From chatbots to instant payment solutions, Finance Monthly has heard from Ralf Ohlhausen, Business Development Director at PPRO Group, who gives his top 10 on the ever-changing payments sphere, the fintech disruptions of 2017, and the latest regulatory updates for the coming year.

1. Usability of payment methods

Payment methods need to become more user-friendly to appeal to various platforms of commerce from the till point to online, taking differing devices into consideration in order to stay competitive. This is especially important for providers of e-commerce payment methods who need to come up with optimised user experience and facilitate the growing trend of mobile payments.

2. Strong Customer Authentication (SCA)

SCA becomes a mandatory part of the Payment Services Directive 2 (PSD2), which will be implemented in the member states of the EU over the next two years. Unfortunately, the SCA’s increase in security will likely affect usability, which is completely contrary to what merchants and consumers want. New innovations around authentication methods may reduce the problem, but may also lead to more advanced concepts overall, making SCA obsolete.

Going forward, we will see increasing discrepancies between fast moving technology and slow moving regulatory changes - a difficult dilemma, which can only be overcome by fundamental changes in the regulatory approach. If you are impacted by SCA watch out for exemptions that might be granted and new authentication methods mitigating the adverse effect on usability.

3. Mobile payments

There’s been some bad news for mobile-payment sceptics. According to the 2016 Visa Digital Payments Study, in just one year the number of European consumers using mobile payments has increased by 200%. Previous scepticism may have been prompted by the fact that it took mobile payments longer to take off than originally predicted.  Bashing mobile-payments also became a favourite sport for some journalists.  But that doesn’t change the fact that mobile has now reached its tipping point. And with companies such as Apple and Samsung now getting serious about mobile payments, it seems a fair bet that the pace of that change is about to accelerate.

ApplePay is now rolling out to most major markets. And it’s doing so, as it turns out, exactly as consumers are starting to accept mobile payments. Given how often Apple has got it right before, particularly in terms of user experience, there’s every reason to be optimistic this time too. That can only be a good thing both for mobile payments and for the alternative-payment market as a whole. On a more wide-ranging note, this is a lesson for all of us in the industry. New developments invariably go through the whole of the hype cycle — including what Gartner refers to as the “trough of disillusionment”, when everyone is pointing to early failures and disappointments and saying “it will never work.”

As an industry, we’ve got to get better at recognising this cycle for what it is. We need to stick with good ideas, even when they don’t seem to be fulfilling their early hype. Because good ideas don’t go away. And no one wants to be the late adopter when, suddenly, everything starts coming together at last.

4. Instant Payments

The Euro Retail Payments Board (ERPB), a successor of the SEPA Council, is currently pushing very hard to make sure that SEPA is not falling behind the many national initiatives for implementing faster and even instant payments. The European Payments Council (EPC) just published their first rulebook for instant SEPA credit transfers (SCT Inst), which will bring down the crediting of the beneficiary’s account from one business day to a mere ten seconds. Similar instantaneous funds availability shall also come to SEPA Direct Debits, Cards and other payment methods. Implementation of SCT Inst will be optional for all the banks (at least for now) and may take some time, but the future of payments will be instant – just as it happened to messaging, the purchase of books or music and many other things of our daily lives already.

5. Access to Account

January marks one year until the Second Payment Services Directive compliance deadline, which will bring the new concept of “Access to Account” (XS2A) into the EU. Licensed Third Party Providers (TPPs) will be granted access any bank account in the EU to provide payment or account information services to their customers. 2017 will see increasing competition to the additional layers of value-added services (VAS) presented to banking customers.

6. Chatbots

At the beginning of 2016, internet giants rushed to incorporate an Application Programming Interface (API) into chat programs – also known as chatbots – for automated communication with customers. After a year of creating a firm presence in the UK, chatbots will become one of the biggest innovations in 2017 since the introduction of smartphones and it won’t take long until “chatbot payments” are the norm.

7. Blockchain Technology

The underlying blockchain technology behind bitcoins will certainly make further headlines in 2017. Blockchain is a database where all bitcoin transactions are saved. It consists of a long chain of data blocks in which one or more transactions are being compiled, encrypted and securely stored. Transactions are very fast with blockchain, and although they are not made in real-time, they are very cheap. Ideas, where the blockchain technology might be used in the future, are only just being developed. Basically, however, it is already clear it could be beneficial for all transactions that are currently in need of a “trusted third party”. One example is smart contracts. Instead of solicitors, computers take over the contractual management, meaning that they are proofing all preconditions in live mode and are able to realise individual agreements automatically.

8. Anti-Money Laundering

It has been much speculated whether the fifth Anti-money laundry directive (AML5) will actually come into play in 2017. If it does come in the form currently proposed by EU legislators, it will have a massive impact on e-money institutions. The already low limits for e-money usage without Know Your Customer (KYC) processes will be further decreased in a way e-money will lose its appeal over standard banking. That would through the baby out with the bathwater and could collapse the whole EMI industry.

9. Peer-to-Peer (P2P) payment

Person-to-Person or Peer-to-Peer (P2P) payment solutions have been popping up across Europe and the rest of the World for quite some time, but we can expect 2017 to see the method to gain traction here in the UK. The European Retail Payments Board (ERPB) is working to facilitate the co-operation of existing and future P2P mobile payment solutions to ensure interoperability on a pan-European level. The vision is to provide any person with the ability to initiate a pan-European P2P mobile payment safely and securely. 2017 could finally see a standard brought into place which reaches a critical mass of people and enables P2P payments without the need for knowing lengthy bank account numbers.

10. Cashier-free stores

Amazon recently unveiled plans to bring a chain of cashier-free stores to the UK next year. By using technology to track which items have been selected, the store will remove the need for products to be scanned or for customers to queue at a checkout as customers will be able to pay via smartphone as they exit the store. The introduction of such stores will accelerate the UK’s move towards a cashless and even encourage a card-less society in 2017.

The UK Car Finance market has grown aggressively over the last few years, fuelled in part by innovation and a growing ability to serve the sub-prime market.

