According to the published mobile financial services data in emerging market, Huawei’s platform supports more than 50% of the global FinTech market activity alliance boosts financial inclusion
Smartphone addiction spooks US schools
Crypto's rising political influence
EU-China trade war: Tough days ahead?
EDITOR’S NOTE
The payment space has undergone many changes, from traditional cash and money orders to modern methods like credit and debit cards, Automated Clearing House, and Digital Payments. Now the latest trend in the sector is "Pay By Bank," which has been tailored to deliver business benefits to retailers, apart from ensuring an enhanced customer experience (CX).
Also recently, Kenya has been in the news due to demonstrations opposing planned tax increases by President William Ruto. The protests led to the government withdrawing the proposed reforms. The tax bill, which had the support of an International Monetary Fund (IMF) team, also resulted in accusations of imposing a "colonial agenda" on the African country's population.
The European Union (EU), on the other hand, will implement tariffs of up to 38% on imported Chinese electric vehicles (EVs) on the continent. This would result in duties of over €2 billion annually, thereby sparking a trade war-like situation with the world’s second-largest economy. Our article titled "EU-China trade war: Tough days ahead?" will break down the latest standoff straightforwardly.
The cover story of our July-August 2024 edition will focus on Ethio Telecom, a pioneer in Africa's telecom sector with 130 years of dedicated service. In 2021, the company launched a groundbreaking financial solution called telebirr, which has revolutionised financial inclusion by providing a seamless, accessible platform for transactions. This innovation has significantly simplified the lives of millions and is accelerating Ethiopia’s transition toward a comprehensive digital economy. Ethio Telecom's efforts are pivotal in steering the country closer to its ambitious goal of achieving a fully Digital Ethiopia in a remarkably short period.
JUL - AUG 2024 VOLUME 24
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editor@ifinancemag.com www.internationalfinance.com
BONZA'S COLLAPSE HIGHLIGHTS NEW AIRLINE ISSUES
According to the published mobile financial services data in emerging market, Huawei’s platform supports more than 50% of the global FinTech market activity
US ELECTIONS 2024: ECONOMY TAKES CENTRE STAGE
Bonza's little fleet lacked any scale advantage compared to crew or aircraft scheduling in the world IS EUROPE BECOMING UNCOMPETITIVE?
Europe-based big businesses invested 60% less in 2022 than their American counterparts and expanded at a rate of two-thirds slower
In February 2024, UEFA came up with a report that pegged European football's financial power at a record 24 billion euros
JOBS’ VISION: HOW THE IPHONE CHANGED EVERYTHING
Analysts predicted that by the 2007 end, iPhone sales would reach three million units, making it the fastest selling smartphone ever
The power transition from Trump to Biden occurred during the 2020-21 period, when the global economy was reeling from pandemic
52 Is Open Banking suffering from API sprawl?
An order from the US Treasury Department directing the country's banking sector to begin reporting the assets it holds in Russia. The ultimate objective is to seize these billion-dollar holdings and sell them to help the beleaguered Ukrainian economy. The REPO Act, a new law passed by Congress earlier 2024, mandates the disclosure in order to give Washington the power to seize Russian state assets held by US banks to sell them and transfer the proceeds to Ukraine. The US banking system is thought to be holding up to $6 billion in Russian assets in trust.
According to Meta, Quest VR headsets in the United States and Canada will carry Meta AI from August. Owners of Meta Quest 3 in North America will have beta access to Meta AI. According to the company, this effort to integrate Meta AI into Quest VR will give the users access to Meta's "intelligent scanning" of the real environment. Meta explained that “these changes will begin rolling out in the United States and Canada in experimental mode.”
According to management consulting firm Gartner, the global infrastructure as a service (IaaS) market expanded by 16.2% in 2023 to reach a total of $140 billion, up from $120 billion in 2022. In the IaaS market in 2023, Amazon remained at the top, followed by Alibaba, Huawei, Microsoft, and Google. Sid Nag, VP Analyst at Gartner stated that cloud technologies continue to be a major business disruptor, due to the focus on hyperscalers looking to support offerings related to sovereignty, ethics, privacy and sustainability. The future with these offerings is being spurred by generative AI investments for 2024 and beyond.
American Airlines has completed an order for 180 CF34-8E engines plus spares to power its fleet of 90 new Embraer 175 regional jets, according to GE Aerospace. Russell Stokes, President and CEO, Commercial Engines and Services, GE Aerospace stated the CF34 engine has a long track record of success with American Airlines and we are grateful the American team is putting its trust in us again. Over 900 regional and business jet operators worldwide use more than 7,500 CF34 engines in operation. Over 40 million flight hours and 29 million cycles have been accrued by the CF34-8E.
Source:GoodFirms
The Crown Prince of Dubai Sheikh HH Hamdan bin Mohammed bin Rashid Al Maktoum, reaffirmed that the emirate's economy is expanding steadily and exhibiting strong economic indicators that reflect the goals and directives of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister, and Ruler of Dubai. The fact that Dubai's GDP increased by more than AED 115 billion in the first quarter of 2024, a 3.2% increase over the same period in the previous year,
clearly demonstrates the strength of the city's economy, according to Sheikh Hamdan.
According to His Highness, the emirate's achievements in this area are particularly noteworthy because they demonstrate the collaboration and concerted efforts of multiple stakeholders to achieve the goals of the comprehensive development plans for the emirate for 2033, particularly the Dubai Economic Agenda (D33) and Dubai Social Agenda 2033.
GEORGE KURTZ CEO OF CROWDSTRIKE
The Republican leaders asked George Kurtz to explain the reason behind the outage and the ‘mitigation steps’ that the company is taking to prevent similar episodes in the future
STEVE COHEN
AMERICAN MANAGER
Steve Cohen's Point72 Asset Management is looking to raise roughly $1 billion for a new artificial intelligence-focused hedge fund that pick stocks
ERIC X. LI
CHINESE VENTURE CAPITALIST
Eric Li claimed that in the last three months, China’s industrial capacity had increased from having the combined capacity of ‘US, Japan, and Germany put together’ to ‘US, Japan, Germany and India’
Adnoc and CNPC had previously signed a strategic cooperation agreement aimed at exploring opportunities in lowcarbon solutions, international gas and LNG ventures
The Atlanta Fed revised its estimate of the second-quarter GDP from a 2% pace to a 2.6% rate in response to the data
The United Arab Emirates and China recently signed agreements and MoUs in important areas and sectors of shared interest under the Comprehensive Strategic Partnership (CSP), during a ministerial visit to China.
The signing of strategic agreements with the Chinese side resulted from meetings between the UAE delegation, led by Dr. Sultan Al Jaber, Minister of Industry and Advanced Technology, Adnoc Managing Director and Group CEO, and private sector companies.
These agreements included the announcement of two agreements between Adnoc Logistics and Services and the joint venture AW Shipping, Jiangnan Shipyard, and China Shipbuilding Trading (CSTC) of Wanhua Chemical Group, to construct nine 'Very Large Ethane Carriers,' valued at approximately $1.4 billion, and two to four 'Very Large Ammonia Carriers,' valued at $250 million to $500 million.
Adnoc and CNPC had previously signed a strategic cooperation agreement aimed at exploring opportunities in low-carbon solutions, international gas and LNG ventures, low-carbon solutions, oil and gas activities, marketing, sales, and trading projects. This was in addition to the low-carbon solutions, liquefied natural gas, oil
and gas exploration and development, advanced technologies, refining, marketing, and trading agreements.
Additionally, a project collaboration agreement was signed for a feasibility study to establish a speciality polyolefins complex in China by Wanhua Chemical Group and Wanrong New Materials, with a consortium consisting of Adnoc, Borealis, and Borouge. The two parties also talked about how to improve their collaboration and partnership in important sectors like shipping, storage, logistical services, oil and gas, petrochemicals, renewable energy, and PV manufacturing. China has emerged as one of the most important strategic allies of UAE, which is essential for the Gulf nation to advance collaborations and programmes that promote long-term, sustainable economic growth.
According to Dr. Al Jaber, China has emerged as one of Adnoc's most important markets for the production of crude oil, refined products, and petrochemicals. He emphasised that as long as China needs a dependable energy supplier, the UAE will continue to be a partner, in order to achieve reciprocal and long-lasting benefits for both nations in all sectors, including oil and gas, renewable energy, shipping, and storage.
The second quarter saw a likely acceleration of US economic growth due to strong consumer spending and inventory building, but the rate of expansion should maintain expectations of a Federal Reserve interest rate cut in September.
Inflation is predicted to have significantly decreased last quarter, with readings below three per cent on all measures, according to the Commerce Department's advance report on the second-quarter GDP.
This will be good news for US central bank officials as they prepare for their two-day policy meeting.
Even though the Fed raised interest rates significantly in 2022 and 2023, the economy, which is still outperforming its global counterparts, is still bolstered by a strong labour market, even though the unemployment rate has reached a 2-1/2-year high of 4.1%.
Brian Bethune, an economics professor at Boston College said, "The economic expansion is tracking the Goldilocks outlook, which is slower growth and a lower rate of inflation. Consumer spending is keeping things in motion."
A Reuters survey of economists indicates
that the gross domestic product probably grew at an annualised rate of 2.0% last quarter. It would be slightly above the 1.8% growth rate that Fed officials consider to be the noninflationary growth rate. The estimates varied from a pace of 1% to 3%.
However, the poll was carried out before advance indicators data, which revealed rising retail and wholesale inventories and a narrowing of the goods trade deficit in June 2024.
The Atlanta Fed revised its estimate of the second-quarter GDP from a 2% pace to a 2.6% rate in response to the data. The first quarter saw a 1.4% growth rate in the economy. Even so, the growth rate would still be much lower than the 4% growth rate recorded in the second half of last year.
After slowing to a 1% pace in the JanuaryMarch 2024 quarter, consumer spending, which makes up more than two-thirds of the economy, is expected to have increased at a rate of about 2%. June also saw a significant increase in spending.
Businesses increased their inventory, following two quarters of declines in GDP growth.
The bank's total assets grew by 12% from December 2023 to that same month, and the strategic approach to risk management was also responsible for the higher net profits
As per the agreement, the two parties will work together to develop programmes that are centred around the upcoming deployment of a fleet of 25 unmanned aircraft of Odys' Laila generation in Oman
The United Arab Bank (UAB) reported a 15% increase in net profit after tax to AED 139 million in the first half of 2024 from AED 121 million in H1-23. During the six months that concluded on June 30, 2024, total income increased by 10% year-over-year to AED 300 million. The bank's total assets grew by 12% from December 2023 to that same month, and the strategic approach to risk management was also responsible for the higher net profits. Mohammed bin Faisal bin Sultan Al Qassimi, Chairman of United Arab Bank, expressed confidence that their prudent business model would continue to deliver solid performance and address the opportunities and challenges that would arise.
Check Point Software Technologies announced that its new CEO, Nadav Zafrir will take over the leadership reigns in December 2024. The Executive Chairman will be the current CEO and founder Gil Shwed. Zafrir will join the board of directors of Check Point, with the consent of the shareholders. The Israeli-based business released 2024 Q2 earnings that exceeded expectations. Adjusted earnings per share were up 8% to $2.17, on revenue of $627 million, an increase of 7%. Based on LSEG data, both figures were in line with analysts' forecasts, which predicted a profit of $2.16 per share on revenue of $623 million. Check Point predicted non-GAAP earnings per share of $2.19–$2.29 and revenue of $615–$650 million for the third quarter.
Oman to unveil VTOL
Oman's national transport operator Mwasalat and US-based sustainable aviation pioneer Odys Aviation announced a historic partnership that will enable the introduction of unmanned aircraft for the first time to support the nation's aerial logistics objectives. The next generation of VTOL aircraft, which will use hybrid-electric propulsion systems to deliver the best possible balance between performance and sustainability, is currently being developed by Odys Aviation. As per the agreement, the two parties will work together to develop programmes that are centred around the upcoming deployment of a fleet of 25 unmanned aircraft of Odys' Laila generation in Oman. The first of these pilot programmes is scheduled to launch in 2025 along unpopulated and defined routes.
The wealthiest man in Tanzania, Mohammed Dewji, is placing substantial bets on the African country’s economy by planning to make significant investments worth millions in the capital city, Kigali, through his business conglomerate, Mohammed Enterprises Tanzania Limited (MeTL) Group. Dewji is eyeing a $100 million investment in four prominent companies operating in strategic sectors in Rwanda. Forbes has placed him among Africa's 13 wealthiest individuals, with an estimated net worth of $1.5 billion. The Rwanda Development Board (RDB) deputy chief executive, Nelly Mukazayire, and the 48-year-old CEO, Ildephonse Musafiri, met in September 2023 in Dar es Salaam, Tanzania, and decided that MeTL could invest in one of the continent's fastest-growing economies.
According to immigration authorities, 25.8 million foreign visitors were drawn to Japan last year by these and other attractions, a six-fold increase from 2022
Foreign travellers are returning in Japan, lured by a weakening yen, world-class cuisine, and the prospect of an unforgettable vacation in a nation that was previously regarded as a tourism backwater, nearly a year after Japan lifted all travel restrictions related to the pandemic.
According to immigration authorities, 25.8 million foreign visitors were drawn to Japan in 2023, a six-fold increase from 2022. The Japan Tourism Agency claims that they spent a record ¥5.3 trillion (£28.3 billion) together. The government of Japan has set an ambitious target to welcome 60 million tourists and spend ¥15 trillion by the end of the decade.
The government has a goal of receiving 60 million inbound tourists in 2030, with a large chunk of it being the repeat travellers. The goal here is simple; ensure that people are arriving in the country with the goal of conducting offbeat travel
In January 2024, Japan saw the arrival of over 2 million visitors gracing its, marking the eighth consecutive month of such numbers.
According to data from the Japan National Tourism Organisation (JNTO), the January tally nearly matched December 2023’s figure of 2.73 million, which had set an all-time high for that month. Both the December 2023 and January 2024 tourist arrival figures remained on par with the 2019 tally. During that year, Japan received a record-breaking 39.9 million tourists.
"While tourism from China remains below prepandemic levels, with mainland Chinese visitors once constituting a significant portion, there are positive signs of recovery. Chinese visitors numbered 415,900 in January, representing a notable 33% increase from the previous month. Additionally, Japanese department stores reported robust sales of luxury goods and duty-free items in the first half of February, partly attributed to Lunar New Year celebrations," TravelBiz Monitor reported.
Both tourist arrivals and spending have remained on a greener pasture for Japan and that bodes well for the nation's economy. In 2023, visitors surpassed the JYP 5 trillion-mark, exceeding the government’s set target, reinforcing the economic significance of tourism to Japan.
Japan National Tourism Organisation (JNTO) is now seeking out partnerships with the social media influencers to promote the country's raw natural beauty. And it’s a strategic move, given the fact that a 2022 survey by the Japan Tourism Agency revealed that relatives and friends (22.8%), social media (21.9%) and video-sharing sites (21.4%) were the top three sources of travel information for foreign tourists.
The government has a goal of receiving 60 million inbound tourists in 2030, with a large chunk of it being the repeat travellers. The goal here is simple; ensure that people are arriving in the country with the goal of conducting offbeat travel. In that way,
the already popular tourist spots gets a breathing space, in terms of crowd management, while the less explored ones prosper economically.
A very good example here was South Korean influencer Chomad, who with over a million followers on Instagram and nearly 780,000 on YouTube, posted about his visit to a place in Japan that’s not very well known. The video, which garnered over 37,000 views on YouTube and more than 24,000 likes on Instagram, showed Chomad visiting a small village where he grilled fresh seafood with a group of ama, Japanese female divers who collect seafood from the ocean by free diving without the aid of modern equipment, at the eponymous Ama Hut, an outdoor seafood grill they operate in Mie Prefecture.
Hideki Tomioka, JNTO’s executive director on overseas promotion, told Japan Times that his department had been engaging social media influencers to promote Japan overseas since around 2017.
JNTO's 26 overseas branches typically invite multiple influencers for every tour, which they organise independently to cater to their specific markets. The same recipe has been picked up by marketing firms, who are now beginning to involve the influencers to promote Japanese products and tourism.
One such is Carta Marketing Firm, which is now offering services utilising influencers for clients including local governments who are looking to target markets primarily in Asia. Ryosuke Sasaki, Carta Marketing’s strategy planner leading the firm's influencer-related services, said that even within the short time frame since the venture began offering such services from August 2023, they have received an overwhelming reception among its clients.
Within the first three months, the company, which used to primarily take on domestic marketing projects, shifted its focus; now, almost 50% of its projects are ones that target international markets.
A section of the analysts believe that Japan is unprepared for an increase in tourists and this will put additional pressure on lodging, public transportation, and the service sector at a time when the nation is already grappling with a severe labour shortage.
According to Prime Minister Fumio Kishida, sustainable tourism hinges on allowing visitors to arrive without negatively impacting the standard of living for the local population. This is part of his vision for a new "Tourism Nation." The government in 2023 unveiled plans to increase the number of buses and taxis, increase the cost of public
transportation during rush hour, and launch new bus routes.
The subtropical island of Okinawa and rural eastern Hokkaido are among the 20 "model" destinations it has designated in the hopes of luring tourists away from Tokyo, Osaka, and Kyoto, which together accounted for 64% of overnight stays by foreign visitors in the first eight months of 2023. Less emphasis will be placed on consumption and more on immersing oneself in the culture, from learning to meditate in Zen and experience mountain asceticism to crafting sake and pottery.
In the 20 areas, local government officials and residents will draw up plans in fiscal 2024, which started on March of this year, to ease traffic congestion and raise awareness
tourist manners.
The most prominent examples of "Tourism Pollution" can be found in Kyoto, the former capital of Japan and the site of many of the nation's most well-known temples and shrines, as well as the geisha district of Gion. About thirty times as many people visited Kyoto in 2022 as lived there: over 43 million tourists.
Geisha-themed walking tours are organised by longtime Canadian resident Peter MacIntosh, who told the Guardian that locals have been finding it difficult to reconcile the disruption caused by throngs of visitors with a sharp rise in spending.
To combat the "Tourism Pollution," the city administration now has restricted walking through the ‘geisha district’. Isokazu Ota, the local
official, told The Associated Press about the installation of warning signs, which will apply mainly to pedestrians, and those who fail to comply with the rules will face a $66 fine.
The ban applies to several blocks of Gion, but the district’s public streets will remain open to tourists. And this is not the first time that Japan has thought about implementing restrictions on tourists. In January 2024, the authorities announced an entry fee for the routes to Mount Fuji.
The tourist destination is dealing with issues like pollution, littering, and unprepared visitors. From July 2024, there will be a daily visitor limit in this destination. Around 4,000 hikers will be allowed to
visit the Yoshida trail, but climbers cannot begin their activities between 4 pm and 2 am. To preserve the area further, climbers have also been asked to voluntarily contribute a sum of ¥1,000 ($6.60) per person.
The entry fee to the UNESCOlisted Itsukushima Shrine is ¥100 (53p), and later 2024, visitors visiting the Taketomi islands will have to pay an amount that has not been decided upon to support the preservation of their immaculate beaches.
As per Tokyo-based journalist Jay Allen, since more tourists are arriving the country and taking advantage of the weak currency, Japanese businesses are too raising prices. However, since the price hike has been made for both the foreigners and the locals that have left some wondering whether businesses should implement separate pricing model for tourists. Still, the talk of the town is that the businesses must raise their prices.
The Bank of Japan’s policy of pursuing a weak currency has made it harder for those staying in the Asian country to get value from their money abroad. However, foreign tourists are finding their currencies, particularly dollars, going a long way.
"That has some wondering if local businesses shouldn’t jack up prices. After all, many businesses in Japan are struggling to stay afloat thanks to rising prices. And, as the prices at the popular ski resort town Niseko show, tourists don’t seem to mind paying more than locals," Allen wrote in his article for Unseen Japan.
While Tsukiji is already up-
Number of international visitor arrivals to Japan from 2011 to 2022 (In Millions)
Source: Statista
charging a bowl of seafood ramen for 5,500 yen ($37), only foreigners can pay this much. The problem here is that Tsukiji, as Japan’s famous seafood market, serves both foreigners and locals. The tourists can pay the inflated price, not the locals.
Analysts are backing a “two-tier” pricing system for the businesses, under which a bowl of ramen that costs 1000 yen for locals would cost 3000 yen for visitors. These experts call it a “reverse discount,” operating similarly to how student and senior discount prices currently work in Japan.
There are examples like golf clubs in Hawaii charging tourists more than double what locals pay. Some Buddhist temples in Thailand also charge tourists for entering, while residents can enter for free.
"The idea has some traction. Loyalty Marketing, which runs the points programme Ponta, asked 1,200 people between their teens and their 60s whether a two-tiered pricing system was a good idea. Over 60% said yes, with the numbers pretty consistent across age groups. People in their 20s agreed the most, with 33% agreeing and 32% slightly agreeing. Those in their 30s and 40s agreed the most, at 35%. Only those
in their 60s were slightly sour on the idea, at around 49% with 32% slightly opposed," Allen added.
Analysts also believe that instead of charging tourists a high price, businesses can go for a “locals discount,” subject to the people producing their proof of residence, while going for an eat out or shopping.
"On the flip side, only businesses in highly trafficked tourist areas would implement the change at first. So, it’d only impact residents who are eating out while at work or on the go. However, once it takes off in tourist traps, it’s hard to see such a change not percolating throughout the country," Allen noted.
"My initial reaction to the idea of a two-tier system was opposition. The more I think about it, however, the more I think it could be good for Japanese businesses and Japan’s economy in general. The tourism boom shows no signs of stopping, and businesses should strike while the iron is hot," he concluded.
Officials have indicated that in some cases, a Volkswagen car made in China but sold in Europe could be more expensive than a BYD vehicle
IF CORRESPONDENT
In a fresh escalation, the European Union (EU) has informed Beijing about implementing tariffs of up to 38% on imported Chinese electric vehicles (EVs) on the continent. This would result in duties of over €2 billion annually, thereby sparking a trade war-like situation with the world’s second-largest economy.
These tariffs will take effect in July 2024 in line with World Trade Organisation (WTO) regulations. The EU will offer China a four-week period to challenge any evidence supporting the imposition of tariffs on imported EVs.
In addition to the existing 10% tariff on vehicles imported into the EU, Chinese electric cars will now face total tariffs of up to 48%. The move follows a nine-month investigation into alleged unfair state subsidies into Chinese battery electric vehicles (BEVs), including top brands such as BYD, Geely, part owner of the Swedish brand Polestar, and Shanghai’s SAIC, which owns the British brand MG and has a joint venture with Volkswagen in China.
Giving out the details
Brussels will implement five tiers of tariffs. EV manufacturers, upon their cooperation with EU investigators, will face a 21% tariff. Those not following the line will face the highest tier of 38.1%. SAIC, the owner of MG, will be hit with the top tariff, while Geely, a stakeholder in Volvo, will face a 20% tariff. BYD brands will be subject to a 17.4% duty. These tariffs could be enforced as early as July 5th, potentially adding €5,250 to the price of a €30,000 entry-level BYD car.
Officials have indicated that in some cases, a Volkswagen car made in China but sold in Europe could be more expensive than a BYD vehicle. Car plants owned by Chinese companies in the EU, such as the upcoming BYD factory in Hungary, were not part of the
current investigation, highlighting the EU's focus on creating job opportunities within the bloc.
