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The US economy’s growth rate last quarter was recently revised on the basis of stronger investment from businesses and government bodies than previously assessed. GDP in Q3 was revised up to 3.3% annual growth rate compared to the previous quarter. This was according to the US Department of Commerce in a press release on the 29th November 2017.

This week Finance Monthly reached out to sources across the globe to hear their take on the current situation in the US, what has impacted growth across several industries, and what the forecast for 2018 looks like.

Josh Seager, Investment Analyst, EQ Investors:

US growth was revised to 3.3% annualised on Wednesday, up from an initial reading of 2%. This was the fastest growth rate in 12 quarters but there is likely to be some hurricane distortions, so we must interpret the data with caution, we don’t expect it to continue at this level.

Looking into the numbers and things look broadly positive. Consumer spending, which accounts for around 70% of the US economy, remained strong, growing 2.3%. This wasn’t quite as strong as last quarter but is a good level nonetheless and shows that the US consumer is relatively healthy. For the consumer to continue to spend, we really need wage growth. So far, this has been pretty anaemic in spite of very low unemployment. We believe this could be about to change. NFIB Small Business Surveys show that 35% of small business are now finding it hard to fill jobs and 21% are planning to raise compensations as a result. This data points are at cycle highs and this is highly likely to feed into US wage growth at some point.

Business investment picked up, contributing 1.2% to growth, up from 1% the quarter before. This is a pleasing sign as it suggests that corporates are gaining confidence in the economy and are willing to make the investment necessary to capitalise on this. Corporate profits were also up last quarter which should give corporates the financial freedom to continue to develop and (hopefully) growth wages.

Dan North, Chief Economist, Euler Hermes North America:

Consumer

Home Sales

Holiday Shopping

Tim Sambrook, Professor of Finance, Audencia Business School:

The upward revision, from previously 3.0%, was mainly due to a higher than expected increase in public and private spending.

The increase compares favourably with the second quarter of 2017 of 3.1%, and the third quarter of 2016 of 2.8%. It is the fastest rate since Q3 2014.

If the current estimate of growth in the Q4 GDP is realized, then this would represent the first time since 2004 that the US economy has posted three consecutive quarters of over 3%.

The growth rate is in line with the government’s target. They are engaging a tax cut plan to lift GDP to 3% annually. However, economists see such a pace as unsustainable and expect growth to slow sometime in 2018.

If you were to look for some bad news in the revision, then you could point to the fact that the revision comes from public and private spending and not consumer spending, which makes up 70% of the US economy. In addition, inventory build-up was significant and could prove to be a drag on growth in the future. However, this upward revision comes with a backdrop of severe hurricanes and low wage growth, which should have been quite negative for consumer growth.

This positive news will strengthen the case for the Fed to raise rates next month, although the announcement had little effect on the dollar or the markets.

Duncan Donald, CEO, The London Academy of Trading:

The highlight of last week’s US data card was the release of the GDP numbers for the third quarter of 2017. The number brought US GDP from 3% to 3.3%.

This is slightly above the median expectation of 3.2%, and shows the US economy continues to expand progressively with the GDP reading being the most aggressive since late 2014.

But in context, what does this mean for the US rate path, as the December rate decision from the Federal Reserve rate setting committee comes next week? From freshly inaugurated Federal Chair Jerome Powell’s perspective, the data is on course for a hike. Even the departing Janet Yellen appeared to shift her dovish tone, referencing data with the possibility of a hike in December.

We need to look no further than the recent performance of US stocks and the dollar for confirmation that the market believes in the upcoming rate hike. Despite the ongoing investigation into President Trump’s electoral campaign, which is an obvious anchor, there are no signs of a slowdown in the US positivity story. The one final hurdle for the market to overcome ahead of next week’s decision is the Non-Farm Payrolls on Friday. The data has been somewhat muddied over the last few months, as hurricanes have taken their toll. However, this month, we should expect to get a true reading on the strength of the US jobs market.

A strong Friday performance will push the market up the final few percent towards a December hike.

John Lorié, Chief Economist, Atradius:

Across the Atlantic, the US economic outlook is also robust, which is reflected in high business confidence. US GDP is expected to expand a solid 2.0% in 2017 and 2018. The positive outlook is supported by strong job growth, very low and still declining unemployment, and even firming wage pressure. In this environment, the number of bankruptcy filings is at historical lows. In Q3 of 2016, the number of bankruptcies in the US reached its lowest quarterly level since Q4 of 2006. We forecast a 4.0% decline in the overall number of insolvencies this year and a mild 2.0% decline in 2018. The US outlook is subject to risks, on the upside (tax reform) as well as downside (trade, NAFTA).

We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!

Yesterday saw Chancellor Phillip Hammond deliver his second budget.  While the abolition of Stamp Duty, several tax revisions, freezes on several duties, increased investment in AI and Technology and a £3 billion investment into the NHS all came as welcome additions they could not prevent a sharp drop in the UK Growth Forecast following the budget.

So with many experts labelling it a ‘make or break’ moment for Hammond and a somewhat beleaguered Government, we spoke to the industry experts to see what the Autumn budget really means for the Financial Sector in a special extended Your Thoughts: Autumn Budget 2017

Choose your sector below or scroll through to read all the insight.

FinTech & Digital
UK Growth, Investment & Forex
Tax
Healthcare & Retail
Property & Real Estate

 

FinTech & Digital

 

Abe Smith, CEO and Founder at Dealflo

London has been a world-leading financial centre since the 19th century, but low growth forecasts and the lack of clarity around Brexit are unsettling for businesses. The Chancellor has had to work hard to ensure that the UK remains an attractive place to invest and innovate post-Brexit. The new National Investment Fund means that even after Brexit, the UK will remain a hub for FinTech innovation and will attract fast-growing tech companies.

Niels Turfboer, Managing Director of UK & Benelux, Spotcap:

The FinTech industry is going from strength to strength and the UK Government can play an important part in enabling FinTechs to continue to thrive.

We therefore welcome Philip Hammond’s promise to invest over £500m in numerous technology initiatives, including artificial intelligence and regulatory innovation, as well as unlock over £20bn of new investment in UK scale-up businesses.

With this assurance, the government has shown a strong commitment to the FinTech sector, which will hopefully help tech companies all around the UK to flourish and grow.

World Economic Forum member Jane Zavalishina, CEO of Yandex Data Factory

The reality is that it is not the scientific development of AI that will be game-changing in the next few years, but instead the more prosaic, practical application of AI across many different sectors.