Car-buyers have a number of options now available to them if they’re unable to be a cash-buyer – including Hire Purchase, Personal Loan and the newer Personal Contract Plan.

But flexibility on purchase options is only part of the reason for the strong growth in the market.  Car Finance companies have also embraced technological innovation to help them broaden their market into the sub-prime sector – i.e. those customers who have an impaired credit history and won’t be able to access finance from the high street banks at their leading rates.

The sub-prime lending market has always been eyed with both desire and caution by finance providers – on the one hand the sub-prime market offers the ability to charge higher rates of interest, on the other hand, the sub-prime borrower market, by its very nature, carries with it a high risk of default. Get the model right and a lender can make handsome profits, get it wrong and the bad debt rates can force a lender out of business.

The car finance market is slightly different to the personal loan market in that during most of the finance arrangements available, the finance company technically retains ownership of the car so can repossess the vehicle if things go wrong with the loan repayments. Traditionally though that was easier said than done – finding the car when the borrower knows the loan has defaulted may be tricky.

The introduction of technological solutions have helped finance companies not only track and locate vehicles but also ‘encourage’ the borrower to keep up the payments under their finance plan.

Immobilisers are often fitted to vehicles, particularly those financed in the sub-prime sector – i.e. those that present the highest risk of the borrower not keeping up the repayments – and they’re clever pieces of kit. Every month when the finance payment is made the borrower will receive a unique pin code to enter into the immobiliser. Fail to make the payment and enter the correct code, the immobiliser will kick in and the car won’t start. What’s more, the Immobiliser will also act as a tracking device making it much easier for the finance company to repossess the vehicle.

So at a stroke the finance company has a) heavily incentivised the borrower to keep paying (or their car won’t start) and b) made it much easier to recover the security for the finance.

The sum of which means that defaults and write offs are down, so the finance companies can be a lot more confident opening up to the illusive sub-prime credit market. Allowing more people to finance a car purchase than would previously have been able to.

All well and good? Well, certainly from the point of view of the finance companies (who book more loans and keep defaults to a profitable level) and the dealers (who get to sell more cars). But what about from the customer’s point of view?

At face value it looks to be good news for the customer, particularly those in the sub-prime space, as more customers are able to access a finance product for their car purchase. But, if the default rates are lower and repossessions are lower (and therefore write offs) – are the interest rates also lower?

A quick look at the top ranking sites on Google for ‘Car Finance’ found a Representative APR of 49.6 for applicants with bad credit – for a £5,000 loan over 4 years that’s a total interest of £5,236.

The interest rates charged cover the costs of providing the finance, including off-setting the loans that ‘go bad’ and are not repaid, and providing the lender with a return for its investment. The rate charged can be roughly translated into the risk represented by the borrower. The lenders have found technological solutions to reduce the risk of defaults and write-offs but still point to a borrower’s credit history to determine a level of risk – which justifies the high interest rates.

There is no regulation forcing a direct correlation of profit levels and interest charged but as we know, a highly profitable sector in financial services quickly attracts profiteering companies eyeing a quick (or large) buck. To keep this growing market buoyant but sustainable the lenders will need an element of self-regulation (and self-control), perhaps forgoing some of the bigger short term gains and passing on some of the profit to borrowers in the form of reduced rates.

(Source: Talk Loans)

The updated lodging forecast released  by PwC US notes that strong industry performance in the fourth quarter of 2016, including encouraging trends in demand and average daily rate (ADR), coupled with a post-election surge in consumer and business sentiment that contributed to improving economic conditions, sets the stage for continued revenue per available room (RevPAR) growth in 2017.

PwC expects the increase in supply of hotel rooms to marginally outpace growth in demand, resulting in a decline in occupancy to 65.3%. Aided by an expected increase in corporate transient demand, growth in average daily rate is expected to drive a RevPAR increase of 2.3%, according to the report.

PwC's outlook is based on an economic forecast from IHS Markit, which expects real GDP to increase 2.3 percent in 2017, measured on a fourth-quarter-over-fourth-quarter basis, approximately 50 basis points higher than in PwC's November forecast. Improving economic conditions are driven by a number of factors, including improving business and consumer confidence, and surging financial markets, as well as potential policy decisions related to tax cuts and changes to trade regulations.

The updated estimates from PwC are based on a quarterly econometric analysis of the US lodging sector, using an updated forecast released by IHS Markit and historical statistics supplied by STR and other data providers.

"Based on a strong fourth quarter, we are encouraged by the trends we are seeing as we head into 2017," said Scott D. Berman, principal and U.S. industry leader, hospitality & leisure, PwC. "However, we remain cautiously optimistic, as higher-than-previously anticipated increase in demand is still expected to be offset by increasing supply through the year."

(Source: PwC US)

While the outlook is for firmer and more geographically balanced growth in 2017, the Canadian economy faces major downside risks from the incoming Trump administration's trade policies and Republican-backed corporate tax reforms, finds a new report by CIBC Capital Markets.

These risks will impede the Bank of Canada's ability to tighten monetary policy, the report says.

"We would need a huge and unlikely upside surprise to push the Bank of Canada into a rate hike this year," says Avery Shenfeld, Chief Economist, CIBC. "Particularly since, the Trump administration's trade-policy-by-Twitter and a Republican-backed corporate tax reform plan biased against import content both represent a major downside risk if Canada gets caught in the crossfire."

In that more negative scenario, Mr. Shenfeld expects the Canadian dollar to come under pressure. "The shock to US-bound exports would engender a much steeper slide in the Canadian dollar, well beyond 1.39 Canadian dollars per US dollar we expect to see on monetary policy differentials," he says.

CIBC forecasts Canada's real GDP growth at 1.8 % in 2017 and 2.0 % in 2018. "A modest rebound in energy sector capital spending and ongoing oil output gains will add a full percentage point to growth, a lot of that showing up in Alberta's climb out of recession," says Mr. Shenfeld.

The growth in the energy sector will offset the reduced contribution from housing and consumption as an indebted household sector faces higher inflation and a tighter in mortgage borrowing conditions, the report says.

