’s a very surprising number, because, you know to spend two minutes talking to a machine, it’s not so easy.
It’s around 70 percent of the customers are using it now, and they do basic things like transfers of money, or review the amount of money that they have in their accounts; to more sophisticated things. Also they ask the assistant, ‘Tell me, what is the right thing to do to invest my money?’ and these kinds of things.
What we learn is that the people love it. Because at the end, it’s natural language: it’s what normal people do, it’s talking. So if finally you find someone or something that is understanding you and answering your questions, you are taken in the right key.
World Finance: How far has the rest of the Spanish banking industry come in the digitisation journey that we’re seeing all over?
Carlos Oliveira: Well I think that we have to divide in two big groups. One of those are the legacy banks, you know, the traditional banks. To be honest they are doing great effort to change their reality. But also there’s a lot of legacy to change, no? So at the end they are really really investing harder, but I think they are not so agile, in terms of changing the arena.
So, I think that we are in a pretty advantageous position, these banks like EVO. Because innovation, it’s more a question of attitude. Of how you’re going to put the customer in the centre of everything that you do as a bank. And I think in EVO, we really have a vision of being useful for the customers. For us it’s an obsession. We don’t do innovative things just to be fancy, okay? We need to do things that make sense for the customers, and that are making their life easier. Okay? Our obsession is to be easy for them, and to create something that makes sense.
World Finance: So, how are you making sure that the innovations you’re creating are useful to your customers?
Carlos Oliveira: Well first of all, the ideas and also the priorities are not defined by me – they’re defined by customers.
So we have a lot of data, you know? At the bank we have a lot of information of the customer, we have all the transactions of the customers. So we try to analyse with the big data department, what are the real insights, what are the real trends that we have with our customers? Then we develop some products, we test them with our beta testers: a thousand customers are using our products one month in advance. So, they are analysing how it’s working, how it’s not working; and see if it’s performing or not.
I’ve always said that we are not a bank: we’ve said that we are a BankTech. A bank traditionally, they have… they know how to manage a P&L, they know how to manage customers. But they’re not really good on user experience and these kinds of technologies – these kinds of things.
On the other hand you have the fintechs. They’re really good in some aspects of user experience, but on the other hand they don’t know how to manage P&Ls. We’re in between. We’re like a start-up bank that combines the two things. And I think that this is the secret of our success.
World Finance: Finally, what is next for EVO Banco? What are the opportunities you see in your future?
Carlos Oliveira: Well there is a lot of opportunities. The secret is to choose the right ones. It’s not so easy; with the big data and the insight… to choose the right insight is the critical thing.
We are stimulating our brains with ideas from other industries. I mean, we want to be useful for you. We want to go beyond the traditional banking system, and the traditional banking products. To touch with you in your life on a very day-to-day basis. So we really want to be on the first screen of your phone. We don’t want to be a normal bank. We don’t want to do the typical things that the banks do. We want to be someone who understands you, someone who really adds value to you, on a real basis. This is exactly what we really want to do.
The Turks and Caicos Islands has committed to revitalising its financial services sector. It’s been one year since the islands’ updated National Investment Policy was approved, outlining key development priorities to maintain a dynamic, growing economy. James Bursey, CEO of Invest Turks & Caicos, and David Stewart, President of the islands’ Finance Industry Association, discuss the opportunities for investment on the islands, what makes Turks and Caicos an attractive jurisdiction for establishing a business, and their ambitions for financial services.
World Finance: The Turks and Caicos Islands has committed to revitalising its financial services sector. It’s been one year since the islands’ updated National Investment Policy was approved, outlining key development priorities to maintain a dynamic, growing economy. James Bursey is CEO of Invest Turks & Caicos, and David Stewart is the President of the Finance Industry Association.
David – what opportunities are there for financial services investors on the islands?
David Stewart: Turks and Caicos is a five-star jurisdiction and resort. We have a substantial population of ultra-high-net-worth visitors and residents; so there is a lot of opportunity in relation to trust, fiduciary, asset management, international wealth management and financial services for individuals.
We also have a strong reputation for our mid-market captive insurance industry, which mostly faces the US market. And I would say we’ve got an experienced regulatory environment – accounting, banking environment – that’s used to working with captive insurers. So that is another major opportunity.