While AI is too often associated with self-driving cars and robots, the truth is the most significant AI applications that are of most significance to businesses, are actually the least visually exciting. AI that improves decision-making, optimises existing processes and delivers more accurate demand prediction will boost productivity far more powerfully than in all sectors.

But it’s not just productivity that will be significantly impacted – business revenue will also benefit. The beauty of AI lies in its ability to be applied with no capital investments – making it an affordable innovation for businesses to adopt. Unlike what is commonly thought, applying AI does not require infrastructure changes – in many processes cases we already have automated process control, so adding AI on top would require no investment at all. Instead, companies will see ROI within just a few months.

Martin Port, Founder and CEO BigChange:

We welcome this announcement and support for tech businesses from the Chancellor. Financial backing and stability is a huge hurdle facing all start-ups, so I am pleased to see the government pledge more than £20 billion of new investment. I just hope this funding is easy to access and readily available for those who need it, rather than being hidden among reams of red tape.

Leon Deakin, Partner in the technology team at Coffin Mew:

As a firm with a growing technology sector and client base in this area we are obviously delighted to see specific investment in the technology sector, particularly in AI and driverless vehicles.

Doom mongers have long been predicting that the UK and its tech hubs will be hit hard by Brexit and there have been numerous reports of rival cities within the EU which have sought to position themselves as alternative options. However, we are yet to see this materialise and incentives and commitments such as those announced by the Chancellor in these innovative but essential areas have to be great news for the economy, the sector and those who advise businesses in it.

Of course, creating the next unicorn is no easy task but a serious level of investment of the magnitude announced should at least ensure those businesses with promise have the best chance to scale up even if they don’t reach the $1billion level. Likewise, there is little point developing these new technologies if the infrastructure and support is then not there to utilise them properly

Matthew Adam, Chief Executive Officer of We Are Digital:

With the UK economy now expected to grow by 1.5% in 2017, a downgrade from the 2% forecast made in March, coupled with the challenges of Brexit, the need for the UK to sit at the forefront of digital skills and inclusion is more pressing than ever. We need to be able to grasp, with both hands, the digital opportunities that present themselves to us in order to make us a true global digital force.

The reality is that we simply cannot afford not to. Independent analysis shows that getting the UK online and understanding how to use digital tools could add between £63 billion - £92 billion to UK Plc’s annual GDP. Indeed, it is my belief that economies which focus strongly on getting its citizens online are also more productive.

The Chancellor has said that a new high-tech business is founded in the UK every hour, which he wants to increase to every half hour. It is imperative we support this growth through the announced £500m investment in artificial intelligence, to 5G and full-fibre broadband. However, to bridge the need for the 1.2 million new technical and digitally skilled people which are required by 2022, we must create and support retraining opportunities across society to make the UK truly digital.

Technology improvements are causing widespread changes in every market and the public sector should be no exception, especially as it often faces the biggest social problems to solve. I’m glad the government is waking up to the fact that the latest technological advances don’t need to be assigned only to the private sector, but can do a lot of good to the community at large. We know from our direct work with the Home Office that every government and council department is moving its processes online. Whether it’s chatbots to automate processes, or solving how people engage with Universal Credit, there is so much we can do here with ‘Gov -tech’

I therefore welcome the Chancellor’s digital announcements today and consider this budget as not so much a leap in the right digital direction, but more a necessary conservative step.

 

UK Growth, Forex & Investment

 

Owain Walters, CEO of Frontierpay:

The Chancellor’s efforts to win younger voters from Labour by abolishing stamp relief for first-time buyers on homes up to £300,000, and on the first £300,000 of properties up to £500,000, come as no surprise. The potential for such an announcement has been a hot media topic in recent weeks and as such, we don’t expect to see any significant impact on the value of the pound.

“In the wake of this Budget, any real movement from the pound will be caused either by developments in the Brexit negotiations or the potential for a further interest rate rise. I would therefore advise any businesses that want to stay on top of turbulence in the currency markets to keep a close eye on inflation data.

Markus Kuger, Senior Economist, Dun & Bradstreet

It’s not surprising that the Chancellor opened this year’s statement with a focus on Brexit; even as businesses absorb the implications of the Budget, they have a close eye to the ongoing negotiations and any likely trade agreement, which is likely to profoundly impact their future. The government’s move to provide a £3bn fund in the event of a no-deal outcome is designed to increase business confidence. In the meantime the business environment remains challenging, and Dun & Bradstreet forecasts that real GDP growth in 2018 will slow to 1.3% (from 1.8% in 2016). Businesses should continue to follow the Brexit negotiations closely and consider that operating conditions could change dramatically over the next 18 months as the Brexit settlement is clarified.”

 Damian Kimmelman, CEO of Duedil

We welcome the government’s announcement that the Enterprise Investment Schemes’ (EIS) investment limit, for knowledge intensive scale-ups has been doubled.

The EIS has been great for attracting investment for small businesses, however we need to ensure investment through the scheme is not being used for capital preservation purposes, but instead to encourage the growth of companies.

The key to increasing investment in ‘higher risk’ growth companies through the EIS scheme, is to eliminate information friction. With more data, investors can price risk effectively, so they can lend to support the small businesses forming the backbone of the economy, driving growth, and creating jobs.

Lee Wild, Head of Equity Strategy at Interactive Investor:

This budget was always going to be especially tricky for the chancellor. Hitting fiscal targets amid wide divisions over Brexit, while also spending more on populist policies to distract voters from Conservative party infighting and dysfunctional cabinet, was a big ask.  Hammond wasn’t fibbing when he promised a balanced budget. Once tax giveaways, downgrades to growth forecasts, billions more for the NHS and the rest are put through the mincer, both the FTSE 100 and sterling are unchanged.

Given Britain’s housing crisis was an obvious target for the chancellor, he really needed something substantial to make his aim of 300,000 new homes built every year anything more than a pipe dream.  Committing to at least £44 billion of capital funding, loans and guarantees to support the housing market will go a long way to achieving the chancellor’s ambitious target. Abolishing stamp duty for first-time buyer purchases up to £300,000 is a tiny saving, however, and buyers, especially in London, will still require a huge deposit to get a foot on the housing ladder.

The market hung on Hammond’s every word, causing a comical yo-yo effect as the chancellor slowly revealed his strategy.  A threat to use compulsory purchase powers where builders are believed to be holding land for commercial reasons, could cause sleepless nights.

Overall, Hammond’s ideas are sound, but probably not enough of a catalyst to get sector share prices rising significantly near-term, given mixed results in the run-up to this budget.

Mihir Kapadia – CEO and Founder of Sun Global Investments:

The Autumn budget statement from Chancellor Phillip Hammond was as expected, with a few pleasant surprises. While Mr Hammond set out his policy proposals with a "vision for post-Brexit Britain", he also acknowledged that his Budget was "about much more than Brexit".  With the Conservatives struggling in the polls, the Chancellor was under pressure to regain support for his party, which is currently in a fragile coalition.

The expected announcements include the decision to abolish stamp duty for first time buyers on properties up to £300,000, addressing the housing crisis, an immediate injection of £3.75 billion into the NHS, investments into infrastructure (transport and network), freezing duty on fuel, alcohol and air travel, and finally a Brexit contingency budget of £3 billion.

While today’s budget was populist and aimed at the electorate, it has to be noted that the Office for Budget Responsibility (OBR) sharply downgraded both Britain's productivity and growth forecasts, as well as its business investment forecasts, meaning the UK's finances look set to worsen over the coming years. This does not factor the possibility of a Brexit-related downturn or a wider global recession, which has already been seen as overdue by many forecasters.

We expect the abolition of stamp duty for first time buyers on properties up to £300,000 will draw extra attention and headlines from much of today’s announcements. It is vital that we acknowledge the warnings from the Office for Budget Responsibility.

 

Angus Dent, CEO, ArchOver:

The UK’s productivity growth continues to decrease and we’re looking in the wrong place for answers. It’s not just a case of everyone working a bit harder. Investment in public infrastructure and fiscal policy will be the defining factors that help the UK catch up, while real growth will come from our SME sector.

Britain is known as a nation of entrepreneurs. Yet we’re in real danger of not giving our SMEs the support they need to thrive. We need a bottom-up approach where small businesses with bright ideas have access to the finance and advice they need to grow. Only then will we have the firm economic foundation we need to build our productivity post-Brexit.

The expansion of the National Investment Fund in today’s Budget is a good start, but too many SMEs still have to pay their way with personal savings or put their houses on the line as security if they turn to the big banks for help.

We need to inspire a new culture. We know there is an army of willing investors out there who want to support British business - lending across P2P platforms is on course to rise by 20 per cent by the end of this year according to data from 4thWay.

However, we need to raise awareness among SMEs of the different options available to help them finance their growth. SMEs need to take control of their own destiny. With the right finance in place, they can drive the whole country forward to new heights of productivity. We can’t just leave it to government – small businesses must be given the power and the cash to fulfil their potential.

 

Tax

 

Paul Falvey, tax partner at BDO:

It’s clear that the headline grabbing news revolved around the Chancellor’s decision to abolish stamp duty for first time buyers on properties purchased up to 300,000, at a cost of £600m a year to the tax man. Whilst this is important for people getting on the property ladder, there were other key assertions.

Firstly, HMRC will start to charge more tax on royalties relating to UK sales when those royalties are paid to a low tax jurisdiction.  Although this is only set to raise approximately £200m a year, it sets a precedent that tax avoidance will continue to be on the governments agenda. Implementing the OECD policies is a tactic we expected.

Furthermore, companies will pay additional tax on the increase in value of their capital assets from January 2018. The expected abolition of indexation allowance will mean that, despite falling tax rates, companies will be taxed on higher profits. By 2022/2023 this is expected to raise over £525m.

62% of the businesses we polled before the Budget said they will be willing to pay more taxes in return for a simpler system. Yet, once again, the government has done nothing to tackle the issue of tax complexity. It is a huge obstacle to growth and businesses will be disappointed that there was no commitment to setting out a coherent tax strategy.

Craig Harman is a Tax Specialist at Perrys Chartered Accountants:

Although it was widely anticipated beforehand, the only real rabbit out of the hat moment for the Chancellor was confirming the abolishment of stamp duty for first time buyers. This equates to quite a generous tax incentive for those able to benefit resulting in a £5,000 saving on a £300,000 property purchase.

The Chancellor has also stood by his previous promises, by raising the personal allowance to £11,850, and the higher rate threshold to £43,650. This is in line with the commitment to raise them to £12,500 and £50,000 respectively by the end of parliament.

Small business owners will be pleased to note that speculation regarding a decrease in the VAT registration threshold did not come to fruition. It was anticipated the Chancellor would look to bring the UK in line with other EU countries, however this will be consulted on instead and may result in changes over the next couple of years. Any decrease in the threshold could place a significant tax and compliance burden on the smallest businesses.

Ed Molyneux, CEO and co-founder of FreeAgent

I don’t believe that this is a particularly positive Budget for the micro-business sector. Rather than actually offering real support or meaningful legislation to people running their own businesses in Britain, the Chancellor has simply kept the status quo.

While it’s pleasing to see that the VAT threshold has not been lowered - which would have added a significant new administrative burden to millions of UK business owners - this is hardly cause for celebration. Neither is the exemption of ‘white van men’ from diesel charges, which is the very least that the Government could have done to protect the country’s army of self-employed tradespeople.

It’s also disappointing that there are still a number of issues including digital tax that have not been expanded in this Budget. I would have preferred to see the Chancellor provide clarity on those issues, as well as introducing new legislation to curb the culture of late payment that is plaguing the micro-business sector and further simplifying National Insurance, VAT and other business taxes.

Rob Marchant, Partner, Crowe Clark Whitehill

The Chancellor announced that the VAT registration threshold will not be changed for the next two years while a review is carried out of the implications of changing this (either up or down).

Having a high threshold is often regarded as creating a ‘cliff edge’ for businesses that grow to the point of crossing that line. However, keeping a significant number of small businesses away from the obligations of being VAT registered allows them to focus on running their operations without additional worry. Many small businesses will welcome the retention of the threshold.

The consultation should look at ways to help smooth the effect of the “cliff edge”, while continuing to reduce administrative obligations for small businesses.

Jane Mackay, Head of Tax, Crowe Clark Whitehill

The tax avoidance debate has centred around large multinationals and their corporate tax bills. High profile cases have eroded public trust in how we tax companies. By maintaining the UK’s low corporate tax rate, currently 19%, and reducing it to 17% from 2020, the Chancellor accepts that corporate tax is only of limited relevance in our UK economy. It accounted for around just 7% of UK tax revenues last year.

The Budget announces changes to extend the scope of UK withholding taxes to tax royalty payments in connection with UK sales, even if there is no UK taxable presence. There will be computational and reporting challenges, but this measure may pacify those who feel the UK is not getting enough tax from international digital corporates which generate substantial sales revenues from the UK

 

Healthcare & Retail

 

Hitesh Dodhi,Superintendent Pharmacist at PharmacyOutlet.co.uk

With a focus on Brexit, housing and investment into digital infrastructure, it was disappointing to see a many healthcare issues overlooked in today’s Budget. The additional £2.8 billion of funding for the NHS in 2018-19 is a undoubtedly a step in the right direction, but it falls short of the extra £4 billion NHS chief executive Simon Stevens says the organisation requires.

What’s more, the Budget lacked substance and specifics; it did little to progress digitalisation in the healthcare sector – an absolute must – while the opportunity to promote pharmacy to play a greater role in delivering front-line services to alleviate the burden on GPs and hospitals was also overlooked. These are both items that should feature prominently on the Government’s health agenda, but the Chancellor did little to address either in today’s announcement.

Jeremy Cooper, Head of Retail Crowe Clark Whitehill:

There is little in this Budget to bring cheer to the struggling retail sector.

The changes to bring future increases in business rates into line with the Consumer Price Index in 2018, two years earlier than previously proposed, is welcome, but is it enough for hard-stretched shop owners?

The National Living Wage will increase for workers of all ages, including apprentices, which is excellent news for lower paid employees. Retailers would not begrudge them this increase, but retail tends to have a higher proportion of lower paid employees and the impact on store profitability and hurdle rates for new stores should not be underestimated.

There is more positive news for DIY, home furnishings and related retailers in the form of the abolition of Stamp Duty Land Tax (SDLT) for first time house buyers. This should help stimulate the first time buyer market and free up the wider housing market which in turn should boost retail sales for DIY and home furnishings retailers from buyers decorating and furnishing their new homes.

 

Property & Real Estate

 

Paresh Raja, CEO of bridging specialist MFS

After an underwhelming Spring Budget that completely overlooked the property market, this time around the Chancellor has at least announced some reforms that will benefit homebuyers. While stamp duty has been cut for first-time homebuyers, the amount of money this will save prospective buyers is in reality still limited – the average first-time buyer spends £200,000 on a property; abolishing stamp duty for them will save them just £1,500.

Importantly, homeowners looking to upgrade to another property still face the heavy financial burden of stamp duty, which will ultimately deter them from moving house. I fear this will have significant implications in the longer term, decreasing the number of people moving from their first property purchase, and thereby reducing the number of properties available for first-time homebuyers, and reducing movement in the market as a whole.

Fareed Nabir, CEO and founder of LetBritain

“Having acknowledged the growing number of Brits stuck in rental accommodation, it’s pleasing to see the Government deliver a Budget heavily geared towards the lettings market. With 7.2 million households likely to be in the rental market by 2025, the Chancellor has seized the opportunity to continue with the recent wave of reforms by offering tax incentives for landlords guaranteeing tenancies of at least 12 months. This should hopefully have a trickle-down effect on rental prices, offering more financial manoeuvrability for tenants saving to buy their own house – something the Chancellor has made easier – while also providing additional security for renters.”

Richard Godmon, tax partner at Menzies LLP

We should to see house price increases almost immediately on the back of this announcement. His commitment to building an extra 300,000 homes a year is not going to happen until 2020s, so this measure could lead to market overheating in the meantime.

The removal of indexation allowance will come as a further blow to buy-to-let landlords, many of whom have been transferring their portfolios into companies since interest the restriction rules were introduced. This will mean paying more tax on the future sale of properties.

Now that all sales of UK investment property by non-residents after April 2019 will be subject to UK tax, it effectively means one of the incentives to invest in UK property by non-residents has been removed.

Jason Harris-Cohen, founder of Open Property Group 

There was a lot of speculation before the Budget that the Chancellor would reduce or temporarily suspend stamp duty for first-time buyers, in a bid to help young people get on the property ladder. What we got was the complete abolishment of the tax on first-time house purchases of up to £300,000, effective from today, and in London and other expensive areas, the first £300,000 of the cost of a £500,000 purchase by first-time buyers will be exempt from stamp duty. This is arguably the biggest talking point of today’s announcement and as the Chancellor says will go a long was to "reviving the dream of home ownership".

It was equally refreshing to hear that the Government is committed to increasing the housing supply by boosting construction skills and they envisage building 300,000 net additional homes a year on average by the mid-2020s. However, I was surprised that local authorities will be able to charge 100% premium on council tax on empty properties, though I appreciate that this is a further stimulus to free up properties sitting empty and bring them back to the open market to increase supply. Conversely this could result in falling house prices if there is further supply and lower demand following a period of political and economic uncertainty.

What was disappointing, however, was the absence of any mention to reverse the stamp duty change that were introduced in 2016 for buy-to-let and second homes, which is currently deterring people from investing in the private rented sector. The longer it is around the more of a knock on effect it will have on the growing homelessness crisis, a problem the Government plans to eliminate by 2027 - a bold statement from Mr Hammond!

 

We’d love to hear more of Your Thoughts on Phillip Hammond’s Autumn Budget.  Will it benefit Britain and will the reduced growth forecasts have an impact?  Let us know by commenting below.

Velshi & Ruhle grade the economy's performance under President Trump.

Below Kathleen Brook, Research Director at City Index, talks Finance Monthly through the current markets environment, referencing US stock, bonds, tech, crypto and oil.

As we reach the middle of the week, there are a few signs that stocks could have a harder climb from here. After reaching record highs earlier on Tuesday, the S&P 500 closed the day lower. Advancers vs. decliners were pretty even on the day, with 243 advancers compared with 255 declining stocks, the biggest loser was Tripadvisor, which sunk on the back of growth concerns. The most striking thing about the US stock market today is not the individual movers, but instead the lead indicators and the bond market.

Lead indicators head lower

The two classic lead indicators for US stocks include the Dow Jones Transport Average and the small cap Russell 2000. The Dow Jones Transport index peaked on 13th October and has been falling since then, it fell through its 50-day moving average on Tuesday, which is a bearish sign and could signal further losses ahead. The decline in the Russell 2000 hasn’t been as steep, but it peaked on October 5th and sold off sharply on Tuesday as investors seemed to rush to ditch small cap stocks after yet another record high was reached.

These two lead indicators have not been able to muster enough strength to recoup recent losses, which could be a sign of investor fatigue further down the pipeline. If the selloff in these two indices continues then it is hard to see how the blue chip indices can sustain momentum as we move through November.

The bond market: a health check for stocks

The other warning sign could be coming from the 10-year bond yield. It has fallen more than 15 basis points since peaking towards the end of October. This is in contrast with the 2-year yield, which has been climbing over the same period and is up some 5 basis ponts so far this month. This has pushed the 2-10-year yield curve up to its highest level since 2007, which is typical in a market where the Fed has embarked on a rate hiking cycle, even this mild one that Janet Yellen started in 2015. Rising yields tends to mean woe for stocks, hence investors may now try to book profit instead of instigating fresh long positions as we move to the end of the year.

However, we believe that it is not as simple as rising yields spooking the market. The decline in the 10-year yield could also be relevant for stock investors, especially if it is a sign that the bond market has lowered its expectations for Trump’s tax plan and thus reduced long term growth expectations. If 10-year yields keep falling – and they are testing key support at 2.31% which is the 200-day sma – then it is hard to see how the stock market won’t follow suit and sell off on the back of tax reform stalemate in Congress. Thus, the Trump tax premium could come and bite markets on the proverbial.

Is tech the canary in the coalmine?

Tech is worth watching at this junction after massive gains so far this year. Already bond prices have started to fall for some of the major tech players including Apple, as more supply has weighed on bond yields. Is this a sign that the market could, finally, be falling out of love with tech?

What can the Vix and Bitcoin tell us about markets?

Before predicting market Armageddon, the Vix still remains below 10. Although it doesn’t usually stay low indefinitely, we want to see it move higher before confirming our fears about global risk appetite. Bitcoin is also worth watching. Before anyone can call it a safe haven we need to see how it performs in a sharp market sell off. So far this week it is down nearly $550, so if you are looking for volatility, bitcoin is the place to find it. It is hard to pinpoint the reason for the decline, maybe the market is getting nervous ahead of the upcoming fork later this month? Or maybe the market sees Bitcoin becoming mass market, both the CME and the CBOE are readying themselves for the arrival of Bitcoin futures, as a threat to its price gains? Who knows, but if traditional stock markets sell off, I will be watching to see how Bitcoin reacts and if it has any traits of a safe haven (recent price performance suggests not.)

What next for the oil price?

This week appears to be oil’s chance to steal the limelight. After surging to a high of $64.65 at one point on Tuesday, Brent crude lost $1 by session close as the market re-assessed the geopolitical risks that have propelled the oil price higher, while the fundamental picture remains unchanged. While we acknowledge that the price of oil cannot simply rise on the back of the Saudi anti-corruption crackdown, we still think that there could be some gas in the tank that could send Brent towards $70 – a key technical level - after all, the sharp increase in the price of Brent crude actually began in early October, well before talk of Opec production cut extensions and Saudi corruption purges.

Ahead today, economic data is thin on the ground, so we expect price action to take centre stage. On Thursday Brexit talks resume, this could lend some volatility to GBP, which has been one of the top performers in the G10 FX space so far this week.

According to the Consumer Prices Index (CPI), inflation in the UK hit 3% this past September, a level not seen since April 2012, climbing from 2.9% this August.

Overall this rise in inflation means a more assured likelihood of increased interest rates, which currently sit at 0.25%. State pension payments will also rise in line with inflation figures in April 2018.

Most rumour surrounding the inflation rise speaks of the Brexit pound drop and the subsequent increase in the cost of imported goods.

Below Finance Monthly had heard from a number of reputable sources, experts and analysts in the financial sphere, with your Thoughts on the current inflation high and what it means for Britain and beyond.

Emmanuel Lumineau, CEO, BrickVest:

The UK’s relative economic strength post Brexit has now waned as consumers begin to feel the impact of rising inflation. Higher interest rates should be coming for the first time in more than a decade. For the commercial real estate industry, higher interest rates and rising inflation make borrowing and construction more expensive for owners, which can have a constraining effect on the market but can also lead to an increase in property prices.

We continue to see the highest level of volatility from the office sector as many international firms currently headquartered in the UK put decisions on hold over their long-term office space requirements. If the UK no longer gives businesses access to the European market, they may need to spread their staff across multiple locations to more efficiently access both the UK and European market. Indeed our recent research showed that 34% of institutional investors believe the biggest real estate investment opportunities will be found in the office sector and the same number in the hotel & hospitality industry over the next 12 months. If the UK no longer gives businesses access to the European market, they may need to spread their staff across multiple locations to more efficiently access both the UK and European market.

Matthew Brittain, Investment Analyst, Sanlam UK:

While far from being a watershed moment, today’s announcement that the rate of inflation has reached the 3% point does pile more pressure on already squeezed living standards. For people up and down the county, the pound in their pocket now feels a little less valuable. Inflation is now confidently outstripping wage rises, which have tended to be around 1-2%, meaning that people’s disposable income is in decline and many will have to take on more debt or save less in order to maintain their living standards.

Our view is that current levels of inflation are nothing to worry about – it’s simply a case of businesses passing on higher import costs, brought about by a fall in sterling, to their customers. Over the coming months, our expectation is that it will start to fall back to 2%, the level at which the Bank of England is mandated to maintain it. This view is not necessarily shared by the Bank of England, and today’s announcement makes an interest rate rise in November a near certainty as the Monetary Policy Committee takes action show they are keeping inflation under control.

Stephen Wainwright, Partner, Poppleton & Appleby:

While the level of corporate insolvencies are at an all-time low, personal insolvencies have jumped to their highest level in almost three years. It is no coincidence that the increase comes as incomes are squeezed and failing to keep pace with inflation at 3%.

The level of annual inflation is anticipated to peak in the next three months, but while companies are trying best to absorb the increase in material costs due to the weaker pound, this can only be absorbed for a short period. Therefore don't be surprised to see higher shop prices in the near future, which in itself will cause yet more inflationary pressures.

To compound matters, the BOE have made it clear that interest rate increases are on the radar which will impact on the £ in the pocket. We as a practice have seen a significant increase in advisory work which will inevitably lead to an increase in business failures.

The slow down is currently being concentrated in the consumer-led businesses such as retail and hospitality sectors. Recent data suggests that the construction industry has seen a downturn. The sale of motor vehicles have seen a steady decline in the last six months so clearly people are reluctant to spend on big-ticket goods.

While this sounds very negative, we must remember that the economy has been the fastest growing in the G7 for a number of years and unemployment is at its lowest since 1975. This has all happened during some of the most financially challenging times in living memory.

Has anyone tried to get a good plumber or electrician lately? Well, believe me, there is still a lot of confidence in the economy, and we are as a nation are very resilient.

Owain Walters, Founder & CEO, Frontierpay:

UK inflation figures have continued their rapid rise to 3%, coming in way above the Bank of England’s target of 2%. Sterling had a small spike against all major currencies following the inflation release, but the gains were short lived. The markets reacted accordingly to the announcement, with the pound falling throughout the day to 1.1212 and 1.3174 against the euro and US dollar, respectively.

Investors are expecting the BoE to respond by raising interest rates at its next monetary policy meeting in November, but this could be a very slow and soft approach, with rates potentially remaining at those levels for a couple of years. This has the potential to hinder any sterling strength over the coming months, with Brexit also still firmly holding the pound down.

Daniel Ball, Director at eProcurement provider, Wax Digital:

With inflation on the rise, procurement teams need to consider how to mitigate against price rises from their suppliers. Exchange rate fluctuations and rises in inflation are difficult to predict, but organisations can take steps to actively protect themselves from sudden price increases:

Be proactive

It’s important that procurement professionals, particularly those with an overseas supply chain become more proactive and disciplined when it comes to their sourcing and tendering activities. This will enable them to lock down pricing for a given period of time so that they are exempt from any cost or exchange rate fluctuations.

Collaborate with finance

Large multi-national enterprises, who do much of their buying overseas are adept at mitigating exchange rate and inflationary pressures, using complex management instruments borne from operational necessity. But if you’re a smaller organisation that only does a portion of business internationally, protecting against inflationary or exchange rate hikes won’t necessarily be a core competence.

If nothing is in place it may be time for procurement to raise the topic with the FD – most of the large banks can offer FX and inflation hedging tools. If your organisation uses these instruments already, then procurement needs to collaborate more closely with finance to discuss how to extend these current arrangements into more areas of purchasing, not just perhaps direct expenditure, but into indirect categories at risk too.

Assess risk

Supply chain evaluation needs to include risk matrices which cover not simply the core KPIs around financial stability, performance etc, but in the case of overseas suppliers then factors such as geopolitical, logistics and currency metrics too. Procurement professionals need to understand their supplier tiers, from the critical strategic ones that support production or service delivery, to the mid-tier in the larger spend categories and into the long tail invoicing infrequently. They then need to decide which parts of the supply chain will need a secondary wave of potential suppliers lined up to mitigate risk if things change significantly. This alternative supply chain may be more expensive, but will minimise the impact to business as usual if there are significant changes to the exchange rate.

John Calverley, Lecturer, London Financial Studies:

Britain’s headline inflation rate rose to 3% in September, well above the Bank of England’s 2% target. But this rise is entirely due to higher import prices caused by the devaluation in Sterling after the Brexit vote. Unless Sterling slumps again – unlikely as it is already historically low - inflation will drop back to 1.5% or below in 2019.

The conventional view is that when unemployment falls to a certain level the labour market heats up. Workers and unions are emboldened to ask for higher wages and companies become willing to offer higher wages to attract workers. For the UK (and US) that level has long been put at about 5%. In Britain unemployment has fallen from 4.9% to 4.3% since the Brexit vote which suggests wage growth should start to pick up. That is the Bank of England’s view which is why a programme of gradual interest rate rises is likely over the next year.

But some economists fear that the conventional view is wrong. Around the world wages are not responding to low unemployment the way they used to. In Japan the labour market has been tight for some time and yet wage growth is zero. In the US unemployment is also almost down to 4% yet wage growth is stuck at 2-2.5% pa, the same as in Britain. Exactly why wages are quiescent is disputed, but most put it down to the combination of weak unions, fearful workers reluctant to push for a pay rise and the competitive pressures of globalisation.

Inflation hawks fear that we have been lulled by these considerations. They worry that very soon wages and prices will start to surge, creating a serious inflation problem. The best outcome would be for a very gradual lift in wages even as unemployment falls further. After all unemployment typically stood at 2-3% in the 1950s and 60s so perhaps that is possible again today. And if wages lift only gradually this would support consumer spending while keeping the Bank of England in gradualist mode, raising rates but not too far or too fast. At the moment this seems the most likely outcome which is why, after 2017, 3% inflation may not be seen again for some years.

Katharina Utermoehl, Senior Economist for Europe, Euler Hermes:

Inflation reached three% in September, the highest rate seen in more than five years. The sharp acceleration from around one% a year ago has been largely driven by the sharp depreciation of the pound following last year’s Brexit vote which made imports more expensive. In addition, increases in food and transport prices further pushed up annual headline inflation from 2.9% in August.

For 2017, we expect UK inflation to come in at 2.7% before slowing slightly to 2.6% next year. Consumers will continue to feel the pinch with inflation easily exceeding sluggish wage growth which is close to two% and showing no sign of a pick-up.

We expect UK GDP growth to slow down to 1.4% this year and one% in 2018, down from 1.8% in 2016. The pronounced pick-up in consumer price inflation is raising the probability of the Bank of England (BoE) increasing the benchmark interest rate from the current record low of 0.25% for the first time in over a decade. The BoE has long tried to strike a balance between supporting economic activity and ensuring price stability, but with inflation now registering a full percentage point about the BoE’s two% price target the latter objective will likely take priority. We expect an interest rate hike to be announced as early as this year.

Mihir Kapadia, CEO and Founder, Sun Global Investments:

The rising inflation is largely due to the fall in value of the pound over the Brexit uncertainties. With increasingly abrasive negotiations underway in Europe, along with political cracks appearing within the British parliament, the period of uncertainty is long from over. Therefore, we can expect that the inflation figures will only be climbing northward though the foreseeable future unless and until the UK political machinery brokers a viable deal with its European counterparts and thereby douse the uncertainty which is inflaming the markets.

Meanwhile, the pick-up in inflation raises the likelihood of an increase in interest rate from the Bank of England, which is currently at 0.25%.  That being said, we would argue against a premature rate rise, considering the current political uncertainty. An interest rate rise now, which increases prices for millions of mortgage holders and could dampen economic activity, could just be the final blow to the squeezed out UK consumer.

Greg Secker, CEO, Learn to Trade:

It’s no secret that the UK’s divorce from the EU has left the economy vulnerable to more persistent price pressures, which has had a negative impact in the short term for consumers. This hike in inflation rates has tightened the squeeze on British households. The rise in the cost of everyday goods means workers are seeing the value of their pay packets weaken in real terms.

Over the next coming weeks, UK businesses will continue to take a ‘business as usual’ approach of experiencing higher costs from exports and cutting costs where possible to ease the pain of a potential decrease in business profits and power to purchase. Yet, while it may seem like doom and gloom this winter there is a light at the end of the tunnel. We expect the pound to strengthen in the long term, increasing buying power and easing those tight purse strings, but this will be dependent on the trade agreement and movements within the Brexit negotiations.

We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!

According to reports, Jordan Belfort, the American stockbroker immortalized in the blockbuster movie Wolf of Wall Street, claims Initial Coin Offerings, the IPOs for new crypto coins, have become “the biggest scam ever.”

Belfort told the Financial Times that fundraising ICOs are “far worse than anything I was ever doing,” adding that “"It's the biggest scam ever, such a huge, gigantic scam that's going to blow up in so many people's faces.”

Many see crypto currencies as a massive investment in the future of finance, while other see them as a bubble, with rising prices inciting a speculative investment spin. According to official figures from CB Insights, $2 Billion was raised in ICOs in the first nine months of 2017 alone. In 2016 the same period saw $54 Million raised. Bitcoin, the leading crypto currency has also seen a rise from circa $1,000 to up to $5,000 this year.

Cryptocurrency expert and Founder of London firm CommerceBlock disagrees and says the old guard of banking and finance are running scared. Nicholas Gregory, founder and CEO of cryptocurrency enabler CommerceBlock, said: "The old guard are being cut out by ICOs which means the banks, VCs and lawyers are losing billions. No wonder they're upset.

"It's wrong to ban them because an ICO is just a way of crowdfunding investment for technology firms who choose to do it in cryptocurrency because that is their field. 

"In the old days - up to a year ago - you would go to a VC and they would decide whether to invest in your company and you would have to follow their rules. ICOs make it easier for companies to raise funds from more sources and free themselves from the straitjacket of VC interference.

"Are there scams? Of course. But there are scams in every financial system from penny stocks to fraudulent gambling sites.

"It's too easy for critics to point the finger of blame at the technology and not the criminals who exploit every loophole in every kind of commercial environment.

"Investors take a risk by buying into ICOs just as they do buying equities, even though they are not securities. But they are offered far greater transparency. There is more they can vet with ICOs because you can look at the source code of the firm you are funding. You can download the product and play with it. In the stock market all you get is a brochure.

"This is why it's more transparent and that's why VCs hate it. The VC model is all about the 1%. Only a multi-millionaire could invest in Facebook in 2009. With the ICO model, if you and I spot the next Facebook we can get in on it."

A recent study from Forex Bonuses finds the countries among the 20 largest economies who are adapting quickest to using cashless systems like phones and contactless cards – revealing that Canada narrowly edges out Sweden for the top position.

The economies adopting the most cashless technology have been revealed in new research from global trading site Forex Bonuses.

Investigating twenty of the world’s most significant markets, the study looks into contactless card saturation, number of debit and credit cards issued per capita, usage of cashless methods, growth of these cashless payments, and the proportion of people who are aware of which mobile payment services are available. From these six metrics an overall ranking was calculated.

Cashless Economies

The top position has gone to Canada, who, while only having contactless functionality in 26% of their cards (compared to 41% in the UK and 56% in China) and the lowest number of debit cards per capita included in the research (0.7), were found to have over two credit cards per person, a figure only exceeded by their neighbours in the US, who had just under three.

Likewise, the majority of their payments were made using cashless means at 57% of transactions, outmatched only by 2% in both Sweden and France. The UK reached 52% on this scale, while China, despite the majority of cards being contactless, used cashless methods in only 10% of transactions. China were also the most educated on mobile payment services, with 77% of survey respondents claiming they were aware of the options available to them in this regard. In comparison, only 47% in the UK claimed the same.

(Source: Forex Bonuses)

In 2008 the global financial crisis hit business worldwide and recovery has been slow ever since. At the centre of this recovery banks have played a vital role, but attitudes have shifted over the years. Here Marina Cheal, CMO at Reevoo, answers the question: have banks earned our trust back?

When is a bank not a bank?

In 2008 the major financial institutions managed to comprehensively dismantle consumer trust. Since then, they’ve tried almost everything to win that trust back – but the main change is what’s happening around the big banks, not within them.

The Big Six survived the 2008 crash (some by the skin of their teeth) but nearly ten years on they’ve still to rebuild consumer trust. Their customers remain – mostly out of necessity or inertia. But changing attitudes, expectations and regulations mean a raft of challenger banks are ready to snap them up.

And those big banks have no one to blame but themselves.

Pre-2008, banking customers were supposed to look out for stability, tradition, heritage above everything, even customer service. Customers would put up with inconvenient branch opening hours and computer-says-no failed mortgage applications because at the time, legacy was a good thing.

Today’s banking customer has done a complete U-turn – influenced not just by the failings of the big financial institutions, but innovation in almost every other industry. Compared to how easy it is to set up a Gmail or Uber account, banking is in the dark ages. Challenger banks’ USP is helpfulness not heritage, speed not solidity - and it’s blowing a wind of change through the industry.

This has led to the birth of a clutch of new smartphone-only banks that are focused on making banking a more user-friendly experience. Understanding that banking isn’t just about holding onto and shelling out the customer’s cash when required, these ‘neo-banks’ put money management back into customers’ lifestyles. What, if anything, is the bedrock of people’s modern lives more than money?

So instead of lining up deposits and debits and administrating standing orders, these banks review the customer’s spending patterns, established commitments to help customers better understand how much cash they really have in hand. Oh, and making the experience enjoyable while they’re at it.

Tom Blomfield, founder and CEO of one of the most popular smartphone banks, Monzo, doesn’t believe that the incumbent banks are under immediate threat. He does, however, insist that they will have to change.

He told the People Tell Richard Stuff podcast: “Big banks don’t need to fail for startups to succeed. We’re still fractions of a percent of the market. But retail banks will look dramatically different in five years. They may not have to fail, but that’s not to say that some won’t,” he warns.

Mark Mullen is chief executive of Atom Bank and the former CEO of First Direct. His view is that the market is changing in response to customer needs and it really is time to move with the times.

“When regulation changes, banks change in response. The question is really what drives regulation. A lot of what we see today has been driven by the crisis but also a broader range of influences like advances in technology. The great majority of innovation in banking didn’t start anywhere near banking and so it’s had to respond.”

There can be no doubt that the Big Six have been slow to respond to the changes in the retail banking sector. Barclays only launched a mobile app in 2012 and the majority of mobile banking apps are simply a pared down version of online banking - in many cases, so pared down that the app still can’t perform simple tasks such as pay someone new without referring to the online portal.

Open banking looks set to be the real spanner in the works for banks. PSD2, the second Payment Services Directive will open up customer banking data (with consent under data protection legislation) to anyone the customer is happy to share it with.

This can include but isn’t limited to: online retailers, utilities, insurers... in fact, anyone who can provide the customer with great user experience and simple financial management under a trusted brand.

Being side-by-side, and in some cases having to cooperate with more nimble companies will be an unfavourable comparison – and may shepherd customers toward banks that can offer a more tech-forward solution.

Mullen explains the challenge ahead, for challenger banks as well as incumbents: “Open banking and PSD2 paved the way for an API economy in financial services. The acid test of whether it succeeds is less to do with technology or regulation. What will motivate customers to engage in a different banking model and fundamentally - what’s in it for them?

“We’ve lived with the universal banking model and the one stop shop. The open banking model has to be as convenient. I wouldn’t underestimate that. You can have a great reputation and tick the boxes you think are important and still struggle because the trade-off of effort versus return isn’t transparent.

This still won’t necessarily drive the big banks into obsolescence but it will strip away the brand and service elements until our hallowed institutions are nothing but white label providers of banking functions. The account management, the ancillary services and the relationship will be with whoever can deliver consumer trust, 2018-style.

Mullen concludes: “This is a very big banking market and there are lots of opportunities for us to develop over the next five years. When PSD2 enacts in January, the world won’t be different but there will be a competition for customers and products over the year.”

Interactive Investor, the online investment platform, recently released its clients’ most traded investments, by number of trades, in August 2017.

Commenting on the results, Lee Wild, Head of Equity Strategy at Interactive Investor said: “Following an exhausting 2,000-point rally between February 2016 and the record high in June this year, equity markets have extended their pause for breath, moving largely sideways over the summer months.

“Both the FTSE 100 and broader FTSE All-Share index rose less than 1% in August, though North Korean sabre-rattling tested investors’ nerves. Concerns that Kim Jong-un could nuke Guam, the US west coast or anywhere in between began a rollercoaster ride through the month, as enthusiastic buyers took advantage of each sell-off.

“Mopping up underperformers like Barclays proved a popular trade. After falling 6% in August, Barclays shares haven’t been this cheap since November 2016.

“Trading at a discount to most domestic peers on several key multiples, Barclays gatecrashed the top five most-traded large-caps on the Interactive Investor platform as buyers outnumbered sellers by more than two-to-one.

“AstraZeneca’s popularity proved fleeting as bargain hunting following July’s crash dried up. Investors who bought heavily last month below £43 are busy counting profits, currently a healthy 8%.

“Perhaps the biggest story to pass under the radar in August was the AIM market’s break above 1,000 for the first time since summer 2008. It’s easily outperformed the other domestic indices in 2017 so far, rising 20% in the past eight months.

“There were big moves in August by some of the junior market’s biggest companies, among them Frontier Developments (67%), Plus500 (45%), Blue Prism (33%) and IQE (29%).

“It was IQE that piqued interest among investors in August, almost toppling UK Oil & Gas from top spot as trading volume on the Interactive Investor platform more than doubled.

“A rally, given fresh momentum by a bullish update in July, spilled over into August, pushing IQE shares to new highs. There’s real excitement here as market watchers speculate about the possibility its chip components feature in Apple’s new iPhone 8, due to be launched next week (12 September).

“Internet of Things (IoT) hopeful Telit Communications came from nowhere in August following a profits warnings and shock departure of its CEO. A subsequent plunge in the share price and extreme volatility made it a trader’s favourite.

“Overseas, trading volume for Apple doubled as the shares surged by 10% in August. Apple shares typically nudge higher ahead of major product launches and the unveiling of the iPhone 8 next week has pushed the share price to a record high.”

(Source: Interactive Investor)

A recent report form PwC concludes that UK investment in InsurTech in the second quarter of 2017 surpassed that of the previous three quarters, increasing to $290 million (£218m) in the first half of 2017, compared to $9.7 million (£7.3m) the year before.

Global investment in InsurTech by global insurance firms, reinsurance firms and venture capital companies surged 247% to $985 million.

Mark Boulton, Insurance Sector Lead at Fujitsu UK & Ireland has this to say to Finance Monthly:

“This year has been phenomenal for the insurtech industry in the UK, and these latest figures reflect it. Increasingly, we see the market gaining momentum, and the amalgam of data made available is reshaping the industry in an unparalleled fashion. Investors are coming to much better understand the values that lie within a connected world, from more dynamic customer relationships to personalisation and need for tailor-made solutions.

“Fujitsu’s recent research looking into the UK’s digital landscape showed that nearly 40% of people want the UK to make faster digital progress. As such, insurers need to keep up with the rapidly changing dynamics and unlock the power of technologies.

“Although many insurance companies have digital on their radar, it is important for this industry to take advantage of digital innovation by not only creating savvy online apps and improving the digital elements on the consumer-facing side, but by also implementing digital throughout the business. This will help insurers not only save more, but also become more integrated and process efficient. The amount of deals and investment in the past year are a vote of confidence and now is time UK claims its role as a global insurtech hub.”

While many younger drivers have been using so-called black box car insurance, telematics has yet to become mainstream. The FT's Oliver Ralph test drives a telematics system to see how it affects his driving, and whether it could be the future of car insurance.

September marks the 10th anniversary of the contactless card, and in the last decade we’ve seen its use soar, particularly in recent years. Barclaycard believes its use will push a further 300% in the next four years.

 Finance Monthly has heard from Ian Bradbury, CTO for Financial Services at Fujitsu UK and Ireland, who shares his insights on how contactless has developed over the past ten years, and where he expects the payments landscape to go next.

It is hard to believe that contactless cards have now been around for a decade, as we have only in recent years seen them receive significant uptake with consumers. What was once seen as ‘scary’ and ‘unsafe’ to use, is now – thanks to its ease and education – resonating and growing in popularity with today’s consumers and now responsible for a third of all card transactions.

We expect this adoption of contactless payments to only grow, and become an increasingly important feature in the British payments landscape. Ultimately, both consumers and retailers are choosing to adopt solutions that are secure, quick and easy to use, as well as ubiquitous.

Not only are contactless payments quicker and easier to use than Chip and Pin, they are in a variety of ways more practical than small change and notes. The notable corresponding growth in debit card transactions also implies that this is not just growth fuelled by debt and easy credit – much of this increase will be a result of contactless payments being made purely due to ease. Moreover, contactless payments have the added value of fuelling other payment solutions such as Apple and Android pay and other wearable technology, which isn’t so easily done with Chip and Pin.

The success of contactless payments highlights consumers today are quick to adopt new payments solutions that focus on improving their experience. That said, because consumer experience can cover many aspects including convenience, security, speed and ubiquity, it’s essential that providers put in place ways to improve the experience over current solutions. If future payment solutions do not address all of these areas – which are fast-becoming an everyday expectation from consumers – then they are unlikely to be successful.

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