finance
monthly
Personal Finance. Money. Investing.
Contribute
Newsletter
Corporate

Back in 2019, the London airport saw four million passengers through its door in just 18 days. Now the airport has warned that its passenger numbers for 2021 could come in even lower than figures for 2020. Around 22 million passengers travelled through Heathrow in 2020, with over half of those travelling in January and February before the covid-19 virus led to closed borders and government-imposed travel restrictions. 

The airport has described the recent changes to quarantine rules and testing requirements for those arriving in the UK as “encouraging”. However, it still warns that the current rules are restricting the country’s financial recovery. Heathrow’s chief executive, John Holland-Kaye, has said that the UK’s slow removal of restrictions is causing the country to fall behind its EU rivals in international trade. 

As pressure from the travel industry increases, the Department for Transport will hold a formal review of the UK’s traffic light system no later than 31 July. 

Last year, the London-based fintech firm made £39 million on its cryptocurrency investments. The company, which allows its users to trade in anything from silver to bitcoin, saw its revenues jump by 34%, reaching £266 million. Revolut said it turned a profit in the final two months of 2020, a period which coincided with the start of a big rally in cryptocurrency prices. 

However, the company’s continued expansion across the globe resulted in increased admin and employee costs, pushing up losses. In 2019, pre-tax losses sat at £107.7 million, but in 2020 that figure reached £207.8 million. The fintech firm had employee costs of £170 million, close to a triple-increase on the employee costs it incurred the previous year. 

Despite 2020’s losses, Revolut has become one of the most valuable fintech companies in the United Kingdom. In its last private fundraising round, the firm was valued at around $5.5 billion, despite still not holding a full UK banking licence.

Mikko Salovaara, the new chief financial officer of the firm, has said that 2021 started positively. By the end of last year, Revolut had 14.5 million retail customers, while commercial customers reached 500,000. 

Benjamin Franklin said it best: "If you fail to plan, you are planning to fail.” We all need goals and objectives. Some of these should be ambitious and fanciful. We all have our dream house or dream vacation — even if we know it may never truly come to pass.

But you need some real-world goals grounded in reality. Ultimately, these practical items are what should be populating your “bucket list.” Sure, always keep a few unlikely-to-achieve items in your back pocket. But you want to really focus on the ones that you know you can — and will — tick off.

And don’t procrastinate! Your bucket list is hopefully long and full of great experiences. There’s no time to waste letting them just sit there.

Yes, achieving some things will be more difficult for many people this year for a variety of reasons. But don’t use excuses and instead focus on the other goals that you still can attack. And if you need a little inspiration, set your sights on checking off the following three 2020 bucket list items.

1. Explore Professional Development

For every person, in every line of work, there is always some thing that you know will help you develop in your career. Maybe it’s learning a new skill, like becoming a spreadsheet or data wizard. Maybe it’s improving your communication ability, like mastering public speaking so you can get your ideas heard. Maybe it's finding a mentor who can help you see something that you keep missing. Or maybe it is sitting down and devising a new strategy or process to improve your company that will surely knock the socks off you boss and earn you that promotion. But no matter what it is, get started today.

2. Keep Your Mind on Your Money

We all need to improve our financial literacy, strategy, or discipline in one way or another. It’s time to stop hoping and start doing. Do you keep tapping into your savings for discretionary purchases? Are you failing to put away enough for retirement? Are you throwing away too much on interest payments? Or, God forbid, do you still not have a good budgeting tool that keeps you on task? Perhaps now more than ever, you need to work to get your financial life in order, and you should look at all the financial services tools out there to help you get it done.

[ymal]

3. Splurge on Something for You

While being financially disciplined is great, that actually isn’t the problem for many people. Some are too stingy and fail to hit their bucket list items out of an overabundance of caution. If that’s you, maybe now is the time to splurge a little. Do so responsibly, but recognize that there are some great prices out there on toys and luxuries that you may have been eyeing for years. Maybe today is the perfect time to buy that RV you have always wanted and do some road trip traveling to dream locations. Along with good deals, you can also find fantastic credit financing options that offer perks and cash back rewards.

Rethinking Your 2020 Bucket List Goals

Achieving your lifelong goals is never easy. That goes double in a year like this. But there are always ways to look at your bucket list from a different angle and start checking off some key boxes no matter what.

It doesn’t have to be all skydiving and flights to Paris. There are other objectives you can pursue even today. Start exploring your professional development goals, work on hitting a key financial benchmark for you, and don’t forget to find creative ways to splurge on yourself — and even travel.

The world may be more complicated than ever — but it’s still your oyster. Even when everything is turned upside down, your life can still be whatever you make it.

BrokerChooser is a global online service for comparing and choosing investment brokers. Below, their CEO and co-founder Tibor Bedő talks us through the awards process, discusses the top five awards and the firms that have been selected, providing some insight on the complex world of investment brokering.

