Stock market investors should not be spooked by the return of volatility on US and global stock markets, they should instead use it to their advantage.

This is the message from deVere Group as US stocks fell into correction territory on the first day of the new quarter, triggering a ripple effect to other financial markets around the world.

The turbulence is largely due to investors becoming rattled over rising trade tensions between the US and China – the world’s first and second largest economies – and major tech firms’ recent declines.

Tom Elliott, deVere Group’s International Investment Strategist, comments: “Stock market investors should not be spooked by the return of volatility on US and global stock markets.

“We are emerging from an unusually long period of low volatility, and this makes recent sharp moves in stock prices feel like an important signal when, in all likelihood, it will prove largely irrelevant for long term investors.

“Several themes are being used to describe Monday’s fall on Wall Street: fear that Trump will announce another set of tariffs on Chinese imports, Trump’s attack on Amazon’s low - but legal - corporate tax bill, and consumer and regulatory backlash against those tech companies who harvest and re-sell personal data to advertisers. None of these are sufficient triggers for a major correction outside of certain sectors, with tech looking the most vulnerable.”

He continues: “Indeed, the current correction feels like a continuation of March’s de-rating of tech stocks, as investors revaluate future earnings potential in the sector. Tech makes up about a quarter of the market cap of the S&P500, so it is important. But its problems shouldn’t be bringing down other sectors. Therefore stock price falls elsewhere on Monday – for example discretionary goods and energy - are perhaps best described as ‘collateral damage’.”

Mr Elliott goes on to add: “The sell-off in late January and early February felt more convincing, as a sharp rise in Treasury yields amid some buoyant wage and inflation data combined to convince investors that the days of cheap money are coming to an end. Risk assets, such as stocks, fell in response.

“A trade war with China certainly has the potential to be a trigger for a major sell-off, but we are not there yet. Otherwise Treasury yields would have risen in recent weeks, in response to a likely rise in inflation coming from tariffs and import quotas. Instead, 10-year Treasury yields have remained in the 2.7% to 2.8% range.”

Nigel Green, the founder and CEO of deVere Group, says many investors will welcome this bout of volatility: “Some of the most successful investors embrace some volatility as major buying opportunities are always found where there are fluctuations.

“Fluctuations can cause panic-selling and mis-pricing. High quality equities can then, for example, become cheaper, meaning investors can top up their portfolios and/or take advantage of lower entry points. This all, in turn, means greater potential returns.”

He concludes: “A professional fund manager will help investors take advantage of the opportunities that volatility presents and mitigate potential risks as and when they are presented.

“Many serious investors will be using this turbulence to create, maximise and protect their wealth.”

(Source: deVere Group)

Analysts currently expect the Bank of England to hike interest rates in May, but some are opposed, claiming the market is misjudging the BoE’s plans. Bond market guru Mohamed El-Erian says the potential rate hike is "far from a done deal."

Last week the BoE left interest rates on hold, adding to suspicious they may raise them in May. After all, the BoE has been hinting at increased rates since last November’s hike.

This week Finance Monthly asked experts: What are the indications? What's the BoE's plan? What are your thoughts on future implications?

John Goldie, FX Dealer & Analyst, Argentex:

Carney and Co. were not expected to spring any surprises last week, opting to keep interest rates on hold again, much as the consensus had suggested. While the vote to retain the current status of the asset purchase facility was unanimous, there were dissenting votes from serial hawks, McCafferty and Saunders, who saw that the time was right for the Bank to raise interest rates to 0.75%. Many of the major banks have brought forward their forecast for a hike to May, though Bloomberg's interest rate probability tool sets this likelihood still at only around 65%. Commentators are certainly warming to the idea, but most believe that it will be almost another year before a subsequent hike is carried out.

This may be underestimating the path of inflation, wage prices and - importantly – overstating Brexit concerns. Carney has repeatedly suggested that Brexit remains one of the greatest challenges to their forecast models, however, the price action in Sterling already belies a growing optimism, or acceptance, that the economic impact of the 2016 referendum is far less negative than suggested by the major players prior to the event. With a transition agreement in place, a move into the critical trade negotiations is a huge step forward even if it brings us to a position with the greatest potential for deadlock.

With headline inflation remaining high and now wage prices heading in the same direction, the UK's second hike in just over a decade will indeed come next time around. Furthermore, with a May hike enacted, the door will then open for a second hike of the year in Q4, an eventuality that the market is yet to price in. With Brexit concerns reducing on the growing optimism that a transition agreement will provide the time and space for a trade arrangement to be thrashed out, the prospect remains for Sterling to trend higher in the weeks and months to come.