But more broadly, we’re a wonderful place to live and work. And we want to attract a broad church of financial services businesses to consider the Turks and Caicos as the place to locate for their next opening.
James Bursey: The third pillar of the financial service industry of course is – banking. We have three Canadian banks already there. And we’re discussing with European, US and Asian banks. And I hope by the end of the next 12 months we’re going to have three more resident on the islands. So it’s a great place from which to locate a bank.
World Finance: What are the benefits of establishing a business on the Turks and Caicos?
James Bursey: First and foremost it’s a beautiful place to be. I get up with the sun, I can go for a walk on the beach – try doing that in London or New York.
So if that’s the kind of lifestyle you want, that’s a start.
Second thing is of course, we’re very closely located, and very easily accessible, to the whole of North America. But most importantly it is a great place to work. We have an environment where people know each other; but we also have a lot of people who pass through on vacation, or to monitor their investments – which is an opportunity to meet people that you often in larger financial centres don’t get.
David Stewart: And I think it’s a wonderful place to live if you’re internationally mobile, which lots of families are. You can be in New York in two hours and 50 minutes daily, and Florida eight times a day. Quality of life is very good – schools, shops, restaurants, the beaches – commuting time never more than 20 minutes, no matter where you are; and there’s no traffic jams. All of these things are tremendously attractive if, like me, you’ve lived and worked in big cities for most of your career.
World Finance: Sounds idyllic; what’s the path to incorporation for businesses?
James Bursey: It’s actually very simple. Primarily you could do it yourself, but I would frankly recommend: get a local lawyer whom you like, and let them do the paperwork. It’s about $2,000-2,500 depending on who you work with. Incorporation’s straightforward and simple. And you get your paperwork in less than two weeks. Not quite as fast as you are online, but: sit back and enjoy the beach, or just start building your next business.
David Stewart: But we are in the midst of digitising our company registry. So within a year we will have online incorporation, online certificates of incumbency and all of the other corporate paperwork. And I think that the other opportunity – particularly in preferred sectors like financial services – is that there are concessions and development incentives which are available on a case-by-case basis, which offer significant value to investors, in terms of a guaranteed immigration, guaranteed concessions on expenditure, and other concessions which people would find valuable.
World Finance: How else does Invest Turks and Caicos work with investors to match them up with opportunities on the islands?
James Bursey: Well for instance, I’ll be very specific on a case we have right now. We had a developer who came in, wanted to get into the islands – hadn’t been there before. And had a project that we liked a lot, and they were short of total capital.
So our organisation, we went with them off-island, to primarily North America. We arranged for the subsequent capitalisation that they required. And now they are able to proceed – we’re now at the point where we will be writing that development agreement – and they will be able to proceed fully funded. So that’s the kind of help that our organisation gives.
Conversely, we do a match-making service where we keep a list of organisations or individuals who want to invest in projects, but don’t have the time to go and suss them out themselves. So we do that match-making service.
So again: financial assistance, match-making, working through government regulation. That’s what we do.
World Finance: Finally David – you seem to have incredible ambitions for financial services on the islands – where do you want to see the industry in the next five to 10 years?
David Stewart: So right now the Turks and Caicos is a minnow – it’s a tiny, tiny market.
I would like to see the Turks and Caicos grow in a sensible, proportionate way. Focusing on its key, distinguishing factors which are: ultra-high-net-worth families, multi-family offices, trustees and fiduciaries on the one hand; and captive insurance on the other.
It doesn’t mean I’m not going to be hugely encouraging of fund management or any other clean, compliant, transparent, international financial services business.
The international financial services environment at the moment is a very challenged, very interesting one. But I believe that tax neutral jurisdictions – the aggregation of capital for international investment – is something that in a proper, compliant, and transparent way – properly regulated – is going to go from strength to strength. And I believe that the Turks and Caicos has a real role to play in that industry. And I look forward to seeing it grow.
World Finance: We’ll look forward to that as well. James, David: thank you very much.
James Bursey, David Stewart: Thank you.
Thanks for watching. Learn more at investturksandcaicos.tc, and please subscribe for the latest international business insights from worldfinance.com
FBN Holdings is one of the foremost pan-African financial institutions in sub-Saharan Africa. UK Eke, its Group Managing Director, joins me now. UK, you assumed office in January 2016; explains why the group was created, its commitments to drive efficiencies, extract synergies, and grow the group’s non-commercial bank businesses. He also explains the importance of strong corporate governance to the group’s financial performance. In the other half of this interview UK discusses the group’s flagship brand, Firstbank, which is celebrating 125 years of operation.
