This ground-breaking reform changed previously rigid rules to make the financial services sector more competitive and focused on the customer. 

Cloud-based digital banks have taken advantage of this initiative by offering better services to customers, as 8 out of 10 Millennials say they would switch banks for personalised service. Such fintech players and challenger banks now account for 20 per cent of the banking and payments market in Europe.

However, acquiring these new customers is not enough for digital banks to stay competitive, according to customer relationship marketing experts at the customer data platform Optimove. Challenger banks need to find new and personalised marketing strategies to keep brand-agnostic customers loyal – or else they will be made irrelevant by other agile providers with better product offerings.

Roni Cohen, Director of Data Science at Optimove, comments:  “In the age of Open Banking, the best way for these agile technology driven banks to effectively implement personalisation is to make the most of the available customer data, which is now also available to their competitors.

“A customer-centric approach using advanced technologies can help create a long-term competitive advantage. This can be done by looking at customer data to find out what value means to each person, and communicating with customers in an emotionally intelligent way to create value for each and every customer. By using AI, banks’ marketers can gain actionable insights and build effective campaigns and strategies that will target customers at the right time, the right channel and with the right offer for a fully personalized experience.”

Roni concludes: “As consumers see an increasingly personalised experience, challenger banks will be able to distinguish their brands with promotions and rewards tailored to each individual – just like retailers do.”

(Source: Optimove)

Fortunately, Viktoria Ruubel, Chief Product Officer at IPF Digital, is here to help you stay ahead of the curve, looking forward to 2019 and the top trends that will dominate the industry over the coming year.

1. Banking in your back pocket

Mobile banking has been around for barely five years, but now it is ubiquitous. In the next five years, 72% of the UK population is expected to be banking via their phones. Paper money is dated – new transactional experiences define our daily spending, with contactless cards sharing a crowded market with mobile tech like tap-and-pay.

2018 saw millennials flocking to digital wallet providers like Monzo and Revolut. In 2019, this sort of tech will go mainstream, with a wider range of providers and services, all targeting improved customer experience, financial inclusion, and digital service.

2. The global fintech opportunity

The global payments industry processed over $1bn per day in 2017. In Latin America, and Sub-Saharan Africa, where traditional institutions shied away from investing, fintech firms have plugged the gap in the market.

The restrictions enforced by old-fashioned lenders have catalyzed the development of mobile banking. Mobile payments enabled by technology grant financial inclusion to users who wouldn’t meet the criteria for traditional banks

Smartphone adoption lies behind the accessibility of mobile banking – with a smartphone and internet access you can be part of the financial system without a bank account. More people than ever can contribute to the movement of money around the world, resulting in more opportunities for individuals to improve their financial situations, and for business to leverage credit for growth.

In 2019, fintech companies will recognize the massive markets that await outside of the traditional financial ecosystem.

3. Open Banking matures

Open Banking has won over its early sceptics and now has a strong place in the market, driven by the adoption of PSD2 regulation, new strategic partnerships, and increased customer expectations. 2019 will see open API reach maturity, with new products, customer experiences, business models, and opportunities created along the way.

Stripe, Mint, N26 – these are just some of the players using open API to offer products to both banked and unbanked segments. Meanwhile companies like Alipay and WeChat are building exciting new infrastructure which could drive the financial services revolution globally.

4. Applying artificial intelligence

The rapid advances in AI-enabled customer intelligence will drive the great leap forward in the 2019 financial industry, notably consumer lending. Chatbots and virtual assistants grew in popularity over the last two years, and consumers are increasingly comfortable using them to request information. Advances in voice tech mean that virtual assistants could soon submit loan applications on your behalf with a vocal signature.

Meanwhile, digital devices and pay for each other, to each other. Lending will become ‘real-time’ and AI learning will allow credit products to be personalized to each customer’s behavior.

For example, AI technology could analyse customer spending, and then suggest saving plans, helping consumers budget and borrow more sustainably. AI would then remind customers when they might need to borrow, how much to borrow and the schedule they should follow for repayments.

5. Securing data with biometrics

In developed global markets with high levels of smartphone use, biometrics are the next big step for financial services, in 2019 and the medium term as well. Biometrics will soon be integral to verification processes and payments - mobile banking apps already allow users to log in and pay with facial recognition, voice recognition and fingerprints.

The more financial institutions rely on digital, the more data security becomes a concern. Biometric technology one solution, maintaining the transactional security crucial to any sound financial environment.

Here Stan Swearingen, CEO of IDEX Biometrics, discusses the potential trends for 2019’s biometrics sector.