Every year we carry out a comprehensive review of the market and of the brokers in it. We then make awards based on nine criteria: fees, trading platforms, product portfolio, security, account opening (ease and cost), deposit and withdrawal (costs and time it takes), customer service (the support across all channels), research (the resources and tools they provide) and education (does the broker offer support services such as webinars and other tool).

This year we collected much wider and more in-depth data on brokers and their services than ever before.  Our aim was to make the scoring more precise and better reflect the differences between brokers.

This year we collected much wider and more in-depth data on brokers and their services than ever before.  Our aim was to make the scoring more precise and better reflect the differences between brokers.

It was important to use the right parameters for each category. To ensure we got this right, we interviewed our customers about their preferences and, of course, also used our own professional knowledge and insight into the brokerage industry.

There were 24 awards in total.  However, the key ones, the winners, and the criteria we used for judging them, are below.

1. Best online broker was won by Interactive Brokers

We considered how brokers performed across all the criteria, particularly fees, product selection and trading platforms. This is the second year in a row that Interactive Brokers have won this category. It won high scores due to its low trading fees, comprehensive product range, and well-developed trading platforms. It is a strong company with a great reputation.

2. Best discount broker was won by DEGIRO

This award is all about the fees and how cost effective the broker is.  It is a key consideration with our customers. DEGIRO won this for the second year in a row as its trading fees are low for all asset classes. In addition, there are no withdrawal, inactivity, or account fees charged.

3. Best broker for stock trading was also won by DEGIRO

Stock is one of the most popular asset classes (more than 60% of our clients focus on investing in stocks). The main parameters for this award are fees, stock exchanges availability and the overall quality of their service. DEGIRO won this award due to its low stock fees, global stock exchange coverage, and the high quality of the service it provides.

4. Best forex brokers was won by Saxo Bank

Here we were obviously looking for outstanding performance in criteria that are relevant to forex trading. Our customers told us that these are low forex and withdrawal fees, advanced trading platforms with great charting tools, and wide range of currency pair selection. Saxo Bank has performed well in all these categories.

5. Best discount forex brokers was won by Fusion Markets

This is a new broker category. We created it as many from our customers are looking for great value forex trading. The most important factor here is therefore the forex fees. Fusion Markets charge the lowest commission per lot for buying and selling the currency pairs ($2.25) and doesn't charge any withdrawal fee.

The other awards and their winners were:

Best broker for funds                                                        Firstrade

Best broker for bonds                                                       Fidelity

Best CFD broker                                                                  XTB

Best broker for cryptos                                                     eToro

Best broker for options                                                    TD Ameritrade

Best broker for futures                                                     Interactive Brokers

Best broker for beginners                                               Robinhood

Best broker for millennials                                              Revolut

Best broker for buy and hold                                          TradeStation Global

Best broker for day trading                                             Interactive Brokers

Best web trading platform                                              Saxo Bank

Best mobile trading platform                                         Oanda

Best app for stock trading                                                Robinhood

Best desktop trading platform                                       TD Ameritrade

Best broker for research                                                  Saxo Bank

Best broker for API trading                                              Oanda

Best social trading                                                              eToro

Best digital bank                                                                  Revolut

Best robo-advisor                                                               Betterment

All the winners offer exceptional services but of course there are some brokers who perform very badly. Even investors with a lot of experience can find it difficult to identify the good ones, or the ones that suit them best, without weeks of research. The idea behind these awards is that we do this work for you.

According to Roberts Lasovskis at investment platform TWINO, the year ahead is an opportunity to get onboard with the changes happening all around us, embrace regulation, and create solutions that focus on the customers.

Lendy’s collapse in May and FundingSecure in October put a combined £240m of savers’ money at risk, while Funding Circle’s new withdrawal processes have raised investor concern among even the most well-established lenders. But there is light at the end of the tunnel, and the industry can be optimistic for 2020, providing last year’s lessons are learnt.

Firstly, there is one particular aspect of the two peer-to-peer collapses last year that has attracted much of the criticism from both media and investors. Both Lendy and FundingSecure came advertised as ‘approved by the FCA’, yet in collapse, both displayed structural faults and warning signs that should perhaps have been noticed earlier. Managing credit risk is an expensive learning process, but should be taken very seriously, and using as many data sources and as much testing as possible. Inevitably, these high-profile failures will cause a tightening of regulation across the industry. That is a good thing.

The sector should not just tolerate and survive regulation; it must embrace it. Higher levels of scrutiny from administrators lead to better industry structures and more robust business models that generate greater trust from consumers. This is an inevitable step for a maturing industry, and now is the time for peer-to-peer to ensure its regulations are fit for purpose, and that investor money is not put at unnecessary risk.

Higher levels of scrutiny from administrators lead to better industry structures and more robust business models that generate greater trust from consumers.

As well as building consumer trust and engagement in the sector, increased regulation encourages the development of better products. When regulation works well, companies are forced to innovate and adapt to meet the new challenges, eliminating the number of shortcuts or ‘easy options’ that are taken when developing a product for consumers. Ultimately, this creates safer and more sustainable returns for investors.