World Finance: UK, you assumed office in January 2016; tell me about the company’s journey up to then.
UK Eke: Let’s step back and look at 2012. We took a decision to ring-fence the commercial bank, and hive out all the non-commercial bank activities into a holding company. And the holding company is now the listed entity.
From 2012 to 2015, the focus was really around laying the building blocks; creating the policies and then the framework. So when we took over in 2016, it was around building the super-structure on that solid foundation that had already been laid. And we made three commitments.
One was to drive efficiencies. And we just recently got approval from the central bank to implement our group shared services. Now the commercial bank, First Bank of Nigeria, will be the centre of excellence, and render services to the other operating entities – at a fee, of course. And so through that, we expect to drive down costs. We’ve already seen it trending down, and in absolute terms we’re seeing costs dropping below the inflation rate. And in some cases, even well below what it was for prior periods. So we are optimistic that the cost-to-income ratio will continue to trend downwards.
The second was to extract synergies. I have to confirm that we have seen year-on-year growth in the synergy numbers. As a matter of fact, we’ve achieved over 100 percent growth in the synergy revenue numbers year on year.
And the third was to increase the contribution of the non-commercial bank businesses to group revenue, and of course profits. And I think over the last three years we’ve done a great job delivering that commitment. I have to say that the insurance company, just to give you a sense, grew over 50 percent just in one year. And we’re seeing return on equity north of 40 percent year on year.
So these are excellent results we’ve achieved over the last three years, and I think the shareholders should be proud of the decision that was taken to restructure through a holding company.
World Finance: World Finance has awarded FBN Holdings Best Corporate Governance in Nigeria for 2019 – how important is world-leading corporate governance to the group?
UK Eke: Well, at FBN Holdings, we hold the view that there is a direct positive correlation between corporate governance and financial performance of institutions. And so that is why over the last 100+ years we have entrenched corporate governance in operations across the operating entities.
Now, if you check the local bourse, which is the Nigerian Stock Exchange, we are one of the four listed entities on the elite board. And what that tells you is that, unless you adopt and subscribe to the best code of corporate governance, you will not get onto the premium board. We’re one of the four.
Now, receiving this award from World Finance basically tells us two things. One: it’s an affirmation of what we are doing in corporate governance, beyond the giant strides we’re making in financial performance. So we see this as an endorsement of the brand, and it’s a bragging right for us. Because again, there are very few institutions in Nigeria that have benefited from this award. We are truly proud to receive this award.
World Finance: And what does the future hold for FBN Holdings?
UK Eke: The future is bright. We think that the successes we’ve recorded, which we’re celebrating this year, will be surpassed. That in the years to come, as we hand over to the next generation of managers, they will be inheriting a very strong institution, a solid institution, and therefore the accolades will get even louder than what we are hearing today.
We are proud of our accomplishments, and so the future definitely is bright for this great institution.
Firstbank, the largest bank in Nigeria, is celebrating 125 years of operation. UK Eke is Group Managing Director of FBN Holdings, the bank’s holding company. He discusses the bank’s origins as the British Bank of West Africa, the transformations that Firstbank has undergone through the years, and its vision for the future of banking. In the other half of this interview UK discusses the corporate restructuring that created FBN Holdings.
World Finance: UK, 125 years is a magnificent achievement; how does it feel?
UK Eke: Thank you very much Paul; for us, it’s been humbling.
In 125 years we’ve transformed. We started off as the British Bank for West Africa. But within a few years we became the monetary policy authority for not just Nigeria, but also the British West Africa. Becoming the foremost financial services institution in Nigeria, with strong presence in Africa, and also presence in Asia and Europe.
And so for us it’s been an amazing story. And we do feel proud of what we’ve achieved. This is a landmark celebration; it’s a heritage, it’s an iconic brand that everybody in Nigeria is proud to be associated with. So there’s a feeling of pride and accomplishment; and I daresay the future is even brighter than the past.
World Finance: Tell me more about the transformations that the bank has gone through; how has it changed, and what lessons are you taking forward to the future?
