International Finance Mar - Apr 2018: Investment Trends for 2018 by International Finance

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March - April 2018

Volume IV Issue 3

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UK £4 | Europe €5.35 | USA $6

Acing Self Employment In A Modern Economy

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PSD2 A Catalyst For Innovation In Financial Services

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Yearly Forecast For Major World Currencies

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UAE’s next major investment hub His Excellency Sheikh Mohammed Bin Saud Al Qasimi, chairman of Sharjah Asset Management explains how the emirate of Sharjah is leading the path of economic diversification using innovation and technology

MOST INNOVATIVE BANK AND FASTEST GROWING BANK International Finance Magazine presents ABK with the 2017 Most Innovative Bank and Fastest Growing Bank in Egypt awards.

Simpler Banking

Note FROM EDITOR

he second issue of International Finance for 2018 explores the coming of age of trade and business as we know it. Brexit continues to highlight major concerns about business in Europe and UK, and one can expect a ripple effect of this major political shift to continue this year too. In this issue, asset management takes the spotlight. Some of the topics include Asia as a favourable asset management destination, while we have experts weighing in on managing zombie assets as well as the investor forecast for 2018. The special focus is on the emirate of Sharjah, with the chairman of Sharjah Asset Management Sheikh Mohammed Bin Saud Al Qasimi explaining how economic diversification has positioned Sharjah as a robust investment destination in UAE. 2018 has been momentous for the UAE, which rolled out Value Added Tax (VAT) in January, so how are businesses ensuring compliance? With the advent in technology and changing

ways of doing business, gig economy is gaining traction in the West. One of the biggest financial events was the World Economic Forum held in Switzerland in January, and we have a round-up of what happened in Davos. Technology is taking over our lives in more ways than we can imagine. The world faces the prospect of dealing with cryptocurrency and how it will change transactions. Taking this technology a step further is blockchain and its impact on the gaming industry. Saudi Arabia is taking its first steps to incorporate blockchain in its economy as well. As the world finds new ways to diversify business interests, there is no denying the role of entrepreneurs in shaping the future. As part of our creative landscape, we will be featuring interesting startups from around the world. To inaugurate this special segment are two millennialfriendly startups from the UK, focusing on generation rent and Muslim lifestyle. We welcome your feedback and comments. Do write to us at editor@ifinancemag.com

Director & Publisher Sunil Bhat Editor Sindhuja Balaji Production Sarah Williams, Mark Miller Editorial Adriana Coopens, Jessica Smith, Lacy De Schmidt, Madhurima Roy, Sangeetha Deepak Business Analysts Dave Jones, Sharon Mendis, Sean Thomas Business Development Manager Steve Martin Business Development Sunny Shah, Sid Jain Accounts Angela Mathews Registered office INTERNATIONAL FINANCE is the trading name of INTERNATIONAL FINANCE Publications Ltd 843 Finchley Road, London, NW11 8NA Phone +44 (0) 208 123 9436 Fax +44 (0) 208 181 6550

Sindhuja Balaji Editor editor@ifinancemag.com

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Design & Layout Rahil Shaikh Miya

Mar - Apr 2018 International Finance

INDEX March - April 2018

Volume IV Issue 3

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Industry Trends in 2018 Are Likely to Centre on Risk Control

How You Can Monetize Your Zombie Assets

Asia A Major Driver of Growth for Asset Management

Digitizing Real Estate Investment Generation

Wealth Management: Opportunities are On the Horizon with the Innovative Finance ISA

International Finance Mar - Apr 2018

Company Profile: JODC blends tradition and innovation at Makkah

Economy: How Tally leads the complexities of VAT

World Economic Forum A Tricky Terrain for Global Reformation

banking: PSD2 will act as a catalyst for innovation within the financial services market

Open Banking is Here: How are Big Banks Coping

Opinion: Vanessa Byrnes The Digital Revolution â&#x20AC;&#x201C; Will it transform or devastate the retail banking sector?

The Importance of Soft Skills in Accountancyâ&#x20AC;&#x2122;s Digital Age

COVER STORY

How Sharjah is Emerging as UAE’s Next Big Investment pg.08 Destination

How VNPT is at the forefront of Vietnam’s Industrial Revolution

technology: Newer Cryptocurrencies are managing to reduce security risks even more than bitcoin

Elon Musk: Carving Out Science Fictions Into Reality

Revamping the Future of Medicine with 3D bioprinting

What Makes A Great Brainstorming Session

Company Profile: STech Startups Have Become a Major Victory for Millennials

Blockchain Experts to Convene at Saudi Arabia’s first blockchain conference OUT OF OFFICE A Great Team, A Great Wife and A disciplined approach to how you work make life easier pg.98

Mar - Apr 2018 International Finance

Opinion Matters

Daniel Stanley, Head of Trading Daniel joined the Global Reach Partners Group in 2011. His initial career in financial services began with RBS’s Credit Card division. He subsequently went on to work in the London office of KBC, a Belgian-headquartered bank insurer with 11 million international clients, before joining the Global Reach team. In his role as Head of Trading, Daniel is responsible for the company’s options trading operations. He is a regular media contributor on foreign exchange-related issues.

Vanessa Byrnes, Sector Managing Director, Retail Banking & Insurance, Alexander Mann Solutions

Alexander Mann Solutions is passionate about helping companies and individuals fulfil their potential through talent acquisition and management. Today, over 4,000 of its talent acquisition and management experts are partnering with more than 100 bluechip organisations, operating in 30 languages, and in over 80 countries. Delivering a distinctive blend of outsourcing and consulting expertise, together with specialist consultants Talent Collective, its unrivalled experience, capability and thought leadership helps its clients attract, engage and retain the talent they need for business success. Vanessa joined Alexander Mann Solutions in 1998 as a Resourcing Manager within its Technology sector. Today, Vanessa holds the position of Managing Director of Global Client Services, where she is globally responsible for the integrated growth and service delivery of talent acquisition & management solutions to all Alexander Mann Solutions clients within the Financial, Insurance & Retail services sector. Over the last 19 years, Vanessa has held a number of roles within Alexander Mann Solutions including, Global Director of Client Services, Global Account Director, Practice Director for Telecommunications &amp; Enterprise and the Director of People Capital. She currently sits on the Alexander Mann Solutions Global Operations Board. For more information, visit www.alexandermannsolutions.com.

Egor Gurjev, CEO, Playkey Egor Gurjev is the CEO of new blockchain gaming company Playkey. His company Playkey recently raised $10.5m (approx £7.4m) in an ICO and has the co-founder of Oculus on its advisory board.

International Finance Mar - Apr 2018

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COntributors

Tim Evershed

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Suparna Goswami Bhattacharya

Tim Evershed is a freelance business journalist with over a decade’s experience of reporting on the world of business and finance. As well as contributing to International Finance his work is published across a number of titles including Global Reinsurance, Insurance Post, The Journal, Financial Solutions and Global Trader.

Susanne Jakobsen Financial technology entrepreneur Gene Pranger has designed more than 500 bank branches since 1995. In 2008, he pioneered the market of video banking with the uGenius platform, acquired by NCR in 2012. His latest venture, BankOn Mobile

Financial technology entrepreneur Gene Pranger has designed more than 500 bank branches since 1995. In 2008, he pioneered the market of video banking with the uGenius platform, acquired by NCR in 2012. His latest venture, BankOn Mobile

It’s the best way to to reach our audience that is spread across over 100 countries Susanne Jakobsen

Susanne Jakobsen

platform, acquired by NCR in 2012. His latest venture, BankOn Mobile

and to know what’s latest inFinancial technology entrepreneur Financialreads technology IFM entrepreneur Financial technologythe entrepreneur Gene Pranger has designed more Gene Pranger has designed more Gene Pranger has designed more Banking, than 500 bank branchesFintech, since 1995. thanwealth 500 bank branchesManagement, since 1995. than 500 bank branches since 1995. In 2008, he pioneered the market In 2008, he pioneered the market 2008, he pioneered the market Insurance and Islamic banking Inof video of video banking with the uGenius of video banking with the uGenius banking with the uGenius Contact: Sean Thomas Email: sthomas@ifinancemag.com

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COVER STORY

How Sharjah is emerging as UAEs next big investment destination

Souq al Jubail is one of Sharjah Asset Managementâ&#x20AC;&#x2122;s key projects in Sharjah

International Finance Mar - Apr 2018

COVER STORY

His Excellency Sheikh Mohammed Bin Saud Al Qasimi, Chairman of Sharjah Asset Management

Mar - Apr 2018 International Finance

COVER STORY

With technology and innovation at its core, Sharjah Asset Management, the investment arm of the emirate of Sharjah, is leading the path for economic diversification by expanding its reach in multiple industries and developing world-class facilities for sustained investment opportunities

You have been named the â&#x20AC;&#x153;Most Innovative Asset Management Companyâ&#x20AC;? by International Finance. Tell us about your most innovative solutions for the marketplace. The most innovative asset management company award is another feather in our cap. It is a testament to our commitment towards innovation through various projects in the Emirate. At Sharjah Asset Management, innovation is one of our core values geared towards generating solid returns. We have revolutionised our asset management software through telecom operator du. This innovative initiative solves

International Finance Mar - Apr 2018

one of the key issues in traditional implementations, through which customers have several different contracts and several different parties to negotiate with for a single solution. We have used innovative solutions in most of our investment projects such as Souq Al Haraj, Souq Al Jubail and Al Sajaâ&#x20AC;&#x2122;a Industrial Oasis How is Sharjah emerging as an affluent asset class in the UAE? Sharjah is emerging as an affluent asset class in the UAE because the government has fostered the development of entrepreneurialism through its flexible rules and procedures adding to a positive

business sentiment in the Emirate. Sharjah is well able to meet the demands of its residents, businesses, foreign investors, and visitors which is attracting an affluent asset class to live, work and invest here. The new projects and population growth reflect the demand that Sharjah has for high quality investment in malls, residential communities, universities, hospitality, healthcare, and many other opportunities which in turn leads to high quality development and infrastructure growth. What kind of strategic advantages make Sharjah a strong business hub in the UAE?

COVER STORY

Souq Al Haraj, one of Sharjah Asset Management’s projects to support the growing automotive industry in Sharjah.

In the UAE, Sharjah is the only emirate with a coastline on both the Arabian Gulf and the Indian Ocean. With key logistical hubs on both coasts and an international border with Oman, Sharjah is a perfect business destination for export, re-export and imports to and from the emirate, as well as onwards to the wider UAE and other GCC destinations. Furthermore, Sharjah’s dynamic role as an economic visionary over past decades has elevated its status as an international investment destination to rival any other in the region. The Emirate’s internationally recognised business-friendly environment means it is increasingly becoming the first choice for investors looking to break into a Middle Eastern market or increase their presence, and the trend from previous investments from major financial traders looks to be continuing. With the third largest economy in the country, Sharjah is expected to

attract more than a billion dirhams in direct foreign investment in 2017 with anticipated growth of 15 per cent on 2016. According to figures released by the Federal Competitiveness and Statistics Authority, the value of Sharjah’s GDP stood at Dh85.66 billion ($23.6bn) in 2015, while Standard & Poor’s forecast an average growth rate of 2.4% in the period 2017-2020. The four largest sectors in Sharjah’s economy are: Real Estate and Business services (20 per cent), Manufacturing (16 per cent), Mining, Quarrying and Energy (13 per cent) and Wholesale and Retail (12 per cent). How is Sharjah Asset Management enhancing its offerings to ensure diversification of its economy? One of our primary objectives is to work towards diversification of Sharjah’s economy. Therefore, we are consistently developing mechanisms

to expand the scope of investment services that generate sustainable financial returns. These efforts will help boost economic diversification in the emirate and strengthen its competitive edge, allowing us to effectively contribute to the economic development process in the UAE. Our projects are in line with the vision of His Highness Sheikh Dr Sultan bin Muhammad Al Qasimi, Supreme Council Member and Ruler of Sharjah, for creating a diversified and robust economy that enhances the competitiveness of the emirate’s economy. Can you tell us about the Al Saja’a Industrial Oasis (ASIO) and why it is such a significant initiative for you? Al Saja’a Industrial Oasis (ASIO) is one of the most significant initiatives of Sharjah Asset Management as it was launched following the vision of the Emirate of Sharjah to create a

Mar - Apr 2018 International Finance

COVER STORY

The interiors of Souq Al Jubail, one of the biggest shopping complexes for fresh vegetables and seafood

strong and diversified economy, to further boost the competitiveness and prosperity of the emirate. Aspiring to be the largest industrial park of its kind in the region, ASIO will help contribute to the sustainable growth of the Emirate. The industrial park is a dedicated platform for industrial growth in the UAE, offering quality, dependability, and adaptability. As Sharjah’s industrial hub, ASIO represents the future of needs and aspirations of firms and companies associated with growth and productivity. From construction to infrastructure to industrial services, the industrial park provides the roadmap for sustainable growth. We look forward to seeing our investors participate in this economically viable project, which will be a platform for import, export, or re-export of goods. What is the role played by technology to enhance the quality

International Finance Mar - Apr 2018

of your business offering? No one can deny the increasing role of technology in every type of business as it improves quality, performance and can be cost-effective. At SAM, we take technology and innovation seriously, which is why we were recently recognised with the International Finance Award for the most innovative asset management company. Digitalisation is an important trend in business, which is well adopted from scheduling work; being adequately stocked; identifying imminent failures to capturing and analysing data. We are well positioned to embrace this technology at SAM, as we keep in mind the future of technology, ensuring it is well integrated into our systems to serve the best interest of all parties. From Social Media to the IoT, we are well equipped to leverage new technology. Digitalisation has not only reduced operating costs but also offers

a stronger market position, higher efficiencies, improved regulatory compliance and better client experience. Almost all our services are offered online to support client interaction. Being the main investment arm of the government, how is SAM working with other departments of the Sharjah government to strengthen cooperation and economic growth of the emirate? Sharjah Asset Management works very closely with many government departments to strengthen cooperation and achieve the goals set by HH Sheikh Dr Sultan bin Muhammad Al Qasimi for sustainable development and economic growth. SAM has cultivated a strategy for Sharjah’s future, integrating the development and fulfilment of targets, with the aim of enhancing economic development. The company’s cornerstone of

COVER STORY

An aerial view of Al Saja’a Industrial Oasis, one of the largest industrial parks in the region.

business is its integrity as it seeks to support growth and development of government initiatives, to further generate income and prosperity for the emirate. The company’s overall objectives are to establish a diverse economic culture for Sharjah, creating future reserves and achieving economic benefits. To do this, SAM has delivered number of key projects and is working on other economically viable projects such as Al Saja’a Industrial Oasis, Souq Al Haraj and Souq Al Jubail among others. What is the value provided by different economic sectors as investment assets in Sharjah? Sharjah has many economic prospects that contribute effectively to boosting the movement of economic growth in Sharjah and attracting local as well as foreign investments. Sharjah’s leading economic sectors are industrial, healthcare, education, wholesale and retail trade, according to Sharjah Economic Development Department. These sectors play a key role in attracting direct foreign investment into the Emirate and are high value investment assets. Sharjah

has 19 large industrial areas with all kinds of manufacturing facilities from food to small manufacturing and large or heavy mechanical manufacturing. It also has an advanced healthcare sector with large hospitals, clinics and pharmacies but with massive expansion plans, there will be further good investment opportunities. The emirate also has a robust education system consisting of local, regional and international educational institutions. The wholesale and retail sector in the emirate is also a key economic sector that attracts significant investment. The emirate has a stable, integrated infrastructure with Sharjah International Airport helping significantly to facilitate trade by maintaining the smooth transfer of goods in and out of the emirate. There are also the free zones such as Al Hamriyah Free Zone and Sharjah Airport International Free Zone that help to facilitate business and which provide potentially lucrative investment opportunities.

existing and seeking new investment opportunities besides launching several growth projects to develop the industrial, mixed-use, and retail sectors to tackle the growing needs of investors and residents in the emirate. We look forward to seeing our investors participate in economically viable projects. On January 25, 2018, SAM launched its new strategy for numerous sectors including Investments and NBV, Fish Business Unit, Sharjah Taxi, Asset Management, Real Estate Development, and Support Services, as well as Senior Management officials. The new strategies aim to develop further our competitive economy through the deployment of dedicated professionals. IFM editor@ifinancemag.com

What are your plans for 2018? In 2018, we will continue to manage

Mar - Apr 2018 International Finance

asset Management

How You Can Monetise Your Zombie Assets Developed nations are dealing with a surplus of outdated assets that are not being disposed of in a profitable and environment-friendly manner. Alan Bell, managing director of Troostwijk Asset Management shares his insights on why large corporations must focus on managing outdated assets and how they can make money from it

manufacturing sector than one would imagine. If a company is lacking a complete cradle-to-grave asset management strategy, they could lose out on hundreds of thousands, even millions of pounds in business. According to Bell, most companies believe asset management and redistribution is done in times of crisis. “Ideally, managing assets should be part of a company’s continuous assessment process. Large corporations should survey their assets regularly, understand the needs of their businesses and plan what to do with these assets when they become surplus.” Troostwijk Asset Management has operated since 1930 and is the

Alan Bell, managing director of Troostwijk Asset Management

ver wondered what large corporations do with machinery and equipment that has reached the end of its lifecycle? It usually goes to waste. The United Kingdom alone sits on nearly £1.7 billion worth of assets, also known as zombie assets, that could lose their value if not disposed or redeployed adequately. Alan Bell, managing director of Netherlands-based Troostwjik Asset Management, advises businesses on the importance of developing a proper strategy to derive the best value from their assets after they reach the end of a lifecycle. Having zombie assets is a far more common affliction in UK’s

International Finance Mar - Apr 2018

biggest industrial online auctioneer in Europe. Bell explains that Troostwijk does a complete analysis of a customer’s business before making recommendations on how to adequately deal with zombie assets. “We use redeployment as a primary option, which allows a customer the option to reuse its assets internally instead of just getting rid of it. The other option is to auction off the machinery, which is an ideal way to generate returns. This is a very positive way to manage a company’s cash flows,” says Bell. In the UK, the B2B auctioneering market is worth around £480 million but Troostwijk believes that only a quarter of businesses in the country use B2B auctions as part of their asset management strategy, which means UK’s manufacturers could be leaving around £1.7 billion worth of assets lying dormant and losing value on expensive goods. “There are many corporations in the UK that aren’t doing anything with their assets or are scrapping useful assets for a fraction of their worth. There could be a massive financial opportunity for a company just lying in a warehouse somewhere.” With a long-standing reputation in the market, selling to 127 nations and with 18 operational facilities around Europe, Troostwijk Asset Management encourages more companies to use services like theirs. Around 70% of

asset Management

the assets sold by the company are exported. Bell recalls a contract with a major UK-based bakery that was looking to dispose of their equipment, and crumpet lines were one of them. Crumpets are extensively a UK product. “Part of what we do is to carefully analyse where best to sell assets. In this case, we managed to sell these crumpet lines to customers in the UK and two more to New Zealand.” One of the biggest lacunae in adequate asset management is lack of policies. While bigger manufacturing markets like the United States are more comprehensive in their approach to asset management, Bell believes

there are big gaps in European and UK markets. Bell says, “Capex is managed by the finance department, while maintenance of equipment falls on the engineering department. So, managing outdated assets is often neglected. We spoke to a customer who sold six pieces of machinery for £5,000 a piece. Had he come to us earlier, we could have helped him sell these for at least £35,000 a piece. Asset management isn’t always about disposal – it is also about valuating products according to the market value and assessing the right time and place to sell them.”