Beyond regulatory intervention, it is paramount that in 2020 the peer-to-peer industry prioritises transparency - with investors, borrowers and other industry partners. Transparency and clear communication are key to rebuilding trust in the sector, and even in specific products. Take Funding Circle as an example. It is undoubtedly one of the most successful businesses in the sector, and yet has been suffering a recent crisis in trust, which has been largely caused by customers not fully understanding what procedural changes are going to mean for their money.

The changes in question are not necessarily the full problem. The model is no less safe and the business is no less high-profile. Nor do investors automatically object to the idea of a delay before they can access their money (look at fixed-term savings accounts for example). As with all peer to peer lending platforms, it is simply a question of understanding risk - customers misinterpreted the changes as a sign that their money was under threat and understandably rushed to protect it.

[ymal]

As with all communication, and this goes for most industries, the customer must always come first. Fintech itself exploded as a sector in the wake of the 2008 financial crash, as a reaction to bad practices in the financial services industry. New businesses and solutions were developed to fix the shortcomings in finance and financial services, and to pivot them back to a consumer-focus. Many are predicting an economic downturn in the next year or couple of years, following a decade of growth. Fintech businesses emerged from the last downturn by creating solutions that focused on their customers, and should do so again.

Peer-to-peer is a prime example of how fintech puts customers first, directly connecting those investors who want to see their money grow faster with those seeking convenient loans. For all the perceived problems in the P2P sector, the fundamental market for the products have not changed. By remembering where it came from, and the problems it set out to solve, the sector can still thrive in 2020, even if the predicted economic downturn materialises. To avoid the pitfalls other providers have fallen into, peer-to-peer must embrace regulation, communicate with transparency and focus on leveraging their expertise to provide trustworthy customer-centric solutions.

This week Chief executive and chairman Larry Fink sent a personal letter to clients stating the firm would be focusing on sustainability as BlackRock's "new standard for investing."

“Climate risk is investment risk...Indeed, climate change is almost invariably the top issue that clients around the world raise," Fink wrote.

The firm, which manages $6.9 trillion for investors all aorund the world, communicated that it would pulling out of any "high sustainability-related risk" investments such as fossil fuels and that it would be including questions pertaining to sustainability as part of its process when building new client investment portfolios.

Fink also stated BlackRock will be weighing in its shareholder vote on many sustainability and climate issues that arise in shareholder decision making.

The CEO's letter also read: “Climate change has become a defining factor in companies’ long-term prospects.

"Last September, when millions of people took to the streets to demand action on climate change, many of them emphasized the significant and lasting impact that it will have on economic growth and prosperity – a risk that markets to date have been slower to reflect.

“But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.”

In the letter Fink makes reference to climate change as a highly impacting factor in investment models, claiming that this new approach will destroy existing products and create new markets, ridding traditional investments and creating fresh and new opportunities for investment.

“What will happen to the 30-year mortgage – a key building block of finance – if lenders can’t estimate the impact of climate risk over such a long timeline, and if there is no viable market for flood or fire insurance in impacted areas?” he said. “What happens to inflation, and in turn interest rates, if the cost of food climbs from drought and flooding? How can we model economic growth if emerging markets see their productivity decline due to extreme heat and other climate impacts?”

This statement will have significant impact on the proceedings and discussions that take place at the World Economic Forum in Davos next week, as the drive to protect investor value will turn towards climate change and sustainability as key considerations to factor into each and every investment.

As John Murdock, CEO of business intelligence experts Centage, explains below for Finance Monthly, this has begun to shift over the past decade due to technology and automation.

Companies like Botkeeper and MindBridge.ai are fully automating tasks like entry and validation of transactions, line items, compliance and auditing corporate books. Other companies offer platforms that streamline budgeting, surface trends hidden in data, and a wide variety of classic financial team functions.

As these functions move into software, one of two things will happen: accountants will lose their jobs, or automation will prompt them to radically transform the office of finance. Even if  CEOs prefer people to AI, they may have trouble finding qualified accountants to staff their financial teams. According to Accounting Today: “Accounting, like many professions, is experiencing a shrinking talent pool as boomers retire and younger generations are opting for other careers.”

This evolution is going to kickstart some serious changes in the industry, which is why the AICPA, through its CPA Evolution project, is working to ensure CPAs continue have the skills needed to support the accounting profession. I see that there are five distinct transformations occurring in the office of finance that are a direct result of financial technology.

1. Finance teams are becoming business partners

Back office automation allows the financial team members to move in a more strategic, front-office role by offering their talents to the managers and department heads who run the day-to-day business. For instance, the financial team of a retailer can help the company optimize revenue per square foot, or understand the profitability of each product in order to tweak the brand’s merchandising strategy.

The financial team of a retailer can help the company optimize revenue per square foot, or understand the profitability of each product in order to tweak the brand’s merchandising strategy.