UK Eke: If you check what has happened in the last 125 years, we’ve gone through economic and market cycles. You can talk about the First World War, the Second World War, the Great Depression, even the Nigerian Civil War. And so we have gone through transformation over the period. But one thing that has endured is our full commitment to the nation. Supporting businesses, supporting societies. Not just in Nigeria, but also across West Africa and beyond.
What we have also done has been to deliberately make investments into our future. And that means technology has been at the forefront of delivering service.
Secondly, investment in people. Because the people make the difference. And we do believe that this is what has given us the edge. And so we do feel proud of what we have achieved.
From oil and gas to manufacturing; the retail sector to the government: we’ve supported business. So we are woven into the fabric of society. And that is why we believe that the future again, I repeat, is very bright for us.
World Finance: Tell me more about the investments you’re making in Firstbank’s future; what do you hope to achieve over the next 125 years?
UK Eke: Banking will continue to be relevant. What will change is the way banking services or products are delivered to the consuming public. So we are right now in the digital age, and we are prepared to ride that digital wave. We are building permanent system infrastructure. We are supporting financial inclusion. And we’re just redefining how banking is done.
So for us in Nigeria, and for us in Firstbank particularly, we see an opportunity to drive innovation. We are partnering with fintechs to create products for the future. And we believe that the investments we have made in the present will serve us into the future.
Just to give you a sense of how strong that investment is, today in Nigeria we are the only bank that has issued over 10 million cards. Today in Nigeria we have well over 15,000 agents that are helping us drive towards financial inclusion. And so today we are seeing a whole array of products internally, and then being deployed into the market. And acceptability has been very, very strong.
So our dominance will continue to be entrenched. We believe our relevance and our resilience will continue to endure, even into the future.
As of March 6th 2019 it’s been 18 months since Hurricane Irma wreaked havoc on the British Virgin Islands. Simon Gray, Head of Business Development and Marketing at BVI Finance, discusses how the islands bounced back and is now incorporating more companies than ever, as well as the increasing importance of fintech on the BVI. In the other half of this interview Simon talks about the role the BVI plays in international trade and investment.
World Finance: Simon, how is life and business on the islands today?
Simon Gray: It’s thriving, and it was an interesting time 18 months ago. But I think the word resilience springs to mind; stability, robustness and capacity to adapt.
I think the best example I can give is perhaps the actual register of companies, which continued registering companies two days after Hurricane Irma.
We’re also encouraged that in the Vistra 2020 report for 2018, for the eighth consecutive year we were voted the world’s top offshore centre.
In addition, the Bank of Asia became a new licensed entity, and that is one of the world’s most prominent digital banks, it’s a global bank. We found that fact very encouraging. We’ve had new legislation – the limited partnership act introduced two months after the hurricane in December 2017. That’s led to a significant uplift in the registration of partnerships.
We also responded very quickly to a new European Union requirement for economic substance, and as a consequence we’re not on the non-cooperative list. And finally we led a very successful trade mission to Asia, focusing on China, last year. And that’s proving to bring in very good dividends. And we think there will be more of those to follow.
World Finance: Now, incorporations of BVI business companies have been higher than ever in recent quarters; what’s been driving this growth?
Simon Gray: Well I think actually, having come out of the hurricane, stability, resilience were factors. But in terms of stats, it’s quite impressive. If you take the Q3 statistics, our most recent ones for 2018, they are showing a five percent increase quarter on quarter. And actually if you compare that completely with the previous year, it shows a 25 percent increase, which is pretty good.
Another great development: we introduced the limited partnership act in December of 2017. That was just two months after these hurricanes. And if you take the Q2 and Q3 stats for 2018, they are showing a 200 percent markup in terms of limited partnership registrations – largely driven by an enormous, insatiable appetite for funds.
So we’re very encouraged by these statistics.
World Finance: What other changes have the last 18 months brought? I understand that fintech is increasingly important.
Simon Gray: Well absolutely – we see that as a key priority, going forward. We’ve certainly had masses of interest. And it is a core focus for us.
For example, last year we ran two very successful international shows. One in Singapore, one in Tortola. And the theme was The Great Digital Disruption. And the feedback we got was extremely positive. So we see that as a core value added in the past 18 months, and we think that will grow going forward.
