The UK has long been a top destination for investors, having received over £4.5bn of investment into technology companies within the last 3 years. However, with Brexit on the horizon, there is a discussion about how the UK can maintain its attractiveness to foreign and domestic investors after leaving the European Union.
Ana Bencic, Founder and CEO of NextHash, comments on how UK-based, high-growth companies can maintain their appeal to investors in a post-Brexit Britain:
"It is clear that in the UK currently, there is no slowdown in appetite for the investment opportunities that exist, especially in the fast-growing tech sector, but there are questions about whether this will continue after Britain has left the European Union. The UK's abundance of high-growth businesses, particularly those in the technology sector including FinTech, require vital growth finance in the next five years and with the current funding gap, how will these businesses thrive in post-Brexit Britain?
“Blockchain investment platforms can help make global growth finance for scaling technology businesses more transparent and easier to access. Both individual and institutional traders will be able to engage more with blockchain technology-backed trading, where the businesses are backed by a Digital Security Offering and there is greater potential to make rapid returns on their investments than the traditional venture capital route. When this is adopted into the mainstream, it will revolutionise the way businesses will access scale-up finance, how investors will access these companies, and how illiquid shares can be traded into liquid capital in ways never imagined before. As Britain prepares for Brexit, new forms of investment could be crucial for these scaling businesses as well as global investors who want to maintain access to the UK marketplace."
(Source: NextHash)
Here Ramesh Ramani, Cognizant Head of Banking & Financial Services, argues that for banks to remain relevant in a context of regulatory pressure and intense competition, during an era when experience is overtaking trust as a key differentiator, they have three options: become a multiservice provider; go beyond banking to become part of people’s lives; or find a niche segment.
So what are the Steps to unlocking future banking growth?
Today, banks are no longer just competing with each other. The BigTech firms are nipping at their heels, trying to gain market share within the financial services industry. For example, both Google and Facebook have already secured e-money licences. And, according to Crunchbase, there are now over 12,000 fintechs operating globally, with new entrants such as N26, the branchless digital bank offering a paperless sign-up process that can be completed on a smartphone, with identification verified by a video or selfie, which is building a large customer base rapidly. As digital banks such as Monzo report less than one-tenth the cost of servicing a retail account compared to a large traditional bank, these fintechs, built on technology from the outset, are undoubtedly luring away previously loyal customers and revenue through their ability to offer a more digital customer experience.
Trust is no longer the holy grail and experience has taken over
Customer experience has now become the most important differentiator. Where trust was once hailed as the holy grail for banking institutions with customers sticking with their bank for long periods – indeed, sometimes their entire lives – this is no longer the case. Trust and legacy are diminishing over time as younger consumers, brought up in a world surrounded by the BigTechs, increasingly look for speed and convenience. There are, however, notable instances of big-name banks being early adopters, using technology to streamline their operations, improve customer experience and enhance their offering. For example, in Spain, BBVA has developed an app feature called Bconomy, which helps customers set goals, save money and track their progress. The app makes suggestions about how to save money and compares prices on things like utilities and groceries. Idea Bank in Poland makes its products available on the go with branches and co-working spaces on commuter trains. These Idea Bank cars feature desks and conference spaces, plus free office supplies, Wi-Fi and coffee.
It is clear that banks are aware they need to change their strategy to remain relevant. To survive in the evolving banking landscape, banking institutions have three options:
- Become a “multiservice provider” – as profit margins decrease with new entrants coming into the market, banks must consider partnering with the new digital players to ensure they remain an important element of the banking ecosystem. If it is done right, an ecosystem with fintechs need not cause them to lose or dilute their relationships with customers – nor come at the expense of their bottom line. Many fintechs are now offering flexible partnership options that include white-labelling services. And, if done correctly, a partnership with a fintech can bring multiple benefits. For example, ING and Santander have white-labelled Kabbage’s automated SME lending platform and integrated it into their product portfolios.
- Go beyond banking to become part of people’s lives – banks should transform their customer experience, and one way is to make themselves integral to their customer’s lives. For example, besides supplying a mortgage to a family that has just moved into the area, a bank could become their hub for the move, offering them advice on the best schools for their children as well as providing information on local amenities.
- Find a niche segment – banks today are trying to be everything to everyone, which is causing their innovation to stall. Those identifying a market niche will have the best chance of survival in the digital era. We are already seeing examples of household names in the banking world, such as Credit Suisse and Barclays becoming more selective about areas they want to be in to differentiate themselves.
New regulations continue to shake up the landscape
Even as little as three years ago, one could argue that banks still held some form of advantage over new players due to the vast amounts of customer data they held, giving them unrivalled access to consumer spending patterns. However, with new regulations, such as Open Banking, forcing financial institutions to make their data available, this data ceases to give them the competitive advantage it once did.
However, these regulations are certainly improving the landscape. For consumers, it means they can more easily pick and choose banks for different purposes by managing all accounts and payments in one centralised place. For example, taking advantage of the UK's new Open Banking environment, ING Bank has developed Yolt, a free mobile app which allows users to centralise their finances and manage their money with different banks for different financial services in one place. And, in theory, this improved access to payment information and spending data will lead to better banking products that offer more efficient service to consumers.
As the use and implementation of technology continues to change the banking landscape, we can expect a dramatic change in the sector within the next five years. A decade ago, many investment banking leaders thought it was ridiculous to suggest that software would run and complete their research analysis whilst today, many are almost entirely reliant on automation and AI to provide thorough and fast analysis. The question is, which banks will recognise and take advantage of the market changes ahead? Only time will tell.
More than three-quarters (80%) of bankers believe challenger banks are an increased threat to their business, while almost one-third (30%) believe they will be the single most disruptive threat in 2019. The survey, commissioned by fintech provider Fraedom, found that in response the challenger bank threat, bankers expect their organisations to invest heavily in updating legacy systems (44%) and new technology (26%) in 2019.
“With challenger banks setting themselves apart by offering innovative technology platforms, commercial banks are now realising they must invest in key areas in order to counter this threat. This was also echoed by our survey which found other disruptive influences in 2019 to be digitalisation (36%) and consumerisation of technology (36%)” said Kyle Ferguson, CEO, Fraedom.
This comes as almost half (46%) of respondents perceive legacy systems to be the biggest barriers to the growth of commercial banks, while 32% cite it’s the pressure to save money.
With investing in new technology high on the agenda for commercial banks, the survey found that over half (53%) of respondents believe AI and Machine Learning will be the technologies to have the biggest impact on commercial banking in 2019.
“It is clear to see that challenger banks are a disruptive force within the sector. Through the use of innovative technology, these banks have plugged a gap left by established retail banks, and are acting as a stark warning to banks within the commercial space which remains open to similar disruption,” added Ferguson. “If commercial banks are to compete, they must become more agile and adopt new technology platforms suited to changing needs of businesses, or risk being left behind.”
(Source: Fraedom)
Nearly 50% of 2017’s Initial Coin Offerings are currently failing, and one serious factor in this lack of success comes from the lack of trust in a business. Investing in ICOs is risky. Little regulation results in a vulnerability to fraud, and is putting off people from contributing - and rightly so, why would you want to just throw away money?
With that said, ICOs can prove an incredible investment opportunity, with huge potential for growth starting at the pre-sale; and if a potential contributor has trust in a project, there is absolutely no reason for them not to invest.
So how can you earn investors’ trust? This week Tomislav Matic, CEO of Crypto Future, provides Finance Monthly with his top five ways to incite trust in potential investors.
1. Be transparent
One key factor in convincing others of your legitimacy is through being as transparent as possible. Of course, not every detail can be given away, but letting potential contributors understand the inner workings of your company can go a long way to showing them all the work being put into your ICO.
Being transparent develops a unique relationship with investors. Show them you align with legal compliance - you could even go as far as showing off clips of on-site testing; whatever it takes to show the world that you are genuine in your efforts, working hard to make this project a success - it goes much further than you might think.
2. Go social
On average, people spend 116 minutes of their day on social media - just under two hours checking what other people are doing. Only a fool would miss out on this opportunity for both exposure, and a chance to involve future contributors.
Use Facebook, LinkedIn and Twitter - and other social media sites too - to give people regular updates on product details, blog posts, interviews, information; anything you can think of. Frequent updates through a channel that people will be checking regardless go a long way to making investors feel involved in the progression of the project, connected and valued - that extra insight only helps towards bridging that relationship.
3. Introduce your team
By now, contributors feel the platform is safe, they know the inner workings of your product, and they feel involved with the project; it’s time to show them the team behind it. It’s all well and good having a brilliant product, but if you’ve got someone running the ICO who isn’t capable of delivering it, how can an investor trust it?
Roll out the blogs, the interviews, the Q&As, and get their social media accounts active too. Does your CEO have an incredible track record of getting ICOs off the ground? Shout about it. And an inexperienced leadership team isn’t necessarily a bad thing either - you just need to show to contributors why they are in the position they hold.
4. Create an extensive whitepaper
Not everyone will go through the entire whitepaper from front to back, but having a detailed outline of everything to do with your project gives contributors access to any specific information they might need.
Having a strong, comprehensive whitepaper in place allows investors to complete their due diligence at their own leisure. It’s a recurring theme: access to information. The more access, the more allowance you give for trust to blossom.
5. Outlining a clearly defined roadmap
Actions speak louder than words, but if you’re showing future contributors exactly what you’re planning and how you’re going to implement that plan, and then following through on it, there is absolutely no reason for them to believe that you can’t continue in that vein.
Outlining your strategy is a brilliant way of proving that you follow up on promises, and if you can do it before the ICO even starts, even with the smallest steps, investors will be more inclined to put their faith in you once the sale has kicked off.
Building trust is by no means easy, but it is incredibly vital to aiding your ICO’s success. It can without doubt be the difference between an ICO that hits the ground running, and one that flops completely.
The process starts early, and requires a huge amount of time and effort - much like building trust face to face - but the rewards are tremendous.
Phil Sugden, Director at flexible workspace solutions provider, Portal Group, discusses below how the Managed Office Solutions concept has reduced the risk of capital expenditure for fast-growing companies when relocating offices.
In a rapidly evolving market place, businesses are often growing at an entirely unpredictable rate. While growth is one of the most highly valued characteristics of any successful organisation, it often causes logistical and financial challenges when relocating to a larger workspace under the traditional office lease and the serviced model.
Businesses that opt for the traditional lease model are highly restricted in terms of flexibility, fit out and capital expenditure, thus limiting future developments and changes. While the serviced model offers more flexibility, businesses still face limitations on how they can use the office environment to reflect their brand.
Selecting an integrated service offering, such as Managed Office Solutions (MOS), offers a ‘third way’ for businesses to relocate to larger premises. Using MOS, offices are tailored to the client’s exact needs with the added advantages of risk mitigation, the removal of capex requirements and contract terms to meet business planning horizons.
The typical challenge for a small business that has outgrown its existing premises is finding and setting up an alternative location with access to high-calibre talent in a short space of time. In addition, extensive lease lengths can restrict SMEs from finding a new workspace that is wholly suited to their growth strategy.
Historically, companies opting for the traditional lease model have committed to the security of lengthy 10, 15 or even 20 year leases. As business plans often change several times over lengthy lease terms, this certainty has come at a critical price of flexibility in an often volatile economic climate.
The contract lengths for MOS, however, typically range from 3-5 years and therefore enable companies that require a high number of workstations, to more closely align their accommodation requirements with their actual business needs, allowing them to expand or downsize as required.
When expanding under the traditional office lease, businesses are required to self-source and invest substantial capital expenditure in what would be a large, ‘from-scratch’ project. Outsourcing fit-out and facilities management providers when relocating offices can be a costly and time-consuming process.
In addition, the exit fees and dilapidation costs can present even the most well-established businesses with a weighty unnecessary expenditure at the end of a lease.
As a result, small to medium sized businesses are now viewing their office space requirements as a strategic component of their business plan, and thus opting for more flexible leasing options at a fixed price, with no additional costs.
Leases are rapidly becoming an outdated concept, and under more flexible workspace contracts such as Managed Office Solutions (MOS), agreements can be negotiated so they are based on inclusive managed contracts that are priced on a per workstation basis with no capital expenditure or risk.
By having a single cost for the property, facilities management, fit out and ongoing management, flexible methods like MOS remove what can be considerable associated upfront capital expenditure costs, while allowing business funds to be utilised more effectively on operational costs for the property itself.
Simply put, the new wave of shared offices options are allowing SMEs to not only access all the services they need at a cost-certain price, but to work within a flexible financial model that actively encourages their individual development and culture.
The UK’s passion for innovation means it is now seen as a global leader in the development of financial services that are powered by prepaid technology, according to data released by Prepaid International Forum (PIF).
PIF, the not-for-profit trade body representing the prepaid sector, reports that the percentage of UK adults using tech-based financial services has risen to 42% (up from 14% in 2015). The UK is at the forefront of this growing market in Europe, ahead of Spain (37%) and Germany (35%). The UK is third globally to only China (69%) and India (52%).
Fueling this growth in the UK is prepaid, which has become a driving force for the fintech companies who are rapidly transforming the way we pay and get paid. The prepaid sector in Europe is growing faster than anywhere else in the world (up 18% since 2014 compared to just 6% growth in the US) is now worth $131bn*.
Experts believe that the UK’s passion for innovation may help to offset the potential negative effects of a no-deal Brexit, should UK financial service providers lose its right of automatic access to EU markets.
Diane Brocklebank, spokesperson for PIF, says: “The UK is a globally significant player in the creation of prepaid-enabled financial services with consumers keen to adopt new and innovative services and a growing industry of experts with the knowledge needed to develop such products and bring them to market.
“In a global sector, the UK stands out as being a key market and one that should retain its prized status even if it loses its financial passporting rights as a result of a no-deal Brexit.”
The UK’s status in prepaid is significant as it is a sector that is growing much faster than other financial services. In Europe, the 18.6% growth in prepaid since 2014, compares to just 7.8% growth in consumer debit and 5.8% growth in consumer credit markets*.
Diane Brocklebank, continues: “Prepaid and Fintech are the areas where people looking to invest in financial service businesses are seeing the most potential. This is being driven by increased dissatisfaction with mainstream financial services and a desire for greater innovation and flexibility, particularly amongst consumers looking for lower costs and fees as well as smartphone accessible products.
“The UK’s status as a global player is therefore crucial to it continuing to be seen as a key market for such investment. To maintain this, it must continue to be a positive environment for innovation with a supportive regulatory environment and strong skills base.”
(Source: PIF)
This week Finance Monthly benefits from expert insight into the financial world, with a close look at the development of fintechs and the increasing need for these to come together for the sake of progress. Here Ian Stone, CEO of Vuealta, describes some of the challenges ahead, and the solutions that are already possible.
Between 2010 and 2015, the financial services industry changed drastically. In just those five years, four of today’s most successful fintech companies were launched; namely Stripe, Revolut, Starling Bank and Monzo. These launches all had one thing in common; putting the customer at the centre of the operation, untied to legacy or history. Fast forward and the fintech industry is coming of age, with the UK’s fintech sector alone attracting £1.34 billion of venture capital funding in 2017, and new companies launching into market every day.
Scaling up
This success means that the challenge these companies now face is one of scale. To keep moving forward, they need to be able to expand and scale up quickly and easily to support their growing customer bases. They need to do this at the same time as maintaining the flawless, fully-digitised customer service that they have become synonymous for. No easy feat.
How they play this growth period is therefore vital. They need to be fast in making decisions and flexible enough to adapt to the constant changes that are now part and parcel of today’s market. That means arming themselves with the tools and information that will help them achieve that.
A new age of planning
The key is in the planning. As digital companies, fintechs already benefit from high levels of flexibility and adaptability. These traits must also be reflected in how they approach their business planning if they stand a chance of still being relevant five years down the road. A recent survey by Ernst & Young revealed that a third of UK fintech companies believe that they’re likely to IPO in that timeframe – a clear demonstration of the rewards that can be reaped from staying successful. What will set the successes apart from the failures is connectivity. A more connected company with a more connected approach to how it plans will be more successful.
Realising a connected approach to planning
By connecting their people, processes and data, fintech companies will be able to more accurately forecast their revenue, costs and liquidity on a monthly if not weekly or daily basis. They’ll be able to model and digest significant variations in activity and resources, as well as changes in operating models and growth scenarios.
Holding information in different siloes makes it almost impossible for a business to have an accurate view of where money is being spent, meaning the value of forecasts are limited. For those looking to scale up their operations, both from a size and geography point of view, these forecast insights are invaluable. Expansion is an expensive business, so using the company’s data, connecting it and breaking down those silos to make more informed, accurate decisions will help ensure that they don’t burn through valuable capital.
It will also help them stay nimble. This is a period of significant change, with new regulations, political fluctuations affecting currency rates, access to skills and trade deals, amongst other things. The future is unclear so staying nimble means having a clear view and plan for what multiple futures could look like. By having a holistic view of how the entire business is performing and then using that data to forecast where it is likely to be in one, three, ten years’ time, the future becomes much more predictable and achievable. Suddenly, a fintech company can start making decisions now that before may have seemed too risky.
When implemented properly at both a technological and an organisational level, connected planning provides an intuitive map of how decisions ripple through an entire organisation. That is only possible with a real-time overview of the business and the ability to quickly understand the impact of any market changes. This is a critical point for fintech companies.
The competition is growing and although the larger banks will never be able to match new fintechs in terms of agility, they have experience, big customer bases and money on their side. Taking a more connected approach to how fintechs plan will be key to success. Only with a clear view of how the business is performing and scenarios for when that performance is jeopardised, will these companies cement their place in the future of finance.
After some time of speculation, the Bank of England confirmed interest rate hike last week, by 0.25%. Already we have seen some banks act fast in passing this hike onto the customer, in particular mortgage buyers, as opposed to savings rates.
In this week’s Your Thoughts, Finance Monthly has collated several expert comments from UK based professionals with expert knowledge on this topic.
Richard Haymes, Head of Financial Difficulties, TDX Group:
While an interest rate rise is positive news for people living on their savings income, or holding pensions and investments, it may prove to be the tipping point for those in financial difficulty or struggling with debt.
Individual Voluntary Arrangements (IVAs) have reached record levels and we expect the rate of monthly IVAs and Trust Deeds to grow by around 17% this year. A rise in interest rates will make it much harder for people in these arrangements, and there’s a risk they’ll default on their strict requirements.
A large portion of people who are in personal insolvency hold a mortgage (over a fifth according to personal insolvency practice Creditfix), and a rate rise will obviously increase their mortgage repayments. Due to these people’s unfavourable credit circumstances, it’s likely that majority of mortgage holders in insolvency are tied to variable mortgage products, leaving them particularly vulnerable to a higher interest environment.
Holders of a £250,000 mortgage will have to absorb a monthly repayment increase of £31* as a result of this 0.25% hike. Modest as it may appear to many, for people in structured debt management plans or IVAs this could have a very significant impact, even resulting in their debt solution becoming defunct or in need of renegotiation.
Jon Ostler, UK CEO, finder.com:
This rate rise decision comes as no surprise. Our panel of nine leading economists unanimously predicted that the interest rate would rise by 25 base points, and this is a positive sign that the economy is growing stronger.
It’s particularly good news for savers, who have suffered ultra-low interest rates for the past decade. They can expect a rise to their savings, albeit a small one. Now is a good time to consider switching your banking products, as banks will be reviewing their rates. Make sure you keep an eye on which banks are offering the best interest rates as not all of their products will increase by the BoE’s 25 basis points.
On the other hand, borrowers and homeowners with a mortgage are likely to face extra costs. For example, those paying off the UK’s average mortgage debt with a variable rate mortgage face paying an extra £17-£18 per month, which adds up to an extra £200 per year or more than £6,000 over the life of a 30-year loan term.
Angus Dent, CEO, ArchOver:
While banks are likely to pass the rate rise straight onto borrowers, they will be less keen to pass it on immediately to savers. Aspirational borrowing such as mortgages and bank loans will get more expensive – so the man in the street needs to counter that with strong returns on savings. Only 50% of savings account rates changed after last year’s rise, so there’s good reason to be underwhelmed.
But this is certainly a step in the right direction for the cautious Bank of England. While such an incremental rise won’t shake the earth, and probably means business as usual, it nevertheless spells good news for the UK.
The country is still hungry for a stronger economy, ten years after the financial crash. Both savers and investors are now aware that to chase higher returns, they need to open the door to alternative opportunities. Alternative finance options that offer higher yields – without sacrificing security – offer savers a path to higher returns in a still-struggling economy.
Savings accounts still aren’t the safety net they once were. Despite this rate rise, savers still need to cast the net wide in the hunt for higher returns.
Markus Kuger, Senior Economist, Dun & Bradstreet:
This rate hike had been anticipated by the markets, despite inflation having fallen in recent months, as UK growth seems to have recovered from the poor performance in Q1. The effects of the rate rise will be minimal, given the Bank’s forward guidance over the past months. The progress in Brexit talks will remain the most important factor for companies and households in the near to medium term. Dun & Bradstreet maintains its current real GDP and inflation forecasts for 2018-19 and we continue to forecast a modest recovery in 2019, assuming the successful completion of the talks with the EU.
Max Lehrain, Chief Operating Officer, Relendex:
The increase in interest rates is a significant moment as it is the first time the Bank of England has raised interest rates above 0.5 in nearly a decade. However, for savers, this change should act as a wakeup call as it is not likely to have a material impact on their investment meaning that those stuck in standard savings accounts are still missing out.
This is in large part down to the rate of inflation far outstripping interest rates, even with today's increase. In simple terms this means that if your savings earn 0.75% interest they are being eaten into by the effects of inflation.
With traditional lenders offering low returns on their savings accounts and cash ISA products, savers who are looking to achieve higher rates of returns should still consider alternative options. Peer-to-Peer (P2P) lending for example, can offer substantially higher returns, giving a good income boost when interest rates are still relatively low.
Innovative savers will identity these options to take this interest rate rise out of the equation. In real terms, over a three year period investing £5,000 in a cash ISA is likely to render a return ranging from £15 to £113, whereas P2P providers offer prospective returns far exceeding that. For example, investing £5,000 in a provider that offers 8%, would see returns of approximately £1,300 over a three year period.
Nigel Green, CEO, deVere Group:
Hiking interest rates now – for only the second time since the financial crash – is, to my mind, premature.
At just above the Bank’s target of 2%, inflation is not currently a key issue. In addition, major uncertainty surrounding Brexit, the looming threat of international trade wars, and absolutely average economic growth, business and consumer confidence are on the slide.
As such, there seems little real justification to increase interest rates now.
Against this back drop, why is the Bank of England raising rates today?
Has the decision been motivated in order to protect reputations and credibility after the Bank’s Governor and some of the committee had effectively already said the rise would happen?
Whilst today’s decision to hike rates is unnecessary, I think that the Bank is likely to refrain from any more increases until after Brexit.
Paul Mumford, Cavendish Asset Management:
The decision on balance might be the wrong one. While all agree that rates need to return to normality eventually, panicking and doing it for the sake of it - or just because other countries are doing it - will only make things worse.
The idea, as in these other regions, is to start incrementally escalating rates in a managed way as growth and inflation tick up. But the UK is in quite a distinct situation. To borrow some terminology from the Tories, the economy is stable, but far from strong - and certainly not booming. Higher interest rates could have very disruptive effects on sectors such as housing, where it could trigger a rush to buy at fixed rates, and motors and retail, which are performing OK but contain a lot of highly geared companies. This does not look like the sort of economy you want - or can afford - to remove demand from. Meanwhile the pound is holding firm at its lower base, so there is no immediate impetus to shore up the currency.
And of course looming behind all this is Brexit. Interest rates may be needed as a weapon to combat sudden inflation from tariffs should the worst happen and we crash out of Europe without a deal. It would make more sense to save the powder until there is more clarity on this front, and we now what sort of economic environment we're all heading into. The last thing we want is to be in a situation where we are stuck with higher and higher rates to combat inflation, while growth remains anaemic or stagnant.
These things are all swings and roundabouts, of course - one big plus from rate rises is that they will ease our mounting problem with big pension fund deficits. Whether this will make it worth the risk remains to be seen.
Stuart Law, CEO, Assetz Capital:
It looks like savers will be disappointed once again. Although the rate has risen slightly, this is unlikely to be passed on to savers, with many banks having form for just applying increases to borrowers.
What’s more, the Bank of England's statement that future increases will be at a 'gradual pace' implies that savers won't see returns that outstrip inflation for months - and potentially even years.
Rob Douglas, VP of UKI and Nordics, Adaptive Insights:
Ultimately, it is the companies that do not currently have sound financial planning processes in place that are likely to be impacted when changes like this occur, as it can upend budgeting and forecasting, making it difficult for finance and management teams to develop accurate financial plans and make business-critical decisions.
The 0.25% extra interest rate is being announced at an already uncertain time, when many fear the long-term effects of a possible no-deal Brexit or a potential trade war with the US on their business, organisations across the country will need to once again adjust their financial plans accordingly. To do this, companies must plan in real-time, with current data from across the organisation, so that they can mitigate potentially damaging consequences, such as a negative impact on profit margins.
The interest rate hike, while expected, is a reminder why businesses need to be able to continuously update their financial forecasts in real-time. Manual spreadsheets and processes simply don’t cut it anymore and finance teams need to be able to respond to economic changes such as this efficiently and effectively. With a modern, active approach to planning and forecasting, businesses will have the foresight and visibility to make better decisions faster, minimising the impact of unexpected government, regulatory or economic changes.
Paddy Osborn, Academic Dean, London Academy of Trading (LAT):
As widely expected, the Bank of England’s Monetary Policy Committee (MPC) raised the UK base rate by 0.25% today, stating that the low GDP data in Q1 2018 was just a blip, the UK labour market has tightened further and wage growth is increasing. This is the highest level of interest rates in the UK in more than nine years, and the MPC’s vote to raise rates was actually 9-0, against expectations of 8-1 or even 7-2.
There was also an unanimous vote to keep the level of government bond purchases at £435 billion, although the MPC remains cautious about the potential reactions of households, businesses and financial markets to future Brexit developments.
Assuming the economy develops in line with current projections, they stated that any future increases in the Bank rate (to return inflation to the 2% target) are likely to be “at a gradual pace and to a limited extent”.
In currency markets, GBP/USD spiked 50 pips higher from 1.3070 within 10 minutes of the announcement, but has since collapsed back below 1.3100. The longer term view for GBP/USD remains bearish, although there are a number of political and fundamental factors which may affect Cable in the coming weeks, namely Brexit developments, the developing trade war, and US interest rates.
The stock market, having fallen over 200 points since yesterday morning, failed to find any solace in the MPC comments and is currently trading at its 1-month lows around 7550. Higher interest rates mean higher cost of debt for companies, and this will often encourage investors to take some money out of their (more risky) stock market investments.
Feel free to offer Your Thoughts in the comment box below and tell us what you think.
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.