The advent of technology has greatly helped the company grow. Now, Troostwijk Asset Management does online auctions through its customised software, designed to maximize returns and streamline the sale. “Electronics is a massive game changer in this market, and we recognize this. With constantly evolving processes and upgrades around us due to technology, we strive to stay ahead in the market while presenting the right value proposition to clients.” IFM editor@ifinancemag.com

Here are some expert tips from Alan Bell to businesses that will help them manage their assets better: 1. Build a long-term strategy. Selling assets isn’t just something you do when your business is in trouble. It is part of a wider asset management strategy that seeks to strategically sell items for the best price, at the right time. Only by being proactive in developing a strategy can a business optimise value. 2. Affect grassroots change. Assets are often unloaded at times of cash flow need, but this is rarely the best way to get best value. Ingraining asset management in your day to day operations can maximise the return and delivery of business objectives. 3. Make someone responsible. All too often a lack of strategy means that there’s no clear owner of the issue of what happens to an asset as it is reaching the end of its useful life. Make a department, or an individual, responsible for this so you’re one step ahead and will have the foresight to unlock the best value. 4. Remember that everything has value…and that value fluctuates. The value of assets isn’t static, it changes over time depending on market conditions and industry demand. This level of knowledge is hard to attain and keep which is why enlisting the help of a specialist asset management advisory can help to ensure you don’t sell at the wrong time or wrong price. 5. Choose the right asset management partner. There are a number of things to look out for including: side-by-side partnership, tailored valuations, turnkey solutions, international reach and crucially trust to help you reach best value. 6. Think global. Just because an asset has reached the end of useful life in the UK, doesn’t mean it’s not going to be highly sought after overseas. Similarly, even if you have buyers in the UK, there may be someone willing to pay more elsewhere. This is why it’s important to consider marketing assets through international channels. 7. Knowledge is key. The selling process can be complicated, it involves a lot of moving around and logistical coordination…but it doesn’t have to be. A good and experienced partner can take care of everything for you, from the organisation of viewings to dismantling through to delivery.

Mar - Apr 2018 International Finance

Industry trends in 2018 are likely to centre on risk control David Macdonald, sales and marketing director of VAM Funds, a Luxembourg fund management company talks about the upcoming year for investors

othing lasts forever. And 2018 could be the year that investors – and advisors – remember that. The last year has been a strong one for markets. The FTSE reached a record close in the first week of November, and the S&P 500, too, saw its best weekly performance earlier this month. Even with a correction in early February, with the Dow Jones plummeting by 1000 points, the market has rallied. Unsurprisingly, the strength of these major indices has supported continued flows into low-cost passive investments over the last year. In the US alone, assets in ETFs increased by a record $715 billion in the first 10 months of 2017, according to research firm ETGFI, reaching $3.26 trillion. In Europe, they’re up more than a third to $766 billion at the end of October. In the debate between passive and active, investors have been voting with their wallets. Not everyone is a fan, though. In a recent interview, Nobel prize winning economist Robert Shiller described passive investing as a “pseudo

International Finance Mar - Apr 2018

science”. He likened it to crossing at an intersection on a green light without looking. In the coming year, though, investors, regulators and advisors are all likely to take an increased interest in what’s coming down the road. Risk control, rather than costs, is likely to rise up the agenda. And that’s likely to benefit unitised discretionary fund management (DFM). Troubling times Most obviously, the big risks that have been in the background over the past year’s growth haven’t retreated. Uncertainty over Brexit remains; Trump’s Presidency is still unpredictable; and the threat of terrorism continues. These are uncertain times, and 2018 guarantees little more stability on the international stage. None of these risks have yet manifested themselves in a way to derail returns, and so far bearish commentators have been confounded. But a stopped clock is right twice a day. Sooner or later, investors know there must be a turning.

When it comes, investors in many passive funds will be hit hard. As passives have risen, costs have come down, but risks remain unmanaged. Despite the growing popularity of “smart beta” products, by far the biggest inflows continue to be into the big benchmark trackers. Other retail investment money, meanwhile, continues to chase the latest trends; crypto currencies are perhaps the most recent example. In both cases, those looking to preserve the big gains they’ve made in the last couple of years must increasingly start considering their risk appetite and find investment approaches that match. If they don’t, they are not only likely to lose significantly by cashing in when the markets turn, but also won’t come back: basic service levels are usually the corollary of ever-lower costs, so when losses occur, there’s no support for investors to counsel and encourage them. The pressure on risk control is also being felt from regulators. In November, the FCA expressed its concerns over crypto currencies, for

ASSET MANAGEMENT

Macdonald, sales and marketing director of VAM Funds

instance. More fundamentally, its review of the suitability of advice earlier this year is evidence of a continuing focus on ensuring clients’ attitude to risk is appropriately assessed and accommodated. Simply ticking a few boxes on a lengthy risk profile is not going to be sufficient to satisfy them. Even if it were, though, advisors have their own motivations to look carefully at risk control. First, the regulators’ focus on understanding clients’ risk tolerances and matching these to products ultimately reflects investor concerns: few want or react well to big swings in returns. Second, such swings do no favours for advisors either. Many are trying to de-risk their businesses. As the costs from regulation and technology grow, few want massive declines in trail income from one month to the next. In that sense, investors’ and advisors’ interests are increasingly aligned.

The limits of technology For all the hype, the answer to meeting this need for increased risk control is unlikely to be found in low cost automated advice solutions. To genuinely understand investors’ attitudes to risk requires not just a quantitative approach, but also a qualitative element. That requires face-to-face advice to gauge individuals’ reactions and build a more nuanced view of their attitude. Technology can – and must – enhance that advice, and it will continue to play an increasing role in the year ahead: enabling businesses to scale cost effectively, and enforce the risk controls that are put in place. But it won’t replace the human element. Individual advice will continue to be central to identifying risk tolerances. At the same time, identifying those tolerances is only half the battle. Risk controls also need to be efficiently and effectively put in place. That’s

why unitised DFM is likely to be well placed to benefit as the focus shifts to controlling risk. DFM meets regulators’ and investors’ requirements for investments that explicitly match the appetite for risk, as well as the institutional approach to selecting the assets that individuals are increasingly demanding. It also provides the ability to access the diversification that’s needed to control the risk. On the one hand, DFM goes beyond what clients can get from just a multi manager fund by offering an investment tailored to their risk, throughout the investment’s life cycle. As well as selecting investments and blending them as a multi manager fund manager does, DFM provides the continued monitoring, reporting and advice for ongoing support of the investor. On the other, a unitised solution provides the ability to gain access to sufficient diversification without the investment size required by traditional DFMs. For investors with $100,000, a unitised DFM solution can give them access to perhaps 50 different funds with maybe 100 securities in each: 5,000 different investments in total. Even those with five times the investment opting for a traditional, bespoke DFM solution are likely to end up with far fewer funds, perhaps about ten. It’s not about cost – although the ability to scale while controlling costs is a powerful argument for unitised DFM. It’s about delivering on the promise to control risk. As 2018 gets underway, the price that investors, advisors and regulators put on that is only likely to increase. IFM editor@ifinancemag.com

Mar - Apr 2018 International Finance

ASSET MANAGEMENT

Asia a major driver of growth for asset management Analysis over the last few years has revealed that Asia remains a high potential growth market for asset management International Finance Mar - Apr 2018

ASSET MANAGEMENT

sia is one of the fastest growing regions in the world now, with a high concentration of rising assets. Deep capital markets and rapid industrialisation make Asia a hotbed for development and reports indicate that the region is poised for fast growth in asset management. A report from Boston Consulting Group states that the region’s wealth is estimated at US$57 trillion, surpassing North America. Private wealth in Asia Pacific (excluding Japan) expanded by 15 percent in 2014 to reach US$33 trillion. By next year, private wealth will rise to an estimated US$55 trillion, adds the report. The region can soon narrow the gap with North America in terms of owning the most amount of wealth. Among the most significant reasons behind this tremendous rise in wealth is market performance of existing assets, specially rise in value of local equities in China and India bolstered Asia’s performance. In addition, substantially rising economic output accounted for about 60% of the total wealth growth. Moreover, wealth originating in Asia-Pacific continue to get routed to Singapore and Hong Kong, which are emerging as extremely favourable destinations over Switzerland, which has long remained a favourite with high net worth individuals. The BCG report states that Hong Kong and Singapore

accounted for 15% of global offshore assets in 2014 and are expected to hold about 17% of global offshore assets by next year. The spotlight continues to shine on Asia, and these factors are building the momentum for the region to become a high-profile investment market. In a report by Fitch Ratings titled Growth Shifting to Onshore Markets, Aymeric Poizot, managing director of the EMEA fund and asset management ratings opined in 2013 that China, Malaysia, Indonesia and Thailand will contribute to Asia’s growth of assets under management (AUM). On one hand, China’s market has shown great potential but its Indonesia, Malaysia and Thailand that have shown doubledigit annualised growth in AUM. Southeast Asia the epicentre of action There are many factors that make Southeast Asia a top region for investment, and potentially a high activity bed for asset managers. Findings from a Deloitte report titled Capturing the multi-trillion asset management opportunity in Southeast Asia, one of the top factors is the growth of digital natives. With a 35% smartphone penetration, there is a massive scope for digitized customer offerings and higher customer engagement through smart devices. Another major reason is the prevalence of an aging population – touted to

Deloitte’s Ten Types of Innovation • • • • • •

Developing strategic partnerships to penetrate local markets Increasing automation and efficiency Customizing local products Developing integrated offerings and solutions Delivering digital value-added services Positioning

constitute 15% of Southeast Asia’s population by 2025, and grow by 22% every five years from 2015 to 2034. The impact of a fast aging population can be felt among institutional and retail investors, claims a Deloitte report. For instance, public pension funds have to account for uncertainties caused by demographic factors like early retirement and improvement in life expectancy – this compel funds to seek risk management frameworks to mitigate cash volatilities. Among the high potential pockets for asset management is new avenues for Assets Under Management (AUM), mainly arising from sovereign funds, pension funds and onshore wealth. By strategically focusing on these high growth opportunities, asset managers can reap dividends. Thailand, Malaysia, Singapore and Brunei have emerged as the major sovereign wealth fund pockets in Asia, states the Deloitte report, with Singapore on track to have the highest High Net Worth Individuals (HNWI) population by 2025. The demand for newer, improved products especially Sharia-compliant in Southeast Asia have also diversified investor interest. The next decade looks to be very promising for Asia, especially Southeast Asia, for asset managers. In a report, Peter Sartori, head of Asian equity at Nikko M, said, “Emerging Asia offers some of the most dynamic growth in the world, but developed Asia offers more mature economies, established governance structures, and upside in value-added sectors driven by regional growth dynamics.” IFM editor@ifinancemag.com

Mar - Apr 2018 International Finance

ASSET MANAGEMENT

European Commission’s tough warning to UK’s asset managers

he European Commission has given a warning to UK’s asset managers to take action or face a potential shutout after Brexit, set to take place in March 2019. In a letter to the asset management industry, the European Commission said that when the UK leaves the bloc without concluding a withdrawal agreement, legal repurcussions would be considered. “Subject to any transitional arrangement that may be contained in a possible withdrawal agreement, as of the withdrawal date, the EU rules in the field of asset management, in particular Directive 2009/65/EC on Undertakings for Collective Investment in Transferable Securities4 and Directive 2011/61/EU on Alternative Investment Funds Managers5 no longer apply to the United Kingdom,” said the letter. According to the detailed letter, here are some of the consequences: • UK UCITS management companies and UK AIF managers will lose the EU passport, thereby cannot benefit from authorisation and will be treated as third-country AIF managers. All collective undertakings registered in the EU will be considered non-EU AIFs. • Member states may permit AIF managers to market AIFs under National Private Placement regimes (NPPR) in their territories only. Some member states allow NPPR, while others allow marketing only to professional investors. • UCITS and AIFs authorised or registered in the UK per directives, will be considered non-EU AIFs. EU-27 UCITS companies handling these UK-authorized UCITS will require authorization • Marketing of non-EU AIFs by managers authorized in the EU is subject to NPPR. The letter has many other comprehensive clauses for asset managers, and is reckoned by industry veterans as one of the toughest warnings pertaining to Brexit. Following the UK’s decision to leave the European Union in 2016 following a referendum, there have been considerable upheavals across multiple industries in the UK. Given that Brexit will mean the UK will lose EU market access, a series of changes and updates are expected to take place in trading and investing. https://ec.europa.eu/info/sites/info/files/180208-notice-withdrawal-uk-asset-management_en.pdf

Malaysia’s EPF looks to foray into Latin America

alaysia’s Employee Provident Fund (EPF) is scouting for investment opportunities in Latin America, according to multiple reports. CEO Datuk Shahril Ridza Ridzuan stated that Latin America was a growth market, and EPF Malaysia is looking to expand its portfolio globally. He added that their growth was pegged at 32% but was at 28%, only four percentage points behind their target owing to tightening of the ringgitt movement. 50% of investment assets remained in fixed income instruments, while asset classes recorded YoY growth except for the money market. The EPF, Ridzuan said, had been investing in the UK since 200809 mostly in equities. Since 2013-14, EPF was selling a number of commercial properties and assets, mostly because it took a lot of big returns, most of which were invested in Europe and North Asia.

International Finance Mar - Apr 2018

Malaysia’s Employee Provident Fund (EPF) is scouting for investment opportunities in Latin America, according to multiple reports.

ASSET MANAGEMENT

Regtech will reduce wealth management compliance budgets, says GlobalData

Wealth managers will again find themselves dedicating much of 2018 to adopting new compliance requirements. With this come associated increases in operating costs. However, regtech will make the process more cost-efficient, according to GlobalData, a leading data and analytics company. In 2018, the wealth management sector will face another wave of regulatory changes that aim to make the industry more transparent and restore consumer confidence. In Europe, MiFID II entered into force in January 2018 and the General Data Protection Regulation will be effective from May. The US financial services industry is getting ready for the Fiduciary Rule, which is due to

enter into force in 2019. Across the board, as of January 2018 all countries that signed the OECD’s agreement on automatic exchange of information must now be fully compliant with the Common Reporting Standard and report on accounts held by their residents. Regulation has weighed heavily on wealth managers’ operating costs in the past few years. Wealth of Opportunities II, a joint report by the British Banking Association and the Wealth Management Association, confirms operating costs increased steadily up to 2015, mainly because of increased spending to cover compliance requirements. GlobalData’s 2017 Global Wealth Managers Survey found that 75.3% of

wealth managers globally regard local regulatory changes as a big concern for their business. Silvana Amparbeng, Wealth Management Analyst at GlobalData, said, “The two associations estimate that technology investments have been beneficial, helping the industry reduce its overall costs by 3% over 2016 compared to 2015. This is especially true for compliance costs; as per our survey data, over half of wealth managers believe that cooperation with regtech will reduce compliance costs. Of course, differences apply across markets. Asia Pacific is the most willing to implement regtech solutions going forward, while North America is less enthusiastic. “Nonetheless, considering the busy year ahead in terms of regulatory changes, wealth managers would do well to consider partnering with regtech companies. Smaller players with limited resources to dedicate to compliance will find outsourcing these tasks to be particularly cost-efficient.”

Mar - Apr 2018 International Finance

Company Profile

Digitizing real estate investment generation Evarei Management LLC has earned the distinction of winning the Most Innovative Real Estate Fund of the Year 2017 award from International Finance for its Evareium initiative. Evarei CEO Stefan Hickmott talks about this award-winning initiative that’s breaking new ground in real estate investment management

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arketed as the world’s real estate investment token, Evareium is a blockchain and smart contract solution for the digitalized real estate investment generation. Its introduction has galvanized instant online digitalized investment into managed real estate assets through a ‘tokenized’ fund. Such funds tend to create liquidity by registering on multiple

International Finance Mar - Apr 2018

digital exchanges and this trend will be noticeable over the course of 2018. Reacting to the honour bestowed upon Evareium, Stefan Hickmott, CEO of Evarei expressed his delight and stressed the importance of being recognized by one’s peers. He said, “We engineered Evareium to be a complete, digitalized ecosystem investment model. We hope it will define a turning point in the global real estate investment

industry. We can only show our appreciation for this recognition by reaffirming our commitment to widening such technological boundaries.” Andrew Rowlstone, Head of Investor Relations, Evarei, added “Our gratitude goes to International Finance for recognizing our efforts, as well as the entire Evareium team and our many advisors, each of whom have been instrumental in forming Evareium and making this such an inspiring project.” Hickmott stated that the company is currently launching an Initial Token Offering (ITO) to raise funds through the issuance of EVM tokens, which represent a beneficial interest in the Evareium fund and are disseminated via blockchain technology. Elaborating on the new premise, Stefan further said, “Fully integrating blockchain technology is a key objective of Smart Dubai’s 2020 government vision for example. Today, a significant number of governments on the global stage are following the same lead with the aim of integrating full digitalization

of government processes. Evareium achieves this by offering a highly-valuable and scalable real estate investment model suitable for the point-and-click digital investment age that we are all rapidly entering.” The marriage of technology into real estate investment is just beginning. A swift transformation is occurring in terms of growth industries like IoT (the Internet of Things), smart digital contracts based on blockchain and the ability to harness these technological phenomena, all of which create a vastly different approach to real estate investment procurement and management in a more rapid, transparent and valuable manner. Hickmott is clear that the future will demand ultimately a total reorientation of mindset within the real estate investment sector. “Our belief is that investment, exchange and divestment of interests in this sector will one day be orchestrated completely digitally on a widespread scale. And it will be facilitated in an instantaneous, digitalized, secure manner, opposing

Company Profile

traditional physical sales and purchases which will rapidly become obsolete.” He was confident that Evareium would spearhead this new paradigm across the multi-trillion-dollar real estate investment industry. “The vision has been to create a Limited Partner/ General Partner fund in the Cayman Islands, which will raise and deploy capital initially into the real estate sector in the GCC region, with a particular focus on Dubai and the wider UAE,” he said. With over 20 years of experience in the European and the GCC region, based out of Dubai, working exclusively on real estate, hospitality, and related projects Hickmott has established impressive credentials in the real estate investment business. Previously, vice-president at leading private equity firm The Abraaj Group, and before that in 2004 was instrumental in the formation of what is now Jones Lang LaSalle MENA. He is known as a person with a passion for creating value for stakeholders in the real estate space and delivering meaningful models to power new initiatives that address investment and consumer needs. Having handpicked the Evareium team, he now finds the challenge of harnessing blockchain technology stimulating. By collaborating with excellent blockchain, asset enhancement and fundraising advisory firms regionally and internationally, Evareium’s

strategy is destined to yield returns. These strong links include Evarei’s recent signing with lead fundraising arrangement firm: Safa Capital of the Dubai International Financial Centre, as well as Block Gemini Technologies in Dubai, as well as asset enhancement, green technology and energy/costsaving specialists Tellus Environmental Specialists from the UK. Evareium believes it will help to create a pillar of stability in the market and drive value for investors wanting conveniently passive but valuable exposure to what is by far the most favoured asset class in the region. Setting forth details of how the new system works, Hickmott said, “Real estate attracts huge volumes of investment and investors globally every day. But inherently, being a physical asset, owning real estate as a single unit owner can have some major drawbacks – mainly that you must find a tenant, collect rent, maintain the property and of course, sell it at some point. This can drain an investor’s time and resources and have imperfect results. Evareium eliminates all these issues by exchanging a token with investors, carrying the benefits of profits, dividends and gains from Evareium’s investment into real estate projects. Furthermore, by listing the token on exchanges, investors who have a need for liquidity and exit from their investment as and when they desire.

This tokenized layer, which represents ownership of assets, enables instantaneous transfer of interests by leveraging blockchain technology, therefore the physical processes of handling asset exchange, which can be cumbersome, timeconsuming and costly, are effectively eradicated. This is particularly evident in real estate investment, because it is inherently a very illiquid asset class; transacting property assets in a rapid manner is challenging and time-consuming. Evareium is therefore able to offer the benefits of traditional real estate investment models whilst creating a tokenized exchange layer, which eradicates inherent illiquidity. Whilst there are plenty of listed real estate funds globally, nothing has ever existed that’s so accessible, easy-to-adopt and able to optimize full benefits in a direct manner to investors as the technology underpinning the Evareium tokenized fund. Hickmott has no doubts this will fundamentally change the way people comprehend asset ownership and consume real estate investment over the coming decades. He even goes as far as to submit that digitalization across the board will have a direct impact on every facet of our daily lives. “The process has already begun. From buying movies and music to using transportation, social interaction, ordering groceries to controlling our

homes – digitalization is creating a more convenient, instant and time-efficient means to harness and transfer value in products and services.” “The advent of blockchain allows for the exchange in a trusted and immutable manner without the identities of investors being shared by one another. This maintains the key characteristic of a private equity fund model but introduces the opportunity of instant liquidity as well as a vast number of additional features and benefits.” “Moreover, who doesn’t want the option of liquidity over a 10 year or more investment life of a fund?” Although the investment strategy is Middle Eastfocused, the Evareium initiative is domiciled in the Cayman Islands since it is a favoured location globally for such pooled investment initiatives. Stressing the importance research plays in the development of the digital process Hickmott said, “We have been working on developing a complete symbiotic ecosystem approach to fully realize and unlock this intrinsic value. The core constructs of decentralized networks and automated processes offer an entire new paradigm towards transparent capitalism within real estate through smart contracts and a blockchain-founded architecture.” IFM editor@ifinancemag.com

Mar - Apr 2018 International Finance

INTERVIEW INTERVIEW Wealth Management

Opportunities are on the horizon with the Innovative Finance ISA In conversation with Angus Dent, co-founder and CEO of ArchOver on the highlights of peer-to-peer lending and how the new Innovative Finance ISA is off to a promising start International Finance Mar - Apr 2018

INTERVIEW

Angus Dent, co-founder and CEO, ArchOver

Mar - Apr 2018 International Finance

INTERVIEW INTERVIEW Wealth Management

What is the Innovative Finance ISA (IFISA)? The Innovative Finance ISA allows you to invest your ISA allowance across peer-to-peer platforms such as the ArchOver platform. This type of ISA generally gives you a higher rate of return at the cost of reduced security.