As for equity markets, Canadian stocks are unlikely to have the same edge relative to U.S. stocks as they did in 2016. "It's not what you know, but what you can't know at this juncture, that gives food for thought for investment strategies," says Mr. Shenfeld. "But, this could still be a wild ride for investors. There are some significant skews to the risks around the bland base case."

Energy and gold prices look to be range-bound, with the former constrained by inventories and rebounding US drilling, while industrial metals lack the sustained demand needed to build on the prior year's gains."

US stocks have already priced in a lot of good news, mostly on the cost side, and Mr. Shenfeld says that if Trump delivers on lower corporate taxes and a lighter regulatory burden, high-single digit earnings growth looks achievable.

The report forecasts 2.3% growth for the US economy in 2017 and 2.1% in 2018, noting that uncertainty is "extremely high" surrounding Trump policies.

"Trump enters the Oval Office with a promise to Make America Great Again, but the trouble is that America is pretty good already," Mr. Shenfeld says. "We've lifted our US growth forecast slightly for 2017, reflecting economic momentum already in place more than any new policy developments. Wage and jobless data suggest that slack is diminishing, with the US on target for full employment by next year.

"We're also not sure that large scale fiscal stimulus is really on the way, at least not on a sustained basis. Tea Party conservatives are likely to insist on spending cuts to "pay" for tax reductions, and the infrastructure plan is extremely modest in scale."

If such offsets aren't forthcoming, the result won't be faster growth, but simply a steeper climb in Fed hikes to keep inflation at bay, the report says. A situation with a greater fiscal ease in the US, would prompt increases in borrowing requirements, inflation and Fed hikes that will lift bond yields at a sharper pace.

"For corporate Canada, the instinct would be to judge a becalmed outlook as reason to eschew active hedging for now. But the potential for a Trump in the night bump suggests looking for opportunities to hedge against a pullback in commodities, a weaker Canadian dollar, and a rise in long term rates," Mr. Shenfeld says.

(Source: CIBC)

Melaine Campbell, Managing Director at Dun & Bradstreet, discusses her compliance predictions for the year ahead.

It is hard to ignore the impact that the one of the most turbulent political years in recent memory might have, not least on world of compliance. The overarching theme from the second half of 2016 seems to be countries making moves to do what’s best for themselves in regulation, rather than what works for the majority. From Trump to Brexit and all the regulations in between, 2017 will certainly bring uncertainty to the regulatory landscape…

In the US, Donald Trump has given some indication on his perspective on regulatory compliance: to eliminate regulations which are not in the public interest. In his economic policy platform he called for “a new modern regulatory framework” and outlined his vision on regulations proposing to “reform the entire regulatory code to ensure that we keep jobs and wealth in America” as well as “issue a temporary moratorium on new agency regulations that are not compelled by Congress or public safety.”

Since becoming President-elect, Donald Trump’s stance on Dodd-Frank has been scaled back, although it is apparent he still intends to dismantle the federal law passed in 2010. This deregulation would mean fewer stringent compliance checks and a rethinking of how to ‘red tape’ banks.

Furthermore, while Trump is concerned about burdensome regulations, he also is concerned about fighting terrorism and other crimes such as drug trafficking. His objective, as is the case with any administration, is to disrupt the financial flow to terrorism groups and other criminals.

Closer to home, it is also hard to say how Brexit will impact international regulation immediately, but it is clear from Theresa May’s speech on 17th January that the UK will leave the single market, revoke EU laws and set its own regulations in due course. As a result, there will be an even greater demand in the short and medium term for the compliance functions for businesses due to the increasingly likely outlook of complex regulatory negotiations.

In the midst of significant potential change in 2017, it will be vital for companies to make use of the latest data and insights to ensure that they are up to date with international requirements. Know Your Customer (KYC) will be vital, both from a compliance and business perspective; the compliance team can share insights with the rest of the organisation about potentially risky partners and prospects. Data must be current, accurate and be drawn from more than one source – such as using online news sources to support public records. Companies will also need to take care over how they use data, and be aware of possible changes to privacy laws in different territories. Working with a well-informed and compliant data provider will help to address this.

There is a view that even if regulation is scaled back, companies’ own compliance efforts will remain strong. There is growing acknowledgement in the business community of the importance of remaining compliant to demonstrate corporate social responsibility, and attract both customers and the best new talent. Through their compliance efforts, businesses can play a role in disrupting terrorist and corrupt organisations. By pursuing ethical and compliant growth, businesses can not only benefit themselves, but make a positive difference to the world.

(Source: Dun & Bradstreet)

Though the US’ 45^th President, Donald J. Trump stole the headlines last week, Alpine resort Davos saw a sweep of discussions, announcements and interesting statements come from this year’s 47^th World Economic Forum.

Here below we have picked out some of the top highlights from the four-day annual forum.

US-China Trade War

Keynote speaker Chinese President Xi Jinping opened the forum stating that “Protectionism is like locking yourself in a dark room, which would seem to escape wind and rain, but also block out the sunshine…No one is a winner in a trade war.”

Jinping and other Chinese spokespersons, throughout the forum, set out a strong position, a warning even, against Trump's intimidations to start an American trade war against China.

Chairman of Ali Baba stated at the forum that a trade war between the US and China would be disastrous, and that he would do all he could to prevent it. "I think that China and the US should never have a trade war, will never have a trade war, and I think we should give President-elect Donald Trump some time - he’s open-minded, he’s listening," Ali Baba’s Chairman said in a speech.

AIi Baba executives also announced the signing of an Olympic sponsorship deal and provoked the US on its concerns towards its military rather than prioritizing infrastructure.

Europe & Brexit

On topics of European politics, and their effect on global economic matters, delegates met to discuss, and thereafter agree or disagree, on how political shifts, due to ground-gaining anti-establishment political parties, can be addressed by institutions.

Brexit was of course a big talk at the forum; in the UK Prime Minister's attempt to woo London’s banks, describing the institutions as a “huge value” to the economy despite their announcements of accelerated action in transferring executives to the EU, May shifted her Brexit priorities towards financial services in the UK capital. She said: “I value financial services in the City of London, and I want to ensure that we can keep financial services in the City of London… I believe that we will do just that.”

