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His background consists of extensive work in both restructure/corporate renewal as well as capital markets transactional advisory. In the restructure realm, Joseph specialises in liquidity management, crisis management, balance sheet restructure, and organisational change. In this capacity, Joseph has served as both an interim and fractional CFO and COO. Through Kreshmore Group, he has served in these roles for private equity sponsored companies and other privately held middle-market companies. Over the course of his career, Joseph has closed a multitude of transactions in virtually every industry with a special emphasis on transportation, multi-unit retail chains, clinical medicine, and distribution/wholesale. Joseph has been successful in pushing the fold of capital stack creativity by leveraging equity, complex subordinated structures, traditional financial offerings, and federal, state, and local government incentives.

Kreshmore Group serves privately held middle-market companies. It works on behalf of both management teams and creditors to resolve clients’ core problems. Kreshmore’s senior advisory staff is comprised of industry-leading strategists with strong finance and accounting backgrounds and a history of owning and managing their own companies which gives them a distinct advantage over traditional consulting firms.

The COVID-19 economy continues to challenge many businesses across the globe. What has that meant for restructurings and turnarounds in the US?

The predominant buzzword thrown around the business community in 2020 used to describe the fallout from the COVID-19 pandemic was “unprecedented”. Despite how overused the term is 18 months later, it still remains a rather accurate description of the challenges companies faced throughout the pandemic and continue to face as the pandemic looms. To that end, COVID-19 has forced business leaders, their management teams, and their financial advisers to make extremely challenging decisions and to push the bounds of innovation. A key fact pattern in restructures consists of the following: assess the current situation and determine knowns from unknowns, gather data and determine quality of said data, craft plans and strategies to enact key initiatives, make assumptions and forecast the various scenarios that could arise as a result of the decisions made. The COVID pandemic has not fundamentally changed that process. What it did change, perhaps, is the extent to which the “equation” is filled with unknowns. In the heat of the pandemic, it took sound judgment and deep experience to swiftly close offices, shutter stores, lay off certain personnel, etc. Today, with the immediate emergency at bay, there is a return to a systematically slower approach that affects change and revives enterprises.

Today, with the immediate emergency at bay, there is a return to a systematically slower approach that affects change and revives enterprises.

How has the pandemic affected Kreshmore Group’s restructuring and turnaround department and how have you navigated this?

When it became evident that the attempted containment of the COVID-19 pandemic would grind the world economy to a halt, our team was highly focused on existing restructure clients. We were headlong in numerous files that were inching towards resolution when COVID stopped everything in its tracks. It in many ways it felt like COVID would be the straw that broke the camel’s back. Our approach was to reallocate resources internally from M&A activities to Restructure initiatives, understanding that M&A transactions were going to cease or slow down until the pandemic restrictions eased. This enabled the Kreshmore team to enact the key initiatives we had outlined across a wide base of clients (both ongoing restructures and pre-emptive restructure planning). This further allowed us to dedicate analyst resources towards reading the dense local and federal aid legislation in order to be at the forefront of economic aid programs. We prioritised our focus on debtor and creditor relationships as we had to build trust with the creditors and garner their buy-in to our process and ultimate plan to survive the pandemic. We additionally focused on forging relationships with the SBA and related parties to better understand the various grant and relief programs. These programs would ultimately serve as a crutch for our entire client base who would go on to qualify to varying degrees.

The 2020 pandemic has been a roller coaster for our company and our clients both professionally and personally. There were many 14-hour days in early March 2020 when clients were reeling and there was little help in sight with regard to government intervention. Overall, Kreshmore’s restructure business became very busy in the early innings of the pandemic and continued to stay busy throughout the pandemic.

Our goal at the outset of the pandemic was to rapidly institute cash preservation plans and to proactively open discussions with our clients’ various stakeholders. This entailed significant planning and execution of loan and lease deferrals, landlord deferrals and abatement, furloughs and staffing restructures. The COVID crisis was a predicament of catastrophic consequence and we knew that in order for our clients to have a fighting chance we needed to be realistic with the help we would require from our creditors. We also had to base our requests on actual facts supported by meaningful analysis. This analysis would prove to be some of the most challenging work we have undergone in that it was nearly impossible (and in some ways still is) to see what the world would look like in 4 weeks, 8 weeks, 12 weeks, etc.

Today we see many companies who have had their balance sheets shored up with government aid. The clients who were able to negotiate with key stakeholders have further strengthened cash reserves. We are seeing a much more sober management approach than perhaps 24 months ago, with many companies still waiting for a clearer line of sight on the mid-to-long term impacts of the economic recession brought on by the COVID-19 pandemic.

What are the main lessons the pandemic has taught you?

In many ways, the same tools, strategies, and best practices deployed pre-pandemic are just as important in the environment we’ve found ourselves in today. One particularly interesting insight the pandemic has offered is the fragility of the supply chain and the benefit of US-based manufacturing (for US-based companies). Most companies, especially in (or above) the middle market, have experienced supply and vendor related issues; be it through natural disasters, rising prices, or any number of other complications that may happen in the ordinary course of business. Typically, management can inexpensively manoeuvre and replace the key vendor/supplier so as not to severely impact operations. The supply chain disruption we have experienced as a result of the pandemic has been economy-wide and has opened eyes as to the importance of manufacturing “close to home”. It has also become very evident that in addition to simply keeping a wide base of potential suppliers it is critical to have strong lines of communication open at all times with suppliers to help forecast potential disruptions and course correct at an earlier juncture.

Another very practical reminder from the COVID pandemic is the human consequences that happen as a result of management initiatives. Oftentimes management teams are so focused on revenue targets, growth, profitability metrics, etc. that they forget about their impact (as an organisation) on their employees’ and customers’ lives. The sweeping changes that were enacted by companies across the United States were bold, costly, and commendable. These changes were done with no known government aid and no idea of when restrictions would ease. The restrictions were put in place for the common human goal of ending the pandemic. This human reminder was a rare time that borrowers, creditors, competitors, employees, employers, etc. put everything aside and were completely aligned on a non-financial goal.

Can you tell us a little bit about the way the pandemic affected you and your businesses? 

I think the pandemic was an intense obstacle for most businesses and business owners. For my companies, I quickly changed my mindset from being shocked and grappling with this whole new world to thinking about how I could adjust to better serve my clients, employees, and community.

The pandemic created unprecedented needs for our clients and with all the restrictions and safety concerns, we had to be very agile in creating client-focused solutions. All told, I think Postema Insurance & Investments grew well above 50% in 2020.

What were the main challenges you were faced with and how did you manage to overcome them? 

The first challenge was in rethinking how I could keep my employees and clients safe. The safety of those around me has always been important, but there was a new threat to consider with the pandemic.

With that handled, I had to decide how to keep my business operating smoothly so I could meet customer needs despite potential employee absences. We had to stay extremely organised and do a lot of cross-training while maintaining company ethics and service standards as our clients’ need for sound financial advice continued to grow.

What are some of the key lessons the past year and a half have taught you? 

It’s made me think a lot differently about my weaknesses. I realised how important it is to hire people who can do what I can’t, rather than just trying to do it all myself.