Following a number of successful trials using fingerprint sensor technology within smart cards across multiple markets, (including Bulgaria, the US, Mexico, Cyprus, Japan, the Middle East and South Africa) the biometric smart card is reaching its inflection point. Key players within the banking industry, including Visa and Mastercard, are already heavily invested in this new payment technology and anticipate that biometrics will play a key role in the revolution of the payments industry.

With mass market rollout on the horizon, here are five key predictions for the biometric payment industry in 2019.

2019: The year of dual interface

The first half of 2017 reported 937,518 cases of financial fraud, resulting in losses of an astonishing £366.4 million^[1], a clear demonstration that the PIN is no longer fit for purpose. Recent research from IDEX Biometrics supports this claim and found that 29% of consumers surveyed felt concerned about the use of PINs to keep their money secure, and as many as 70% believed that contactless payment cards left them exposed to theft and fraud. As consumer concerns continue to grow around the security of payments, so too does the need for a personalised, secure and convenient payment solution.

Enter the biometric dual interface payment card. 2019 will see biometric fingerprint sensors integrated into cards with both a micro-processor and contactless interface, removing the need for PINs. This will provide consumers with the reassurance that their money is safe as any transactions will require their finger print to authenticate it. 2019 will be the year of the dual interface where biometric authentication will be available for both contact and contactless payments!

These advances in technology and those within the payments market have meant that the concept of biometric authenticated payments is no longer a novelty. In fact, according to forecasts by Goode Intelligence, nearly 579 million biometric payment cards will be used globally by 2023^[2]. The integration of the biometric sensors in the payment card will be one of the next-generation transformative innovations to breathe new life into the payment industry next year and assist in the fight against payment fraud.

The integration of the biometric sensors in the payment card will be one of the next-generation transformative innovations to breathe new life into the payment industry next year and assist in the fight against payment fraud.

Remote enrolment will be the key to mass market adoption

For mass market deployment of biometric smart payment cards to be possible in 2019, banking infrastructures must look at the implementation of biometric technology and ensure that this method of enrolment is accessible and convenient to all. The elderly or those with physical health limitations may struggle leaving the house to enrol within bank branches and even those who work a 9-5 day can often find making it to the bank within opening hours a challenge.

The latest advancements in remote enrolment of biometric payment cards will mean that enrolment for biometric payment cards can take place in the comfort of your own home. Card users will be able to enrol straight onto the card by simply placing their finger on the sensor (with the aid of a small device that comes with the card) to upload their print to the card’s highly secure EMV chip. There is no need for an external computer, smartphone or internet connection. Once loaded, the fingerprint never leaves the card, thus eliminating multiple attack points.

Biometric payments will bridge the gap to financial inclusion

In 2019 advances in biometric fingerprint authentication will be a vital ingredient when bridging the gap to financial inclusion. Currently, 1.7 billion adults remain unbanked across the globe today^[3]. This is for many reasons, from immigration issues, to illiteracy as well as mental health. Those living with dementia are also at risk of losing their financial independence as their short-term memories decline. A fingerprint sensor on the card can take the place of a PIN or even signature, meaning sufferers are able to stay financially independent for longer.

Currently those who lack access to financial services are missing out on the many benefits financial inclusion has to offer. Fingerprint authentication will remove the barriers that face those with literacy challenges, or face difficulty with memory, as card payments will no longer be about what you know, or what you can remember, but who you are.

Currently those who lack access to financial services are missing out on the many benefits financial inclusion has to offer.

Biometric authentication will be a simple, secure and convenient solution eradicating the need for passwords and PINs as a form of authentication. For this to work as a solution to financial inclusion, banking infrastructures and card manufacturers must work together to reach a price point that enables this technology to be available to all.

The possibilities for biometrics are endless…

While biometric authentication technology is already being used with smartphones and passport identification in the UK, 2019 and beyond will see endless possibilities for the use of biometric smart cards into payments and beyond. We can even expect to see biometrics branch into the Government issued identification and IoT enabled devices arenas.

In fact, a whole host of public services is set to benefit from this secure means of authentication. The use of biometric smart cards within the NHS, for example, could see access to sensitive patient records limited only to the patient themselves. Biometric social benefits cards could control how the money is spent and that it is spent by the right person. According to IDEX research, 38% of consumers surveyed would like to see biometric methods of authentication introduced to wider government identification including driving licenses, National Insurance numbers and even passports.

The future of the biometrics – 2019 and beyond!

In 2019, authentication will get even smarter, and further technological advances such as multi-modal or multi-factor authentication will further enhance security within the payments landscape. This refers to technology that combines a variety of different types of biometrics in order to add an additional layer of security, including persistent authentication. For example, instead of having one single authentication, smartphones could continuously scan features to ensure the correct person is using the device.