Personally, I see this as a positive development. I never saw the benefit of sequestering such an important role in the office of finance. The finance team is responsible for ensuring company priorities are funded. How can they do that if they don’t understand how or why those things become priorities to begin with?

2. Finance teams will recruit more graduates with business and operational knowledge, not just accounting degrees

The more the financial office moves to the front-office, the more executives will value people who have degrees and backgrounds in business strategy, market differentiation, and competitive positioning. These are the skills that inform strategic decision-making and can help the business chart long-term strategies.

This is a reversal of a trend that began after the 2008 financial crisis and the passage of Sarbanes-Oxley. According to the executive search firm Spencer Stuart, the number of CFOs with CPA certification rose from 29% to 45%. But now that compliance and auditing can be automated, I believe that CPA certification will be less of a priority for management teams.

The accounting industry itself is undergoing a similar shift. Non-accounting college graduates accounted for 31% of new hires across public accounting firms in the US in 2018. The Journal of Accountancy cites the need for tech skills as a primary driver of the shift: “Increased demand for technology skills is shifting the accounting firm hiring model,”  Barry Melancon, CPA, CGMA, AICPA President and CEO and the CEO of the Association of International Certified Professional Accountants, said in a news release. “This is leading to more non-accounting graduates being hired, particularly in the audit function.”

3. More CFOs will have a non-traditional path to leadership

The other day I listened to a podcast of the Boston Red Sox, Tim Zue, describing his rise to CFO. He didn’t come from a finance background (he studied mechanical engineering in college). But after working for the Red Sox organization for more than 18 years, he developed a keen understanding of the business, which more than made up for his lack of a finance degree. He knew the right questions to ask in order to make strategic business decisions. As a result, he now believes that the only way to gain such a deep understanding is to get into the front office and work with the people who are running it day-to-day.

The only way to gain such a deep understanding is to get into the front office and work with the people who are running it day-to-day.

I agree wholeheartedly with Zue, not the least because I experienced the same trajectory in my own career. I earned my bachelor's degree in engineering and worked in sales and marketing prior to becoming a chief revenue officer. My experiences as CRO positioned me to become a CEO.

4. Technology will increase the demand for strategic thinkers

This may seem counterintuitive, but as AI merges with business intelligence to alert the finance teams to trends inside the business as well as trends within their markets, companies will need CFOs who are highly strategic thinkers. After all, if everyone uses the same software to guide decisions, they’ll all make the same decisions. We see this phenomenon in our everyday lives all the time. For instance, Waze does a great job of informing drivers of traffic congestion and suggesting alternative routes. But if enough drivers take that alternate route, it just creates another traffic jam.

To complete the metaphor, successful companies will need CFOs who can see the out-of-box alternative route to long-term sustainability and growth.

[ymal]

5. Finance and engineering will merge

Financial degrees are already becoming more data and tech centric. This past October, the Pratt School of Engineering at Duke University announced it will offer a masters degree in financial technology. There is compelling reason why these disciplines are merging: both center around data. Fintech is still in its infancy, and it offers significant opportunities for engineers to build out automation around financial rules. It makes sense for engineering schools like Pratt to train their students in the ins and outs of finance. I can’t emphasize enough how radically the coupling of these disciplines will transform accounting and finance over the next decade.

Accountants and finance teams shouldn’t fear technology. It will certainly change the way they think about their roles, but that’s a positive, not a negative development, especially for ambitious people who are eager to play a more strategic role in their corporations.

Here Finance Monthly hears from Kasim Zafar at investment specialists EQ Investors, who looks back at the past decade and considers the investment opportunities we should be considering ahead.

We started the decade with the global economy still reeling from the worst financial crisis in modern times.

Following the failure of the banks, trust in capitalism was then further eroded by the largest financial fraud in US history; Bernie Madoff was imprisoned for 150 years after defrauding clients to the tune of $65 billion.

Extraordinary times called for extraordinary measures. By 2012, most major central banks had slashed interest rates close to zero or below, hoping that ‘free money’ would help the economy heal and return to growth. Trillions of dollars were pumped into financial markets to plug anything resembling a hole. The idea was basic, yet oxymoronic. To save free market capitalism, central banks staged the greatest market intervention of all time.

Sovereign debt crisis

Europe was tested further by its sovereign debt crisis. Despite zero interest rate policies, the rate demanded to fund government debt of the ‘PIIGS’ (Portugal, Italy, Ireland, Greece and Spain) soared between 2010 and 2012, reaching almost 30% in the case of Greece’s 10-year debt.

The European Central Bank created its rescue package to save the European Union from imploding, committing to buy a massive amount of European sovereign debt. Despite this, since the root cause of the problem was too much debt, European governments adopted austerity measures, cutting fiscal stimulus spending.

Quantitative easing in the US put a line under asset prices, first bringing stability and then allowing growth, to the substantial benefit of those with wealth invested. The wave of economic austerity that swept across Europe led to an increase in income inequality and sowed the seeds of populism.