I’ve also learned how important it is to work on total and complete life management, not just time management. I’ve found that if I continue to follow a path of self-improvement, my entire team and all of my organisations will improve as well. If we want to change the world and make it a better place, we must first make ourselves better.

lending, pandemic, financial services

Tell us about your new company, Postema Capital Lending.

Ultimately, I have always wanted to add a lending component to my financial services organisation. The pandemic not only gave me the time to implement Postema Capital Lending but also pointed out just how necessary this service was. I strongly believe that financial planning isn’t just about accumulating wealth. It’s also about preserving your wealth and property with insurance, rigorous tax planning and strategic borrowing that’s easy to access from lenders all over the country. With the capital lending component, my company comes full circle. Our clients enjoy a full financial planning team meeting all of their financial needs, and it’s all in one place, making it easier for clients to manage.

What are your goals for the future of Postema Capital Lending? 

We are experiencing rapid but controlled expansion, so we’re focusing on opening satellite offices for captive sales associates and others. The Postema Capital Lending team is amazing. With Julie, Jodey, Kevin, Dustin and Abby running our home team in tandem with our accounting company, we’re seeing exponential growth in our list of lenders. We’ll soon have over 900 lenders available to help borrowers all over America get the right lending option. Ideally, we’d like to become the first place both borrowers and Loan Originators turn to.

Considering how much you’ve got on your plate, what are the strategies you implement to find time for everything?  

It really starts with the team that’s supporting me. We have to work together with a shared vision, ethics and goals. Once that’s taken care of, the rest is just a psychological battle. I’ve mentioned this in other interviews, but being a driven, hard worker can be both a blessing and a curse. But once you realise that your potential is limitless, it stops being a question of how you will manage everything; you just know that you will.

What does a typical day look like for you? 

I’m typically up and working out by 5 am. I get to work by 7 am so I can get ahead of everyone else. Keeping each company structured and running requires a full day of appointments, meetings, podcast recording and television interviews.

Ideally, I’m home by six and enjoying dinner and family time. From 8:30 pm to 11:00 pm I enjoy what I call my Prime Time. This is when I’m usually journaling in my victory journal and gratitude journal and working on book, program or website content. Before bed, I review my goals and plan my day so my subconscious mind can sort everything out and organise it by morning.

What are your top tips on motivation, productivity and successfully juggling a lot of things at once? 

I make sure that throughout the day, I’m constantly “filling my cup.” In other words, I’m getting spiritually, emotionally, and psychologically renewed all day by making sure I’m always immersed in some form of self-improvement. I never want to be the same person tomorrow that I was today. I want to constantly grow and evolve so I can better my life and the lives of those around me.

Chris, I believe that you and Josie have just been involved in a project on this topic in collaboration with London Business School. How did that come about?

Chris: Josie and I both run independent executive coaching practices and have worked very well together on coaching briefs like this in the past. I was invited as an alumnus of LBS and now I’m part of their Alumni Career Coaching team to co-create a pilot leadership webinar aimed at senior executive alumni. It felt natural to bring Josie into the mix on this topic because she is a great communication coach and complements my background in finance.

So, what did you learn from this exercise?

Josie: So many golden nuggets came out of it! I don’t think that any business would have signed up to mass hybrid working as an experiment unilaterally, however, we were all thrust into the pandemic regardless. Collaborating with other leaders in this webinar produced some great insights into the challenges of adapting business models to suit current circumstances. With so many factors and permutations to consider, it provided the leadership cohort that participated a real opportunity to a) air & debate the challenges and b) share best practices in finding possible solutions from their collective experiences.

Chris: It was indeed a fascinating session. Hybrid working is not exactly a new concept for leaders to handle, but since the pandemic employees have experienced, en masse, the flexibility that hybrid working offers and quite reasonably want it to continue in some form. Subsequently, how can leaders - globally - maintain business effectiveness and cohesion while at the same time allowing employees greater flexibility in how they work? It’s a huge question. Hybrid working isn’t going away, so the difference between winning and losing in this new world order will be measured by the speed at which leaders are able to adapt their business models effectively. The upside of course is that, for agile leaders who can embrace this coming of (the digital) age, there’s a huge opportunity to listen, learn, adapt, and grow in spite of the pandemic.

In this new hybrid culture of work, if you had to put the main challenges companies are facing into distinct categories, what would those be?

Josie: Chris and I spent a long time researching and soliciting feedback on this question in preparation for the webinar. Thankfully, as you might imagine, there is also some great empirical research that has been done on the pandemic’s impact as it unfolds. From our perspective in the context of team leadership, the primary challenges boil down to three Cs: Culture, Communication & Connection.

Chris: Yes, absolutely. It’s the combination of firm Culture also cast as vision & purpose; Connection, specifically in terms of active engagement; and effective Communication across the whole organisation from the top down which actively embraces the best of what technology can offer. The obvious challenge for leaders in a hybrid context is that the binds that tie individuals to the organisation are by definition loosened in a hybrid working world. So forward-thinking leaders are figuring out how best to better utilise digital tools to foster innovation & collaboration whilst retaining an acceptable degree of oversight over productivity & accountability.

Josie: And not just controlling productivity but increasing it by continuing to develop & upskill teams through formal and informal Learning & Development (L & D) activities. How can you best train your people when you’re not in the same room as them? What is truly going to work?

Chris: Exactly! One big conundrum across all professional services is how do we train our young talent in a hybrid context.

Really interesting. What are the implications of these findings for leaders going forward?

Josie: Great question, leaders are beginning to understand that, in moving forward, “one size fits none” and old styles of leadership are unlikely to fit the bill. Hopefully, they will adapt their style of leadership before they are forced to by the workforce voting with their feet. Currently, in investment banking (based on reports in the mainstream media), we’re seeing two types of leadership being played out in real-time. Some banking leaders believe it’s still optimal to “return” to a pre-pandemic business model. They’ve been upfront about requiring teams back in the office after Labor Day unless they are an active health risk. On the other hand, some other firms, notably in Europe, appear to be taking a more flexible & pragmatic approach about who might need to return to the office full-time or part-time and when. Which type of leadership will attract and retain the best talent? Only time will tell.

Chris: From our research, developments in the legal profession seem to be playing out differently from banking probably in part because the nature of legal work lends itself more easily to remote working than banking. From what we are seeing, the law firms are currently taking a more pragmatic view as long as productivity remains high and client needs are being met.

What have the leaders you have spoken to shared about this?

Josie: Well, that’s the beauty of hosting these webinars with senior leaders from a variety of locations and sectors; it invites a myriad of different perspectives and context is key. We are talking predominantly about knowledge workers who account for 1 in 5 workers globally but, for example, make up 60% of the workforce in the US. So, it’s a far bigger consideration today for corporate leaders in the world’s advanced economies than it is elsewhere.

Chris: In addition, the trends set by today’s Fortune 500 companies will be studied and in part incorporated into the global way of doing business in the coming years. This undoubtedly has wider ramifications for the planet and how we live and work. It’s a huge obligation and a massive opportunity at the same time for today’s leaders to embrace constructive change.