Whilst the biometric dual interface smart payment card is set to hit the mass market next year – this is just the beginning. The payment card of tomorrow will go beyond just transactions. Biometric smart cards will serve multiple purposes – a payment card, a form of ID for restricted goods and even a loyalty card!

The early days of biometrics where it was felt to be invasive and a privacy concern are long gone. In fact, according to recent research from IDEX, 56% of consumers surveyed state they would trust the use of their fingerprint to authenticate payments more than the traditional PIN. Further to this, 52% would feel more confident if their fingerprint biometric data was stored on their payment card, rather than a bank’s central database.

Consumers are ready for the use of biometric fingerprint methods of authentication for card payments and 66% expect their roll out to authenticate in-store transactions in 2019. We predict that by 2019 biometric smart payment card adoption will go into many millions!

[1] https://www.financialfraudaction.org.uk/news/2017/09/28/latest-industry-data-shows-fall-in-financial-fraud/

[3] https://globalfindex.worldbank.org/

The study, which looks at cash and cashless technology usage in four markets—the UK, Australia, Brazil, and South Africa—shows that a cashless society may not be a realistic ambition. In fact, the survey revealed an “immovable” 24% of consumers who will never abandon cash—no matter what technological advance or leap forward is available to them.

In Brazil and South Africa, where cash use is more common, there is a strong desire for wider acceptance of cashless technologies such as payment cards and digital wallets. In both markets, 60% say that they are worried about having cash stolen from them which suggests fear of theft is a key driver rather than convenience.

In the UK and Australia, however, where the use of cashless technologies is more widespread, people are happier with their use of cash. Around 80% of people in both markets say that they are comfortable using cash.

Respondents across all countries saw cash as part of their day-to-day lives. They carry cash at all times, replenishing their wallets and purses regularly at ATMs, and are unwilling to go that last extra mile and never use cash again.

The findings suggest that cashless technologies will not replace cash completely; instead people are happier with an equilibrium between the two.

“While the proliferation of cashless payment technologies has generally led to a reduction in cash usage across developed economies, banknotes have unique properties that consumers value, such as security against fraud,” said Michael Batley, Head of Strategy, Travelex. “As long as this is the case it’s unlikely that any attempts to abandon cash completely will succeed. Even Sweden’s bid to go cashless, touted as a successful model, has seen pushback. Ultimately, only consumer demand will drive the change towards a truly cashless society and our research indicates this is further away than many realise.”

As well as revealing a lack of appetite for a cashless society, the study also reveals that opinion is split on whether it is even possible. The UK, the most ‘cashless’ country surveyed, represented the highest proportion (47%) of respondents that do not see an end to cash, closely followed by Australia (42%).

Travelex commissioned Sapio Research to survey 1,000 consumers regarding their attitudes to cash and cashless technology across four markets: the UK, Australia, Brazil and South Africa. These four countries are at different points in the “journey towards cashlessness”, as defined by Mastercard’s Measuring progress toward a cashless society report, and together give a representative overview.

(Source: Travelex)

In Africa, the want for cryptocurrency is growing, and according to Iggi Vargas at Paxful, this could affect the wider markets.

The interest in bitcoin has continued to grow at a rapid pace. Exchanges are reporting that a lot of Africans, especially millennials, are taking over the platforms.

The “Cheetah generation”

The term “Cheetah generation” was coined by Ghanaian economist and author George Ayittey. It refers to the young and hungry generation of African graduates and professionals. This is the generation that is trying to change the status quo for the better.

“The Cheetahs do not look for excuses for government failure by wailing over the legacies of the slave trade, Western colonialism, imperialism, the World Bank or an unjust international economic system… To the Cheetahs, this ‘colonialism-imperialism” paradigm, in which every African problem is analyzed, is obsolete and kaput. Unencumbered by the old shibboleths, Cheetahs can analyze issues with remarkable clarity and objectivity.” (Ayittey, 2010)

The Cheetahs offer the people of Africa a new way of thinking. Ayittey says that their outlooks and perspectives are “refreshingly different” from past African leaders, intellectuals, and/or elites.

Ayittey compares them to what he calls the “Hippo generation”. This refers to the generation before the Cheetahs.

“ [The Hippo generation] lacks vision - hippos are near-sighted - and sit tight in their air-conditioned government offices, comfortable in their belief that the state can solve all of Africa’s problems.” (Ayittey, 2010)

According to Ayittey, the Hippos are the ones that “are lazily stuck complaining about colonialism, yet not doing anything to change the status quo.”

With that being said, how does the Cheetah generation translate to the Africans’ new-found passion for crypto?