Additionally, the UK PM was confident in portraying post-Brexit Britain as a champion in free trade, claiming that “The UK will step up to a new leadership role as the strongest and most forceful advocate for business, free markets and free trade anywhere in the world.”

An interesting comment came from Sergio Ermotti, CEO of the UBS Group AG: “2017 will be a very challenging year for Europe…You see what's going on with Theresa May (and Brexit) but also, we have elections coming in Holland, most likely it's going to come out that the Populist party will have a relative majority. You will see France elections, you will see German elections, Italian elections and they are all pointing out to a lot of divide within the EU on how to tackle these issues."

Trump’s Presidency

On the other hand, much discussion also surrounded the inauguration of Trump, populist politics and business confidence on the back of his intentions… and tweets.

“I think that these very rational people will be very thoughtful when they go about the actual policy,” said Jamie Dimon, CEO of JPMorgan Chase & Co., discussing the need to focus on Trump’s cabinet nominees, rather than worrying about his one-line tweets.

Dimon told reporters he was not concerned about the US’ future and its effect on the world’s economy, given that the real estate magnate and TV star has enlisted “very serious people” for the new US administration.

Though financially, many were on the fence in discussions surrounding Trump’s intentions in relation to finance, Wall Street’s high flyers spoke about being confident that the incoming administration will relax regulatory limits on financiers, though they are not counting on the new President to overturn Obama’s Dodd-Frank Act (2010).

On the last day, a discussion took place as to whether populist politics can be positive for the global economy, markets and moving onward. Both the election of Trump and Brexit were prime examples used to define whether populism is a detriment to economic affairs or not, and one of the overall conclusions that can be taken from the discussion was that Trump and similar scenarios “will be disruptive and bring the economy forward,” (Indian billionaire Anil Agarwal).

This however, was not a majority opinion shared by all, and has been an ongoing debate through various speeches at the forum. Philip Jennings, General Secretary of the UNI Global Union said: “I think Donald Trump is going to turn out to be the betrayer in-chief. If you look at the people that he’s surrounded with, there’s not one of them that’s got the working man’s interest at heart.”

But again: “In Davos, I’ve got the impression that the Trump election is being interpreted as thoroughly positive in economic terms,” stated Swiss Finance Minister Ueli Maurer to reporters on the final day.

Technology, Motoring, Climate Change and R&D

But of course, politics did not dominate the forum necessarily, leaving ample space for tech and manufacturing companies to make announcements and analyses.

Toyota Motor Corp. Chairman Takeshi Uchiyamada, says that due to the need for further infrastructure, fuel-cell automobiles will eventually become popular, but it will take much longer than it took gasoline-electric cars to gain status.

“The hybrid sold much faster than we had anticipated…as for the FCV cars, we assume it won’t be as fast as hybrid as the infrastructure needs to be prepared before it becomes major in the market,” he told Bloomberg.

Co-founder of Alphabet Inc., Sergey Brin said in a speech that the company was one of the biggest spenders on AI in the world as of late, stating that the boom in uses of AI technology “has been very profound, and definitely surprised me even though I was right in there and could throw paper clips at them."

Much of his speech revolved around advances in AI technology, their application to a variety of segments from law to manufacturing, the threat of job eliminating and further shifts in society. He says it is a priority now to focus on the “inherently chaotic” tech steps and how the world must adapt appropriately.

Another hot topic during the week was climate change. Campaigners are worried the US’ new administration will be the demise of fresh policies, action and protection. Norwegian Prime Minister Erna Solberg spoke on behalf of the many in stating that Trump may very well not implement the Paris agreement, which aims for nations to keep global warming levels “well below” 2C. Many activists said their prime focus now is on Trump’s moves and how they might affect global climate concerns.

On top of these developments, the Gates Foundation also announced the joining of a global coalition for vaccines, against infectious diseases worldwide, the Coalition for Epidemic Preparedness Innovations. Starting off with a funding of $460 million from the Wellcome Trust, Germany, Japan, Norway, and now the Gates foundation, the coalition aims to develop and deploy vaccines in record times to curb the spread of global diseases.

And finally, the entire forum itself went to prove to the world the gigantic advent of drone technology, in the form of security. Across the Davos resort, security staff were armed not only with counter-human measures, but also with anti-drone technology. Dedrone, a leader in said technology, provided the personal with a drone defence system. Police in the Canton of Graubünden then used the system to monitor critical airspace above the resort area in real time.

This week Finance Monthly heard from Jim Prior, CEO of The Partners, on his take from the World Economic Forum 2017 in Davos, which took place last week.

If you’ve invested the unavoidably large amounts of public or private money required to get to Davos the general rule is that you can't just sit back with a glass of Kirsch and take in the elite view. You need to be seen to be doing something by those who funded your trip.

The formula for that in recent years has been simple: gaze through the telescope at the real world, identify some problems with it, then loudly and publicly promise to fix them just as soon as you get back home.

However, this year seemed decidedly quieter than before. Fewer predictions, fewer promises. This year’s snow put a hush on Davos and, back in the real world, one might not have noticed that it had happened at all.

This was a year more of frostbite than soundbite. Attendees appeared to be conscious of their failure to fix, or even identify, society’s biggest problems so they stayed silent on them. No-one seemed clear on what story there was to tell, so no real story was told at all.

Even the commentary around the unavoidable subjects of Brexit and Trump was inconclusive. “We failed to predict them and we don’t know what will happen”, was the general summary – leaders seemed unwilling to take responsibility for a future they had not expected to find.

So, on the whole nothing happened at Davos. Which might be fine if nothing had happened in the real world. Which, like Davos, couldn’t be further from the reality in which we live.

Deloitte predicts that over 300 million smartphones, or more than one-fifth of units sold in 2017, will have machine learning capabilities within the device in the next 12 months. The 16^th edition of the "Technology, Media & Telecommunications (TMT) Predictions" showcases how mobile devices will be able to perform machine learning tasks even without connectivity, which will significantly alter how humans interact with technology across every industry, market and society.