Environmental instability

Distrust of big companies spread beyond bankers like wildfire with the largest environmental disaster in American history. BP’s Deepwater Horizon oil spill in the Gulf of Mexico eventually cost the company more than $65 billion in clean-up costs and compensation.

There was no shortage of environmental tremors. We saw floods on multiple occasions in Pakistan, India, China, Brazil, Thailand and the UK. Hurricanes Sandy, Irma, Maria and Harvey; earthquakes devastated Haiti, Chile, Mexico and of course Japan where in Fukushima we witnessed the world’s second largest nuclear power plant disaster after Chernobyl.

The latest signs of an overheating planet are record temperatures (high and low) across the globe, including fires in the Amazon rainforest and across Western Australia in 2019.

A concerted effort to tackle the climate crisis was finally embraced by 195 governments in the form of the Paris agreement. Last year, the EU declared a climate emergency, no doubt inspired by Greta Thunberg. All legislative and budget proposals will be fully aligned to limit temperature increases to under 1.5 degrees – seen as the danger line for global warming.

Looking forward

The last decade has seen rapid technological advances and we see a number of these coalescing over the next decade. Let’s take a glimpse into the future because we think it’s pretty exciting.

Sustainable finance

Why would you want to invest unsustainably? Now that’s a powerful question. When the rules of the game change, only a fool plays the same strategy.

The next decade is going to see financial markets transform to incorporate a broader set of stakeholders and interests well beyond the bottom line. Legislative changes are already underway in the EU that will significantly alter the reporting requirements for companies and investment products including:

Although the UK will have exited the EU by the time these rules come into force (around December 2021), we fully expect the UK to adopt similar reporting requirements.

The next decade is going to see financial markets transform to incorporate a broader set of stakeholders and interests well beyond the bottom line.

This will help to establish a common language for what qualifies as sustainable and unsustainable through legislature. The associated data reporting will bring transparency to the conversation and encourage us all to consider the merits of economic activities, particularly those ones which are deemed to be harmful.

AI revolution

A decade ago, we were buying the iPhone 4 and the original iPad had only just been released. The idea of cloud storage and cloud computing was just taking off and the volume of data in the world was estimated to be around two zetabytes – that’s two trillion gigabytes. For comparison, entry level iPhones today have a data capacity of 64 gigabytes. The volume of data in the world has since exploded to around 41 zetabytes. That’s a lot of data! Through analysing these big data sets, we are finding better ways of doing things and finding altogether new things to do.

This is the realm of artificial intelligence (AI). Data scientists are creating sophisticated computer algorithms that identify esoteric features in data of a known entity (such as known ailments in radiology scans). When the algorithms are presented with new images, they are now able to identify things better than their human equivalents. This technology has incredibly wide applications in everything from early stage healthcare diagnoses to logistics route optimisation.

Data and artificial intelligence is being combined with robotics to achieve some pretty incredible feats, often referred to as the ‘internet of things’. Computing power is now decentralised, agile and mobile, freed from the confines of the home and office. The smartphone heralded a new era of fast and interactive data sharing and then the proliferation of sensors has taken things to another level. Everything is being connected: the smart home, smart buildings, wearable consumer devices, remote machine & engine diagnostics and of course, our transportation systems.

[ymal]

Transforming healthcare

Healthcare is getting better from improved diagnostics, but there are improvements in treatments themselves. Increasingly healthcare is become an exercise in engineering. Biotechnology is developing medicines that are designed to combat specific diseases; treating the cause rather than the symptoms. In the future, it is easy to envisage so called ‘designer drugs’ that are designed for our specific genetics and perhaps beyond a decade from now, we could even be 3D printing these at home.

Precision fermentation

The current world population is 7.7 billion and the UN forecasts we’ll add another one billion people over the course of the next decade. Resource efficiency will be crucial for this to be sustainable, especially to create enough food for everyone. Robotics assisted precision agriculture and partially or wholly embracing veganism will help, but a new technology could change the face of agriculture and food supply altogether. Precision fermentation is the name of the technology behind the various meat alternatives we see in restaurants and supermarkets.

These are synthetic, precision engineered proteins that have similar nutritional value and are approaching cost parity to animal protein. We haven’t synthesised the perfect rib-eye steak yet, but we believe there is a good chance that agriculture will look wildly different in a decade’s time. Could we be looking at the path to ending poverty by then?

Quantum computing

Many of these transformational technologies are based on analysing data using artificial intelligence with computer power that is thousands of times faster today than it was a decade ago, all connected through the digital infrastructure of the internet. There is one problem though. We are approaching the physical limits of computer miniaturisation that has driven the increase in computer power.

However, human ingenuity is pushing through this boundary, developing a new breed of computing. Based on Einstein’s concepts of quantum superposition and quantum entanglement, this new breed of quantum computing would rewrite the rulebook and open the door to… a world of even more new possibilities yet.

From more intelligent healthcare to synthetic steak, the decade promises major developments.