Hunger for crypto

When it comes to cryptocurrency, Africa is a shining star. This is because of one major factor: peer-to-peer finance. Africans have joined the peer-to-peer revolution. It is doing wonders not only for their economy but also their culture. The Cheetahs seem to be embracing this as a good number of African millennials have been joining peer-to-peer marketplaces. This is important for many reasons.

First, it shows that peer-to-peer platforms have an amazing reach. Africa does not have, by any means, cutting-edge technology but they find a way to make a living off of cryptocurrency. Being able to send money around the world without the bank’s high fees are a big deal. Whether it be to a sibling halfway around the world or to your neighbor, being able to send money anywhere is an advantage for Africans.

Second, it shows that peer-to-peer platforms are easy to use. Many non-users will find bitcoin intimidating at first and give up on learning. This shows not only that everyone can use peer-to-peer platforms, but also that it's easy to learn if you’re willing.

Third, it shows that the underbanked aren’t a lost cause. With Africa being so underbanked, bitcoin serves multiple purposes for them. It serves as both a way to hold your money and a way to send out money.

Fourth, it shows that everyone has the power to take control of their own finances. Some Africans actually make a living by trading cryptocurrency, and you can too.

Lastly, it shows that a revolution is in the works; a peer-to-peer revolution. The benefits of peer-to-peer exchanges are being seen all over Africa. The idea of fast transactions and innovation flawlessly aligns with the Cheetah Generation. Clearly cryptocurrency and peer-to-peer finance are the right tools for the new generation of Africans to get ahead and prosper. But it doesn’t just have to be Africa. All over the world, peer-to-peer platforms are showing significant amounts of growth. They are also becoming a popular method to buy bitcoin.

The time is now

It seems like we can learn a lot from the Cheetah generation, including how to make money with bitcoin. If they can have the right set of mind, the world can follow suit. The drive of these young prodigies is something to look up to. They have the attitude that can conquer and inspire the world. Taking control over your own finances is a big deal, and it seems the Cheetahs have figured it out. The peer-to-peer revolution is here and it’s time to get in on it.

According to recent research by IDEX Biometrics, more than half (53%) of cardholders would trust the use of their fingerprint to authenticate payments more than their PIN.

A further 56% of research respondents stated that they would feel more secure conducting purchases with their card, if they were authenticated with their fingerprint. It seems that payment card users are very aware of the limitations of their PIN with almost half (45%) admitting that they never change them. And a third (29%) expressing concerns that PINs cannot be relied on to keep their money secure.

This scepticism around current card security measures also extends to contactless payments with 63% questioning their security and 70% believing that they actually leave them exposed to theft and fraud when used.

It is evident, that as a nation, we are ready for the introduction of biometric fingerprint card authentication. The only area of concern users admitted to, was how their fingerprints would be stored. 45% were worried that criminals could mimic their fingerprint biometric data and a further 51% was concerned about the possibility of it being stored in a bank’s central database - leaving them exposed to identity theft or their personal information being used without their knowledge.

These findings highlight that banks need to provide reassurance that biometric fingerprint authentication can be used in a user-friendly manner. There is no need for this information to be retained centrally and that any fingerprint data is kept with the user on their own cards. Providing customers with the confidence that they can embrace fingerprint biometrics as a more secure and personal method of authentication for their payments.

“Consumers are ready for the use of biometric fingerprint methods of authentication for card payments and it is set to be a reality in 2019, but banks have a responsibility to address security concerns, particularly in relation to how and such data is held. It is ultimately up to the banks and the financial services sector to reassure consumers to drive adoption and ultimately tackle fraud head-on,” comments Dave Orme, SVP at IDEX Biometrics.

“With a resounding 53% of consumers stating they would trust the use of their fingerprint to authenticate payments more than the traditional PIN, this must be where the UK banking industry focuses its attention. Chip and PIN is now 12 years old, and has seen its course. The consumer demand for fingerprint methods of authentication is a reality, with two-thirds (66%) of UK consumers expecting their roll out to authenticate in-store card transactions by 2019,” added Orme.

(Source: IDEX Biometrics)

Below, Rune Sørensen, at Nets, explores with Finance Monthly the impact that sophisticated card infrastructure can have on mobile-led banking.

All this innovation is pushing and pulling card infrastructures in ways no-one could have predicted a decade ago. Mobile banking, ecommerce integration, loyalty and rewards schemes and even IoT payments all link to cards. That’s a lot to ask of a back-end system.

So the question is: how can issuers balance a need to be perceived as innovative with providing a reliable, compliant and fit-for-purpose payment infrastructure?