However, over time machine learning on-the-go will not just be limited to smartphones. These capabilities are likely to be found in tens of millions (or more) of drones, tablets, cars, virtual or augmented reality devices, medical tools, Internet of Things (IoT) devices and unforeseen new technologies.

"Machine learning is fascinating as it will revolutionize how we conduct simple tasks like translating content, but it also has major security and health consequences that can improve societies around the world," said Paul Sallomi, vice chairman and global TMT industry leader, Deloitte LLP and US technology sector leader. "For example, mobile machine learning is a strong entry point to improve responses to disaster relief, help save lives with autonomous vehicles, and even turn the tide against the growing wave of cyberattacks."

"Our predictions for 2017 showcase the enormous influence that machine learning and the Internet of Things are having on the current technology marketplace," said Sandy Shirai, principal, Deloitte Consulting LLP and US technology, media and telecommunications leader. "With many technologies coming into their own as their power and speed increases and the cost of delivering them goes down, we'll continue to see these platforms grow exponentially and expand their role across industries, creating a whole new value proposition and opportunities."

Another innovation with the power to transform the world is autonomous braking. Deloitte predicts that in 2022, in the US alone, fatalities from motor vehicle accidents will have fallen by 6,000, a 16% decline in 2017. The greatest factor in this decline will likely be automatic emergency braking (AEB) technologies. Deloitte expects that AEB will be so widely adopted, affordable, and successful at helping to save lives that it may even slow down the movement toward full self-driving cars.

It's not just about developing new technology, but how this technology is procured that is set to transform how we live and work. Deloitte predicts that by the end of 2018, spending on IT-as-a-Service for data centers, software, and services will reach nearly $550 billion worldwide, up from $361 billion in 2016. Although flexible consumption-based business models will not be ubiquitous by 2018, at over a third of all IT spending (35%), they're expected to exceed half a trillion dollars and grow rapidly. This shift will begin to transform how the IT industry markets, sells and buys technology across businesses worldwide.

(Source: Deloitte)

After the New Year, the UK pound and FTSE 100 made significant progress, and according to reports, UK business confidence is at its highest in 15 months, eluding Brexit doomsday predictions.

BDO’s Optimism Index, which indicates how firms expect their order books to develop in the coming six months, increased from 98.0 to 102.2 in December, above its long-term trend. This signals that businesses are continuing to stay resilient following the referendum result, the pre-2017 declining value of sterling and volatility in the global economy.

Finance Monthly reached out to numerous sources this week, to hear their thoughts on the pivotal pushes behind this increased confidence, reasons behind the inaccurate predictions of how the Brexit referendum may have affected UK business, and how this situation may progress in 1Q17.

Alister Esam, CEO, eShare:

Personally, this turnaround wasn’t unexpected – I didn’t buy into the doom and gloom that surrounded Brexit at the time. When we leave the EU, the UK will have a GDP of nearly 25% of the EU and it’s hard to take seriously any worries about us not having a trade agreement. The UK is a great country for business that will soon be released – Europe will remain struggling with inefficiency and a currency that doesn’t work.

People are finally thinking clearly about Brexit and what it means for business. Because the referendum result was so unexpected, people hadn’t really thought through the consequences. Those that did were positive in the first place, and others are starting to see that too, now they have been forced to consider what the implications and opportunities are.

I think people originally focused on the negatives. Now it is really happening they have had to focus on their own plans with positivity and find the not-insignificant opportunities this brings in being able to define our own rules, set our own taxation etc. Furthermore, the negatives were false – people argued leaving Europe meant we couldn’t trade anymore, which was daft. By definition, we will be the most EU-aligned of non-EU countries so we will trade with the EU more than any other non-EU country in the world.

I believe we will still have a tough ride in the short term. There remains uncertainty about how exactly everything will fall into place, and leaving the EU was never good in the short term. – it’ll take time for the benefits to emerge.

The on-going uncertainty is likely to affect UK business optimism over the coming months. European leaders failing to get down and solidify a deal, dragging out negotiations to steal pennies from the UK at the cost of pounds and Euros to both. It’s in no-one interests for negotiations to drag on so let’s hope it can be resolved as quickly as possible.

John Newton, CTO and Founder, Alfresco Software:

A positive side effect of global uncertainty is that it helps to push business resiliency. Enterprises will be open to new competition in a deregulated environment driven by significant political change. This, in turn, will positively force corporations and governments to establish new models, based on best practices.

However, it will be impossible to predict the next five years. Companies should be weary of being too optimistic and instead adapt to become more agile and resilient, whether trade deals are good or bad, inflation or not, and growth or not. Therefore, businesses must focus on bolstering digital core competencies and adopting new ways of thinking at the start of 2017. This will enhance enterprise organisations’ ability to deal with both new threats and beneficial opportunities as they arise. Platform Thinking, will help leading edge enterprises to thrive. It creates a single, scalable, central solution through which organisations can route information, automate processes, and integrate third-party innovation. Additionally, instead of building business plans, new digital enterprises should compose their business outcomes through Design Thinking, which puts the user first and solves problems for them. Using this approach will help enterprises design and adapt digital initiatives to respond faster and engage customers who also face uncertainty.

Deregulation is coming, and enterprises should adapt. For example, Blockchain is impacting our financial markets in the way that party-to-party contracts are managed. In the beginning of 2000, when companies weren’t getting their return on investment in the stock market, they turned to the power of data and peer-to-peer directives. Furthermore, asset-light industries (companies with fewer physical assets, and that tend to require less regulation), will emerge as the marketplace winners. While in the technology industry, computing platforms are evolving so rapidly that it is forcing architects and developers to almost relearn computer science. Cloud platforms, in particular, are changing at astounding rates. New concepts around microservice architectures, deep learning and new data, and compute techniques will again challenge the old way of thinking about things.

UK business optimism is set to be tested but there are huge opportunities for us to adapt and adopt digital transformation objectives. In the Fourth Industrial Revolution, it is no longer about who hasn’t adopted digital technology, but those who have digitally and fundamentally transformed their business, creating a new platform to connect with customers. Think AirBnB and Uber.