What are your views on the IFISA as a form of investment? There is a lot of money in the UK in cash ISAs, which are not performing very well in terms of ROI. So the idea of getting a decent performance for those savers has to be welcomed. As such I think it’s a credit to the government that they have broadened the scope of the ISA to allow savers to access higher-yield options with their tax-free allowance. .

International Finance Mar - Apr 2018

On the other hand, there is a danger that people might not quite understand what they are buying into because the security offered by a cash ISA is very different to the security you get with an IFISA from peer-to-peer lenders. There is a good rate of return, but people shouldn’t think that they can increase their return without the loss of some security. So, I welcome the IFISA, but it needs to be properly sold to potential investors. Peer-to-peer is still a young industry. How is it an attractive choice of investment in the UK? Peer-to-peer is a technology-enabled, young sector that helps businesses secure the funding they need to grow by sourcing money from private investors—the

‘crowd.’ We are becoming an increasingly relevant sector in the UK: In 2017 a significant proportion of business lending was provided by peer-to-peer lenders. We believe that we offer a decent rate of return coupled with a decent amount of security and increasingly, lenders and investors are picking up on that. Peer-to-peer platforms provide IFISAs as part of their financial offering. How has the response been so far? I think the impact so far has been positive. Investors and savers seem to like it. They are putting their money into it. From the conversations I’ve had with CEOs from other peer-topeer lending platforms that have already got the IFISA

in place, they are seeing significant amounts of money flowing through. So it clearly has a strong future as a service for the P2P sector to offer. How is the IFISA attracting new peer-topeer investors? The IFISA is attracting some new peer-to-peer investors. But I think the first flood of money is coming from people who were already investing across peer-to-peer platforms. It’s likely that the cautious ISA saver will wait a little while and see what happens before they switch their money from a cash ISA to an IFISA. This is a long game. At ArchOver, we generally find that investors who are cautious to begin with and start off slowly are the people that are still with you

INTERVIEW Wealth Management

two, three and five years down the line. Those are the people we particularly want to reach, because they help us provide a steady stream of money to borrowers. Can the IFISA add definite value to one’s future investment plan? The probability is that it will, but there is always risk involved when you are investing cash. There is no such thing as a definite rate of return. What is the key benefit when the IFISA is incorporated into a pension plan? The main benefit is that the return should be higher than it is now. For example, if you’ve got savings that supplementing your income, putting some of that money into an IFISA could help you improve your return on that cash. If you invest carefully, that could allow you to keep your capital

intact and live off the return rather than having to keep dipping into the capital. If you have to dip into the capital each year then your return the next year is going to go down and it’s a downward spiral. This is an opportunity to break out of that downward spiral. How is the interest rate decided? The interest rate is decided based on a combination of the time value of money and a rate that our lenders have indicated to us is fair by putting their money in. It is always the case that investors would like to receive more interest while borrowers would like to pay less interest. So we have to balance out. You mentioned investors can choose IFISA with peer-to-peer platforms. Does this mean they can hold

other financial services in the same account? It wouldn’t be in the same account, but investors can have different investments over the same platform. We already have that to an extent where people will invest in their own name across the platform; people will invest through their company across the platform; and conceptually the same person can invest through the IFISA as well. They can have three different accounts and there’ll be no mixing between the accounts. Does ArchOver offer an IFISA? Not yet. However, we will be launching one soon with a small group of existing investors and we will then roll it out more gradually. What opportunities does ArchOver provide for investors and borrowers?

In terms of borrowers, we are looking for businesses that have a debtor book contracted recurring revenues such as a software rental stream, and we will advance money against that. The opportunity for investors is to invest project by project, company by company through the services we offer. IFM editor@ifinancemag.com

Angus Dent co-founded ArchOver in 2011 to connect those looking for a higher return on their investments with successful companies looking for a flexible loan, and continues to lead the team as CEO. He is responsible for developing the overall policy and strategy of the business and ensuring its delivery by the management team. On a day-to-day basis, Angus is engaged with borrowers, highvalue lenders, strategic partners and the management team. Angus is qualified as a Chartered Accountant with Price Waterhouse, and has since helped build a number of technology businesses, as CFO of OneClickHR PLC and CFO and CEO of Synchronica.

Mar - Apr 2018 International Finance

Company Profile

JODC blends tradition and innovation at Makkah Saudi Arabiaâ&#x20AC;&#x2122;s leading real estate developer Jabal Omar Development Company presents its flagship project, which is a perfect amalgamation of creativity and spirituality

abal Omar Development Company, is arguably one of the largest real estate developers in the region and one of the largest listed companies in the Saudi Tadawul Stock Exchange. Its flagship project, Jabal Omar, is a multi-use real estate mega development project within

International Finance Mar - Apr 2018

a walking distance of The Grand Mosque of Makkah. As the Kingdom of Saudi Arabia continues to increase its capacity to welcome a growing number of pilgrims, JODC is a proud contributor to the development of the area surrounding The Grand Mosque and strives to provide Makkahâ&#x20AC;&#x2122;s visitors and residents with a unique

spiritual and physical experience. Jabal Omar project lives up to the sacredness of the place and spirituality of time. It is where pilgrims and visitors to The Grand Mosque find peace, harmony, and content. The project is a blend of tradition and innovation which is achieved through preserving the Islamic -particularly

Company Profile

Makkahâ&#x20AC;&#x2122;s- architectural style and infusing it with a touch of modernity. The project will offer a distinctive design, luxurious atmosphere, and a superb service that lives up to the holiness of the place. Jabal Omar seeks to offer guests the comfort, tranquillity and peace of mind that is worthy of Makkah, while achieving the goal of developing the land and improving human lives. The project is composed of 40 towers situated on top of 16 structural bases with a total built-up area of approximately two million square meters. The project houses an array of hotels, apartments, residential units, and malls. Upon completion, Jabal Omar project will include a variety of five and four star hotels with the capacity to host up to 36,000 guests annually and in excess of 100,000

visitor during Hajj season. Jabal Omar Development Company has leaped to new great heights by establishing one of the largest mixeduse projects and has become one of the main and most majestic landmarks in the vicinity of the Grand Mosque due to the distinctive view it offers of The Grand Mosque. JODC is a strong supporter and partner of Vision 2030 and Makkah in general, especially when it comes to the Hajj and Umrah. JODC coordinates closely its efforts with the Makkah Region Development Authority. Vision 2030 includes a strategic and comprehensive plan to develop the sector to allow the largest number of Muslims possible to perform Haj and Umrah. The largest expansion of the Grand Mosque is underway in Islamic history.

The plan as per the vision includes increasing the capacity to 30 million pilgrims and Umrah visitors in the coming years. Jabal Omarâ&#x20AC;&#x2122;s projects seek to serve these pilgrims by not only accommodating them in hotels or apartments but also introducing them to the Saudi and Islamic heritage through different cultural elements. Moreover, Jabal Omar is a great contributor to the economy of Makkah and, more specifically, in creating jobs for local citizens IFM editor@ifinancemag.com

Mar - Apr 2018 International Finance

INTERVIEW INTERVIEW economy

How Tally greets the complexities of VAT The New Year witnessed the UAE join its counterparts in a global classification of ‘Rich countries with a Value-Added Tax’

International Finance Mar - Apr 2018

INTERVIEW

Vikas Panchal, business head, Tally Solutions Middle East

Mar - Apr 2018 International Finance

INTERVIEW INTERVIEW economy

he tax reformation is new for the oil-reliant UAE economy, which has enjoyed a luxuriant tax-free lifestyle for the longest time. As a result of collapsing oil prices, some goods and services are subject to the lowest rate of five percent excise—to boost non-oil revenue.

The International Monetary Fund (IMF) advised oil-exporting Gulf countries to introduce taxes for the same reason. In addition, the IMF recommends levy of taxes on business profits as well. According to a Forbes report, the UAE is expected to draw US$3.3bn revenue from its first taximposed year.

The VAT makes perfect sense because of its economic diversification efforts to re-establish fiscal balance. But following the announcements on five percent VAT, which came into effect on 1st January, there has been some struggle in understanding its implementation.

Mr. Vikas Panchal, Business Head of Tally Solutions Middle East after Solutions speaks more about the successful launch of Tally.ERP 9 Release 6, which offers a seamless VAT experience for businesses and consultants. Excerpts from the Interview:

The country’s proposition as a tax-free haven has changed. Apart from the software launch, what role does Tally Solutions play to ease the change? Tally Solutions was started in 1986 and we have qualified experience in this business for more than 30 years. Being one of the leaders in statutory compliance, we understand the requirement to implement a solution that satisfies the VAT scenario for all business enterprises. First, we conducted a lot of pre-VAT sessions for business owners who could not afford to extract that form

International Finance Mar - Apr 2018

of quick expertise. We carried out more than 500 VAT sessions for nearly 8,000 businesses in order to build a foundation and bring exposure in the right way. In addition, we also have live webinar sessions for people who are not able to travel to other locations. The webinars allow them to attend sessions and gain better insight. The contents of these sessions are available at zero cost on our website, YouTube and social media. The registration for a session is quite simple on the website. Our intent is to keep all channels open for people to understand general information on VAT and how Tally can

help in compliance. Businesses can also contact us on the toll-free number 800 82559 for any queries. When was the VAT accounting software Tally.ERP 9 Release 6 launched? We launched the software in mid-December before VAT was implemented. This gave our existing customers sufficient time to migrate to a VAT enabled software, and allowed new businesses to adopt the software. Most of our customers were able to generate VAT invoices on January 1. The latest release, Tally.ERP 9 Release 6.4 targets to simplify VAT filing and make the entire process easier and more effective. While they will be able to define tax return as specified by the Federal Tax Authority (FTA), the latest version will also allow a “tax computation analysis,” which offer businesses a complete overview of all transactions and taxes before generating the return. The VAT tax computation and analysis report available from the software, identifies transactions which have been included or excluded in the return, the total amount of tax to be paid and refundable amount if paid in excess, eliminating any misses or discrepancies.

INTERVIEW economy

VAT is a new complex system for businesses of all kinds in the UAE. Can you give us an example on the working mechanism of the software? The current version Tally.ERP 9 Release 6.4 is totally complaint with the VAT regulation defined by the Federal Tax Authority (FTA) in the UAE and by The General Authority of Zakat and Tax (GAZT) KSA. So far, we have incorporated all the requirements. One of the key strengths of the software is its simplicity. It can be seamlessly implemented for total accounting and business management solution, across different industries. For example, businesses using the software can continue with their business operations such as purchase and sale, and all the VAT complexities will be managed by the software. Concerns such as the technicalities of statutory compliance are completely wiped out and the configurations are in sync with the regulations to generate reports. Who are the target users? All businesses naturally becomes our target customers. But it is ideal for SMEs and mid-sized enterprises to implement the software. The Tally software is suitable for oneman show businesses which want to manage everything from operations to finances. As the business grows, advanced features can be enabled and also works well for large organisations. How suitable is the software for tax accountants and consultants? The software is a tool which will help VAT accountants and consultants to implement accounting and statutory compliance for customers in a much much better way. Our software provides 100% assurity on the reports generated. Once the reports are generated from Tally, business owners don’t have to verify the reports, giving them a complete peace of mind. We closely work with The Institute of Chartered Accountants of India (ICAI) Dubai and Abu Dhabi as well.

Ultimately, tax accountants and consultants are the people who will verify the reports. So any statutory report generated by the Tally software provides complete confidence in its accuracy. Because of our close association with the ICAI, we are invited to participate in their events and share our knowledge in terms of IT implementation in this space. You said the software is highly reliable because of its up-todate compliance with VAT regulations. Can you elaborate? We are extremely proactive in incorporating the amendments the government has introduced. For example, the designated zone amendment that came after January 1 is incorporated in our software. We ensure any amendment that is introduced will be incorporated within a short span. So how do your clients feel about the VAT-ready experience the software brings? The feedback has been really amazing. We have ensured to capture a few customer testimonials. Initially, the customers were skeptical of its first-time implementation, but they slowly realised the complexities are taken care of by the software. At this point, all our customers really appreciate the ease of filing and return generation the software offers. IFM editor@ifinancemag.com

Vikas heads business development and operations for Tally Solutions Pvt. Ltd in the Middle East. He completed his MBA and did a Management Program from Indian Institute of Management Ahmedabad. He holds 20 years of comprehensive experience in channel development and direct sales in IT Industry. Prior to working with Tally Solutions, Vikas held key positions at Sify Limited (Leading Broadband Company) and SSI Limited. His past experience and various levels of responsibilities bear testimony to his versatile personality. Vikas has been associated with Tally for almost 10 years, and deeply understands the company’s vision and goals. Currently as the BD and Operations Head for Middle East, he is largely responsible for building and leading MENA Strategy to achieve Tally’s dominance in the region. He prepares the company’s annual strategy and ensures its effective execution. Building a stronger distribution network, working in sync with the country leads to achieve a wider dominance in countries of operations through channel expansion and development, are some of the core areas he oversees. He is closely working with influencers (CA’s and CPA’s) to monitor industry developments and influence those developments to support overall goals for all.

In our next issue, tax expert Mohamed Fathy, General Manager of Al Dhaheri Jones & Clark, spells out the intricacies of VAT and its impact on the UAE economy

Mar - Apr 2018 International Finance

INTERVIEW INTERVIEW economy

Acing self-employment in a modern economy With the advent of new-age businesses, income generation and economic proliferation has assumed a whole new meaning and the world is seeing gig economy gain relevance. But how does it aim to support micro-businesses? Ed Molyneux, CEO of FreeAgent talks about the rise of the gig economy and how FreeAgent helps freelancers and micro-business owners

Tell me about Free Agent and how it helps UKâ&#x20AC;&#x2122;s microbusinesses - What is the problem that you aim to solve? Traditionally, freelancers and owners of micro-businesses (ie, those with fewer than 10 employees) have mainly relied on unwieldy spreadsheets or overly-complex accounting software to manage their business finances. This meant that many were spending unnecessary

International Finance Mar - Apr 2018

extra hours - or even days - to keep on top of basic financial admin and be able to see how their businesses were performing. FreeAgent was therefore designed to take away the pain of day-to-day accounting and to help freelancers and micro-business owners relax about their tax. Our cloud software enables customers to manage expenses, create and send professional-looking estimates and invoices, track time and

run a fully RTI-compliant payroll. We also enable micro-business owners to see how much tax they owe and when itâ&#x20AC;&#x2122;s due, keep record of their cashflow, and file VAT and self-assessment returns directly to HMRC. What are the current challenges of this sector of workers? Anyone starting their own freelance or micro-business is taking a huge risk. Not only do you have to spend money

Ed Molyneux, CEO, FreeAgent

Mar - Apr 2018 International Finance

INTERVIEW INTERVIEW economy

to get your venture off the ground, but you’re then left in the position where you shoulder the full burden should your business fail. And the likelihood is that, while you may enjoy a flexible schedule, you’ll be working long hours, spending ages on admin and investment time that you can’t bill clients for, and never taking time off when you’re ill because you don’t think you can afford to. Currently, there’s an inequality that exists between employed and self-employed workers, where there is rarely any kind of safety net in place to help protect the latter group. Statutory benefits that workers expect, such as sick pay, maternity pay or pension provision, aren’t there for the self-employed. Yet there has been a sustained attempt at trying to “level the playing field” by taxing both sets of workers equally. There is some positive news in that the government does appear to be taking notice following last year’s Taylor Review. However, before anything is formally put into action, self-employed workers are stuck in a legal grey area.

International Finance Mar - Apr 2018

How does a gig economy aid national income generation? There’s no doubt the gig economy is beneficial in bringing a lot of people out of unemployment and back into some form of work. Online marketplaces like eBay and Etsy, freelance sites like PeoplePerHour and Elance and platforms like Airbnb have given people more opportunities to earn money than ever before - as have the new wave of service-focussed apps like Uber and Deliveroo. All of this helps people have more personal income, stimulate the wider economy and - hopefully - generate more tax revenue. How many such workers exist in UK today and which industries are deeply dependent on them? It has been reported that there around five million people currently working in the gig economy which equates to 15.6% of working UK adults and that number is expected to rise. The most prominent and well-known players in the gig economy include the likes of TaskRabbit, Uber and Airbnb.

However, the model can extend past you offering out a room or booking a taxi; consumers can rent an aeroplane with OpenAirplane and even have a meal at someone’s home using food experience app, Eatwith. Do you believe the numbers of workers part of gig economy will go up? If so, why? Yes, but I don’t think it can keep rising indefinitely. There will definitely be a point at which the gig economy will saturate due to too many workers joining it and outstripping customer demand - although that might not happen for a while. The rise of automation and increasingly-sophisticated new technology means that there are many positions within the workforce (particularly in clerical or administrative roles) that may be put under threat in the coming years. If that happens, there will likely be a swell of new people looking towards self-employment - and in particular the gig economy - to make a living. How will the new package

INTERVIEW economy

conditions of gig economy workers? It should have a significant role in doing this. Historically, the gig economy has been something of a Wild West free-for-all, where workers were viewed as self-employed freelancers and didn’t have much in the way of rights when it came to pay or working conditions. Hopefully the recommendations of the Taylor Review and the government’s consultations will help standardise these issues and bring them closer in line with the conditions enjoyed by employed workers.

announced by the UK government change things for this sector? I welcome the government’s plans to change the statutory rights for the self-employed. One crucial change that the government is planning to enforce is sick pay entitlements for the selfemployed. In research conducted with The Freelancer & Contractor Services Association (FCSA) and FreeAgent, UK micro-businesses and freelancers said they would be more interested in receiving sick pay more so than any other statutory benefit. The reason for this is clear, as our research found that eight in ten have worked through an illness at some point while running their own business because they felt they could not afford to take time off. The simple fact is that when you’re self-employed, if you’re too sick to work, you won’t make any money. How do existing employment laws in the UK support gig economy workers? It depends whether those taking jobs in the gig economy are legally considered as “workers” or not - and that’s not as black and white as you’d imagine. For example, Uber lost a case last year that ruled its drivers should be treated as workers - and therefore should be eligible for improved rights

such as guaranteed minimum wage and holiday pay. But Deliveroo won a similar case, when a tribunal ruled that it’s couriers were “self-employed” and should not get such rights. It’s this imbalance that led to the government commissioning the Taylor Review and, subsequently, publishing its “Good Work” plan aimed at modernising workplace practices. But the changes needed to do this and support gig economy workers properly are still being discussed. How can technology help improve the condition of gig economy workers? Technology can certainly make the admin side of freelancing much easier. As a member of the gig economy, you’re usually seen as a self-employed business owner, which means you have to maintain your finances, calculate the tax you owe and do all of the other niggly little bits of management that go into running a business. Mobile record-keeping apps, cashflow forecasting tools and wider cloud accounting systems will certainly help gig economy workers save time and stress when performing this kind of admin.

If well regulated, how will the gig economy benefit the UK? It will provide a valuable alternative to employment or traditional freelancing/contracting - giving people the opportunity for flexible working and the ability to earn a living in a way that suits them. Provided that these workers are properly recognised, protected from exploitation and helped to plan for the future, the gig economy should be a significant benefit to the whole of the UK. IFM editor@ifinancemag.com

What role does government regulation and policy pay in standardizing the working

Mar - Apr 2018 International Finance

The Industrial Valley at King Abdullah Economic City: The Fastest Growing Manufacturing and Logistics Hub in the Region Strategically positioned on the Red Sea coast of Saudi Arabia is one of the regionsâ&#x20AC;&#x2122; fastest growing shipping and logistics hubs. King Abdullah Economic City (KAEC) is the largest city in the world to be built entirely with private capital, and is a city built by business with the needs of business in mind.