Payment revenue is falling, so issuer’s profit margins are being squeezed. Technological change is advancing faster than internal systems can be updated, and the demand for developers with the skills to design and implement back-end solutions is growing faster than supply. As a result, the most forward-thinking banks are taking a critical look at their go-to-market strategies, and questioning if a business model where they design, implement and maintain their own systems is still feasible.

Technological change is advancing faster than internal systems can be updated, and the demand for developers with the skills to design and implement back-end solutions is growing faster than supply.

Take payment gateways as an example. Banks need a payment gateway to the card schemes as they are the backbone of broad e-commerce payment acceptance for their customers, thereby enabling banks to benefit from the international e-commerce market - set to grow to $4.5 trillion by 2021[1]. To avoid locking themselves in with a single scheme, these gateways must also be card scheme agnostic. Issuers now have the choice of whether to develop and maintain these gateways themselves, or to prioritise reliability and time to market by working in collaboration with a trusted partner.

The debate around outsourcing infrastructure has been simmering under the surface for the last few years, and was brought into focus by the Second Payment Services Directive (PSD2). Open banking is bringing huge opportunities to banks because the importance of national borders in the provision of financial services is diminishing. This opens up the market and benefits consumers, and enables banks to target whole new countries of potential customers. However, these opportunities come hand in hand with two significant challenges.

Open banking is bringing huge opportunities to banks because the importance of national borders in the provision of financial services is diminishing.

First, banks must ensure that their payments infrastructure is compliant not only with EU and their own national regulations, but the domestic regulations of any other international markets they intend to enter, as well as the complex and constantly evolving requirements of the card schemes. Card scheme compliance alone is a great responsibility, demanding increasingly more resources as the service portfolio diversifies and becomes more complex, predominantly driven by mobile payment enablement. This is an enormous undertaking – and one difficult to justify when there are dedicated providers of back-end systems offering full compliance for less than it would cost a bank to create and maintain it themselves.

Second, scalability is key. In the increasingly globalised world of financial services, exciting new products must be made available to all customers at the same time, without any of the downtime associated with launching new products and systems. Stability and security are fundamental to banks; innovation alone means nothing.

It’s clear that, in an era where banking and financial services are evolving faster than ever before, banks need to put their money where it counts. A flexible and reliable card infrastructure will be crucial to a successful transition as more and more financial services move to being predominantly mobile – and in the future, maybe even mobile-only.

Although most consumer-facing financial institutions now offer mobile applications, that doesn’t mean that they are ready for a world where smartphones are the primary point of contact with their customers. This is a new reality, and as the industry changes issuers must evolve too. Those that survive and thrive will be the banks that focus on their delivered customer journey and value-adding core business areas – and it’s time to ask if this really includes developing and maintaining back-end systems.

So, put your cards on the table. Is your infrastructure up to the challenge?

[1] https://www.shopify.com/enterprise/global-ecommerce-statistics

New entrants to the banking market — including challenger banks, non-bank payments institutions, and big tech companies — are amassing up to one-third of new revenue, which is challenging the competitiveness of traditional banks, according to new research from Accenture (NYSE: ACN).

Accenture analysed more than 20,000 banking and payments institutions across seven markets to quantify the level of change and disruption in the global banking industry. The study found that the number of banking and payments institutions decreased by nearly 20% over a 12-year period – from 24,000 in 2005 to less than 19,300 in 2017. However, nearly one in six (17%) of current participants are what Accenture considers new entrants — i.e., they entered the market after 2005. While few of these new players have raised alarm bells among traditional banks, the threat of reduced future revenue growth opportunities is real and growing.

In the UK, where open banking regulation is aimed at increasing competition in financial services, 63% of banking and payments players are new entrants – eclipsing other markets and the global average. However these new entrants have only captured 14% of total banking revenues (at £24bn), with the majority going to non-bank payments institutions. The report suggests incumbent banks will likely start to see a significant impact on revenues as leading challenger banks are surpassing the 1 million customer threshold and 15 fintechs have been granted full banking licenses.

“Ten years after the financial crisis, the banking industry is experiencing a level of competitive intensity and disruption that’s much greater than what’s been seen before,” said Julian Skan, senior managing director for Banking and Capital Markets, Accenture Strategy. “With challenger banks and platform players reducing traditional banks’ competitiveness and the threat of a power shift looming, incumbent players can no longer rest on their laurels. Banks are mobilizing to take advantage of industry changes, leveraging digital technologies and ecosystem business models to cement their relevance with customers and regain revenue growth.”

In Europe (including the UK), 20% of the banking and payments institutions are new entrants and have captured nearly 7% of total banking revenue — and one-third (33%) of all new revenue since 2005 at €54B. In the US, 19% of financial institutions are new entrants and they have captured 3.5% of total banking and payments revenues.