Another area – I mentioned the limited partnership act, that was obviously a very inspired decision to make – but we also have a micro business act, and I think that will show potential definitely going forward.
World Finance: And what about for the next 18 months? What can we expect from the British Virgin Islands – and BVI Finance?
Simon Gray: Well, there’s no room for complacency. And we’ll do our best to continue to punch above our weight. I think there will be great innovation; an awareness, a cognisance of ever-evolving international standards. We do our best to keep track of changes being made in all of the IMF standards – be it IOSCO, Basel for the banks, IAAS for insurance, and of course FATF in terms of anti-money laundering. And OECD corporate governance. All of those are absolutely imperatives. But I think fintech will grow exponentially. I think there will be probably a great economic boom as a consequence of the new substance legislation. So I think actually it will be not only a compliant benefit, but an overall net economic benefit to the territory.
World Finance: We’ll look forward to that! Simon, thank you very much.
International finance centres galvanised $1.6trn in additional finance to developing countries between 2007 and 2014. According to a January 2019 report by the Overseas Development Institute, IFCs also helped boost developing economies’ tax revenues by $100bn. Simon Gray from BVI Finance discusses the role that the British Virgin Islands plays in supporting developing economies and facilitating international trade and investment. In the other half of this interview Simon talks about how life and business on the BVI has bounced back since Hurricane Irma struck 18 months ago.
World Finance: Simon, tell me about the role that the BVI plays in supporting developing economies.
Simon Gray: International financial centres play an absolutely integral role in helping support developing countries with developmental finance.
Perhaps the most significant way in which they do that is by producing a facility to allow international investors – be they private or institutional – to pool resources. So you can amalgamate those resources in pool vehicles. They do so also to mitigate risk, by providing a safe rule of law, common law. And also a system of tax neutrality, which is particularly beneficial: rather than trying to trigger all sorts of additional tax liabilities by investing in so many different countries.
World Finance: Now, beyond developing economies, what are the BVI’s strengths today in facilitating international trade and investment?
Simon Gray: Well, they’re myriad. But for example, the ability to generate companies in a very speedy and cost-effective fashion. I think the reason for that is stability, it’s familiarity. And I think in spite of recent events with the hurricane, we didn’t really skip a beat.
We’re very proud of the fact that Capital Economics produced a report entitled Creating Value: What the BVI contributes to the global economy. And that produced some very interesting statistics. For example, overall a figure of $1.5trn is the impact that BVI mediated finance makes to the global economy. Employment-wise it’s estimated that two million jobs are created globally or are linked to BVI mediated finance. So, sometimes we may be small, but we do punch quite big.
World Finance: Now it’s been over a year since full implementation of your BOSS system, that’s your ultimate beneficial ownership secure search system; how’s that going?
Simon Gray: We’re very proud of that system. If you can imagine a very large hotel, there is a common entry point of the lobby, but of course there will be hundreds – and in our case many thousands – of separate rooms. Which are distinct, separate, and secure. And you will have complete privacy within those rooms.
But if there is a valid case from a law enforcement body – for example, within the United Kingdom, the National Crime Agency. If they have an issue – be it a suspected money launderer, or perhaps an evader of tax – they simply have to make a request, and the information will be provided. Often within 24 hours, it can be faster if circumstances demand it.
It’s fully compliant with FATF, it continues to evolve. For example, under the new economic substance requirements we’re making some tweaks. But we’re very proud of it, and I think it could become a model for many other jurisdictions.
World Finance: How else is BVI Finance helping in the international fight against financial crime?
Simon Gray: Well in a number of ways; it’s very important when you’re operating an international financial centre, you have credibility. And that means not only a robust rule of law, but also robust compliance with agreed global, international standards. And back in 2002, we signed up through the OECD to the common reporting standards, which allows the exchange of tax information between jurisdictions. And we are still very active in complying with that.
Separately and a little more recently, we signed up to the OECD’s BEPS initiative. And perhaps the most recent example is late December of last year, where in response to some new requirements from the European Union, we produced the economic substance companies and partnerships act, which we’re pleased to say two weeks ago we were advised we would not be on the list of non-cooperating jurisdictions, sometimes known as the blacklist. And we were pleased with that result.
World Finance: Fantastic; Simon, thank you very much.