AWARDS 2017

FASTEST GROWING LOGISTICS AND INDUSTRIAL ECONOMIC ZONE

GCC

International Finance Mar - Apr 2018

t the heart of KAEC is the Industrial Valley one of the regionâ&#x20AC;&#x2122;s fastest growing manufacturing and logistics hubs. The Industrial Valley focuses on capturing latent demand within the Kingdom of Saudi Arabia in non-oil industries, with particular focus on specifically logistics, pharmaceuticals, automotive, FMCG, building materials

and packaging. In Saudi araba, the pharmaceutical market alone is worth an estimated $4.5 billion today and is expected to reach $6 Billion by 2020. And with ten world class pharma companies, including Pfizer, sanofiaventis and Aurobindo among others, the Industrial is already home to one of the largest pharmaceutical clusters in the region.

Company Profile

Covering an area of 55 sq km, and situated adjacent to King Abdullah Port, one of the largest deep water ports on the Red Sea, the Industrial Valley has already attracted more than 100 local and international companies including global leaders like Mars, Total, Johnson Controls and Rosenbauer The growth of the Industrial Valley is supported by a wide range of government incentives, including load financing, 100% foreign ownership for companies, government support for hiring and training local talent, and a single regulator – the Economic Cities Authority – that streamlines the process of establishing operations in KAEC. Because it is integrated with the city, the Industrial Valley offers investors a unique total package, from land and utilities to residential properties and family support services for workers, employees, and executives. The unique KAEC lifestyle is a significant feature of the city overall value offer to international businesses. In addition to its picturesque location on the Red Sea coast, the city is home to top class educational and healthcare facilities and a growing range of family-friendly amenities, from karting and golf to cycling paths, beachfront

dining and a premium yacht club and marina. And from early 2018, the launch of the Kingdom’s high-speed rail line will place KAEC just one hour by train from the cities of Makkah and Madinah – a total catchment area of more than 10 million people As the Industrial Valley moves forward in its development, it is bringing new facilities online. The recently-announced bonded and re-export zone will offer land and facilities for the storage of imported goods net of duty, streamlined import/export processes, and support

services for logistics and supply chain companies and light manufacturers supplying the KSA, Africa and Middle East markets. The Industrial Valley’s pre-built warehousing and light manufacturing units facilitate rapid, cost-effective set up for SMEs and logistic companies. Also under development are a Tier 4 technology park to provide infrastructure tailored to the needs of IT companies and a Gas Zone to supply natural gas feedstock. In April 2016, the government of Saudi Arabia announced Vision 2030, a bold roadmap to take the country away from its reliance on oil. The Industrial Valley at King Abdullah Economic City is a clear demonstration that this is not only possible in Saudi Arabia, but a commercial reality today. IFM editor@ifinancemag.com

Mar - Apr 2018 International Finance

world economic forum

World Economic Forum a tricky terrain for global reformation How far did global luminaries address the key complexities ‘in a fractured world,’ as economic disparities between nations and people rise in the background?

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n the first day, India’s Prime Minister Narendra Modi delivered the opening speech in Davos, and stood out as a nationalist and a globalist: “Development is when all can participate and it is for everyone,” he told the audience gathered at the World Economic Forum. The speech and references from the quotes of Mahatma Gandhi, Rabindranath Tagore and the Upanishads—with emphasis on ‘Vasudhaiva Kutumbakam,’ in translation, “the world is one family,” was invigorating. And yet hard-hitting as it fit the conflicting global set-up we are forced to thrive on. His remarks on the three morbid conditions that distort global civilisation: climate change, terrorism and slow down of globalisation somewhat depicted the forum’s contextual slogan Creating a Shared Future in a Fractured World. Associate editor of the Financial Times and chief political commentator Philips Stephens in his column says “Nobody has the faintest idea what this [slogan] means, but presumably it abhors America First economic nationalism.” The Davos elites and the rest of the world were expecting a stellar show with America’s President Donald Trump’s first-time address at the forum. Trump at the time of his presidency campaign opposed

International Finance Mar - Apr 2018

globalisation, is America’s first sitting president to attend the forum, since Bill Clinton in 2000. Much to everyone’s disappointment Trump’s 15-minute speech was palatable. He spoke of America’s ‘resurgence’ as a ‘strong and prosperous’ nation. However, there were slight implications made as he turned to trade, and said in reference to China that the US will ‘no longer turn a blind eye to unfair economic practices.’ The ‘predatory behaviors’ as he described are ravaging ‘the global markets’ for everyone ‘in the US and around the globe.’ Addressing business and world leaders Trump affirmed “America is open for business and we’re competitive once again.” His views, in part, were well-received: “It’s not enough to invest in our economy, we have to invest in our people,” Trump added “Only then can we have a bright future that is shared by everyone.” But following his every statement Trump’s secondary comment only sought acknowledgement in favour of Americans as predicted: “America first does not mean America alone. When the US grows, so does the world.”

world economic forum

While the audience observed two contrast speech from Modi and Trump, President of France Emmanuel Macron in his address argued differently, according to Joshua Cole, professor of history at the University of Michigan. Macron strategically positioned France as a ‘model in the fight against climate change’ to set a world example in the future. Referring to his meeting with China’s President Xi Jinping, Macron appreciated the Chinese leader’s strong vision towards the Paris Agreement. Macron said: “The new Silk Road has to be a green road. We cannot have a coal-based route.” His vow to shut down all coal-stations in France by 2021 is in stark contrast to America’s current political push favouring fossil fuels for greater profits. This carried a round of criticism: whether Macron’s move is suggestive of France’s 2.2% coal power generation. Professor Cole argues Macron’s assertive direction to bring quick change as consequential and meaningless: “For Macron this is the danger of the present moment: a relapse into a sterile nationalism that is incapable of addressing the real challenges posed by the present,” he wrote on The Conversation. The strong gestures and persuasive plans of both Macron and Trump at Davos led to a series of critical evaluation. Jay Zagorsky, economist at The Ohio State University asserts that both leaders will not succeed in reforming the fundamentals of world economics.

“Politicians can claim all they want that they are for or against coal in Davos’ forums, making grand promises about ending the use of the dirty fuel or declaring their plans to make it cheaper to use as a way to protect jobs,” Zagorsky wrote. “No matter what they say in speeches, however, economic forces will inevitably dictate whether reality can match their words.” On the other hand, German Chancellor Angela Merkel in her speech was apprehensive on how the digital future is causing separation among Germans. The concern to protect citizens’ privacy is always there, but the divide comes as the younger generation look for digital interconnectedness just like their US counterparts. Merkel said: “The Europeans haven’t decided how we want to handle data, and there’s a great danger that we may be too slow, that the world may steamroll us as we conduct philosophical debates about the sovereignty of data.” As Elizabeth Hieneman of the University of Iowa reflects “Merkel’s— and Europe’s—quandary is this: how to move forward in the digital age when Europe’s contribution is to seek balance between state power, individual rights and the dynamism of

capitalism. Achieving that balance— achieving any balance—means slowing things down. It means philosophizing.” All this mockery rightfully questions the purpose: Was there a substantive outcome to tackle the complex world disputes? The audience did not witness a marked changed. Truth be told, political leaders at Davos held their countries high in terms of past and future reforms. But there was lack of distributed efforts by the leaders to collaborate and find shared interests especially with Trump’s ‘my country first’ vision. At global levels, the leaders are disoriented and constantly look for development under their democracy. The presented agenda is relevant but experts are lukewarm about the World Economic Forum and its influence to bring a meaningful change. It has evolved as ‘talk shop.’ Max Lawson, Oxfam International’s head of inequality policy, told Al Jazeera, “The main critique is that it is a manifest failure of imagination,” convincingly declines the forum’s potential effect on global reformation. IFM editor@ifinancemag.com

Mar - Apr 2018 International Finance

INTERVIEW INTERVIEW banking

‘PSD2 will act as a catalyst for innovation within the financial services market’

International Finance Mar - Apr 2018

Alex Bray, Vice President for consumer banking, Genpact

Mar - Apr 2018 International Finance

INTERVIEW INTERVIEW banking

Interview with Alex Bray, Assistant Vice President for consumer banking at Genpact, as he dives deep into PSD2 – focusing on the regulation’s benefits as well as the disruptions it could cause in the banking sector.

Why is open banking one of the most significant changes in UK’s recent banking history? Open banking will catalyse competition within the UK’s banking market. It will cause meaningful disruption, and give start-ups and challenger banks the opportunity to compete on a more level playing field with the incumbents. It reduces the barriers to entry and the ideas and apps created by innovative challengers should raise customer expectations. The threat of competition should lead banks to try harder to offer more personalised products, pricing and experience to customers.

How will PSD2 spark innovation in financial services? PSD2 will act as a catalyst for innovation within the financial services market. It will transform how banks can price and structure their products, and how they display data to their customers. Combined with artificial intelligence, the data from PSD2 will enable banks to offer services akin to those of a private banker to the mass market, offering tailor made products or recommended next actions based on the customer data they hold. For example, the new Emma financial management app will help consumers avoid overdrafts, find and cancel subscriptions, track debt and save money. The onboarding process for customers also will be significantly easier; since banks will have access to third party data, there will be less need for customers to fill in countless number of forms. As a result of being able to validate customer data from other sources, it will also be easier to identify customers, and thus reduce fraud. This

International Finance Mar - Apr 2018

will give more confidence to processes such as KYC (know your customer) and AML (anti-money laundering) and will help with compliance issues. What impact will have PSD2 have on account information service providers (AISPs)? An account information service is an online service which offers a consolidated view of the payment accounts customers holds with their payment service providers. It provides a clear overview of an individual’s financial situation, aggregating information from multiple payment accounts and displaying data in a way that is easy to understand. While these services already exist in the UK, PSD2 will bring them within the scope of the regulation. This means that AISPs can receive access to payment accounts, however, they also will be subject to new data security rules to ensure consumers are properly protected. What are the benefits of PSD2’s open API for banks and customers? For customers, there are some significant benefits to having financial data aggregated in one place. Financial analysis tools will provide meaningful insights as data from other financial institutions – for example credit card statement data can be integrated alongside current account statements. This aggregated data will be easier to monitor, offering new insights into personal income and expenditures. As a result, customers can more easily compare experiences of ‘other customers like you’ and products from other banks. This means it will be easier than ever for customers to find out what bank account is best for

them. For banks, the initiative will open a number of new opportunities. With customer permission, financial institutions can access customer information held by competitors. Banks can use this to seek out new opportunities and meet customer needs more effectively. PSD2 will also give banks the ability to make more accurate marketing and credit decisions, therefore offering an improved customer service and pricing. Furthermore, with a wider range of customer data, banks can become the relationship hub for customers, and win a greater share of customer wallet – after all, they are already starting from an advantaged position. What are the risks associated with open API? First, there is always a risk when sharing data with a third party especially a start-up, they may not have the protocols or security in place to prevent a cyberattack. Another risk is customers may give away data accidentally, by ticking boxes they don’t fully understand, which could lead to unwanted recommendations and offers, with no idea of how these third parties use their data. There is also the risk of fraudulent payments being made through the payment initiation service. However, this should be covered by the originating bank as it will own the liability for unauthorised transactions. Are banks and customers comfortable with screen scraping? Tell us about the issues related to the process. Banks have never been comfortable

INTERVIEW banking

with screen scraping as there are a lot of security and technical issues associated. Screen scraping has only ever been a workaround where there is no access to an API. First, customers have to provide their password to the aggregator, which is a risk. Either the password is saved in app on the local device, or it has to be held by the aggregator. This process also desensitises customers to sharing passwords, which can increase the risk of phishing attacks. Second, screen scraping only works if the webpage being scraped stays the same, with all the fields in the same position when the screen scrape was first set-up. If the page were to change, then the customer will receive all the wrong data or no data at all. There can also be latency issues, as multiple pages have to be scraped simultaneously for customers to receive their data all in one place. Finally, screen scraping can discourage customers from changing their passwords, because if the password changes, then the aggregator won’t be able to access the webpage—causing a lot of hassle for customers as they have to change passwords multiple times.

debt, and save money. Doubtless, there will be many more examples in the future.

Moving into the evolution of fintechs – how are they at play? We have started to see some early examples take form. HSBC and its subsidiary First Direct have partnered with Bud, a London-based fintech start-up to test an open banking app. This app will allow a mix of HSBC customers and non-customers to view all their account information. They also can receive transaction notices, money management tips, and product suggestions based on individual needs (even from third parties). For example, the app will trawl databases for the best broadband and energy deals, personalised for each customer. Meanwhile, Emma is building a financial management app for millennials. It has been given Financial Conduct Authority approval. The app will help consumers avoid overdrafts, find and cancel subscriptions, track

Overall, what impact will PSD2 have on banks and its customers? It is still too early to see the impact for customers, but we have started to see banks change their lending processes. By gathering data automatically, lenders can access more accurate and comprehensive data than could otherwise be provided by a customer. This will mean that potential bank lenders will be able to understand as much about new customers as their existing ones. Manually gathered data—especially for income and expenditure, is often inaccurate. By automating this process, PSD2 data sources will reduce the number of manual underwriting referrals and the need to go back to the client for clarifications. In turn, this reduces the cost and turnaround time of the application and improves the customer experience.

How will regulations such as GDPR and new technologies, such those involved in as roboadvice, transform open banking this year? Robo-advice will be powered by a wide range of artificial intelligence and machine learning technologies. This will form a key part of open banking. The available customer data will feed AI bots to recommend personalised products based on spending habits, credit scores, mortgage repayments, etc., as well as give financial advice on investments and savings based on a customer’s profile. Banks will ultimately be able to offer an automated relationship manager for all customers. GDPR and PDS2 are very much aligned. PSD2 allows customers to share data, while GDPR allows them to control the data once it is shared. GDPR protects customers in case their data is misused, and outlines the rules for when giving and withdrawing consent.

In addition, by improving the data quality gathered, banks can more accurately assess the risk of the potential loan. This means the bank can make more informed credit decisions. As a result banks can deploy a more sophisticated pricing model, and offer more competitive loan rates to new customers, which will in turn help to increase applications and provide customers with more choices. IFM editor@ifinancemag.com

Alex Bray is Assistant VicePresident for consumer banking at Genpact, a global professional services firm focused on digital transformation. He is an expert on omni-channel banking and regularly comments on trends in the industry. Prior to joining Genpact, Alex was global director of retail channels at Misys. He has previously worked at IBM as a Managing Consultant in the Digital Banking practice, and spent 10 years at Lloyds Bank.

Mar - Apr 2018 International Finance

banking

Open Banking is here:

How Are Big Banks Coping? A report by Bain & Co. titled Coping With The Challenge of Open Banking, by Stanford Swinton and Eduardo Rana discusses how UKâ&#x20AC;&#x2122;s big banks can effectively handle the competition following the introduction of open banking. Here are its findings International Finance Mar - Apr 2018

banking

he UK banking industry is once again producing healthy margins, with the Big 5 banks reporting profits for the first three quarters of 2017 that were 50% higher than the same period the previous year. The sector’s performance has inspired investors, who bid up the FTSE All Share Banks Index by almost 12% in 2017. Despite these auspicious trends, big UK banks face big challenges. Low interest rates continue to put pressure on the average net interest margin, which remains below 3.5% for the industry. Brexit looms large. The separation is likely to change the regulatory environment for UKdomiciled banks and restrict their access to some European capital markets. At the same time, major UK banks have perennial problems attracting and retaining customers. UK banks have an average Net Promoter Score® (a key metric of loyalty) of 15 points. By comparison, big tech companies such as Amazon and Apple have scores in the 60s and 70s. Meanwhile, fintechs and other digitally adept rivals are nibbling away at both the big banks’ brand equity and their potential share of future growth. The biggest challenge incumbent UK banks face is the advent of open

banking—a series of reforms that took effect in January. The new rules, mandated by the Competition and Markets Authority, aim to foster competitive markets and encourage innovation. The regulations require banks to disclose performance and fee data, which will make it easier for customers to compare the offerings and results of different financial providers. The new rules also direct banks to use open application programming interfaces (APIs). With open APIs, customers can readily share their financial information with other providers, if they choose to do so. Open APIs will also make it much easier for customers of big banks to transfer their accounts, manage payments, and conduct transactions through other banks and nonbanks— thereby creating new opportunities for aggregators to offer customers services from multiple providers on a single platform. Big banks face the prospect that many of their customers may seek out the convenience of digital aggregators, taking their accounts, and the profit pools they represent, with them. Open banking is good news for consumers, who are likely to gain easier access to a broader array of financial services offered by a larger

selection of providers. With open APIs, many of the long-standing barriers to switching providers will dissipate. Big banks face the prospect that many of their customers may seek out the convenience of digital aggregators, taking their accounts, and the profit pools they represent, with them. Analysts estimate that 10% to 20% of current UK banking business is at the risk of being disintermediated due to changes in the industry. The risk of losing high-value customers On the face of it, the big banks don’t seem to be in imminent danger. The Big 5 — Barclays, HSBC, Lloyds, Royal Bank of Scotland and Santander UK — still dominate the UK retail banking market, with a collective share of 80%. Except payment providers such as PayPal, Apple Pay and Android Pay — which are used, respectively, by 65%, 16% and 10% of UK consumers, nonbanks and other fintech platforms have made limited inroads. Alternative platforms such as those provided by Atom, Azimo, Monzo and Xoom each have less than a 2% market share. However, a survey of more than 4,000 UK banking customers conducted by Bain & Company, Salesforce and MaritzCX shows that big banks have reason to be concerned. Their most important customers—those who have a primary banking relationship, usually in the form of a current account—are at risk of leaving: 63% say they are willing to share financial information concerning their accounts with a competing bank, fintech or aggregator in pursuit of a better offer. In general, UK banking customers are very open to potential disruptors—a reality that open banking will magnify dramatically. Additional provisions in the open banking regulations that require banks to participate in a regulatorrun consumer benchmarking study and publish those results will further threaten primary bank relationships. When we asked consumers what they would do if a government ranking

Mar - Apr 2018 International Finance

banking

showed their bank was poor on customer service relative to its peers, 17% said they would look for a new bank and 43% said they would stay, but look elsewhere for new products and services. Traditionally, consumer-banking relationships in the UK have been stable. Only about 3% of current account holders switch providers each year, according to the Current Account Switching Service. However, consumer loyalty is not exclusive and not guaranteed: 32% of consumers report having two or more current accounts, 57% are in the market for new banking products every year and nearly all report holding some form of financial product with a competing provider. Big bank customers, who give their banks high Net Promoter Scores tend to behave in ways typical of loyal customers. These customers buy more products, are open with the bank about their financial needs, are less likely to churn their accounts and are more willing to refer their bank brand to their friends and family. That said, in a market being disrupted by a force such as open banking, loyalty economics based on historical performance can break down. Competitor landscapes change, redefining for customers what is possible and creating a moment for them to re-evaluate their longstanding relationships with brands. Traditional consumer metrics may predict what banking customers will do in the current marketplace but may not foretell what consumers will do in a period of disruption. As an example from our survey, NPS® promoters are 24 percentage points more likely than detractors to share information with their existing bank provider, but promoters are also about 10 percentage points more likely than detractors are to share their information with another bank or a nonbank. This implies that customers who have a positive relationship with banks today can be open to innovative banking alternatives in the future. Our survey shows that certain