We have been bullish on GBPUSD for more than a year now and even with such a consistent trend higher in the last 12 months, the pound remains historical cheap by nearly any measure. There will be times when negotiations with the EU falter, and with it Sterling will stutter, but with a focus on the policy outlook from the central banks and a long-term chart to hand, the medium-term future continues to look bright for the pound.

Samuel Leach, FX trader and Founder, Samuel & Co. Trading:

When the BoE begins to hike interest rates the main concern I see is the impact this will have on over indebted consumers. I have been paying close attention to UK unsecured consumer debt, which is currently at all-time highs of more than £200bn. Furthermore, the annual growth rate in UK consumer credit is 10% a year which is considerably higher than household income growth (2%), therefore a very concerning place to be. These are unsustainable levels now and an interest rate hike could tip these consumers over the edge. Particularly, those on interest rate tracker mortgages. This will then have a ripple effect on businesses as consumers rein in spending to pay off their debts.

For entrepreneurs it is damaging because funding is an issue as it is, let alone with higher interest rates as it will put off potential investors. The first thing businesses cut back on is risky investments and purchases, so entrepreneurs and small businesses will see the biggest brunt of it in my opinion. For the financial markets we should see strength come into GBP. That, combined with the soft Brexit announcement we had earlier last week could push GBP back towards 1.5 – 1.6 against the USD.

Markus Kuger, Senior Economist, Dun & Bradstreet:

The Bank of England vote to hold interest rates is not surprising, as recent figures indicate a moderation in inflationary pressures. However, with wage growth finally picking up, our analysis suggests that interest rates are likely to increase later in 2018, despite the tepid real GDP growth figures.

Based on our current data and analysis, we are maintaining a ‘deteriorating’ risk outlook for the UK but this could change to ‘stable’ depending on the outcomes of the EU summit this week. If the 28 EU leaders agree on the much-needed transition period until December 2020, the risk of a hard Brexit in March 2019 will drop significantly. That said, implementation risks remain high and the long-term future of EU-UK trade relations are still unclear. Against this backdrop, a careful and measured approach to managing relationships with suppliers, customers, prospects and partners is key to navigating through these uncertain times.

Jonathan Watson, Market Analyst, Foreign Currency Direct:

The Pound spiked up following the latest UK interest rate decision which saw GBPEUR and GBPUSD touch fresh levels as the recent improved expectations were realised. Whilst Inflation had fallen slightly lower than expected it remains above target and rising wage growth too has given the Bank of England a freer hand in raising interest rates.

Rising growth forecasts for the UK also add to the increasingly rosy picture for the UK, progress on Brexit with the agreement of the transitional phase has also added to the buoyant mood. Whilst the current stance of the Bank is for a rate hike in May any serious changes in economic data could derail that.

A rate hike in May is now very likely but with that looking so likely, the Pound may not move much higher. The next 6 weeks of economic data ahead of the decision on May 10th will now be pored over for any signs of either caution from, or indeed signs of further hikes down the line. It would seem likely that with the UK and global economy forecast to grow further in 2018 and 2019, the Bank of England will continue to need to manage rising Inflation as the economy grows.

In my role as a specialist foreign exchange dealer my clients have been quick to utilise the forward contract option to lock in on the spikes and moves higher for the Pound. Whilst the longer-term forecast has improved lately, the uncertainty over Brexit and the fact the UK remains behind other leading economies in the growth stakes, indicates a risk averse approach. Locking in the higher levels still remains the most sensible option to manage your currency exposure and volatility from the Bank of England and interest rate changes.

Robert Vaudry, Investments Managing Director, Wesleyan:

With two members of the Bank of England’s monetary policy committee voting to raise interest rates it is becoming more likely that at least one increase will take place this year, probably as early as May.

Whether the era of ‘cheap money’ has finally come to an end remains to be seen. Any rise will be welcomed by savers who will potentially see an increase in rates on saving accounts, but the cost of borrowing will increase too. Those on variable mortgages could experience higher interest rates for the first time and need to understand the financial implications this could have. However, it is important to remember that even with the interest rate rises expected, interest rates remain low by historical measures and below the rate of inflation.

It’s also important to not become complacent and we’d advise everyone to remain mindful that there may be uncertainty in the months ahead, especially as stock markets remain volatile.

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

Disney’s acquisition of 21st Century Fox means that the House of Mouse now controls a huge amount of our most beloved films and television series.

Announced in December 2017 and expected to take until at least 2021 to complete, this $66.1bn deal (that included taking on a sizeable debt portfolio from Fox) ranks amongst the largest mergers of its kind in history.

We’ve compared these media giants, looked at the potential impact of the deal on both their own employees and the end user and demonstrated how Disney is looking to leverage this deal to break into new markets.