Over the past dozen years, the number of financial institutions in the US has decreased by nearly one-quarter, largely due to the financial crisis and subsequent regulatory hurdles imposed to obtain a banking license. These factors have made the US a difficult market for new entrants and a stable environment for incumbents. More than half of new current accounts opened in the US have been captured by three large banks that are making material investments in digital, while regional banks focus on cost reduction and struggle to grow their balance sheets.

The research appears in two new reports: “Beyond North Star Gazing,” which discusses how industry change is shaping the strategic priorities for banks, and “Star Shifting: Rapid Evolution Required,” which shares what banks can do to take advantage of changes.

The reports found that many incumbent banks continue to dismiss the threat of new entrants, with the incumbents claiming that (1) new entrants are not creating new innovations, but rather dressing up traditional banking products; (2) significant revenue is not moving to new entrants; and (3) new entrants are not generating profits. To the contrary, the reports analyze where revenue is shifting to new entrants and identifies examples of true innovation happening around the world that can no longer be dismissed. Accenture predicts that the shift in revenue to new entrants will continue and will start to have a material impact on incumbent banks’ profits.

“Most banks are struggling to find the right mix of investments in traditional and digital capabilities as they balance meeting the needs of digital customers with maintaining legacy systems that protect customer data,” said Alan McIntyre, head of Accenture’s global Banking practice. “Banks can’t simply digitally enable their business as usual and expect to be successful. So far, the conservative approach to digital investment has hindered banks’ ability to build new sources of growth, which is crucial to escaping the tightening squeeze of competition from digital attackers and deteriorating returns.”

“As the banking industry experiences radical change, driven by regulation, new entrants and demanding consumers, banks will need to reassess their assets, strengths and capabilities to determine if they are taking their business in the right direction,” McIntyre said. “The future belongs to banks that can build new sources of growth, including finding opportunities beyond traditional financial services. They can’t afford to blindly follow the path they originally set out at the beginning of their digital journey. However, as the report clearly shows, there is no single answer and each bank needs to truly understand the market it is operating in before charting a path forward.”

Over its 10-year life Bitcoin has been the standard bearer of the new financial revolution. As the baby of the 2008 global financial crash, Bitcoin was launched as a direct challenge to banks and other financial intermediaries – a middle-finger to fiat currency markets. Below Kerim Derhalli from Invstr, provides expert detail on the rise and impact of the prized digital currency.

Enormously popular with those who grew up during that very crash, Bitcoin became an outlet for their anger and rejection of the traditional currency systems. These were people who felt excluded from the club of the global financial elite, an elite who had driven asset prices – stocks, bonds and property – far out of the reach of the ordinary saver. At last here was an asset that they could claim for their own. The early returns were spectacular. A new class of financial investor was born. A digital divide was created.

Bitcoin’s impact has been as much a cultural one as it has been a financial one. The Bitcoin revolution has been defined by self-empowerment and self-direction. Such is the extent of its impact on Internet culture, that there are now entire lexicons dedicated to Bitcoin investing – from ‘HODLing’ (hold on for dear life) and ‘SODLing’ (sell off for dear life) to Bitcoin ‘mining’.

Like many revolutions, Bitcoin’s emergence has resembled a rollercoaster ride. Since its first transaction on 12^th January 2009, it has enjoyed enormous growth and now sits at a current value of nearly £5000. With this growth however has come seismic price crashes. Back in November 2013, a single day saw 50% of Bitcoin’s value wiped out – the biggest single-day crash experienced by the cryptocurrency. Similarly catastrophic crashes and corrections have become near-commonplace on the Bitcoin market. Across only three days of trading in April 2013 Bitcoin’s value dropped a staggering 83%.

Bitcoin’s revelatory impact on both the global fiat currency system and internet culture might never have come to be were it not for the very technology which underpins it. In following the bumpy ride of bitcoin over the past ten years, we’ve also come to learn more about its elusive public ledger - blockchain.

The blockchain may have risen to notoriety on Bitcoin’s coattails, but now we find that the financial and tech sectors are waking up to it more generally. We’re seeing more banks, and industries, recognise its potential as a payments system and we’ve even see the world’s first blockchain-drive smartphone from HTC.

Some people have compared blockchain to the infancy of the Internet in 1996. The major difference however being that in 1996 anyone with a browser had access to an infinite source of information. The Internet’s potential as an encyclopaedic resource gave it a driving purpose. Today that mass use case for blockchain is still missing.

This isn’t the only hurdle which blockchain needs to overcome to forge an identity of its own. To truly divorce itself from the price volatility of Bitcoin and the speculative nature of crypto trading we need to see that it can resolve scalability issues as well as help us to overcome security issues more broadly.