International Finance Mar - Apr 2018

customers are “high risk”—that is, more open to appeals from disruptors in an open banking environment. Those most likely to leave for another provider tend to be 55 or younger and have an annual household income of at least £55,000. Additionally, majority of these consumers have already adopted at least one alternative fintech solution, such as Apple Pay. Amongst these high-risk customers, 65% are open to sharing their personal data with other banks or nonbanks in order to get better products or services. While high-risk customers account for only 15% to 20% of the total customer base, we estimate that they make up close to 45% of bank profits. In contrast, about 25% of bank customers are “low risk”—that is, not likely to switch providers or adopt new technologies in an open banking environment. These safe consumers tend to be older than 55 and have an average annual household income of less than £55,000. They’re unlikely to have used fintech platforms, are less willing to share their data with other banks or nonbanks and are much less likely to try an aggregator. However, we estimate that these low-risk customers make up only about 11% of total bank profits. The rise of the aggregators Along with the increased risk of losing high-value customers to competitors in an open banking environment, big banks must also contend with the potential for aggregators to siphon away large portions of their profit pools. Amongst all bank customers surveyed, 59% report already being willing to try a platform that aggregates banking products and other services (such as insurance and investment advice) to save money and simplify financial transactions. Within the high-risk group, that figure is much higher, at 74%. Aggregation in open banking represents a deeper threat to banks than disintermediation by brokers or rate-comparison websites. In these

traditional front-end origination services, the relationship with the customer is ultimately with the bank— not the broker or website—once the account is set up. Aggregators, by contrast, can own the entire customer relationship. They have the potential not only to provide greater transparency and ease of access than banks but also to furnish holistic account management and transaction services on a single platform. If banks lose control of customer transactions to aggregators, they effectively become wholesalers for at least some of their customers. This disintermediation trend is not unique to banking. Industries that are further along in the cycle of disruption, such as music and travel, have seen 10% to 20%, and sometimes more, of profit pools move away from incumbents in favour of aggregators. These shifts usually take fewer than five years to materialise. A similar 10% to 20% of banking profits could be at risk of disruption. Bain estimates that within five years as much as £1 billion to £2 billion of annual pre-tax profits could be vulnerable to disintermediation, primarily driven by downward pressure on margins and accounts shifting to alternative sources of lending. Strategies for dealing with change As big UK banks develop strategies to ward off disruptors, they face several challenges with which their younger and nimbler digital rivals do not have to contend. Big banks have costly legacy distribution networks. Even though the top five retail bank brands have shrunk their number of physical branches by more than 25% over the past five years, collectively they still had more than 5,000 outlets at the start of 2017. Banks rely on both expensive and complex IT systems and inefficient manual processes to manage these networks. In grappling with these challenges, the big banks may paradoxically be

banking

victims of their own recent success in the marketplace. After several relatively strong years of profit growth, driven by robust mortgage lending on the one hand and ongoing cost cutting on the other, bank management teams may find it harder to justify the large investments in innovation required to transform their operations to compete in an open banking world. Amongst all bank customers surveyed, 59% report already being willing to try a platform that aggregates banking products and other services (such as insurance and investment advice) in order to save money and simplify financial transactions. Despite this inertia, UK banks can adopt strategies now that will prepare them for the disruption that open banking is likely to catalyse. Deepen your relationships with your customers. Incumbents have at least one clear advantage in open banking: They already have access to a sizeable pool of customers and an opportunity to understand those customers better than their competitors do. The big banks also have an edge when it comes to trust. When we asked customers if they are willing to share more data with a provider in order to get a better product offering, 78% said they are willing to share with their primary

bank, while 63% said they would share with another bank and just 43% would share with a nonbank. Banks can build on this competitive edge by keenly paying attention to what their customers—and their customers’ data—are saying about the products and experiences that they want most, both now and in the future, as alternative propositions evolve. Banks can enrich the picture they have of individual customers by mining and analysing data from banking apps and customer cash flows, as well as from external sources such as credit history, mobile location and browser histories. In particular, with the privilege of better access to information, big banks can increase their efforts to understand high-value customers, the ones most at risk of moving their accounts. In addition to building the mandatory API infrastructure for open banking, banks that understand the advantage of knowing their customers are already taking further steps to enhance their competitive edge by, for example: • building a complete picture of individual customer needs and how customers choose to meet those needs at the product and episode level; • understanding bank strengths and

weaknesses in the eyes of customers relative to direct competitors and digital alternatives for key customer segments; • using data pools to predict customer needs, proactively avoid unpleasant experiences and recover customers when things go wrong; • designing experiences that delight the customer across multiple channels that are simple and easy to use, digital and straight through (i.e., don’t need human intervention); and • using data to personalise those experiences, such as providing propositions aligned to customer life events. Be ready for the aggregators. UK banks have long gone to market primarily through two channels: direct to the customer and through brokers. In recent times, however, the direct channel has split into two— physical pathways, such as branches and telephony centres, and digital channels. Digital has quickly taken over as the preferred direct channel. Digital already accounts for more than 60% of purchases by UK bank customers, according to Bain’s 2017 Customer Loyalty in Retail Banking Report. Aggregation looks likely to become an increasingly important fourth channel in open banking, bringing the potential to disintermediate both primary and secondary banking relationships. Forward-looking banks are taking a proactive approach to developing strategies to use aggregation as an extension of, and potential substitute for, the way they now distribute products. Potential strategies include: • shoring up existing customer relationships and actively engaging on the journey towards open banking, thus ensuring that the bank remains a top-of-mind choice; • partnering with thirdparty digital platforms and developing capabilities to distribute effectively through them;

Mar - Apr 2018 International Finance

banking

•

building robust and differentiated capabilities to price and personalise offerings for customers (e.g., tailored, fully preapproved, always-on lending); • ensuring existing bank platforms can aggregate thirdparty data and information from other platforms; and • investing in new data and service providers, such as digital brokers, to play further up the value chain. The right strategy depends on the individual bank and builds in enough flexibility to accommodate some level of uncertainty. UK banks are already placing bets by investing in technology and data providers, and in some cases even developing their own aggregators. While strategies may differ, looking the other way is not an option. Banks need to develop an approach that recognises alternative banking platforms as potential disruptors. Be nimble. Banks entering the open banking era need to develop the muscles to change and adapt quickly. Forward-looking banks are not only aiming to improve experiences for customers, they are organising themselves around customer needs in a way that enables faster innovation cycles and eliminates silos that get in the way of decision making. Changeready banks are also taking a hard look at ways to simplify and automate backend processes, remove legacy costs, eliminate options that customers no longer value and deliver experiences that are 100% digital. Banks are evolving to be more nimble by, amongst other things: • breaking down silos of activity by organising the work into a common set of customer needs (e.g., buying a home) and customer episodes (e.g., applying for a mortgage); • consolidating the responsibility for each customer need and

International Finance Mar - Apr 2018

episode, with clear targets for cost, risk and commercial outcomes; • unifying the accountability for the decision rights and underlying resources (systems, processes, funding and people) for each customer need; and • simplifying technology and process architecture and governance to shorten time to market and allow for more regular platform upgrades. While it is difficult to know for certain how open banking will affect major UK banks in the coming years, the industry clearly is heading for change. Greater sharing of information with, and by, consumers will bring both threats and opportunities for incumbents. Aggregators will redefine how at least some consumers research, purchase and manage their financial products and services day to day. As banks disclose more information, customers will gain greater insights into how their primary banks are performing compared with other providers, prompting many of them to try out new platforms and solutions. Whole segments of UK bank customers are primed for change and willing to experiment with new ways to manage their money, borrow and protect their wealth. Industry leaders have an opportunity now to get ahead of the curve by redefining their battlegrounds and their strategies around key customer segments. Banks that do not prepare now will inevitably be forced to react when changes do arrive, which for some may be too late. IFM editor@ifinancemag.com

For this study, the financial services teams at Bain & Company and Salesforce and the research team at

MaritzCX combined their expertise to provide insights into how new UK open banking regulations will affect the customer experience, as well as what implications the new rules will have for the strategy of major UK banks. Bain & Company is one of the world’s leading management consulting firms in financial services and digital innovation. Salesforce is a global leader in customer relationship management (CRM), bringing companies closer to their customers in the digital age. MaritzCX combines customer experience research, technology and service to help companies connect with customers and respond to industry issues. The authors would like to acknowledge the assistance of Alex Sukhareva, a consultant in Bain’s London office; at Salesforce, Joaquin De Valenzuela, head of financial services for Europe, the Middle East and Africa (EMEA), Luca Romagnoli, head of business development for EMEA, and Sergio Segura Canton, banking and insurance market director; and at MaritzCX, James Thornborrow, vice president, and Carol McCreadie, customer experience director.

+61 3 8610 2800

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www.latrobefinancial.com

banking

Indonesian bank revitalizes image to ace new-age banking standards Bank Ganesha, which remained dormant in the financial services sector until 2015, has gone through a tremendous transformation in just three years. Read on to know how the bank established its worth in Indonesia as a top league financial services provider

ne of the most significant success stories to emerge from Indonesia’s banking sector is Pt Bank Ganesha Tbk. The private bank that was established in 1990 didn’t witness runaway success until 2015, when management changes turned around the Bank’s fortunes. This year’s winner of International Finance’s Best Small Bank and Emerging CEO of Indonesia, Pt Bank Ganesha’s journey has resonated with the changes taking

International Finance Mar - Apr 2018

place across emerging economies across Asia. Strategy First The new management, brought in mid-2015, transformed the small bank to a fast rising performing asset, with new strategies in line with the latest financial trends. One of the major steps taken towards establishing a presence in Asia among other bigwigs was forging strategic alliances. Pt Bank

Ganesha partnered with Mitra Adi Perkasa (“MAP”), the biggest retailer in Indonesia with 150 brands including Zara, Marks&Spencer, Sogo and Starbucks, and introduced products including Ganesha-MAPClub Savings, whereby Bank Ganesha borne MAPClub Points as acquisition incentive and monthly interests to depositors. Being the first-of-its-kind, the product drives low-cost funds and serves as entry point for cross selling. For MAP, this encourages Bank’s depositors to buy more MAP products and ultimately increases revenue. Further strategic partnerships with a major bank and leading licensed providers for co-branded Affinity Credit Card; Bancassurance; and Debit Card; and Bank strengthened the bank’s position as an all-round service provider. A special feature for the employees of sister companies were salary loans and payroll savings – incorporated as an added incentive. Contrary to other unsecured personal loan products in market, its salary loans have miniscule NPL as employees receive a monthly salary and repay loan installments from their payroll accounts at Ganesha.

banking

Pt Bank Ganesha goes the IPO way One of the highlights of 2016 was Bank Ganesha conducting and completing its Initial Public Offering, in a bid to strengthen long-term funding structure for business expansion. Oversubscribed 13x, the IPO saw robust demand from investors amidst current market condition and tight competition for funds. Post IPO, Ganesha closed 2016 with Capital Adequacy Ratio of 34.9% - a massive 20.5% improvement from 14.4% a year ago and amongst the highest ratio in the banking industry. Shareholders’ equity rose 407% YoY as of December 2016, which enabled Ganesha to ascend from its BUKU1 to BUKU2 classification and offer more products and services including mobile and internet banking, credit card and trade finance. Following the IPO, governance guidelines for public companies has also been completed. Stronger Brand for a Better Market Advantage Recognising the need for stellar customer experience, Bank Ganesha launched a series of initiatives from 2015 including boosting their social media presence, a 24-hour customer care centre and an E-Sales kit for closing sales more efficiently. Aside from these upgrades that are reflective of a growing financial brand, the leadership also revitalized brand presence by providing improved versions of various marketing collaterals and an optimised franchise footprint by providing a functioning network of branches and ATMs. To a large extent, technology has played a vital role in enhancing the company’s footprint. Improved customer-centric data analysis for better management insight, cost management and third-party certifications have gone a long way in establishing Bank Ganesha’s credentials as a competent player in Indonesia’s financial services sector. Moreover, the revamp of the corporate website has greatly helped

in enhancing the bank’s online image, so much so, that it won the award for Award for ‘Best Website of the Year – Indonesia’ in 2017 at Asian banking & Finance Retail Banking Award programme. The bank has several other honours to its credit such as – • International Finance Award for Best Emerging CEO in Indonesia to CEO Surjawaty Tatang and Best Small Bank in Indonesia • 2017 International Business Awards program for CEO Surjawaty Tatang as ‘Woman of the Year’ (Silver Stevie Winner), Bank Ganesha as ‘Small Banking Company of the Year’ (Silver Stevie Winner) and the Bank’s website as ‘Banking Website of the Year’ (Bronze Stevie Winner). • Award for ‘Best Website of the Year – Indonesia’ in 2017 Asian Banking & Finance Retail Banking Award program. • Gold Award in 2017 Asia Pacific Stevie Award program for ‘Excellence in innovation in Financial Industries’. • ‘Very Good’ predicate from leading banking industry publication InfoBank magazine. • Investor Award as the Best Bank for ‘Banks with Asset Rp. 1-25 trillion’. • ‘Best Private FX National Bank’ in 2017 Indonesia Banking Award program by leading business publication Warta Ekonomi. • Corporate rating of ‘idBBB+’ with Stable outlook from PT Pemeringkat Efek Indonesia (“Pefindo”), a domestic rating agency affiliate of Standard & Poor’s. This is the first rating exercise that Pefindo conducted on the Bank, which rating result reflects the Bank’s strong capitalization, growth potential from captive market and adequate liquidity.

Overcoming Market Challenges Despite difficult global and domestic macroeconomic backdrop, Bank Ganesha not only survived 2015-2017, it thrived; with gains made across all areas of profitability, lending, deposit taking, capitalization, branding, organizational capacity and service quality. During the last two years, growth performance is better than industry average in many key metrics: • Net Profit after Tax grew at 207% Compound Annual Growth Rate (“CAGR”) to IDR 51 billion driven by strong revenue generation, disciplined cost management and asset quality improvement. • Total operating revenue up 48% CAGR to IDR 248 billion on the back of solid growth in Net Interest Income and Fee-Based Income. • Asset up 52% CAGR to IDR 4.58 trillion on the back of strong loan book growth of 52% CAGR to IDR 2.90 trillion, which is made possible due to the much stronger capital base following IPO. • Funding base is diverse and up 43% CAGR to IDR 3.38 trillion. • Underpinned by strong recoveries of impaired loans, Gross and Net Non-Performing Loan ratios improved to 0.81% and 0.20% at end-year 2017 from 3.14 % and 1.80%, respectively, recorded two years prior. • Capital Adequacy Ratio stood at 30.1% as of end-year 2017, which is well above the regulatory requirements and remains supportive of business growth. With no signs of slowing down, Bank Ganesha is well on its way to establish new benchmarks for financial excellence in Indonesia. IFM editor@ifinancemag.com

Mar - Apr 2018 International Finance

OPINION

Vanessa Byrnes

The Digital Revolution - Will it

transform or devastate the Retail Banking sector? 54

Total talent management strategies could radically change the retail banking sector, if workforces can precisely reflect the needs of a business accurately

International Finance Mar - Apr 2018

OPINION

istorically, businesses have built workforces by advertising for specific roles which fit into rigid organisational structures. However, in an age when the digital revolution is impacting the skills that businesses require, and candidates of all ages are increasingly seeking to work in an agile way, this model is quickly becoming outdated. While this new desired way of working is evident across all sectors, the financial services sector – and retail banking in particular – arguably has the most to gain from implementing effective total talent management strategies. That is, planning workforces which precisely reflect a business’s needs at any given moment. However, in today’s VUCA (Volatile, Uncertain, Complex and Ambiguous) environment, where skills requirements are shifting continually, organisations can find themselves lacking the expertise they need to drive innovation, or a surplus of skills which are no longer relevant. ‘Current requirements’ can often seem like a moving target. The digital transformation of retail banking has excelled at a rapid pace in recent years. Technological advancements have not only revolutionised back-office processes, but also customer expectations. Users now routinely expect secure, beautifully designed, frictionless

banking experiences across all of their devices and the bar continues to rise. From customer logins based on facial recognition, to the app that can offer mortgage rates based on a photo of a potential property, we as consumers now habitually anticipate developments which would have been regarded as science fiction even a few short years ago. As such, ensuring that the volume and calibre of talent is available to keep abreast of this rapid pace of change is a perpetual challenge for business leaders. This perhaps explains why, according to PwC’s latest CEO Survey, 71 per cent of business heads within financial services say they have changed their people strategy to reflect the skills and employment structures they need for the future, but only 25 per cent have done so to a ‘significant’ extent. This is despite the fact that over a third (34 per cent) say that digital skills are very difficult to recruit. What’s more, less than half of the same group use data analytics to attract, engage and retain colleagues (48 per cent), and less than 20 per cent use these tactics to a ‘great extent’. However, the benefits of harnessing data to implement total workforce planning strategies, in order to aid organisational efficiency, should not be underestimated. By digitally tracking the availability of skills, both within the business and externally in the market, leaders can

map where permanent workforces can be deployed most effectively, the places where artificial intelligence can pick up process-driven tasks which zap productivity, identify the skills they are lacking, and determine if these can or should be acquired on a full-time, flexible or contingent basis. Once hiring managers have this crucial intelligence, they can then source specific skills in an agile way. In the future, I believe that searching for a job will be akin to building a holiday on Expedia. A candidate will be offered options based on past behaviours and other data, yet they will ultimately be offered the freedom to ‘build’ their own role based on their skills and availability. Today, banking institutions are not just competing with tech giants like Apple and Google for the brightest digital professionals, they’re also fighting contiguous sectors such as retail and hospitality in an effort to offer the greatest customer experience in the most efficient way. In order to be the victor in the war for talent, business must entice candidates with an employer value proposition which resonates with not only their professional ambitions, but also their lifestyle and values. By gaining a bird’s-eye view of the talent landscape, businesses can get rid of rigid jobspecs and build roles around the talent they value most highly. Ultimately, commercial success relies on investing in innovation to reduce costs and boost revenue – while simultaneously improving customer experience. And this is only possible if decision makers first prioritise implementing systems which enable their businesses to attract, engage and retain the talent to make it happen. IFM editor@ifinancemag.com

Vanessa Byrnes, Sector Managing Director of Retail Banking & Insurance at Alexander Mann Solutions.

Mar - Apr 2018 International Finance

OPINION

Adrian Oâ&#x20AC;&#x2122;Connor

The importance of soft skills in accountancyâ&#x20AC;&#x2122;s digital age 56

Why the current wave of digital seeks more humane attributes such as creativity and intelligence amongst finance professionals

ccording to a recent report by PwC, the first wave of automation arriving in the next two to three years will hit financial and professional services hardest, when compared to other sectors. According to the analysis of more than 200,000 jobs across 26 counties, between six and eight per cent of financial services jobs will disappear during the first wave of automation in the early 2020s. Across the board, this figure stood at just two to three per cent. Against this backdrop, finance professionals must capitalise on innately human attributes such as creativity

International Finance Mar - Apr 2018

and emotional intelligence in order to safeguard their careers. Looking at accountancy specifically, the FT recently reported that increasing automation and artificial intelligence are behind the reducing need for armies of graduates who can do the low-level paperwork usually required of them. In short, technology is replacing their jobs. Furthermore, a top executive at Big Four accountancy firm, EY, recently went on record to say that graduate recruitment at auditors and accountants could fall by as much as 50 per cent by 2020 due to the impact of artificial intelligence.