Read on to see how the merger will affect everything from television and the cinema box office to streaming platforms and sports broadcasting with our comprehensive infographic:

(Source: ABC FINANCE LTD)

With this week’s market commentary from Rebecca O’Keeffe, Head of Investment at interactive investor, Finance Monthly learns about global markets, the US-China trade war and about recent activity in the M&A sphere.

A turnaround in Asian markets has seen US futures rise and eased the pressure on European equity markets. The last two months have seen global sentiment become more fragile, but the one thing that has kept markets going is the reliance on investors to buy on the dips. The last week had undermined that position in what was a worrying sign for the wider markets, but investors appear to be feeling slightly more resilient this morning.

Steve Mnuchin has taken on the unenviable task of attempting to resolve the trade dispute between the US and China via negotiation – however, he may be trying to reconcile the irreconcilable. The idea that, as one of the largest holders of US treasuries, China will be expected to help finance the growing US fiscal deficit but is also expected to reduce its trade surplus with the US by as much as $100bn to satisfy Trump’s demands appears to be a major contradiction. The question for investors is whether this adds up.

Another day, another flurry of activity in what has become one of the most vitriolic and antagonistic hostile merger bids since Kraft purchased Cadbury in 2010. GKN and Melrose investors have just three days to wait until the final count is in and much will depend on short versus long term investors. This bid has raised several questions about the difference in UK takeover rules versus other European countries and, irrespective of the result, may provide a catalyst for the Government to review the current rules to make sure they have the right balance between competition and protection.

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

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

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

Angus Dent, CEO, ArchOver:

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

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

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

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

Jonathan Watson, Chief Market Analyst, Foreign Currency Direct:

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

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

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

Chris McClellan, CEO, RAM Tracking:

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

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

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

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

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

The private sector outsourcing market soared to a three-year high in 2017 as businesses signed contracts worth £4.93 billion, according to the Arvato UK Outsourcing Index.

The research, compiled by business outsourcing partner Arvato and industry analyst NelsonHall, found that the total value of contracts signed by UK companies rose 36% year-on-year, from £3.62 billion in 2016 and £1.84 billion in 2015.

Overall the UK outsourcing market saw an increase of nine% year-on-year in 2017, with contracts worth £6.74 billion agreed by the public and private sectors over the period.

A surge in technology investment was behind the strong performance in the private sector, according to the findings. Businesses spent £3.82 billion on procuring IT Outsourcing (ITO contracts) agreements in 2017, more than double the value of deals agreed in 2016 (£1.73 billion).

The analysis shows that companies focused their spending on securing multi-process IT deals, which included new hosting services, equipment, network infrastructure, data centres and application management.

Customer services accounted for almost half (46%) of business process outsourcing (BPO) agreements signed by companies last year. Firms spent a total of £508 million as they looked to deliver improvements in customer experience across traditional and digital channels, according to the findings.

Debra Maxwell, CEO, CRM Solutions UK & Ireland, Arvato, said: “The private sector is increasingly outsourcing more sophisticated work, with firms turning to external partners to introduce new technology and enhance the customer experience.

“This shift towards greater complexity is contributing to more outsourced services being delivered here in the UK. Just two% of private sector deals procured last year will be delivered offshore, compared to 12% in 2016, as outsourcing continues to move up the value chain.”

Overall, fewer deals were agreed across the UK outsourcing market last year, with 98 procured compared to 165 in the 12 months previous, according to the research.

The rise in spending in the private sector market comes as activity across the government market fell year-on-year. Central government departments and councils signed contracts worth £1.82 billion in 2017 compared with £2.59 billion in 2016 – a 30% drop.

Excluding work procured for healthcare, the data shows that the average value of deals signed across government was down 42% year-on-year in 2017

Debra Maxwell added, “In line with calls for a review of the government outsourcing model, the findings show the public sector is already moving away from procuring long-term, high value outsourcing contracts.

“Councils and central government departments are now accessing the technology and expertise they need to deliver a range of functions, from digital service transformation to cyber security, through smaller contracts for productised services.”

Financial services leads private sector growth

The analysis shows that a sharp rise in the value of outsourcing contracts procured by financial services businesses was behind the growth in private sector spend last year.

Companies across financial services agreed deals worth £3.26 billion in 2017, more than treble the total value of contracts agreed in the previous year (£829 million).

According to the research, the growth can be attributed to a sharp increase in ITO spending as firms turned their attention to deals in application management, application hosting and end user computing. The findings show ITO contracts worth £2.70 billion were signed across the sector last year, up from £208 million in 2016.

Pat Quinn, CEO of Arvato Financial Solutions UK & Ireland, said: “Financial services businesses are under pressure to transform, particularly in the wake of high profile security threats and the upcoming GDPR obligations.

“The findings show that a growing number of companies see outsourcing as key to addressing the challenge, delivering the resilient infrastructure and architecture they need to protect against cyber-attacks, keep their data safe and comply with new privacy legislation.”

Alongside financial services, telecoms & media and energy & utilities were the most active sectors in the UK outsourcing market, procuring deals worth £1.08 billion and £279 million respectively, according to the findings.

The research showed that the average value of contracts signed across the private sector more than doubled to £91 million in 2017, from £36 million in the previous year.

(Source: Arvato UK & Ireland)

With the explosion of cryptocurrencies over recent years, many businesses and start-ups are turning to Initial Coin Offerings, or ICOs, to raise money to get their projects up and running. This week Finance Monthly gets the lowdown on ICO management from Dr. Moritz Kurtz, CEO & Co-Founder of Acorn Collective, clarifying the point, purpose and benefits of launching an ICO.

In an ICO campaign, early backers of the venture buy a percentage of the cryptocurrency, often based on one of the existing public blockchains, in the form of tokens created by the company they are supporting.

An ICO can theoretically be used to fund any project or product in any category, however, before an ICO is launched it needs to clarify:

• The concept
• The token model
• Funding required
• Next stages if funded

With so many ICOs in the marketplace you must lay out your concept in detail before launching an ICO. This way contributors can see the utility of your token, and understand what they are buying into. It also makes token holders feel part of the process of creating a new technology, platform or product.

Who should run an ICO?

Whilst any product or project CAN launch an ICO, that does not mean anyone SHOULD. ICO’s have become a popular funding model with start-ups looking to bypass the traditional, and more rigorous, process of gaining funds via venture capital backing.

Although technically an ICO model can be used to fund anything, it is important to consider:

• The necessity of the blockchain
• What you want to achieve
• Utility of your token: What real-world utility will your token have?
• Potential for regulation: Currently, ICOs are largely unregulated, but that does not mean they will be in the future. As the ICO market grows, many countries plan to impose stricter regulations.

ICO for Crowdfunding

An ICO could be greatly beneficial for the crowdfunding space, as it allows for the following:

• Removes transaction and platform fees: Current platforms charge 5-10% in fees.
• Be accessible to all: Without the same commercial pressures as traditional crowdfunding platforms, an ICO-funded platform would be able to accept any legal project in any category and country.
• Integrated post-campaign marketplace: The token economy created through ICO funding means the platform could have an integrated post-campaign marketplace, alongside reasonably priced campaign support services for founders.

Essentially, an ICO can be used to ‘crowdfund crowdfunding’.

How is an ICO mutually beneficial?

Successful ICOs benefit both backers of the venture and those relying on the funds it provides.

The backers can contribute towards a product or project at an early stage, thus benefitting from the increased demand for the token as utility increases. Meanwhile, projects can receive early funding to build their business venture without having to give away equity in the company.

Things to think about

Although launching an ICO can hold great promise for start-ups, it’s not all plain sailing.

Getting the funds can be tricky. When launching an ICO you must generate interest from contributors to encourage them to buy your tokens which, in a crowded marketplace, can be challenging. Not getting enough funds is one of the biggest risks. Not meeting the minimum target means the funds are returned to the token holders and the ICO is deemed as having failed.

An ICO is a great way of raising funding for the right projects in certain industries, but is by no means an easy solution. The ICO world is currently saturated with projects and competition for funding is intense. Making sure you have a viable and sustainable idea that requires blockchain is a good start. From then on, a successful ICO requires all the same focus on marketing and community building as any other form of fundraising.

Apple makes an astonishing amount of money but this presents an interesting challenge for the company and raises questions about what they should do with it all.

Trading is often seen as a career path only for those with a deep understanding of the market. But the truth is we all trade. The concept of value and purchasing power is something we learn at a young age and most people haven’t yet learned that the forex market is everywhere. Here Finance Monthly hears from Benjamin Sparham, Trader at Learn to Trade, who has expert insight into the world of trading.

The richest people in the world are constantly in the know about the markets. They must ensure they’re making the most out of their money and investments.

Most of us don’t worry about things that don’t affect us directly but the economy does. It’s a complex ecosystem that’s constantly growing, therefore it’s important we know what’s going on. For example, have you ever wondered how Brexit is affecting you? Understanding the Forex markets will give you the full picture.

Here are the 3 things you didn’t know about trading.

1. Trading happens at all times

Trading is literally, as defined, “The act of buying, selling, and exchanging commodities”. Any time you buy food, you’re trading; you’re giving money to someone in exchange for food. The forex market represents an exchange in purchasing power between currencies and the exchange rate is pretty much the value of one currency reflected in another currency

For example, if the exchange rate between USD/EUR is 2:1 a H&M jumper that costs $100 in the US will cost €50 in the EU, So, when you exchange $100 and get €50, you are not losing money, you’re acquiring the same purchasing power you had, but in a different currency.

2. The forex market affects you…even if you don’t buy foreign currencies

We live in a globalised economy where no country has the power to produce everything.

In Venezuela there’s a strict currency control that limits the purchase of the USD which has caused USD prices to skyrocket. The exchange rate of USD/VEF is around 1:40,000.

If Venezuela let the currency float freely, the price rate would be approximately 1:10. The massive devaluation of the VEF leaves prices growing rapidly which has badly affected the wallets of their citizens.

Since individual countries cannot produce everything, most companies import some of their materials to make their products available. Think iPhones, cars and food brands. As a result, the increase and decrease of prices in the forex market means that these imports can also become more or less expensive.

Going back to Venezuela, with the USD prices growing, any company importing their items will need to sell them at a higher rate than before, which causes inflation and badly affects their citizens.

If you have ever bought anything from the internet, then you’ve probably used the forex market. Online sellers get paid in their particular currency, so the value of that currency will affect the price you pay.

3. How the world develops, politically or economically, will affect you

Most people worry only about news and political events that affect them. However, every election, every separation, every merger, and any referendum does affect you. Economic and political stability shapes the health of any currency.

Look at the GBP performance after the Brexit referendum; shortly after the surprise results that led to David Cameron quitting his job as Prime Minister, the market started getting more and more volatile (higher volatility, higher price swings). That is because the British market was filled with unknowns about the future of the nation. 64 million people will, potentially, lose access to a 500 million people market in 2 years if nothing is agreed.

A lot of British citizens didn’t mind that fact, but the market did care. The interest rates that your bank account pays, the goods you buy, the petrol you put in the car, even the cost of your services all depends on the strength of the British pound. Let’s break it down in simple terms, so you see it.

The value of the pound fell to a low not seen in over three decades after the referendum. The pound fell 20% against the US dollar and since then it has regained most of the losses with prices now at almost pre-Brexit levels. This shows the size of swings the market can make and of course, this creates trading opportunities. ”That means that anything the nation imports (like warm weather vegetables) will be roughly 13% more expensive. So, that increases inflation and lowers your disposable income.

And your bank account? A large part of the interest rate banks pay on savings accounts come from said banks trading in the forex market. Consequently, just the fact of having a bank account means you are a forex holder since you benefit from the profits the bank made from trading currency.

So next time you read the news, keep an eye on the economic indicators, they influence your life more than what you think they do.

In 2018, consumers enjoy more choice and power over their purchasing decisions than ever before. The retail market has evolved to the point where the strength of a product and its price no longer call all the shots. Below Peter Caparso, President North America at Checkout.com, explains why payments may even be considered a commodity in today’s markets.

To stand out with a clear differentiator, merchants now need to emphasise the customer experience. As an essential business function, payments have long been considered a utility. But perceptions have shifted, and to compete and thrive in a hyper-competitive retail environment, merchants must focus on delivering excellence across the entire customer journey – and that includes the all-important payment experience.

As digital innovation continues to transform how people shop, the quality of the customer’s remittance experience is now just as important as any other commodity or offer. It needs to be easy, intuitive and user-friendly. Ultimately, it must make the buyer’s life easier, not just ensure that the seller gets paid.

Delighting customers

When a customer becomes disillusioned or discontent with their experience with one service provider, they have the power to simply switch to another. In fact, research reveals that some 54% of customers are being driven to the competition because of poor service.

In this regard, payment solutions are no different to any other commodity. Merchants need them, but they aren’t dependent on any particular provider. Instead, they choose the one that provides them with a smooth and frictionless payment service. This is a critical element of the wider customer experience and plays an important part in winning and retaining business.

Providers, therefore, have to supply merchants with relevant technologies such as mobile and desktop functionality, and stay up to date with innovations like voice activated payments. To keep up with innovation and trends, retailers need to work with tech-savvy payment service providers (PSPs) that can provide exceptional customer service and experience to whichever user base they serve.

And as new technologies continue to evolve how payments are processed, a collaborative relationship between merchants and their PSPs will be all the more important. Working in this way will enable merchants to harness new, innovative solutions effectively – and to deliver faster, better services to match market demand. They can continue to attract and delight customers, and make a profit.

Tech driven excellence

The challenge for many merchants, is that not enough PSPs are aware that a payment is in fact, a commodity. What’s more, while many succeed in developing and providing a top-class technology solution, they fail to consider its usability.

The best solutions succeed in merging excellent technology (i.e. automation), with superior customer service. And to achieve the latter, there needs to be room for authentic human engagement. It’s an almost paradoxical combination but finding the right balance is hugely important.

When a merchant signs up to a specific PSP, the PSP has an opportunity to forge a strong relationship. It can collaborate with the merchant to help solve problems, develop improvements and progress business. Of course, the PSP needs to provide a mobile-friendly purchasing and payment service – or risk losing business. However, the ability to delight the merchant goes beyond simply meeting their tech-driven needs.

PSPs that don’t work with merchants in this way have a much harder task ahead of them. They’ll need to make sure that their technology is 100% perfect at all times. Of course, this is always worth aiming for – but, without a more collaborative relationship in place, it only takes one glitch to drive the merchant into the arms of a competitor.

As we head deeper into 2018, merchants need to go above and beyond and pay even more attention to the customer experience they offer – or risk falling behind their competitors.

Now a booming trading market, cryptocurrencies do however create an avenue of risk. Below Schalk Nolte, CEO at Entersekt, discusses said risk and the overall safety of trading Bitcoin and the likes.

It’s official: Bitcoin is now the golden child of the investment community. Following news headlines about becoming instant millionaires, starry-eyed cryptocurrency enthusiasts are flocking to online exchanges to get in on the action. Sign up, transfer funds and trade – the faster, the better. To keep the eager traders’ money and data safe, these exchanges all need to have transaction security in place. And most of them do – except that their security appears to be stuck in the early 2000s.

Nine years ago, Bitcoin didn’t exist. Today, between three and six million people are estimated to have a bitcoin wallet, with over $3 billion worth of the currency traded every 24 hours. Nine years ago, the one-time password, SMS OTP or mobile transaction authentication number (mTAN), represented the apex of transaction security. Today, other technologies have left SMS OTPs in the dust in terms of both user experience and security – and for good reason.

OTPs are typically reliant on mobile network operators for delivery, and they require additional effort from the user without rendering transactions fraud-proof as a reward. They are vulnerable to man-in-the-middle (MITM) attacks for the simple reason that an OTP is never truly out of band, whether it’s delivered via SMS or another route. Because it’s entered into a potentially compromised primary channel, it will always be susceptible to MITM attacks, while the involvement of mobile networks also introduces the possibility of attacks such as SIM swapping and number porting.

In fact, in August 2017, Sean Everett, CEO of artificial intelligence startup PROME, lost a significant cryptocurrency investment with the platform Coinbase as a result of a simple number porting attack made possible by SMS OTP. Soups Ranjan, Coinbase’s head of data science, commented: “I firmly believe we have the hardest payment fraud and user security problem in the world right now.” So how is it possible that the OTP is still the security measure of choice at the majority of cryptocurrency exchanges – and, more importantly, what are the alternatives?

In order to protect its trader members and allow them to match the pace at which cryptocurrency fluctuates, a cryptocurrency exchange needs to do three things:

Minimize risk: This is done by implementing a solution that offers solid app security and strong customer authentication for all transactions.

Make things easy: A convenient and user-friendly trading platform will attract and retain customers. To put it another way, play to a real-world trading scenario: if you were a trader, would you want to open an app, copy an OTP, switch apps, and then paste it? Or would you prefer to simply open an app and scan your fingerprint? The choice isn’t difficult – especially considering that the easier option is also the safer one.

Achieve regulatory compliance: It’s cheap and easy for a trading platform to recommend or require that their traders install a third-party app like Google Authenticator, but this will mess with regulatory compliance – such as with PSD2’s Regulatory Technical Standards on Strong Customer Authentication. Third-party apps often only authenticate logins, not transactions, and as such are not compliant with these requirements. OTPs, needless to say, do not comply either.

If they want to offer winning and secure trading options for cryptocurrency aficionados, it makes no sense for these exchanges to insist on using obsolete, not to mention risky, technology. Instead, exchanges should be employing a more robust and convenient out-of-band authentication solution that does not rely on mobile networks. They should look for a solution that offers PKI-based authentication and transaction signing directly from the mobile phone, which will eliminate fraudulent transactions and build trust in cryptocurrency trading practices – all while providing a user-friendly experience.

On the flip side, cryptocurrency traders should be demanding better security from the platforms they use. It is the only way for them to keep their investments safe and avoid becoming the next cybercrime news headline. After all, if cryptocurrency is at the cutting edge of innovation, shouldn’t the same apply to the protection of its trade?

Despite a swift comeback from the global stocks chaos last week markets have been shaken up.

Dow Jones closed at 24,601 yesterday, up from the 23,860 low of last Thursday. The plunge happened on the 1st of the month, across the weekend, recovered, and dropped further. Dow Jones is now on a recuperating trajectory. The same drop, recovery and further fall also happened within the same time frame for the S&P 500, NASDAQ and the FTSE 100.

All are on their way back up but fears of increased volatility are floating around. Finance Monthly has collated a number of comments and market responses from experts and economists worldwide in this week’s Your Thoughts.

Phil McHugh, Senior Market Analyst, Currencies Direct:

The switch to risk off in the markets was markedly sharp and severe against an air of positive momentum which ran ahead of the fundamentals. The S&P index fell by more than 4% which was the steepest single day drop since August 2011. The rout continued into Asia markets and the spark was growing concerns that inflation will force borrowing costs higher.

The momentum since the start of the year has been bullish with equities pushing higher and the USD selling off. The honeymoon period for equities has now hit a question mark over potential rising borrowing costs. It can be argued that the bull run had ran somewhat ahead of sentiment with overconfidence creeping in. The higher wage inflation from US payroll data on Friday was the beginning of the doubts and this was enough to encourage some profit taking that has now spilled into a wider sell off.

We have not seen a big correction since Brexit and although we could see further selling pressure it should find support soon on the underlying improved global economic optimism and growth.

In the currency markets the reaction was more balanced but we have seen a defined swing into the classic risk off currencies with the Japanese Yen and Greenback gaining ground.

The pound lost ground after a strong start to the year. The pound tends to suffer in a risk off market and the weaker services data yesterday and concerns over the latest Brexit talks have helped it on its way lower. The next focus for the pound will be the Bank of England meeting on Thursday.

Lee Wild, Head of Equity Strategy, interactive investor:

Just as markets cannot keep rising forever, they must also stop falling at some point, but it’s still unclear whether we’ve reached a level where buyers see value again.

Futures prices had indicated a much brighter start for global markets, but early gains were wiped out in Asia and Europe looks vulnerable. Volatility is back, and investors had better get used to it.

While there’s certainly a case to be made against high valuations, especially in the US, there are lots of decent cheap stocks around. Plenty of investors are itching to bet that concerns about inflation and bond yields are overdone and that any increase in either will be much slower than expected. If that’s the case, a 10% correction in the US looks more like a healthy retracement rather than reason to hit the panic button. Long term investors will be amused by it all and are either choosing to ignore the noise or pick up stock at prices not seen for two months in the US and over a year in London.

There are stark similarities between this sell-off and crashes both in August 2015 and in early 2016 when market volatility reached similarly extreme levels. It took several trading sessions played out over weeks to find a bottom, and it’s likely the same will happen here. Only difference this time is that it’s the tune of US economic data, not China’s currency devaluation that markets are dancing to.

Kasim Zafar, Portfolio Manager, EQ Investors:

Pullbacks in markets are (usually) quite normal and healthy, giving moments of pause where everyone pats themselves over, does a quick sense check and then carries on. In the case of the US equity market it hadn’t fallen more than 5% in 404 trading days (back to June 2016). That’s the longest stretch of ‘uninterrupted’ gains in history, with data back to 1928!

There weren’t enough signs of investor heebie-jeebies around, especially not in January when the US index was up over 7% for the month at one point. That’s pretty extreme and entirely unsustainable.

The equity market has finally taken notice that over the last several weeks bond markets have been reflecting a higher inflation and interest rate environment, so it’s not at all surprising to see some adjustment and a return of some much needed investor fear!

We are going through the quarterly reporting season for US companies currently, which is a good test of what’s happening on the ground. With 264 out of 500 US companies having reported so far, most are reporting positive results for both top line revenue growth and bottom line earnings.

So, as things stand, we see this as a long overdue market correction and if it falls much further we would be looking to increase our equity weightings. Increased volatility is a healthy sign of investors becoming more conscious of the risks inherent in markets.

Ray Downer, Trader, Learn to Trade:

Though you may not knowingly own any shares, there is a high chance that you are paying into a pension scheme which invests in shares and bonds. This means the value of your pension pots is dependent on the value of the investments in it and while investment values increase and decrease all the time and this will have very little noticeable difference to your savings, financially turbulent times like this will impact you in some way, particularly if you’re looking to retire this year.

For now, at Learn to Trade we are looking at this in the context of a correction rather than a reversal. Following this week’s FTSE 100 fall, investors should keep a close eye on the stock markets in the months ahead as the value of the pound has gotten weaker with the sell-off. The Bank of England will announce whether or not it plans to raise interest rates because of this ‘bloodbath’ later this week when it publishes its quarterly inflation report. Should the Bank of England announce a rise in inflation rates, British consumers will have less spending power and will start to feel the pinch of higher costs on imported necessities. The inflation report will give us a clearer picture of how this will impact our everyday spending.

Bodhi Ganguli, Lead Economist, Dun & Bradstreet:

It’s a common misconception that stock market activity is linked to the economy. However, an unexpected and ferocious swing in the stock market is disruptive and can wipe out a significant chunk of wealth from the markets – resulting in economic implications. This week’s activity could mean retail investors could see a significant erosion in their nest egg, which would be bad for future consumer spending.

The latest crash was caused by technical or algorithmic trading, most likely computer-generated as at times the stock market was dropping faster than that can be explained by human intervention. These changes were exacerbated by macro-economic triggers such as the recent US jobs report, which was a strong signal of wage inflation returning. This caused market participants to upgrade their inflation outlook with more Feb rate hikes expected. Bond yields also crept up, setting off a bearish shift in the stock market.

We expect the stock market to stabilise in the near future, but the longer term outlook will be determined by how these fundamental macro-economic triggers interact with each other going forward.

Ken Wong, Client Portfolio Manager, Eastspring Investments:

Currently, the market is going through a much-needed correction as valuations were approaching expensive levels for most markets. In particular, China’s equity markets were up 70% over the past 13 months, and this recent 10% correction from its high is actually not that steep.

Despite the recent market correction, investors in Asian equity markets still seem to be in a better position at a time when corporate America seems more hard pressed to deliver elevated profit expectations while also trading at very expensive valuations. Asian equity markets are trading at a P/B ratio of around 1.7x while US equity markets are still trading at 3.2x P/B after this recent price correction.

Asian corporates in general are still expected to deliver strong corporate earnings and most are in good shape as a result of previous cost cutting and balance sheet restructuring that we have seen over the past few years. Despite the recent market volatility, things are still quite sound in this part of the world, Asian corporates are still expecting to see their earnings grow by around 13% in 2018, with China leading the way with earnings growth expectations of over 20% this year.

For investors concerned about the recent market volatility, they should look at investing in a low volatility equity strategy as we have seen these types of strategies outperform the broader benchmark indices by over 2% over the past few days. The benefits of these low volatility equity strategies is the fact that they have bond like risk / volatility characteristics while providing investors with an enhanced dividend yield and market returns which are more in-line with equity returns.

As long as there is still enough cheap liquidity out in the market place, we could start to see some bottom fishing over the coming days as investors start to look for cheap / undervalued stocks. In particular, investors could look toward those sectors that underperformed in 2017, such as financials, energy and consumer staples.

Richard Perry, Market Analyst, Hantec Markets:

Equity markets remain highly attuned to the threat of the increase in volatility across financial markets at the moment. Equities are considered to be a relatively higher risk asset class, so with a huge sell-off on bond markets, equity markets have also come under threat. The concern comes in the wake of the jump in US earnings growth to 2.9%, a level not seen since 2009. A leap in earnings growth has investors spooked that this will lead to a jump in inflation which could force the Federal Reserve to accelerate its tightening cycle. Markets can cope with gradual inflation but inflation running out of control can lead to significant volatility, such as what we have seen recently. The high and stretched valuation of equities markets meant that was the prime excuse to take profits.

For months, analysts have been talking about the potential for a 10% correction and at its recent nadir, the S&P 500 had corrected 9.7%. So is this just another chance to buy, or the beginning of a bigger correction? The key will be the next series of inflation numbers, with CPI on the 14^th February and core PCE at the end of the month. If inflation starts to increase appreciably, longer dated bond yields could take another sharp leg higher, perhaps with the 10 year breaking through 3.0%. Subsequently, equities would come under sustained selling pressure with volatility spiking higher once more. However, if there can be a degree of stabilisation in the bond markets, then equity investors can begin to look past immediate inflation fears and then focus back on the positives of economic growth in the US, Eurozone and China.

Alistair Ryan, Senior Dealer, Frontierpay:

This afternoon’s hawkish approach from the Bank of England came as a surprise; I personally – along with many others – didn’t expect there to be any talk of a rate rise in the UK until at least the end of 2018. The services sector, which makes up around 80% of UK GDP, faltered this month and wage growth is slowly increasing but remains low at 2.4%. Both of these factors suggest a slack economy, so I expect we will see many questioning whether this is the right time for a rate rise.

If we were to see some further improvement in the economy over the coming months, then a rate rise would of course be a possibility, but whilst wage growth and inflation slowly start to correlate, I don’t think we will see any movement on the base rate.

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