The EU Vice President, Margaritis Schinas, expressed concerns that car manufacturing in China was unfairly subsidised, posing a risk to the EU's battery electric vehicle producers. The EU's investigation presented to China highlighted data indicating potential harm and a threat to the European car industry.
The EU claims that the shift from combustion engines to EVs has been hindered by competition from China, which could result in a loss of investment and jobs in a sector that employs nearly 13 million people in Europe. Schinas stated that the EU has contacted Chinese authorities to address these concerns and find solutions.
European manufacturers are preparing for possible retaliatory actions. In 2023, the value of all EU vehicle exports to China is estimated to be close to €200 billion, making it the third most important market for the EU after the United States and the United Kingdom. The EU anticipates that China may impose additional counter-duties on exports from other sectors, such as French cognac and dairy products.
The action increased tensions in Germany, as the country seeks to safeguard its exports to the large Chinese market. Talking about Germany, the country has reportedly launched its bid to avert a full-scale trade war between Europe and China.
The EU aims to convince other leaders that a focused approach is needed to address China's overcapacity in cars, steel, and other products like solar panels and electric vehicle batteries in order to protect non-Chinese G7 member states. Reports indicate that American and
Source: Statista
Turkey administrations have recently imposed tariffs of 100% and 40% respectively on Chinese EV imports.
Concerns also exist among G7 members that Chinese production overcapacity could negatively impact emerging economies such as Brazil, Mexico, and India. According to the EU Chamber of Commerce in China, which advocates for European companies in the country, any imposed tariffs should adhere to WTO regulations and be disclosed transparently.
The deadline for Chinese companies to provide evidence to challenge the EU's findings is 4 July. If resolved through talks before this date, the tariffs may be adjusted. Consumers who have already ordered a car before this date with a locked-in price should be cautious of potential price hikes and review their contracts. The EU thinks companies like BYD can absorb the subsidy level and remain competitive with European competitors without fully passing on the tariffs to consumers.
The EU argues that China provides subsidies at every step of the electric vehicle manufacturing process, including mining lithium for batteries, shipping cars to Rotterdam and Zeebrugge. The investigation revealed that car factories receive cheap or free land from the
government, as well as specific subsidies for lithium and batteries below market price. Additionally, battery suppliers are said to act as public bodies implementing national industrial policy, and the battery sector benefits from tax exemptions.
The investigation uncovered several financial benefits, such as green bonds being issued at a lower rate than those available in international markets and preferential refinancing rates for funds supporting the sector. Xi Jinping aims to establish global leadership in the green technology industry, encompassing solar panels, heat pumps, and wind turbines.
The EU is accusing Chinese car suppliers of receiving state support that is allowing them to undercut European rivals and hinder the EU's transition from internal combustion engines to battery electric vehicles. The EU plans to ban the sale of new ICE cars by 2035.
China-made cars made up 25% of the EU market in 2023, a significant increase from 3.9%. The EU claims that the aggressive trade tactics used by Chinese manufacturers to lower prices in their domestic market are now being applied in Europe, putting pressure on EU manufacturers to lower prices and impacting their profitability and ability to invest in the future.
And yes, chances are higher that
China will strike back. As per the politico, Beijing sees France as the instigator behind the EV probe and has hit back with a dumping probe of its own into “wine-distilled brandies from the EU,” aka French cognac. President Emmanuel Macron, hosting President Xi Jinping in May 2024, claimed a win after their talks, saying his Chinese counterpart didn’t want to impose pre-emptive tariffs.
As per the reports, China is setting its sights on German luxury cars. In an interview with state media, Liu Bin, a top automotive adviser, recommended raising temporary tariffs on large-engine vehicles imported from Europe to 25%, a move that would hurt the likes of sports car and SUV maker Porsche.
While German auto brands are exposed to China, their premium models would be able to take such a hit, according to Matthias Schmidt, a European automotive analyst, who stated, “The models impacted are all high-end premium models that can either soak that
up in higher pricing or lower margins but remain profitable.”
Similarly, analysts expect Chinese exporters to be able to swallow whatever the EU decides in its subsidy investigation.
Jurgen Matthes of the German Institute for Economic Research, said, "No major economic damage is to be expected."
Auto exports as a share of GDP are declining, now accounting for only about 0.3%. Moreover, Beijing's threatened tariffs on luxury cars are expected to have a limited impact on exports.
Battery maker CATL and EV giant BYD are investing in Hungarian factories and upon the completion of these projects, the ventures will be able to avoid the EU’s duties in the coming years. They are following a similar strategy in Mexico to avoid US tariffs.
Lin Jian, a spokesperson for the Chi-
nese foreign ministry, criticised the EU's investigation as an example of protectionism. He warned that imposing tariffs would harm China-EU economic cooperation and disrupt the production and supply chains of vehicles worldwide. Jian stated that Beijing would do everything necessary to protect its rights and interests.
Beijing is reportedly annoyed with the increased pace of the EU's trade investigations and calls for a truce to avoid further escalation. China is not simply calling for a cessation of hostilities but is also signalling potential retaliation.
Beijing is calling for a broad negotiated solution and fresh ideas on solving the ongoing disputes, affecting trade in everything from airport security scanners to medical devices. The Xi Jinping government can target the EU's agricultural stakes since China has emerged as the third destination for the regional bloc's agri-food exports and represents 6.4% of the EU’s total agrifood trade.
Aviation will be the other arena. European giant Airbus is the largest supplier to the Chinese market. Beijing had threatened to target Airbus in the past. On one occasion, it said that it would not buy the planemaker's products if China's airlines were to fall under EU carbon emission trading rules.
In response to the investigation into subsidies for Chinese electric vehicles, Beijing in January 2024 launched an anti-dumping probe against European producers of liquor, hitting France specifically. French cognac producers fear that they will be the target of Beijing’s ire once the EU executive officially announces the electric vehicle tariffs.
Xi met European Commission President Ursula von der Leyen and French President Emmanuel Macron for
three-way talks in Paris recently, but the tone of talks was reportedly chilly and only yielded a promise by the Chinese leader not to slap temporary duties on French cognac producers. Expect the promise to remain just words.
Analysts are warning about an escalating trade war, raising prices for consumers and hurting exporters and their workers on both sides. Both are major markets for each other, China, a rising economy of over one billion people, and Europe with its relatively well-off population of more than 400 million.
“It’s a little bit like seeing a slowmotion traffic accident unfolding. The accident has not happened yet and it is still possible to find an off-ramp. It is getting urgent,” Jens Eskelund, the president of the European Chamber of Commerce in China said a few
months back.
Beijing has been reiterating about taking “all necessary measures” to protect the rights and interests of Chinese companies.
As per He Yadong, a Commerce Ministry spokesperson, the Xi administration "reserves the right to file complaints to the World Trade Organisation.”
The EU is also investigating subsidies given to Chinese wind and solar companies and whether China is unfairly restricting access to the market for medical devices, a long-running complaint of European manufacturers.
China's state-owned Global Times newspaper has reported that businesses may ask the Xi government to launch an anti-dumping investigation into certain EU pork products and an investigation
into subsidies for some dairy products. Confirming the report, he said that the authorities would review any applications for investigations and initiate a case if the requirements for one were met.
The Global Times also quoted a leading Chinese auto industry expert calling for raising the tariff on imported vehicles with larger engines to reduce carbon emissions, a move that would hit high-end German exports from Mercedes and BMW.
Volkswagen expressed concern that the EU tariffs on Chinese EVs could escalate trade conflicts and said the EU is promoting an ongoing trend toward protectionism, nationalism and isolationism.
“The negative effects of this decision outweigh any potential benefits for the European and especially the German
automotive industry,” the automaker noted.
China may also impose retaliatory tariffs on French and Italian luxury goods, cosmetics, wine, chocolate or furniture, said Gabriel Wildau, a China analyst at the Teneo consultancy.
How badly will tariff warfare affect the Chinese companies? As per the analysts, some of these ventures might still be able to make a profit, even with duties as high as 30%. The provisional tariffs range from 17.4% to 38.1%, depending on the carmaker, and come on top of an existing 10% tariff on vehicles. The new rates would pose a serious market barrier to Chinese EV exports, the China Chamber of Commerce to the EU said.
Calculations by the research and policy think tank Rhodium Group found that five of six models from BYD, China's largest EV maker, would earn a profit with a 30% tariff, while a made-in-China Tesla Model 3 would sell at a loss.
A few years ago, China banned seafood imports from Japan due to a dispute over maritime waters and Japan's disposal of treated nuclear wastewater into the sea. According to Euro News, EU food companies, such as dairy producers, are currently concerned about reports of Chinese domestic food companies requesting investigations into some EU food imports.
These allegations could lead to either anti-dumping or anti-subsidy investigations. Even if these allegations are later disproved, trade could still be halted for a significant amount of time during the investigation.
"However, this could also end up harming China itself, as the EU was the country’s second-biggest import partner in 2023, with China importing about 36% of its dairy imports from the bloc last year.
Some of the most frequently imported products were cream, whey powder and fresh milk," Euro News stated.
"If a trade war does escalate, New Zealand, which is currently China’s biggest dairy products supplier could potentially be poised to step into the gap. Australia, another significant import partner, could also stand to benefit," it added.
The EU’s luxury products sector is another arena that may face the heat, with China being a major market for products such as handbags, perfumes, shoes, clothes and other accessories. European watches and jewellery also have strong demand in China.
With several luxury goods companies already facing falling demand postpandemic, due to the cost of living and higher interest rates, any punitive action from Beijing could potentially derail
"Similarly, China is a key component in the critical minerals supply chain globally, and has already shown that it is more than willing to use this sector as a tool in trade wars. This was seen when China stopped the export of rare earth minerals to Japan, due to the two countries disagreeing over the Senkaku Islands. If things with the EU heat up, China could also do the same to the EU, which could prove to be disastrous to the continent’s green transition goals. The EU has also recently launched an anti-dumping investigation on Chinese biofuels being imported into the bloc," Euro News concluded.
According to the published mobile financial services data in emerging market, Huawei’s platform supports more than 50% of the global FinTech market activity
Frehiwot Tamiru CEO - Ethio Telecom
IF CORRESPONDENT
Far beyond ensuring its core connectivity services nationwide, Ethio Telecom, a pioneer in Africa’s telecom sector with 130 years of dedicated service, is actively leading significant infrastructure projects crucial for societal transformation and economic development in the continent. In addition, the company is significantly geared towards advancing “Digital Ethiopia” by widely introducing and making digital solutions. As a leading brand with a customer base of 78.3 million, it has played an enabling role in the multifaceted development of the country. It is the second largest of the 195 telecom operators on the African continent, and the 17th largest of the 778 operators worldwide.
In alignment with these commitments, Ethio Telecom launched telebirr, a mobile money solution on May 11, 2021, which has revolutionised financial inclusion, simplifying the life of the society and driving the country's digital economy geared towards realising a digital Ethiopia within a short period. This mobile money platform empowers millions with a secure, accessible, and convenient way to manage their finances.
Before telebirr, Ethiopians, especially those in rural areas, faced significant challenges in accessing financial services. Traditional banking systems were lacking reach, and cash transactions were cumbersome and insecure. Telebirr addressed this gap by offering a user-friendly mobile money solution accessible through any Ethio telecom SIM card. Customers can register themselves or visit a service centre for hassle-free registration.
Developed in collaboration with Chinese ICT giant Huawei, telebirr, Ethiopia’s first operatorled mobile money platform, has witnessed a surprisingly high adoption rate, by acquiring 47.55 million subscribers within just 3 years of its launch, while handling transactions worth more than 2.55 trillion Birr.
Telebirr goes far beyond basic mobile wallet functionalities like cashing in and out, buying airtime, paying bills, and remitting money locally and internationally; it fosters financial empowerment by partnering with two leading financial institutions, Dashen Bank and Commercial Bank of Ethiopia. This collaboration, since its launch in August 2022, is facilitating micro saving, microcredit, overdraft and salary credit, ensuring customers’ access to financial services and promoting financial inclusion. As a result, microloan services of over ETB 12.88 Billion were provided to 5.32 Million customers whereas 2.15 million customers were able to save ETB 13.35 Billion.
In addition to advancing financial inclusion, telebirr is facilitating the country's digital transformation. It is simplifying the lives of individuals, while enabling businesses and public enterprises to digitalise their services to increase their productivity and efficiency.
Keeping its innovation game going, telebirr
recently upgraded to "telebirr SuperApp," which provides access to multiple services for Ethiopians through engaging mini-apps. The telebirr SuperApp has been integrated with multiple ecosystem players like government services, private companies, and the African country’s start-ups so they can easily access and be accessed by the 47.55 million customers of telebirr. Online public services such as e-government services have now been made possible, enabling hassle-free cashless transactions for customers.
People can now pay their taxes, utility bills, and other fees using their smartphones. The Ethiopian government's recent move towards cashless payments for fuel transactions shows what a powerful and promising tool telebirr is.
Supporting this growing ecosystem, telebirr has 157 master agents, 215k agents, 195.6k merchants, and 28 banks working in tandem. With over 52 public and private institutions integrated into telebirr, it has emerged as the most interoperable mobile money platform in Ethiopia.
Telebirr’s success stems from its extension network coverage across Ethiopia (99.2%), as well as from its large customer base of more than 78.3 million, its 302,140 point-of-presence through partners, and its distributors, retailers, franchisees and service centres. The localised names assigned to the services and the commission-based structure for customers and agents have helped create widespread acceptance of telebirr.
Aggressive social media campaigns and referral marketing programmes such as cashback, cash for recharge, and other future transactions were launched. Partnerships are a key success factor. An integrator has been engaged to integrate merchant platforms across a wide network of retail and business partners, allowing customers in supermarkets, companies in entertainment and hospitality services, hospitals, pharmacies, and cafes to pay service charges using telebirr.
Telebirr aspires to become a digital marketplace and the largest FinTech platform supporting the digital economies of Ethiopia and Africa. Ethio Telecom desires to facilitate the digitalisation of industries such as education, agriculture, gaming, health, lifestyle, and more. At the same time, it
aims to help telebirr evolve into a payment lifestyle brand that gives customers a one-stop shop for all of their financial service needs.
Telebirr is playing a crucial role in digitalising fuel payment which helps the Ethiopian government to control fuel stock, automate processes, reduce foreign exchange strain as well as for real-time monitoring and efficient fuel distribution.
While implementing telebirr, diverse sets of challenges were faced such as a lack of digital literacy, regulatory challenges, and building a reliable agent network. Lack of awareness of the platform in low-income markets and rural areas prevented widespread adoption among merchants in those areas. It has built an agent structure by developing its existing airtime distribution channel.
Through telebirr, the user can conveniently receive money via his/her mobile number sent from
Telebirr aspires to become a digital marketplace and the largest FinTech platform supporting the digital economies of Ethiopia. Ethio telecom desires to facilitate the digitalisation of industries such as education, agriculture, gaming, health, lifestyle, and more. At the same time, it aims to help telebirr evolve into a payment lifestyle brand that gives customers a one-stop shop for all of their financial service needs
family members, friends, loved ones and/or others residing abroad. To enable the smooth functioning of international remittance services, the venture has established partnerships with TalkRemit, Remitly, Taptap Send, RIA Money Transfer, MasterRemit, Moneytrans and Majority, covering regions like Europe, United States, Canada and Australia under the service's ambit.
The Huawei-Ethio telecom venture, through applying state-of-the-art cloud computing infrastructure, AI technologies and SuperApp is unlocking opportunities and advancing Ethiopia’s digital and financial inclusion. Just within three years of the launch of telebirr digital financial services, a remarkable result of reaching the underserved and the unserved is witnessed
Strengthening its commitment to innovation a groundbreaking telebirr feature: “telebirr Engage” was launched in April 2024. This feature has transformed the platform into a comprehensive social and financial hub. Users can chat, send money, share locations, create groups, send photos and videos, request money, pay bills, and buy airtime and packages, all within the telebirr ecosystem free of charge.
Further solidifying its commitment to a thriving digital economy, telebirr recently added a dedicated developer section on its website. This section empowers app developers to create and launch innovative apps that seamlessly integrate with the telebirr platform which fosters a collaborative culture, shares expertise, cultivates an online community of developers, and ensures an inclusive and innovative ecosystem.
Huawei: The powerful ally
Huawei has played a crucial role in the tremendous success of telebirr in Ethiopia, significantly contributing to its establishment.
Since the development of the Mobile Money platform started in 2012, Huawei has deployed its platform across all of the existing mobile finance markets and is now expanding across Asia and Africa to more than 50 markets. According to the published mobile financial services data in emerging market, Huawei’s platform supports more than 50% of the global FinTech market activity. In total, Huawei’s Mobile Money platform now provides access to digital financial services to over 450 million people in markets worldwide who otherwise would not have this benefit.
Huawei is committed to continuously investing in the FinTech domain, focusing on innovation, technology development, and overall industry development. Huawei offers a one-stop Mobile Money platform, supporting distributed full-cloud architecture, with scalable capacity expansion. Huawei Mobile Money platform aligns with the TM Forum's Open Digital Architecture (ODA) standards and has earned certification for a suite of Open APIs, ensuring interoperability and flexibility within the digital services ecosystem.
Telebirr is a mobile money service launched in 2021 by Ethio Telecom and empowered by Huawei. The key factors for the success of telebirr are positioning mobile money as a strategic business, creating a clear business plan and establishing a win-win partnership. Telebirr and Huawei, as business partners, encountered and addressed three primary challenges together.
The first challenge is how to rapidly develop users, which is addressed by reusing and expanding the existing telecom agent network, and bundling telecom services for cross-marketing and fission marketing. The second challenge is how to provide more services for users and expand the transaction flow. The approach is to identify industry pain points and persuade industries to go digital, to solve the problems, such as low efficiency, corruption, and tax evasion caused by cash transactions. The third challenge is how to offer convenient realtime credit services for users while ensuring bank partners remain profitable by effectively managing bad debts. This involves building a model based on the analysis of users’ historical data, generating credit scores, and making lending decisions based on credit scores.
All these successful practices can be valuable for global carriers to develop Mobile Money services. Huawei and Ethio Telecom are committed to promoting excellent practices and sharing the experience. In addition, Huawei consolidates the practices to enhance its platform & solution, which greatly lowers the threshold for other carriers to replicate their success.
Telebirr leveraged Huawei’s extensive experience in Mobile Money from other emerging markets.
Rather than just offering a simple point-of-sale (POS) transactional service, it started with dozens of new services based on the App, USSD and SMS, including money transfers, cash deposits, remittance, bill payments, cash withdrawal, fundraising, bulk disbursement, ticket purchases, utility services, passport services, digital lotteries, donations, credit loan, microloan, savings services and more.
To accomplish this, telebirr and Huawei had to gain the backing of the regulators who were willing to accept the concept of holding biometric information electronically and registering customers electronically by matching faces and ID cards. This is more reliable than giving the information to a human being. Telebirr has launched new payment
services and financial services, on top of the basic wallet. It's quite an incredible journey to witness this development in one of the most populous countries in North Africa.
Huawei’s Mobile Money platform is built with modularity as its core, including its main products, such as the wallet, finance services, and payment services. In addition, Huawei incorporates enabling technologies for API integration, APP development frameworks and AI Technologies to enable the development of smarter and more secure ecosystems. A key benefit of Huawei's extensive R&D and software portfolio is the ability to easily obtain and pre-integrate such world-class enabling technologies to accelerate the growth and development of Mobile Money ecosystems.
US financial regulators have roughed up and brought crypto startups into court under the Biden administration, which they consider to be incredibly unfair
Jonathan Padilla, the self-proclaimed "crypto guy," prowled among the sea of American flags and omnipresent blue placards at the Democratic National Convention in Chicago held in August of this year.
Donning a baseball cap and an eye-catching pineapple-print shirt, Padilla strolled through the convention halls, engaging in conversations with everyone who would listen about cryptocurrency legislation. He stood with his arm around Delaware Senator Chris Coons in a selfie that was shared on Facebook. The caption reads, "Senator Coons now knows about crypto."
More than $200 million has been raised by Fairshake, the biggest of these super PACs; this amount exceeds that of any other super PAC, cryptocurrencyspecific or not
Since other DNC delegates gave him the nickname "crypto guy," Padilla is happy to have it, viewing it as an implicit acknowledgement that Bitcoin has made an appearance on the political scene.
Padilla said, "Four years ago, crypto was a nonissue and nobody talked about it. But now, you have former President Donald Trump talking about it at major conferences. And it’s being discussed by some of the highestranking Democrats.”
Padilla was the resident blockchain whisperer at PayPal before founding the cryptocurrency marketing firm Snickerdoodle Labs. Additionally,
he is one of the leaders of the alliance known as Crypto4Harris, which unites pro-Democratic individuals of the cryptocurrency sector in an effort to persuade Kamala Harris to back legislation about the industry and show that it "is not monolithically Republican."
Senate majority leader Chuck Schumer, one of the notable Democrats who attended the August 14 virtual town hall held by Crypto4Harris, stated that he "believed in the future of crypto."
Additionally, according to Padilla, the group has "made headway" with "finance and policy folks" within the Harris administration.
The group's access to the Harris team is indicative of a radical shift in US politicians' views on cryptocurrencies, as they now appear to acknowledge the existence of a voting bloc that will choose a candidate solely on the basis of who will send their investments to space. Not to mention the large donations that cryptocurrency companies are making.
According to a report by consumer advocacy group Public Citizen, cryptocurrency companies have made "unprecedented" investments to influence the US election this year, following a surge in cryptocurrency values in 2024.
Crypto companies are responsible for 48% of all corporate contributions this election season, despite their relatively small revenue base and the persistent lack of use cases outside of financial speculation.
The 2020 contest received financial support from the cryptocurrency industry. But its desire to intervene in the 2024 campaign has a newfound urgency and vigour.
During an interaction with WIRED, Veronica McGregor, chief legal officer at crypto wallet company Exodus, said, "The industry believes this election is existential. No matter who gets into office, changes need to happen for our industry to thrive like it should.”
Defend American Jobs, Fairshake, and Protect Progress are the three connected mega political action committees (PACs) that get the lion's share of political contributions from the cryptocurrency business. These groups are unable to actively support political candidates with donations, but they are free to spend money endorsing individuals who make the appropriate corny noises regarding cryptocurrency.
US financial regulators have roughed up and brought cryptocurrency startups into court under the Biden administration, which they consider to be incredibly unfair. However, by using super PACs, the cryptocurrency industry hopes to elect lawmakers who would back specialised crypto legislation, putting an end to the dispute over which regulator's
regulations should be applied and how cryptocurrency should be classed.
More than $200 million has been raised by Fairshake, the biggest of these super PACs; this amount exceeds that of any other super PAC, cryptocurrencyspecific or not. The cryptocurrency companies Coinbase and Ripple, the pro-crypto venture capital firm a16z, and the investment firm founded by Gemini's founders, Cameron and Tyler Winklevoss, are among its principal backers.
The Federal Election Commission has received a formal complaint against Coinbase, the biggest Fairshake donor with $45 million given to the pot. The case, filed jointly by Public Citizen and software engineer Molly White—who is the brains behind the website Follow the Crypto, which tracks donations made to the cryptocurrency industry—claims that Coinbase broke campaign finance regulations by making payments to Fairshake while attempting to secure a contract to work as a federal contractor.
Coinbase turned down a request for an interview, citing instead remarks made in public by Paul Grewal, the company's chief legal officer, who disputed the company's designation as a federal contractor on the grounds that the service it offers isn't backed by tax money.
“To us, it looks like Coinbase is trying to find a loophole that doesn’t really exist. The crypto industry has been historically very willing to ignore laws they don't like, and it would be nice to see some consequences for that. I don't like watching any big companies or very wealthy executives throwing money around in ways that most voters are not able to do. I'm just hoping to see that the spending is at least within the law," White said.
Whether Coinbase should face penalties will now be decided by the FEC. Meanwhile, the super PACs focused on cryptocurrency are effectively using their funds to target disbelievers in the field. Around $10 million was spent by Fairshake on advertisements criticising Democratic senatorial candidate Katie Porter in California, who ultimately lost her primary.
Democratic members of Congress Jamaal Bowman and Cori Bush, whom Fairshake spent a total of $3.5 million discrediting, suffered the same fate in their respective primaries. Crypto was not mentioned in any of the antagonistic advertisements.
Fairshake refuses to comment on its approach in public, but the candidates it opposes have something in common: either they have a strong stance against cryptocurrency, such as Massachusetts Senator Elizabeth Warren, one of the industry's favourite cartoon villains, or they have not cast a ballot.
Porter and Warren began looking into how cryptocurrency mining affected the Texas electricity system in 2022. A crypto measure that would have clarified the Securities
and Exchange Commission's jurisdiction—a US financial authority that has filed numerous cases against cryptocurrency companies under the Biden administration, including Coinbase—was voted down by Porter, Bowman, and Bush in May. Leaders in the sector have so far sided with the Trump campaign: Jesse Powell, cofounder of the Kraken exchange, and the Winklevii both contributed $1 million to Trump. The
founders of a16z, Marc Andreessen and Ben Horowitz, have likewise openly supported Trump.
For his part, Trump has started promoting himself as the "crypto president," even though he had earlier called Bitcoin a "scam." At a gathering in July in Nashville, Tennessee, where he addressed thousands of supporters of Bitcoin, President Trump pledged to create a national "Bitcoin stockpile" and
make the US the "crypto capital of the planet" if reelected. Trump's vow to fire SEC Chairman Gary Gensler ignited the loudest applause of the evening.
“There is a lot of anger and frustration with the fact that we in the industry often don’t know what to do. We think we are complying, then the SEC or another agency sues. We are serving a bunch of different masters. That’s not how regulation is supposed to be done," McGregor noted.
Organisations such as Crypto4Harris are advocating for a "reset" within the Harris campaign to challenge the belief that Trump is the only reasonable choice for crypto enthusiasts.
“People are angry. People are concerned. But I think if you have the reset we are talking about with the Harris campaign, you’re in a really good spot to have temperatures simmer down," Padilla said.
In contrast to her Republican competitor, Harris has not revealed many details about herself. Also, 2024's Democratic platform made no
mention of cryptocurrency. However, Harris's adviser just offered the first hint that the vice president might be thinking about making a request.
While talking to Bloomberg, the adviser said, "She’s going to support policies that ensure that emerging technologies and that sort of industry can continue to grow."
For various reasons, the crypto industry's proponents and opponents have concluded that the 2024 election is "existential." The Trump-supporting camp thinks that any mention of a "reset" is misleading and that a Harris administration would simply be a continuation of the disastrous Biden years.
Cameron Winklevoss, tagging Harris, commented on X, "We will not fall for any bluffs."
The crypto-Democrats, on the other hand, regard Trump's ecstatic courting of the sector as overt electioneering.
"You have to ask yourself: Is Donald Trump somebody you actually trust? Donald Trump is the only presidential candidate who has ever claimed that cryptocurrencies are a
scam," Padilla pointed out.
The first nation to retain Bitcoin in its national reserve is not the United States. El Salvador had already done so four years prior, but regrettably, their acquisition had only served as a pretext for a subsequent market collapse.
The United States' enormous Bitcoin holdings may help to stabilise and protect the cryptocurrency from sharp fluctuations. Alternatively, it might bring down the biggest economy in the world. Time will tell.
Regarding the industry's future during his second term as president (assuming that occurs), Donald Trump has already stated his position clearly. Additionally, the Republicans have profited from the position in terms of raising money for elections.
However, Kamala Harris also wants to mend her party's connection with the players of virtual currency. Her position on the subject, nevertheless, has been silent up until now. On the other hand, the industry might not see her selection of Senator Gary Peters as her running mate favourably.
In 2024, the crypto sector has undoubtedly become a political force of some kind. Republicans and Democrats will be thrilled to have the cryptocurrency players on their side when it comes to raising money for their campaigns, even though there are other significant economic concerns that Americans will vote on instead of the virtual currency.
Bonza's little fleet lacked any scale advantage compared to crew or aircraft scheduling
IF CORRESPONDENT
Australia's experience with low-cost airlines is a long one filled with dashed hopes. Historically, it has been difficult for newcomers to gain traction. The most recent victim in the business is the low-cost carrier Bonza, which abruptly cancelled all of its flights and entered voluntary administration in April 2024.
For the twenty-four remote Australian locations without direct connection to any other airline, losing the airline would be devastating. Additionally, it would result in even less competition in the highly consolidated domestic aviation industry. Only three airline groups operate more than 85% of the routes.
However, Bonza did not find itself in this predicament by accident. Errors in judgement were probably a major factor from the start.
Bonza introduced a small fleet of Boeing B737 jets into the Australian market. However, these had no lower operating costs than the B737s that Qantas, Virgin, and Rex already used. Furthermore, Bonza's little fleet lacked any scale advantage compared to crew or aircraft scheduling.
Second, the airline used a completely different strategy, putting the app first, to sell tickets. Customers could only look for and purchase tickets directly through the official Bonza app. However, this meant that prospective buyers could frequently not find Bonza flights when using traditional search methods like search engines or booking websites.
The fact that Bonza found it difficult to acquire momentum on its flights to Gold Coast airport, which welcomes a sizable 250,000 domestic travellers each month, highlights this problem with the business strategy.
Thirdly, although Bonza provided service to a distinct set of destinations, its networkwide flight schedule was far from ideal. Certain routes had only one weekly flight, in contrast to the far more regular gateway city services offered by Rex and QantasLink.
It may be feasible for European airlines such as EasyJet or Ryanair to operate fewer than daily flights to smaller tourist sites. However, these airlines are large and connected enough to provide passengers with several network routes. Short regional routes are not the mainstay of their economic plan, in contrast to Bonza.
The success of a jet airline depends on maximising three critical elements: territory,
airport accessibility, and market size. Australia provides a harsh starting point for aspiring low-cost carriers on all three fronts.
Airlines offering low-cost and ultra-lowcost services have established themselves well in Southeast Asia, the United States, and Europe. However, compared to Australia, these markets are orders of magnitude bigger.
For instance, the US provides airlines with a market of sizable cities spread out over a vast region. The populations of Miami (6.1 million), Houston (7.1 million), Chicago (9.6 million), and New York are getting close to 20 million.
Nearly 450 million people live in the European Union. Furthermore, there are more than 30 European cities with a population of one million or more, including the United Kingdom. There aren't many cities like that for Australian carriers.
Australia lacks the range of secondary
airports that European low-cost carriers have used to access adjacent markets and reduce operating costs, as well as the population density of Europe.
The next major obstacle low-cost and extremely low-cost market entrants must overcome is airport access. Most major routes connecting major Australian cities run into Sydney are all concentrated along the east coast.
Aircraft movements at Sydney Airport are artificially limited to 80 takeoffs and landings per hour during peak hours by regulations, which also place significant restrictions on the use of the airport. The incumbent operators retain the majority of the slots.
London Heathrow, on the other hand, is a limited two-runway airport that can handle 88 movements per hour.
Some alleviation from this capacity constraint will be available upon completion of the new Western Sydney Airport. It won't, however, change the
reality that Sydney Airport is subject to an operational restriction.
The final limitation in Australia is geographic. They have a line of big cities on the East Coast, unlike Europe, the US, or Southeast Asia. There isn't a hub that links our larger cities with other regional locations.
The populations of towns too far away for easy access by rail or road are frequently too tiny to allow regular, let alone profitable, flights to the larger centres.
Small "turboprop" aircraft can operate with success on some regional routes. The cost per passenger to operate these is higher than that of passenger aircraft that connect the major cities. However, operating larger aircraft on these itineraries is insensible if the flights are only half full.
The 1990s end of Australia's two
Share of on-time flight arrivals in Australia in January 2024, by airline (In Percentage)
airlines programme, in which two similar corporations, one private and one public, maintained identical fleets and timetables, was expected to boost competition. A litany of failures has occurred.
The first major example was Compass Airlines, which began in 1990, failed in 1991, was revived in 1992, and crashed in 1993. Tigerair, OzJet, Strategic Airlines, and others have come and gone since then.
As Impulse Airlines showed, Qantas acquisitions are the best for tiny airlines. Impulse was a regional airline from 1992 until 2004 before Qantas bought it and started Jetstar. Qantas uses Jetstar as a "flanker" or "fighter" subsidiary to prevent low-cost competitors while maintaining its premium brand status.
Virgin Australia, which took much of Ansett Australia's market, is the only serious competitor. Even that was uncertain. Although the Morrison government wanted Virgin to fail at the start of the COVID pandemic, Bain Capital saved it. Qantas, always the recipient of political favours, has refused to repay billions in public help.
More disappointing than surprising is Bonza's departure. However, the lack of actual rivalry in the Australian airline business is unexpected. The "golden triangle" (Sydney, Melbourne, and Brisbane) has some of the world's busiest flights and passengers. Four, six, or more airlines provide similar routes.
Australians can fly Virgin, Qantas, or Jetstar.
This hurts customers. Australians rarely have a choice of three or four airline groups, yet the Australian Competition and Consumer Commission found lower fares. As competition decreases, airfares rise considerably.
Another 1980s and 1990s neoliberal microeconomic reform programme failure is the greater story. Much of the country’s political class still romanticises this Hawke-Keating and Howard-era programme. However, most Australians now see it as a failure, and politicians are responding.
Failures like financial deregulation, privatisation, and outsourcing policy to consulting firms are easy to identify but harder to fix. After the Chris Minns-led New South Wales government exposed private toll roads' devastation, calls for renationalization have grown. The failure of the National Electricity Market and privatisation has forced states to generate electricity again.
Restoring a two-airline regime is unwise for the aviation sector. Instead of waiting for the market, competition must be enforced.
The most crucial step is forcing Qantas to sell Jetstar. Not easy. Prime Minister Anthony Albanese calls compelled divestiture for competition regulators a "Soviet-style" policy. Whether Stalin would have liked better competition legislation, it's hard to see another
FEATURE BONZA
method to abolish the near-monopoly that is much of the Australian industry.
Restoring public authority over landing and takeoff slots at Australia’s privatised airport system is more realistic but still tough. The administration is reviewing the system to make it more welcoming to newcomers. As Bonza joins the long list of failures, new entrants are unlikely to arrive soon.
Australia's tiny population, the capacity restrictions placed on Sydney Airport, the existence of powerful existing airlines, and the East Coast market's linear structure all contribute to the difficulty of new entrants.
After Ansett collapsed, Virgin Blue took over the space. However, two iterations of Compass, Impulse, Tiger, Air Australia, and Ozjet failed as market entrants. Even Air New Zealand decides not to do domestic operations in Australia despite having the fleet, strong brand, and market access necessary to justify joining the country.
Australian regional towns might take little comfort in knowing why new entrants fail. However, capital city travellers hoping for increased competition on the main East Coast routes won't see much difference because of Bonza's tiny footprint.
According to Michael Kaine, national secretary of the transport workers union, "Bonza must ensure staff are prioritised and informed as this process plays out.”
Along with criticising the "unchecked corporate greed" in the aviation sector that has resulted in higher tickets, Mr. Kaine issued a warning to carriers, saying that they "have little chance of survival" in the competitive market.
As Laos’ telecommunications sector gets more dynamic and competitive, one venture is standing out firm above the rest not only due to its innovative services but also for its commitment to sustainable business practices and financial inclusion.
“Lao Telecommunication Public Company (LTC) has emerged as a pioneer in integrating sustainability and social responsibility into its core business operations while spearheading efforts to promote digital financial inclusion through its groundbreaking e-wallet platform,” the company told International Finance.
Laos’ telecom revolution
Since 1996, LTC has become a leading telecommunications provider in Laos, while being the first one to launch 5G services in the country. LTC also provides its solutions in other verticals of the
telecom sector such as fixed-line telephony, internet, and cloud services.
LTC is also working closely with operators around the world to offer the best roaming services possible, apart from providing solutions related to ‘mega-projects’ in the Southeast Asian country, ranging from the Lao-China high speed railway to airport wifi and smart-city solutions.
Being sustainable in its operations
“LTC’s sustainability efforts include the identification, assessment and mitigation of activities by the company that may affect the environment negatively. This includes the selection of materials and equipment used to provide the company’s core services but also extends to the careful selection of locations when it comes to setting up new base stations and antennas for the Company’s network,” the
company stated.
Through the implementation of energy-efficient technologies, waste reduction initiatives, and responsible resource management practices, LTC has significantly enhanced its operational efficiency in an environment-friendly manner.
The company is also prioritising corporate social responsibility (CSR) initiatives to foster community development and empowerment. By partnering with government agencies, non-profit organisations, and grassroots initiatives, LTC has remained a steadfast supporter of developments in the field of education and infrastructure across Laos.
One such prominent example has been LTC’s scholarship support for students at the National University of Laos. The company has provided 50 million kips annually for the past 15 years to students requiring financial support, apart from improving school buildings and education materials in rural areas.
During the COVID-19 pandemic, LTC also worked with the Laos government to disseminate online study materials to students. As of March 2024, the company is constantly upgrading and expanding its network coverage to every corner of Laos.
E-wallet innovation and financial inclusion
LTC has been at the forefront of promoting financial inclusion through its innovative e-wallet platform, M-Money. This is a userfriendly and secure e-wallet solution which helps its users to send and receive money, pay bills, top up their mobile phone credit, and make purchases at participating merchants, all from the convenience of their mobile devices. Millions of Lao citizens have been empowered
by the solution, in terms of accessing formal financial services for the first time.
“LTC’s e-wallet platform has facilitated greater financial inclusion for vulnerable populations, including women, youth, and individuals with limited access to traditional banking services. By lowering barriers to entry and expanding access to digital financial services, LTC is helping to bridge the digital divide and unlock economic opportunities for all segments of society,” the company noted.
Judging the impact
LTC has been playing a decisive role in preserving Laos’ biodiversity. Similarly, its CSR activities have fostered a sense of inclusive socio-economic growth across the Southeast Asian country.
Its M-Money platform has enabled individuals to participate more in the formal economy and achieve financial security and prosperity. By promoting digital financial literacy, LTC has empowered Lao citizens to take control of their financial futures and realise their aspirations.
LTC is an inspired case study for businesses aiming to create positive social and environmental impacts while driving innovation and growth.
“As we continue to expand our reach and impact, we are poised to play a leading role in shaping the future of telecommunications and financial services in Laos and beyond. By harnessing the power of technology and innovation, we are empowering individuals, communities, and businesses to thrive in an increasingly interconnected and digital world, while also safeguarding the planet for future generations,” LTC concluded.
Pay by Bank allows customers to make online payments directly from their bank accounts, eliminating the need for cards
The payment space has gone through many changes, from traditional cash and money orders to modern methods like credit and debit cards, Automated Clearing House, and Digital Payments. These changes have kept up with advancements in technology, security, and consumer needs. The latest addition to this evolution is Pay By Bank.
Stockholmbased Tink, a marketleading payments services and data enrichment platform in Europe, has announced its Pay by Bank partnership for checkout options with Payop
Pay By Bank, as defined by Delia Pedersoli, COO, MultiPay Global Solutions, has been built to deliver business benefits to retailers and an enhanced customer experience (CX). As an alternative payment method (APM) that requires no additional downloads for a customer, Pay by Bank works under the following principle: when in-store and at checkout, a customer selects Pay By Bank as a payment option. They then scan a uniquely generated QR code on the checkout terminal, opening the customer’s banking app. From there, with one click, customers can authorise the payment. A bank-to-bank transfer then sends funds instantly to the retailer’s account.
Data from the British Retail Consortium (BRC) found that APMs already account for 5% of all transactions in the United Kingdom. Research
from EY too discovered that 85% of the American merchants were expecting to accept new APMs in the next three years.
"As demand for APMs rises across the world, Pay By Bank is well on course to be at the forefront of the queue to replace card payments," Pedersoli noted.
With digital wallets now serving as the leading method of payment for North American e-commerce purchases, the EY survey has predicted APMs to be at the forefront of the US payment roadmap. So as a new concept, Pay by Bank has a bright future. In fact, it is emerging as a favourite alternative payment method, offering both security and convenience.
Pay by Bank allows customers to make online payments directly from their bank accounts, eliminating the need for cards. This method not only offers merchants the opportunity to enjoy lower fees but also significantly reduces the risk of chargebacks and fraud.
Talking about Pay by Bank's popularity in Europe, let’s talk about the Tink-Payop experiment in the continent.
Stockholm-based Tink, a market-leading payments services and data enrichment platform in Europe, has announced its Pay by Bank partnership for checkout options with Payop, the international payments processor and aggregator. Payop has a specialisation in working with merchants ranging from small e-commerce stores to large enterprises, offering tailor-made checkout options with numerous payment solutions.
Payop has already integrated Tink’s Pay by Bank solution for merchant checkouts. Payop saw a more than 2.5-fold increase in payments between January and December 2023 after partnering with Tink.
Tink is quickly becoming a key player in the Pay by Bank domain, with Berlin-based payment processor Micropayment now partnering with the payment services and data enrichment platform. Micropayment will be introducing Tink’s Pay by Bank product for merchant checkouts across the DACH (Germany, Austria and Switzerland) region.
Pay by Bank's working principle is pretty simple: during checkout, customers select the Pay by Bank option. Then they get redirected to their bank’s trusted online platform or open their banking app and approve the payment. Following this, the funds move directly to the merchant’s account. Merchants can provide the Pay by Bank option through their online/mobile checkout or in person with a Pay by Bank terminal.
Some of the benefits of this method are: reduced costs as direct debit payment mechanisms like Pay by
Bank typically come with lower transaction fees. In the United Kingdom, businesses often pay between 1.5% and 3.5% per transaction in card processing fees. On the other hand, Pay by Bank offers competitive rates, enhancing profitability.
Another advantage is in the form of chargebacks. Credit cards come with a higher risk of chargebacks. Customers initiate a chargeback on a purchase made with a credit card, which results in merchants shipping goods/providing services without receiving payment. With Pay by Bank, merchants get more say in providing a refund. Also with security elements like multiple layers of security, including passcodes, biometrics, bank passwords, and two-factor authentication, Pay by Bank makes it challenging for unauthorised users to make payments.
Another advantage is swift transactions. Realtime payments (RTP) networks, such as Faster Payments in the United Kingdom or PayNow in Singapore, ensure almost instantaneous transfers. Completing Pay by Bank transactions through their bank’s interface also boosts customers’ trust and confidence, especially for cross-border transactions.
Also, while Pay by Bank can be executed for
any good or service, they're most often applied to bills, subscriptions, and loan repayments. Also, the method should not be confused with account-to-account (A2A) payments (payments to oneself to fund an account or peer-to-peer payments via apps like Venmo).
"Cost reduction is the main benefit of 'Pay by Bank'. In the US, merchants must pay around 3% in fees for every credit card transaction. When considered at scale, this number is massive. Some large enterprises pay billions of dollars in credit card fees per year," comments Plaid.
In the words of Delia Pedersoli, COO, MultiPay Global Solutions, "In recent years we have witnessed the rise of 'zero consumers' who have no brand loyalty and no patience for bad service. This lack of patience for bad service makes Pay By Bank a powerful tool in retailers’ arsenals. Offering a quick and easy checkout process that bypasses the need to enter card details or navigate cumbersome checkout procedures provides a hassle-free way for consumers to pay, significantly boosting the overall customer experience."
"Offering a new and easy way to pay is not the only way Pay By Bank boosts CX. Connecting seamlessly with existing loyalty programmes means data and insights generated by Pay By Bank payment systems can easily be used and combined with online payment data for a full 360-degree view of the customer. With a more detailed view of each customer merchants can provide
tailored offerings and promotions that enhance customer relationships and prevent customers from becoming zero consumers," she continued.
In 2022, Plaid, a prominent fintech company, conducted a survey and identified the potential for Pay by Bank to significantly influence daily transactions and recurring payments.
This payment solution offers greater convenience by allowing users to easily log into their bank accounts and make payments, eliminating the need to enter credit card details.
Another benefit was in the form of "Risk Reduction" as Pay by Bank comes with the ability to mitigate risks associated with credit card usage. For instance, customers don’t have to worry about missing payments due to an expired card/ about acquiring excess debt. Moreover, direct bank payments reduce the chance of missed subscriptions/ bills compared to cards.
Plaid also found youth to be the main predictor of Pay by Bank adoption. Other factors, such as income, gender, and tech savviness, have no impact on Pay by Bank adoption when adjusted for age.
Credit Card usage (In Percentage)
Family Income
$100,000 or more 98%
$50,000–$99,999 94%
$25,000–$49,999 83%
Less than $25,000 57%
Source: Federal Reserve
Huddles remain
Pay By Bank’s biggest plus has been its operational improvements. It is providing significant cost savings to merchants by eliminating interchange and scheme fees. These savings can be used to drive growth and improve operations.
Pay By Bank is also seeing funds being instantly transferred from the customer to the merchant’s account. Having funds arrive instantly is in turn, providing accurate and realtime visibility into revenue and quick access to reserves. Furthermore, as funds flow seamlessly between accounts, there is a minimised exposure to fraud, further reducing losses.
However, the mechanism has huddles of its own as well. One of them is the historical association of 'Pay by Bank' with poor user experience (UX). Customers have to enter their account and routing
numbers, long number sequences that are often not readily at hand.
Nevertheless, things are changing here, as instant authentication tools are reducing the UX friction associated with linking bank accounts. Plaid itself, for example, is offering a simple and frictionless UX, through its embedded search flow. This flow creates a more seamless transition to the account connectivity experience required for 'Pay by Bank'.
Most Pay by Bank transactions happen via the Automated Clearing House (ACH) and are revocable, which creates a potential risk situation, as fraudsters see the opportunity of making a purchase using information from an account owned by someone else. The account owner may then claim that the transaction was unauthorised.
"A customer-initiated return such as this (the scenario above) can take up to 60 days to process. In the meantime, physical goods may have already been shipped and received. There is also the risk of bankinitiated returns, in which a financial institution cancels a transaction due to issues such as account closures or insufficient funds," Plaid added.
Bank payments use ACH, which has a slower settlement time than credit cards. This can range from hours to days, depending on the form of ACH used and the time of day submitted. Other payment rails, including Real Time Payments (RTP) and FedNow, offer instant settlements but have limited coverage and capabilities for requesting payments. In their current forms, these payment rails work well for instant payouts but still have a ways
to go for requesting instant payments from customers in real-time.
To address the above issue, Plaid has introduced "Plaid Signal," which creates synthetic instant ACH. In this method, Signal determines if a transaction is low risk. If it is, the merchant can proceed with the transaction as if it were a payment that was settled immediately. If it's not, they can choose to re-verify the customer, wait to provide the goods or service to the consumer until the payment settles, or steer them to another payment option.
As per Delia Pedersoli, Pay By Bank is already in use with millions of consumers on a daily basis. Over in Sweden, the Swish payment platform, an early version of a Pay By Bank type system, has eight million users, with the average user making over 10 transactions in May 2023 alone.