For all is pitfalls though, Bitcoin, and by association blockchain, still represent the next phase of the digital revolution. As people continue to reject the traditional top-down approach to information dissemination and finance, Bitcoin, other cryptocurrencies and their associated technologies will take human civilisation towards a more self-empowered future.

Gold has long been known as a store of value to help investors weather turbulent financial markets. Below, Shaun Djie, Co-Founder and COO of Digix, explains why digital gold is a forward moving solution for everyone.

In recent years, it has also become far easier for the average individual to buy and sell gold. There are online bullion dealers and high-street shops selling gold, as well as exchange-traded funds for gold, which are effectively investment funds that track the price of gold.

However, while it’s now easier to purchase, the spread between what individuals pay for this asset and what dealers sell it for can be very big. This is especially true for small denominations of gold. Exchange traded funds overcome many of the associated complications of investing in gold but they tend to be more expensive than physical gold because of the inclusion of brokerage and management fees.

But for those interested in investing in gold and getting a better deal for it, the good news is an alternative to owning physical gold and relying on ETFs is emerging – thanks to blockchain technology.

Understanding blockchain’s potential

Blockchains are shared digital ledgers that record every transaction ever made on them. So physical assets like gold can be divided and represented by tokens, and blockchain technology can keep track of the ownership of those tokens.

Gold has become one of the first real-world assets to be tokenised and freely traded on the blockchain. With this comes a level of divisibility that hasn’t been seen before. Emerging gold ownership and trading protocols can ensure that tokens are minted on a proportional basis – so, for example, one token is equivalent to one gram of a physical gold held in a secure vault.

In some systems, the delivered gold is subject to verifications at the point of deposit into the vault, as well as at quarterly reviews by independent auditors. Hence, there should never be more tokens created than the total weight of physical gold bullion backing them.

Simplicity and liquidity

In this way, gold-backed tokens not only bring divisibility but also an easy, reliable and secure way to own and trade gold. Liquidity would increase, which would be good news for current gold investors and any prospective investors who may have been put off by an inability to access small denominations or by the fees that ETFs charge.

For existing investors, more profits from gold can end up in their pocket too. Buying a gram of gold through leading smart asset companies on the Ethereum blockchain costs under US$40, where as the retail price for a 1g bar hovers around the US$77 mark.

That’s because, by removing the physical and administrative costs of creating 1g gold bars, tokenised gold can get as close to the the spot price of gold than any method – regardless of the size of purchase.

Stability that investors can rely on

While these benefits will sound appealing to many investors, some may point to the historical volatility of cryptocurrencies as a sign that they won’t appeal to gold investors’ needs. It’s certainly true that the huge speculative bubble in virtual currencies has led to immense volatility.

However, gold-backed tokens are totally different to existing cryptocurrencies because of the bridge they have to the real world asset. To build confidence in crypto markets, gold-backed tokens are needed. They can also diversify portfolios and be used as collateral for lending and other financial products.

For existing investors, gold forming a central part of the crypto economy would be beneficial, pushing up the demand for the metal even further. These investors have always been able to see the value of their investment in this asset. However, through the tokenisation of physical gold, they can benefit from the liquidity, divisibility and security of these digital assets just as much as entirely new investors can.

More than a third of financial institutions (37%) find that legacy data platforms are the biggest obstacles to improving their data management and analytics capabilities, according to research from Asset Control. Whereas, for 31%, the cost of change is seen as the biggest hindrance to progress.

The poll of finance professionals, conducted through Adox Research Ltd., also revealed that for more than half of financial institutions (56%), the integration of legacy systems is the biggest consideration as they plan investment in future data management and analytics capabilities.

“What we’re seeing is financial institutions being held back by legacy data management platforms which they have acquired or developed over the years. These systems can slow down organisations as they are costly to maintain, miss audit or lineage information, often cannot scale to new volume requirements, and do not quickly and easily provide business users the data they require. While businesses recognise there is a need to update their data management systems they are sometimes reluctant to do so due to cost of change and perceived difficulties of integrating their systems with new solutions. Although I understand where these concerns come from, businesses also see the risks posed by inertia,” says Mark Hepsworth, CEO, Asset Control.

However, when it comes to considering new data management and analytics capabilities, firms remain focused on the fundamentals. More than a third (36%) of respondents cited ease of use and flexible deployment as their top business consideration, while 41% deemed ROI to be the biggest determiner.

“It is clear that while firms are currently being held back by the cost of change and legacy systems, they can see that both these challenges can be overcome with the right solution. While ROI is, of course, important in any business, these organisations must also consider how much their current data management systems are holding them back by delaying processes, lowering productivity and causing data discrepancies because they lack a clear and comprehensive view on their sourcing and validation process,” adds Hepsworth.