Owain Walters, CEO, Frontierpay:

Economic data releases have surprised to the upside in post-Referendum Britain, which is very encouraging to see. Nevertheless, the pound has actually been in steady decline since the result of the Brexit vote and is yet to make a turnaround. What we have noticed, is that the pound has plummeted whilst the FTSE100 has prospered as a result.

We must remember that the FTSE100 is full of companies that derive their incomes from outside the UK, and so as the pound has declined since the Brexit vote, their non-GBP earnings are now worth more. As a result, earnings of the GBP denominated stock in these businesses have improved, however, we must not confuse this with a turnaround in the pound.

I would certainly agree that the catastrophic predictions forecast on the immediate impact of the Brexit decision have been proven wrong. Unemployment continues to fall, GDP growth has continued, and we have even seen some high-profile announcements somewhat quashing forecasts of a halt of foreign interest in British business.

However, we can’t thank the pound for these encouraging developments. In truth, the fact that Article 50 has yet to be triggered means that Brexit has yet to have any significant impact on the UK. What we are currently seeing is a great deal of volatility in the markets as we wait to find out what kind of relationship the UK will ultimately have with the EU.

As long as the future of this relationship remains unestablished and the government continues to keep any details of a deal firmly behind closed doors, I believe it’s too early to tell if the predictions for Brexit will be wrong in the long term. That said, in at least the first quarter of 2017, I think we can expect to see further falls in the pound, a jump in inflation and steady GDP growth of around 0.5%.

Lynn Morrison, Head of Business Engagement, Opus Energy:

We recently surveyed 500 SME decision makers to find out how they had been affected by the Brexit referendum result. We found them to be unmoved, with 72% stating that their confidence was either unchanged or increased. Looking forward, it was extremely encouraging to find that nearly two-thirds of the respondents say they expect their income to increase and even expect to grow their business, in terms of headcount, by up to 20% in the next two years.

Considering the initial market reaction to the Brexit result, as well as the sharp decline in the value of the pound and initial drops in the FTSE250, this positive response may seem unexpected; especially given how many larger, more established businesses have been reporting otherwise. It’s likely that this reaction stems from SMEs’ focus on working within the confines of the UK borders. The Department for Business Innovation & Skills estimates that less than 10% of all small and medium sized businesses export directly to the EU, and only a further 15% are involved in EU exporting supply chains. This makes it easier for SMEs to embrace a new trading landscape, possibly less restricted by EU red tape, enabling them to continue with a ‘business as usual’ mentality.

Another source of SME confidence may be the fact that between the declining pound and the potential changes in our trade relationship with the EU, the UK is likely to look to its own businesses to help fill the gaps on products and services that had previously been imported.

Making up 99.3% of all private businesses in the UK, and with a combined annual turnover of £1.8 trillion, SMEs are the lifeblood of our country and their success is invaluable. I think it’s therefore hugely encouraging for the future of British business, and indeed our future relationship with the EU, that SMEs are expecting to not only survive the result of Brexit, but also to thrive in the coming years.

Salvador Amico, Partner, Menzies LLP:

Levels of business confidence were high before the Brexit vote in June 2016 and many businesses were optimistic about the future, bolstered by a strong Pound and UK economy. The Brexit vote result caught many by surprise and created shockwaves across UK businesses.

However, since the vote, it is evident that the world hasn’t ended and that things have moved on. Businesses, particularly those with extensive export operations, who were concerned pre-Brexit vote, have found renewed confidence brought on by the weak Pound and continuing enthusiasm by suppliers and customers to trade with UK businesses.

The UK economy is fundamentally strong and is still considered a world leader in many sectors such as tech and manufacturing. Even the property sector, which is often considered to be struggling in the UK, is benefitted from continuing inward investment, brought about by a weak currency.

Whilst the weak Pound has certainly helped boost business confidence, the UK has proven itself to be a good place to invest for quite some time. Low tax rates and a competitive market presence, combined with strong connections and a creative attitude have long made Britain an attractive place to do business.

Optimism indices have likely been affected by a general feeling that the world hasn’t ended post-Brexit vote, particularly with the majority of business owners who voted for Remain. Many of these businesses are now feeling that everything will be fine.

There has been a real push from businesses in some sectors to break into new markets and to find new customer bases abroad. Whilst there is still much more work to be done, the sense of optimism brought about by a potential increase in competitiveness caused by leaving Eurozone, is hard to ignore.

Dropping tax rates along with the opportunity to introduce new policies to support UK businesses will further boost confidence across the board.

The effects that a weakening Pound would have were perhaps underestimated by some financial commentators, and in particular sectors such as manufacturing, businesses which export will currently be feeling very positive.

It is also important to note that it is perhaps too early to say that the predictions were wrong and we may find that a year down the line the UK economy will look significantly different. This was the case with the effects of the financial crisis in 2008, where it took several years for a ‘new normality’ to resume.

Once Article 50 is triggered it is possible that we may see a further slight dip in confidence if we see the Government move towards a hard Brexit, effectively closing off free access to the EU trade zone.

However, once negotiations begin it will be the media who will play a large part in controlling business confidence through the ways positive and negative news is reported in relation to specific business sectors.

We may see that the Pound is going to remain weak for some time and exporters should make the most of it while they can. There is also still a lot of activity in terms of inward investment coming into the UK and lots of parties looking to make deals and secure contracts. Capitalising on this investment, along with looking to secure the best talent possible – regardless of location – will be key for UK businesses in the coming months.

Problems faced across the Eurozone are very likely to have a knock-on effect for the UK economy and should not be overlooked. Upcoming elections in France and the Italian financial crisis, combined with any slow-downs faced by the EU economy could have a larger impact than many people realise.

The strength of the EU market will be particularly important for businesses selling goods abroad and if that market cools or becomes more turbulent, the ripple effect will be experienced by the UK economy.

Omar Mohammed, Operations and Financial Market Analyst, Imperial FX:

It was a turbulent year in terms of political turnarounds – the unexpected Brexit decision and the unexpected outcome of the U.S election made 2016 one of the most unprecedented years. That caused a lot of loses, suspension of business, re-planning of strategies.