OPINION

Similarly, according to Accenture analysis, transactional tasks are already moving to integrated business services solutions that use robotics, which will automate or eliminate up to 40 per cent of transaction accounting work by 2020. This shift means that finance staff will spend more than 75 per cent of their time, up from 25 per cent today, on decision support, predictive analytics, and performance management. It is here where the value of soft skills comes into play. The role of the accountant isn’t disappearing, merely metamorphosing. Today’s professionals must capitalise on the increase in data available to adopt a more advisory role, proactively offering valueadded services based on live information, such as strategy and planning and business partnering to drive business performance. Despite some controversy

surrounding the rise of RPA and AI, a recent poll of Chartered Institute of Accounting Professionals (CIMA) members found that the vast majority were embracing this change, with a significant 83 per cent in support of automation. When asked about the effect of such innovation on businesses, management accountants were most likely to state that the outcome would be more efficient companies as a result of better automation and data analysis (62 per cent), followed by a general up-skilling of the workforce due to the need for more advanced computer skills (47 per cent). Similarly, ACCA research shows that the next generation of accountants are aware of, and ready for, PwC’s forecasts. According to its Generation Next survey of 18,000 finance professionals under the age of 36, more than half (57 per cent) believe that

technology will replace entry level roles in the profession, and the majority (84 per cent) welcome this, saying that technology will enable them to focus on higher value-added activity. What’s more, while the practice of culling graduate roles may aid short-term efficiency, it will almost certainly have a disastrous impact on future talent pipelines by creating significant shortages at newly-qualified and midlevel in the next three to five years. This will inevitably add to the rarity and value of innately ‘human’ skills moving forwards. As accountancy moves from a purely technical role to a more consultative role, professionals can free up time to analyse data, spot trends and add real value to their organisation. It’s no secret that some elements of traditional accounting are monotonous, tedious and time intensive – it seems that the days of the number

cruncher are strictly limited. Contrary to long-held stereotypes, today’s inhouse finance professionals must have the ability, and gravitas, to engage with others both inside and outside of the organisation. The aforementioned PwC research found that as many as 30 per cent of jobs across the economy could be lost to automation by 2030. However, while finance and accountancy may be the sectors most susceptible to job losses amid the rise of automation, this also means that they potentially have the most to gain. Yes, AI can boost efficiency exponentially, but news that Walmart’s recently introduced customer service robots are being ignored by customers is indicative of a continuing, innate, desire for human interaction. As such, professionals who can firmly differentiate their skill-sets from the capabilities of machines will quickly find their value increasing. IFM editor@ifinancemag.com

Adrian O’Connor, Founding Director, Global Accounting Network

Mar - Apr 2018 International Finance

OPINION

Daniel Stanley

What does this year hold for major currencies worldover? Significant political developments will be at the core of currency performance across the world’s leading economies

hen asked what troubled him most, UK Prime Minister Harold McMillan famously replied: ‘events dear boy, events.’ With those words in mind we can consider how unfolding events on the world political stage might affect the prospects of major global currencies in the year ahead, including the Pound, Euro and US Dollar. From President Trump’s increasing protectionism, to progress on Brexit talks between the UK and EU, and Angela Merkel’s ability to form a stable coalition government in Germany, core events will be the significant

International Finance Mar - Apr 2018

factor in determining the performance of currencies over the course of 2018. For the international business community, where trade is conducted across borders using these and other types of currencies, this could have major implications on their financial stability. While the Pound has made some upward progress in recent months, Brexit continues to make its mark on the currency. It has some way to go to return to its pre-June 2016 value. Sterling is currently sitting at around €1.13 against the Euro, significantly lower than before the vote to leave the EU. Domestic politics, including last summer’s

OPINION

snap general election which back-fired badly and reduced the Conservatives to a minority government, have not helped matters. Although some recent progress has been made, there is still likely to be further turmoil to come as the Brexit talks continue. The longer-term uncertainty over how the UK economy will fare outside the EU is also a concern. All these factors could impact market confidence, further affecting the value of the Pound over the short to medium term. Meanwhile, over on the continent, the European Central Bank is slowing down the pace of bond buying, outlining the current programme which is due to end this September. The EU zone seems to be making a steady recovery from the strains it faced after the financial crisis, with many of the emergency loans taken by national banks being repaid faster than was expected. As a result, these institutions are accumulating the currency which is growing demand for the asset and giving way to a potential price rise. Emmanuel Macron’s tax cutting agenda could prove to be another positive development for the Eurozone. His actions, while controversial in France, appear to be having an initially positive economic impact. It’s not all smooth sailing for the EU, however. Angela Merkel continues to struggle to form a coalition government. While partnering with her centre left SDP rivals seemed a potentially stable option,

-at the time of writing this piece, a critical vote on the coalition hangs in the balance with some vocal opposition to the deal coming from some leading social democrats, including the leader of its youth wing. The ultimate success of a coalition will determine Ms Merkel’s progress and will undoubtedly impact the single market economy. Looking to the world’s biggest economy and the prospects for its currency, there is also a mix of optimism and caution in the months ahead. There is a strong expectation that we could see another three interest rate rises from the Federal Open Market Committee over the course of 2018, fuelled partly on the back of President Trump’s tax reform plans. This is seen as a huge gift to business and one that will fuel inflation. Anything that bumps up borrowing costs could help take some steam out of the economy as well as equity valuations. With Jerome Powell succeeding Janet Yellen as the new head of the central bank we can expect continuity in America’s monetary policy. With US export improvements being reliant on a weak dollar, he will likely take a cautious approach on policy matters going forward. Recent economic performance has been broadly positive in the US, but President Trump’s tax cuts and his unorthodox approach to foreign policy matters, especially with North Korea, could threaten this currency stability. There is also the investigation

around whether Mr Trump had political ties with Russia. If evidence emerges in the year ahead that directly implicates him it could prove catastrophic, not only for his presidency but also for international confidence in the Dollar. Just as Harold McMillan had no direct influence over events during his time in office, globally-focused businesses can often do little more than watch from the side lines as they unfold. They can, however, ensure they assess and manage the risk that results from decisions and actions taken in the political world. For businesses which transact in Sterling, Euros, US Dollars and other international currencies, the need for diligence remains crucial in managing exposure and protecting profitability against fluctuations. Globally active businesses need to firstly understand the level of risk they could be exposed to. From there they must set out an appropriate budget rate and create a suitable hedging plan which can be supported by a range of effective foreign exchange management tools, including forward contracts, spot deals and orders. With professional advice that is often essential in determining the best means of managing foreign exchange risks, companies can insulate themselves from unexpected shocks and protect their profitability. Events have always offered the prospect of hope and fear for politicians and it will be no different in the year ahead. They will

also continue to influence key aspects of economic performance including the value of national currencies. The global business community must therefore ensure they put in place the appropriate safeguards to manage the risk this could present. IFM editor@ifinancemag.com

Daniel Stanley, Head of FX at London-based foreign exchange specialists Global Reach Partners

About Daniel Stanley A former semiprofessional footballer, Daniel joined the Global Reach Partners Group in 2011. His initial career in financial services began with RBS’s Credit Card division. He subsequently went on to work in the London office of KBC, a Belgianheadquartered bank insurer with 11 million international clients, before joining the Global Reach team. In his role as Head of FX, Daniel heads up the trading team and is responsible for the company’s options trading operations. He is a regular media contributor on foreign exchange-related issues.

Mar - Apr 2018 International Finance

How VNPT is at the forefront of Vietnamâ&#x20AC;&#x2122;s industrial revolution International Finance Mar - Apr 2018

TELECOMMUNICATION

As Vietnamâ&#x20AC;&#x2122;s economic growth percentage steadily rises, Vietnam Posts and Telecommunications Group (VNPT) has earmarked various milestones of its success, paving the way for it to become a leading digital service provider by 2018

he robust growth of Vietnam is a reflection on the countryâ&#x20AC;&#x2122;s many sectors, including telecommunication. By 2017, the economic growth will be 6.81% following difficulties bottoming out in 2012. According to Brand Finance, VNPT is in the third position and VinaPhone (mobile brand name of VNPT) is ranked 8th in the top 10 most valuable brand names in Vietnam in 2017. The brand value of VNPT increased the most by 11% compared to 2016. In 2017, VNPT has achieved impressive results as it has participated actively and plays a leading role in implementing

e-government nationwide. Compared with the same period of 2016, the e-government software of VNPT has been integrated and used in 61 of 63 provinces and cities such as VNPT E-Office software has been used increased 04 times times; The one-gate software (VNPT I-Gate) increased 03 times; Information portal (nPortal) increased 1.2 times; Educational software (Vnedu) usage doubled. VNPT has signed agreements and strategic cooperation on telecommunications - IT with 52/63 provinces and cities and Introduced, implemented smart city model in 17 provinces / cities. BThey also built and deployed IT solutions for

ministries, departments, hospitals, universities. VNPT has provided many new IT solutions and services such as: Enterprise Management Solution (VNPT ERP); The Distribution channel management solution, point of sale (VNPT DMS-POS); Remote image monitoring and control solution (VNPT CAM); Video conferencing services on cloud computing platform (VNPT Meeting); Goods origin authentication (VNPT Check); Smart Advertising Solutions (VNPT SmartAds); Storage service (Smart Cloud); Security Services (F-Secure SAFE); Value added service management system (VASCloud); Application charging and checking account (VNPT USSD)

VNPT also actively invested in infrastructure, improving network quality, coverage with the largest number of BTS stations ever. Namely, VNPT-Net Corporation, a subsidiary of VNPT, has deployed 20,000 more mobile stations 2G, 3G and 4G, raising the total number of stations on the network to 75,000 mobile stations nationwide. In addition, total international Internet bandwidth increased by 83% compared to 2016, total internet caching capacity increased 2.1 times. In 2017, VNPT produced over 2 million products, including 1.5 million GPON ONT and many new products in the field of IoT, LTE, sensor ... Total output of optical fiber production

Mar - Apr 2018 International Finance

TELECOMMUNICATION

VNPT has successfully completed the business targets in 2017. VND 5,010 billion: Total profit, reaching 105.6% of the plan, up 21% compared to 2016. VND 144,747 billion ($ 6.5 billion): Total revenue, reaching 100.7% of the plan, up 7% compared to 2016

VNPT CEO Mr Pham Duc Long

to serve VNPT’s network development demand is 52,066 km.VNPT has exported its products and equipment to countries like India, Cuba, Myanmar, South Korea, and the Philippines. VNPT has established the Streamnet company in Myanmar to operate the broadband network and telecom services. The company officially provides services from January 1/1818. VNPT is also accelerating the provision of IT solutions in overseas markets and expands investment and business opportunities in potential overseas markets. VNPT also successfully completed its business results in 2017 with a 7% increase in group revenue compared to 2016, a 21% increase from the same period last year. For 4 consecutive years, VNPT’s profit has grown over 20% over the previous year. In 2017, VNPT Group has more than 31 million

International Finance Mar - Apr 2018

mobile subscribers, 3.1 million fixed subscribers, nearly five million sub of Internet broadband service, increased 52% over last year. As the first enterprise to offer fixed, mobile, internet and 3G, 4G services to the people of Vietnam, throughout the development process, VNPT has made efforts to build a national communications infrastructure system which is modern, synchronous, and broad. This effort is not only used for business activities, but many of them serve both the socioeconomic development goals of the country, especially the remote and rural areas. In the past time, VNPT has spent some hundreds of billions (VND) and initiated and participated in many social responsibility programs such as: • •

Funding the Poor Taking care Vietnamese heroic

VND 4,116 billion: Total state budget contribution, reaching 105.5% of the plan, up 9.3% compared to 2016. 34 million: Total phone subscribers, of which, fixed subscribers (wired, wireless) reached 3.1 million subscribers; Mobile subscribers reached 31.1 million. 4.6 million: Total broadband Internet subscribers, up 21% compared to 2016, of which FTTH subscribers reached 4.1 million, up 52% compared to 2016.

TELECOMMUNICATION

VNPT Chairman Mr Tran Manh Hung

• •

•

mother Build houses of gratitude, love Support for local and national child protection funds Support humanitarian organizations To support people affected by natural calamities and storms Support poor

communes and districts • “The compassionate program” brings the Tet (new lunar year holiday) to the poor • Offering wheelchairs for people with disabilities With these contributions, VNPT has been awarded many noble titles such as Gold Cup “Humanity of Vietnam” and “Enterprise

for the Community” in the year. The “Vietnam IT Talent Award” is one of the most prestigious awards in the country’s telecom and IT sector. VNPT has initiated and co-operated with this award over the past 12 years, with the aim to nurture talent in the field of IT development. IFM editor@ifinancemag.com

“

2017 is the fourth consecutive year that VNPT Group achieved the profit growth rate of over 20% Tran Manh Hung, Chairman, VNPT

Company Brief Name: VietNam Posts and Telecommunications Group (VNPT) Location: Viet Nam HQ: Hanoi Business: Telecommunications and ICT services Products: Smartphone (Vivas Lotus), Tablet, GPONT ONT, Indoor and Outdoor Wifi AP, IPTV Set top box, Wifi ADSL2+Wireless Router, OTT Smart Box Turnover (latest): 6.5 billion USD in 2017 Employees: 39,000 Branches/Global footprint: Laos, Cambodia, Myanmar, USA Owner/CEO: Chairman: Mr Tran Manh Hung CEO: Mr Pham Duc Long A standout feature of the company, its initiatives, products, employees

Mar - Apr 2018 International Finance

INTERVIEW INTERVIEW

‘Newer cryptocurrencies are managing to reduce security risks even more than Bitcoin’ Vikram Nikkam’s bitcoin journey started when he was with the hotel industry in the UK. With the hit of recession, he faced a professional whirlwind and got introduced to bitcoin. Now, Vikram is successfully dealing in bitcoins and is the Founder & CEO of ‘instacrypto.in’, which has about 550 users. Madhurima Roy

International Finance Mar - Apr 2018

INTERVIEW

Vikram Nikkam, Founder & CEO, ‘instacrypto.in’

Mar - Apr 2018 International Finance

INTERVIEW INTERVIEW bitcoin

Excerpts from the interview

What are the major factors that are restraining bitcoin reach its pinnacle? Bitcoin is a financial and economic solution aiming to decentralize today’s system and remove dependency on ‘a’ particular group of individuals who have control over today’s economy. Major factors restraining the use and therefore popularity of bitcoin are: • Lack of knowledge: Most people have a vague idea about bitcoin. People should at first understand that bitcoin is not only a technical marvel but a socio-economic model as well. • Insufficient government approval: Governments also have a lack of understanding with respect to this new currency and therefore, are taking their time to approve/ support it. Furthermore, the decentralized model of bitcoin can have no interference with regards to its inflation/deflation from any government or fixed entity. This won’t let them have control over the currency and is a probable reason for their reluctance in accepting Bitcoin. • No laws for protection of users: Very few governments have accepted cryptocurrencies and comprehended the benefits (Japan and South Korea). Once governments acknowledge this, they can create laws in order to protect cryptocurrencies users. Unfortunately, India is not there yet. In fact, in a recent parliamentary debate, the Indian Finance Minister Arun Jaitley has stated this in a subtle manner. • Insufficient reach: Cryptocurrency work on blockchain that is dependent on internet. Only 41% of the world has access to the internet (Source: International

International Finance Mar - Apr 2018

Telecommunications Union). According to the World Bank and Washington Post, nearly a quarter of India’s population lives without regular or reliable access to electricity. While our government has been continuously working towards this, we still have a long way to go. What was the idea behind establishing your company, TryBitcoin.in? My intention was to introduce India to this new method of payments and investment, so everyone could gain from it. I collaborated with like-minded people and I started Trybitcoin.in. Trybitcoin.in is not only aimed at being a mere trading platform but also is an information hub. The company is now called ‘Twarita Nanya’ and our exchange is now upgraded and called ‘instacrypto.in’, which is a more efficient, quicker, faster and is a more evolved trading platform. It also offers the options of crypto-currencies along with bitcoin. At present, we offer Bitcoin, Bitcoin Cash, Etherium, Litecoin and Vertcoin and we plan to introduce more once we’ve researched the stability and trends of other altcoins as well. What is your outlook about the current upheavals that are going on in Bitcoin all across the globe? How do you think the sector will attain stability? Since the concept of cryptocurrency is still in its infancy, there is bound to be instability. The peaks and troughs in the value of bitcoin are due to a sudden increase in knowledge, awareness and usage of bitcoin. While 2017 had bitcoin on a steep incline, 2018 will bring things down. Please explain the process of buying/selling bitcoin in India. Buying or Selling of any crypto-

currency can be done from a myriad of exchanges or trading platforms. Essentially, crypto users in India trade crypto amongst themselves with the help of an exchange or trading platform. The buying price of any crypto differs from the selling price. The price of the coin includes the rate of a coin, a transaction fee (charged by the exchange) and a network fee charged by the original miner of the currency. Quicker transactions demand higher network fees and so on. An ideal platform to deal with would be one that offers the most current updating of rates and a quick transaction time. If you’re trading from crypto to fiat money (i.e. in INR) there are certain KYC documents that need to be provided and a legitimate bank account. You also need to possess an active crypto wallet in order to store your crypto. This may be a soft wallet or a hard wallet. A potential trader will first have to register on a particular exchange. In order to buy any crypto, he will have to make a payment from his bank account. Some international exchanges also offer debit or credit card payments (which in my opinion is not very advisable). Depending on the exchange that is chosen, transaction time will differ. Any crypto bought, will be sent to the buyer’s crypto-wallet address. The buyer is then free to transact as and when required. Selling crypto just follows a reverse process. While there are several exchanges around the world, an Indian national can only use local exchanges since most exchanges (national or international) need a bank account of that particular country in order to transact. What is/are the loophole(s) in

INTERVIEW bitcoin

the sector? How to fix them? Surprisingly, there arenâ&#x20AC;&#x2122;t many. The blockchain technology that is pre-written in the code, provides for security issues that may occur. Newer cryptocurrencies are managing to reduce security risks even more than bitcoin. There is no way of stopping criminal activities but the use of most cryptocurrencies (especially bitcoin) can be traced end-to-end; making it much easier for law enforcement agencies to detect and almost eradicate the concept of black money. Since India has no laws to protect users or cryptocurrencies yet, users must exercise caution while trading with crypto especially, with the new ones. As a bitcoin analyst, which are the latest trends in bitcoin that are worth mentioning? Bitcoin is now trying to scale itself based on its usage and user requirements. Forks are being created on the original so as to diversify and increase the use of the currency. Bitcoin Cash and Bitcoin Gold are the most recent forks. How do you ensure the security of the bitcoin transactions in your company? Instacrypto.in does not store

Who was your first client/ buyer? What services does your company offer to the clients and also tell us about the functionality of each of them? My first clients were actually free users. People that I had just given 0.01 of bitcoin to for free, so that they could experience it. This was as part of meetups that I have been holding. Our company offers not only a trading platform for quick buy and sell of crypto that allows transfer of crypto between users for the purpose of remittance and value settlement, but also offers consultation and guidance for people or organisations that want to get into the crypto space.

development of better exchanges and crypto-wallets, etc. Some Indian IT majors are already working on blockchain solutions for various processes. Although the Indian market is seeing upheavals, the government is not putting a ban on it. Itâ&#x20AC;&#x2122;s legal to use them in the form of an asset or trading. Indian Income Tax department is clear on collecting capital gains tax and trading tax accordingly. Indian government and the RBI have been issuing similar statements against dealing with cryptocurrency; alerting users to deal at their own risk and understanding, and do a detailed research before investing, since they have economic and financial risks associated with them. The Indian government seems to have decided to keep an open mind about cryptocurrency. Mr Jaitley also mentioned that the government is already exploring the use of blockchain technology and cryptocurrency and bitcoin and an expert team is being setup to monitor and regulate them soon.

What is your perception of the current cryptocurrency industry in India? Being a gold mine in terms of IT expertise, India has been able to contribute greatly with respect to

How do you see bitcoin 10 years from now? With the improvement in technology and wider acceptance, it has the potential to replace fiat currencies as we see it.

any financial data or even cryptocurrencies for that matter. Crypto moves directly into user wallet which gives the user more control. We have a very quick but thorough KYC that is done pre-registration. There also exists a cap on the amount that can be transacted so as to protect the user as well as the company from potential fraudsters.

What is your outlook about the new cryptocurrencies that are getting introduced every day? Any individual with technical know-how can create their own cryptocurrency. There are over 500 cryptocurrencies today and the list is rapidly growing. The value of these currencies, however depends on their popularity which can be attributed to several factors like usability, variety of communities that it can be used in, speed of transaction, etc. IFM editor@ifinancemag.com

Mar - Apr 2018 International Finance

business leader

Elon Musk: Carving out science fictions into reality Madhurima Roy

G. Wells in 1897 published his work ‘War of the Worlds’ where he talked about the Martians invading the human world. Year 2018 witnesses an alternate reality where the world sees Elon Musk sending his SpaceX-built Falcon Heavy rocket to Mars. The venture has taken Musk one step closer to his biggest dream of creating ‘Mars Oasis’ – a human habitat in Mars. A confident Musk who believes none but himself will be the first one to reach Mars by 2023. If any of his competitors proves him wrong, he will eat his own hat with a side of mustard. “...I will seriously eat my hat with a side of mustard if that rocket flies a national security spacecraft before 2023,” Musk said in a Twitter post. There are people who live in the fantasy of science fictions. But only a few like Elon Musk, can shape sci-fi into reality.