"Ultimately, payments are constantly evolving. Retailers must be ready to adapt and offer the latest payment method to maintain a positive relationship with the new breed of zero consumers. The good news with Pay By Bank is that it is available now, is quick and easy to install, and provides power features that can transform today’s retailers. While card payments may rule the roost now, no merchant can afford to miss out on the next payment king," she concluded.
In February 2024, UEFA came up with a report that pegged European football's financial power at a record 24 billion euros
Internazionale Milano, popularly known as Inter Milan, became champions of 2024’s Serie A, the top flight of Italian football. While the tournament ended on the last week of April, in May, the club hit the news again, as its ownership got transferred to the American investing firm Oaktree Capital Management.
Inter became the seventh Serie A club under American ownership, showing the rising domination of US investors in the European football circuit. Is it that dominating? The answer is yes, given the fact that individuals and business groups from the world's largest economy also own nine of the English Premier League’s 20 clubs. And talking about the English Premier League (EPL), we don't need to remind our readers how popular and prestigious the English football tournament is.
Also, PSG secured its spot in the Champions League semi-finals against Barcelona in April 2024, it not only brought joys for the club's Qatari owners, but also to the minority stakeholders, who are, once again, Americans. So be it France, Italy or United Kingdom, the trend is clear: American investors have found a new investment opportunity in the form of football.
Analysing things
Perhaps the main driver is money. In the case of Inter's acquisition, Oaktree “assumed the ownership” after the Italian club’s Chinese owners, Suning, missed the deadline to repay the €395 million (£336.5 million) that Oaktree had loaned them in 2021. Most of the American investments in the European football circuit have been in the form of direct investments into shares (buying part/all of a club) rather than completing the move through cash payment.
The pattern has been observed in the purchases of Chelsea in England, Atletico Madrid in Spain, AC Milan in Italy, and Wrexham in Wales.
"American investors are the majority in the British Premier League ahead of the British. And the second in the Italian Serie A after the Italians. And in the French Ligue 1 after the French. In Spain, they are in Mallorca, even though barely five of the twenty clubs in La Liga are in foreign hands. The major exception among the big leagues is Germany with all teams in German hands except for RB Leipzig, owned by the Austrian company Red Bull," said La Vanguardia in its report.
Most of the elite European football clubs are seeing a rise in their brand values, leading to increased interest from American investors thinking they can buy now, hold for a few years, and resell the club for a profit. The sale of Chelsea has been a very good case study here, highlighting the capital growth that European football clubs have undergone.
In 2003, Chelsea was bought for £140 million (£247 million in today’s money), a relative drop in the ocean compared to the £4.25 billion American businessman Todd Boehly and his Clearlake Capital consortium parted with to buy the club in 2022. The sale included £2.5 billion for the initial purchase and a further £1.75 billion of investment for the benefit of the club.
The only downside of this tale has been Manchester United, Liverpool, Arsenal and Tottenham Hotspur, where their American owners underwent a financial loss in the 2022–2023 seasons. Take United for example. Its owners, the Glazer family earned the ire of the club's supporters in the last few years, due to the team's lacklustre performances season after season (United used to be a dominating force in both English and European football a few years back), coupled with administrative instability and poor player transfer seasons. Things
went so bad that the Glazers had to sell some 27.7% stakes of the club to iconic British billionaire Sir Jim Ratcliffe earlier in 2024.
"European football is not a very profitable business. While the Premier League generates more revenue than any other football league in the world, the financial state of its teams is generally poor. Football clubs tend to be reliant on cash injected by their owners to run," explained Steven Vass, the senior journalist of Conversation UK.
However, one way to navigate through the above scenario is by controlling costs. This particular opportunity is what draws American investors to get involved in the European football circuit. Talking about Europe's biggest football leagues, a Statista study found that during the 202122 calendar, "English Premier League clubs generated more revenue than all Bundesliga and La Liga clubs combined, with a total revenue of around 6.44 billion euros. This has been forecast to rise to 6.66 billion euros by 2023/24. Meanwhile, Ligue 1 generated the least revenue out of the big five leagues, with a total revenue of just over two billion euros."
Now the study's observation is not surprising. Take the Premier League as a case study, where apart from its nailbiting matches and global fan base, clubs also put an equal focus on their balance sheets and brand values, while using their history and prestige as the cash cows. These clubs have always set the standard for commercial success, especially on the revenue generation parameters. We have Manchester United, Chelsea, Arsenal and Liverpool as the success stories.
The only other European league which gives some competition to the Premier League is Germany's Bundesliga, as it has combined a rich tradition of competitive football with a robust economic model. The league is also known for its worldclass facilities, fan-friendly policies, vibrant supporters and strong corporate
partnerships.
Talking about Spain, another European football giant, La Liga has emerged as the home of some of the most iconic clubs (Real Madrid, Athletico Madrid and Barcelona) and players. La Liga's global appeal and marketing strategies (take note of the promotional of the iconic Lionel Messi vs Cristiano Ronaldo rivalry) have ensured the tournament's place among the top revenue earners.
In February 2024, UEFA (Union of European Football Associations) came up with a report that pegged European football's financial power at a record 24 billion euros ($25.75 billion). Breaking down the study further, here are some mindboggling numbers below:
The 20 Premier League clubs' total revenue of 6.5 billion euros ($7 billion) in 2022 was almost equal to the next two richest leagues combined Spain's La Liga and Germany's Bundesliga. Each of them had about 3.3 billion euros ($3.54 billion).
The Premier League clubs combined had as much revenue as all 642 clubs in the 50 countries outside the big five leagues of England, Spain, Germany, Italy and France. Total revenue topped 26 billion euros ($27.9 billion) in 2023, fuelled by broadcast deals, commercial sponsorships and ticket sales.
American investors were involved in seven of the 15 foreign takeovers at topdivision European clubs in 2023. Nine of the top-20 earning clubs in Europe were English, including Brighton which had an income of 264 million euros. That was just 13 million euros less than Serie A champion Napoli.
The 20 English clubs collectively ranked number one in Europe for most revenue, most domestic broadcast rights sales, most UEFA prize money from European competitions and most matchday ticket revenue. Spain ranked second in most metrics. The average revenue of a Premier League club is 323 million euros, which is almost 10 times over the average club in the seventh-
richest league, the Netherlands.
Premier League clubs had almost 2 billion euros of commercial revenue including sponsorship, stadium use, merchandise sales, and international tours of a record 7.8 billion euros total across Europe in 2022. That was a 14% collective rise in 2021.
Some 17 out of the 20 main sponsors of Premier League clubs were from outside
England and eight had headquarters in Asia. UEFA also noted German clubs have the highest median income of commercial income due to their ability to excel at working in local markets. Not to forget that the apex European football body has created a new ranking table for revenues just from kit sponsorship and merchandise sales, an index which gives a solid reading of a club's popularity. Barcelona led that list with 179 million euros followed by Real Madrid and Bayern Munich.
English giant Liverpool was at number four, the best among the English clubs with 132 million euros. Manchester City was sixth among the English and number 11 overall, earning 73 million euros.
Many American investors come to European football having already made other sports-related investments. Take Todd Boehly, co-controlling owner and chairman of Chelsea, for example. He also owns several American baseball and basketball sides, which helps him to share resources from crossover investments, including marketing, contacts and ideas, which should lower costs for clubs/ franchises.
Russian oligarchs, Gulf nations and
Chinese billionaires have been heavy investors in European football clubs over the last 20 years. However, things are changing now. Due to geopolitics and sanctions, Russian oligarchs are cutting down their investment commitments in the European football circuit, and to fill that gap, US private equity players are stepping in.
"Transnational investors, driven by financial returns in a sport fast converging with the entertainment and digital sectors, are transforming the game into a big bucks global industry. Television helped make top football clubs rich, but streaming could bring them untold riches," Conversation reported back in 2021, while making a correct assessment of the trend.
However, the investors also need to take note of the fact that the European clubs need to keep up spending (in terms of buying players) alongside their competition to avoid the risk of falling down the leagues. The situation here is very different from the US sports, where
closed leagues (no promotion/relegation) decrease the risk attached to having a bad season.
Jaume García Villar, a specialist in sports economics and a professor at Pompeu Fabra University, told the La Vanguardia that the American interest is due to "European soccer, its leagues, being the most globally appealing spectacle overall despite other specific events, such as the Superbowl, potentially having higher audiences."
American entrepreneurs have different interests compared to Chinese and Arabs, giving rise to new risks. For example, uncertainties arise regarding the purpose of their investment and their time horizon. For these investors, they don't enter with short-term profit objectives, which could lead to "decapitalising" the value of the players by selling them. Their ultimate goal is to ensure longterm profitability, where the focus is not on selling the club but on reaping the investment's benefits.
While the Arabs use such investments
as having a "toy" for increased social visibility. The Chinese, on the other hand, seek short-term returns, leading to a decapitalisation of players. American investors believe, as per La Vanguardia, that football will likely continue to have high economic growth potential in the coming years, "leveraging their experience in the sports industry, even if in other sports, as an additional advantage. They are looking for mediumterm profitability."
However, European football, as already stated, is already known for its fierce competition and it acts like a risk factor for the American investors. Injecting money into a club to achieve success may not necessarily result in recouping the initial investment, but that too on an immediate basis.
"Unlike the North American model of closed-league sports competitions, which ensures all teams a minimum income, European soccer does not operate in the same way. Relegation in European soccer implies a significant drop in revenue," La Vanguardia stated.
Also, the clubs are more than sporting teams for their fans. Clubs like Manchester United, Chelsea, Real Madrid etc. have occupied special places among their fans' hearts, so much so, that these supporters consider themselves equal stakeholders of the clubs. For them, supporting their teams and flocking to the stadiums acts like emotional investments. So, if the club does not perform as per their expectations, the owners will immediately come under the firing line (like Glazers' of United). In that way, operating these teams amid fan hostilities makes things further risky for the owners. A bad press is always an investor's Achilles heel.
The American investors are placing their money on both big and small clubs. And the phenomenon is having a positive impact. How?
In the words of Jaume García Villar, a specialist in sports economics and a professor at Spain's Pompeu Fabra University, who decoded Johan Cruyff's signing by FC Barcelona in 1973, found an expenditure of sixty million pesetas.
"Updating that figure with the evolution of inflation shows that the cost of this transfer is lower than the market value of the top 500 players today. Previously, in European football, the sporting component and its connection to the club's territory prevailed, but it has changed with globalisation, technological advances, and more. The globalisation of European competitions themselves has increased the financial needs of clubs in order to attract talent to remain competitive, which requires significant economic investments," he said.
The great exception, however, is Germany, along with Athletic Club, Barcelona, Osasuna, and Real Madrid in Spain, which are still in the hands of their members. These are the only ones remaining in La Liga who are not becoming a corporation with investorshareholders as a sports anonymous society.
"In the German case, however, those who have been the club's partners up to now maintain control with the 50% plus one rule. This makes it possible to
maintain territorial connections while also partially opening the door to the presence of national or foreign investors.
Recently, they have prevented the entry of the CVC fund into the German league," said La Vanguardia, while adding, "The danger for German teams is being relegated in European competitions due to a lack of economic injection, which is not happening at the moment. Their road ahead is still to be seen. But while so-called state-owned clubs like PSG seem to be at a standstill alongside the Arab decision to strengthen their national leagues after successfully organising major events like the last World Cup in Qatar or the Spanish Super Cup in Saudi Arabia, the madein-USA model is taking over European football as it did with other mass sports competitions like motorcycling, now in the hands of the American group Liberty Media after acquiring Dorna, the Spanish company that owns MotoGP. And Liberty already controlled Formula 1."
One of the immediate targets (for the American investors) post the club takeover, is optimising efficiency, by costcutting and trying to find new commercial opportunities. There are chances that such moves will clash with the views of fans, who have a lot more power in Europe
than they do in the United States.
"There are many commercial opportunities to be found in European football, including increasing the variety and availability of merchandise. But European sports culture is much less commercial than in the US and many fans can be put off by the commodification of their sport," La Vanguardia explained.
"This can impact match day ticket sales directly, while also affecting sponsorship and broadcasting income. Sponsors try to avoid controversy that can be bad for their own sales, and broadcasters prefer full stadiums and atmosphere as it is good for their product," the media outlet continued.
In February 2024, fans' protests forced the German Football League to abandon plans to sell a stake in its media rights business to a private equity firm. As protests intensified, one of the two leading candidates for the investment contract, US private equity firm Blackstone, withdrew from the process citing uncertainty and an unstable environment.
"American investors that are looking to buy European clubs are also discovering that there are bargains to be found. Since the turn of the century, a number of European clubs have gone into administration, including Serie A’s Fiorentina in 2002, Portsmouth (then in the Premier League) in 2010, and French side Bordeaux in 2021. This means some clubs can be picked up at relatively low prices compared to their counterparts in the US. This difference in value is particularly stark in women’s football. The latest National Women’s Soccer League franchise in the US, San Diego Wave, sold for $120 million in March. By contrast, one of the most illustrious clubs in women’s football, Olympique Lyonnais Féminin, was valued at just $5.1 million in 2023," La Vanguardia concluded.
The spread of money throughout the Mediterranean didn’t mean that it was universally used
IF CORRESPONDENT
Money is defined as an "object that is generally accepted as payment for goods and services and repayment of debts in a given country or socioeconomic context. The main functions of money are distinguished as a medium of exchange; a unit of account; a store of value; and, occasionally, a standard of deferred payment."
Internet states money's origin as "commodity money." However, as per PositiveMoney (an international organisation working to shift the economic model to a more fair and sustainable territory), the online encyclopaedia’s categorisation of "commodity money" is not correct as money did not originate in that manner.
In the seventh century BC, the small kingdom of Lydia introduced the world’s first standardised metal coins. Located in present-day Turkey, Lydia sat on the cusp between the Mediterranean and the Near East, and commerce with foreign travellers was common
There are three theories of the origin of money: that it was created for trading, social, and religious purposes.
Given its flexible nature against traditional bartering (exchanging goods or services for other goods or services without using money), economists assume that money was developed for trading purposes. The assumption makes money a valuable commodity in itself, such as cattle in ancient civilisations, later gold and silver by weight, and finally coinage, gold and silver coins.
The 'social' theory suggests that money was
created for social purposes, such as establishing the price of a bride or as blood money for somebody killed/injured by another tribe. And talking about the 'religious' theory, German historian Bernard Laum in his book “Heiliges Geld” (Holy Money) states that money’s origin was in the "Eastern temples as the prescribed sacrifice to the gods and payment to the priests."
Between 1500 BC and 1000 BC, the medium of exchange shifted from a cattle standard to gold by weight standard. The temples played a major role in transforming gold into money. As gold and silver kept on accumulating in the temples and not all of them were required for decorative purposes, there was a good motivation for these religious establishments to transform the metals into money or monetise them.
Money was assigned a value by decree by the priests. Therefore money, in the form of gold or silver by weight, was the first fiat currency. It had a value both as a means of payment and also as a commodity.
As per the article titled "A Brief History of Money," published in IEEE Spectrum, in the 13th century, the Chinese emperor Kublai Khan embarked on a bold experiment. China at the time was divided into different regions, many of which issued their own coins, discouraging trade within the empire. So Kublai Khan decreed that henceforth money would take the form of paper. He went against the earlier governance practices of sanctioning paper money alongside coins. Kublai wanted to make paper money (the chao) the dominant form of currency.
How did money become the basis of trade?
By the time money made its first appearance in written records, in Mesopotamia during the third millennium BC society already had a sophisticated financial structure in place, and merchants were using silver as a standard of value to balance their accounts. But cash was still not widely used.
In the seventh century BC, the small kingdom of Lydia introduced the world’s first standardised metal coins. Located in present-day Turkey, Lydia sat on the cusp between the Mediterranean and the Near East, and commerce with foreign travellers was common. Just the kind of situation in which money is quite useful.
The Lydian system’s breakthrough was the standardised metal coin. It was made of a gold-silver alloy called electrum. Other kingdoms followed Lydia’s example, and coins became ubiquitous throughout the Mediterranean. This had a dual effect: It facilitated the flow of trade, and it established the authority of the state.
The spread of money throughout the Mediterranean didn’t mean that it was universally used. Most people were still subsistence farmers and existed largely outside the money economy. However, as money became more common, it helped the markets to spread.
The lesson here was that once even a small part of a civilization’s economy was taken over by markets and money, they used to colonise the rest of the economy, gradually forcing out barter, feudalism, and other economic arrangements. Money started making market transactions easy, apart from redefining people's values, pushing them to view things in economic, rather than social, terms.
Hard currency became mainstream
Governments started embracing hard currency because it facilitated the collection of taxes and the building of military forces. In the third century BC, with Rome's rise, money became an important tool for unifying and expanding the empire, reducing the costs of trade, and funding the armies that kept the emperors in power.
The decline of the Roman Empire saw a decline in money's usage too, at least in the West. Parts of the former empire, like Britain, simply stopped using coins. Elsewhere people were still using money to balance accounts and keep track of debts, and many small kingdoms minted their own coins. But in general, the circulation of money became less central, as cities shrank in size and commerce dwindled.
"The rise of feudal society also undercut money’s role. The basic relationship between master
Barter: At first, barter, the exchange of goods and services for other goods and services, served as the primary form of money, with easily traded items such as animal skin, salt, and weapons emerging as the first currency
Coins: China and Europe were the world's pioneers in creating objects similar to modern-day money that could be used easily for purchases
Paper Currency: With banks emerging, coins transitioned to notes that could be stored and were easier to carry in large amounts
Mobile Payments: Technological advancements allowed people to carry virtual currency via their mobile gadgets like smartphones, and merchants began accepting various mobile payment methods
Digital Currency: Bitcoin was introduced as the world's first digital currency that could operate with a decentralised authority, moving away from banks and flat currency
Source: coingeek.com
and vassal was mediated not by payment for services rendered but rather by an oath of loyalty and a promise of support. The land was not bought and sold; it belonged, ultimately, to the king, who granted use of the land to his lords, who in turn provided plots of land to their vassals. And feudalism discouraged trade; a feudal estate, or fief, was often a closed community that aimed to be self-sufficient. In such a setting, money had little use," IEEE Spectrum explains.
However, the above phase didn't last long, as by the 12th century, even as the Chinese were experimenting with paper currency, Europeans began to embrace a new view of money: Instead of being something to hoard or spend, money became something to invest, to be put to work in order to make more money.
Trade fairs sprang up across Europe, frequented by a community of merchants. A new industry, called banking, emerged in Italy. These new institutions introduced a host of financial innovations,
including municipal bonds and insurance. The banks fostered the use of credit and debt, which became ever more central to the economy as kings borrowed to finance their military adventures and merchants borrowed to fund their long-range trades.
The invention of the bill of exchange laid the groundwork for the emergence of paper money in the West. The bill was a sort of precursor to the traveller’s check: a document representing a quantity of gold that could be exchanged for the real thing in a different city. Merchants liked the bills because they could be carried around with far less risk (and exertion) than the precious metal.
By the 16th century in Europe, money remained a physical thing, the thing being a piece of gold/ silver. The amount of money in the economy was still a function of how much gold and silver was available. The rulers of Spain and Portugal didn’t quite like this system. This led them to plunder their "New World
Colonies" and accumulate vast hoards of precious metals, which in turn triggered periods of rampant inflation and enormous tumult in the European economy.
The view of money as a commodity began to shift only with the widespread adoption of paper currency, which became popular in the American colonies. In 1690, the Massachusetts Bay Colony issued paper money to fund a military campaign, and did so without explicitly promising to redeem the bills for gold/silver.
During the American Revolutionary War, the Continental Congress printed “continentals” to pay for the country’s war efforts against the British. These bills were in principle backed by gold, but so many were issued that their collective value far exceeded the available gold.
The Bank of England, on the other hand, adopted the gold standard in 1821, with a promise of redeeming its notes for gold upon request. As more countries followed suit, the gold standard became the general thumbnail for the 19th century global economy. The discovery of major new gold fields over the years ensured that the money supply kept growing.
The gold standard brought stability to prices and became beneficial for property holders and lenders. However, it also brought deflation (fall in prices), because as countries’ populations and economies grew, their governments had no easy way to increase the money supply. So money became scarcer.
The gold standard also didn’t prevent economies from falling
into recession. During the Long Depression, which lasted from 1873 to 1896, adherence to the standard made it difficult for the nations to undertake course-corrective measures like cutting interest rates or pumping more money into the economy.
However, banks could still make loans against their gold reserves. Economic historians now believe that the amount of paper currency in circulation dwarfed the actual amount of gold and silver that banks had on hand. During the First World War, governments needed more money for their armed forces. So they simply began printing it. Although countries tried to return to the gold standard after the war, the Great Depression ended that experiment for good.
The rise of fiat currencies
Post the Great Depression, emerged the “fiat currencies," the currencies backed by the authority of the issuing government. However, critics believe that the reliance on fiat money gives too much power to the government, which can recklessly print as much money as it wants. However, the flaw with this theory is that, even with the gold standard, governments revalued their currencies from time to time, in effect dictating a new price for gold, or they ignored the standard when it proved too limiting, as during the First World War.
Abandoning the gold standard has given central banks much more flexibility in dealing with economic downturns. Let's play out a scenario here. During recessions, instead of spending and investing, people and
businesses hold on to their cash, shrinking overall demand, which forces businesses to cut back. This creates unemployment and shrinks demand even more.
Governments face the challenge of spending more. For that, you need interest rates to drop and for the money supply to increase, thereby making it easier for people to borrow money and spend more to shore up the demand. Central banks can pull off the task of dropping interest rates, without worrying too much about maintaining the gold standards. Ever since the gold standard has been dropped, recessions have been shorter and less painful.
Multiple variations of a standard API are produced by banks' freedom to adopt and modify various API standards
According to the Open Banking Impact Report, one in nine people in the United Kingdom currently use open banking, and during the first half of 2023, payment volumes doubled. Although the Payment Services Directive (PSD2) aims to improve authentication and regulate third parties, provider adoption has not kept up with expectations.
In contrast to what was anticipated, the market has changed, leading to fragmentation and endangering PSD2's sustainability to the point where the European Commission felt obliged to intervene and release a report on the use and effects of PSD2.
The report's examination of the role that application programming interfaces (APIs) play in authentication and granting access to the back-end data needed for open banking services is particularly noteworthy.
Screen scraping, which made it challenging to identify who was logging into the account and considerably more difficult to offer richer data sources, has been replaced by APIs. Concerns are now raised by the way the industry has decided to use APIs.
According to the report, there is a lack of cohesion and cooperation in the market as "APIs vary greatly from bank to bank, even though they sometimes claim to use the same standard."
It continues by saying that a lot of these APIs occasionally "do not work properly."
For instance, third-party providers frequently do not receive accurate status feedback for scheduled payments made by PISPs (Payment Initiation Service Providers), and some claim that because regulators have not taken action regarding API flaws, these providers are unable to provide services that they are legally required to provide under PSD2 regulations.
Finally, it concludes that "the reliability of the eIDAS certification is inconsistent throughout the EU, the availability of APIs remains patchy, and the scope of the data being accessed remains unclear."
PSD2 establishes performance standards for APIs, but the industry sets the standards, which hinders access rather than helps it, leading to problems with interoperability.
Multiple variations of a standard API are produced by banks' freedom to adopt and modify various API standards.
It then becomes necessary for a third party doing business with these banks to establish special connections, which is a labour-intensive procedure. The report acknowledges that "the absence of a PSD2 API standard and the large number of APIs" are to blame for the emergence of aggregators, which create a single API on top of multiple APIs and then sell it to third parties.
The complexity of the situation has increased with the introduction of Premium APIs. These make it possible
for third parties to initiate payment) or AIS (access to transaction data). Nevertheless, they may lead to unlicensed parties being able to access data that licensed APIs compliant with PSD2 do not, thereby weakening the standard.
Furthermore, unlicensed third parties are even able to offer AIS and PIS through an aggregator's licenseas-a-service offering. This creates an "uneven playing field" where two parties may provide the same service under different circumstances, potentially giving the unlicensed party a competitive advantage, because Premium APIs can offer services beyond those defined in PSD2.
In a survey done for the report, 58% of respondents said they were in favour of a global API standard to make payments easier and only 9% were against it. However, the qualitative interviews that were also conducted did not match the quantitative data.
According to that research, there
were several reasons why the adoption of a single API standard was seen as controversial. It was thought that this might hinder banks' ability to innovate and create their interfaces. Although there are several competing API standards, these have limited rather than impeded progress, and it was thought to be too late to introduce them.
Others proposed that in order for Premium APIs to overtake and compete to establish de facto APIs, the market needs to be opened up for business. This makes sense because some people have continued to scrape less secure data because they believe that the PSD2 requirements are too restrictive regarding the access they allow. The issue of unapproved third parties having access to banks would still need to be resolved, though.
The issue with the current business model for API development is that
banks are not incentivised to invest in high-performing APIs, which means that security won't advance further.
Account Servicing Payment Service Providers (ASPSPs) i.e., banks are the ones that must invest in APIs to provide access, whereas the third parties effectively get access to that data for free.
It makes sense that banks are choosing to "limit or at least complicate access to their data" and that third parties are reporting implementations have "mostly been poor (by banks)... with a significant number of obstacles built-in" given the lack of financial incentives, the slack enforcement, and the ambiguity of the regulations themselves.
Although opinions on the need for a single standard may differ, it is certain that the current approach is ineffective and that the industry is experiencing API sprawl as a result of the standard's fragmentation. Due to the lack of incentive for banks
(In Billion US Dollars)
to enhance API connectivity, third parties are becoming more dependent on aggregators.
Additionally, the system as a whole has allowed competitors' offerings to grow, leading to the emergence of unlicensed providers and nonstandard alternative APIs with greater functionality. As a result, we can anticipate that this year will see action from the European regulators. They will actively look into ways to get PSD2 back on track, so all of the participating providers should get ready for the regulations to tighten up and be strictly enforced.
Meanwhile, the "Payments Services Package" is a new regulatory framework that the European Union (EU) is introducing to update its payment services regulations. The European Commission released a set of legislative proposals in June 2023 to improve and modernise the EU's digital financial environment.
The Payment Services Package
consists of the Payment Services Regulation (PSR), the Payment Services Directive III (PSD3), and the Regulation on a Framework for Financial Data Access (FIDAR), which must be enacted in tandem. The goal of PSD3, an update to the current Payment Services Directive (PSD2), is to broaden and improve the payment services regulatory framework.
Additionally, it will replace and repeal the Electronic Money Directive (EMD2), creating a single regulatory framework that will control e-money services in addition to payment services. Since e-money institutions will be licensed as payment institutions under PSD3, there will be a single set of requirements for licensing, business conduct, and prudential supervision.
The Commercial Bank of Qatar (CBQ) has recently been named the winner in two categories by International Finance for the year 2024 — 'Fastest Growing Credit Card Issuer - Qatar' and 'Best Card Payment Service POS/ATMQatar'.
Established in 1975 as Qatar's first private bank, CBQ's commitment to innovation and customer satisfaction radiates brightly. The distinction of being named winners in multiple categories only underscores CBQ's dedication to providing cutting-edge solutions and unparalleled service in the banking and finance sector.
International Finance recently caught up with Shahnawaz Rashid, Executive General Manager and Head of Retail Banking, and Dr. Sudheer Nair, Assistant General Manager and Head of Cards and Payments at CBQ, who provided insights into the Bank's recent achievements.
What were the key factors that led to the CBQ winning the award for Fastest Growing Credit Card Issuer – Qatar 2024?
Shahnawaz Rashid: CBQ's success in the Fastest Growing Credit Card Issuer category can be attributed to its pioneering initiatives in the Cards and Payments sector. From spearheading the contactless payment revolution to introducing innovative digital wallets like CB Pay, instant discounts like CB Fawri, the first cashier-less checkout in the country, and forging strategic partnerships for seamless payment experiences during major events like the FIFA World Cup, Commercial Bank of Qatar has consistently led the industry through innovation and customer-centric solutions.
What factors do you attribute to the significant growth in your credit card issuance in Qatar in 2024?
Shahnawaz Rashid: The economy is experiencing growth, leading to increased consumer spending, and prompting financial institutions to issue more credit cards to meet the demand. With the rise in disposable income among Qatar's population, people are more inclined to use credit cards for purchases, driving up demand for cards. Advancements in financial technology (fintech) or digital banking services, such as mobile payments or contactless transactions, make credit card usage more convenient and appealing to consumers. Targeting new market segments or demographics, such as younger consumers or expatriates, with tailored credit card offerings and marketing strategies, also contributes to our growth. Changes in consumer preferences, lifestyle habits, or spending behaviours also influence the demand for credit cards. For example, if there's a shift towards online shopping or travel-related expenses driving the need for credit cards. Changes in regulations related to credit card issuance, interest rates, or consumer protection laws could impact the market dynamics to encourage more people to apply for credit cards.
What role has innovation played in the rapid expansion of your credit card portfolio in Qatar?
Shahnawaz Rashid: Being the leader in innovative digital banking solutions in Qatar, we have leveraged our advanced channels and platforms to contribute to this exponential growth in our credit card issuance. We are also adopting a fully digital onboarding process through CBQ Mobile App, where customers can instantly apply without the need to visit a branch. In addition, we have streamlined the instant card printing process through our automated kiosks distributed all across Doha.
How does the CBQ ensure responsible lending practices amidst the rapid growth in credit card issuance?
Dr. Sudheer Nair: We maintain responsible lending practices through a rigorous risk assessment, setting credit limits based on salary transfers, secured deposits, and healthy credit history, as well as ongoing monitoring of customers spending patterns for signs of any financial strains. We also continuously review the portfolio performance to identify early delinquency trends and revise our credit policies accordingly.
Can you discuss any specific initiatives aimed at capturing market share and accelerating growth in the credit card sector?
Dr. Sudheer Nair: We are currently focusing on several key initiatives to capture market share and further grow our portfolio. These initiatives include introducing new card products and features tailored to specific customer segments, CVP revamps with more attractive benefits, tactical marketing campaigns to attract new bank customers, expanding our current loyalty programme to make it more rewarding to customers with more redemption options, expanding partnerships with merchants for exclusive offers and discounts, and enhancing our digital capabilities for a seamless user experience across our digital platforms (mobile app and internet banking).
What challenges did the CBQ encounter during the process of becoming the fastest-growing credit card issuer in Qatar, and how were they overcome?
Shahnawaz Rashid: Handling credit risk while growing, monitoring inventory closely, and ensuring topnotch customer service were key. We overcame them through careful planning and relentless dedication.
What specific initiatives did the CBQ implement to win the award for Best Card Payment Service POS/ATM - Qatar 2024?
Dr. Sudheer Nair: CBQ has won the award for Best Card Payment
Service POS/ATM – Qatar 2024 for successfully implementing the following disruptive initiatives in the payment acceptance ecosystemCashierless Checkout Solution & VPOS (Virtual POS).
What key features or services distinguish your bank's POS/ ATM payment offerings in Qatar?
Shahnawaz Rashid: CBQ is the only Acquiring Bank in Qatar that provides a holistic set of payment acceptance offerings and ValueAdded Services to its merchants. This includes POS, ECR integrated POS, Cashierless Checkout, E-Payment Gateway, Pay By Link, Virtual POS, Dynamic Currency Conversion, Buy Now Pay Later, VISA Instalment Solution, and CB Fawri (Instant Discount).
How does the CBQ ensure the reliability and efficiency of its POS/ATM networks across Qatar?
Shahnawaz Rashid: CBQ utilises the latest PCI DSS compliant Android Smart POS hardware and has a robust E-payment gateway platform. This reduces transaction time and ensures secure payment acceptance. Commercial Bank of Qatar has its own dedicated and well-trained, in-house POS Service and Support team. This ensures the highest level of service standards while responding and addressing customer complaints.
What measures does your bank take to ensure the security of transactions conducted through its POS/ATM networks?
Dr. Sudheer Nair: CBQ ensures that its POS terminals are compliant to PCI DSS and other network certifications from Cards Schemes such as VISA, MasterCard, AMEX, Diners etc.
How does the CBQ collaborate with merchants to optimise the POS/ATM payment experience for consumers in Qatar?
Dr. Sudheer Nair: CBQ offers payment acceptance devices to meet the business needs of each type of consumer. For example: Food delivery merchants are
provided with CB VPOS (Virtual POS), retailers are provided with Smart POS, home businesses are provided with payment links etc. Commercial Bank of Qatar also partners with its consumers to offer specific campaigns or Value-Added Services such as Buy Now Pay Later (BNPL), Dynamic Currency Conversion (DCC), VISA Instalment Solutions (VIS), Instant Discount (CB Fawri) etc., to increase customer footfall at merchant outlets.
How does the CBQ address issues such as transaction fees and processing times to provide competitive POS/ATM services?
Shahnawaz Rashid: CBQ consistently invests in the latest in Payment acceptance technology and POS infrastructure to ensure that such issues are proactively mitigated.
Can you share any success story or case study that demonstrates the impact of your bank's POS/ ATM services on businesses and consumers in Qatar?
Shahnawaz Rashid: CBQ is the market leader in bringing cuttingedge technology to its customers. The convenience and safety of our consumers drive us to deliver the latest and most secure in payment acceptance innovations to the market. CBQ is the First Bank in Qatar, to launch the Virtual POS (VPOS), Payment Link, Cashierless Checkout, and VISA Instalment Solution. Commercial Bank of Qatar was also recognised by VISA as the fastest deployer of Virtual POS (VPOS) in the market.
In 2024, what kind of innovations or enhancements can we expect to see in your bank's POS/ATM services in Qatar?
Dr. Sudheer Nair: CBQ is heavily focused on sustainable solutions that offer customer convenience and safety. We are exploring key initiatives that are centred around these ideologies to ensure that our customers can transact securely, conveniently, and sustainably.
President William Ruto’s now-withdrawn tax hikes as well as similar legislation passed in 2023 are both linked to IMF loans as Kenya staggers under the weight of a heavy debt crisis
The COVID-19 -related disruptions and the inflation pressures also weighed heavily upon the African country. Added to that were the supply chain disruptions in agriculture in Kenya that followed Russia’s invasion of Ukraine
Kenya has been in the news these days, albeit for the wrong reasons. Demonstrations against planned tax increases by President William Ruto got out of hand. Protesters stormed Kenya’s Parliament, forcing Ruto to withdraw a tax bill supported by an International Monetary Fund (IMF) team. The protesters also accused the Kenyan President of imposing a “colonial” agenda on the African country's population.
Kenyans are demanding more accountability from the Ruto government, despite the latter agreeing to withdraw his tax reforms. These were intended to help reduce the African country's large debts but protesters insisted the government should first cut spending, saying there was too much waste. Ruto has already announced several austerity measures, including a freeze in proposed pay rises for the Parliament. However, the protesters are determined to see Ruto go.
During his 2022 presidential election campaign, Ruto promised to improve living conditions for low earners by tackling corruption within Kenya’s institutions, reducing government waste, and
eliminating the country's $82 billion debt.
"However, Ruto’s detractors say he has not delivered on those claims. What have irked many in particular, they say, are the frequent hikes in taxes with no corresponding improvements in social amenities. Already, a 2023 law doubled taxes on fuel, and the initial draft of this year’s finance bill was set to further raise that fuel tax," Aljazeera reported.
The value of the shilling has dropped by 22% against the US dollar since 2022, causing prices to soar, while incomes have largely stayed the same. Ruto initially justified the tax increases, saying they were necessary for Kenya’s debts. His government took office amid a punishing drought in 2022 and after the Russia-Ukraine war disrupted food imports.
However, critics have long said massive waste in public spending could offset the debts. In April 2024, the IMF said there was a significant shortfall in tax collection that would keep Kenya’s domestic borrowing needs up, although it also stressed the need to cut government waste.
Ruto’s now-withdrawn tax hikes as well as similar legislation passed in 2023 are both linked to IMF loans as Kenya staggers under the weight of a heavy debt crisis. When he entered the President’s office in August 2022, Kenya was already in a crisis. Its external debt was about $62 billion, or 67% of its GDP.
Former President Uhuru Kenyatta had
borrowed heavily from commercial lenders and countries like China to finance huge infrastructure projects, including a rail line that links Nairobi to the port city of Mombasa and 11,000km (nearly 7,000 miles) of tarmacked roads. Most of those loans were commercial, meaning they had high interest rates. Meanwhile, the infrastructure efforts failed to generate the expected revenue.
The COVID-19-related disruptions and the inflation pressures also weighed heavily upon the African country. Added to that were the supply chain disruptions in agriculture in Kenya that followed Russia’s invasion of Ukraine. All these combined meant food and the general cost of living were soaring in 2022 and so were Kenya’s debts as interests accumulated.
As of July 2024, the nation's debt has reached $82 billion, including domestic borrowing. More than half of government revenue goes towards debt repayments. In April 2021, Kenya under Kenyatta and then-Vice President Ruto entered into an
agreement with the IMF for relief.
The package came in the form of a 38-month programme the international lender said would help Kenya manage its debt and create a conducive economic environment for needed private-sector investment. Under the programmes, Kenya is set to unlock $3.9 billion in funding. A separate climate fund was also approved at $542 million.
The IMF conditioned the loans on hiking taxes, reducing subsidies and cutting government waste, measures it said would increase government revenue while reducing spending. Those measures kicked off in 2023. Ruto since 2022 has made the IMF relief programme a priority, as disbursements under the programme come based on periodic reviews of how well the government has pushed through some of the reforms. The last review in January unlocked $941 million.
After taking over the country's reign, Ruto
suspended subsidies on fuel and fertilisers as part of the programme. Fuel subsidies were reinstated in 2023 after protests broke out. The Finance Bill 2023 was also backed by the IMF. The bill, which passed in June 2023, introduced a 2.5% housing levy for employed people and raised the VAT on fuel from 8% to 16%.
The now-withdrawn Finance Bill 2024 with its tax hikes was backed by the IMF. It was set to generate $2.7 billion to fund a budget deficit and fund development programmes. Analysts said Kenya still needs to fill that gap to meet some targets under the IMF programme.
The IMF loans helped Kenya avoid defaulting on a $2 billion Eurobond that matured in June 2024. The country does not have any pressing repayments in the short term.
As per Martin Muhleisen, a non-resident senior fellow at the Atlantic Council’s GeoEconomics Centre and a former IMF official, Kenya’s decline into fiscal trouble has been entirely predictable, "led by the ambitions of past leaders who followed the path of easy money."
"During the mid-2010s, under President Uhuru Kenyatta, Kenya was looking for ways to leverage its frontier market status into higher growth via debt-financed investments and infrastructure projects. As a result, within a decade, Kenya’s public debt ratio almost doubled from 41% of gross domestic product (GDP) in 2014 to a projected 78% of GDP in 2024," Martin remarked.
One prominent creditor has been China’s Export-Import Bank, which provided Kenya with $3.2
billion to build a Standard Gauge Railway (SGR) between Nairobi and the port of Mombasa—a project that has been criticised because of its weak governance and high cost but, as per the recent reports, will be extended to Kenya’s western border with Uganda.
"Although public investment does have an important role in raising a country’s economic fortunes, Kenyans are still waiting to see the social returns of the debtfinanced investment spree. GDP growth has hovered around 5% since the mid-2000s, real GDP per capita has stagnated in recent years, and the poverty rate (at just below 40%) remains above pre-COVID-19 levels. It is no wonder that the fiscal belt-
tightening now required to arrest a further run-up of public debt has met with resistance, amid legitimate questions about who benefited from the loans that ordinary Kenyans now have to repay," Martin added.
However, the former IMF official also mentioned that after turning to the IMF, Ruto's administration was doing reasonably well, in terms of predicting a steady pace of fiscal adjustment (at about 1% point of GDP per year over five years) and allowing for measures to absorb its social impact.
Both the primary fiscal deficit and the trade balance improved, and the shilling unwound much of its decline against the dollar as Kenya surprised markets by repaying
a two-billion-dollar Eurobond in June 2024. Moreover, the IMF programme unlocked a considerable amount of concessional multilateral financing, including from the World Bank.
"But the country remains in a financial hole from which it will be very difficult to climb out. One problem is that higher interest rates keep adding to Kenya’s debt dynamics, as illustrated by the hefty 10% interest rate on a smaller Eurobond that Kenya issued in February to meet its June payment. Therefore, despite an improvement of the primary deficit broadly in line with programme targets, Kenya’s public debt is still projected to increase this year," Martin commented.
With interest payments accounting for more than a quarter of total revenue, the Kenyan government may decide to seek a debt restructuring. As per Martin, this is not something the IMF could impose on Kenya, unless it judged that public debt was unsustainable.
However, the government went to great lengths in the past to service its debt and retain access to financial markets. It would have been cynical on the part of IMF shareholders to force Kenya into an unwanted debt operation, as long as there was still a realistic chance of avoiding it. This now looks less assured, and it may be the only avenue left for Ruto.
As per Martin, the IMF and other multilateral institutions have raised funds and mobilised special drawing rights (SDRs) to subsidise interest rates paid by poorer member countries, and Kenya is already
Kenya's Gross Domestic Product in current prices from 2014 to 2023 (In Billion US Dollars)
Source: Statista
benefiting from this effort. However, there are limits to this approach. Subsidies have to be either financed from donor countries’ budgets (with dwindling political support) or they are generated from richer countries’ SDR holdings.
"SDR-based lending works only to a limited extent. SDRs derive their value from their status as foreign exchange reserves and being exchangeable for dollars and other hard currencies held by central banks in wealthy countries. Any overuse or exposure to default risk (for example, from rising public debt in recipient countries) could compromise their reserve-asset status, which would impact both the IMF’s financing model and its capacity to lend to countries in distress," he noted.
Could the IMF and World Bank provide larger loans? The two institutions regularly review the amounts that countries can access under various conditions. Ceilings have gone up over time, but shareholders require that larger loans come with stricter macroeconomic conditionality, an approach that would presumably have triggered a similar outcome for Kenya. Also, multilateral loans already account for more than a
quarter of Kenya’s public debt.
Since these loans cannot be restructured, private creditors might be more hesitant to invest in the African country, because any future debt operation might need to be deeper than in similar countries with a smaller share of multilateral debt.
Going by Martin's analysis, Kenya’s ongoing economic mess is largely homemade, albeit with help from willing external lenders. The COVID crisis exacerbated a lack of fiscal discipline, eventually forcing the country to adopt a stabilisation programme.
"While meeting with some initial success, recent events have made it clear that the government’s adjustment strategy needs to change, putting a possible debt operation on the table. The IMF did its best to support an initially credible effort by the government, but it must also ask itself what could have been done to prevent the sharp increase in public debt that is at the heart of Kenya’s problems today," he concluded.
IF CORRESPONDENT
The power transition from Trump to Biden occurred during the 2020-21 period, when the global economy was at a standstill due to the COVID-19 pandemic
It's 2024, a pivotal year in the history of both the United States and the global order, as Uncle Sam approaches the crucial Presidential Election. What until a couple of months ago looked like a rematch between Joe Biden and Donald Trump has now evolved into a contest between Kamala Harris and Donald Trump.
ECONOMY FEATURE ECONOMY
It looks like the health of the United States economy and its future prospects will be the key issue in voters' minds this time around. It appears that more people trust Kamala Harris over Donald Trump as someone who can better address economic issues. A poll conducted in August 2024 for the Financial Times and the University of Michigan Ross School of Business found that 42% of voters in the United States believe the presumptive Democratic candidate can handle the economy more effectively, compared to 41% who favoured the Republican candidate on this issue.
Was Biden's withdrawal from the 2024 race surprising? One might say yes, considering that surveys conducted in April, May, and July showed only 35% of voters had confidence in incumbent
KAMALA HARRIS
DONALD TRUMP
President Joe Biden’s ability to handle the economy better than Trump. The former president was leading by a margin of 10% over the incumbent. In the poll conducted in June, 37% of people expressed confidence in the president.
The power transition from Trump to Biden occurred during the 2020-21 period, when the global economy was at a standstill due to the COVID-19 pandemic. While the United States, under Trump's leadership, recovered quickly compared to its Western peers, this trend continued under Biden's administration, as the nation experienced the strongest pandemic recovery within the G7, as measured by GDP.
In Biden’s words, the US economy has been the “envy of the world” under his economic stewardship. To justify his stance, he pointed to data such as record job creation and historically low unemployment.
“Fifteen million new jobs in just three years – that’s a record! Unemployment is at 50-year lows. A record 16 million Americans are starting small businesses, and each one is an act of hope,” he remarked during his March 2024 State of the Union address.
During Trump’s four years in office (between January 2017 and January 2021), the average annual growth rate was 2.3%. Under the Biden administration so far, this figure has often exceeded the 3% mark since 2023.
When it comes to inflation, during the first two years under Biden, the
price rise peaked at 9.1% in June 2022, followed by a downward trend. Trump claims that the US has experienced “the worst inflation we've ever had.” However, inflation was last above 9% in 1981. On the other hand, the rate has now fallen to around 3%, but it remains higher than when Trump left office.
To justify the above trend, it is worth noting that many other Western countries also faced extremely high inflation rates after 2021, as global supply chains experienced disruptions due to COVID and the Ukraine war. Economists also point out that Biden’s $1.9 trillion American Rescue Plan, which was enacted in 2021, contributed to the issue. The injection of cash into the economy led to further price increases.
The Biden administration has repeatedly highlighted strong job growth as a major achievement. Before the high unemployment in 2020 due to COVID, the first three years of Trump's presidency saw the addition of nearly 6.7 million jobs, according to data on non-farm employment (which covers about 80% of workers in the labour force). Since the Biden administration took over in January 2021, there has been an increase of almost 16 million jobs.
Biden has claimed this as the “fastest job growth at any point of any president in all of American history," and data from 1939 supports this assertion. However, analysts also point out that the current administration has benefited from a sharp rebound in economic activity as the country emerged from the pandemic.
“Many of the jobs would have come back if Trump had won in 2020 - but the American Rescue Plan played a major role in the speed and aggressiveness of the labour market recovery,” says Professor Mark Strain, an economist
at Georgetown University, while interacting with the BBC.
Prior to the pandemic, Trump had delivered an unemployment rate of 3.5%. Lockdown measures led to soaring levels of unemployment in the United States, which then dropped to around 7% when Trump left office. Under the Biden administration, unemployment continued to fall to a low of 3.4% in January 2023, the lowest rate in over 50 years, but it has since ticked up to 4.3%.
In terms of wages, they did rise under Trump but at a similar rate to his predecessor, Barack Obama, until 2020. Wages increased rapidly at the start of that year, but the sudden uptick was linked to lower-paid workers being more likely to be laid off, which raised the average wage of those who were still employed. Under Biden, average weekly earnings have grown, but they have struggled to keep up with inflation.
US presidential elections are often won and lost on the economy. “It’s the economy, stupid,” coined by Bill Clinton during his 1992 election campaign, remains a popular slogan among American voters.
By the time Biden withdrew from the White House race, he was indeed fighting a battle of perception.
“The alarming fiscal trajectory of the nation has been made worse by a sharp increase in federal spending. Allies have been incensed by corporate investment subsidies in the United States, which may ultimately be ineffective. However, many of these policies are undoubtedly having an effect already. Just have a look at the construction boom in factories: even after taking inflation into account, investment in manufacturing facilities has more than doubled under Mr. Biden, reaching an all-time high,” The
Economist noted.
It revolves around the prosperity of middle-class and working Americans. Harris aims to facilitate 25 million new small business applications (including start-ups) during her first term, up from the record 19 million received under the Biden administration as of mid-August. This goal will be achieved through tax reliefs and simplification of bureaucratic red tape. She has already released a four-part package designed to make housing, groceries, childrearing, and prescription drugs more affordable. Many of these proposals build upon efforts previously unveiled by the Biden administration.
However, these ideas come with significant price tags, and she has yet to detail how she will cover the costs. Her prior package would add $1.7 trillion to the deficit over the next decade, before interest, according to the Committee for a Responsible Federal Budget.
So far, her campaign has stated that she would increase the corporate tax rate to 28%, up from the 21% rate established by Trump’s 2017 tax cut law. This increase would raise about $1 trillion over the next decade, according to the committee.
Harris has also expressed support for the revenue-raising provisions in Biden’s fiscal year 2025 budget blueprint, which includes tax hikes on wealthy Americans and large companies. Overall, these measures would raise approximately $5 trillion.
Currently, small businesses are allowed to deduct up to $5,000 of eligible start-up expenses in the year they begin operations, according to the Congressional Research Service. Harris’ plan would expand the tax deduction to up to $50,000 and allow businesses to claim that deduction
in the year they first turn a profit to ensure they receive the full benefit.
Additionally, Harris will advocate for increased investment in community development financial institutions (CDFIs), which are dedicated to serving low-income individuals and communities. While many small businesses struggled during the COVID-19 pandemic, those owned by people of color were hit hardest.
Harris’ affordable housing plan includes providing up to $25,000 in down-payment support and a $10,000 tax credit for first-time homebuyers. To spur construction, she would introduce a first-ever tax incentive for builders who construct starter homes sold to first-time buyers. She also plans to expand an existing tax incentive for building affordable rental housing and create a $40 billion fund for innovative housing construction.
Furthermore, the Democratic nominee will ban algorithm-driven pricesetting tools for landlords and remove tax benefits for investors who purchase large numbers of single-family rental homes. While incentives to build more homes should increase inventory and help drive prices down, experts have warned that down-payment support could stimulate demand and lead to higher prices.
Harris’ $25,000 homebuyer credit and additional affordable housing policies are projected to cost $200 billion over a decade, according to the Committee for a Responsible Federal Budget, which assumed these provisions would be in effect for four years.
Among Harris' other plans, she is advocating for a federal ban on price gouging to help lower grocery prices. Additionally, she supports restoring the
GDP of the United States at current prices from 2014 to 2023 (In Billion US Dollars)
Source: Statista
American Rescue Plan Act’s popular expansion of the child tax credit to as much as $3,600 and extending the more generous Affordable Care Act premium subsidies that are set to expire at the end of 2025.
She also wants to expand the current $35 monthly cap on out-of-pocket costs for insulin and the upcoming $2,000 annual limit on out-of-pocket costs for prescription drugs to all Americans. These caps were initially established for those on Medicare under the Inflation Reduction Act. Harris is also backing the idea of accelerating Medicare’s drug price negotiations to reduce the costs of more medications more quickly.
Furthermore, she has expressed eagerness to work with states to cancel medical debt for millions of Americans. According to her campaign, states and municipalities have used American Rescue Plan funds to cancel $7 billion of medical debt for up to 3 million Americans.
Expect import tariffs, a hallmark of Trump's first term, to return, along with more tax cuts and a sharp
reduction in immigration.
Trump has been discussing the idea of targeted tariffs as well as an overall import duty of 10% on all goods entering the country. While the Republican repeatedly claims that China bore the costs of his earlier tariffs, economists view these moves as "a tax on Americans," potentially leading to higher inflation.
“Such a tariff, and likely retaliatory tariffs from other countries, would increase the price of imported goods. It’s not clear how much this proposed tariff would affect the inflation rate. A bigger concern is that such a steep tariff and ensuing trade war would harm both American producers and consumers,” said Patrick Horan, research fellow at the Mercatus Centre at George Mason University, while talking to the US News.
According to economist Kenneth Rogoff, Trump's proposed tariffs on imports would have "recessionary effects on the US economy and could end up sending inflation higher again."
The Harvard professor and former chief economist of the International Monetary Fund told Bloomberg that Trump's proposed policies and Joe Biden's current Inflation Reduction Act make them both the "most protectionist" presidential candidates the United States has seen in a while.
"10% tariffs, I think, would push up inflation. They'd push up interest rates. If you do it out of the blue, it's very dislocating to the economy. I think it would tend to be very recessionary and inflationary," he added, expressing concern that other countries might retaliate, potentially sparking trade wars and making Trump one of the biggest threats to the global economy.
Cutting taxes, especially on
corporations and high-income individuals, has been a staple policy for Republicans. In 2017, Trump secured a $1.7 trillion tax cut from Congress. Economists widely agree that this move will further add to the nation’s debt if not offset by other cuts or revenue enhancements.
The Trump tax cuts are set to expire in 2025, and if the Republican returns to power, he will likely pursue an approach opposite to Biden's: raising taxes on the wealthy.
The corporate tax rate, which was lowered to 21% from 35% as part of the 2017 tax cut package, may be maintained at the current level if Trump returns to office.
According to Allianz Research, "A Trump 2.0 presidency would inherit very large fiscal deficits from the Biden administration, rising interest
expenses, and an economy probably more prone to bouts of inflation. Another round of large, deficit-financed tax cuts (or increased spending) could thus reignite inflation and heighten concerns about the sustainability of US public finances in the bond markets."
Maxime Darmet, senior economist at Allianz Trade, even predicts that Trump might reverse some of Biden’s policies supporting green energy and high-tech manufacturing to finance his own industrial policy, which would be broader and less targeted than Biden's.
Darmet noted that the current economic environment is significantly different from the one seen during Trump 1.0. Interest rates are now higher, which makes most of Trump's industrial subsidies inflationary in nature.
While Trump's accusation that the current Democratic administration has ruined the "greatest economy in the history of the United States," which he created, may sound like empty rhetoric, the nation experienced a rapid and sharp recovery post-COVID under the Biden-Harris administration compared to its Western and G7 peers. Additionally, the current government has done a far better job of adding new jobs in record time.
If we take a close look at Kamala Harris’ roadmap for the US economy, it appears to be geared toward benefiting the middle class and working Americans by making housing, groceries, child-rearing, and prescription drugs more affordable. Additionally, she aims to support the growth of small businesses and startups. On the other hand, Trump, if elected for a second term, plans to implement targeted import tariffs, industrial subsidies, and more tax cuts, while reversing some of Biden’s policies in support of green energy and high-tech manufacturing. This approach would finance a broader and less targeted industrial policy compared to Biden’s.
However, regardless of who becomes the next President, they will inherit an American economy with large fiscal deficits, rising interest expenses, and a potential for increased inflation. How the new leader addresses these challenges will be crucial in determining the nation's future economic stability.
Prabowo intends to raise the budget deficit cap, currently set by law at 3% of Indonesian GDP, as well as increase the government debt-to-GDP ratio from the current level of 38.11%
In March 2024, Indonesia’s election commission confirmed Defence Minister Prabowo Subianto as the Southeast Asian nation’s next president. Prabowo won the February 14 contest with more than 58% of the nationwide vote. Immediately after his election win, Prabowo pledged to govern for all Indonesians, apart from repeating his earlier pledge of continuing the economic policies of President Joko “Jokowi” Widodo, who during his decade in power, focused mostly on overhauling Indonesia’s infrastructure and promoting foreign investment.
Despite being a resilient economy, achieving the 7% target looks like a pretty tough one for Indonesia as of now.
The last time it achieved the milestone was way back in 1996
“We will use the strong foundation he has built, especially in the economic sector, to work faster, harder, to bring results as quickly as possible to the Indonesian people,” Prabowo said.
In this article, we will explore the significance of the outcome for the Indonesian economy.
The ground reality
Joko “Jokowi” Widodo came to office in 2014 by pitching a promise of raising the Southeast Asian country’s growth rate to 7%. Prabowo has taken the game higher by suggesting that a double-digit growth was possible. However, the Q4 2023 data shows that Indo-
nesia's GDP growth settled at 5.0%. The economy grew 0.45% compared to the previous quarter, and economic activity picked up ahead of the election.
Household spending (up by 4.5%) supported the growth. Government outlays posted growth but were more modest, up roughly 2.8%. The economy also got a boost from fixed capital formation, which expanded 5.0%, thereby managing to post decent growth despite seeing borrowing costs at elevated levels.
While Indonesia’s growth remains resilient, supported by declining inflation and a stable currency, the World Bank states that the nation's GDP growth will ease slightly to an average of 4.9% over 2024-2026 from 5% in 2023 as the commodity boom loses steam. Private consumption will be the primary growth driver, while business investment and public spending will also pick up due to reforms and new government projects.
However, the overall economic outlook still possesses downside risks, mostly due to external factors like higher-for-longer interest rates in major economies, which, apart from weighing on global demand, will increase borrowing costs and make it harder to borrow on world markets. Add the geopolitical uncertainties, which may disrupt supply chains.
The World Bank has some advice for the Southeast Asian country: speed up growth and strengthen resilience while transitioning into a low-carbon and climate-resilient economy that will
eventually reduce poverty.
Despite being a resilient economy, achieving the 7% target looks like a pretty tough one for Indonesia as of now. The last time it achieved the milestone was way back in 1996, just before the Asian Financial Crisis. Since the Southeast Asian country transitioned to democracy in 1998, promises of higher growth have remained as empty rhetoric than the policies that could have supported the plan.
Widodo wasn’t able to complete his “7% growth” prophecy. However, he has achievements to flaunt. A decade ago, Indonesia used to be one of the “Fragile Five”, a group of emerging-market economies vulnerable to high interest rates abroad and a strong dollar. As of 2024, its current account is roughly balanced and its external debts are modest.
Jokowi’s omnibus bill, which cuts restrictions on foreign investment and simplifies licensing, finally became law in 2023. Also, Indonesia’s infrastructure has improved over the past decade, highlighted by the construction of thousands of kilometres of roads.
Jokowi's other milestone is Indonesia's nickelfocused industrial policy. The metal is used in electric vehicle (EV) batteries, and Indonesia has the world’s
largest deposits. Indonesia, by banning the export of its raw ore, is now forcing companies to process and manufacture in Indonesia. BYD, Ford and Hyundai are now investing in the Southeast Asian nation.
Exports of ferronickel, a processed form of the metal, rose from $83 million in 2014 to $5.8 billion in 2022. However, as per Cullen Hendrix of the Peterson Institute for International Economics, lithium-iron phosphate batteries, which contain no nickel, are becoming more popular. Sodium-ion batteries, which need neither nickel nor lithium, could surpass both types. In 2024, JAC Motors, a Chinese carmaker, delivered the first lot of commercial vehicles powered by sodium-ion batteries to customers.
Despite reforms introduced by the omnibus law, rules requiring imports to be screened at particular entry points have remained at a 22% tariff, and as per the World Bank, the ratio is more than twice the South-East Asian average.
Compare Indonesia with its neighbours Malaysia, Thailand and Vietnam and there is a stark difference. The three countries place fewer restrictions on outside investors and are becoming obvious destinations for firms looking for alternatives to Chinese manufacturing. Indonesia is losing out big time here, as its exports of electronics are not just
lower than any other large economy in Southeast Asia, but the sector's overall growth ratio in the country has slowed down too.
However, not everything is bleak. Since 2014, the Indonesian economy has grown by an average of 4.2% every year. Take out the pandemic years of 2020 and 2021 that figure goes up to 5.1%. Economic activity has not remained entirely dependent on commodity exports, with growth being increasingly driven by a combination of consumption and investment.
According to the World Bank data, net foreign direct investment averaged $15.5 billion a year from 2014 to 2022, and portfolio investment averaged $12.6 billion a year. Investment has come from a variety of sources and in a variety of forms. Domestic capital markets have flourished, especially the stock exchange, whose market cap has
grown tremendously over the last 10 years, with hundreds of new companies having gone public.
On the infrastructure front, the count of toll roads, airports, power plants, and dams has gone up in 10 years. At the same time, fiscal reforms drove tax revenue up. Despite increased spending, Indonesia’s fiscal health is quite good. One can argue that the Jokowi era also saw wasteful public works projects, widespread corruption, and the prioritisation of economic growth over the interests of local communities and the environment. However, a 5% annual growth anchored by investment and consumption, combined with big spending on infrastructure and social welfare and financed by sound fiscal policies makes the outgoing President's rule a fruitful one.
Indonesia has a goal of becoming a high-income developed country by
2045. To fulfil that, the nation needs a national programme capable of effectively harnessing Indonesia’s human capital and population characteristics. Widodo’s "Kartu Prakerja" programme has become a good example for the future Indonesian administration to advance the nation’s economy by harnessing human capital.
The programme, which aims to enhance the competence, productivity, competitiveness and entrepreneurial development of Indonesia’s workforce, has been made available for Indonesian citizens over 18 years who are not enrolled in formal education and do not engage with other welfare programmes.
The Kartu Prakerja programme, a conditional cash transfer scheme, started in 2020. Under it, participants get vouchers to purchase training courses and once they complete the
Source: Statista
training, they receive a cash incentive. In the pandemic-disrupted 2020, the initiative reached over 5 million.
A further 17.5 million recipients were reached in the next couple of years through online training, with the beneficiaries getting digital wallet incentives through fintech companies and banks.
What the Southeast Asian country needs is a series of reforms that will allow investors to deliver the jobs boom. These reforms can be as simple as regulatory changes like creating a truly level playing field between state-owned and private enterprises or allowing easier immigration avenues for skilled foreign labour. In short, reforms that will make the Indonesian economy a competitive one in a globalised world order. Also, Prabowo needs to ensure job creation, poverty reduction and price stability.
"Prabowo’s economic technocrats need to convince him, in the context of a still-underdeveloped tax base and limited domestic savings available to underwrite private and public investment, that alongside deepening Indonesia’s own capital markets, there is no alternative to inviting a bigger role for foreign investment in the economy if Indonesians’ expectations for
growth, expanded public services and better employment prospects are to be met," EastAsiaForum noted.
The former general has an ambitious plan to raise the tax-toGDP ratio from 10% to 16% and become a food-exporting nation in the next four years. His 8% growth target is higher than the World Bank’s January 2024 forecast, which predicted Southeast Asia’s biggest economy to grow only 4.9% this year and next.
Bhima Yudhistira, director at the Jakarta-based Centre of Economic and Law Studies (Celios), while interacting with the South China Morning Post, called Prabowo’s 8% growth forecast a “delusional and unfounded” target that was reminiscent of Widodo’s promise of a 7% annual growth rate during his first presidential campaign a decade ago.
Prabowo intends to raise the budget deficit cap, currently set by law at 3% of Indonesian GDP, as well as increase the government debt-toGDP ratio from the current level of 38.11%. He has pledged to uphold Widodo’s economic policies while urging the nation to adopt the best economic practices from major Asian powers such as China and India in order to progress. Additionally, he has promised to enhance the private sector's contribution and promote efficiency in state-owned enterprises.
Prabowo has also sought advice from experts on potential new sources of tax revenue. As per the OECD, Indonesia’s current tax ratio of around 10% is lower than the Asia-Pacific average (19.8% in 2021).
Bhima thinks that in case Prabowo raises taxes for the country’s 52 million middle class, the move will affect Indonesia's purchasing power and household consumption.
Bhima credited outgoing Finance Minister Sri Mulyani Indrawati behind Indonesia’s sound fiscal discipline. However, it’s unclear that Sri will join Prabowo’s new cabinet as her relationship with the government soared since Widodo asked the veteran economist to allocate more spending to social assistance programmes ahead of the election.
In December 2023, Prabowo revealed that his programmes to modernise Indonesia’s ageing military were hindered by a lack of funding. This, as per the analysts, may have also hurt his ties with Sri.
“The future minister of finance must act as a brake on Prabowo’s populist programmes. If you can’t apply the brakes, there will be fiscal pressure that will be felt by all economic indicators, and capital outflow will occur,” Bhima told the South China Morning Post.
According to a McKinsey Global Institute report, Europe-based big businesses invested 60% less in 2022 than their American counterparts and expanded at a rate of two-thirds slower
IF CORRESPONDENT
Europe's economic share of the global market is declining, and concerns about the continent's ability to compete with powerhouses like China and the United States are growing. Enrico Letta, a former Italian Prime Minister, recently gave the European Union a report on the single market's future and declared, "We are too small."
The head of Norway's sovereign wealth fund, the biggest in the world, Nicolai Tangen, told The Financial Times, "We are not very ambitious." The European Chamber of Commerce has declared that "European businesses need to regain selfconfidence."
There is an endless list of factors contributing to the socalled "competitiveness crisis" in the European Union (EU), including an excessive number of regulations and insufficient authority held by Brussels' leadership. Companies are too small to compete on a global scale; public and private investments are too low; and financial markets are too fragmented.
"Our organisation, decision-making and financing are designed for ‘the world of yesterday,’ pre-COVID, pre-Ukraine, preconflagration in the Middle East, pre-return of great power rivalry," Mario Draghi, a former president of the European Central Bank who is heading a study of Europe’s competitiveness said.
It is now impossible to take for granted cheap energy from Russia in the post-Ukraine scenario, inexpensive exports from China, and a firm reliance on United States military defence. Concurrently, hundreds of billions of dollars are being directed by Beijing and Washington toward the development of their own semiconductor, alternative energy, and electric vehicle industries as well as the disruption of global free trade agreements.
According to a McKinsey Global Institute report, Europe-based big businesses invested 60% less in 2022 than their American counterparts and expanded at a rate of two-thirds slower. In terms of per capita income, it is typically 27% less than that of the US. Furthermore, compared to other large economies, productivity growth is slower and energy prices are significantly higher.
Draghi's report, in all likelihood, will be made public after the parliamentary election of the European Union is over. However, he has already declared that “radical change” is necessary. From his perspective, this entails a massive rise in collaborative spending; a reorganisation of Europe's convoluted financing and regulatory framework, and a consolidation of smaller businesses.
The inherent difficulties in coordinating the actions of over 22 nations have gotten more acute due to the speed at which technology is developing, the escalating number of international conflicts, and the growing reliance on national policies to direct business. Imagine if the federal government's ability to raise money to finance the military was restricted and each state in the United States retained its national sovereignty.
Europe has started moving in the right direction already. The European Union first proposed an industrial defence policy, and it passed the Green Deal Industrial Plan in 2023 to expedite the energy transition. However, compared to the resources that China and the United States are using, these efforts are insignificant.
the bloc "is set to fall far behind its ambitious energy transition targets for renewable energy, clean technology capacity and domestic supply chain investments."
Draghi believes that for the European Union to stay up, public and private investment in the digital and green transitions alone needs to increase by half a trillion euros annually ($542 billion).
The European Commission, the EU's executive body, ordered both his report and Letta's to aid in directing decision-makers when they convene in the fall to draft the bloc's next five-year strategic plan. A considerable portion of people still favour free markets and are wary of government interference in Europe and other regions.
However, there is a growing consensus among Europe's most powerful politicians, business executives, and officials regarding the necessity of more assertive group action.
They contend that Europe cannot effectively compete if public funds are not consolidated and a single capital market is not established. This will prevent the continent from investing in crucial areas like energy, defence, and supercomputing.
Furthermore, it cannot compete with the economies of scale enjoyed by enormous foreign corporations that are better positioned to gobble up market share and profits if smaller businesses are not consolidated.
According to Draghi, Europe possesses at least 34 major mobile networks, while China and the United States have four and three, respectively.
According to an analysis released by the research firm Rystad Energy, European Union’s Gross Domestic Product from
Letta claimed that during his sixmonth research trip to 65 European cities for his report, he witnessed
Source: Statista
first-hand the peculiar competitive shortcomings of Europe.
"By high-speed train between European capitals" was not an option, he declared.
This stark contradiction serves as a metaphor for the issues facing the single market. However, there may be political pushback to the suggested fixes. Concerns about jobs, living standards, and purchasing power are major issues for many politicians and voters throughout the continent. Giving Brussels more power and resources, though, is something they are cautious about.
Furthermore, they frequently find it difficult to witness the demise of well-known administrative guidelines and business practices or the merger of national brands with competitors.
Another concern is that there might be an increase in red tape. In 2024, in protest of the numerous environmental regulations imposed by the European Union that govern their use of pesticides
and fertilisers, planting schedules, zoning, and much more, irate farmers in France and Belgium blocked roads and dumped truckloads of manure.
For far-right political parties seeking to capitalise on economic concerns, blaming Brussels is also a handy strategy. The European Union has been dubbed the "enemy of the people" by the anti-immigrant National Rally party in France.
According to the current political undercurrent, right-wing parties are gaining big time in the European Parliament, further fracturing the legislative body. Government officials at the federal level tend to defend their rights. The European Union has been working to establish a single capital market for the last ten years to facilitate international investment.
However, a lot of smaller countries, like Sweden, Ireland, and Romania, have resisted changing their laws or giving up control to Brussels because they fear it will hurt their own financial sectors.
The consolidation of power worries civil society organisations as well. Thirteen European organisations released an open letter in May 2024 alerting readers to the dangers of increased market consolidation, which they said would hurt workers, small businesses, and consumers while giving corporate giants undue power and driving up prices.
Europe has been lagging behind the rest of the world for over ten years in many competitiveness metrics, such as capital investments, research and development, and productivity growth. However, McKinsey claims that it is a global leader in lowering emissions, reducing income inequality, and
promoting social mobility.
Also, choice plays a role in some of the economic differences with the United States. Because Europeans choose to work fewer hours on average over their lifetime, the difference in percapita GDP between Europe and the US is half. Others caution that if Europeans wish to keep their standards of living, they may no longer have the luxury of making such decisions.
According to Simone Tagliapietra, a senior fellow at the Brussels-based research group Bruegel, policies controlling energy, markets, and banking are too dissimilar.
"If we continue to have 27 markets that are not well integrated. We cannot be competing with the Chinese or the Americans," he remarked.
Europe's recovery remains firmly on course, driven by internal demand. All of the major economies performed marginally better than predicted till April 2024, which shows growth that is slightly above expectations, according to the most recent GDP data for the euro area. The healing process is propelled by a rise in both consumer and business optimism. Household finances are fortified by persistent job markets, resulting in a rebound of incomes.
In various countries, disinflation is ongoing and is preparing the ground for interest rate cuts. As of April 2024, the inflation rate in the euro area has stayed the same at 2.4%. Additionally, the core inflation rate has noticeably decreased. FEATURE EUROPE
Established in 1967, Al Ahli Bank of Kuwait (ABK), was recently recognised as ‘Best Workplace in the Banking Sector’ by International Finance. This honour serves as a testament to ABK's unwavering commitment to fostering a culture of continuous learning, employee development, and excellence in benefits and compensation.
One of the top Kuwaiti banks in the Middle East and North Africa (MENA) region, ABK offers a vast range of personal, corporate, and private banking products and services to individual and corporate clients. This is in addition to a wide selection of local, regional, and global investment services and solutions through its subsidiary, ABK Capital.
Commenting on the award, Afrah Al Arbash, General Manager of Human Resources at ABK, said, "This accomplishment comes from our fulfilment of International Finance’s requirements and our demonstration of exceptional performance, innovation, and leadership in the banking industry. This involves showcasing effective human resource management,
Al Ahli Bank of Kuwait is committed to empowering staff by investing in their growth and development
including talent development and a supportive workplace culture that fosters employee wellbeing as well as professional and career growth across the Bank’s divisions.”
“Investing in the growth and development of our workforce is of high priority to our organisation. We therefore offer comprehensive training programmes and access to diverse learning opportunities to empower our employees and cultivate a positive work culture that fosters productivity and loyalty,” she added.
ABK’s commitment to employee wellbeing and ongoing endeavour to enhance policies supporting diversity and inclusion proved to be the decisive factor over its rivals, as the venture won the honour.
Stressing that the Bank has fostered a culture of equality, Al Arbash continued, “By prioritising our employees’ personal and professional wellbeing, we have created a supportive and inclusive environment that values each individual’s valuable contribution.”
During the event, Al Arbash highlighted that ABK prides itself on setting the bar high when it comes to benefits and compensation.
"The Bank goes above and beyond to create competitive packages that not only attract top talent but also retain existing employees. This contributes to a healthy workplace that allows mutual progressive growth," she remarked.
It is worth mentioning that the International Finance award is one of several accolades that ABK has received, adding to the Bank’s impressive track record of achievements. In 2023 alone, ABK was recognised for its outstanding
performance, innovation, and commitment to excellence in the banking industry across Human Resources, Retail, Governance, and Corporate Banking.
Receiving the ‘Best Workplace in the Banking Sector’ award from International Finance solidifies the Bank's position as an industry leader in providing a supportive, rewarding, and dynamic work environment that empowers employees to reach their full potential while delivering exceptional value to customers and stakeholders.
On a related note, ABK has been a strong supporter of the ‘Let's Be Aware’ awareness campaign by the Central Bank of Kuwait and the Kuwait Banking Association as it aims to promote financial inclusion through various initiatives and content that educate the Kuwaiti society about customer rights and duties, different types of banking products and services, and services that are specially tailored for special
needs customers.
Furthermore, ABK consistently provides strategic information on avoiding electronic fraud as well as educates its customers on loan application requirements, digital services, and more. It is committed to empowering customers with the knowledge and tools needed to make informed financial decisions.
Some oppose an outright ban on using smartphones in schools, saying removing critical communication devices from schools will not address the root of the problem
School is no place for cellphones: This new message has been the talk of the town in 2024. In the United States, authorities are imposing some of the strictest bans on smartphones and in the words of Jennifer Jolly, Emmy Award-winning consumer tech columnist, educators, lawmakers and even some students are now agreeing to the fact that technology is indeed becoming a constant distraction, taking a toll on academic performance and mental health.
Nearly threequarters of high school teachers and one-third of middle school teachers in America are now saying that smartphone distractions are becoming a significant problem in their classrooms, according to a Pew Research Centre survey released in June
“Cellphones are a drug, and kids are wired to get addicted,” Idaho's Boise County Sheriff Deputy Dave Gomez told USA Today.
Gomez has been a school resource officer for the past 11 years and says he has seen the problems with students and smartphones get worse every year.
In July 2024, the Los Angeles Unified School District Board, overseeing approximately 1,000 schools, approved a resolution to create a policy banning student use of cellphones and social media platforms in public schools. This decision joined a growing trend across American districts, states, and cities. Although the policy is set to be implemented in 2025, it will not take effect until then.
Finding the rationale
Recently, US Surgeon General Dr Vivek Murthy called for warning labels to be added to social media platforms, similar to the health warnings that appear on tobacco and alcohol products.
Jennifer Jolly talked about a case from Wilmington, North Carolina, where a person named Leigh Hicks allowed her daughter to use an iPhone just before the sixth grade. Hicks used Apple’s parental controls and set strict ground rules around her daughter’s iPhone. Still, within a year, her daughter, in the words of Hicks, "Was completely and totally consumed by that smartphone and social media, and it absolutely changed who she was. She got maybe like 23 write-ups in school. She would sneak into my room at night and use my face or my finger to unlock the phone in the middle of the night. It was a horrible experience.”
Hicks had to get rid of the phone. Now, her almost 16-year-old daughter is starting 10th grade with a Lively Jitterbug Flip2 phone, a device marketed mainly to senior citizens for simple calls and texts.
Virginia-based first grade teacher Allison Graves also regretted giving her daughter an older-model iPhone just before the seventh grade. Despite her locking down her daughters’ phones, apart from setting Apple screen time limits and turning on content, privacy and app download restrictions, the child managed to have TikTok on it.
Graves eventually replaced the device with a Bark phone built specifically for kids. The phone's uniqueness lies in the fact that it can be modified
Source: Statista
with features as kids mature.
Many schools from Seattle to St. Louis are adopting a no-cellphone policy, and several states are also implementing measures to keep phones out of schools. Even states such as New York and California are considering similar policies. As of August 2024, 11 states either restrict cellphones in schools or have policies that encourage schools to do so from the beginning of the school day until the end.
Nearly three-quarters of high school teachers and one-third of middle school teachers in America are now saying that smartphone distractions are becoming a significant problem in their classrooms, according to a Pew Research Centre survey released in June.
Another study released last fall by Common Sense Media shows that 97% of kids use their phones at school. The average student gets about
60 notifications during school hours in a single day and spends 43 minutes, about the same length as a full class period, on their phone.
Nearly three-quarters of US high school teachers say smartphones are a major distraction in the classroom, according to a Pew Research poll conducted in November 2023.
“High school teachers are especially likely to see cellphones as problematic. About seven in 10 (72%) say that students being distracted by cellphones is a major problem in their classroom, compared with 33% of middle school teachers and 6% of elementary school teachers,” the survey reported.
As per the Pew report, high school teachers are especially likely to see cellphones as problematic. About seven-in-ten (72%) say that students being
distracted by cellphones is a major problem in their classroom, compared with 33% of middle school teachers and 6% of elementary school teachers.
Overall, 82% of American teachers say their school or district has a cellphone policy of some kind. Middle school teachers (94%) are especially likely to say this, followed by elementary (84%) and high school (71%) teachers.
However, as the study covered the views of a few American teenagers (back in 2023), 95% of the respondents said they have access to a smartphone. Even as some policymakers and teachers see downsides to smartphones, these teenagers tend to view the devices as a more positive than negative thing in their lives overall.
"Seven-in-ten teens ages 13 to 17 say there are generally more benefits
than harms to people their age using smartphones, while three-in-ten say the opposite. And 45% of teens say smartphones make it easier for people their age to do well in school, compared with 23% who say they make it harder. Another 30% say smartphones don’t affect teens’ success in school," the report noted.
Jonathan Haidt, social psychologist and author of "The Anxious Generation: How the Great Rewiring of Childhood Is Causing an Epidemic of Mental Illness," said his research has identified a strong link between smartphone use and declining mental health.
“To the teachers and administrators I spoke with, this wasn’t merely a coincidence. They saw clear links between rising phone addiction and declining mental health, to
say nothing of declining academic performance,” Haidt mentioned, as he continued, “A common theme in my conversations with them was: We all hate the phones. Keeping students off of them during class was a constant struggle. Getting students’ attention was harder because they seemed permanently distracted and congenitally distractible.”
In February 2024, British communications regulator Ofcom found nine in 10 youngsters in the United Kingdom own a mobile phone by the time they are 11. The regulator further said more should be done by social media companies and caregivers to protect children from harmful online content.
Daniele Harford-Fox, principal of Guernsey's Ladies College, located in Guernsey, one of the Channel Islands in the English Channel near the French coast, told the BBC, "I
absolutely think mobile phones, in under-16s particularly, should be banned in schools. Social media companies are creating algorithms that are keeping us addicted to our phones and we are seeing this dramatic rise in mental health and wellbeing problems in young people. So for me, there is no question that for eight hours of the day at least I can protect children from that exposure and I am going to do it."
Harford-Fox added that since controls had been put in place at her college, things took a positive turn, with students experiencing "more play and connection" between themselves.
Liz Coffey, executive principal of the Secondary School Partnership in Guernsey, said the island's four States-funded high schools have enacted a similar policy.
Dr Carmel Corrigan, Jersey's Children's Commissioner, however, is among those who think the time for banning smartphone technology has passed.
She said that there's a "huge amount of positive things" smart technology can be used for, from improving "safety, educating and forming social contacts".
banning smartphones in schools work?
Marilyn Campbell, professor of early childhood and inclusive education in the Faculty of Education at Queensland University of Technology, and Elizabeth Edwards, associate professor in education at the University of Queensland, Australia, carried out a “scoping review” of published and unpublished global evidence for and against banning mobile
phones in schools. The findings were published in March 2024.
The research covered 1,317 articles and reports, including dissertations from master's and PhD students, written between 2007 (when the smartphone was first introduced) and May 2023. The authors also identified 22 studies that examined schools before and after phone bans. These studies covered schools in approximately 12 countries.
From their initial research, Campbell and Edwards said they found only weak evidence for the benefits of banning smartphones in school.
However, Policy Exchange, a British educational think tank, published a study in May 2024, titled "The Case for a Smartphone Ban in Schools," a study which reportedly showed a clear correlation between an effective phone ban and better school performance.
Opinions on how to address the impact of smartphones and social media vary considerably. Some oppose an outright ban on using smartphones in schools, saying removing critical communication devices from schools will not address the root of the problem.
“I don’t think bans solve the thing that we’re trying to solve, which is trying to get our kids to understand when it’s appropriate to use phones and when it’s not,” Keri Rodrigues, president of the US-based National Parents Union, told Al Jazeera.
However, Daisy Greenwell, cofounder of Smartphone Free Childhood in the United Kingdom, a parent-led organisation that focuses on the responsible use of smartphones with children, said she backs curbs on smartphone use.
“We feel like childhood is being colonised by Big Tech in a way that we’ve not, as a society, spoken about with each other enough,” Greenwell told Al Jazeera, as she added, “Teachers are telling us the biggest problems that they face in school come from the smartphones and the social side and social problems that it causes amongst the pupils.”
While experts and education sector stakeholders argue that banning smartphones in schools can mitigate distractions and enhance focus, the move may also deprive students of valuable learning resources and essential communication tools.
“School’s the same for 120 years, where kids go nine to three, have long holidays, sit at desks and have to regurgitate what the adults tell them to learn, basically all over the world. We’re blaming kids for falling academic standards, we’re blaming the rise in mental ill health, we’re blaming the rise of cyberbullying. Oh, well, it all must be the fault of the mobile phone,” Marilyn Campbell said.
As per the experts, a balanced approach, involving regulated use and clear guidelines, may be the most effective way to harness the benefits of smartphones while minimising their drawbacks. The general recommendation of Campbell and Edwards, who carried out the scoping review in Australia, was to leave it to individual schools to determine smartphone use and to focus on helping children use smartphones positively.
Analysts predicted that by the 2007 end, iPhone sales would reach three million units, making it the fastest selling smartphone ever
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It was late morning in the autumn of 2006, approximately one year before Steve Jobs assigned roughly 200 of Apple's most skilled engineers to work on the project that would redefine the telecom sector in the coming years. Yes, we are talking about the iPhone. However, the prototype was still clearly a disaster in the Apple boardroom. Not only was the product clunky, but it was also inoperable. Data and applications regularly became corrupted and unusable, the phone would frequently drop calls, and the battery would drain before it was fully charged. Problems seemed to be inexhaustible. Upon concluding the demonstration, Jobs gave a stern look to the approximately twelve individuals present in the room and declared, "A product is not yet available."
It was a terrifying effect, even more so than one of Steve Jobs' famous meltdowns. When the Apple chief screamed at his staff, it was scary but familiar. A meeting participant remarked, "It was one of the few times at Apple when I got a chill."
In just a few months, Apple was scheduled to host its annual Macworld convention, with the iPhone slated to be the star attraction. Upon his return to Apple in 1997, Jobs had utilised the occasion to introduce his most significant products and those who followed Apple were anticipating yet another momentous declaration.
Jobs had previously acknowledged that Leopard, the upcoming release of Apple's operating system, would be delayed. If the iPhone wasn't ready in time, Macworld would be a dud, Jobs' critics would pounce, and Apple's stock price could suffer.
The question was, what would AT&T (an American multinational telecommunications holding company) think? Steve Jobs had finally worked out a deal for the iPhone's carrier, the telecom behemoth (then known as Cingular), following a year and a half of closed-door meetings. Jobs had been given unprecedented power by AT&T in exchange for five years of exclusivity, about 10% of iPhone sales in AT&T stores, and a small portion of Apple's iTunes revenue.
He had persuaded AT&T to invest millions of dollars and thousands of man-hours in order to reimagine the labour-intensive in-store sign-up process and develop a new feature known as visual voicemail. He had also negotiated a special revenue-sharing plan that allowed him to take about $10 off each iPhone user's AT&T bill each month.
In addition, Apple continued to have total control over the iPhone's development, production, and promotion. Jobs had achieved the unimaginable: he successfully negotiated a favourable agreement with a major player in the
well-established wireless sector. The least he could do at this point was to meet his deadlines.
For the next three months, there were frequently screaming matches in the hallways. Engineers who were exhausted from working through the night often resigned, only to return a few days later. The product manager locked herself in her office after slamming the door so hard that the handle bent.
A few weeks before Macworld, Jobs had a working prototype that he showed the AT&T suits. He first met wireless boss Stan Sigman (CEO of AT&T) in mid-December 2006 at the Four Seasons hotel in Las Vegas. He demonstrated the iPhone's sharp screen, potent Web browser, and captivating UI. Unusually enthusiastic, Sigman praised the iPhone as "the best device I have ever seen."
On June 29, 2007, six months after its launch, the iPhone went on sale. Analysts predicted that by the end of 2007, sales would reach approximately three million units, making it the fastestselling smartphone ever at the time of publication. It's also possibly Apple's most lucrative product. With every $399 iPhone sold, the company makes an estimated $80, excluding the $240 it receives from each two-year AT&T contract an iPhone customer signs. In the meantime, the iPhone has tripled AT&T's data traffic in major cities like New York and San Francisco, and about 40% of iPhone buyers were brand-new customers.
Although the iPhone has been crucial to Apple and AT&T's success, its true influence has been felt in the way the $11 billion US mobile phone market is structured. For many years, wireless carriers have acted as though manufacturers were subservient, con-
trolling phone production, pricing, and feature availability through access to their networks. The majority of people saw cell phones as disposable, lowcost bait that was heavily subsidised to entice users to use the exclusive services offered by the carriers.
But with the iPhone, carriers started to realise that a well-chosen product, even if it is expensive, can attract consumers and generate income. Nowadays, manufacturers are racing to make phones that consumers will love rather than ones that the carriers will approve of in an attempt to land a deal akin to Apple's.
According to Piper Jaffray securities
analyst Michael Olson, "The iPhone is already changing the way carriers and manufacturers behave."
Jobs began considering creating a phone in 2002, not long after the first iPod was introduced. It makes sense that customers would prefer to have just one device when they see millions of Americans carrying around multiple phones, BlackBerrys, and now MP3 players. In the future, he also anticipated, cell phones and mobile email clients would continue to add features, posing a threat to the iPod's hegemony in the music player market. Jobs anticipated having to enter the wireless industry at some point to safeguard his new
product line.
However, there were challenges. Data networks were unreliable and unprepared for a fully functional handheld Internet device. The operating system for the iPod was not complex enough to handle advanced networking or graphics. Even a stripped-down version of OS X would be too demanding for a mobile phone chip. This meant that Apple had to develop an entirely new operating system for the iPhone.
Apple would also be up against fierce competition: in 2003, people went crazy for the Palm Treo 600, which combined a PDA, phone, and BlackBerry into one stylish package. That increased
the bar for Apple's engineers but also demonstrated that there was a market for a so-called convergence device.
Then there were the cellular service providers. Jobs was aware that they controlled what was built and how it was built, and that they viewed hardware as little more than a means of gaining access to their networks. Being a notorious control freak himself, Jobs was not going to allow a group of executives, or "orifices" as he would later refer to them, dictate how he should design his phone.
The iPod business owned by Apple was both more significant and more susceptible than before, by 2004.
Although the iPod made up 16% of the company's revenue, its long-term position as the industry's leading music device appeared to be in jeopardy given the rise of 3G phones, the impending release of Wi-Fi phones, the sharp decline in storage costs, and the proliferation of competing music stores.
Therefore, Jobs was preparing his entry into the mobile phone industry that summer even as he flatly denied he would create an Apple phone. He went to Motorola in an attempt to get around the carriers.
With the release of the immensely popular RAZR by the phone company and Jobs’ familiarity with Ed Zander, Motorola's CEO at the time, from Zander's time as an executive at Sun Microsystems, it appeared to be a simple fix. With a deal in place, Motorola and the carrier, Cingular, could work out the intricate details of the hardware, leaving Apple to focus on creating the music software.
Of course, Jobs' plan was predicated on the assumption that Motorola would create a worthy replacement for the RAZR, but that was soon to be determined. The three businesses fought over almost every detail, including how songs would be stored on the phone, how much music could be played, and even how each company's name would be shown. There was still another issue: the device itself was unsightly when the prototypes appeared at the end of 2004.
With his trademark panache, Jobs introduced the ROKR in September 2005, calling it "an iPod shuffle on your phone." However, Jobs probably realised he was dealing with a failure; customers detested it. The ROKR, which could only store 100 songs and was unable to download music directly, soon came to
symbolise everything that was wrong with the US wireless industry. It was the result of a tangle of competing interests, with the customer coming last on the list.
Even as the ROKR was going into production, Jobs realised he would have to construct his own mobile device. He met with Cingular in February 2005 to talk about a partnership where Motorola would not be involved. A few Cingular senior executives, including Sigman, were present when Jobs presented his plans in a top-secret meeting held in a hotel in midtown Manhattan.
In December 2006, AT&T acquired Cingular. Sigman continued to serve as the president of Cingular Wireless. Jobs gave Cingular a three-part speech, stating that Apple had the technology to create something "light-years ahead of anything else" that was genuinely revolutionary. Apple was willing to explore an exclusive agreement to close that deal. However, Apple was also ready to become a de facto carrier by purchasing wireless minutes in bulk.
Jobs was justified in his confidence. After nearly a year of developing touchscreen technology for tablet PCs, Apple's hardware engineers persuaded him that they could create a comparable phone interface. Additionally, with the introduction of the ARM11 chip, mobile processors could now run a device that merged the features of an iPod, a computer, and a phone. Additionally, wireless minutes had dropped to the point where Apple could resell them to customers; Virgin and other companies were already doing this.
The iPhone concept instantly captivated Sigman and his group. The approach taken by Cingular and the other carriers encouraged users to access the Internet more and more through their
mobile phones. Price wars were slashing margins, and the voice business was in decline. The iPhone may result in a rise in the number of data users due to its advertised capacity to download media files (music and video) and browse the Internet at Wi-Fi speeds. Furthermore, profit margins were highest in data rather than voice.
Additionally, the Cingular team realised that the wireless business model needed to be altered. Carriers had grown accustomed to considering handsets as useless commodities and their networks as priceless resources. This tactic had worked wonders for them. Carriers facilitated new customer enrolment by offering subsidies for the purchase of inexpensive phones, which in turn led to the signing of long-term contracts that guaranteed a steady stream of revenue. However, wireless access has evolved from a luxury to a need. The carriers' biggest problem wasn't finding new customers; rather, it was stealing existing ones from one another. It wasn't sufficient to simply entice customers with cheap phones; Sigman and his team aimed to offer essential gadgets exclusive to their network. Who better than Jobs to design one?
Cingular found Apple's aspirations to be both exciting and unsettling. A loving partnership with the iPod manufacturer would enhance the brand's appeal. If Jobs was rejected by Cingular, another carrier would undoubtedly sign with him because he was adamant about pitching his idea to anybody who would listen. Sigman knew he would have a difficult time convincing his fellow executives and board members to approve a deal similar to the one Jobs proposed, but no carrier had ever offered anyone the flexibility
and control that Jobs wanted.
Sigman was correct. Throughout the more than a year-long negotiation, Sigman and his team would frequently question whether they were giving up too much ground. Jobs met with some Verizon executives at one point, but they quickly declined him. Assigning blame was difficult. Carriers had been charging suppliers and users for using and selling services over their proprietary networks for years.
Cingular ran the risk of making its renowned and costly network into a "dumb pipe," a mere conduit for content rather than the creator of it, by granting Jobs such extensive control. Sigman's team placed a straightforward wager: the iPhone would generate a massive increase in data traffic that would more than offset any money it lost on content deals.
Jobs wouldn't hold off until the details of the agreement were ironed out. He gave his engineers orders to go full steam ahead on the project around Thanksgiving 2005, eight months before a final agreement was signed. If the talks with Cingular were difficult, they were nothing compared to the technical and creative difficulties Apple encountered.
First, there was the matter of which operating system to select. Mobile chips have become more powerful since the original Macintosh OS prototype was developed in 2002, which is when the idea for the Apple phone was first conceived. An iPhone OS should only be a few hundred megabytes, or about a tenth of the size of OS X, so it would need to be completely rewritten and stripped down.
Jobs and his top executives had to decide how to resolve this issue before they could begin designing the iPhone.
Although Linux had already been modified for use on mobile devices, engineers gave it serious consideration, but Jobs insisted on using his own software.
They developed a phone prototype that was integrated into an iPod and used the click wheel to dial numbers; however, it was limited to selecting numbers and could not browse the Internet. Therefore, Apple started rewriting OS X for the iPhone in early 2006, right as their yearlong effort to modify it to work with Intel chips was coming to an end.
At the very least, all of Apple's senior executives had heard the discussion regarding the appropriate operating system to use. They were ill-prepared to talk about the complexities of the mobile phone industry, such as radio-frequency radiation, network simulations, and antenna design. Apple invested millions in purchasing and putting together specialised robot-equipped testing rooms to make sure the iPhone's tiny antenna could perform its function.
Apple constructed human head models, complete with goo to simulate brain density, and measured the radiation output to ensure the iPhone didn't produce excessive amounts of it. For millions of dollars each, Apple engineers purchased almost a dozen server-sized radio-frequency simulators in order to forecast the iPhone's network performance.
Jobs learnt while carrying a prototype in his pocket that even Apple's prior experience creating iPod screens wasn't helpful in creating the iPhone screen: glass, not the hard plastic used on the iPod, was required for the touchscreen to reduce scratches. An insider projects that Apple invested about $150 million in the iPhone's development.
Jobs remained as secretive as possible throughout. Inside, the project was referred to as P2, or Purple 2, short for Purple 1 (the name of the abandoned iPod phone). Teams dispersed throughout Apple's Cupertino, California, campus. Apple executives registered as workers of Infineon, the company that manufactured the phone's transmitter, whenever they went to Cingular.
The teams responsible for developing the iPhone's hardware and software were kept apart. The former worked with circuitry that contained fictitious software, while the latter used circuit boards that were housed in wooden boxes. Only about thirty of the most senior project members had seen the iPhone by January 2007, when Jobs unveiled it at Macworld.