With UN Secretary-General Antonio Gutterres warning that climate change is about to reach a point of no return - and with Boris Johnson and Nigel Farage empty-chaired for Channel 4’s climate change debate in Novermber – new research suggests the green agenda is gripping the UK investor community. Renewable energy is now a top investment choice for investors of all ages; it is equally popular with men (29%) and women (31%) and it also transcends investment philosophy. For example, active traders, those that are simply looking to make an opportune gain, place as much emphasis on renewables as those investors that act with a specific ethical investment philosophy (33% and 36% respectively).

At a time when the general election and protracted Brexit delays are casting a cloud of uncertainty over what lies ahead in 2020, GraniteShares research suggests economic and political events have powered a greater sense of conviction among investors, with 76% seeing clear investment opportunities to capitalise on. Further, more than a third of UK investors (37%) identified as being in control of their investment decisions, acting with conviction.

Given this UK appetite to amplify their investment edge, GraniteShares asked a nationally representative sample of 1,560 UK investors which sectors they would put their money into if they were looking to make a long-term gain over the next year.  After renewables, the most popular sectors were technology (28%), property (25%), and gold (22%). Technology was most popular with younger investors aged 25-34 (31%), whereas property was most popular with the over 55s (33%). Gold was evenly popular across all age groups, a top choice with around one in five investors.

In addition, pharmaceuticals and biotechnology were particularly popular with over 55s (36% and 23% respectively), cannabis was most popular among the over 40s (20%) and oil and gas was top choice among the 25-34s (17%).

With recent warnings that UK car production could plummet with a non-deal Brexit and bleak warmings of the health of the high street for the crucial Christmas season, retail (8%) and auto (7%) along with industrials were the sectors that investors were least interested in putting their money into. With all these sectors, it was older investors (over 45) that were walking away and investing their money elsewhere.

The sectors UK investors would put their money into if they were looking to make a long-term gain over the next year (by age group)

Investment sector Total 25-34 35-44 45-54 55-64 65+
Renewable energy 30% 31% 26% 33% 35% 33%
Technology 28% 31% 22% 32% 30% 29%
Property 25% 21% 31% 26% 33% 28%
Gold 22% 23% 21% 26% 27% 10%
Biotechnology 19% 20% 16% 18% 23% 22%
Pharmaceuticals 19% 16% 17% 22% 36% 25%
Cannabis 17% 16% 17% 20% 18% 14%
Oil and Gas 14% 17% 15% 11% 10% 15%
Banks and Insurance 14% 14% 13% 9% 13% 11%
Crypto-Currency 13% 20% 14% 11% 3% 5%
E-Commerce 12% 14% 10% 9% 15% 6%
Utilities 11% 11% 12% 10% 10% 7%
Mining 9% 12% 4% 8% 7% 11%
Retail 8% 10% 8% 5% 3% 5%
Industrials 8% 9% 3% 6% 6% 7%
Auto Industry 7% 9% 10% 4% 7% 4%

 

New challenges are being laid down and to remain relevant, businesses are facing tough decisions on how to best align to the current economic climate.

With significant change comes great opportunity. As we step into 2020 and the next decade, Stephen Magennis, MD for UK Quality Business at Expleo, acknowledges that in spite of market challenges, it is an exciting time for businesses who are looking to use technology to drive their future success.

The Biggest Change of the Past Decade: Fast money

Currency has been used to trade in exchange for goods and services for millennia. Each evolution has been prompted by a shift in convenience. Bartering? Too variable. Bronze replicas? Too cumbersome. Metal coins? Too heavy. Paper? Too bulky.

For a long time, plastic cards seemed to have cracked the problem: easily portable, quick, convenient. Then Apple launched the iPhone in 2007, which represented a seismic cultural shift in how we go about our daily lives.

This one device enables us to stay connected and productive in so many ways, that it was inevitable it would also be the catalyst for another evolution in the story of currency. Contactless payments are designed to be seamless and convenient. One tap, and the shopper is on to their next errand. Simple.

Arguably, of all the technologies which have emerged over the last ten years, contactless payment has claim on being the most impactful on our daily lives.

Arguably, of all the technologies which have emerged over the last ten years, contactless payment has claim on being the most impactful on our daily lives.

Here it is worth thinking of the proverbial swan, calm and collected floating on the lake’s surface, yet paddling away under the water. The technology used to deploy, integrate and support contactless systems is complex. Layers of data and functionality are in play, with security constantly being tested, reviewed and enhanced so users can remain confident that their money is protected.

Across travel, retail, entertainment and beyond, experts are already looking for the next technology evolution in the payment space that will ensure customer experience remains paramount. In the early 2020s, we are likely to see regulation technology move into the spotlight while biometrics become mainstream.

The businesses leading the charge will be those who can ensure systems are fit for purpose, delivering a simple user interface and offering rigorously-tested security.