International Finance Mar - Apr 2018

Anatole France, the French poet, journalist and novelist once mentioned, “To accomplish great things, we must not only act, but also dream; not only plan, but also believe.” Elon Musk dreams, plans, acts and most importantly, believes in his deeds, making him THE ELON MUSK, one of the go-to global brands in the technology market. Musk has made things possible, the possibility of which one can think of solely in the world of science fictions. The ‘real-life Iron Man’, as he is called, has mentioned time and again how science fictions have stirred him

business leader

while growing up. ‘Tesla: Inventor of the Electrical Age’ by B. Carlson, Star Wars, Startrek, ‘The Hitchhiker’s Guide to the Galaxy to the Galaxy’ by Doughlas Adams, ‘Lord of the Flies’ by William Golding, ‘Foundation’ by Isaac Asimov are the few reads that have left deep their marks on him. Talking about ‘Lord of the Flies’, Musk said in an interview that the interplay between two of the leading characters, has to a great extent shaped his life’s mission, that is, to save mankind. About ‘Foundation’, he mentioned, “The heroes of the books I read ... always felt a duty to save the world.” Starting with Zip2, X.com and PayPal, Musk shifted his focus to SpaceX, Tesla, SolarCity, Hyperloop, Open AI, Neuralink, The Boring Company and SolarCity. To shape his dreams of turning science fictions into reality, he has designed the functioning of all his companies in a manner that each is a boost to the other – making each other successful. Hyperloop and The Boring Company Musk’s idea of creating a new line of high speed transportation started coming to life through Hyperloop in 2013. Musk’s vision was to build a supersonic vehicle that has been shaped in the form of a pod, having the capability of running through an almost vacuum tube at an average speed of 1,100 km per hour and above without turbulence. The pod is supposed to travel between New York and Washington DC through the tunnel in 29 minutes. To make the pods successfully pass through the vacuum tunnels, Musk needed a tunnel-making company, and thereby established The Boring Company in 2016. Henceforth, The Boring Company has been working hand in hand with Hyperloop to build tunnels for them. SpaceX and Tesla Established in 2002, Space Exploration Technologies Corporation, popularly known as

SpaceX became the transporter of Musk’s Mars dream. The following year, was the inception of Tesla – Musk’s car manufacturing vision. Cars and rockets, although technologically poles apart from each other, yet as Musk calls it, through ‘crossfertilization’, SpaceX has helped Tesla resolve hiccup with a cast aluminum auto parts. “That’s cross-fertilization of knowledge from the rocket and space industry to auto back and forth, as I think it’s really been quite valuable,” Musk on Tesla’s recent call. Material science is the zone of common conduct for the two. Both the companies hold joint meetings to discuss several material issues. To deal with the galactic amounts of data, both the companies have co-developed software that handles material specifications, data and feeds it into analytic tools; although its functioning is unique to each of them. Tesla and SolarCity A subsidiary of Tesla, SolarCity handles solar energy services. SolarCity has introduced roof tiles that will not only power up the house, but also help in charging Tesla’s ecofriendly electric vehicles.

(BCIs). Musk compares AI to ‘summoning the demon’ and has been incessantly warning governments and organisations to control AI right ‘Now’. But there has been no sign of it. Musk opines that if AI keeps advancing at such pace, the human race will fall behind and will be under the dark spell of it. To cope with situation as such, Musk started his BCI venture and is hoping to create a ‘high bandwidth interface for the nervous system’. This, he opines will help humans to stay competitive with the ever advancing AI as BCI will enhance brain function. The tech-savvy’s career graph proves that ambition is like an amoeba, constantly changing its form, phagocyting one and moving to the other. Musk has dipped his fingers into several ones, mostly, in more than one at a time, and earned massive success, proving himself to be the ambitious amoeba that he is. But as we can hope, it’s only the beginning of what Musk has to offer to the world. IFM editor@ifinancemag.com

OpenAI and Neuralink Unlike his other companies, one supporting the other, Neuralink is one to counter Musk’s own creation. Musk’s initiated his venture of Artificial Intelligence (AI) with the notion of creating an artificial general intelligence which is safe and assists in the well-being of humanity. Although he calls AI, the ‘existential threat’ to human kind, the potential benefits of AI overshadowed the complexities that AI holds, and a cautious Musk started OpenAI in 2015 as a non-profit organization in order to keep the organization’s focus in one direction, that is, doing good to the human race. With the advancement of the works at OpenAI, Musk established Neuralink in 2016, a company dealing in nanotechnology, to develop implantable brain-computer interfaces

Mar - Apr 2018 International Finance

OPINION

Egor Gurjev

Why Blockchain is the Future of Gaming 70

Blockchain could emerge as revolutionary technology for gamers around the world by enabling players to match wits on a cloud or get rewarded in crypto currency

hange in the gaming industry is not uncommon and blockchain technology is now the next, or for some the latest, wave of disruption to the industry. The important changing factor for gaming is moving it from a traditional hardware platform, on to the cloud, via a decentralized gaming ecosystem. Blockchain technology naturally lends itself to achieving this. Millions of gamers across the globe are losing out on playing some of the most popular titles in the industry, due simply to lacking the powerful hardware required to run the games to an optimum level. It is for precisely that reason that the gaming industry is required to move to the cloud where processing power can be shared, a step that will no doubt transform the industry as we know it. Blockchain technology helps in this shift by encouraging owners of powerful gaming PCs and GPUs, to â&#x20AC;&#x153;rentâ&#x20AC;? their servers to the individuals

International Finance Mar - Apr 2018

who donâ&#x20AC;&#x2122;t necessarily have the funds, or hardware they require, to play the games they desire. This means gamers will not have to keep investing in costly gaming consoles and other hardware. The more developers look into blockchain technology, the more it becomes obvious that it is a natural transition for the industry Cloud gaming is not a new idea, but many have encountered severe problems in the past, notibly internet quality and service difficulties. If the first problem was improving over the years, the second was causing some serious difficulties that put a stop to the development of this technology for a while. Decentralization is the answer. It is essential to a quick scaling process and will place the power back into the hands of the gamers and out of the hands of the corporations currently in control of the system. With no central body, consumers can communicate and socialize directly without

OPINION

intermediaries. This will allow for the freedom and flexibility that will benefit the gaming experience as a whole. In fact, a re-occurring idea in the use of blockchain in the gaming industry is the end goal of shifting power back in to the hands of the gamers. One such example is the way some innovators are applying blockchain to the sale of gamer-earned digital goods, where gamers earn a reward or item as a result of the time and effort they invested in playing the game â&#x20AC;&#x201C; and then sell it on for real money reward. However, these kinds of transactions can often end in a scam, and those who are regulating the process, for example Steam, can only offer Steam credit in return for sale, rather than money. However, blockchain is set to transform this process entirely. There are a number of companies now developing decentralized marketplaces for the sale of in-game items. These are safe spaces for such transitions, as a result of blockchain. A key benefit of using Blockchain technology is the transparency it gives, decentralized gaming is set to depend on the exchange and investment of cryptocurrency, for example the Playkey Token, and blockchain allows for all users to be able to exchange and trade worry-free. As a rule, cryptotransactions are easy-to-

monitor even if they are not yours. For example one user is perfectly able to view the contents of a cryptowallet by only possessing the wallet address if the transaction was done under the smart-contract of the decentralized cryptoexchange like EtherDelta, for example. Another smart contract that is required to manage the rules of interaction between a miner and a gamer in a future Playkey decentralized ecosystem is also a transparent mechanism to guarantee a miner will get it reward once certain conditions within renting out its PC are met. The security in online gaming can also benefit greatly from harnessing the technology. Hacking is a common and frequent occurrence, this is due, amongst other things, to the use of centralized networks, meaning that hackers have an easy entry to the entire system via a single point of failure. Blockchain networks can not be hacked in a similar way due to their decentralization, meaning there are any number of servers active at any given moment. A possible way for blockchain and cryptocurrency technology to integrate further into the industry is by offering crypto as an incentive to reward in-game achievements. Blockchain would make such payments a relatively

simple process. Thus creating a tangible and achievable means of hardcore gamers being able to make a living out of their expertise and skills. Competitive gaming, AKA e-sports, could also benefit from the embracing of blockchain. The inner workings of a game and its servers, known as Core Logic, is handled by centralized servers unquestionably, with no real evidence to prove the fact that everything is working as advertised, and that the outcomes are genuine and untampered. Once upon a time, this was an un-solvable conundrum. However, blockchain has the potential to host a public core logic, providing absolute transparency. If this proved too costly or complicated, a similar outcome could be generated by proof of results being published to a public blockchain, which would allow analysists to rerun a game should the result be in question. It is also worth saying that there will be a much heavier impact than we are even able to comprehend or foresee at this point, weâ&#x20AC;&#x2122;ve yet to unleash the full capabilities of blockchain technology. It is not simply the addition of cryptocurrency and the removal of intermediaries. It is the introduction of an auditable, verified store of data including players moves within a game, collating every possible measurement of data it can, all in a protected but open ledger. Whilst some solutions are closer to completion that others, blockchain is ready and waiting to completely transform the gaming industry, creating a more transparent and effective industry. Gamers are such a passionate group of people, who feel strongly about the industry â&#x20AC;&#x201C; a decentralized setup incorporating the many benefits of blockchain will hand the power back into the hands of gamers themselves, creating a democratized platform for all. IFM editor@ifinancemag.com

Egor Gurjev, CEO, Playkey

Mar - Apr 2018 International Finance

Technology

Revamping the future of medicine with 3D bioprinting technology Erik Gatenholm, the co-founder & CEO at CELLINK, aims to be a positive difference maker in the world of healthcare and medicine Madhurima Roy

“I 72

am a strong believer that anything is possible if you just put your mind and focus to it and I’m highly motivated by people telling me something cannot be done.” This is Erik Gatenholm’s steadfast approach to life that has helped him successfully create the

world’s first bio-ink company CELLINK. Gatenholm, who is the winner of ‘Forbes 30 Under 30’ for 2018, always yearned to cater high-end products and services that would create ripples of significance and positive impact in the world. The notion gave him the inspiration to

be a part of the medical industry and take it to newer heights. Armed with a degree in business management from Virginia Tech University and an MBA from Gothenburg University, Gatenholm’s entrepreneurial skills were strengthened in addition to his ardent passion to make a difference in the medical world, which eventually paved the way to create CELLINK. The uniqueness of CELLINK CELLINK is a revolutionary and ground-breaking 3D Bioprinting platform that enables researchers and scientists to print

International Finance Mar - Apr 2018

Technology

human tissues and organs, which in turn can be used to develop new drugs and cosmetic products. The company aims to deliver end-to-end solution for scientists and enables them to begin bioprinting, including products such as the novel bio-ink, cost-effective bioprinters, consumables, and even educational packages for high schools and universities. Erik said: “We believe in building a community. Today, we have 300+ researchers in more than 40 countries worldwide utilising our products together to change the world of medicine. CELLINK is not only a bio-ink and bioprinting company, it is a global research solutions company. We have not yet taken it upon ourselves to work on creating human organs. We are working 24/7 on creating technology that can help others achieve this.” As an entrepreneur, Gatenholm believes that the quality of a company’s products and services is a testament to its success and says that he strives to bring ‘value to customers, through excellent customer support and making sure that the entire organisation constantly revolves around the customer’. Currently, the company is trying to

revolutionise personalised medicine by working with a French company called CTIOBIOTECH to bio-print cancer tumors. They are taking tissue from a tumour to replicate and then test various treatments to determine which would treat them the best. Inception of CELLINK The roots of Erik’s passion for 3D printing lie in his father who was one of the main researchers at Chalmers University where several researchers and organisations decided to develop a biomaterial that could be used for growing human cartilage. Working in association with Dr Hector Martinez, a tissue engineer at Chalmers University, the duo started investigating 3D bioprinting. Upon a closer look at the research, Gatenholm comprehended the commercial opportunity of 3D bioprinting as well as its challenges. He was determined to step in the world of bioprinting by smoothing its creases. “There was no company in the world focused on making the actual bio-ink for the bioprinters. I love being first so we quickly claimed it by purchasing the technology and IP from the researcher at Chalmers, started selling

the product online, and fired up the company that is today CELLINK,” said Erik. Dissolving difficulty Erik believes that a good team is the pillar of any organization and greatly values his team. However, while starting CELLINK, he faced major issue while building his team. Discussing how he prevailed through the situation, Erik stated: “As a small startup, it is always challenging to compete with larger organizations that can offer a wide range of benefits that startups might not always be able to offer. The big learning experience in this has been to constantly focus on the amazing journey that team members get to be part of that other companies simply cannot compete with. I think that when a new employee is faced with the option of joining a large organization where changes come slowly and where the ability to standout is much smaller versus working at a rapidly changing company where the main drive is to change the world of medicine, the choice is much easier.” Going places

Mar - Apr 2018 International Finance

Technology

Erik Gatenholm, the co-founder & CEO at CELLINK

After Erik’s passion started taking shape in the US and Europe, he decided to ship his first product to South Africa and is currently mapping its expansion in Asia. Talking about his ‘super exciting’ expansion plan, he said: “There is a lot of exciting research ongoing in Africa that many might not be aware of. Our major focus has been within the US and Europe when we launched and now we are further establishing ourselves in Asia. We believe the Asian markets will thrive with the help of several leading research institutions throughout various countries there. We have had tremendous support and interest from both the corporate and academic communities in Asia who are interested in 3D Bioprinting. We recently opened an office at Kyoto University in Japan and look forward to working closer with our collaborators in that part of the world.”

avail the technology is restricted to a specific number of people. Viewing this issue as a major drawback, Erik believes more people should be able to reap the benefits of the technology. Also, the rise of cost-effective technology within 3D Bioprinting will lead to a massive impact on how the technology is used for various forms of research. “The more people who can get their hands on 3D Bioprinting technology, the higher chance we have of changing the future of healthcare and medicine,” he added. For the future, he wants to provide the best technology possible at an enviable price and looks forward to extend CELLINK’s collaboration with research institutions and corporations. “We want to learn from what they are doing now to create technology that is needed to help them succeed. Our goal is to have our systems in every lab all around the world,” he concluded.

Future endeavours Pertaining to the sky-rocketing expenses of the 3D Bioprinting technology, the financial capability to

Message for budding entrepreneurs A person who has always been intricately dedicated to his dream, and

International Finance Mar - Apr 2018

turned his passion into his soul, has opined that the entrepreneurs with dreams should do the same to make it big. And, they should definitely be passionate about their dreams. “Without passion you won’t succeed,” said Erik. “The goal to succeed financially is always a driving factor but if you are not truly passionate about what you’re doing, that drive will eventually fade away. There will be many times where you will struggle and light at the end of the tunnel seems so far in the distance. If you have that constant love and passion for what you do, you will still see the flicker of light even on the darkest days. I live for my company and dedicate all of myself to making it succeed,” inspired Erik. IFM editor@ifinancemag.com

Entrepreneurs

Tech startups have become a major breakthrough for millennials

Londonâ&#x20AC;&#x2122;s entrepreneurial streak breathes new life into underserved sectors such as Generation Rent and Muslim Lifestyle that are especially relevant to the millennials International Finance Mar - Apr 2018

Entrepreneurs

rban Rent and Halal Gems are among the hottest UK startups featured by Startups.co.uk—a startup-friendly website for young entrepreneurs to discover fresh ideas and win exposure through a host of awards such as Startups 100 Generation Rent encapsulates the complex issues an average young UK family encounters when looking for a home. By 2020, first time buyers in the UK will need to earn an average of £64,000 and Londoners will need to earn £106,000, to entitle to home ownership, which can put extreme pressure on a family’s income and expenditure. Millennials (or Generation Y) are increasingly renting their real estate. According to Daily Mail, urban renters in London are estimated to spend £2.6mn on rent in their lifetime. The capital city is predicted to become a land of renters by 2025,

observed a 2016 PwC report. This means, only 40% of people will be homeowners, while the remaining 60% will be renting homes. This raises a vexing question: Is the generational shift attributed to rise in housing cost or changing lifestyles? The truth is, millenials want to buy, but they can’t afford it. While the rising housing costs raise plenty of problems, a number of new tech-driven startups are stepping in to support Generation Rent, and help millennials with various parts of their lifestyle. For example, London-based home insurtech startup Urban Jungle was founded in 2016, and is focused on offering affordable insurance products to young people—an area easily forgotten in the rented sector. Co-founder and CEO Jimmy Williams, said, “Millenials are the first generation to be poorer in real terms than their parents, and that, along with rising property prices means many

are renting for longer. From what we can see, the services renters are being offered really don’t measure up.” There has been lots of recent controversy about the fees being charged by real estate agents to renters whenever they have to move homes. A typical two-adult household pays over £400 whenever they move, or renew their lease. Costs like these are driving living situations to change rapidly— such as sharing homes with a few friends is increasingly common. For this reason, Urban Jungle is introducing a number of specialist renters products to the market. For example: a product which covers renters who live in shared homes with a few friends, and a product to protect against their liability to the landlord. They are also emphasize on how easy their products are to buy. “We already have a smartphone optimised purchase process, which should be a big improvement on the unwieldy purchase experience of

Mar - Apr 2018 International Finance

Entrepreneurs

some of the big insurance providers,” Williams said. Perhaps because of rising rental costs, cover is often forgotten with only 40% of private tenants having some form of insurance, according to Mintel. And they have no backup if the worst happens. Urban Jungle plans to make better designed cover, at a much cheaper price for customers, and increase their take up significantly. Williams hopes that customers will not only come to Urban Jungle for cheap cover, but also buy into their overall approach. He concluded: “Our early customers really buy into our mission to help young people, and look forward to seeing how the product evolves over the coming months and years.” Entrepreneurs in the UK see new potential in the next sector—the Muslim lifestyle market that largely overlaps the food and retail industry. The Muslim habitat has had a significant influence on the West for generations now. The modern Muslim thinkers look for opportunities to connect between modern ways of life and centuryold practices. For example: Halal in

International Finance Mar - Apr 2018

Islamic context refers to wholesome. The concept is grasped and young entrepreneurs want to create contemporary products and services that is sourced ethically to serve the community. In London, the food industry is quickly expanding—and targets customers of all cultural backgrounds. The startup Halal Gems is a restaurant finder website and app that allows Halal-conscious diners and others to skim through a variety of high-end multi-cuisine and Halal restaurants in the city. “When I started five years ago, there was hardly anybody targeting this audience. But then I think what happened was a bit of culture shift. People started to become vocal about what they wanted,” Founder and CEO Zohra Khaku said. “Then really what happened was the Muslim or Halalconscious consumers started paying attention to the services directed towards them. That sort of started to pop up in the UK. We have a few exciting things coming up in the sector for sure.” Halal Gems brought the biggest street food festival in London in

“

When I started five years ago, there was hardly anybody targeting this audience. But then I think what happened was a bit of culture shift. People started to become vocal about what they wanted Zohra Khaku, Founder and CEO, Halal Gems

Entrepreneurs

2017. Its website is user-friendly and new-fashioned in its content and approach—the Foodie Guide offers an explorative insight into restaurants in different cities. But the website does not hold strong views. “We don’t put a religious doctrine to it. We don’t define what Halal means,” Zohra said. Halal-conscious consumers are very selective and look for transparency in all their products. “We found in our research that halal-conscious consumers are very loyal. So if you tick them off they are not coming back. If they like you, if they think your brand is for them—they will be a part of it and be proud of it. If a brand

caters towards the halal-conscious community but is ashamed of them, or misaligned in terms of ethics, halalconscious consumers walk away. So it’s a very strong sentiment in that sense,” Zohra told us. And it is fair to say that the company brings value with transparency into the business: where the Muslim consumers understand the restaurants they want to dine at—and how to find them. So far, the website has had great visibility: their mailing list includes 25,000 customers and received 2mn views last year. This year is going to be exciting with its second round of

Street Eats festival. There will also be a new launch on City Guides: to help travellers discover local eats and great restaurants around the world. IFM editor@ifinancemag.com

Jimmy Williams is the co-founder & CEO of Urban Jungle. A graduate from the University of Cambridge, Jimmy’s work experience spans 6 years in the insurance industry. Previously, he has served as a consultant to some of the industry’s biggest players.

Zohra is the founder of Halal Gems, the UK’s leading Halal dining platform. She is an MBA graduate from the University of Cambridge. Zohra produces her own TV show in the UK: The Curious Foodie and has won BAFTA for her outstanding work on Muslims Like Us, the BBC factual documentary.

Mar - Apr 2018 International Finance

Blockchain experts to convene in Saudi Arabiaâ&#x20AC;&#x2122;s first Blockchain Conference Saudi Arabiaâ&#x20AC;&#x2122;s Vision 2030 is accelerating the need for a digitized economy following which the country is now conducting its first ever Blockchain conference in April

International Finance Mar - Apr 2018

Event Preview

s Saudi Arabia continues its journey towards its Vision 2030 with the National Transformation Program (NTP) 2020, one of the key measures outlined in Vision 2030, is a shift towards a digitized economy. While the focus is globally shifting to new and emerging Blockchain technologies which are integral to supporting and realizing digital economies around the world, the Middle East isn’t far behind. One of the most important developments of the century, Blockchain technology, has the potential to help the world’s largest oil producing region realize their vision of becoming a digitized nation.