The iPhone was so overwhelming it was easy to ignore its imperfections. The initial price of $599 was too high (it has been lowered to $399). The phone is connected to AT&T's EDGE poky
network. Video recording and email searches are not possible for users. Programmes written in Java or Flash cannot be executed by the browser.
Still, it was all insignificant. With the iPhone, several advantages for manufacturers, developers, carriers, and customers were made possible, shattering the wireless industry's carrier-centric framework. The product is a user-friendly handheld computer. And just like the introduction of the PC, the iPhone is inciting a new wave of innovation that will boost its capabilities even further. Jobs plans to make a developer's kit available in February so that anybody can create apps for the device.
In the meantime, manufacturers have more negotiating leverage over the carriers they have been working with for many years. Carriers are rushing to find a competitive device and seem willing to give up some authority to get it, having watched AT&T eat away at their
Source: Statista
customer bases. Users, rather than the usual cabal of complacent juggernauts, will have more influence over what gets built, giving manufacturers more control over what they produce.
As the wireless carriers start to show signs of moving away from their walledgarden strategy of trapping customers, application developers stand to gain more opportunities. Google's Android operating system, which facilitates the creation of mobile apps by independent developers, has partnered with T-Mobile and Sprint.
In November, Verizon, a carrier known for its stubbornness, announced that it would allow any compatible phone to use its network. A few days later, AT&T made a comparable statement. This will eventually lead to a whole new wireless experience where apps run on any platform and across any network. It will eventually provide some of the Internet's flexibility and functionality to the wireless world.
The iPhone may seem to have fulfilled the carriers' worst fears, giving manufacturers, developers, and customers complete control while reducing wireless networks to ineffective conduits. However, carriers' networks might become more valuable, not less, by encouraging more innovation. Customers will use their devices and networks more frequently as a result of spending more time on them, increasing costs and profits for all parties.
Paul Roth, president of marketing at AT&T, says the company is looking into new services and products that make use of the iPhone's capabilities, such as mobile banking.
"We have a different perspective on the market," Roth said.
In other words, the very advancement that wireless carriers have long feared might be just what they require. It was demonstrated to them by Steve Jobs.
editor@ifinancemag.com
NAVANIL SENGUPTA ASSOCIATE DIRECTOR AND HEADS GROWTH, BRAND, AND COMMUNICATIONS AT BLINKX
Artificial Intelligence algorithms significantly strengthen risk assessment and fraud detection capabilities
In the words of Steve Jobs: “Innovation is the ability to see change as an opportunity, not a threat.” The financial sector today has started recognising the importance of technology, particularly Artificial Intelligence (AI), in its regular functioning. There are many experts who believe that AI can save the banking industry nearly $1 trillion by 2030.
A thorough understanding of the customer base is pivotal for institutions seeking to thrive in a competitive market. Artificial Intelligence has actually revolutionised how financial institutions comprehend and engage with their clientele. Through Machine Learning (ML) algorithms, AI carries out accurate customer segmentation. This segmentation is not solely demographic but includes transaction history, preferences, and other behavioural patterns. By understanding consumer behaviour at a granular level, institutions can foster deeper connections with customers, resulting in increased customer experience and loyalty.
JPMorgan Chase & Co uses AI to analyse transactional data, social media interactions and customer enquiries, to identify patterns in spending behaviour, investment preferences and life events. Bank of America uses AI-driven segmentation to handle mortgage lending, credit cards, and investment products.
AI has changed the way financial institutions are today
handling customers, enhancing their experience and ensuring loyalty. Chatbots, powered by AI, provide immediate and personalised assistance, addressing customer queries and concerns efficiently. These AI agents provide round-the-clock support, which enhances customer satisfaction and retention. By analysing customer feedback across various channels, they identify areas for improvement. This analysis helps the company develop better products and services tailored to meet customer expectations.
DBS Bank introduced an app where AI chatbots provide financial advice, answer queries, and assist customers manage their finances. The app uses predictive analytics to anticipate customer needs.
Capital One’s virtual assistant, Eno, leverages natural language processing (NLP) software to understand and respond to customer enquiries.
Artificial Intelligence algorithms significantly strengthen risk assessment and fraud detection capabilities. ML models can analyse historical data to identify patterns indicative of potential risks or fraudulent activities. The models continuously learn and adapt to new trends and emerging threats, enabling institutions to mitigate risks effectively. By swiftly detecting anomalies or suspicious activities, AI systems safeguard both the institution and its customers. This proactive approach not only minimises financial losses but upholds trust and confidence in the institution's security measures.
A software developed by NICE Actimize provides
a comprehensive suite of anti-money laundering and fraud prevention solutions to banks, capital markets, and the insurance sector. Similarly, the SAS Fraud and Security Intelligence software provides a robust fraud detection platform, identifying fraudulent behaviour in real-time. Several banks and financial institutions use FICO Falcon and solutions provided by ACI, IBM and ThreatMetrix.
Understanding the diverse needs and preferences of customers is crucial for offering personalised financial products and services. Artificial Intelligence plays a pivotal role in analysing customer data to identify trends and predict future requirements accurately. This enhances customer satisfaction, increasing the probability of cross-selling or upselling opportunities, leading to improved revenue streams.
Goldman Sachs introduced an online lending platform that utilises AI algorithms to offer personalised loan products. The platform assesses individual creditworthiness and financial behaviour to provide customised loan amounts, interest rates, and repayment terms. Barclays has its platform that uses AI-driven algorithms to assess customers' risk profiles, investment
goals, and other preferences.
In an increasingly complex regulatory landscape, compliance remains a top priority for financial institutions. AI-powered systems assist in ensuring adherence to regulatory requirements by automating compliance processes. These systems continuously monitor transactions and activities, flagging any potential deviations from regulatory standards. By automating compliance tasks, institutions can reduce errors, lower operational costs, and mitigate the risk of penalties due to non-compliance. AI facilitates the efficient management of regulatory obligations while enabling institutions to focus on delivering quality services to their customers.
Standard Chartered uses AI-powered systems to analyse large volumes of data to flag suspicious activities, enabling the bank to comply with AntiMoney Laundering (AML) regulations more effectively. HSBC utilises AI-driven technologies for regulatory compliance purposes. The bank also employs AI algorithms to perform Know Your Customer (KYC) procedures, analysing customer data and documents to verify identities.
Artificial Intelligence has transformed traditional market research methods by providing financial institutions with powerful tools to analyse vast amounts of data efficiently. AI algorithms can sift through structured and unstructured data, including social media, news articles, and customer feedback, to identify emerging trends, sentiment, and market dynamics. A leading bank implemented AI-driven market research to understand customer sentiments regarding their services. By analysing social media and customer reviews, the bank identified areas for improvement in its products and services. This datadriven approach helped the bank tailor its offerings to meet customer expectations, resulting in increased customer satisfaction and loyalty.
Predictive analytics powered by AI allows financial institutions to anticipate customer behaviour and preferences. By analysing historical data, AI algorithms can identify patterns and trends, enabling institutions to personalise offerings, predict market trends and optimise business strategies.
As financial institutions handle sensitive customer information, ensuring robust data security and privacy is paramount. AI plays a crucial role in fortifying cybersecurity measures, detecting anomalies, and preventing fraudulent activities. Financial institutions implement AI-powered cybersecurity measures to protect customer data. Through ML algorithms, the system detects unusual patterns in transactions and flag potential fraudulent activities in real time. This
proactive approach ensures privacy and data security, thereby safeguarding customer trust.
The integration of AI in the financial industry raises ethical concerns related to bias, transparency and accountability. Financial institutions need to establish ethical guidelines and frameworks to ensure fair and responsible use of AI technologies. A credit-scoring agency faced criticism for the alleged bias in its AIdriven credit-scoring model. In response, the agency implemented transparency measures, provided explanations for credit decisions, and continuously monitored and adjusted the model to eliminate bias. This commitment to ethical AI practices restored customer trust and ensured fairness in credit assessments. Artificial Intelligence is revolutionising the financial industry by providing powerful tools for market research, predictive analytics, customer segmentation & satisfaction, data security and privacy. However, financial institutions must navigate these advancements, keeping ethical considerations in mind. By embracing AI responsibly, financial institutions can unlock new opportunities, enhance customer experiences, and build trust in an increasingly digital and data-driven era.
Navanil Sengupta is Associate Director and heads Growth, Brand, and Communications at BlinkX by JM Financial. He has an impressive 16-year journey and has held pivotal roles such as CMO at HDFC Securities and led brand, PR, and content mandates at JP Morgan Chase, IDBI Intech, and Syntel Ltd. He holds a BE in Information Technology from Mumbai University and an MBA in Banking and Finance from the University of Wales, UK
The possibility of using AI tools to monitor employees and maybe violate their privacy is a further source of concerny
The quick development of generative AI tools, like Microsoft's Copilot and OpenAI's ChatGPT, has stoked worries that the technology may lead to several privacy and security problems, especially in the workplace.
Because Microsoft's new Recall tool can snap images of your laptop every few seconds, privacy campaigners branded it a potential "privacy nightmare" in May 2024.
According to Microsoft, for Copilot to function properly, the principle of least privilege, which holds that users should only be granted access to the data they require, must be followed
The Information Commissioner's Office in the United Kingdom is interested in this feature and has asked Microsoft to provide further details regarding the product's safety before it launches in its Copilot+ PCs.
A further source of concern is ChatGPT, which has shown screenshotting capabilities in its upcoming macOS software and which privacy experts warn could capture private information.
The Office of Cybersecurity determined that Microsoft's Copilot posed a risk to users because of "the threat of leaking House data to non-House approved cloud services," hence the United States House of Representatives has barred its use by staff members.
However, "Using Copilot for Microsoft 365 introduces the risks of sensitive data and content exposure internally and internationally,"
according to market research firm Gartner. Additionally, Google had to modify AI Overviews, a new search function, last month after screenshots showing odd and deceptive results to queries went viral.
One of the main concerns for people who use generative AI at work is the possibility of unintentionally disclosing private information. The group head of AI at risk management company GRC International Group, Camden Woollven, describes the majority of generative AI systems as, "basically big sponges. They train their language models by consuming vast volumes of information from the internet."
According to Steve Elcock, the CEO and founder of Elementsuite, AI businesses are "eager for data to train their models" and are "apparently making it behaviourally desirable" to do so. Sensitive data may end up "into somebody else's ecosystem" as a result of this massive data collection effort and "it might potentially be removed later with astute prodding," according to Jeff Watkins, chief product and technology officer of digital consultant xDesign.
Additionally, there's the risk that hackers will target artificial intelligence systems directly. "Theoretically, an attacker might siphon off critical data, plant fake or misleading outputs, or use the AI to propagate malware if they managed to obtain access to the large language model
(LLM) that runs a company's AI tools," Woollven explains.
AI tools for consumers carry some clear hazards. However, Phil Robinson, chief consultant at security company Prism Infosec, notes that a growing number of possible problems are emerging with "proprietary" AI products like Microsoft Copilot that are generally considered safe for use.
If access privileges are not restricted, this can potentially be exploited to view sensitive data. Workers might request access to records revealing credentials, pay scales, or M&A activities, which might later be sold or leaked.
The possibility of using AI tools to monitor employees and maybe violate their privacy is a further source of concern. "Your photos are yours; they stay locally on your PC," and "you are always in control with the privacy you can trust," according to Microsoft's Recall function.
However, Elcock notes that "it doesn't seem very long until this technology may be utilised for staff monitoring."
Although there are several possible concerns
associated with generative AI, companies and individual personnel should take precautions to increase security and privacy.
According to Lisa Avvocato, vice president of marketing and community at data provider Sama, the first piece of advice is to avoid entering sensitive information in a prompt for a publicly accessible tool like ChatGPT or Google.
Be general when creating a prompt to prevent oversharing. Instead of saying, "Here is my budget, prepare a proposal for expenditure on a sensitive project," she advises asking, "Prepare a proposal template for budget expenditure. First draft with AI, then add the sensitive material you must include."
Verify the information it offers if you utilise it for research to avoid problems like those with Google's AI Overviews, advises Avvocato. Request citations and links to its sources from it. Even if you ask an AI to write code, you should still review it before approving it.
According to Microsoft, for Copilot to function properly, the principle of "least privilege," which holds that users should only be granted access to the data they require, must be followed. Robinson of Prism Infosec calls this "an important factor. Organisations can't just rely on technology and hope for the best. They need to set the foundation for these systems."
It's also important to remember that, unless you choose the corporate edition or turn it off in
the settings, ChatGPT uses the data you share to train its models.
Companies that include generative AI in their products claim to be taking all necessary precautions to ensure privacy and security. In addition to providing control over the capability under Settings > Privacy & Security > Recall & Snapshots, Microsoft is eager to discuss security and privacy aspects of its Recall product.
"Does not undermine our basic privacy protections for giving users choice and control over their data," according to Google, which also states that generative AI in Workspace does not use user data for advertising purposes.
While enterprise versions of its solutions are available with additional controls, OpenAI reiterates how it ensures security and privacy in its products.
During an interaction with WIRED, an OpenAI representative said, "We take precautions to secure
people's data and privacy—and we want our AI models to learn about the world, not private individuals."
According to OpenAI, it provides controls over the use of data, such as self-service tools for accessing, exporting, and deleting personal data and the option to refuse the usage of content for model improvement. The firm claims that ChatGPT Team, ChatGPT Enterprise, and its API are not trained on data or chats and that its models do not automatically learn from usage.
In any case, it appears that your AI colleague is a permanent fixture. The risks will only increase as these technologies become more complex and commonplace in the workplace, according to Woollven.
Multimodal AI is already starting to appear; an example is GPT-4o, which can evaluate and produce speech, video, and images. Companies now have to worry about protecting more than just text-based data.
According to Woollven, people
and businesses should adopt the mentality that treats AI like any other third-party service in light of this. Share nothing that you wouldn't want to be made public.
There are several obstacles in the way of AI's adoption in various businesses, raising concerns about both its effectiveness and its moral implications. One issue that comes up while discussing AI is known as the "black box" dilemma. In essence, this means that AI systems are often quite enigmatic.
There are situations when we don't fully know what data an AI uses to conclude. It seems like it makes decisions behind closed doors, keeping us in the dark about what's happening.
The transparency of AI is a significant additional worry. If there are any errors, it becomes difficult to identify the culprit.
Possible explanations include errors made by the developer, problems with the data, or potential algorithmic concerns. Determining the origin of the faults becomes challenging.
AI integration can occasionally result in complex ethical and societal problems, such as employment losses and privacy concerns. Although automated systems are excellent at performing tasks that people typically perform, this may result in a reduction in the number of jobs available, which could upset social order.
Many AI systems function as "black boxes." It can be difficult to trust them because it's difficult to see how they work. AI will be a lot simpler to trust if we make it more transparent so you can see how it makes decisions.
Understanding the motivation behind any decision becomes crucial when discussing sectors like banking or healthcare. We can increase the dependability of these systems and foster trust by implementing transparent decision-making.
To make sure AI systems function as intended, they must go through extensive testing and validation before being put into use. This entails checking for ethical ramifications like bias or possible misuse in addition to technical accuracy.
To keep AI systems secure and dependable as they develop, regular upgrades and inspections are essential. Consider AI systems that approve loans. It's critical to
How likely are you to trust a business that uses AI? (In Percentage)
Very Likely: 33%
Somewhat Likely: 32%
Neither Likely Nor Unlikely 21%
routinely check them to ensure they don't have any biases in favour of or against particular groups. If so, we must adjust them to maintain equity. This continuous upkeep enables AI to carry out its duties efficiently and morally.
Ensuring fair operation of AI requires establishing a strong foundation of ethics and rules. This framework must address every aspect, including data handling, privacy protection, accountability, and transparency.
An impartial authority should supervise and uphold these regulations to maintain order. By including these guidelines in the AI development process from the outset, we can guarantee that AI acts morally and protects user privacy at every turn.
While most people view AI as a replacement for human decisionmaking, the proper strategy is to use AI as a tool to augment human capabilities. Because AI and humans each have advantages, we can combine them to provide the best results.
Combining both AI's efficiency and human critical thinking abilities allows us to take advantage of situations where humans evaluate AI's outputs, provide context, or
Somewhat Unlikely: 7%
Very Unlikely: 7%
Human oversight guarantees that final decisions in scenarios where AI is employed for predictive policing or disease diagnosis take into account wider implications and ethical complexity that AI might not fully understand.
Employee education regarding the ethical applications of AI as well as its limitations might help to remove a lot of the mystique around the technology. This facilitates the intelligent and efficient usage of AI tools in a given environment.
By illustrating how AI functions and how it may truly benefit humanity rather than pose a threat, providing training that assists everyone in understanding AI can allay fears and dispel misconceptions.
Going forward, it will be critical for enterprises to develop AI trust as it becomes more integrated into our personal and professional lives. Using these instructional techniques will close the gap and guarantee that people view AI as a positive development rather than a cause for concern.
You can almost see Big Tech's energy-hungry appetite from Scotland's east coast. There is a wind farm about 12 miles offshore, with 60 enormous turbines each possessing blades around the length of an American football field. When finished, the Moray West project's utility providers said the site could produce enough electricity to power 1.3 million homes. This was before Amazon's intervention.
As part of its continuous effort to feed its insatiable demand for power, Amazon said in January 2024 that it had reached an agreement to claim more than half of the site's 880 megawatts of output. The greatest corporations in the world are racing to construct the infrastructure required for artificial intelligence (AI), and even isolated wind farms in Scotland are becoming essential.
In Europe in 2023, $79.4 million was spent on new data centre projects, according to research firm Global Data. There are indications that demand is increasing even in 2024. Microsoft has revealed about betting $3.2 billion on data centres in Sweden. The business also said that it would treble the amount of space it had for data centres in Germany and that it would invest $4.3 billion in AI data centres in France.
As part of an $8.5 billion investment in Germany, Amazon unveiled a network of data centres in Brandenburg state. Later, the company committed an additional $17.1 billion to Spain. To spur the development of AI, Google announced that it would invest $1.1 billion in its Finnish data centre.
There's a panic behind the scenes about how to fuel the massive data centres that the big companies are racing to create. It is the goal of logistics-heavy Amazon to reach net zero by 2040, while Microsoft, Meta, and Google want to reach net zero by 2030. Over the last ten years, several corporations have acquired contracts for renewable energy from the solar or wind industries to achieve that goal. However, as the need for clean energy rises, power grids, the foundation of all these projects, are breaking. This puts pressure on the big IT companies to plan for their energyintensive futures and explore ways to run their off-grid power empires independently of the system.
According to Colm Shorten, senior director of data centre strategy at real estate services company JLL, "There is a recognition that the industry will have to find alternative energy sources as power demand increases, while adding that server farms are increasingly searching for "behind-the-wire" power supplies, such as gas/diesel generators, or more cutting-edge technology like green hydrogen."
In essence, grid operators are saying the same thing. Two years ago, Eirgrid, the stateowned energy provider in Ireland, put an
effective ban on data centres located in Dublin, citing grid issues. The Dutch Data Centre Association, a business association, retaliated against the mayor of Amsterdam's introduction of a similar pause. In a statement, it stated that "the existing grid congestion in North Holland is hindering the growth of the data centre sector."
Data centres are moving into more noticeable parts of Europe in their quest for grid space, and when they do, they run the danger of encountering resistance from the smaller villages.
According to Simon Hinterholzer, a researcher at the German Borderstep Institute for Innovation and Sustainability, that trend is already evident in Germany.
"Frankfurt used to be the site of most new data centre construction. In the past two or three years, this has entirely changed," he claimed, while citing the construction of a 300-kilowatt data centre in Wustermark, a small
town, and the most recent investment made by Amazon in Brandenburg, a neighbourhood that borders Berlin, and saw the installation of more than 70 turbines in 2023.
The long-term survival of data centres outside the grid is becoming more and more necessary.
"The scope of AI projects is expanding exponentially, with the potential to reach 1 gigawatt of power that is not attainable through traditional power grids," states Ricardo Abad, the founder of Quark, a data centre that is developing a new location in Spain with an undisclosed partner that will have on-site solar and wind power for selfgeneration.
Although these kinds of on-site projects can function independently, they are theoretically still linked to the grid in case they wish to export extra electricity.
Amazon unveiled its largest-ever on-site solar farm, covering the roof
and parking lot of its fulfilment centre in Seville, Spain, the same year Dublin placed restrictions on data centres. For its upcoming server farms, Google's head of data centre location strategy in Europe has also shown interest in onsite renewable energy sources. Both Microsoft and Meta denied managing any fully off-grid initiatives. However, Microsoft is constructing a data centre in Dublin in addition to its gas backup plant, so even if the grid operator switches it off, the website will continue to function.
Big Tech is looking for renewable energy ideas. According to Kilian Wagner, a specialist in sustainable digital infrastructures at the German digital association Bitkom, "Technology like enhanced nuclear reactors, renewable energy sources, and energy storage systems will be important in making this possible in the future."
As an investor in Helion Energy, an American nuclear fusion firm, OpenAI
Compound
Source: Statista
boss Sam Altman has also committed to supply Microsoft with 50 megawatts of electricity from its first operational fusion nuclear plant. Microsoft has been experimenting with hydrogen fuel cells in the United States and is promoting them as an emission-free backup power source.
It's unclear what the rest of us would lose out on if server farms went off-grid. Big Tech companies may find success going it alone in their quest for the sustainable energy source of the future. The grid is their only option till they figure it out.
There may be a substantial energy cost associated with using AI for some tasks.
Journalist Melissa Heikkilä detailed in an article from December 2023 that some sophisticated AI models can use as much energy to generate an image as it does to charge your phone.
According to the researchers Melissa
spoke with, producing 1,000 photos with a device like Stable Diffusion XL produces as much carbon dioxide as driving slightly more than four miles in a gas-powered automobile.
Although created visuals are visually striking, many AI jobs consume less energy. For instance, producing graphics requires thousands of times more energy than producing text. Additionally, it can be dozens of times more economical to use a smaller, task-specific model rather than a large, general-purpose generative model. Either way, we use generative AI models a lot, and they consume energy.
By 2026, data centre, artificial intelligence, and cryptocurrency electricity demand may quadruple from 2022 levels, the International Energy Agency projects. In 2022, those technologies will account for about 2% of the world's total electricity consumption. Be aware that these figures don't only apply to AI; it can
be challenging to pinpoint AI's precise impact. With that in mind, keep in mind projections regarding data centre electricity consumption.
The IEA's forecasts are subject to a wide range of uncertainty, based on factors like the rate at which deployment rises and the efficiency of computational operations. At the low end, the industry might need an extra 160 terawatt-hours of electricity by 2026. That figure could be as high as 590 TWh.
According to the analysis, the combined effects of Bitcoin, data centres, and AI are probably going to increase world electricity demand by "at least one Sweden or at most one Germany."
The IEA estimates that during that same period, global electricity demand will increase by almost 3,500 TWh. While computing plays a significant role in the shortage of electricity, it is by no means the entire story. The need for power will rise more from the industrial sector and electric vehicles than from data centres in the EU, for example.
Nevertheless, a few major tech firms are speculating that AI might interfere with their efforts to combat climate change. Microsoft committed to achieving zero or even lower greenhouse gas emissions by the end of the decade four years ago.
However, the company's most recent sustainability report reveals that emissions are continuing to rise, with some executives blaming artificial intelligence for this. 2020 saw the release of our carbon moonshot. That was before the artificial intelligence explosion, Microsoft President Brad Smith said.