The last few years has seen tremendous improvement in Jordan’s financial inclusion rate. In 2014, barely a quarter of adults held a bank account. Numbers from 2017 show that’s jumped to 42 percent. But there’s still huge potential for banking growth. His excellency Mr Musa Shihadeh is CEO of Jordan Islamic Bank, for which improving financial inclusion is a key goal. He discusses how the bank is working with women to improve their banking rate, and ensuring the bank has an accessible network in more rural areas.
World Finance: The last few years has seen tremendous improvement in Jordan’s financial inclusion rate. In 2014, barely a quarter of adults held a bank account. Numbers from 2017 show that’s jumped to 42 percent. But there’s still huge potential for banking growth. His excellency Mr Musa Shihadeh is CEO of Jordan Islamic Bank, for which improving financial inclusion is a key goal.
Tell me about the work Jordan Islamic Bank is doing to help improve financial inclusion.
HE Mr Musa Shihadeh: We concentrate on retail banking; and we have almost 177,000 customers dealing with us – and 90 percent of those customers hold less than JOD 100,000.
We concentrate on quality of services, and we try to make awareness of our services by holding seminars and workshops for those people who are expected to deal with our bank, as well as those who are dealing without having our best services.
By these services, and facilitating these services, we help to pass our services to the community and to those people.
World Finance: Expanding your branch and ATM network is also key to this?
HE Mr Musa Shihadeh: We try to have our ATMs and branches as well in different areas, in rural areas, in towns; in order to give services to those people who are away from our main branches and main services. And this enhanced the business, and let them have their services without any cost to come to the branches and do their business.
World Finance: Environmental sustainability is another important facet of your mission; how are those projects going?
HE Mr Musa Shihadeh: Jordan is a sunny country; we have 300 days in the year with sun. So we started having plants to get renewable energy from the sun. Now we have an integrated station that covers one third of our bank’s energy. And as well we started helping people have their electricity through the sun – it is a low cost financing, and that helps a lot for our people and population.
In addition to that, we try always to finance hybrid cars and electric companies, in order to save energy for the country.
World Finance: And finally, what are your ambitions for 2019 and the years to come?
HE MR Musa Shihadeh: We plan to have our share in the banking sector in the country. So we try to give our faster services, with the highest technology. We always develop the needs for our customers and services in order to keep our bank ahead in the banking sector in the country.
World Finance: Musa Shihadeh, thank you very much.
HE Mr Musa Shihadeh: Thank you.
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In September 2018, Banco Popular Dominicano launched the Banco Popular Digital Centre – the first digital branch in the Dominican Republic. Arturo Grullón Finet, Executive Vice President of Personal Businesses and Branches, explains how the centre is helping customers interact with the bank faster and more efficiently, as well as enabling collaboration between its SME and young entrepreneur customers.
Arturo Grullón Finet: I think innovation… it’s not only one of our core values. I think it’s what changes the game in life, and in business.
This is why in September 2018 we launched the first digital centre in Banco Popular, which is the first digital branch of the country.
This centre is part of our service network, and it is designed to change the customer journey towards self-service, towards digital services, and we have learned a lot from it.
For instance, at the digital centre we have installed the latest generation of smart ATMs. So in addition to making withdrawals and deposits, customers can pay their loans and their credit cards with cash or funding from their accounts. This is highly convenient, and it’s a time saver for our customers.
Additionally, our digital centre reserves space for customer educational talks on innovation, digital culture, personal finance, and new business trends. And we have a co-working area, designed to facilitate work meetings between SMEs, young entrepreneurs, and any customers that need it.
Banco Popular gives priority to customer satisfaction. In fact, it is one of our main values. And we work daily to preserve and deserve their preferences.
Right now, more than 91 percent express their satisfaction, and more than 81 percent indicated that Banco Popular is the institution that provides the best service in the banking sector. They find it to be the most reliable bank, and most importantly, it is their main bank.
Digital transformation is the name of the game. And we will talk about digital transformation, we talk about technology, but we especially talk about processes and people. These are the three factors that can guarantee high quality standards that will gain the trust of our customers.
Every day we are revising and improving the delivery mechanisms of our products and services, with the goal of providing an efficient and paperless service to our customers.
We believe digital will bring you closer. We believe digital will put the bank in the palm of your hand, in your house. And this place we’ve built with a lot of work, and a lot of love, and a lot of people involved, is going to change the game for the future of the bank.
