The investing landscape has changed significantly over the last decades. Historically, the large banks have been happy enough to manage investors’ money and keep hold of the information. For those wanting to become involved, it was too tough, or too expensive. Here Finance Monthly hears from Kerim Derhalli, CEO at Invstr, on the potential for fintech to succeed in a complex evolving landscape.

Now, with an unprecedented amount of tools at our fingertips to make the process of committing cash to the stock market – or indeed other assets such as bonds – much easier, you’d expect us to be experiencing a golden age for financial independence and empowerment.

Despite this, the data tells a very different story. A recent US study by Gallup, for example, found that the combined age of adults younger than 35 with money in the stock market in 2017 and 2018 stands at 37%, down from 52% in the two years leading up to the financial crash.

While it’s true that a lingering distrust of financial institutions is impacting millennial sentiment towards stock ownership there’s a bigger story here of a more fundamental failing across the fintech industry – which is still not even scratching the surface of its potential.

Let’s look at this in simple, real world terms. If I were to stand on a street corner and hand out £5 notes to anyone passing by, I'm sure I would have several million people taking up the offer of free cash. If I stood on a digital street corner, the uptake would be even higher.

However, fintech brokers who have deployed these same techniques have apparently failed to attract huge followings. What are they missing?

Well, what many of these platforms are failing to understand is that investing is a process, not an event. Understanding what is going on in the world or at an individual company level, reading the news, following the markets, looking at charts, reading research, talking to friends, peers or strangers to get investment ideas are all part of the process.

The last part, the buying and the selling, only represents 1% of the investment process, and is by far the least exciting part of it. Companies that make the transactional and comparatively dry element the focus of their product are missing the fundamental quality of what makes fintech such an exciting proposition – and doing wannabe investors a disservice in the process.

For me, fintech is the manifestation in the financial markets of the information revolution. Whether it’s about internet or social networks, the sharing economy and now cryptocurrencies – it’s all about empowering individuals.

With investing apps, this means giving users access to data that was formerly the reserve of the large financial institutions and teaching them to interpret how real world events can impact on the stock market.

This is excellent practice for investing, whether via a mobile app or otherwise, where those who truly profit chart a path by making their own investment decisions rather than relying on passive funds that track the major exchanges.

Ultimately, it’s about putting people in a position where they can manage their own money. The disruption we’ve seen in every other consumer sector, where the empowerment of individuals has done away with intermediaries is the real opportunity. If more companies in the fintech industry can capture that space then the impact on finance will be truly transformative.

Taking a closer look at the start-up industry in Europe, card processing specialists, Paymentsense, have conducted research to find out which countries have seen the most significant rise in start-ups between 2013 -2017.

 The data has been mapped out across Europe allowing users to uncover the industries that each country specialises in and how fast those industries are growing.

Paymentsense analysed 30 European countries and ranked each one of them based on how many new businesses have been registered in that 5-year period and which business types have been the most popular in these countries.

Turkey tops the list with the most start-ups registered, followed by France and then the United Kingdom. However, data reveals that the UK is the fastest growing start-up nation in Europe and has brought more than a few successful companies to Europe, including Transferwise and Deliveroo.

Top 10 countries fuelling the European start-up industry:

Among all these countries, the UK has seen the biggest growth in the number of start-ups between 2013 and 2017 at 5.09%, followed by Romania and Portugal. What all of them have in common is a business-friendly environment that gives founders the possibility to grow and nurture their company over time.

When looking at what type of start-ups have dominated Europe in the last few years, wholesale and retail have the largest presence with 3.7 million new businesses started up.

This is surprising to see when in recent years we have seen a retail crash with companies like Woolworths and ToysRUs go bust.

The type of companies that have started up in Europe between 2013-2017

Guy Moreve, Chief Marketing Officer at Paymentsense, says: “It’s interesting to see that the UK ranks among the top five countries with the highest numbers of registered new businesses. It shows that the country offers a great setting for those interested in founding their own company.

Further afield, it’s fascinating to see how Europe has changed in recent times. A number of countries are now placing more emphasis on technology which has helped create a ‘golden era’ for tech startups.

“In order to thrive a business in your respective country, make sure you analyse the market you’re addressing – what works best and what doesn’t; It’s also worth looking at the legal and environmental conditions in order to make sure your business idea is a success”.

(Source: Paymentsense)

The rapidly expanding tech startups industry is progressively becoming the future and face of the business world and those who want to nurture their inner Elon Musk are increasingly travelling abroad to emerging tech hubs. Although, Silicon Valley still remains the undisputed destination for startups and venture capitalists, a new crop of global tech hubs are rapidly expanding to match the talent oozing out of the Bay Area.

A recent study by SmallBusinessPrices.co.uk has revealed the best rising tech hubs for people who are seeking entrepreneurial opportunities. The research took into account the average internet speed, the average business valuation, and cost of living, among other metrics.

1. Boulder, US - With the second highest internet speed, Boulder has over 5,000 business investors and an average business valuation coming in at $4.3 million. Boulder is a prime location for those wanting to start their next tech-startup.

2. Bangalore, India - In spite of an average internet speed of 11mbps, Bangalore has over 6,000 investors and an average business value of $3.4 million making it one of the best locations on the Asian continent.

3. Johannesburg, South Africa - As one of the most affordable tech hubs for young innovators, Johannesburg boasts reasonable average monthly rent cost of $416. The city has an average business valuation of $3.6 million and over 1,200 investors.

4. Santiago, Chile - With 1,201 startups, Santiago is considered as a new home for tech startup companies, making it a great destination for those in the South American continent. The city has an average monthly rent cost of $372, making it the second cheapest city to live behind Colombo in Sri Lanka.

5. Stockholm, Sweden - Named the 9th happiest country in the world, Stockholm is the capital of Sweden and ranks number 5 for the World's Rising Tech Hubs. The city also scores highly for its internet connectivity with the second highest average internet speed of 42mbps behind Houston, Texas.

Digital Hotspots
Connectivity is a non-negotiable in the 21st century working world, especially for tech startups. Although Houston has only having 322 public wifi hotspots, the city number one for the highest average internet speed of 65 mbps. Stockholm offers some of the highest internet speed outside of the United States at 37 mbps.

Business
Recently, there has been growing trends of millenials moving abroad for greater work opportunities. Bangalore is great for young innovators as it call home to over 7,500 startups and the largest amount of investors (6,236). While Boulder in Colorado has the highest average business valuation of $3.4 million.

Living

The cost of living is one of the biggest concerns for many young people especially when the majority of their capital is being used to fund their venture. Helsinki has the highest average monthly rent cost of $1,548, with Tel-Aviv ($1,338), and Boulder ($1,250) respectively. Whereas Lagos has the lowest infrastructure score of 2.4, with the highest being Stockholm (4.27).

Although many still regard cities such as Silicon Valley as one of the few locations where entrepreneurs can develop their untapped entrepreneurial talent. This new study gives insight to the best alternatives rising cities to live and work for innovators outside the overcrowded Bay Area.

PayPal is an American company operating a worldwide online payment system that supports online money transfers and serves as an electronic alternative to traditional paper methods like checks and money orders. PayPal is one of the world's largest Internet payment system companies.

Established in 1998, PayPal had its initial public offering in 2002, and became a wholly owned subsidiary of eBay later that year. In 2014, eBay announced plans to spin-off PayPal into an independent company. Today, PayPal has over 200 million users worldwide. Under the kind patronage of Samuel Patterson.

Sometimes investing isn’t as straightforward as some make it out to be, and knowing the tricks behind stronger investment strategies can go a long way. This week Finance Monthly benefits from expert advice from Hannah Goldsmith DipPFS, Founder of Goldsmiths Financial Solutions and author of ‘Retire Faster’.

If you’d like your money to work harder, perhaps with a view to retiring sooner, here are five rules you need to follow. And they are probably not what you’re thinking:

1. Trust the markets

The global market is an effective information processing machine. Millions of participants worldwide buy and sell securities in the world markets every day. The real time information they bring to the market helps set the market price. With more than 98 million trades a day, the probability is miniscule that a committee, sitting in a board room and discussing where to invest your money, will spot a favourable discrepancy in a stock price. It is possible, but it is also highly improbable.

Instead, of buying retail funds selected by a fund manager, buy a diversified basket of global index tracker funds and let the markets work for you. A wide basket of stocks from around the world linked directly to market returns can reduce the risk of trying to outguess the markets or worse, paying somebody else to outguess the markets.

2. Diversification is key

Investment returns are random; they cannot be predicted with any certainty. Therefore, don’t limit your investments to a handful of stocks or one stock market. This is a concentrated strategy with high risk implications.

You cannot be certain which parts of the world will outperform others, if bonds will outperform equities, or if large stocks will outperform small stocks. So, don’t let your financial adviser visit you each year moving and changing your funds to justify their existence and their fees. They are wasting your money.

Instead, buy the global market using a diversified basket of index tracker funds and leave the speculation to the gamblers.

3. The Financial Services Industry does not have your best interest at heart

Conventional wealth management institutions are far happier when the status quo prevails; it’s more profitable for them and their shareholders. Why would they provide you with an opportunity to move your money to a competitor at their expense, even if it was in your best financial interest? These corporates are in business to maximise shareholder value – not your investment returns.

It is therefore essential to take back control of your money and ensure that the ‘hidden’ ongoing portfolio costs are kept to the bare minimum. Aim to keep the costs of managing your portfolio at under 1%. The industry average is in the region of 2.3%, so if you save yourself even 1% a year you will have made a substantial amount of money using compounding interest over the life of your portfolio.

For example; if you invested £100,000 with a traditional financial services company paying a total fee of 2.3%, and you received a 7% return on your money for 25 years, you will have a projected future value of £329,332. As £100,000 was yours to start with you will have made a £229,332 profit. The overall cost to you, to make that profit, will have been £109,912.

If you invested £100,000 in a low fee portfolio, paying a total fee of 1.11% and received a 7% return on your money for 25 years you will have a projected future value of £441,601. As £100,000 was yours to start with you will have made a £341,601 profit. The overall cost to you would be £63,718.

This additional £112,269 can be used by you and your family, rather than just giving it away to an industry that feeds the ‘fat cats’. Remember it’s your money … don’t give it away.

4. Think long term, not just about today

When there is a long slow decline in markets, investors want to jump ship and wait for the markets to recover before jumping back in. However, market timing cannot be predicted. Taking your money out in falling markets means you lose real money – thanks to fear. Most people don’t reinvest until they get their optimism back, which is often too late; by then the stocks have risen, you’ve missed out on the gains, and you still have your losses to make up.

Manage your emotions by investing in a risk portfolio that is correlated to your capacity for loss. Not one that is based purely on your search for the highest returns. Remember, investing is for the longer term. History shows that you will be rewarded for your bravery – and your patience.

5. Don’t lose money with the banks

Although the banks’ advertising agencies tell us how wonderful these institutions, I am still reminded of the chaos and misery they caused when they needed bailing out by the tax payer. This was due to what was described by the Financial Crisis Inquiry Commission, as a ‘systematic breakdown in accountability and ethics’.

Your capital deposited in a Bank is being eaten by inflation at 2-3% every year. Over the last 10 years, whilst the stock markets have gone up, the buying power of your bank deposited savings has decreased dramatically and will continue to do so for the immediate future.

My advice is to look at investing, rather than ‘saving’ with a bank; diversify your portfolio; let the markets work for you; and ensure you keep your management fees to around 1%. By following these rules you’ll increase your fund faster and the day you can retire (or splash the money on your dream) will arrive much sooner.

Digital transformation in finance has been the word on many people’s lips for some time now with new FinTechs being created on a daily basis. But it’s not just the FinTechs that have made a shift in this sector, it is also the big global tech firms such as Google, Apple, Facebook, Amazon and Microsoft (GAFAM) that are now giving many organisations a run for their money, finance included, particularly with the Payment Services Directive 2 (PSD2) coming into force.

Flexible and nimble challenger banks are also looking at how they can inject the market with customer-led, creative and digital solutions. Whilst there have been casualties and many failed attempts to claim a share of the market, this injection of competition has certainly stirred things up and made everyone review their brand, how they operate and engage customers more effectively.

Given the challenges over the last ten years, and the marketing-led approach that has been taken by many of these new entrants in financial services, it’s not surprising that the spotlight has returned to marketing and communications as a central component to developing a robust growth strategy.

Monzo, for example, is one such organisation that has ripped up the rule books and taken a fresh new approach to engaging a younger, digital first end customer. Having started as a digital only banking service it was granted a full banking license earlier this year.

Never has it been more relevant and important to have a robust marketing and communications process to support reputation and the development of more credible and trusted relationship with customers.

Central to this is being clear as to what your story is, and what you want to be known for. In an industry where there are many new and older organisations, having a clear point of view that is different and positions you as a credible leader is key to success.

Integral to this communication’s led approach is having a CEO and leadership team that will take the plunge and lead the discussion along this journey. As the head of an organisation, the CEO will directly influence the personality of the business. He or she will set the tone for business behaviours and be fundamental in the creation of its identity (with a little help along the way). In many ways, the CEO is an essential member of the marketing team and leading voice piece for the business, or arguably should be.

Whilst CEOs are rightly focused on growth and financial return, they also recognise the value of building the ‘good’ reputation of their business, with many seeing themselves as the reputational stewards. The KPMG 2017 Global CEO outlook report outlines how reputation and risk, alongside trust in a time of disruption, has risen on the CEO agenda to become one of the top most important issues they face today.

We recently surveyed over 500 CEOs and CMOs, and our research showed us that whilst 95% of CEOs claim to regularly engage with marketing, over 70% then go on to provide a range of reasons why this does not happen in reality. When the CMOs were asked about the levels of contact that they had with their CEO, 42% said they still struggled to engage their CEO. This was particularly interesting given the fact that 84% of CEOs believe that a robust communications strategy is critical to business growth.

It appears that whilst many leaders believe they are involved and engaged, there is a perception gap between the CEO and CMO on what this really means, and what is required of the CEO.

So, despite its growing importance in driving growth and supporting new entrants in the financial services industry and further, there is still a real challenge that needs to be overcome in educating the CEO and leadership teams around marketing and communications in practise and their need to engage actively in this. They may understand its importance, but it appears many CEOs are still unclear about the role they should play, and the value this will have.

For more information on this topic and advice about how we can help you approach this please go to: https://speedcommunications.com/xchange/leadership-marketing-gap/

China has been beating its currently forecast growth rate. According to official data, China's economy grew at an annual pace of 6.8% in the first quarter of this year compared to the same period in 2017.

Over the past year China has seen national economic growth that is unparalleled and unprecedented worldwide. This week Finance Monthly set out to hear Your Thoughts on the following: Is China's economic growth rate on the rise? How resilient can Chinese business maintain current growth? Will consumer demand continue to fuel its growth spurt?

Olivier Desbarres, Managing Director, 4xGlobal Research:

With mounting concerns about the impact of potential protectionist measures on global trade and growth there has been much focus on GDP data releases for the first quarter of the year. China accounted for nearly 30% of world growth last year so Q1 numbers had top billing even if doubts remain as to the reliability of Chinese GDP data.

Chinese GDP growth remained stable in Q1 2018 at 6.8% year-on-year, in line with growth in the previous 10-quarters but marginally higher than analysts’ consensus forecasts and quite a bit faster than the government’s 6.5% target for the full-year of 2018.

The stability of Chinese growth has done little to alleviate concerns that this pace of growth may not be sustainable, given the changes in the underlying driver of growth, or even advisable going forward.

In recent years, aggressive bank lending to households, companies and local government has funded rapid investment growth, including in large infrastructural projects and the property market, and driven overall Chinese growth. Property development investment growth continues to rise at above 10% yoy.

This has led to a sharp rise in public and private sector debt as well as environmental pollution. The government has responded with a raft of measures, including a crackdown on the shadow banking sector, a tightening of real estate companies’ access to credit, a tightening of the approval of local infrastructure projects and pollution controls. These measures may in the medium-term help reduce or at least stabilise debt levels, channel funds to a manufacturing sector which has seen a rapid growth slowdown (to around 6% yoy) and reduce environmental damage. Property sales growth, a leading indicator of property investment, has indeed slowed to around 3.5% yoy.

However, near-term there are concerns that these deleveraging and environmental measures could put pressure on Chinese growth at a time when net trade’s contribution to overall Chinese growth is potentially under threat. For starters, the structural shift in China has seen buoyant consumer demand and imports curb the trade surplus. Moreover, if the war of words between the US and China over import tariffs escalates into a full-blown war China’s trade surplus could erode further and household consumption run into headwinds.

The transition from one economic model to another is challenging for any government and China’s leadership has so far avoided a potentially destabilising rapid fall in GDP growth. The increasing focus on high valued-added exports, consumption and broader quality of life indicators is unlikely to go in reverse. However, this transition may not always been smooth as policy-makers deal with the overhang from years of excessive lending and investment. This could well result in slower yet more balanced and sustainable economic growth in coming years.

David Shepherd, Visiting professor in Global Macroeconomics, Imperial College Business School:

Recent figures for Chinese GDP growth suggest the economy is expanding roughly in line with Government targets, with growth at 6.85% compared to the stated 6.5% target. Moving forward, the question is whether this kind of rate can be sustained or whether we can expect to see lower or perhaps even higher growth over the coming months and years?

The outstanding growth performance of the Chinese economy over the last 20 years stems from a successful programme of industrialisation based on market reforms, capital investment and a drive for higher exports. But that was in the past, and it is unlikely that these factors alone can be relied upon to sustain future growth, partly because of a change in the political environment in the United States, which has become increasingly antagonistic towards the Chinese trade surplus, but mainly because of purely economic factors related to high market penetration and the rise of competing low-cost producers in Asia and elsewhere. While exports and capital investment will always be important for China, if further high growth is to be sustained it will have to come either from higher domestic consumption or increased government spending.

The share of government spending in the Chinese economy is currently only 14% of GDP and the Chinese economy would undoubtedly benefit greatly from increased expenditure on health, education and other public services. While this could in principle be a significant engine for growth, in practice there are significant constraints on the ability and willingness of the government to finance increased spending, not least because of an already high fiscal deficit. The implication is that if high growth is to be sustained in the future it will almost certainly require a move towards higher consumption.

In contrast to the United States and the United Kingdom, where consumption has increased significantly over the last 20 years and now accounts for almost 70% of GDP, in China consumption spending has if anything been falling and currently accounts for only 40% of GDP. For the US and the UK, consumption is arguably too high and both economies would benefit from lower consumption and increased capital investment and exports.

In China, the opposite re-balancing is required, and the relevant consideration is how a sustainable increase in domestic consumption can be achieved. Consumption typically rises when real wages rise and when households choose to save less, but in China, saving rates are high and the share of labour income in national income has been falling. The challenge for policy makers is to find the best way to change these conditions, to reduce saving and boost wages at the expense of profits and other business incomes, all in a context of considerable uncertainty about the economic environment. It is now almost nine years since the current economic expansion began and, if history is any guide, the next recession is not too far down the road. But how that would affect China’s growth performance is another story!

Alastair Johnson, CEO and Founder, Nuggets:

Napoleon once referred to China as the ‘sleeping giant’. It’s looking, certainly in terms of its economy, like the giant is finally rearing its head. China’s unprecedented and unparallelled growth in the e-commerce sector trumps that of other nations, boasting a 35% rise in the past year (with a market twice the size of that of the rest of the world).

There is a great deal of focus, not only in online retail commerce in and of itself, but in the bridges built to link it to peripheral services. China dominates the O2O (online-to-offline) model, strengthening the connection between strictly digital commerce and brick-and-mortar merchants. Instead of displacing traditional commerce, the nation’s retail industry is instead evolving by combining physical stores with increasingly innovative online solutions.

Development of applications such as WeChat and Alipay have lead to a seamless user experience, whereby individuals can simply access stores and make purchases from within the app. It integrates with some of the biggest players in ecommerce, including the behemoths that are Alibaba, JD.com and ULE.

Worth considering on the telecommunications front is China’s plan to bootstrap a new network for 5G (versus simply building atop existing ones). Given that 80% of online purchases are done on mobile (versus under half in the rest of the world), this development will only serve to further strengthen the connection between mobile devices and e-commerce.

It’s hard to see the trend dying down anytime soon. Businesses appear to have grasped the importance of user experience, and identified the lifeblood of the industry: consumer demand. New wealth in the nation is fuelling purchasing power. To maintain this hugely successful uptrend, companies in the sector should continue to foster an ecosystem of interconnectivity, both with retailers and tech companies. Smartphone manufacturers anticipate that their growth in 2018 will be slow in China, due to saturation and slow upgrade cycles. Brands will need to look to Western markets for continued development.

Jehan Chu, Chief Strategy Officer, Caspian:

China's rise is not only measured by its achievements, but also by its insatiable appetite to develop new industries. Despite the ban on ICO's and cryptocurrency exchange trading in China, there has been a surge in interest and development in Blockchain technology - the underlying rails of crypto.

From new startups like Nervos (blockchain protocol) and veterans like Neo (US$5bil coin market cap tech) to institutions like Tencent (Blockchain as a Service) and Ping An (internal infrastructure projects), China is leading the world in developing efficient solutions using Blockchain technology. In addition, increased restrictions inside of China have spurred ambitious Chinese developers and entrepreneurs to decamp to crypto-friendly cities like Singapore and San Francisco, creating expert and cultural diaspora networks that span the globe but lead back to China.

Looking forward, it is clear that the sheer volume of engineering talent combined with its seamless adoption and endless ambition to build the new Internet on top of blockchain will keep China at the forefront of technology for decades to come.

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

BDRC published its quarterly SME Finance Monitor. The largest and most frequent study of its kind in the UK, research findings have been gathered across 27 waves of interviews since 2011 and are based on more than 130,000 interviews with SMEs.

The data to year ending Q4 2017 published provides further updates on the period following the General Election and as negotiations over Brexit continue. Current demand for finance remains limited, but ambitious SMEs are more likely to be financially engaged.

Shiona Davies, Director at BDRC, commented: “There have been no dramatic market changes in SME sentiment since the referendum. Whilst there are some increased concerns about the economy and political uncertainty, larger SMEs in particular are more likely to be planning to grow and to be using finance, as are those SMEs with a long-term objective to be a bigger business.”

“4 in 10 SMEs are planning business activities that might benefit from funding, but SMEs are as likely to think they would fund a business opportunity themselves as approach a bank for funding. Awareness of equity finance, which could provide longer term funding, appears limited even amongst larger SMEs. For those who do apply for a loan or overdraft, success rates remain high. However, first time applicants’ success rates are currently lower than in 2015, albeit still higher than they were in 2012. Additionally, fewer SMEs who are not currently using finance show any appetite to do so.”

Key findings

Use of (and demand for) finance remains limited, as self-reliant SMEs use trade credit, credit balances and financial support from directors in addition to external finance. Awareness and use of longer term equity finance is also limited.

• In 2017, 8 in 10 SMEs (82%) were profitable and 42% reported having grown, both little changed from 2016.
• 38% were using some form of external finance, but more (47%) met the definition of a ‘Permanent non-borrower’ with little apparent appetite for finance, similar to 2016.
• 7 in 10 SMEs (70%) would rather grow more slowly than borrow to grow faster and this has changed little over time.
• Fewer SMEs in 2017 were ‘happy to borrow to help the business grow’ (34% in 2017, down from 45% in 2016) and the proportion of SMEs who are not using finance but would be willing to do so in future has declined over time (24% of all SMEs in 2015 to 16% in 2017).
• A third of SMEs (35%) received trade credit and 25% hold more than £10,000 in credit balances. In both cases, most of those with trade credit or credit balances say it reduces their need for finance.
• 29% have received an injection of personal funds from the owner/director. Given a (hypothetical) opportunity that would require finance to achieve, 39% said the directors or the business would provide the funding, compared to 37% who would approach their bank for funding. 1 in 5 SMEs (19%) would not take up the opportunity because of concerns over the risks associated with debt.
• In 2017, 5% of SMEs reported making a new or renewed loan or overdraft application in the 12 months prior to interview. This was unchanged from 2016 and remains at half the level reported in 2012 (when 11% of SMEs had made such an application).
• Overall, 15% of SMEs in 2017 reported any kind of borrowing ‘event’, and 2% had wanted to apply but something stopped them (the Would-be seekers). The Happy non-seekers (83% of all SMEs) remained the largest group, in line with 2016.
• In a new question for H2 2017, 62% of SME companies said that equity finance was a form of funding that they knew nothing about. Larger SMEs were somewhat more aware, but even amongst those with 50-249 employees, 52% knew little about this form of finance with just 6% of them using or considering using it. 1 in 5 companies were aware of equity finance, but thought it was not a suitable form of finance for them – this varied little by size of company.

Whilst appetite for finance remains limited, a consistent 8 in 10 of those who did apply for a loan or overdraft were successful – although those applying for new money for the first time were somewhat less likely to be successful than in other recent periods.

• 80% of all loan and overdraft applications made in the last 18 months (to Q4 2017) were successful, in line with other recent periods.
• Almost all renewals in this period were successful (97%).
• Applications for new money on loan or overdraft have always had a lower success rate than renewals. For the 18 months to Q4 2017, 63% of applications were successful. This was lower than was seen in the 18 months to Q4 2015 (when 70% of new money applications were successful) but remained ahead of the 49% who were successful in the 18 months to Q4 2013.
• Success rates for new money applied for by those who had borrowed before was stable (78%), so this decline in new money success rates was due to a lower success rate for first time applicants (currently 50% compared to a success rate of 60% for applications made in the 18 months to Q4 2015). However, as with overall success rates, this is higher than was seen in the 18 months to Q4 2012 and to Q4 2013 when 4 in 10 first time applicants were successful.

Looking forward, whilst more SMEs with employees are planning to grow, there are some concerns about the economic and political climate. Future demand for finance remains stable, but it’s worth noting that a quarter of SMEs are ‘Ambitious risk takers’ with a greater engagement with finance and 4 in 10 SMEs are planning a business activity that might require funding.

• 45% of SMEs in 2017 were planning to grow. This is somewhat lower than the 49% planning to grow in 2012, due to declining levels of growth amongst 0 employee SMEs (46% to 41% over this period). Growth aspirations amongst SMEs with employees was in line with, or higher than, their aspirations in 2012.
• The top 3 barriers to running the business remained “legislation and regulation” (15% in Q4 2017), “political uncertainty” (15%) and the “current economic climate” (14%). 29% of SMEs mentioned at least one of these as a barrier in 2017, up from 22% in 2016.
• 12% of SMEs in 2017 were planning to apply for finance, unchanged from 2016 but increasing quarter by quarter from 10% in Q1 to 14% in Q4 2017. Confidence that the bank would agree to lend was somewhat lower in 2017 at 50% and remained below the actual success rates achieved. Most of those planning to apply were already using finance.
• 27% of SMEs in H2 2017 agreed that they both wanted to become a much bigger business and that they were prepared to take risks to succeed. These were more likely to be younger, innovative businesses that were, in turn, more likely to use and to apply for finance. A willingness to borrow to grow was a key predictor of being one of these ‘Ambitious risk takers’.
• 42% of SMEs in H2 2017 were planning to undertake one or more business activities that might require funding, including 19% planning to take on more staff, 17% planning to invest in plant and machinery and 16% planning to develop a new product or service. Larger and younger SMEs were more likely to be planning such activities, as were those planning to grow overall (61%). 19% of those planning any of these activities was also planning to apply for finance, compared to 8% of SMEs with no activities planned.

(Source: Farrer Kane)

How are banks meant to co-exist, work with or become the initiators of fast-developing fintech when most are so caught up in legacy systems? Below Finance Monthly benefits from expert insight from Kyle Ferguson, Chief Executive Officer at Fraedom, on the potential avenues banks could focus on in the pursuit of tech advancement and the maintenance of a competitive edge.

Legacy systems are seen to be the most common barrier preventing commercial banks from developing fintech applications in-house. That was a key finding of a recent survey conducted by Fraedom. The research that collected the thoughts of shareholders, middle manager and senior managers in commercial banks revealed that more than six out of ten (61%) of banks are being held back by this technological heritage.

The banking industry has historically found it difficult to make rapid technological advancements so in some cases it is unsurprising that older systems are holding them back. However, with this in mind, smaller fintech firms have already started to muscle their way in to help assist retail banks with providing a more comprehensive range of services to consumers.

Banks now have the option to negotiate the obstacle of legacy systems through partnering or outsourcing selected services to a fintech provider. Trusted fintech firms are offering banks the chance to reap the benefits from technical applications that can lead to more revenue making opportunities, without taking the large risk of banks taking the step into the unknown alone.

However, a shift does appear to be on the horizon with only 26% of commercial banks not outsourcing any services 41% of respondents globally stated that their bank currently outsources payment solutions to fintech partners. This was in comparison to 33% who say they do the same for commercial card management solutions and 26% who claim to do so for expense management solutions.

It was also interesting to note that banks are planning to ramp up their fintech investment over the next three years, with 77% of respondents in total believing that fintech investment in their bank would increase. This feeling was especially strong in the US where 82% of the sample stated this belief opposed to 72% of those based in the UK.

This transitionary period is great news for ambitious fintech firms. Banks are starting to realise that established fintech providers can make a big difference in areas of their business by providing technical expertise as well as in-depth knowledge of local markets.

It’s all about selecting key, digital-driven services that will help retain customers and entice new ones. The ability to offer card expenditure and balance transparency can reduce risk and costs for issuing banks. It is a service that can be joined on to an existing business with little overhead costs.

This is just one of several ways that partnering with fintech firms can bring substantial benefits. This increase in agility also helps banks to speed up service choices and improve customer satisfaction.

Forming a partnership can provide banks with a way around the issue of coping with legacy systems and avoid implementation costs. By forming a partnership, outsourcing banks buy in to a product roadmap that will keep their offerings ever relevant as fintechs develop the technology required.

The partnering approach is becoming more appealing to commercial banks. They understand their customers value their reliability, trustworthiness and strength of their brand. But increasingly, they also understand the importance of encouraging innovation to remain ahead of the technology curve, while recognising it is not the bread and butter of their business.

While legacy systems appear to be the most common factor in preventing banks from creating in-house fintech applications, the study did also reveal that a lack of expertise - recognised by 56% of respondents was also a major stumbling block.

To innovate and grow, banks and fintech firms alike must have employees that understand the technology – developers, systems architects and people with a record of solving problems. Taking a forward-thinking approach to recruitment is key.

If they want to attract and retain the best talent, organisations need to be listening, adapting and trusting each other to work together to resolve issues and frustrations. We believe all the above elements will become increasingly important in any successful business.

Overall, the research represents growing strength within the fintech sector and it is great to see that more banks are beginning to see the value in partnering with a fintech provider. In turn, this is delivering a better service for banks and customers alike and it is a trend that I expect to continue as banks fight to keep on the pulse of technology in the sector.

Interested in scaling your company, or has the scaling process already begun? We connected with Dan Kiely, CEO of Voxpro - powered by TELUS International, a leading provider of customer experience, technical support, and sales operations, to discuss how to scale your business, and the importance of maintaining focus on customer service as your company grows.

What is scaling your company all about?

If you’re scaling your company, congratulations! It’s an exciting time for all involved. At Voxpro - powered by TELUS International, we use the term ‘blitzscale’, which was coined by Reid Hoffman, Co-founder of LinkedIn and PayPal. Learning from the growth of other companies, we’ve realized that if you don’t scale fast enough, you’re going to lose your lead, or even worse – someone could take your idea.

In the early days of developing Voxpro, we had an idea for a new approach to outsourcing, and knew we had to act on it immediately, before anyone else did. We blitzscaled – we opened more offices, hired more people, and signed on more partners. After doubling our workforce and quadrupling the number of countries where we had a home base, we increased our services in two years. Then, in the summer of 2017, we partnered with TELUS International - a customer experience and digital services firm with a footprint across four continents. By joining our two companies, we are now backed by TELUS International’s robust global infrastructure and have an enhanced ability to offer a more comprehensive suite of solutions to the brands we serve to enable new go-to-market opportunities and growth in the digital and IT services market.

Scaling your company is about finding the right partners, but it’s also about hiring all-around good, hard workers, having a mission you really believe in, and creating a strong brand for your employees. Our experience as a former start-up, then scale-up translates into our innate ability to do the same for other brands, helping them scale their customer experience operations while they grow their business.

Why do you believe scaling customer experience and scaling business operations go hand-in-hand?

As your business grows, your customer base should ideally grow at the same or a similar pace. Growing your customer base means an increased number of support inquiries, and keeping up with demand to deliver a strong customer experience is crucial to maintaining your brand’s integrity and attracting and retaining customers. Take our partner Airbnb for instance. They went from hosting 300,000 homes on their site in 2013 to 3,000,000 homes in 2017. To meet the needs of their customers, Airbnb recently launched its Experiences and Places platforms, connecting their renters to local activities and hidden gems in the cities they are visiting. Giving power to the people, Airbnb increased its offering while managing a positive customer experience to meet the interest of its users.

As CEO of a growing company, what are some of your critical practices for relaying important information to your employees, and keeping the business moving?

When we created Voxpro, we set in place a series of values that we hold ourselves to every day. Sometimes, setting and understanding a company’s values can be overlooked, but not for us. Our values aren’t just words on a page, rather they drive our great company culture. These values also guide the partnerships we form, such as with TELUS International. They are a like-minded partner with similar values, and together, we are building upon our shared commitment to fostering and sustaining a caring culture focused on team member engagement and development, and giving back to the communities where we work and live.

Our powerful C-Suite leadership team that includes Jeffrey Puritt, President and CEO of TELUS International, keeps a pulse on our culture and employee engagement, identifying issues and putting forward solutions. We know that people want to be in an inclusive environment, even as a company begins to scale. Our values strive to ignite a sense of entrepreneurship, ownership and operational beauty in people. Through operational beauty, we encourage our employees to grow both personally and professionally. Having a purpose and mission that your employees can get behind will add motivation, plus heart and soul, to a company. This is ultimately reflected in the customer experience that we deliver.

The FinTech industry is seeing a number of companies scale at the moment. Are you seeing any emerging trends?

We partner with a number of companies who are in that “sweet spot” in the scaling process – they’re no longer a start-up, but they aren’t quite on a level of recognition internationally, or globally mature yet. Many times, these organizations are feeling the growing pains and recognize the need for a strong customer experience partner to ensure continued customer satisfaction and reduce customer loss. It can be a big step for companies to recognize that they need additional support, and a BPO provider in a lot of instances can be the smart choice when expanding.

Regarding FinTech, two of our partners who are leaders in the space come to mind. Both companies were searching for a partner to help manager their customer service as their businesses quickly grew. We partnered with them by offering a customized selection of services. Multi-channel, multi-lingual, and social media management were of importance to one, while our partnership with the other FinTech company focused solely on managing safety, fraud, and risk. In each instance, we were able to rapidly onboard and provide the necessary support, so their customers did not feel any strain from the expanding organization. Each of these partners’ needs are vastly different, and that’s what makes what we do and what we can provide so exciting. It’s not a one-size fits all model.

In what ways can scaling companies manage the customer experience for their clients in times of hyper-growth?

When rapidly growing a business, executives must come together to answer difficult questions in order to strategically plan for the future – “Can we do this alone? Do we need advanced services? Can we afford to make a change in staffing?” For some companies, outsourcing a sector of their business becomes an option, but sometimes companies are tentative to do so. It’s important for executives to understand that it’s more efficient and productive to focus on what you’re best at - your core competencies and what has made you successful to date - and seek a trusted partner in other departments, especially customer service.

Also, when rapidly scaling, the need to incorporate digital services and next-gen technology such as artificial intelligence and machine learning continues to grow. It’s important to have a trusted partner already invested in these capabilities and have a knowledgeable team in place able to harness the power of innovation to drive your new business outcomes and customer loyalty.After all, your customers are what drive your business and solidify your reputation in the market.

It’s important to keep your customers happy while scaling, of course, but what about your employees? How should growing companies respond to the challenges of retaining current employees and recruiting new ones?

As part of your growth, it’s inevitable that you’re going to have to hire and onboard new employees and also ensure the ones you currently employ continue to be inspired and engaged through all the changes. Ingraining your company’s values in new hires should be a top priority as these new employees have the potential to either help or hinder the execution of your company’s mission and strategy. Set yourself to a standard, and don’t stray away from it.

We have Voxpro University, which serves as a training resource plus a compilation of our branded learning and development tools, and TELUS International University, which enables our employees to earn a subsidized degree while working. These types of programs serve as a platform for all employees to learn about our culture and grow personally and professionally with us in order to meet the business needs of our partners’ today and tomorrow.

About Dan Kiely:

Dan Kiely is an entrepreneur through and through. Heading up Voxpro - powered by TELUS International, Dan thrives in the entrepreneurial realm. He dreams big and encourages innovation in all aspects of his company. Dan is now also a member of the TELUS International leadership team with TELUS International President and CEO, Jeffrey Puritt.

Netflix, Spotify, Airbnb and Uber are regularly cited as examples of major disruptors. However, there are many more examples on the horizon. Electric and driverless cars will soon disrupt many industries including automobile manufacturing, rental, leasing and motor insurance markets, while the growing popularity of robo-advisors already threatens the existence of traditional financial advisors. For most large companies today, it is a question of when, rather than if, digital will upend their business. Jonathan Wyatt, Managing Director and Global Head of Protiviti Digital, talks to Finance Monthly about the future and direction of management consultancy worldwide.

Management consultancies tend to thrive during periods of rapid and significant change. Many consultancies flourished in the years following the financial crisis as financial institutions struggled to comply with new regulations and needed advice on dealing with more intense regulatory scrutiny. A decade on, the global landscape is facing a more pressing strategic challenge: to innovate and develop solutions that meet consumer and business demands for efficiency, convenience and ease-of-use. The top strategic risk identified by Protiviti’s Executive Perspectives on Top Risks for 2018,[1] is the rapid speed of disruptive innovations and/or new technologies that may outpace an organisation’s ability to compete and/or manage the risk appropriately unless it makes significant changes to its business model.

Tellingly, the second risk highlighted by survey respondents relates to the overall resistance to change within the organisation. Respondents were concerned that their organisation might not be able to adjust core operations in time to make the necessary changes to the business model to keep the company competitive. Even when executives are aware of the disruptive potential of emerging technologies, it is often difficult for them to envision the nature and extent of change, and have the decisiveness to act on that vision. Management consultants are, therefore, positioning their businesses in terms of expertise and skillset to meet the demand from companies looking to conquer those internal and external digital challenges.

To date, the digital experience of many companies has been focused on the digital “veneer” as organisations look to launch and grow digital channels. This is often restricted to customer-facing products, such as websites, apps and payments channels. Often, they have not made the same progress with the digital transformation of their internal processes, even when this has a direct impact on these digital channels. For example, in the mortgage market customers can apply online for a mortgage in minutes. At many of the established banks, the digital mortgage application remains analogue, with traditional credit review and approval processes that take many weeks to complete. Surprisingly, these traditional processes often include regular communication by post rather than embracing digital signatures.