The indices markets in UK and US were on record highs after the Brexit. For instance, FTEE100 is mostly American firms which mainly depends on USD, so whenever the Cable (GBP/USD) is down the FTSE100 is up.

Predictions wrong about the impact of Brexit because of inaccurate opinion polls; both the online and phone polls predicted the majority would vote to remain. The length of the polls needs to extend beyond three days in order to reach hard to reach voters. The less well educated are under-counted in the polls while graduates are hugely over represented.

The first quarter of 2017 expected to be volatile and complicated. The cause of this disarray could be that May herself is muddled. While vowing to make Britain “the strongest global advocate for free markets”, the prime minister has also talked of reviving a “proper industrial strategy”. This is not about “propping up failing industries or picking winners. Her enthusiasm for trade often sits uncomfortably with her scepticism of migration. Consider the recent trip to India, where her unwillingness to give way on immigration blocked progress on a free-trade agreement.

In coming months, UK business will be affected as they will be waiting mid-March for the EU meeting to triggered article 50 which involve heavily on free-trade market and the free movement of European citizens.

Markus Kuger, Senior Economist, Dun & Bradstreet:

Ever since the Brexit vote, the sentiment in the UK has been a melting pot of distinctly differing viewpoints. From Pro-Brexiters to remain campaigners, businesses have been expressing trepidation as the worldwide markets continue to fluctuate. The sterling may have recovered somewhat towards the end of 2016 but has quickly dropped in value, following Theresa May’s hint that the UK will be looking to secure a ‘hard Brexit’. The 14.4% rise that the FTSE 100 posted over the course of last year looks to be a distant memory for the UK; a reason for the end of year boost was arguably due to overseas businesses.

The plain fact is that Brexit has not happened yet and Britain has yet to leave the EU. Against his promise (on which our post-Brexit vote scenario was built on), David Cameron did not invoke Article 50 in the morning hours of 24 June but resigned instead, which has temporarily helped to minimise the effects of the Brexit vote. However, Dun & Bradstreet still expects the Brexit vote to have a significant negative impact on the British economy, especially as ‘hard Brexit’ is now the most realistic scenario.

At the moment, the export-orientated sectors of the economy are benefitting from the weak pound, while domestically-orientated businesses are still being supported by robust consumer spending. That said, the invocation of Article 50, expected towards the end of March, and a potential ‘hard Brexit’ will test the fragile stability of the UK economy, especially as sharply rising inflation rates will reduce households’ disposable income. We strongly recommend that businesses ensure they have the risk management measures in place to deal with the changes. Ensuring that the proper risk solutions are implemented will best prepare a business for any potential market fluctuations.

Although we now expect the government to lay out its Brexit roadmap in the coming weeks, uncertainty will remain high as it will remain unclear if the UK’s and the EU’s positions are compatible and whether a compromise regarding migration controls and market access can be found. Developments in financial services are likely to have a huge impact on the broader UK economy – the financial services sector, including professional services, makes up 11.8% of the UK’s GDP. The impact of firms looking to relocate outside of the UK could have a knock-on effect that leads to further disruption. Our own recent research indicates that 72% of senior financial decision-makers are planning for change post-Brexit. Against this background, we expect businesses to continue to operate smartly and cautiously, while overall prospects in the UK are likely to remain extremely unpredictable in Q1 and beyond.

For context, Dun & Bradstreet recently released a survey on business confidence after Brexit. The results showed that:

• 64% of businesses say the Brexit vote has negatively impacted their growth potential
• Over half (59%) believe that leaving the EU will be financially damaging to their organisation
• 19% of businesses have halted or slowed growth or expansion plans in the UK following the vote
• Nearly half (49%) of senior financial decision makers admit their business is likely to either leave the UK or reduce investment in the UK post-Brexit…
• …and more than one in ten (12%) admit this move is “highly likely”
• 19% of businesses have already seen a dip in deals with European partners and/or customers

(This November 2016 research surveyed 200 senior financial decision makers from medium and large enterprises in the UK.)

Kerim Derhalli, CEO and founder, invstr:

Positive initial data which emerged in the aftermath of the EU referendum has been the catalyst for an ongoing good feeling among businesses, with positive momentum offsetting any continuing political uncertainty.

The UK economy performed well in the run up to June 23, with GDP growth at 2.5%, which helped to cushion any perceived negative impact. Since then, businesses have been buoyed by positive consumer data which has remained broadly optimistic.

UK businesses focused on exports – many of which feature in the FTSE 100 – have enjoyed a boost from cheaper sterling, and are becoming more competitive overseas. Cheaper comparative labour is also having a knock-on positive affect for exporters.

In addition to this, the UK services sector contributed to a 0.6% growth in the economy in the three months following the Brexit vote, fuelling confidence through the end of 2016 and into 2017.

What many observers failed to recognise in the build up to, and immediate aftermath, of the Brexit vote, is that the UK and London in particular still remain highly attractive to international investors.

The core fundamentals that make the UK a good place to do business are still present, and will remain whether the country is within or out of the EU.

The City of London is a world leader in attracting business talent, legal institutions are among the most respected in the world, and UK universities lead the way in innovation and research, continuing to draw students from across the globe. Plus, the UK has the lowest corporate tax rate in the G7 – making it attractive for businesses – and the commercial property sector remains a desirable asset globally.

Predictions underestimated the strength of the UK economy, and the country’s role as a global provider of world-class goods and services. The UK has plenty of reasons to remain optimistic about the future.

Political uncertainty will be the main driver behind any lack of optimism for businesses in 2017. At the moment, the Government looks no closer to confirming any specifics around the terms of agreement between the EU and the UK and, if uncertainty drags on, it could prove a drain on confidence.

That said, a cheaper pound and better global growth prospects, as well as all of the positive business investments we have already seen throughout the end of 2016 and early 2017, will help to offset the uncertainty. This, in combination with the ongoing good data, will serve to strengthen business and consumer sentiment.

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

Almost three in every five (57%) SME business owners say that they do not feel confident about the UK’s economic outlook for 2017, according to the Close Brothers Business Barometer. The quarterly survey questions over 900 UK SME owners and senior management across a range of sectors and regions.