[ymal]

The Differentials to Come in the Next Decade:

  1. Winning the data war

Managing data in a way that combines and analyses knowledge from across global organisations is still a major challenge. Stricter data integrity and protection laws, heavy fines and lower customer trust won’t make this critical opportunity any easier to grasp.

However, those that can master big data, real-time analytics and enhanced cognitive capabilities will be better equipped to counterstrike the Fintech threat and remain relevant.

  1. Guaranteeing financial resilience

Since the 2008 banking crisis, regulators have forced institutions to swell their reserves in case of another crash. With the growing dependency on technology – and the potential threat of disruption from cyber terrorism, outages and data breaches – Financial Institutions (FIs) may soon need to guarantee their operational resilience too. Or they may choose to advertise resilience as a competitive advantage.

  1. Making use of robotics

AI assistants and humanoid robots are constantly evolving. These technology advancements are key for FIs becoming cognitive – replicating the human ability to learn and respond to the preferences of customers.

That said, there is still work to be done in convincing customers that a personalised service from a chat bot who can understand your speech, gestures and even your facial expressions is a good thing.

  1. Do not write off the human touch

One of the many benefits of digital transformation is its ability to automate the most routine office tasks. Undoubtedly, this upheaval will cause widescale restructuring in FIs. However, employers will still need people with the soft skills, who can create a human experience for customers and keep the brand relevant to everyday community life.

To the future

As technological advances revolutionise FIs, efforts to drive efficiencies, improve processes and overhaul supply chains will become central to delivering best-in-class customer service.

The challenge for FIs, is to assure that whilst these innovations offer significant benefits to businesses and consumers alike, transparency and trust is set to become the ‘crucial’ offering.

Below Douglas Blakey, editor at GlobalData Electronic Payments International, considers the key changes ahead.

Among the most notable product launches of 2019 was the Apple Card. It was notable not just for the hype it generated. The card also features the natty feature of no card number, signature or expiry date.

Any 2020 forecasts have to include the call that we can expect to see more of the same. There is huge potential for the popularity of virtual cards to soar due to the peace of mind given to consumers by way of increased security.

A second prediction is a little riskier and that is a tad less political uncertainty in the UK. It may be a little optimistic to make similar forecasts in other markets, such as Hong Kong, Chile and Venezuela. But in the UK, a decisive Conservative general election victory may clear some of the fog. The payments sector will take in its stride the likely rise in the value of a currently undervalued sterling.

Strong customer authentication

A third forecast relates to AI and machine learning. Expect more investment in real-time transactional data analysis to uncover potential criminal activity.

We will hear plenty more about how strong customer identification will play a crucial role in reducing occurrences of fraud in payments.  As the staggered rollout of 3DS 2.0 continues, ahead of full compliance with PSD2 in March 2021 there should be plenty of positive news stories about success in fraud prevention.

On a similar theme, Secure Remote Commerce will allow the sector to rethink the online checkout. It removes the need to type card details manually and replaces the card number with a token.

[ymal]

Open Banking still to show its potential

Next up, faster payments. Safe 2020 forecasts must include the expectation of many a breathless press release about an explosion in faster payments.

And then there is Open Banking. 2019 was meant to be the year that Open Banking took off. The kindest summary would be that it has yet to show its full potential. But in an effort to be upbeat about Open Banking, expect to see a significant increase in the adoption of the payments side of Open Banking in 2020.

Finally, a word on regulation. It is safe to forecast further acceleration towards consolidation in payments. One of the best examples is the roadmap to the Eurosystem Single Market Infrastructure Gateway promoted by the European Central Bank.

Below Finance Monthly hears from Jayakumar Venkataraman, Partner at Infosys Consulting on the key predictions for 2020’s finance sphere, considering key topics including the rapid growth of the API Economy and data, as well as operational resilience, fintech acquisitions by banks, the growth of Regtech and new ways to reduce costs.

1. 2020, the year of the Ecosystem Approach and the API Economy

In 2020, we will see the rise of the ecosystem approach in creating new propositions and delivering banking and financial services to customers. Globally, open banking and PSD2 have enabled newer players to enter the market and gain access to customers’ data that was previously the sole preserve of the banks. This has given rise to many third-party providers (TPPs) that are developing more exciting product propositions for customers, particularly in personal financial management, using customers’ financial data from the banks.

We will see this approach growing significantly in the world of Trade Finance. As well as this, banks will bring together multiple players such as shipping companies, local chambers of commerce and insurance companies to create richer product and service propositions for their customers. We will see blockchain-based solutions continue their pivotal role in helping bring a digital ecosystem’s players together.

All of this will be underpinned by rapid growth of the ‘API economy’, where banks and the other players in the ecosystem are exposing APIs for all their key capabilities, using this to integrate and orchestrate new products and services for their customers.

2. In 2020, data will drive more customer insights than ever

In the last few years, we have seen a significant rise in digitalisation and the amount of data that is collected on customers and their preferences, transactions, and market and industry data.