So, it seems like an almost insurmountable challenge to solve with so many considerations?

Josie: I think you’re right in so far that this challenge won’t get solved overnight - but let’s be optimistic! Good leaders stay curious, embrace calculated risk and set & articulate clear ‘SMART’ goals. They solicit advice & ideas. From these, they come up with creative solutions that fit their organisational purpose and then start implementing them. Of course, this may require some trial & error and you will need to embrace this risk positively from the outset.

Chris: A key factor going back to the three Cs is that the direction of travel within the organisation is clearly communicated, understood, and has collective broad-based buy-in from employees.

Josie: Absolutely. It’s not just what you say but how you say it, to whom and how often.

Chris: Yes. Communicating vision effectively is fundamental to a sense of shared purpose and leads to significantly higher engagement, whether office-based or hybrid. Picking up on Josie’s earlier point, knowledge workers are being paid to think for a living, so why not take into consideration more of their ideas. Since when did all good ideas emanate from the C-Suite?

You mentioned earlier that organisational context is important. Could you elaborate on this?

Josie: Sure, for example, we could contextualise knowledge work-tasks into predominant typologies; Information work, Evaluation work and Creative work as described by the team at Steelcase, a US real estate consultant. Informative & Evaluative work can be done far more easily remotely than Creative work which requires a higher degree of in-the-moment collaboration and collective energy which cannot be easily recreated in a digital (or asynchronous) setting. The benefit of bouncing ideas in a room together is, therefore, more likely to bring Creatives back to the office than Informative or Evaluative workers.

Chris: Equally you can divide the workforce demographically. Data from a 2020 Gensler study suggests that Millennials & Gen Z workers actually want to come back to the office (okay, maybe not 6 days a week!) because their remote working-set up may be less ideal. You could also contextualise the workforce by Learners, Provers and Leaders. Learners may want to be in the office more to gain experience from senior colleagues and actively seek advice and mentoring in order to develop their careers.

Josie: I would also argue that leaders need to increase their visibility and presence to engage with the wider workforce to model open communication and ease of access to their knowledge.

According to a study by Microsoft, a staggering 40% of knowledge workers are considering switching to a new employer in the next 12 months as a result of their pandemic experience and re-evaluating their goals & objectives in terms of work-life balance. Listen up, leaders!

How can leaders score some quick wins in the process?

Josie: Being seen to engage with employees and be open to new ideas and dialogue between the levels. UBS for example seems to have modelled this well. They recently carried out an internal study of their 72,000 employees soliciting feedback on a range of topics. It concluded that two-thirds of its workforce were in positions that would allow for hybrid working. Merely by demonstrating a willingness to listen and adapt, I would be very surprised if that communique had not significantly increased employee engagement at a time when the battle for talent is white-hot. According to a study by Microsoft, a staggering 40% of knowledge workers are considering switching to a new employer in the next 12 months as a result of their pandemic experience and re-evaluating their goals & objectives in terms of work-life balance. Listen up, leaders!

Chris: I would also add that leaders and people managers at all levels of the organisation should assess their own relational skills and take some constructive feedback on development areas. This is a huge opportunity for L&D. It has been well-documented that Millennials and Gen-Z workers, in general, seek more feedback, guidance and encouragement from their leaders. Possibly more than current Gen-X leaders may have received as they were building their own careers.

Even in a hybrid world, there are some easy fixes for this. Praise direct reports in public & critique them more in private. Pick up the mobile phone more often to express gratitude for a job well done or for going the extra mile for a colleague and make a habit of doing so to build social capital with your employees. That personal touch can have a huge impact even though it may take a few minutes.

New methodologies for working are being created, tried and developed as we speak.

This all sounds great but what is the impact of getting it wrong?

Josie: You’re likely to lose your best people! The market for talent became global overnight with remote working. Now, if an employee is dissatisfied with the status quo or pace of change they will start to look elsewhere. Finding a better fit for their talent is now a more global opportunity, especially in hot growth areas like technology and healthcare.

How can leaders identify when things are going off-plan and what can they do?

Chris: By really listening to those reporting into them. For many leaders it will require a more open & responsive communication style and a willingness to engage rather than dictate, embracing the diversity of thinking and developing the necessary EQ skills to get the best from the team. Leaders at the top of their game have a multi-tier strategy in mind to set and communicate clear goals. They then ‘lead side-by-side’, trusting in and empowering teams & individuals to innovate and when they fail, to encourage them to try again without resorting to a blame game.

In your opinion, how is this all going to play out over the coming years?

Josie: I think fortune will favour the brave. New methodologies for working are being created, tried and developed as we speak. It won’t be a question of “Must we keep up with the changes happening all around us?” so much as “What will happen if we don’t?”  The wizened, old-world behemoths may seem tough now, but what happens when the disruptive newbies of the tech world forge new paths without fear because they’re willing to fail and try again until they find a better path that works?

Chris: I would also say that there is plenty of scope for further disruption within established sectors such as banking, the law and consulting. We are seeing this already in FinTech where digital business platforms have been built from scratch in the 21st century by leaders who started them in their 20s. In my opinion, it is these kinds of sustainable, nimble, high-growth companies that will attract some of the best talent coming into the workforce over the coming years, especially if they can clearly demonstrate their raison d’être and offer the most attractive & flexible working environment for their employees.

What do you think we’ll be saying in ten years?

Josie: “Blimey, who knew where we were going to end up - AND aren’t we glad we took those risks?”

Chris: My hope is that the good guys win. Ultimately for the remainder of the century, leadership should be about responsibility rather than entitlement. It’s about sustainable profitability set within the parameters of environmental, social and governance excellence. Hybrid working is after all only one chapter in the unfolding story of doing business in a complex & challenging world.

Fascinating topic. Final question - how can leaders take this conversation further?

Josie: Firstly, I would say engage an outside expert to come in and listen, understand what you are trying to do and enable you to refine and effectively communicate your vision, goals and expectations to key stakeholders both inside and outside the business.

Chris: It’s the beauty of having someone unrelated to the business who can: 1. Keep you accountable to your ‘why' in a season of huge systemic change; 2. Challenge some assumptions and 3. Facilitate recovery and course correction as needed. This is what Josie and I love to do.

Chris has worked in financial & professional services for over 30 years and can be contacted at Chris@BramleyAdvisors.com   

Josie trained and has worked as an actor & master communicator in the UK & US for many years and can be reached at Contact@JosieGammell.com

 

Factset estimates that around 70% of global investment companies are still exploring how to best deploy and understand the growing opportunity presented by ESG alt-data. A Vanson Bourne survey also revealed organisations that incorporate ESG alt-data into their business strategies found that an average of 76% (USA) and 67% (UK) of their investment decisions are now informed by ESG factors.

This type of research highlights the importance of ESG considerations in investing and demonstrates the importance that organisations place on environmental and social impact when doing business. It’s no wonder that most professional investors out there, having seen the value that this data can deliver to their clients, are now exploring more avenues for collecting ESG alt-data. Ultimately, this information is mission critical for savvy investors.

But before you decide to make use of ESG alt-data, you need to first understand clearly what it is, what its benefits and limitations are, and how you can most effectively deploy it to help your business's decision-making be more impactful and successful. Omri Orgad, Regional Managing Director at Bright Data, tells us all about it.  

What is ESG alt-data?

Alternative (alt) or external data is a subset of data, driven by the growing demand for real-time, on-the-spot insights. While all industries can benefit from analysing alt data, its key uses lie within the financial sector, where startups, VCs, and all manner of organisations have a really heightened need for it. This is because their decisions and future innovations involve product development and predicting future market trends. But to really bring something unique and disruptive to saturated markets, investment heads must perform comprehensive market research and dig deep into data lakes such as ESG. However, doing so is not always the easiest of tasks!

The phrase “ESG alt-data” covers all information related to the impact an organisation has on its surroundings. This includes metrics such as air quality, board independence, water use, discrimination lawsuits, executive pay, etc. Given the diverse nature of the potential data points, this data varies in type and size, making it complex and daunting to collect and understand. The financial services sector can now measure sustainability at a far deeper level than ever before, thanks to the increased availability of non-traditional ESG data sets. It is now possible to create a comprehensive framework that identifies the organisations that are best positioned for long-term profitability using ESG alt-data.

While all industries can benefit from analysing alt data, its key uses lie within the financial sector, where startups, VCs, and all manner of organisations have a really heightened need for it.

Where does web-based ESG alt-data shine?

ESG alt-data can help examine Unique Selling Propositions (USPs) by aggregating similar solutions in the industry that are currently being invested in by venture capitalists (VCs). Finding the same type of companies trying to solve similar pain points can form a better view of who the future competitors might be. Alt-data can also aid in making the right kind of investment-focused decisions. During the past year, more and more hedge funds have increased their use of online data to analyse present market shifts and anticipate future ones as well as tune their investment strategies accordingly.

ESG alt-data helps to accurately inform you of the short- and long-term risks and returns of an investment venture, too. For example, it would be wise to consider climate change data and information about historical natural disasters before investing in construction in a particular region. Much of this public data exists across the largest database in the world – the World Wide Web. This is where public online data collection comes in – providing new and innovative ways to look at ESG data that go far beyond the traditional ways we have all become accustomed to.

When it comes to ESG alt-data, bigger isn't always better

According to AIMA and other sources, by 2024, there will be over 5,000 separate alt-data sets available. Even though the amount of ESG data available continues to grow, not all of it is of high quality, and some will be irrelevant to your specific use case. As a result, merely gathering any raw ESG alt-data you may find will not provide you with the information you require. Also, make sure you verify the source of the information you’re collecting or having collected for you and first ask yourself “why is this data valuable to me?”

It’s also important to allocate sufficient time to test and analyse the data you collect. Every hour spent on this task will be well worth it, enabling you to more accurately determine how a company or sector is performing from an ESG perspective. It’s important not to cut corners at this stage, however tempting it may be. There are also faster-automated tools that can take care of the “heavy lifting” for you and swiftly deliver top-quality data.

Web-based data collection for ESG alt-data

Speaking of faster-automated tools, the bigger question now is, how? How do I collect these large amounts of public data from the web? How do I make sense of and analyse it?

Well, automated data collection tools can help tap into those publicly available data pools. Such tools help to gather information and relate it back to those groups that need it to guide their predictive insights. Collecting publicly available images, statistics, social media posts, news articles, etc. enables investors to gain a much more holistic view of an organisation’s ESG picture. Investors can also simply get consumable information by accumulating their own ESG alt-data, which is useful for reporting progress to stakeholders who lack in-depth financial services knowledge. For, example, it’s preferable to say, “the organisations we’ve invested in have 20% more female employees than the sector average” than quoting an opaque figure, by saying, for example, “the organisations we’ve invested in have an average ESG score of 89.3”.

Given that 97% of information specialists in the UK and US financial services sectors report that ESG data is used in some or all strategy decisions, there’s no doubt that the importance of ESG alt-data in financial decision-making will continue to grow for many years to come. To get the best possible results, investors should take advantage of the new data-gathering opportunities on offer – including online data collection tools. With such platforms, calculating investment returns, future growth opportunities, and possible profits has become much easier and significantly faster.

Arguably, the move is a very good one for PayPal. PayPal’s crypto play seems to have brought more users and higher transaction volumes to its platform. More users than ever before are moving to crypto, particularly younger people and millennials internationally. It has served PayPal well to get in there early.

This move was also great for Bitcoin. It certainly brought them media attention. It also helps the world see how Bitcoin – and crypto – can be made user-friendly and safe in a multitude of uses. It makes a statement to the world that Bitcoin is good, works and has use cases. PayPal’s acceptance of Bitcoin and crypto spells out in big letters to any critic claiming crypto is just for scams or crime that Bitcoin is ok.

Yet, in many ways, this move benefits PayPal more than it does Bitcoin. Bitcoin already has its users, anyone who really wanted to buy Bitcoin by now already will have done so. PayPal however has been rather static. Crypto is a new offering for its users and a new way to attract both more users and more transactions. There isn’t really a reason to check Paypal’s app on a daily or frequent basis, unless users are making a transaction. Accepting crypto means that the amount of times its users check the app – and its transaction volume – has gone up!

PayPal has around 350 million users and 26 million merchants. At the time PayPal started to accept Bitcoin transactions, in October last year, the market cap of PayPal – approximately $250 billion – was roughly the same as that of Bitcoin – approximately $240 billion. Now, PayPal’s has gone up to around $280 billion. Bitcoin, however, is currently hovering around $750 billion and has gone far past that previously. PayPal is, in many ways, replaceable. Sure, PayPal has many users and has first user advantage for the service it offers (and strong backers) but, in theory, PayPal could be replaced by another similar app with a better user experience, cooler marketing and a better brand to appeal to a bigger and younger audience. On the other hand, it’s hard to imagine that Bitcoin could ever be fully replaced. For sure, there are thousands of other cryptocurrencies, but they are simply not the same, for many reasons. Bitcoin has first mover advantage, is trust, safe, secure, has a great ecosystem of loyal (and highly skilled) supporters and developers, a big user base and is developing rapidly as well as other differentiating factors.

PayPal’s acceptance of Bitcoin and crypto spells out in big letters to any critic claiming crypto is just for scams or crime that Bitcoin is ok.

It’s not yet known how much Bitcoin and crypto holders will use PayPal to pay with Bitcoin. Generally, most Bitcoin holders want to hold on to the digital currency for the long term, in the belief that it will go up in value. Bitcoin tends to be seen as a nest egg rather than a spending pot.

PayPal’s public endorsement of Bitcoin is great. But it doesn’t change as much as one would think, either for Bitcoin, or PayPal, or traditional banking. Any merchant or user accepting Bitcoin via the app won’t actually receive Bitcoin. The digital currency will be converted in same time to their choice of fiat currency, meaning that as far as they’re concerned, they receive fiat. Had PayPal enabled its merchants to accept and hold money in Bitcoin, and to make other payments in Bitcoin, that might be a slightly different story.