In light of these developments, Bizwingz Production House is hosting Saudi Arabia’s very first blockchain conference, Decoding Blockchain KSA 2018. The conference offers unique networking opportunities for attendees to connect with industry leaders and innovators who are looking to explore the distributed ledger technology, while providing an ideal platform to understand the promising technology of Blockchain in the modern Middle East world. Touted to be the next generation internet tech, blockchain has the potential to bring about a transformation in global financial systems. Industry experts believe

that the implementation of distributed ledgers and smart contracts could leapfrog the industry into the digital age. With a scaled blockchain, transactions will happen instantaneously, allowing anyone and everyone to track the transactions reducing costs, stabilizing prices, and providing a level of transparency which was previously impossible. Commenting on the future of Blockchain in Saudi, Mr. Mohammed AlSehli, conference chairman of Decoding Blockchain and founder of ArabianChain Technology, the first public blockchain in the Arabic world, said that, “I believe Saudi Arabia is on the right track to adopting blockchain technology

and soon enough it will be leading the region in implementing and reaping its benefits. Blockchain naturally integrates with the 2030 vision as it allows for transparency, efficiency, income diversification and creation of new opportunities, take for example the millions of pilgrims who travel for “Haj and umrah” from all around the world every year or Project Neom as one of the most ambitious projects in the decade. The things we can offer are limitless starting from the tokenization of identities, medical records, visas, tickets, all the way to the tokenization of the Saudi Riyal to allow for faster, safer and cost efficient transactions. We are still at

Mar - Apr 2018 International Finance

Event Preview

82 the very beginning of this journey but it’s the best time for innovators to take a leap and start shaping the view of tomorrow”. With the launch of this conference, Decoding Blockchain KSA 2018 offers VCs, bankers, startups, government officials, payment companies and more the opportunity to not only actively exchange information but to also establish powerful strategic alliances. The conference will present a range of speaker sessions through which participants are given the opportunity to meet with innovators who offer business solutions that will help companies reduce costs and improve efficiency and integrity. Come watch the best minds in the blockchain

International Finance Mar - Apr 2018

industry from across the pan-Saudi region, as well as the rest of the world, convene on a single platform on the 23rd and 24th of April, 2018. International Finance is a media partner of Saudi Arabia’s first blockchain conference Blockchain KSA Registrations are open – Ensure your participation for the ultimate knowledgesharing conference at the earliest by logging on to http://www. decodingblockchain.com/.

Feel free to reach out to the below mentioned contact for further discussion concerning your attendance at the conference.

Website: http://www.decodingblockchain.com/ Andrea Anthony I Marketing Head I BizWingz Production House Email - andrea@bizwingzph.com GSM: + 91-9739065066 Website: http://www.bizwingzph.com

DECODING BLOCKCHAIN Decoding the Engima of Blockchain Technology 23rd and 24th of April, 2018 Riyadh, KSA

Andrea Anthony I Marketing Head I BizWingz Production House Email: andrea@bizwingzph.com | smohan@bizwingzph.com GSM: + 91-9739065066

INTERVIEW INTERVIEW Event Review

Islamic Finance can open new investment avenues: WBAF chairman Baybars Altuntas is the chairman of World Business Angels Investment Forum, the 2018 edition of which just concluded in Istanbul. The renowned angel investor tells International Finance how Islamic finance can transform angel investing and why Silicon Valley continues to reign supreme among global startup ecosystems

How did the World Business Angels Forum (WBAF) address the issue of financing? Access to finance is important for investors, who put their money in startups and the ones that want to scale too. It is essential to be able to raise funds at second, third or even fourth rounds. Investors also must be connected to other sources of finance that will support their long-term investments, to be able to create a success story. WBAF 2018 not only connected startups with angel

International Finance Mar - Apr 2018

investors, but also ensured these very angel investors can establish industry relations with venture capitalists, private equity fund managers and major wealth management institutions. This is ultimately a platform for connecting angel investors with other financial institutions.

What would you say were the other highlights of the show? On the second day of the event, the Trade Department of Turkey organized an hour-long meet and greet session for Turkeyâ&#x20AC;&#x2122;s extensive angel investor community with 424 licensed, accredited angel investors from around the globe where they will discuss action plans for 2018. In addition to allowing them a platform to connect, the intent was to draw their feedback on the work done on the first smart fund for US$100 million from the Turkish Scientific Foundation, which would work on matching financing options for startups with the most fitting and appropriate angel investor

INTERVIEW

Baybars Altuntas, chairman, World Business Angels Investment Forum

Mar - Apr 2018 International Finance

INTERVIEW INTERVIEW Event Review

What are the main challenges one faces as an angel investor and how can one address them? I believe that challenges differ from country to country. For instance, Europe has a scale-up problem, not a startup problem. The main gap in funding exists between in the equity stage i.e. US$500,000 to US$3 million. On the other hand, in Turkey, its hard to convince an angel investor to put money in an alreadyfunded startup. This is largely due to cultural differences in mindsets. Every region and country brings with it a whole different set of challenges and opportunities. The main challenge for a startup, globally, is to make an early exit. Following the global economic crisis of 2008, the exit period for startups is around 10 - 12 years and this needs to change. Beyond all this, an angel investor can still succeed depending on their own mantra. Some investors enjoy

International Finance Mar - Apr 2018

investing in a horse, others prefer to invest in a good jockey. But I believe the real formula of success is being able to identify a good mix of a competent horse and a skilled jockey. There has to be a natural synergy between a good product and a skilled entrepreneur. One of your panel discussions is on the growth of the secondary market. How will this impact global trade and finance in the new generation? SMEâ&#x20AC;&#x2122;s, also known as traditional entrepreneurs, run around 96% of the global economy. Due to the advent of technology, we now we have millennial entrepreneurs, who are focused on IT and mobile applications. Around 25% of equity market investment goes to millennial entrepreneurs. I believe it is important to understand the power of both kinds of entrepreneurs. If we focus only on millennials because they are

responsible for innovation, we are making a mistake as we are not giving room to SMEs to grow. This is where policy makers can play a deeply influential role. I think that more than supporting entrepreneurs directly, its more important to support those who support entrepreneurs â&#x20AC;&#x201C; which are the investors. Governments and policy makers should come up with policies that will allow for smarter use of public money for creating a larger social impact on global trade. This can be achieved significantly by tapping into what angel investors can bring to the table such as networking, mentorship, and business expertise. How can angel investing benefit Islamic finance? This was one of the more important panel discussions at WBAF 2018, moderated by Kaiser H. Naseem, Head of IFC Banking & Digital Finance Advisory Services, MENA and Central Asia; the panel comprised Sheikh

INTERVIEW Event Review

The main challenge for a startup, globally, is to make an early exit. Following the global economic crisis of 2008, the exit period for startups is around 10 - 12 years and this needs to change. Ebrahim bin Khalifa Al Khalifa, former minister of housing, Chairman of Accounting and Auditing Organization for Islamic Financial Institutions; Bahrain Salah Jelassi, regional director, Islamic Development Bank Group’s regional office in Turkey and Meliksah Utku, CEO, Albaraka Turk, Turkey. In Europe alone, €6.8billion was invested by around 320,000 angel investors. Around US$26 million was invested by 340,000 angel investors in USA and Canada. An angel investor puts his money in a venture he thinks will make him money, in addition to providing his valuable business expertise, mentorship and access to his network. He seldom expects an RoI with a fixed interest or yields. The angel investment system is compliant 100% with the Islamic investment mindset, but the opportunity hasn’t been tapped into just yet. This topic was discussed at length during WBAF with the aim of creating awareness about angel investment in an Islamic finance ecosystem and how we can develop co-investment funds between Islamic finance instruments and angel investors. Eventually, we would like to see if we can change the mindset of investors in Islamic countries to move from investing in real estate to investing in start-ups.

active corporate life, they should use their wealth of experience to mentor startups, tap into their networks and contribute to the startup ecosystem significantly, not just monetarily but by lending their experience and knowledge. This will help pay forward an enriched startup economy everywhere.

How can a CEO become an angel investor? A seasoned CEO is deeply empowered and has tremendous financial leverage. Moreover, he has a thorough understanding of business know-how as well as an expansive network to build a startup. These are great qualities for an angel investor. Before CEOs seek to retire from an

Right now, what is the one startup ecosystem in the world that is changing the rules and why should contemporaries learn from them? Despite startups mushrooming across the globe, Silicon Valley remains a game changer. It is independent as a startup ecosystem, which is what every other nation or

What makes startups in the West so successful? The success of any startup lies in the mindset of its founder. There are some irrefutable guidelines that set apart successful startups from the ones that aren’t such as finding the most appropriately suited investor. When a startup matches with an investor who understand the product and its impact, he will be better poised to believe in it and really market its worth. Another invaluable lesson to startups is for them to understand the difference between a business model and a business plan. Most startups think that if they have a 20 PowerPoint slides and a 50-page business plan, its enough to convince an angel investor. Never forget that an angel investor seeks good business models that will make him money, create a competitive advantage over peers and make a product on paper a global success story.

region should aspire to be. Silicon Valley remains the only ecosystem in the world with a solid exit strategy for its startups. Moreover, it decides the course of global startup trends too. For instance, if a Silicon Valley investor stops investing in mobile technology, you can expect funding for mobile technology startups to cease everywhere else. They enjoy tremendous power to shift major decisions and trends in the startup world, and the rest of us must try and understand how to create better access for exit strategies and reliable decision making. IFM editor@ifinancemag.com

The World Business Angels Investment Forum & World Congress 2018 was held in Istanbul, Turkey between 18th and 20th February, 2018, running five summits concurrently and hosted more than 1,000 delegates from around the world.

Mar - Apr 2018 International Finance

Major Middle East and Asian companies bag top honours at 2017 International Finance Awards International Finance presented its fifth annual awards ceremony, in cooperation with Oman Oil Company Exploration & Production (OOCEP) at a glittering gala in Dubaiâ&#x20AC;&#x2122;s Jumeirah Emirates Towers on January 18th, 2018. The ceremony honoured the most illustrious and successful companies across industries for their achievements in 2017. Shortly after, the organization felicitated winners from Asia at its second Asia Pacific awards ceremony in Singapore

International Finance Mar - Apr 2018

s International Finance entered its fifth year, Middle East continued to stack up big across multiple industries. Some of 2017’s winners included Oman Oil Company Exploration & Production, Sharjah Asset Management, Emirates NBD Egypt, Emaar Economic City and Kuwait Aviation Services. There were some fitting contenders for individual awards as well such as Khaled Al Sughaier of Kuwait Aviation Services Company for his Outstanding Contribution to Management Excellence, while Telephone Systems International (Afghan Wireless Communication Company)’s Dr. Ehsan Bayat walked away with the award for the Best Media & Telecom CEO. Ms. Jehad Al Humaidhi from Ahli United Bank Kuwait emerged the Woman Entrepreneur of the Year for IT, Banking & Finance and Faisal Al Haimus was named the Best Banking CEO in Iraq. Other winners included Dubai Islamic Bank for Fastest Growing Bank in UAE, Bupa Arabia for Best Investor Relations

in Insurance & Best Medical Insurance Company, Al Ahli United Bank of Kuwait for Fastest Growing Bank in Egypt and Emirates NBD SAE for Best Digital Bank in Egypt. Jin Lei, economic & commercial counsellor, Consulate General of China in Dubai; Weiyun Deng, consular attache, Economic & Commercial Section, Consulate General of China in Dubai; and Nathan Hunter, acting director of business development at the Department of Economic Development Ras Al Khaimah were the guests of honour. Shortly after the successful awards ceremony at Jumeirah Emirates Towers in Dubai, the International Finance hosted the Asia awards at Marina Bay Sands Expo & Convention Centre in Singapore on January 26, 2018. The gala event was a celebration of the most successful and enterprising businesses in Asia. Some of this year’s big award winners were from major Asian economies such as China, Vietnam, Malaysia, Indonesia, the Philippines, Thailand, Singapore and Srilanka. The special guests of honour for the

night were Mr. Jeremy Tan, Honorary Secretary & Singapore Enterprise Chapter Chairman, SGTech and CEO, Liquid Group Pte Ltd. and H.E. Dr. Mohamed Omar A. Balfaqeeh from Embassy of the United Arab Emirates to Singapore. Vietnam and Malaysia emerged big winners taking more than 20 awards together. Some of the companies that took home the honours included Bac A Bank, Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), Vietnam Posts and Telecommunications Group, Asia Commercial Bank, PVcom Bank, Nam Long Investment Corporation, Sun Life Vietnam, Home Credit Vietnam and CMC Telecom. Malaysia’s big wins included Max Capital Management Holding, Maybank, Aspen Group, Hong Leong Assurance, Sunlife Malaysia, Kuwait Finance House, MRCB Quill REIT and Pelaburan Hartanah Berhad. The Philippines’ Subic Bay Metropolitan Authority walked away with the award for Fastest Growing Free Trade Zone in Asia, Indonesia’s Pt Bank Ganesha Tbk won two awards for Best Small Bank and Best Emerging Banking CEO, bagged by Surjawaty Tatang. Significant leadership victories were Bac A Bank’s Thai Huong for Most Inspirational CEO of 2017 and Max Shangker for Best CEO in Real Estate Management Sector. After a leisurely exchange of pleasantries and introductions over hors d’oeuvre and drinks, the guests mingled and enjoyed the award ceremony, presented by Phil Blizzard, UAE’s leading radio presenter. The magical evening was made even more spellbinding by renowned magician Stefan Ebinger.

Mar - Apr 2018 International Finance

DUBAI 2017

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Mar - Apr 2018 International Finance

SINGAPORE 2017 AWARDS CEREMONY

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Mar - Apr 2018 International Finance

smart tips

What makes a great brainstorming session? 94

Many people assume that a brainstorming session is about developing a great idea that will change everything. But the most effective way to brainstorm is actually to think of as many ideas as possible, regardless of how good they are. For one, it is about quantity, not quality. Nick Pollitt, Managing Director of office furniture provider DBI Furniture Solutions, has put together some of the best ways to ensure your brainstorming sessions are fun and productive

International Finance Mar - Apr 2018

smart tips

The people numbers The first rule of a brilliant brainstorming session is the number of people you have in the room. Too small, and you might not get the number of ideas you want. Too many, and you could lose control of the meeting. Follow Jeff Bezo’s pizza rule. At Amazon HQ, no brainstorming session has more people than two pizzas can feed (between 5-8 people). Bezo swears by this rule, and you should too.

The people factor Numbers are one thing, but diversity is another. A brainstorming group of the same people from the same background and similar experience will produce no new ideas. However, when you invite new people in from different areas of the business, their fresh perspectives will make a huge difference in the quality and variety of thoughts that appear on the ideas board.

Pre-meeting planning If you want to get the best out of your brainstorming meeting, plan it well in advance, giving context and goals. You’ve probably noticed, but spontaneous meetings do not always deliver the best results. That’s because your team has not had time to process the goals of the task, or prepare their initial thoughts before going in. It’s essential that you give your team time to prepare. If you do, your brainstorming session will go much smoother and better ideas will be developed.

We all need bad ideas It may sound strange to say that you need bad ideas, but you do. Everyone has bad ideas, and that’s a good thing. Creating an environment where bad ideas are expressed, means you get more ideas out in the open. Remember, brainstorming is about quantity, not quality. Once all of the good, mediocre and truly terrible ideas are out on the table, it’s time to break and build. A good idea never comes out perfect first time, it needs shaping. Turn that list of bad ideas into amazing ideas through discussion and collaboration.

Wordstorming It may sound strange to say that you need bad ideas, but you do. Everyone has bad ideas, and that’s a good thing. Creating an environment where bad ideas are expressed, means you get more ideas out in the open. Remember, brainstorming is about quantity, not quality. Once all of the good, mediocre and truly terrible ideas are out on the table, it’s time to break and build. A good idea never comes out perfect first time, it needs shaping. Turn that list of bad ideas into amazing ideas through discussion and collaboration.

Mar - Apr 2018 International Finance

smart tips

Create a mood board If you need a way to inject new energy into your session, consider adding some colour by creating a mood board. Combining imagery and colour using a visual-spatial arrangement helps to inspire emotions and feelings, sparking fresh ideas and improving information recall. A mood board is a random collection of words, images and textures related to a topic and is similar to a mind map. You can create a physical mood board, or you can use tools like Pinterest to create a digital one.

Doodle it

Sunni Brown, the author of The Doodle Revolution, said: “When the mind starts to engage with visual language, you get the neurological access that you don’t have when you’re in linguistic mode.” Another way of breaking out of the traditional mindsets that dog brainstorming sessions is to doodle your way to the answers. Brown gives two suggestions in her book. The first is to take an object and break it down into its smallest parts. Take a car for example. You might draw the wheels, body shape, gear stick, badge. By visualising all of the elements of the object and the environment it lives in, it will help you view the object in a fresh way. As an alternative, you can take two unrelated items that may connect to your topic or theme and break them down into their separate parts. Once you’ve done this, combine their parts to make something new and random. Your creation may be strange, but it should aid you in finding new angles for your topic. Gives these techniques a try and see if they improve your brainstorming sessions. You may have your own methods that you prefer, but no matter what works for you, it’s always a great idea to experiment.

The right environment One of the key factors of an effective brainstorming session is the environment it’s held in. Creative thinking is impossible in an uncomfortable meeting room with little audio/visual inspiration, and meetings in this kind of situation are almost always fruitless. Updating and upgrading your office is one of the best investments you can make when it comes to unleashing your team’s true potential.

International Finance Mar - Apr 2018

OUT OF OFFICE

‘A great team, a great wife and a disciplined approach to how you work make life easier’ Paul Riseborough, the Chief Commercial Officer at Metro Bank (UK) shares a glimpse of his work and the life he has outside work What is your daily morning schedule before heading to office? I’m a big fan of podcasts. So, on the way to the office I am usually listening to the latest from FintechInsider News, Pod Save America or something from The New Yorker.

Post work what do you look forward to? I usually spend two or three nights a week attending events on behalf of Metro Bank. These tend to have a tech focus as so much is changing in the industry right now. When I’m not doing that, I like to fit in a run or a game of tennis. How do you successfully juggle your life between your hectic work schedule and personal life? Life is easier to juggle if you have a great team (which I do), a great wife (ditto!) and a disciplined approach to how you work. If there’s a secret it’s this: don’t be afraid to walk out of the office if you have done all you need to do. If not into Banking, what would have been your profession? In my head, I would have been a professional tennis player. Back on planet earth, I think I would

International Finance Mar - Apr 2018

have been a writer or an academic. Happiness, for me, is defined by my proximity to books. What is your definition of an ideal weekend? In a word: movement. I view weekends as an opportunity to exercise, travel and generally get out into the world. And of course, having a daughter under 2 years of age means constant movement is almost guaranteed. Do you have a passion for the latest gadgets? What is your latest buy? Is the purchase related to work or for personal use? My latest buy is a Garmin Forerunner 935 watch. It tracks a disturbing number of things about my body while I run. It’s been really useful in helping me train purposefully. Sports, Music, Painting, Reading, Cooking. Which is/ are your favourite(s)? How often do you get indulged in any of these? Definitely, Sports and Reading. I probably read two books a week – I’m currently reading The Design

of Business by Roger Martin which looks at how design thinking is the new competitive battleground in business. The best holiday so far? Which is the destination that is yet to be ticked off your list? We recently did a bit of a road trip through South Carolina and Georgia and had a great time. I recommend the shrimp and grits. Next up, we have our eyes fixed on Tokyo. Quote that inspires you It’s a line from the book The Beach by Alex Garland: “Never refuse an invitation, never resist the unfamiliar, never fail to be polite and never outstay the welcome. Just keep your mind open and suck in the experience. And if it hurts, you know what? It’s probably worth it”. Any social cause(s) you care about? How much is your involvement with the cause(s)? I’m a trustee of two great charities. The first is Making The Leap, an incredible social mobility charity that helps young people prepare for the world of work. The second is the Finance Innovation Lab, which incubates the people, ideas and movements helping to build a financial system that better serves people and planet. IFM editor@ifinancemag.com

As told to Madhurima Roy

Mar - Apr 2018 International Finance For all magazine stories, visit www.internationalfinance.com/magazine/all-ifm-issues/

International Finance Mar - Apr 2018: ​Investment Trends for 2018

International Finance Mar - Apr 2018: Investment Trends for 2018