(Source: Asset Control)

Headlines have raised fears in recent months that robots threaten many of our livelihoods. However, Jan Hoffmeister from Drooms says that those in the private equity (PE) industry should instead be encouraged by how Artificial Intelligence (AI) technology can give them an edge in a competitive marketplace.

AI technology cannot replace human thinking in relation to strategy and business planning, which are fundamental to PE. But it is an impressive tool when it is correctly incorporated into the more process-driven functions of PE firms, increasing the power to collect, process and distribute information to the right parties with much greater speed and accuracy.

The need to stand out is imperative in the highly competitive PE market. Analysis by EY¹ shows that while the industry has made a strong recovery after the crash of 2008, there is also a lot of ‘dry powder’ sitting in the wings because of intense competition for deals.

Total PE commitments globally stood at US$530.7 billion in 2016, which was close to the US$616.7 billion pledged in 2007. However, in 2017, only US$440 billion of transactions took place versus US$748.4 billion in 2007. In terms of dry powder, there was US$525 billion sitting without investments in 2016.

The key issue is that the right investment targets with appropriate valuations are hard to find. Offering a solution to managing the deal-making process helps a PE firm stand out amid intense competition. Using a virtual data room (VDR), which leverages AI technology, makes a firm best in class, whether it is used for a one-off transaction or to create value in assets over their entire life cycles.

Successful PE firms are thorough in their due diligence, nimble and open-minded to pinpoint the right opportunities and disciplined about formulating the right investment philosophies.

There are two key areas in which a VDR is useful for PE firms, particularly if it is used during the ‘hold’ phase of an asset. The first is consistency, in that documents can be updated regularly, giving the vendor full control over data, sourcing investment targets and achieving correct valuations. The second is responsiveness – documents are always ready, so assets can be bought or sold whenever required.

Given that the intention of PE firms is always to sell an asset, it is especially relevant for them to establish a ‘life cycle’ VDR that can be used to manage a company throughout the period of ownership, from purchase, through management and on to divestment.

A VDR connects authorised users, including those inside a company and their external stakeholders, digitally and in a secure environment with real-time access to all relevant documentation.

A VDR always makes documents relevant to a transaction available to authorised parties and helps ensure that they are up-to-date. All data is stored securely online on a server platform and is always accessible to both internal and external parties, depending on their individual permission levels.

Creating a database in which documents can be updated consistently gives asset owners full control and the ability to react to the latest market conditions, bringing assets to market quickly when the conditions are right, sometimes at short notice.

One of the strengths of the Drooms NXG VDR is its Findings Manager function. This improves the vendor due diligence both prior and during the sales process. It allows for the automatic pre-selection of documents and helps in the assessment of potential risks and opportunities within a transaction. This yields greater control, instills confidence in potential buyers and cuts disruption to existing business.

Those PE firms involved in cross-border deals will find the Drooms transactional room particularly useful. It includes a tool that translates documents in real-time, ensuring risk assessments are maintained in a timely fashion throughout the process.

Essential elements

The integrity of documentation is paramount for PE firms. When deals are going through, unclear, incomplete or erroneous documents can cause all manner of problems, including sales falling through. Documentation must provide an accurate assessment of the value of an asset.

For clarity and transparency, a VDR must also have a stringent and standardised index structure for all assets within a portfolio. All an asset’s documentation should be organised in the same manner, allowing quick access to relevant content for the purposes of comparison. Long-term value can be created in assets if they are encapsulated by standardised and sustainable data – and life cycle data rooms are the optimum tool for this purpose.

The practicalities

In practice, careful planning is essential to manage a life cycle VDR successfully. This starts with getting an accurate snapshot of a project’s current progress using key metrics such as available (and missing) documents.

The time frames, processes and the responsibilities of all relevant parties should be defined, and their commitment secured to the proposed solutions, including any changes to management processes.

All the relevant documents must then be collated and, if necessary, digitised before being uploaded to the VDR. Finally, the VDR must be regularly monitored and maintained, updating and adding documents as required.

Most powerful tool in the box

PE firms that wish to manage a market currently characterised by dry powder, high valuation and enhanced competition need to adopt beneficial technologies. A VDR adds value at all the stages of an asset’s lifecycle, including buying, holding and selling, making the whole process much smoother. The value added in terms of making better deals, improving operational efficiency and enhancing the transparency increasingly demanded by stakeholders makes a VDR one of the most powerful tools at a PE firm’s disposal.

¹Source: EY, Global PE Watch, 2017