In 2020, we will see the emphasis shift to using this data to drive a much richer understanding of customers, predicting and responding to their needs and transactional patterns. This will generate much greater insight into their lifecycle stage, and help create personalised offers that address their needs. Equally critical will be the use of this good quality data in risk assessments, compliance and fraud monitoring, to deliver safe banking services to customers.

For commercial customers, banks will bring together the vast amounts of transactional data across multiple product lines – such as lending, trade finance and payments – to create a much richer understanding of transactional patterns, business seasonality and the resultant impact on their financial needs. This means that they too can proactively engage their customer with tailored propositions.

To make this intensive, customer-centric approach to data work, we will see more banks adopting AI and machine learning technologies across their businesses to make sense of all their data. These initiatives are currently constrained by the availability of good quality data, which does not help in building models that are robust and yield correct decisions. In 2020, we will see banks scale their investment in data initiatives that focus on improving the comprehensiveness, availability and the quality of data, so that AI and ML can be used effectively and reliably.

[ymal]

3. Operational resilience needs the right technologies

Operational resilience is emerging as one of the top agenda items for senior executives in banks – and also for the regulator, to avoid the threat to their individual and organisational brand. Certainty and continuity of service availability is very important for customers, so it is important for regulators too. Operational resilience relies on tightening controls and governance around business and IT operations, while continuing to invest in the infrastructure for the future.

Modernisation and transformation of the IT infrastructure in banks – in particular the adoption of cloud and migrating the hosting and delivery of key capabilities in the cloud – is emerging as a major strategic direction. As well as eliminating the costs from maintaining their own data centre operations, migration to the cloud also offers resilience, agility and flexibility, advanced analytics, and innovative applications that are built on a cloud-first approach. All of this significantly improves integrated working and removes some serious challenges.

4. Fintech acquisitions on the horizon for banks

The trend of fintech firms disrupting the way banks and financial services players deliver products and services to their customers is here to stay. The way banks think about the fintech players has also undergone a significant shift. While they were once seen as fringe players, this year, banks will be looking at using fintechs to fill gaps in their own offerings, giving much richer propositions to their customers.

Banks are acting as investors, incubators, collaborators and strategic partners. Banks have set aside formal bandwidth to engage with the fintech community to identify the upcoming stars, to understand how their capabilities can be integrated into their product propositions, and to ensure they don’t fall behind their competitors. In some cases, banks have also bought out the fintech firms outright, as a move to gain competitive advantage over their competitors. Santander’s acquisition of ebury is one such example, and we will see many more acquisitions of fintechs by banks in 2020.

Banks have set aside formal bandwidth to engage with the fintech community to identify the upcoming stars, to understand how their capabilities can be integrated into their product propositions.

5. Regulatory compliance and the growth of Regtech

Regulatory compliance will continue to be a top spend area for banks, as the need to comply with existing and emergent regulatory and industry initiatives continue. There are plenty on the agenda: FRTB, EU Anti-Money Laundering Directives and other industry initiatives such as ISO20022 adoption and IBOR Transition, as well as a slew of other national and regional requirements. With all of this, banks will have their hands full in 2020. Banks will be looking to be efficient about how they approach these initiatives, to then structure their programmes of work so as to minimise duplication and rework in their efforts.

The emergence of RegTech firms is a key development that can aid the banks in their compliance initiatives. Estimates on the size and the growth of the RegTech industry vary significantly, but we know that this sector is set for rapid growth. Regtech firms are focused on developing solutions in data collection and reporting, decisioning, predictive analytics and risk identification and management. Like with fintechs, we expect banks will co-opt these firms to aid their compliance initiatives.

6. New ways to reduce costs

Given the recent trend of results posted by the banks, cost reduction and rationalisation will be an important focus for 2020.  As opposed to outsourcing and offshoring of work to lower cost locations, and the adoption of automation and RPA to drive costs down, in 2020, cost rationalisation will focus on a more fundamental operational transformation.

This will involve a radical rethink of the way banking processes are designed and delivered, and the adoption of an automation-first approach. This approach will be supported by a much smaller team of multi-skilled expert operations teams that oversee business processes, and can jump in to manage any exceptions or incidents with expertise.

As well as a radical redesign of operations, we will also see banks drive operational costs down through the monetisation of assets and mutualisation of costs. Banks will carve out operations and technology capabilities to a strategic partner that also offers such services to other banking clients. We have already seen some of these deals executed, and we will see these conversations picking up scale in the coming year.

About Finance Monthly

Universal Media logo
Finance Monthly is a comprehensive website tailored for individuals seeking insights into the world of consumer finance and money management. It offers news, commentary, and in-depth analysis on topics crucial to personal financial management and decision-making. Whether you're interested in budgeting, investing, or understanding market trends, Finance Monthly provides valuable information to help you navigate the financial aspects of everyday life.
© 2024 Finance Monthly - All Rights Reserved.
News Illustration

Get our free monthly FM email

Subscribe to Finance Monthly and Get the Latest Finance News, Opinion and Insight Direct to you every month.
chevron-right-circle linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram