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More than $17 billion was collected in 2021, according to data by Private Equity International, followed by $14.5 billion in 2022. This year will likely end at a similar figure as several high-profile healthcare firms have received funding stretching into the tens of millions and beyond. 

These figures show that private equity firms still have a big appetite for the healthcare industry despite wider macroeconomic concerns. As always, there are several key trends driving funding opportunities in the space in 2024. 

A Rebound of Investor Funding From Armistice Capital and Others

Both 2021 and 2022 saw a strong rebound of venture capital funding flowing into health care and, if the countless examples of recent funding announcements are accurate, this rebound is ongoing. 

A lot of this funding has gone to pharmaceutical companies like Eledon Pharmaceuticals, a clinical-stage biotech that’s developing treatments for people undergoing organ transplants. Eldeon raised more than $185 million in April. Investors included BVF Partners LP and Armistice Capital.

The biotechnology and pharmaceutical industries have remained highly attractive to investors due to the cutting-edge research and development of new treatments, vaccines, and therapies currently taking place, many of which were fueled by the pandemic. Advances in gene editing technologies, immunotherapies, and personalized medicine are among the areas of interest to investors. 

Personalized medicine is also a concept that’s gained considerable momentum. Promising to offer tailor-made treatments based on a patient’s genetics, lifestyle, and other individual characteristics, advances in genomics and biomarker research have paved the way for more effective therapies. Investors are drawn to companies at the forefront of developing personalized medicine approaches.

The COVID-19 pandemic also put a spotlight on vaccines, leading to increased investments in vaccine development and manufacturing capabilities. Additionally, there’s been growing interest in vaccine research for other infectious diseases and cancers.

Competition Regulations and Artificial Intelligence

Competition and antitrust enforcement in the United States are expected by many to accelerate and potentially lead to the delay of many high-profile mergers. This is because healthcare is a highly regulated sector. 

As new deals gain traction, it’s entirely plausible that competition bodies may pay closer attention to — and scrutinize — cross-sector convergence with companies outside of the industry. The U.S. Department of Justice is particularly interested in roll-up transactions, which consolidate market share and negotiating power.

Investment continues to flow into health care toward firms specializing in using artificial intelligence and data analytics to improve diagnostics, drug discovery, and personalized medicine. 

AI, machine learning, and data analytics together have a substantial range of applications in the healthcare space, from using them to identify potential drug targets quickly to using AI and big data to help users access accurate information on their symptoms and connect with physicians. There are very few if any, areas in health care where these disruptive technologies will not have an impact. 

Mergers and Acquisitions

Finally — and as always — healthcare companies continued to engage in mergers and acquisitions to expand their product portfolios, pipelines, and geographic reach, a trend driven by the need for diversification and the pursuit of cost synergies.

This is particularly true for emerging markets such as Asia, where pharmaceutical companies have been looking to expand their presence in regions with growing healthcare needs and middle-class populations.

Looking to 2024

The private equity healthcare investment landscape has demonstrated remarkable resilience and sustained growth in recent years despite the pandemic, with billions of dollars pouring into the sector from investors like Armistice Capital. Despite economic uncertainty, 2021 and 2022 witnessed an impressive influx of capital, a trend that’s continued this year and is set to do so again in 2024.

Throughout 2023, businesses will continue to be confronted with challenges, but many will still be looking for growth opportunities. The ability to deal with unpredictability is more crucial than ever for the finance team. Run efficiently, they are at the centre of strategic leadership, ensuring businesses are making the correct and most responsible investments, while recognising that the funding market and growth-at-all-costs agenda has changed significantly. Below we explore four key trends we can expect for finance teams to see success this year.

  1. Businesses will be balancing growth and efficiency to survive

The expectation that the post-pandemic boom would continue unabated has left many business leaders at a crossroads. The macroeconomic factors and fallout from geopolitical events has meant that business models established while the going was good need to be course corrected. Many businesses, especially in the software and technology sector have proactively taken measures to ensure business continuity, shifting priorities from all out growth to sustainability.

During the economic turmoil, businesses will need to ensure they are making the right investments and at the right time for such growth to be sustainable. After all, despite the economic slowdown, many businesses are still actively seeking growth. But to protect reputations and manage sustainable growth, businesses will need to plan their futures in a much more careful way.

Throughout 2023, successful businesses will be focusing on their core proposition and doubling down on the segments of the business with the best productivity and economics – essentially those that provide the best ROI for sustainable growth.

Unfortunately, this may mean divesting from longer term and experimental projects in a bid to reduce risk and cost for some companies will be required. International expansion will likely only be prioritised in areas where environmental factors allow for sustainable growth.

  1. Finance will take on a larger leadership role

Our research from 2021 found that a fifth (20%) of UK CFOs say they’ve seen a greater demand placed on them by the CEO and C-suite – this trend will be amplified throughout 2023 as finance takes on a larger leadership role.

Finance should be at the centre of all strategic planning as businesses become more numbers-driven amid economically challenging conditions. New investments will need to be strategically timed and nuanced with different sensitivities at play. This requires focus and crucially, balance. The finance team cannot purely be in cost cutting mode; they will need to create a longer term plan for sustainability and profitability.

Now more than ever, finance leaders will need to modernise with technology to remove manual processes, whilst increasing visibility and control. For example, automation can avoid duplication and wasted spend by approving purchases before they are made, helping businesses tighten their budget control. In addition, automated spend forecasting can help increase accruals accuracy and provides pre-paid data for accounting and FP&A. This will allow for the identification of opportunities for innovation and will free up time for the crucial strategic relationship with the rest of the C-suite.

  1. The global economic outlook will impact investments and IPOs

The technology industry faced significant headwinds in 2022 due to rising interest rates and global economic instability. According to Innovate Finance, globally, FinTechs attracted $92bn in venture capital in 2022 - a decline on $103bn invested into the sector in 2021. UK FinTechs secured $12.5bn, of which $8.9bn was invested in the first six months of 2022 - an 8% drop on 2021 investment.

With less funding available and tech companies losing their appeal somewhat as VCs began to prioritise lower-risk investments, 2023 will see IPOs continue to fall. This will impact businesses’ ability to grow at rates seen previously. Unfortunately for UK companies, they will need to take a more cautious approach to international expansion if they choose to pursue growth during times of uncertainty. To ensure resilience, it is crucial that finance leaders are equipped with the right insights for strategic advisory - placing them at the heart of expansion conversations.

  1. Regulators will need to sit up and take action

The cryptocurrency industry has been more volatile than other financial markets. Macroeconomic factors, the high-profile collapse of FTX, and now fraud lawsuit against founder Sam Bankman-Fried, has forced financial regulators to sit up and pay more attention to the needs of the industry.

In the wake of the FTX collapse, CFOs and finance leaders will become more discerning about where their funds are being held. In tandem, regulators will prioritise compliance and clearer rules for operating in financial markets, such as the European Union’s Market in Crypto Assets (MiCA) legislation which is due to be moved into law and the Financial Services and Markets Bill here in the UK.

A lack of clarity in crypto regulation has been bubbling away at this stage for a long time. In order to see real movement, policymakers and governments need to turn their words into action. Turning regulatory criticism into marked regulatory rules will be key to preventing – otherwise it will continue to be a pipedream.

According to research from AutoRek, 63% of payment firms believe their regulatory burden will increase over the next two years, and UK firms will spend considerably more (£325,000 on average) compared to the US to ensure compliance. We expect the regulatory landscape to shift substantially in the wake of the volatility in 2022. But to keep efficiency high and costs low, businesses will need to be ready to adapt, using technology tools to negate the sudden impact of change.

As the finance industry considers what this next year will bring, one thing is for certain: sustainable growth will be a top priority. Uncertain economics and a lack of funding has meant that growth trajectories have changed substantially. However, with the right data led insights to support key business decision making, the time for finding new opportunities is still here. This can only be done successfully with a strategically savvy finance team in tow; their visibility and control is critical to reacting to new challenges and leading the business towards the best possible outcome.

1. Customers want better money management 

Many households are taking a more cautious approach to spending due to soaring prices, causing consumers to reconsider their choice of payment methods. 44% of respondents have changed their habits as a direct result of the rising cost of living, the majority of whom are searching for options that enable them to track their spending more accurately. 

Debit cards were the most preferred online payment method for those who had changed their payment habits, with 59% of respondents paying via debit card in the month leading up to taking our survey — a 5% increase since 2021. Digital wallet use has also experienced a surge - perhaps, in part, thanks to their money management features, with two-fifths (41%) using them more than they did a year ago. Interestingly, 16% of those who changed their payment methods are paying with crypto more frequently.  

On the other hand, credit-based payments are trending downwards, except for credit cards which remain the second most popular online payment method (51%) behind debit cards. They're also the preferred way to pay for big-ticket purchases including long-haul flights, holidays and household appliances. 

2. Cash is turning digital

Although the majority of consumers (52%) are using cash less often, it still makes up almost a third (31%) of in-person transactions. Respondents still hold cash in high regard, with 59% viewing it as the most reliable payment method and 70% stating they would be concerned if they couldn’t access it. 

As well as remaining a popular choice for in-store payments, cash is also establishing itself as a prominent online payment method, suggesting it is here for the long haul. 

In the last year, eCash payments — online transactions paid in cash — have increased. And in further good news for the traditional payment method, 47% of respondents would prefer to make online purchases in cash, and 44% would buy online more often if they could pay in cash. 

Although our research didn’t focus on the reasons behind this trend, we imagine the cost-of-living crisis is likely a factor. 26% of those who have changed their payment habits due to inflation are using eCash more often, a method that would enable them to monitor their online spending more closely. 

Another benefit of eCash for the increasingly tech-savvy consumer is that it can protect against online fraud by acting as an added layer of security. Consumers can make online payments without sharing any sensitive financial details. 

3. Security is a top priority, but not at the cost of experience

For 44% of respondents, security is the main concern when paying online and, if it’s not addressed upfront, this is a barrier to the first transaction for consumers.  70% don’t feel comfortable sharing their financial details online, and 62% would worry if they weren't asked for any security information before completing payment. 

44% are happy with the current balance between security and convenience when making online payments, and 23% would only accept additional security measures if the inconvenience were minimal. This suggests that any advancements to security at the checkout must not interfere with a convenient consumer experience as the balance is key for customers. 

4. A golden opportunity in embedded payments

Embedded payments are one of the hottest fintech trends. Our research confirms its untapped potential, and although consumer awareness remains low - 49% haven’t heard of the term embedded payments - many have likely used the technology unknowingly.

31% can see themselves using embedded payments within the next two years if the technology becomes more widely available and they learn more about it. The 51% who have heard of the term also feel upbeat about the future of embedded payments, with the majority believing they’re safer than traditional payments. 

Given consumers' reduced appetite for risk and their unwillingness to accept more friction, embedded payments represent a huge opportunity for merchants. And with some education on the benefits of adopting the technology— particularly how it can satisfy consumers’ desire for a balance between security and convenience, it could be a win-win. For merchants, it could build a promising revenue stream, whilst boosting trust and increasing loyalty amongst consumers.

What does the future hold? 

Inflation looks set to continue rising, which means in turn consumers will likely become even more selective with their spending, particularly online. At the same time, they'll also continue expecting to pay securely with a frictionless checkout experience. 

For merchants, offering a variety of payment methods at the checkout continues to be a priority, and if there were any question marks over cash, the impact of the rising cost of living has established it as a must. Customers want more flexibility and control so appealing to this with a broad selection of payment methods will be key. 

One more complex consideration for merchants is how they build relationships with consumers by engaging and educating them on new technologies. For example, embedded payments increase security and are more convenient for consumers, however ongoing education about the benefits can only be a good thing to drive mass adoption. 

Read the full Lost In Transaction report: Consumer payment trends 2022: Navigating online payments in the age of uncertainty.

About the author: Chirag Patel is the CEO of Digital Wallets at Paysafe.

In Adjust’s Mobile App Trends report, we explored the recent performance of FinTech apps, highlighting reports that banking app revenue reached $6.8 billion last year—(an 88% increase on 2020) and that over half of purchases (52%) were made with a digital wallet in 2021, and use of cash declined 42% compared to 2019. Adjust data itself showed a 19% increase in finance app downloads compared to 2020.

As the industry continues to grow, there are huge opportunities in the FinTech space for mobile app developers and advertisers alike.

Embracing user privacy

It’s been more than a year since the rollout of iOS 14.5 and Apple’s AppTracking Transparency (ATT) framework. This marked a critical shift in focus towards protecting consumer privacy. Although early predictions for industry-wide ATT opt-in rates were as low as 5%, our recent data shows a much higher rate of 25% — a number that is increasing consistently.

While the opt-in rate for FinTech apps sits below the industry-wide average, at 11%, these changes to data privacy have reinforced the need for marketers in FinTech to extract value from their own first-party data. Given this, we can expect to see continued acceleration in ATT opt-in rates for the FinTech vertical, as more users understand the value of opting in and receiving personalised advertisements.

Therefore, app marketers in the FinTech realm should implement robust opt-in strategies that communicate the benefits of targeted advertising to users. It’s this exact proposition, which has already been communicated for years, that’s led to hyper-casual games consent rates reaching as high as 40%.

Maintaining accelerated install growth

Adjust’s report finds that installs of FinTech apps grew by 35% between 2020 and 2021. Looking at the breakdown of these installations per subvertical. Payment apps make up approximately 57% of the installs share, followed by banking at 34%, stock trading at 7%, and crypto at 2%.

A rise in post-pandemic interest in investing apps continued in 2021, while interest in cryptocurrencies led crypto apps to overtake stock trading apps to become the majority of asset management app downloads. Bitcoin and overall crypto market capitalisation reached new all-time highs in April and November. As expected, we found that coverage of “meme coins” such as Dogecoin and Shiba Inu and the popularity of NFTs on the Ethereum blockchain led to a surge of new users into the FinTech space.

Globally, the share of paid installs relative to organic installs in the FinTech vertical grew from the beginning of 2020 until midway through 2021. Starting at 0.11 and growing to 0.15, 2021 ended with a ratio of 0.14. The most exponential growth can be seen in the crypto vertical, which started in 2020 at 0.11 and finished in 2021 at 0.23, indicating that the big increase in paid campaigns for cryptocurrency apps also, logically, resulted in a boost in the number of paid installs. Banking’s ratio dropped consistently, starting at 0.12 and finishing at 0.07, showing that the increased need and interest in banking apps caused users to seek the apps out themselves.

With more users than ever before flocking to FinTech apps, we know that marketers and developers are looking to expand their channel mixes to capture the largest number of potential new customers. We found that this was reflected in our trends data, as the number of partners each FinTech app is working with has also increased alongside the competition. What’s more, the average number of partners for the vertical as a whole grew from 3-4 in 2021. Crypto saw the greatest increase — starting in 2020 with an average of 2.5 partners per app and finishing in 2021 with an average of 4.5.

Increasing sessions and understanding user behaviour

With an increase of 53% globally, the growth of FinTech app sessions recorded is even more significant. Our findings highlight a boost in engagement within the vertical, as existing and newly acquired users record more sessions than ever before. While global sessions follow a continued upward trend throughout the year, the highest point can be seen in April, which was 92% higher than the 2020 average, and 27% up on the rest of 2021.

The breakdown of sessions across the FinTech subvertical differs significantly from what we saw for installs. Banking takes first place at 46%, followed by payment at 31%. Stock trading and crypto take more of the sessions share than the installs share, at 17% and 6%, respectively. This suggests that the users who download apps in these categories are clocking more sessions than those using banking and payment apps.

We discovered that this high level of engagement is also reflected in the length of sessions by users in each subvertical, with the most significant growth seen among crypto apps. Session lengths in crypto and stock trading are consistently longer than those in banking and payment, which aligns with the business models of each category. While a payment app might only be needed for a number of seconds for a task to be fulfilled, users buying and selling stocks or cryptocurrencies likely need to spend much longer to complete actions.

According to Adjust’s report, in-app revenue for FinTech apps is also increasing steadily, showing consistent growth from January 2020 through to December 2021. While subscriptions, third parties (sellers and beneficiaries), and advertising are the key ways that FinTechs monetise, we recognise that subscription models have become increasingly prominent. This helps to drive the increase in in-app revenue, as many FinTechs have progressed from the growth stage into the profitability stage.

What next for mobile FinTech?

In 2021, we saw the shift toward mobile accelerate, with more users than ever before turning to apps for their financial needs. With installs and sessions in the vertical increasing across all regions and subverticals, it is clear that the global FinTech app ecosystem is thriving, and continued growth can be expected from this space for the remainder of the year.

As for what’s coming next for the future of mobile FinTech, we expect to see growth in Buy Now, Pay Later (BNPL) services, digital wallets enabling access to cryptocurrencies, as well as cloud banking from traditional banks. For mobile app marketers in the FinTech space, focusing on getting the opt-in is crucial. Although numbers are comparatively low, pushing this rate up by even a couple of percentage points can prove invaluable when it comes to building out conversion value models and predictive strategies for the aggregated SKAdNetwork data set. Focusing on finding these high-value users is key, along with building retention strategies that keep them sticking around. The best way to achieve this perfect balance is to improve the accuracy of your campaigns and to create a user experience that is perfectly optimised to your specific audience segments. Drilling down into your data to determine the key touch points along the user journey is how you’ll achieve this—great data makes for great insights.

Catherine Yuan is the Executive Director and Trust Officer of Tricor Trustco (Labuan) Ltd, a fully-fledged licensed trust company regulated by the Labuan Financial Services Authority (LFSA) based in Malaysia. She has over 15 years of corporate management experience, which includes strategic and leadership training for management development, as well as wealth succession planning. She has a deep understanding of Eastern and Western cultural differences, essential to creating a mixture of strategies catered to multinational corporations and global families’ needs. She is also a STEP (Society of Trust and Estate Practitioners) member. We sat down with Catherine to discuss wealth and estate planning, and the uses of a Labuan Private Foundation for such purposes.

What are the current trends reshaping the estate planning sector?

Based on my experience, the wealth management industry in the Asia Pacific has been continuing to grow rapidly, and I believe that as the population of high-net-worth individuals (HNWIs) increases, so will their assets.  For example, HSBC estimated that Chinese households will have RMB 300tn (USD 46.3tn) of investable assets by 2025, an amount equivalent to the entire US bond market. Over the years, we have seen the emergence of a new affluent group with a more diversified lifestyle. However, the transfer of wealth is still a challenge for many of them. I recommend HNWIs to seek sound advice on navigating international borders, devising the right wealth structures and continually refining them. This will ensure a solid legacy and that their wealth smoothly reaches their intended beneficiaries in an internationally compliant manner.

I personally believe that the lack of comprehensive financial and structural knowledge regarding wealth solutions and succession planning hinders them from finding the right arrangements to fit their families’ needs. Asian HNWIs are typically more familiar with the use of wills and trusts since these instruments have been around for centuries. Many reports suggest an increasing number of Asia families hold various kinds of assets, and these assets are moved across various countries. For example, according to CNBC, inquiries about setting up a family office in Singapore from China have doubled over the last 12 months. It is crucial for these families to devise a wealth structure that is flexible, secure, and compliant enough to safeguard their assets. I can help them achieve these goals by offering them the only Private Foundation structure available in all of Asia.

Today’s ageing generation is closing in on retirement and it will only be a matter of time before the younger generation takes over. I have had talks with clients, who are business owners, and they all share a similar concern: the successor of their businesses or companies. Not every child seeks to succeed through their parents. Often times they wish to forge their own path to success, their own place in the world. They may also lack the business tack or acumen to take over a leadership role in their parents’ businesses. This is where, historically, we usually see the downfall of corporations after losing their original founding members. I would advise these clients to start thinking about their succession plans ahead of time, to decide who is deserving to inherit their shareholdings in corporations, and most importantly, their responsibilities as well. I assist my clients in exploring various estate planning structures to achieve their family business succession goals.

Today, we can see that the younger, smarter generation is reshaping the wealth management industry. Digital assets are gradually finding their way into estate and inheritance planning as we see a greater investment interest in them. I have had clients that have cryptocurrencies, digital wallets, and social media accounts, all of which are relatively new forms of assets.

As the adoption of digitalisation continues to rise rapidly, we need better protection and planning of digital assets. I would advise my clients to make a thorough inventory of all online accounts and passwords so that their beneficiaries have access to them after their passing. Digital assets in estate planning can be complicated. The laws that govern digital assets vary from country to country, platform to platform, and governments around the world struggle to keep up with the ever-changing technological landscape.

I have come to notice that the HNWI’s families in Asia have an increasing need for family wealth planning to preserve and pass on their assets to future generations, including increasingly prevalent digital assets. I strongly believe that Asia’s wealth management community must adapt to digitalisation trends so that the products and services offered can cater to today’s wealth planning needs.

Why do clients need to consider using your help with estate planning?

I have over 10 years of experience in the wealth planning industry. Our team specialises in the handling of Labuan company registrations, financial license applications, and private foundation set-ups in Labuan. We provide a comprehensive suite of services for corporate estate planning – including corporate secretarial services, corporate governance, and management advisory – to global families, multinational companies, entrepreneurs, and investors from all parts of the world who seek to preserve their wealth through the Labuan Private Foundation.

Tricor Trustco (Labuan) Ltd has actively promoted the Labuan Private Foundation since the inception of the Labuan Foundations Act 2010. We are part of the Tricor Group and are backed by a strong global network with offices in 22 countries or territories scattered all throughout Asia and other parts of the world to provide bespoke services to all our clients. Tricor Group is the largest company secretarial firm in Malaysia. We serve major publicly listed companies in Hong Kong SAR, Singapore, and Malaysia, offering services such as share registrar and company secretary. Our major clients also include 40% of all existing Fortune Global 500 companies, and we serve them as their all-in-one corporate services provider.

I trust that with our many experts and professionals, covering many different corporate industries and from countries all over, Tricor has the resources, expertise, and manpower to meet any challenges our clients may face.

Over the years, we have seen the emergence of a new affluent group with a more diversified lifestyle. However, the transfer of wealth is still a challenge for many of them.

How can a Labuan Private Foundation help with estate planning?

My experience in estate planning has taught me that there is no “one-size-fits-all” approach. An estate plan must be tailored to meet specific goals, adapt to family dynamics, and improvised to suit evolving family trees.

Popular estate planning tools such as wills, trusts, and foundations all have their similarities and their differences. It is my job to help clients identify their objectives, choose the right tools, and construct the proper structures to effectively fulfil their goals. The fundamental objective of succession planning is for you to ensure that your wealth is passed on to your loved ones so that they are equipped to face hardships in your absence.

The sole jurisdiction in Asia that offers private foundation wealth protection is in Labuan, Malaysia. The Labuan Private Foundation is the only one of its kind in Asia. The Labuan jurisdiction is a white-listed jurisdiction by Organization for Economic Cooperation and Development (OECD), supported by a strong and transparent regulatory framework covering all business solutions and wealth management needs.

The Labuan Private Foundation is a legal entity fully protected by the Labuan Foundations Act 2010. The Private Foundation has its own separate legal identity, which is similar to that of a company, which helps to limit the risks and exposure of a Foundation to the Founder. With its own legal identity, the Foundation can own a multi-currency bank account and even have a trading account to hold shares of public companies listed on stock exchanges and so on. It essentially acts as an ultimate holding structure.

It is also governed by a set of customised Charter and Articles, which allows each and every Foundation to be unique and flexible enough to suit each Founder’s purposes. The lifetime of a Foundation can also last in perpetuity, in either the Conventional or the Islamic form, which allows for families to further plan for their long-term objectives.

Personally, I have seen families struggle internally when the patriarch or matriarch of a family passes, leaving behind unclear directions or vague interpretations of their wealth distribution instructions. This causes significant distress, confusion, and discord amongst the surviving members of the family. I have helped clients overcome these issues by devising a profound Labuan Private Foundation structure that details the blueprint of how wealth should be managed upon the passing of a loved one. With the Labuan Private Foundation, I am able to give my clients the priceless gift of a peace of mind.

While these may seem complicated and confusing at first, I can advise on vehicles that suit my clients’ best interests and help drive their estate planning forward.

For more information, go to https://www.tricorglobal.com/locations/labuan 

Insurance technology company Zelros is using AI in exactly this way to analyse data on consumer behaviours to make hyper-personalised recommendations. In 2021, they had coverage for up to 250 million policyholders globally and were able to determine where people were lacking insurance coverage. The data enabled them to make 10 million personalised insurance recommendations to individuals and families in 2021. This data provides a glimpse into the economy and what areas of people’s lives are changing the most. Now in 2022, the recommendations for Q1 are providing insight into what’s changing now:  

Zelros bar graph

 JAN | FEB | MARCH

Car | 2.86% | 0.10% | 0.03%

Credit Insurance | 19.95% | 19.92% | 19.07%

Health | 14.95% | 13.99% | 14.11%

Home | 30.42% | 32.42% | 32.33%

Legal Protection | 7.15% | 6.03% | 6.11%

Life Accident | 24.61% | 28.38% | 28.31%

Term Life | 0.07% | 0.06% | 0.04%

With the data on these policy recommendations spanning over the first three months of 2022, it’s interesting to note the value drops and gains of what is being recommended and when. For example, for motor vehicle coverage, it has continued to fall month after month starting at 2.86% of recommendations in January to only .03% in March. Meanwhile, credit insurance, health and legal protection all dropped for the month of February but have slightly risen for the month of March. Recommendations for home insurance rose exactly 2% from the first month of the year to the second. 

Overall, when looking at the data provided for Q1, the changes from February to March aren't nearly as drastic as those from January to February. The top three categories are credit insurance, home and life accident. Together, these three are making up roughly 80% of all insurance recommendations. As we’re now into Q2, it’ll be interesting to see how the data flows for the first six months of the year, and then to compare it with the end of the year results once we hit Q3 and Q4. 

How does hyper-personalised insurance work with AI?

When we get our insurance, we often think that what we’re getting is hyper-personalised to us, but this is not usually true. Historically, agents are trained to cover the bases of what the average person needs, but this has nothing to do with your specific current needs. They can ask questions and make a personalised recommendation based on what you tell them, but hyper-personalisation through AI takes this to the next level.

Hyper-personalised insurance uses artificial intelligence to make specific recommendations to a policyholder based on what is happening in their life right now. With roughly 2.5 quintillion bytes of data being created every single day, a portion of that information is valuable consumer information that is being used to teach AI how to draw conclusions about what people need and want before the thought even crosses their minds. This data can be analysed to help an insurance agent determine if their client (aka you) has had a major life event that would signal a need for new insurance coverage or the re-evaluation of an existing policy. For example, AI could help determine if you’ve moved to a new address and would need to revisit your property insurance coverage to ensure your risk category is still the same and your policy still covers you. It could be used to show the birth of a child, which would prompt an agent to ask specific questions about this to see if life insurance is now needed.

Hyper-personalisation can also include telematics data that makes your policy specific to just you: for example, an auto policy based on your unique driving history. Cars are now so technologically advanced that insurers can provide behaviour-based insurance, so your rates become based on your driving behaviours only, not the pool of driver data used to determine a standard policy. 

Why hyper-personalisation is important

The leveraging of AI and machine learning to meet our needs is a reality now in the insurance industry. It’s helping recommend to those without adequate coverage, to reevaluate risk assessment, and to help make sure that policyholders have the best premiums possible. AI is giving insurers the unique ability to create hyper-personalised suggestions for people in a way that has never been seen before. It’s best that the entire industry jump on now, or face being left behind and never catching up. 

About the author: Paul-Henri Chabrol is Chief Product Officer at Zelros.

DAOs 

Decentralised Autonomous Organisations have a long and colourful history in the world of blockchain, the first emerging in 2016 following in the wake of Ethereum’s 2015 launch. A DAO is much like a corporate governance structure, albeit managed in decentralised fashion using blockchain technology and largely without the oversight of government regulation (for now). DAOs function by allowing holders of its tokens to vote on how funds within the DAO are directed.

2021 saw some big moves in the DAO space. Wyoming became the first state to formally recognise DAOs, granting them the same legal status as limited liability companies. ConstitutionDAO raised over $43 million to purchase an original copy of the American constitution at Sothebys. The DAO was outbid by billionaire hedge fund manager, Ken Griffin, but this episode clearly demonstrated the ability of DAOs to rapidly raise and deploy capital for a given purpose.

We can expect DAOs to soar to new highs in 2022, with many DeFi protocols now using DAOs to govern their future. Meanwhile, a host of new NFT DAOs are emerging to support collective investment in NFT art. Those looking to direct the future of DeFi or invest in a protocol’s future might consider investing in DAO tokens like Maker, UNI, AAVE or BitDAO. More interested in NFT art? Look into FingerprintsDAO, SquiggleDAO, and FlamingoDAO.  Ownership of these DAO tokens will give the holder voting rights in the DAO.

Music NFTs

An NFT, or non-fungible token, is a unique blockchain record managing ownership of a particular digital product like a piece of art and is sometimes also linked to a physical representation. 2021 saw an incredible boom in visual arts NFTs and this has been a serious boon for digital artists. The refrain of digital artists not being able to get a break in the pre-NFT, infinitely copyable world of digital art has been rapidly changed by NFT tech that makes these digital goods uniquely ownable and tradeable.

While NFTs for visual arts have been around in their current form since 2017 (with many early, archaic renditions that predate even this) music is emerging as another hot NFT phenomenon to watch. Artists like 3lau, Nas and Mike Shinoda have all launched music NFT projects in recent months to high acclaim. Expect more established musicians to follow in their wake as the major record labels seek to wade into the NFT space.

Existing major NFT marketplaces are not currently well placed for this new world of music-on-blockchain as their browsing experience and product offering is optimised for visual arts, not music. As such, we are beginning to see a new breed of NFT platforms emerge to service this space, like Catalog, Zora and Sound.xyz. Another such platform is TokenTraxx, which is introducing a marketplace and mint platform for music NFTs this year. TokenTraxx’s deep relationships with the major record labels and its team of music industry personalities mean that it is well-placed to capitalise on this trend.

Layer 2 Blockchains

A layer 1 blockchain is an independent, standalone blockchain in the vein of Bitcoin, Etherem or Solana. All of these face the blockchain trilemma, that a blockchain can only effectively deliver 2 of 3 qualities: security, decentralisation and scalability. Most early blockchains, such as Bitcoin and Ethereum, value security and decentralisation over scalability. More recent blockchains like Solana sacrifice decentralisation for scalability.

The new, faster L1 blockchains that sacrifice decentralisation for speed will have their work cut out for them to compete against L1 heavyweights Bitcoin and Ethereum, however, because a new breed of so-called layer 2 blockchains have emerged to vastly increase their scalability and speed. A layer 2 blockchain acts in conjunction with a layer 1 chain by allowing transactions to take place much more cheaply and quickly on the layer 2, with an update to the underlying L1 happening at some time in future. The L1 becomes a sort of slow, expensive but incredibly reliable settlement layer, with the L2 providing the speed and low expense required of a blockchain fit for consumers.

With Ethereum fees regularly hitting new highs and L2 solutions beginning to hit their stride, the stage has been set for Arbitrum, Optimism and other L2 solutions to take off in 2022. Rumours abound that these L2 solutions will be offering their own tokens to help support their development and let investors gain exposure to them.

Increased Regulation

It certainly causes concern when adverts for shady altcoins appear on public transport in major cities across the world. Many activities that have been illegal in public equity markets for decades, such as wash trades, pump-and-dumps schemes, and unqualified advertisement of high-risk investments, have yet to be regulated in the realm of DeFi and blockchain. Regulators the world over are looking to get a handle on this and 2022 may be the year when we see firm guidance come from the USA’s SEC, Britain's FCA and other regulators on how financial regulation applies to blockchain.

Garry Gensler, chair of the SEC, has stated that while he has no plans to criminalise crypto, regulation is coming and that crypto markets “need more investor protection.”

Enforcement will doubtlessly become more robust and increasingly invasive scrutiny of blockchain participants can be expected. Blockfi’s $100m settlement with US regulators, the SEC’s first enforcement action against a crypto lender, will not be the last such action we see this year.

Stablecoins, privacy coins and DeFi products are the strongest candidates to find themselves within regulators' crosshairs. Stablecoins are attracting attention because of the risk of them not being properly backed by liquid assets, or the risk of an algorithmic peg breaking. Privacy coins that mask the addresses of senders and recipients in financial transactions are a natural haven for criminals, making them a top regulatory target. With DeFi, the regulatory concern is that most investors are not sophisticated or tech-savvy enough to understand if promised returns are possible, and many DeFi protocols are not as decentralised as one might imagine, making them open to abuse by a bad actor.

Conclusion

While no one can tell for certain what 2022 will bring, it’s likely that DeFi and blockchain will continue to evolve at a breathtaking pace. The market remains young but rapidly growing, and as many millions of new users are on-boarded to DeFi and blockchain by new product offerings from major tech companies like Coinbase and Meta in 2022, this is a space that can be expected to continue to boom.

In 2021, the focus on ESG accelerated. COP26 kept sustainability at the top of every executive's agenda, while social movements and supply chain challenges forced a dramatic rethink.

This year, as businesses continue to rebuild from the pandemic – with some having to create entirely new supply processes – the financial industry will see significant change with a deeper focus on ESG resilience, strategies, reporting and governance. In particular, three key trends will shape the finance sector’s approach to ESG reporting in 2022.

More confidence in ESG credentials

Historically, employees, customers, investors, and other stakeholders have been cynical about corporate reports on sustainability and corporate social responsibility issues. There is still a lack of trust regarding organisations’ ESG claims and a perception that companies are guilty of greenwashing or only reporting on positive progress. This is frustrating for organisations that not only understand the value of reporting accurate ESG metrics but also invest significant time to do so.

For many organisations, it isn’t entirely clear what they need to do to build that trust. Until ESG is standardised and everyone is on a level playing field, organisations need to establish how they can provide greater consistency and transparency of ESG data. Key to this is working with investors to understand what it is they want to see.

Companies recognise that strong relationships with their stakeholders will only be possible if they can demonstrate that they are reporting consistent, trustworthy data. With audit-ready reports based on a single source of truth, they can establish more confidence with their stakeholders.

Regulations that seek to mandate greater trust, transparency and accountability are on the horizon. This is one reason why stakeholders are beginning to feel that they can have more trust in the ESG data included within a company’s reports. For example, many organisations across Europe are currently issuing their first European Single Electronic Format (ESEF) filing, in line with a mandate that aims to make reports more easily discoverable and comparable with standardised tagging. Additional regulatory changes are coming into force such as the Corporate Sustainability Reporting Directive (CSRD) which will create more standardisation – and confidence – in the reporting of corporate ESG progress. Inevitably, more regulatory changes are yet to be revealed but organisations don’t need to wait for regulatory bodies and standards setters to set the pace of change within their businesses. Trust can be built now.

Companies will need to go further when sharing data, both to meet these regulatory requirements and to cater to stakeholder demands. For example, outlining the company’s gender and diversity split no longer satisfies investors. They are also interested in how executive pay links to sustainability goals. Pay gaps need to be reported on and taken into account alongside, for instance, seniority and length of time at the company.

Until ESG is standardised and everyone is on a level playing field, organisations need to establish how they can provide greater consistency and transparency of ESG data. Key to this is working with investors to understand what it is they want to see.

Organisations will also need to ensure that processes are in place to gather this data efficiently from siloed departments across the business. One way to address this is to use one centralised platform that integrates teams, processes, and workflows to make this complicated data gathering exercise simpler. With this type of technology, all data within the platform can be linked. When data is updated in one place, it automatically updates everywhere. This means reporting teams can be confident in the consistency of the data, and stakeholders can be confident in the ESG credentials being reported.

As organisations get into their stride with streamlining ESG reporting processes this year, banks and investors can expect more confidence in the ESG data that companies publish.

A collaborative approach to ESG reporting 

As regulation is changing, the ESG data that companies need to track and report on is also shifting. Annual and interim reports can be a mammoth task, involving many stakeholders across multiple disconnected teams — from the sustainability and corporate communications teams to investor relations, auditors and more. So there is a growing need for businesses to ensure that everyone involved in developing ESG reports not only buys into a collaborative, centralised reporting model but understands their role in it.

This requires education across teams. Once an organisation has identified who needs to be involved, those individuals will need access to the right reporting tools and, importantly, clear and consistent lines of communication. Efficient ESG reporting requires everyone to know the role they play and collaborate.

Critically, everyone around the boardroom table — whether an ESG leader or not — has a key role to play. The CFO in particular needs to ensure that all teams become part of the process. This is where groups such as the UN Global Compact CFO Taskforce come into their own. This task force was set up to guide companies in aligning their sustainability commitments with credible corporate finance strategies – enabling advice and idea-sharing between CFOs for peer-to-peer support.

Collaboration is key and establishing a circle of trust optimises the reporting process. Without this, organisations are more likely to continue to face challenges with ESG reporting and may struggle to gain stakeholders’ trust. This year, organisations will need to establish a clear system of ESG reporting roles to ensure those processes can be streamlined for efficient, consistent, and trustworthy ESG reporting.

Continued standardisation of ESG, and tighter regulations

Change is a constant when it comes to the demands put on the annual reporting process. For example, the CSRD proposed by the European Commission last year aims to enhance and strengthen the measures already in place under the Non-Financial Reporting Directive (NFRD) and is, in part, the result of a series of consultations that started as far back as 2018. This year, financial firms will also need to start preparing for the UK Financial Conduct Authority’s mandatory climate-related disclosure rules which are due to come into force by 2025.

As a further change to the ESG reporting landscape, the International Sustainability Standards Board (ISSB) – announced at COP26 – will provide consistent standards for organisations across the world, significantly reduce cross-framework mapping, and simplify some of the more painful elements of the reporting process. The ISSB will be pivotal to meeting demands from investors for transparent, reliable and comparable reporting by companies on climate and other sustainability-related matters.

The move towards greater standardisation, control and rigour is being driven by the need for greater transparency. This transparency fosters trust in data, and this is vital considering that ESG is now a critical business success factor.

The demand for businesses to improve the quality of the ESG information that they share with investors and the market will continue. If a company is to stay on top of the evolving regulatory requirements and ensure that it can deliver consistent, transparent reports, it will need to future-proof annual reporting processes. Bolting on solutions to a reporting framework may seem like the quick answer but it won’t deliver the sustainable, long-term value required. It will only cause delays, inefficiencies, and endemic long-term disruption. Organisations are recognising this, so we can expect to see the need to future-proof annual reporting processes become more of a priority in 2022.

ESG has moved swiftly to the top of companies’ priority lists. The driving forces behind the acceleration are clear; lenders expect greater visibility, new regulation is coming into force, and both customers and employees are increasingly values-driven. As organisations double down on tracking and publishing data that demonstrates their ESG prowess and progress in 2022, the trends above will shape their approach to streamlining the processes which make that reporting possible.

You believe that innovation is not just for the big industry players. Can you elaborate on this?

There are many opportunities and solutions available with insuretechs, and they run the gamut of what’s of interest to the big industry players as well as what might be of interest to someone smaller. A lot of insuretechs and innovators out there are looking to partner with someone a little smaller, with whom they can get their foot in the door and learn from in a more focused way. Utilising the “software as a service” model also allows for flexibility in pricing, and this can enable smaller companies to become involved in the insuretech space and innovate at scale.

What are the benefits of partnering with an insuretech?

One of the biggest benefits of partnering with an insuretech is that, depending on where they are in their journey, they’re open to feedback from customers along their roadmap. Becoming involved with insuretechs has allowed us to partner and identify avenues of innovation we can pursue to bring collective value. It also allows us to influence where insuretechs are spending their time and resources and enables both organisations tolearn as we go. We’ve built strong relationships with our insuretech partners: they appreciate companies that took a risk on them in the early days and want to truly partner and make changes or adjustments that would bring value.

Insuretechs can help insurance carriers think differently— sometimes we get stuck in our traditional ways of thinking and are risk-averse. Insuretechs can push you to realise what’s possible. The relationship provides benefits and opportunities for both parties: many insuretechs are just starting out, and it’s easier for them to get in and focus with a smaller regional carrier who can help them learn and grow as they go along and provide immediate feedback on what works and doesn’t.

The biggest challenge when exploring insuretechs can be deciding where to focus your time and efforts. I spend a lot of time looking at potential solutions through the lens of 1) what’s the problem to solve, 2) what’s the constituency that will benefit from this (such as our customers and their journey, or our claims staff by automating processes so that they have more time), and 3) how will it improve outcomes. At Amerisure, when we began exploring opportunities, we established a roadmap that determined where we wanted to focus and where were the solutions we wanted to look at; conducted evaluations with consultants; and focused on “moments of truth” in our claims journey, with the bookends of claims submission and resolution. We spent a lot of time focusing on those areas; now we can focus on additional enhancements in the journey to help everyone.

To keep learning about the benefits of insuretechs, I leverage industry events such as webinars, conferences and expositions, as well as vendor demonstrations (I am excited in-person events should be starting up again in the second half of 2022, as they are very valuable to help us determine who we may want to move forward with).

Tell us a little bit more about Amerisure and the services you offer.

Amerisure is a leading provider of commercial property and casualty insurance solutions for US-based construction, manufacturing and healthcare businesses. Licensed in all fifty states and available through an exclusive network of elite independent agents, the company upholds an “A” (Excellent) financial strength rating, industry- leading service scores, and multiple awards for innovation. Amerisure has been in business for more than 100 years and is consistently named among the best places to work in the industry and throughout the nation.

Insuretechs can help insurance carriers think differently — sometimes we get stuck in our traditional ways of thinking and are risk-averse. Insuretechs can push you to realise what’s possible.

In what ways has the COVID-19 pandemic affected your work?

The COVID-19 pandemic allowed us to think about technology differently and enabled us to — out of necessity in some cases — innovate. It allowed us to identify vulnerabilities and showed us the “old way” of doing things is not always as efficient. COVID provided us with a timely reason to explore innovation — in general, customers realised that because they were going through it themselves, we must also do things differently. We found that with so many people working remotely, everyone is more patient and understanding of these situations than they would have been before. In a lot of ways, we all became much more flexible and have learned to roll with the punches.

What are the key lessons it has taught you so far?

My philosophy in life is: out of any negative situation, seek to find the positives and silver linings. There have been a lot of negatives with COVID, and while we can’t change the negatives, I always like to reflect on: “What are some of the things I can see as a positive?”

COVID has taught us how important it is to keep in touch and that relationships are truly sacred. At Amerisure, we started to look at how to maintain those connections in this situation, including increased communication with our staff, especially as we move into a hybrid work environment.

We used to believe we needed to be face-to-face with customers and now have found that virtual meetings can sometimes be more efficient, eliminating travel time and in-person technological challenges. The entire experience provides lessons in leveraging technology and finding a balance so that there is a nice blend of communication methodologies.

What trends do you expect to see industry-wide in the next 12 months?

There will be many trends focusing on the customer experience and digital journey. Especially because of COVID, the pendulum settles into a sweet spot where not all experiences are electronic, and yet not all are manual such as it was before. This balance will continue to be a conversation in our industry as carriers respond to what their customers need and where they want to conduct business, whether it’s through a digital channel, over the phone, or a little of both — especially when it comes to claims. It’s important in claims to always consider the empathy piece, as there is likely a traumatic event happening in someone’s life, and it can be emotional. Flexibility for people to opt in and out of digital channels depending on the circumstances is something we’ll continue to see.

There will be a lot more that happens around artificial intelligence (AI) and machine learning (ML) this year. This technology will continue to become more seamless, enhancing software already in existence to identify sentiment.

The next version of analytics will also be a significant trend: There’s a lot of work being done around predictive analytics and prescriptive analytics, which not only tells you that “X” is going to happen, but it also tells you what actions will have the most benefit.

Another trend we’ll hear more about is how innovation can be achieved easier, faster, and cheaper. There will be technology available that doesn’t require as much maintenance from an IT perspective, and even more opportunities in the insuretech space for companies to leverage software across multiple areas throughout an organisation. For example, I may be talking to a vendor about their claims product, and they also have a capability that’s perfect for underwriting or other areas of the organisation. That synergy allows you to learn from the technology you’ve already implemented, making it faster and easier to enhance usage, and also allows for less maintenance and technological debt to manage. That’s an opportunity we’re going to see going forward: more insuretechs are looking at how to broaden their focus to address problems from multiple organisational areas.

Many core systems in the insurance space are looking to expand and make it easier for carriers to innovate, exploring and identifyingopportunitiesalready part of licenses within the software to achieve solutions easier and cheaper than before. Core systems functioning outside of a silo make it easier for carriers to innovate and allow the insuretech to integrate with them easily and seamlessly.

What is Amerisure working on in 2022?

One of the largest initiatives we’re working on is the modernisation and upgrading of our core applications. While we’ve been on a modern claims system since 2015, it’s been an upgrade process to move the entire claims core system to the cloud. Having all major core systems on a modern platform will allow us to innovate and move forward at a much faster rate. Our claims systems will be in the cloud this year; moving our policy and billing systems to the cloud is a multi-year journey.

As an organisation, we’ve made tremendous strides in how to approach the experience we want our customers to have, whether internal or external and focus on the customer journey. We’ve created multiple roles focused on the customer experience, and we’ve added a user experience group within IT to help us focus from a tech perspective, making sure it’s consistent and seamless. The teams will focus and look at opportunities from that perspective and help us feel cohesive and consistent across applications customers interact with. I’m excited to make tremendous strides here in 2022.

One of the things I am most impressed with within our industry is, yes, there’s competition among carriers, as we are all trying to be successful and grow business — but we also are trying to help each other and are always looking to find ways to share information to help others be successful. I feel that it’s important to impart lessons to my industry peers that may help them. As I have looked at technologies, I’ve learned a lot from other companies, and it’s helped me identify how and where to focus. I’m very proud of how we all continue to help each other as an industry, and how so many industry leaders are working to pay it forward and share lessons learned.

As I write this we are already well into the new year and it’s becoming clear 2022 has a very different outlook from last year when the “everything rally” was fuelled by easy money, ongoing COVID recovery and mitigation spending programmes, the market’s belief central banks would act to avoid any market instability from derailing sentiment, and COVID uncertainty.

 This year has opened with a much clearer perspective on how quickly central banks will act to address inflation, normalise rates and unwind the quantitative easing programmes that juiced markets with liquidity over the last decade. Welcome back to grown-up markets!

The critical uncertainties are how destabilisation rising/normalising rates become, how inflation – “transitory” or “persistent” – develops (and the danger it morphs into stagflation), and how quickly the global economy puts COVID-19 behind it to start growing again. That leaves geopolitical tensions over Ukraine and with China as the other known unknowns.

My tech valuation stupidity indicators – ARK, Bitcoin, Tesla - opened the year into negative numbers suggesting fundamental analysis is coming back into vogue.

In short, investors are going to have to think hard about what this market is telling them through 2022. The game is changing. One aspect I expect to change dramatically is “euphoric” market sentiment – the everything rally fuelled speculation to supercharged irrational levels. As a famous boxer never said: “I go into the fight prepared with a plan to get rich – which I stick with right up till I get punched hard in the face”.

Sentiment, especially towards get-rich tech scams, is changing. My tech valuation stupidity indicators – ARK, Bitcoin, Tesla - opened the year into negative numbers suggesting fundamental analysis is coming back into vogue. To be fair, Morgan Stanley disagrees with me on Tesla – predicting a rally to $1400 on the back of improving numbers and it’s already on the final lap of the EV marathon when everyone else is still tying their shoelaces… really? I predict everyone could be making decent EVs within a few years. But they won’t be… and to find out why, keep reading.

I would never grace my market haverings with the legitimacy of being “predictions” but let’s run through some ideas for the coming year.

Stocks

Inflation is nailed on – which is perversely good for stocks on a relative basis. The upside will come from higher corporate dividends as the globe recovers from COVID. Sound stocks which will continue to beat risk-adjusted bond returns. But it will be a selective market – distributable profits matter as rates rise, spelling a crisis for the tech sector where unprofitable firms telling the pursuit of size over returns will struggle. In a rising rate environment, fundamental value stocks will outperform. I’m also expecting an ESG backlash to benefit the detest oil majors as energy shortages in Q1 trigger a fundamental review of climate change transition, and the acknowledgement we can’t dump gas overnight and expect the global economy to keep working.

If we assume the global economy stages a covid recovery I’d expect a knew jerk Q1 market rally, before rising rates and lower liquidity sees a pretty flat second half.

Consumers

This is not going to be a good year for consumers - tax rises, massive increases in energy bills, inflation of food, accommodation, and modern necessities like Netflix will dramatically hit discretionary spending. Wages are likely to remain sticky for most workers, unless they are prepared to move into the more challenging sectors like service, entertainment and logistics where wages are rising. Issues like consumer exposure to interest-free debt (like Klarna) could prove “interesting” – if discretionary spending falls, then so will the amount of consumer free-cash to service debt.

Inflation

Forget transitory – that’s a 2021 expression. Supply chain bottlenecks triggered inflation – but they have themselves spawned significant consequences. We’re now seeing higher wages and supply chains evolving. Energy prices will hoick inflation. While 6-7% inflation rates will characterise the early part of the year we may see moderation to 4% later – but that will be remained sustained as the economy adjusts and finds a new equilibrium at a higher permanent inflation rate.

Bonds

The market now expects the Fed could hike four times this year. The Bank of England has already hit the button. Rising rates mean a bad year for bonds – but remember they are also the ultimate safe haven if markets snap. We’re likely to see an acceleration of corporate defaults which have been artificially low for over a decade due to ultra-low rates allowing unfit companies to survive – and that could get very messy due to terminally dismal liquidity in bond markets – which will set like concrete when the selling starts. Corporate spreads will widen – and the markets will have to relearn the fundamentals of credit strength.

Crypto vs Gold

No contest. Gold will win. Crypto enthusiasts can argue gold is as destructive to the environment as Bitcoin. Really. But it’s also real. Bitcoin isn’t.

Energy

2021 demonstrated the dangers of Energy Sovereignty. Without it, nations are vulnerable – as Europe is finding out. Ensuring sufficient stocks of energy – particularly oil and gas – will become paramount. ESG concerns will be dismissed as it becomes clear the optimal routes to Net Carbon Neutrality by 2050 depend on a phased approach with gas replacing coal before gas can be replaced itself. The likelihood is for oil and gas prices to remain elevated through 2022.

Renewables

Will 2022 be the year the world wakes up to the fact wind and solar might be marvellous in terms of fooling the people we’re greening the planet? They are the least efficient source of power, more expensive than expected to maintain, but can achieve easy funding at tight levels because every institutional investor wants to show off how green and ESG compliant they are by holding renewable assets. A better route to zero carbon involves a much wider range of non-CO2 emitting, but more “difficult” energy sources such as tidal, nuclear and clean gas, and mitigants like reforestation and better waste carbon sequestration. These are all achievable – but difficult. Nuclear fusion – will remain a tomorrow solution. I haven’t mentioned hydrogen – because it’s far more difficult than folk expect.

EVs

A world where Rivian made 1400 cars in 2021 but is worth more than the German auto sector has never made much sense. It makes even less when we appreciate that every single EV on the planet today is based on lithium batteries. Lithium is a nasty, dirty dangerous element that will kill us all if it leaks into the water table. Whatever Elon Musk says, it is very difficult to recycle. If we are going to make 35 million EVs by 2030, then we either mine every single atom of it on the planet or hope that a friendly asteroid comprising pristine lithium and cobalt makes a soft landing (as it didn’t happen in the film “Don’t Look Up”). Otherwise – we probably need a rethink on EV power – soon!

As we head into 2022, companies are preparing by pivoting their focus toward digital transformation to boost value for their customers and their bottom line.

Here are 4 trends to look out for in 2022. 

1. Contactless services

The challenges created by the coronavirus pandemic have caused a major shift in consumer behaviour. Suddenly needing to adhere to social distancing guidelines and other rules, companies shifted their operations with rapid speed. According to The Visa Back To Business Report, nearly 33% of businesses now only accept contactless payments, while 48% of customers said they would not shop at a store that only offers payment methods that involve contact with a cashier or a shared machine such as a card reader. This shift toward contactless services is set to stick around in 2022 and the years beyond as the pandemic continues and customers become increasingly accustomed to simpler and faster ways of paying. As such, businesses that want to keep up will have to make the shift in line with the rest.  

2. Digital Society

Society is becoming increasingly digital, with almost 15 billion mobile devices operating worldwide in 2021. While a decade ago cash made up 60% of payments, 2017 saw debit cards overtake cash for the first time. Covid-19 has undoubtedly pushed an increasing number of people toward digital payments options, but even before the pandemic, cash was set to make up just 10% of payments by 2028.

Digital wallets are also playing a major role in the increasing popularity of digital payments. According to an annual Worldpay Global Payments Report, digital wallets are set to represent half of global e-commerce sales by 2023, meaning we will likely see their popularity grow in 2022. 

3. Automated Processes

Automation button conceptIt’s no secret that manual services are often time-consuming and not always the most efficient option for businesses. While automation can carry a hefty upfront cost, in recent years, many companies have started to invest in automating business processes in finance from payments, to lending, to front-end services, and back-end core functions. According to predictions by Gartner, the worldwide market for technology that enables hyper-automation is set to reach $596.6 billion in 2022, up from $481.6 billion in 2020.

Automation not only boosts efficiency for businesses but also improves client satisfaction by accelerating the pace of communication. Furthermore, in the long run, automation is also likely to reduce a company’s operational costs. 

4. Blockchain

Currently, blockchain is often discussed in terms of its connection to cryptocurrencies. However, in 2022, we will likely see much more of blockchain’s true potential. Blockchain, fundamentally, is a secure system that allows for transactions, financial and otherwise, to be carried out. Such technology can be used by banks to handle remittances for lower costs and greater productivity, upping the efficiency of transactions without compromising security. As a second example, blockchain technology can also be used to support peer-to-peer lending solutions. PwC projects that, by 2025, the P2P lending industry will reach $150 billion. 

Final Thoughts

Thanks to the pandemic and technological advances, major shifts are coming for finance. These 4 trends are set to have a significant impact on the sector in 2022 and will likely set the standard for many more years to come. 

Oleg Giberstein, co-founder of Coinrule, offers new investors some advice on bad habits to avoid and potential avenues of interest to pursue.

There seems to be a widely accepted narrative that ‘normal’ people can’t make money investing. They should simply put their funds into a so-called robo-advisor which will put their cash into index-tracking passive investment funds.

In reality, this type of investing (known as ‘black box’ investing) is a terrible idea. It involves a computer using complicated formulas to achieve returns. However, because an investor may not understand the model, it can lead to unforeseen problems that the investor is unable to react to or even mitigate. This investment approach also goes against the unfolding fintech trends. It looks backwards to when investing was for the elite. However, investment is being democratised.

So, how can the non-professional investor get the most out of the markets?

1. Avoid robo-advisors

Robo-advisors are a class of financial advisers that provide advice or investment management online with moderate to minimal human intervention. Their advice is based on mathematical rules or algorithms only. They charge a management fee, often 1% of your funds.

Although passive-investing has worked while the markets have been going up, this won’t go on forever. Remember Michael Burry in 'The Big Short' who predicted the Subprime Mortgage crisis leading to the financial crisis of 2008/09? He is now warning that Index Funds are the next massive bubble.

Although passive-investing has worked while the markets have been going up, this won’t go on forever.

Action:

With some research, anyone can create their own long-term, low-cost multi-asset fund held via a platform, with total costs below 0.5%. Explore platforms like eToro or IG Index to buy an index fund that holds a range of stocks directly, or create your own.

To spread your risk, pick stocks from different industries and decide what percentage of your portfolio you want to allocate. If that percentage becomes higher or lower over time, you can buy or sell to balance it out.

2. Don’t chase trends

When the dotcom bubble collapsed, those left holding worthless stocks were mostly the retail investors who’d been lured into buying the ‘trend-of-the-day’. The trend-of-the-day today is passive investing into index funds.

Action:

I keep the majority of my funds in safe, liquid assets with only about 20% of my portfolio invested in high-risk high-reward assets, like cryptocurrencies or certain tech stocks. This is called a ‘Barbell strategy’ and has become better known thanks to professor and trader Nassim Taleb, author of ‘Black Swan’.

Cash in a 0.1% rate savings account doesn’t seem attractive, but having the majority of your money in cash, gold or bonds, means you’re protected. And you can buy when everyone else is panic-selling during a market crash because you have cash available.

3. Use advanced trading tools

Robo-advisors give you average annual returns in normal times. But when times are bad, I wouldn’t want to be sitting in an index fund when everybody is trying to get out at the same time.

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Those who get out ahead of everyone else are the ones who won’t suffer. When markets dropped over 30% in March 2020, Hedge Fund Pershing Square reported $2.6 billion in profits in under a month.

Action:

Hobby investors tend to shy away from anything more complex than buying and selling. But they miss out on major market opportunities. A simple ‘Put’ option can act as an insurance that allows you to sell a certain financial asset at a predetermined price: perfect when you want to protect yourself against a market drop.

Moreover, automated trading rules allow hobby investors to use algorithms to trade like professionals. Platforms like Coinrule provide the tools to build strategies that protect against losses and help catch market opportunities. By designing and then automating the strategy you don’t need to sit by the computer all day. Innovation is starting to provide access to the markets for more and more people.

4. Keep learning

Trading and investing is hard. However, most of the problems holding normal people back are related to access. Access to the right trading instruments, the right knowledge and the necessary experience. If you just put your money into a passive fund, you never learn and are forever victim to whatever crisis hits the market.

Action:

Study the markets. Books like 'The Intelligent Investor' by Benjamin Graham,  'What I Learned Losing a Million Dollars' by Paul and Moynihan and others provide great introductions. Tools like TradingView make chart reading accessible. Free resources and communities allow normal people to get up to speed quicker than ever.

If you just put your money into a passive fund, you never learn and are forever victim to whatever crisis hits the market.

5. Decide for yourself

Platforms like Robinhood, Freetrade or Revolut have taken the retail online investing market by storm. But they don’t go far enough when it comes to financial inclusion.

The need for a market that at least has the potential for full transparency, fast learning and large opportunities is there. And cool new tech is making it a reality.

Action:  

Do your own research. Learn to make your own judgements. Use the platforms and tools that offer full transparency and have the ethics that you value. Companies like Luno,  eToro, Coinrule, Kraken and TradingView stand out as frontrunners in making exciting investment opportunities accessible to normal people.

Conclusion 

Does trading take time? Is there risk? Yes. But it’s better to face the risks instead of sheepishly following the crowd and pretending it’s risk-free. We need to take responsibility for our finances. It is better to fail and to learn than never to try. And people are starting to buy into this vision. Opportunities abound for the non-professional - and they aren’t disappearing anytime soon.

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