Organisations are gradually realising that core digitalisation, as well as a cultural change to embrace the digital mind-set, is necessary to compete on the new digital stage. To achieve this, some organisations must advance beyond the use of legacy technologies and systems, and they can sometimes be averse to implementing new policies and ways of working. Consultancy firms advise these organisations on modernising their security policies and demonstrating the advantages of using the advanced technology tools that are now available. This will help with the execution of certain cyber-security and digital projects and the development of proof-of-concepts, thereby improving an organisation’s overall security profile.”

Misunderstanding regulations is often given as an excuse for not innovating. Organisations think the new regulations are more complex than they really are and that by innovating/changing their systems, there is a greater chance of falling out of compliance. But digital leaders are more flexible; they look for solutions rather than excuses and are embracing advanced technology to their advantage.

The advancing tide of demand for digital services will fuel current and future business for consultancy firms. Consultancies are ramping up their expertise and skillsets to provide advice on digital strategies and change management programmes as well as implementing core digitalisation projects. Although there will be no shortage of consulting work, the move to a more digital focus will impact the traditional consulting business and pricing models. As a result, the management consultancy industry is not immune to the wave of disruptive change.

To succeed in the digital race, legacy firms need to put digital at the heart of their business, which encompasses a cultural change to think digitally first. Consultancies should challenge their teams and clients to change their mind-set, put digitalisation at the forefront of all projects and think like a technology company – using technologies such as robotic process automation, machine learning and artificial intelligence to drive efficiencies for the company and consumers. Consultancies also need to be at the forefront in digital thinking to ensure they offer the brightest talent, expertise and experience to help their clients embrace the digital challenge and face the future with confidence.

[1] Executive Perspectives on Top Risks for 2018, Protiviti and North Carolina State University’s ERM Initiative, December 2017, available at www.protiviti.com/toprisks.

According to recent reports, the UK economy is set to grow at a slower pace than any other major advanced or emerging nation in 2018, according to the OECD.

The OECD says UK growth is forecast at 1.3% in 2018 amid a strengthening global recovery. Earlier figures presented a 1.2% growth; however this is still the weakest of the G20.

Consequently, Finance Monthly has asked several experts, market analysts and economists to comment on the news, in this week’s Your Thoughts.

Angus Dent, CEO, ArchOver:

Despite the Office for National Statistics’ cautious optimism about UK productivity in late 2017, the Office for Budget Responsibility (OBR) has refused to upgrade its productivity outlook. It’s just another chapter in a now-familiar story – the Government just can’t jolt the economy out of its lethargy.

If we can’t get out of this rut, we won’t stand much chance of making a smooth economic transition out of the EU next year – we won’t have the leeway to absorb any unexpected shocks. Despite that, Philip Hammond used today’s Spring Statement speech to essentially sit on his laurels and avoid taking any new decisive action.

While the Chancellor rests easy, British business must get to work. Given that the OBR continues to find the government’s position on SME productivity ineffectual, business owners need to take matters into their own hands and look to fund bolder new business projects and models.

They should use alternative financing options to fund new services, hire more staff and improve working conditions. You need money to make money, so UK companies must invest in driving productivity. If the Government won’t do it, entrepreneurs must take the initiative, using tailored financing to secure the tools they need to boost productivity.

Jonathan Watson, Chief Market Analyst, Foreign Currency Direct:

Whilst being rather gloomy in recent forecasts, the OECD (Organisation for Economic Co-operation and Development) are right to single out the UK for a slower pace of growth. The uncertainty created by the Brexit has seen reduced confidence in the UK and held back growth.

Business needs certainty and whatever you think the longer-term outcomes may or may not be, for now there is some mystery in what lies ahead from Brexit for the UK. Since we still don’t know what Brexit will ultimately mean, businesses and consumers cannot easily make long-term decisions. That doesn’t mean they have stopped making any decisions, life is carrying on, just at perhaps a slower pace than would have been before the vote, or upon a Remain vote.

The global economy is, as the OECD states performing better than expected, which is helping support the UK through any difficult period. This doesn’t take away the Brexit disadvantage which is currently hampering not only the longer-term overall economic outlook, but overseas investment in the UK, domestic UK business investment and consumer spending, plus that closely watched barometer of economic strength, GDP or economic growth.

Chris McClellan, CEO, RAM Tracking:

What readers of this article need to ask themselves is if they’re a follower or a pioneer? Yes, we understand that it’s being reported that the UK economy is growing at a slower pace, but what will separate those businesses that struggle from those that thrive, is their mind-set and work ethic.

I firmly believe that growth for a lot of businesses can and will soar this year by making smart, well-informed decisions. Assess not only your immediate but future risks and have well-thought out strategies to mitigate these. Consumers are always going to buy whether it be your product/service or another’s. What’s going to make you stand out is clever thinking - how can you add more value? How can you export or trade with countries in a stronger climate? This flexible approach will not only give you competitive advantage but will widen your business horizons further than just UK shores.

The introduction of trusted sites such as TrustPilot, Facebook and Google (to name a few) together with ‘consumer-power’ should not be overlooked. By focusing on exceeding and delighting your customer’s expectations will result in repeat purchases as well as positive reviews, the power of your business growth lays firmly in the hands of your customers.

At RAM Tracking, we’re increasingly analysing our data and utilising innovative technology to delight our customers and highlight improvements that need to be made quickly. Investment into platforms like Salesforce have helped us become more data focused in a bid to work smarter to save costs but still have the ability to reinvest even when growth is reported to slow down.

If you have thoughts on this please feel free to comment below and let us know Your Thoughts.