Firms at the smaller end of the scale – under £500k annual turnover – were the least confident, with 64% answering ‘no’ to the question ‘are you confident about the UK’s economic outlook for 2017?’.

“Businesses owners are not taking a negative view, but they are being pragmatic about the UK’s economic prospects over the next 12 months,” said Neil Davies, CEO, Close Brothers Asset Finance. “There are still many unknowns and this uncertainty is reflected in what small business owners are telling us.

“For example, the value of Sterling is seen as a short-term issue and doesn’t create conditions for long-term investment. While activity in a number of sectors is stronger due to the weaker pound, helping to boost orders from overseas, cost pressures remain high with price increases being passed onto consumers, which may contribute to an increase in inflation down the road.”

Regional analysis

Business owners in the North East and Northwest of England were the most positive, with 56% and 54%, respectively, feeling positive about the year ahead, contrasting with the 36% of Scottish respondents.

Full list of regional responses to ‘are you confident about the UK’s economic outlook for 2017?’:

Sector results

The most enthusiastic sector was Manufacturing, which returned a positive response of 61%, followed by Engineering with 52%; Construction 49%; Transport 47%, and Print 37%.

“UK manufacturing in on a high at the moment, with recent rates of growth for production and new orders among the best seen over the past two-and-a-half years, according to the Markit/CIPS purchasing managers' index,” continued Neil.

“And this uplift in the manufacturing sector is reflected in what the survey respondents are telling us, which is that they see 2017 as a time of significant potential opportunity.”

(Source: Close Brothers Asset Finance)

The infamous year 2016 is now behind us and we all have a fresh start moving into the new year - one which could perhaps be one of the most unpredictable since the market crash in 2008. Low confidence and an anxious approach to ambition could stunt the growth of startups, so here are my key resolutions that small enterprises should adopt if they want to thrive in 2017.

1. Smarter marketing, not larger

It’s good business sense to always look after the pennies, but with unknown economic territories ahead of us, it’s important for start-ups to tighten up the side of the business where thousands could be wasted when hundreds could take you further = marketing. Social media and SEO will be the most cost-effective ways to drive brand awareness, so invest in consultants and training sessions to help you cover the basics that will ensure your business is heard in a world full of competitors. What’s most important for you to take note of in these workshops is the efficiency of micro-targeting – put spend purely into targeting where your audience digests content and news. Don’t look to reach large numbers, look to reach relevant numbers.

2. Inspiration comes from the workplace

It might sound simple, it might sound unimportant - but neither is true. Your working environment plays a huge role on your energy, motivation and inspiration – three characteristics you’ll need in bundles to take a start-up off the ground. Walk into offices up and down the country and they can be flooded with unnecessary paper, overcrowded desks, folders upon folders and general mess. Take action and declutter your office by taking more of your work online – with the rise of cloud-based services such as Google Docs, sharing working documents has never been easier. What’s more, the cloud has been utilised across industries, and some services even allow you to take your accounting spreadsheets and numbers purely within the cloud. This takes me nicely onto…

3. Re-evaluate your business tools

The beginning of the year is an opportune time to calculate all tools your business subscribes to, and analyse what’s working and what’s not. It could be that you’re paying for three different tools that can all be done by one, this will drive costs way down. For instance, Xero is a tool that allows you to take control of payroll, pay bills, send invoices, creating POs and more – it’s time to research what tools out there will optimise your business.

4. 2017 will be the year of networking

Business owners will need to keep their finger on the pulse of trends that result from Article 50 being triggered. You can make predictions based on what you’ve read online and how your business has been performing, but to get a deeper understand and grasp on where trends will head, you will need to discuss the industry with your peers. Like Open Data, everyone will benefit from each other’s learnings and can adapt accordingly. SMBs are the backbone of the UK economy, and a united effort to thrive this year will help us prosper as we leave Europe.

5. Prioritise your employees’ happiness

Hard workers are hard to come by. You’ll remember sitting in your office interviewing countless candidates who simply weren’t right for your company, so use that experience to treasure what you have now. Research what the larger organisations are doing and you’ll see a host of perk packages, health schemes and away days. While this is great and a real morale booster, employees really respond to one-on-one time with their boss. Simply showing your appreciation of their work and reassurance of their career path will give them the confidence to work for you, and the ambition to achieve for you.

6. Protect yourself against security threats

Hackers and cyberattacks are becoming more sophisticated by the day, and the threat of a data breach is more likely than ever before. It’s vital that businesses of all sizes who use online and financial services ensure they have strong security practices. Using the most up to date virus protection and firewalls is a given, but extra layers of security such as multi-factor authentication (requiring a username and password as well as a piece of information that only the user knows) can help your accounts from being compromised by phishing and malware.

Authored by Gary Turner, UK Managing Director and co-founder of Xero.

(Source: Xero)

Swiss Alpine resort, Davos, is set to see another flock of economy specialists worldwide meet for the World Economic Forum 2017 beginning 17^th January, which will be covering in-depth globalization, the US election, big data, and leadership priorities for the year.

The year’s WEForum is titled "Responsive and Responsible Leadership,” stating that “more than ever, leaders need to share insights and innovations on how to best navigate the future,” and has established that the leadership priorities for the year include the Fourth Industrial Revolution, on the back of technology advancements; the need for a dynamic, inclusive, multi-stakeholder global-governance system via public-private collaboration; the restoration of global economic growth; the reform of market capitalism, and rebuilding of the compact between business and society; and finally “leaders will need to address the pervasive crisis in identity formation that has resulted from the erosion of traditional norms over the past two decades.”

President Xi Jinping is set to become the first Chinese head of state to lead the WEForum, and he will be joined several formidable co-chairs: CEO of Royal Philips Frans van Houten; Sharmeen Obaid-Chinoy, documentary filmmaker of SOC Films; Meg Whitman, President and CEO of Hewlett Packard Enterprise; Brian T. Moynihan, Chairman of the Board and CEO of Bank of America Corporation; and Helle Thorning-Schmidt, CEO of Save the Children International.