PayPal has indicated they are keen to work closely with regulators and governments to ensure legal compliance in their crypto offering. This will also be true of the many other payment firms looking to accept crypto or already that have a crypto offering. This will potentially help regulators come up with ways to make it easier for other crypto related offerings to get regulated and thus be accepted and used in traditional finance. Other payments firms may also follow Paypal’s lead, making crypto the norm rather than the exception in the roster of offerings expected of traditional finance.

So is PayPal’s acceptance of Bitcoin likely to drastically change anything for traditional banking? No, probably not. The move helps win over some new users for PayPal, ups its transaction volume and increases visits to its app. This in turn could help PayPal come up with new ways to monetise its platform. It’s helped prove the legitimacy of Bitcoin, and more broadly crypto, and is another message to traditional finance that accepting crypto will become far more mainstream soon. Even if traditional banks start allowing their users to accept crypto transactions, most likely they will be cashed out into fiat in live time, just as is happening now with PayPal. Will this move be the one that makes traditional banks open up Bitcoin custody offerings to all their clients? No. Not yet, at least.

Crypto Wars: Faked Deaths, Missing Billions and Industry Disruption by Erica Stanford is published by Kogan Page, priced £14.99, available online and from all good bookshops.

With the pandemic’s influence on the transformation of the traditional ‘office’ for the post-COVID world, tell us a little bit about your offering and how this trend has affected WorkSuites?

People want to be back in the office and are tired of competing with their dogs, partners, and children for time to get stuff done. However, they are also used to the ease of working from home even though they are less productive. Companies are now allowing their employees to work a “hybrid work week” from a remote office location instead of asking them to go to the corporate office every day. Organisations that traditionally have a huge headquarters are now downsizing to smaller offices and incorporating flexible office space and remote working options instead. Flexible office space, or coworking, allows workers to have an office close to home for a few days a week and then work from home the rest of the time. This model is very attractive to workers needing a place that will boost their productivity and doesn’t require a long commute twice a day.

Workers are also concerned with social distancing and returning to the workplace safely. And while coworking is known for its large, open, communal workspaces, the pandemic has made this type of working less desirable. During the pandemic, we had to get creative, which meant coming up with new hybrid coworking memberships. They come with private office use as well as more spacious daily desk rooms and other amenities. Our new hybrid coworking allows workers to go to a physical office and benefit from human interaction, while also having privacy at the same time.

What are your predictions for the future of workspaces post-COVID?

In a survey completed by Gensler, known as the US Workplace Survey 2020, the architectural firm discovered that post-pandemic, 52% of the surveyed employees desired a hybrid-work model with some on-site office work and significant time spent at home or working remotely. We do not think this is going to change anytime soon. The way people can work has evolved and the hybrid work model accommodates every kind of worker, while helping large companies attract and keep great employees. For over 20 years WorkSuites has specialised in private offices for small companies and entrepreneurs in DFW and Houston. We believe that executive suites and coworking will always be our clients’ best and most affordable option and will also continue to be our bread and butter. The flexibility and value of our industry now checks all the boxes for both small and large businesses.

office, office space, coworking, post-COVID-19

WorkSuites has made it through two recessions and a pandemic because we can easily accommodate companies that need to suddenly downsize or the newly laid-off worker that decides it’s a good time to finally become an entrepreneur, as well as companies that are thriving and growing. Our model is easily scalable. We provide all the amenities and services needed to start or run your business so you can focus on growing. 

From a financial point of view, what are the advantages of your offering?

Running a business can be expensive but WorkSuites makes running your office affordable and easy. Our clients pay one monthly fee that includes everything you can think of. You get your own professional receptionist, mail and package handling, telephone service and answering, high-speed internet, a fully furnished office, printers and copiers, unlimited coffee, a full-service kitchen and a break room, a variety of coworking spaces, meeting rooms, podcast rooms and so much more. If you decide you want to start a business or enter a new market tomorrow, in most cases, we can have you up and running the next day.

CBZ Holdings is a financial services conglomerate that is listed on the Zimbabwe Stock Exchange. It owns subsidiaries whose activities are banking, short- and long-term insurance, risk advisory, asset management, agro-yield, property investments and mortgage finance.

It’s been an extraordinarily difficult year for many. How have you navigated the COVID-19 pandemic and the challenges it’s presented CBZ with?

The COVID-19 pandemic has compelled CBZ Holding to renegotiate its business view and its way of doing business. In this regard, the Group is working towards becoming “an Intelligent Enterprise” as it shifts from top-down decision-making by:

Bank Operations

Staff Welfare

Stake Holders Engagement

Has the pandemic sped up digitalisation in the banking sector in Zimbabwe?

The banking sector in Zimbabwe had already embraced digitalisation. The challenge faced was mainly on the part of customers that were not keen to adapt to digital banking as they preferred visiting the bank for their transactions. The pandemic sped up customers’ adaptation whilst the banks took advantage to improve processes and systems for complete digitalisation. Some of the innovations that we introduced were:

Digitalisation is expected to result in bank closure branches in Zimbabwe in 2021. How is CBZ dealing with this?

With the uptake of digitalisation and most staff working from home, it made business sense for CBZ to close a number of its branches. We converted 2 branches to Money Transfer Agents for diaspora remittances collections and some branches were converted to Agencies. We are set to open virtual branches as we drive to reduce the approximately 42 brick and mortar branches we have countrywide. The first virtual branch is expected to be operational by the last quarter of 2021.

The pandemic sped up customers’ adaptation whilst the banks took advantage to improve processes and systems for complete digitalisation.

What do you expect for the rest of 2021? Do you think we can put the current crisis behind us?

When the pandemic crisis presented itself in the first quarter of 2020, it never occurred to us that we would still be here a year and a half later. Therefore, as a business, we continue to build resilience amid the COVID-19 pandemic through:

    • Managing risk, capital and liquidity.
    • Employee health and wellness.
    • Implementing client relief plans.
    • Preserving and creating value to maintain a strong balance sheet.
    • Effective communication across stakeholders and staff.
    • Supporting communities.

At the same time, UK firms borrowed more than £100bn last year. While this was predominantly driven by government-guaranteed lending, demand for borrowing is likely to remain strong as SMEs recover and government schemes are withdrawn. Many will return to non-borrowing ways but there is also a case for businesses who may have had their first taste of borrowing and will seek finance to thrive rather than survive - particularly as the cost of borrowing remains relatively low.

Other forms of lending will come to the fore to supplement mainstream solutions such as overdrafts and term loans - asset-based lending is one such model set to play a significant role in offering support to businesses. To meet the rising levels of demand, lenders should be prepared to leverage their digital capabilities to streamline customer journeys, improve risk mitigation and enhance transparency between lender and borrower.

Operational excellence: customer experience and business value

The demand for lenders to create frictionless digital journeys for their customers was growing well before COVID-19, but there is no doubt that the need to streamline communication and digital interaction between lenders and borrowers has become increasingly important and is often the preferred channel for many businesses. With the advent of cloud computing and the drive to greater transparency, led by the Open Banking initiative, the business community is more minded to share data with trusted partners.

But leveraging digital capabilities to improve customer journeys goes beyond just enhancing the customer experience and while borrowers benefit from faster access to working capital, lenders themselves are better able to reduce risk and make informed judgements about the businesses they lend to. For lenders, the access to enhanced data provides superior insight into how they can support customers now and, in the future, and ultimately improve margins.

By utilising online solutions that allow clients to self-serve their funding needs, lenders can achieve excellent operational efficiencies and high levels of customisation, also delivering reliable and secure solutions that offer customers a better overall experience and financial support at the click of a button.

Greater visibility driven by open accounting

In an increasingly data-driven world, lenders are looking towards “open accounting” to provide greater visibility on the financial performance of the businesses to which they are lending. Lending decisions can be made much more quickly by an asset-based lender if they have the trading history of the borrower, with full transparency of sales, purchase ledgers and cash movements at their fingertips.

Open accounting can provide information vital for the lender to manage risk and optimise the funding available. Checks and assessments are completed in a fraction of the time, and with much less friction than with manual processes. Lenders who have access to their clients’ accounting data are in a far stronger position to streamline operations and deliver customer satisfaction.

A modern solution 

Taking advantage of such digital capabilities offers clear appeal to asset-based lenders, but they must ensure they deliver holistic solutions to meet their needs and customer demands, rather than delivering quick fixes which overlook the overall experience and entire digital infrastructure.

By utilising online solutions that allow clients to self-serve their funding needs, lenders can achieve excellent operational efficiencies and high levels of customisation, also delivering reliable and secure solutions that offer customers a better overall experience and financial support at the click of a button.

Overall, digitalisation has been both a natural solution to reducing friction and increasing efficiency for lenders and clients alike and a key tool in dealing with the intense demands placed on lenders during a challenging economic cycle.

In an increasingly competitive environment lenders need to continue providing advanced digitalisation offerings, such as ever-evolving streamlined journeys which build trust, speak to customer needs, and accelerate outcomes, and look to leverage open accounting to enhance insight into business performance and inform lending decisions. This evolving digital landscape is a benefit to lenders and borrowers alike as they tackle the challenges of a post-pandemic future.

The global real estate crowdfunding market is expected to grow a CAGR of 33.4% between 2020 and 2028. The EU REC market size is currently at approximately EUR 7 billion, and with that growth rate, the EU market would be EUR 93.65 billion in 2028. 

This stratospheric projection illustrates the potential of real estate crowdfunding. Stipulations protecting consumers and crowdfunding platforms provided by new EU regulations coming into play in November will foster legitimacy in the industry and draw the focus of new investors.

To determine what drives the crowdfunding community, BrikkApp recently spoke to five real estate crowdfunding industry leaders from Shojin, Reinvest24, Kuflink, Max Crowdfund, LendSecured.

New EU regulation bolsters the market

Faced with substantial industry growth, the European Union has decided to implement regulatory actions that will formalise the service provision process for crowdfunding and widen the potential pool of investors exponentially.

For Jatin Ondhia, Co-founder and CEO of Shojin, the regulations are a necessary step to gain new economic opportunities: “At times, the regulatory costs and process can become burdensome, but they are essential if we want this market to grow.”

Per the regulations’ due diligence requirements by platforms, investors will feel secure in their investment decisions. Terms on suitability and appropriateness will further enhance that sentiment. New passport and authorisation processes will make sure that platforms are held accountable for their listings and work in the best interest of their clients.

Under the new scheme, real estate crowdfunding platforms can collaborate seamlessly with developers and construction corporations across the European continent if their projects total under €5 million.

Given that the regulation works to rule out non-compliant practitioners, there will be fewer market participants—but those participants will present safer investment opportunities, according to the Latvian crowdlending platform LendSecured.

“We find it more complex to spot deals that suit the vetting process. The volume might be smaller, but you can be sure that it has the highest quality,” explains Nikita Goncars, CEO of LendSecured.

The unrelenting interest of new retail investors will bring liquidity to the market and entice developers.

Crowdfunding platforms increasingly make use of the power of collaborating

Shojin provides global investors with direct access to institutional-style debt and equity investments in the UK. Crowdfunding platforms like Shojin work best when they can balance the number of investors with a high deal flow. “Sometimes, there is an imbalance due to the economic and societal environment. This is where collaboration between platforms can be extraordinarily effective,” according to Jatin Ondhia, CEO and Co-founder.

As crowdfunding gains popularity, more and more high-quality platforms will operate in the industry. Increased cash flows and investments deepen the liquidity pool and broaden the range of projects that can meet investors’ and developers’ requirements.

Recently, most crowdfunding platforms have felt the market is too fragmented. To become a mainstream marketplace, the sector needs to attract a much broader crowd and cooperative market opportunities.

In addition, the associated costs with new EU regulations may leave several companies in a difficult position. Thus, collaborations of various platforms play a vital role in the sector. Collaboration is not simply a matter of costs but combining expert knowledge and business strengths: If the market specialists blend their skills and help each other out, this will lift the whole industry to a higher level. Potential joint areas include tech development and research to understand and predict the market’s evolution better.

The EU regulations hit the point of the time. Max Crowdfund, a Dutch crowdfunding platform, forecasts that if real estate crowdfunding continuously grows into the mainstream, cross-border investments and the international interest in the EU market will become commonplace. The new standards and the ability for crowdfunding agents to work seamlessly with developers all across the European continent ensure a fertile ground for the industry.

Interest Rates and Returns

A growing number of real estate platforms ultimately stimulate a higher output for aggregation platforms such as BrikkApp. For investors, it brings higher diversification between investment opportunities. From the current point of view, the size of the platform is becoming less important.

Still, the quality of the project (e.g., well-funded, location, housing prices) investors can crowdfund attracts enormous interest. If the quality of investments and returns will be the decisive factor for the crowdfunding community, this allows a fairer investment fund distribution across European real estate.

Due to the global pandemic, interest rates have been lowered worldwide to stimulate consumption. As a result, banks fear the trend going towards negative interest rates.

One of the downsides of the EU regulations could be a potential split between regulated and unregulated platforms. The latter could try to offer higher returns that don’t face restrictions by any legislation. Fortunately, this won’t stop regulated platforms from offering healthy returns, and it will establish them as more trustworthy than unregulated businesses in the long run.

Lastly, due to the global pandemic, interest rates have been lowered worldwide to stimulate consumption. As a result, banks fear the trend going towards negative interest rates.

“Facing the likelihood of negative interest rates, investors prefer P2P real estate lending platforms as a potential option for their funds. This happens because they could earn significantly higher returns,” agrees Narinder Khattoare. He is the CEO of Kuflink Group, a company developing and leveraging P2P investment models. Higher returns will positively impact the industry and create an enormous leverage effect for those who invest now.

“In our case, we are currently able to offer returns up to 16% because we are working on developing markets, with a big potential for capital growth. By developing most projects by ourselves, we are lowering the expenses as much as possible”, says Tanel Orro. Tanel is the CEO of Reinvest24, a real estate investment platform based in Estonia.

The new EU regulations will not be smooth sailing for every platform. For example, Max Crowdfund operates using blockchain technology, and banks and payment providers are still reluctant to work with the technology. Currently, Max Crowdfund can offer debt-based real-estate-backed loans to their investors.

“Once we have obtained the license per the new European regulation for crowdfunding platforms (CSPR), we will add equity-based deals and a secondary market,” reveals Mark Lloyd, CEO of Max Crowdfund.

The European crowdfunding real estate market shows promising progress. Particularly the Baltics and countries in Eastern Europe, including Estonia, Moldova, and Latvia, are attracting investors’ interests. “We see great potential in the real estate sector, as the competition is still low, due to the small size of the market,” concludes Tanel Orro from Reinvest24.

As soon as crowdlending platforms start to diversify their portfolio and collaborate with each other and developers alike, the alternative property market is ready to become a mainstream capital source.

In July, the European Central Bank (ECB) announced its plans to launch a digital currency. In response to a rise in online payments and the potential threat that could come from others issuing a digital means of payment, the ECB has decided to press ahead with its own digital currency. This aims to help protect its monetary sovereignty by attempting to limit the use of rival means of payment.

This will not be a quick process. The next two years will be spent on design and tests, followed by a launch three years later. However, the announcement highlights that traditional fiat currency won’t be the sole payments method in years to come. Of course, this move does not mean the same will happen for the UK, but with Rishi Sunak and the Bank of England making warm noises about digital currencies, it’s unlikely the UK won’t follow suit.

Will Digital Currencies Work as Cash Replacements?

Of course, there are many questions swirling around digital currencies – namely if they’ll be a digital version of cash, if they will eventually replace cash or just simplify cross-border payments – but the fact of the matter is cash appears to be becoming digital, meaning banks need to get ready, even if the day-to-day reality could be years away.

Taking a step back from this new development, it’s fair to say financial services was already in flux, with the pandemic turbo-charging many of these shifts. Previously, banks, building societies, pension providers and wealth management had defined roles within the market, and whilst there was some interaction between the providers, people had their pots of money and tended not to move them around. In short, loyalty mattered. But this, like many other aspects of financial services has now changed. New entrants are flooding the market and offering platforms that bring vendors together thanks to Open Banking enablement. Therefore, consumers are flooded with choice. It’s now simple to amalgamate pensions or to transfer ISAs to get a better rate. Plus, with digitalisation, self-service is now positively encouraged. One clear example being online brokerages disrupting the investment space and allowing consumers to own snippets of companies, instead of requiring payment for full shares. Consumers are used to a digital financial life – so why not extend this to currency?

The world is moving towards a more digitised way of life – and banking, payments, savings and investments are certainly part of this shift.

No matter where a company sits within financial services, it’s clear that if digital currencies become reality, firms will need to accept them, which throws up multiple issues. Integration with fiat currency is perhaps the most pressing.  However, the growth of cryptocurrencies over the last five to ten years and their recent acceptance by large institutions, shows there’s a clear trend. Financial portfolios should no longer be cash, bonds or equities – a small exposure can be digital. For me, this coupled with the concept of digital Pounds, Euros, Dollars or Yen, signals it’s time for banks to start thinking at the very least what measures should be put in place to lay the foundations for adoption. Surely commercial entities could benefit from showing customers they’re ready to take action, and providing an alternative to investment platforms as a source and store of these assets?

But what’s required? Here are five key aspects which can help determine a starter strategy.

  1. System resilience

Like any fiat system, digital currencies would need to be considered critical national infrastructure – meaning uptime and defence are impenetrable 24/7, 365 days per year. Aside from this requirement, the new system would need to be protected from cyberattacks, whilst also handling high volumes of transactions. Systems should be able to process transactions immediately (or as instantaneously as possible) along with having strong privacy protections.

For banks looking to support and facilitate a lot of this traffic, leveraging blockchain seems the most logical choice, as the roles they will play in these transactions will be different to a normal transfer. Whilst money may well flow from one account to another, banks will also likely be responsible for updating the record of who owns which Central Bank Digital Currency (CBDC) balance. Of course, technicalities are still to be worked out as to how money will move around, but it’s likely the CBDC itself would be a cash-like claim on the central bank. This way, the central bank avoids the operational tasks of opening accounts and administering payments. Banks can continue to perform retail payment services, meaning there are no balance sheet concerns with private sector intermediaries. This in turn helps boost operational resilience, as this architecture allows the central bank to operate backup systems in case the private sector runs into technical outages.

  1. IT infrastructure

The potential introduction of digital currencies will be a testing experience for many – especially while we don’t know if it will come to fruition, or how it will work. Inevitably that will lead to a lot of speculation. One thing is for sure though, it may well require an overhaul of technology to integrate it, which will have repercussions for the IT stack. Unfortunately, technology to support such initiatives are likely to be considered ‘new’ to the majority of existing financial service organisations.

It’s well known that many banks struggle with legacy technology. They are not alone in that and big names across other industries have the same problem. The problem the banks have is that they’ll be the ones facilitating most of the transactions, whereas other players (retailers, for example) will mostly be receiving them. Whilst I don’t believe integration won’t be a problem for newer neobanks, they are in a far stronger position than their older rivals. Now is the time to get on the front foot and start thinking about what transformation will be required to help set the traditional banks on the right path. This includes safeguards which have been a criticism of cryptocurrencies – how to implement anti-money laundering protections, so the same due diligence a traditional banking service provides is applicable to its digital twin.

  1. Centralised vs decentralised finance

The whole concept of digital currency is an interesting one, based on the fact they add an element of decentralised finance to the country’s monetary policy. Of course, they will need to comply with current protocols, but they’ll also challenge how these protocols work.

To enable peer-to-peer transactions, digital currencies will need to make use of centralised governance frameworks that are authoritarian in nature — i.e., controlled by a single body. However, centralised blockchains are slower. Decentralised solutions like distributed ledger technology could make transactions quicker and more streamlined. To achieve widespread adoption, transaction speeds need to be efficient (much like an online bank transfer) otherwise consumers will not want to switch.

Decentralisation would also enable individuals to own their own wallets (akin to cryptocurrencies) and have their own private keys to help bolster security. This can help avoid data breaches and reduces risk. If a hack were to occur, it would stop one, single large fund being stolen – just a single person’s funds. Whilst this is a terrible scenario, it would be catastrophic if one pot were accessed. It would undermine any faith in the system.

  1. Payments

Simplifying cross border payments could provide benefits in terms of e-commerce, travel and the labour market. However, it will have significant requirements, such as aligning regulatory, supervisory and oversight frameworks, AML/CFT consistency, PvP adoption and payment system access. The eventual international adoption of digital currencies is also likely to proceed at different speeds in different jurisdictions, calling for interoperability with legacy payment arrangements. Whilst this sort of information will likely come from G20 discussions, banks need to start addressing how to facilitate this and how this can be achieved within the current stack.

  1. Consumer adoption

Whilst not a technical point, banks will likely share responsibility with the Bank of England in communicating the launch of any digital currency and how it will work. Provision and service is a key differentiation. We also need to acknowledge that the recent volatility in cryptocurrencies may make consumers wary of adopting digital currencies, which impacts their adoption. Being able to clearly communicate how digital currencies will integrate with current offerings and the benefits of this early, will help with customer uptake and acquisition.

Although the adoption is still conceptual, thinking about potential customer provision and how it might be integrated into current platformification/product offerings can help with service design and ultimately, user experience.

 

The world is moving towards a more digitised way of life – and banking, payments, savings and investments are certainly part of this shift. Financial institutions have had to manage this evolution already, so in some ways, a digital currency is a logical next step. For it to survive, however, the necessary infrastructure must be present for it to thrive, which banks can provide if they put the necessary building blocks in place now. The change will not happen overnight, or potentially in the next five years, but to win the hearts and minds of customers, provision will need to be seamless – placing customers at the heart.

Well, for retailers the extended deadline has no doubt been a welcome announcement from the FCA for a number of reasons, predominantly because it gives organisations a little more time and breathing space to adapt their authentication and verification tools. But it’s also a benefit for banks and payment providers too.

The ongoing delay to the SCA will give the payments industry extra time to prepare for the rollout of the directive so they can deliver a secure payment option to consumers. If the payment ecosystem fails to use this time to prepare or implement the right technology to comply with this new ruling, it will open consumers up to a significant threat of card fraud.

The main challenges facing retailers

There has been a large amount of focus on the implications of SCA when shopping online; however, face-to-face purchases will also need to be revisited. Even when using a card physically, SCA will require two-factor authentication for every purchase made over the contactless limit. This additional layer of protection provides a more stringent authentication process that will help to keep millions of accounts safe from both traditional fraudsters and cybercriminals.

Two-factor authentication means that not only will the user need to provide their details when making a purchase, they’ll also have to confirm their identity with:

Once implemented, this will be beneficial in protecting consumers, however, getting to this stage will be a challenge. The requirements are set to cause widespread disruption to the retail space. The introduction of SCA will require in-person merchants and card issuers as well as online Payment Service Providers (PSPs), such as PayPal and WorldPay, to have in place the technical enhancements and testing needed by the deadline.

The importance of educating the consumer on SCA

This presents a significant logistical challenge; maintaining effective fraud prevention while keeping an optimised customer experience is not easy. But perhaps the biggest challenge of all is that consumers themselves still aren’t entirely aware of SCA or what will be expected of them come March.

The introduction of SCA demands collaboration within the industry to educate consumers, but ultimately it is up to payment providers to provide a reliable, secure and SCA-approved method of payment to consumers. Providers must also ensure that the method they choose is not only up to standard but is affordable and accessible to all.

Preparation is the key to secure payments

So, how does the market get ready for the roll-out of the ruling between now and the new deadline of March 2022?

Over the coming months, retailers and banks should be open and transparent with customers to minimise the risk of unexpected disruption to payments. To provide this level of communication, retailers need to educate themselves regarding the issues and requirements needed to ensure they are SCA compliant. Security measures must also be put in place to comply with the SCA requirements sooner, rather than later.

Biometric payment cards also offer the answer for payment providers to help prepare for SCA. Not only will these cards – with inbuilt fingerprint sensors to verify ownership – provide strong customer authentication, but they also come with the added benefit of convenience. Validating your payment with a fingerprint speeds up the transaction process and removes the requirement of PINs or the use of a smartphone.

Already, it is worth noting that some payment card manufacturers, such as IDEMIA, are already preparing biometric payment card solutions. These will be ready for banks and card issuers to adopt so they have the time they need to pilot and roll out the new payment method before the new SCA deadline is imposed.

The FCA has also outlined previously that long-term authentication through biometrics and mobile app-based solutions is the future of secure payments. Biometric payment cards meet the standards of SCA regulation required to enable safer transactions whilst also providing a speedy and easy way for consumers to shop safely. With more consumers now shopping online than ever before, it is imperative that card issuers, payment providers, online retailers – as well as in-store merchants - act now to prepare for the regulation.

The latest figures from the Monthly Insolvency Statistics report registered that company insolvencies in May 2021 was 1,011, which was 7% higher than the number registered in the same month in the previous year (946 in May 2020).

We are seeing the impact of an activist government supporting businesses across two fronts – financial support and temporary suspension of pre-existing corporate insolvency and governance legislation. 

Insolvency protection extended
In a critical move the Corporate Insolvency and Governance Act 2020 (CIGA 2020), which received assent in June 2020, comprised of eight permanent and temporary measures intended to give struggling businesses a pandemic lifeline.

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021 has extended key measures in different ways:

One key measure is continuing with temporary suspension of wrongful trading, which provided company directors with much-needed breathing space. However, on a more cautionary note, they must keep in mind all sources of risk and liability under the Insolvency Act 1986 are unaffected by the Act. For example, directors are still bound by fiduciary duties and fraudulent trading provisions of Section 213, facing sanctions and penalties if they knowingly attempt to defraud company or creditors.

In addition, directors have duties under the Companies Act 2006 and must continue to act and be mindful of the interests of creditors if the likelihood of insolvency increases.

If directors are worried their business is in or expecting financial difficulty, it is crucial that they continue to consider the needs of all key stakeholders and creditors in any decision and maintain ‘good housekeeping’ in the form of board meetings and keeping records of actions taken with an assessment of the reasons for certain decisions.

What does this extension mean?
Overall, temporary suspension of wrongful trading doesn’t change the attention directors should be giving when evaluating their company’s financial position. Directors’ actions will remain subject to scrutiny, making it critical they consider very cautiously whether to continue trading if there is no realistic chance of avoiding insolvency.

The initial extension provisions in relation to filing deadlines no longer applies. The Act had granted automatic extensions for filing deadlines between 27 June 2020 and 5 April 2021 to relieve burdens on companies during the pandemic, allowing them to focus all efforts on continued trading.

Landlords and commercial tenants

The Government has also published a consultation paper seeking responses and evidence from the property industry generally as to how negotiations between commercial landlords and tenants on rescheduling rent liabilities have been handled during lockdown.

The protective measures the Government introduced back in April 2020 were only ever meant to be temporary. This was a lifeline for many but now there is a significant risk for those who relied on this during the pandemic that once those protections are lifted – scheduled for June 2021 - businesses may fail when rent arrears are pursued.

It is hard to envisage the government allowing a cliff edge to come into view when it has spent so long over the past year seeking to protect embattled businesses.

Post-lockdown outlook 
Although easing of lockdown measures is accelerating and businesses are beginning to open, numerous challenges lay ahead, particularly with expected long-term reduction in consumer demand and confidence. Many company directors will likely face challenging decisions whether to continue trading or instigate insolvency processes soon.

There is also pent-up private equity demand and high levels of debt funding. This desire to deploy capital, combined with what we could term a ‘flight to quality’, mixed the optimism as a result of the vaccine programme, as well as near-record levels of corporate liquidity and a strong market for M&A, we could well see a positive market.

If directors are worried their business is in or expecting financial difficulty, it is crucial that they continue to consider the needs of all key stakeholders and creditors in any decision and maintain ‘good housekeeping’ in the form of board meetings and keeping records of actions taken with an assessment of the reasons for certain decisions. Where possible, they should also seek appropriate professional advice.

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