International Finance Oct - Dec 2017 Preparing for needs of the expanded airport in Kuwait by International Finance

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Special Feature

October - December 2017 October - December 2017

Volume IV Issue 1 Volume IV Issue 1

UK £4 | Europe €5.35 | USA $6 UK £4 | Europe €5.35 | USA $6

Banking & Fintech pg.35-70

ANNIVERSARY ISSUE ANNIVERSARY ISSUE

‘New aviation services mean challenges and opportunities’ Interview with Khaled A Al-Sughaier, ‘New airport CEO ofKuwait Finance and Administration, KASCO means challenges and opportunities’ pg.52

Interview with Khaled A Al-Sughaier, CEO of Finance and Administration, KASCO

pg.30

November 6 and 7, 2017 in Zurich Innovative Payment Models | Mobile Payment | Mobile Commerce | Mobile Banking Key Topics of the 6th Annual Conference

Partners

• Mobile Payment Trends: TWINT, Samsung Pay, Apple Pay, Alipay • Biometry: Effects on digital payment • 3-D Secure 2.0: Advantages for merchants and issuers of cards • The implication of PSD2 for merchants and banks • Value Added Services as a mean to escape the price spiral • Use Case Tokenisation • Blockchain as a game changer

Keynote Is the Blockchain Really Going to Change the World?

David G. W. Birch Director of Innovation Consult Hyperion

Tweet: #SPFZH17 Follow: @spfzh

us neo on a t l u ti sim rpreta glish inte n - En ma Ger

Presented by

Note FROM EDITOR

s we approach the end of the year, banks are approaching a deadline that no one would envy. Having to share precious information on customers that would have taken startups decades and billions of pounds to gather. In addition, their cost on technology to gather, arrange and protect data will go up substantially. After all, data is the most precious asset — for startups and hackers. And even as banks and payment service providers prepare for PSD2, it appears that consumers would accept reasonable friction to enhance transaction security. That could explain the spurt in technology companies coming up with banking solutions. Obviously, a lot of preparation is under way to implement PSD2. Our special section on Banking & Fintech focuses on these developments, their consequences and the changes that fintech is bringing about in the banking sector. As banks embrace technology, they are able to free up space in their branches. What are they doing with this newfound space? Mark Aldred, a banking technology expert at Auriga, will give you some answers.

One of the facilities that we now take for granted — an ATM — is facing a challenge. Even as banks were replacing some branches with an ATM to cut costs, fintech companies started coming up with solutions that eliminated the need for an ATM. Suddenly, even the ATM is beginning to look like an expensive proposition. We spoke to Elenice Macedo, Head of Financial Services Solutions, Industry Consulting and Software Solutions BAS, Fujitsu EMEIA, about the future of the ATM. And, we could not leave crypto currency out of this issue. It’s another innovation that banks have to grapple with. It’s quite obvious that banking is changing. And, it is likely that changes will take place much faster than they had in the 20th century. Our October 2017 issue will keep you abreast of the developments in Banking & Fintech. I look forward to your feedback on our stories.

Director & Publisher Sunil Bhat Editor Dhiraj Shetty Production Sarah Williams, Mark Miller Editorial Adriana Coopens, Jessica Smith, Lacy De Schmidt, Business Analysts Dave Jones, Adam Lobo, Sharon Mendis, Sean Thomas Business Development Manager Steve Martin Business Development Newton Gois, Sunny Shah, Benjamin Philips, 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

Dhiraj Shetty Editor editor@ifinancemag.com

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Oct - Dec 2017 International Finance

INDEX October - December 2017

Volume IV Issue 1

COVER STORY

pg.30

‘New kuwait airport means challenges and opportunities’

economy: No evidence that US wage growth is picking up

economy: Sharing is a growing story

24 28

Daryl Liew

New Moon rising in Korea Wealth Management First alternative finance index is launched

International Finance Oct - Dec 2017

BYTE BY BYTE

CONSUMERS PREFER SECURITY TO SPEED

Changes in psC regime will impaCt uK property investments

interview ‘most payments are free in the laKebanKer system’

Bitcoin fork: what we can expect now

interview: ‘ATM has absorbed needs that aren’t of high added value’

presents

banking & fintech SPECIAL FOCUS

pg.35-70 100

smart tips 3 in 10 workers tolerate or hate their job

104

us dominates in millionaire produCing universities

108

to be a billionaire, start with sales

pg.72

interview: ‘we are in the business of creating opportunity’

94 96

Lewie Miller

sales update rEASonS why MILLENNIALs mAKE gReat eMPLOYeeS

pg.118

OUT OF OFFICE

Brian Hoffman: ‘The best way to de-stress is…’ Oct - Dec 2017 International Finance

Opinion Matters Banking: Norris Koppel When Monese founder Norris Koppel first moved to the UK from Estonia, he faced a frustrating experience that is all too common. With no UK credit history or utility bills proving his address, he was immediately denied a bank account. Without one, he found it near impossible to receive his salary or rent an apartment. From his painful experience, Monese was born - a banking service that was inclusive, instant and on-demand. Monese was launched in September 2015 as the first 100% mobile current account in the UK. Today, people from all over Europe can open a UK current account in minutes, free from the hidden fees and restrictions that legacy banks impose. The fee in a free current account | P46

Markets: Daryl Liew

Daryl Liew is a Senior Portfolio Manager with REYL Singapore. He is responsible for asset allocation and monitoring, ensuring the execution of consistent investment decisions. From 2002 to 2010, Daryl Liew worked with Providend Ltd in Singapore where he was promoted to Chief Investment Strategist and Executive Director. During this time with the company, he formed part of the investment committee and managed the Providend Global portfolios and other client segregated investment accounts. Well known and respected in the industry, he co-authored the Singapore Master Financial Planning Guide, as well as writing numerous articles on investment principles and trends. He joined Reyl Singapore in November 2010. New Moon rising in Korea | P24

Technology: Mustafa Al-Bassam Mustafa Al-Bassam is a security advisor to Secure Trading and Cognosec in London, and a doctoral researcher at University College London, working on scalable blockchain technology. He was included in the Forbes 30 under 30 in 2016 for his work on state-sponsored malware. Bitcoin fork: what we can expect now | P86

Fintech: Daniel Döderlein Daniel Döderlein is a serial tech entrepreneur with several successful startups under his belt. In 2010, he founded mCASH, the first mobile payments platform in Norway and the world’s first payment company to run 100% on Google Cloud. In 2014, he was awarded ‘entrepreneur of the year’ in Norway by the Norwegian Venture Capital Association. Today, his company offers its PSD2 API hosting and cloud-based mobile payment solutions to banks wishing to fight the tech giant disruption globally under the name Auka, which means to increase and intensify in Old Norse, Viking language. The Klarna lesson for retail banks: find your ‘paper invoice’ | P58

International Finance Oct - Dec 2017

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COntributors

Tim Evershed

YOUR ADVERT HERE.

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

READ THE

GLOBAL ECONOMIC TRENDS

that is spread across over 100 countries Susanne Jakobsen

Susanne Jakobsen

and to know what’s latest inFinancial technology entrepreneur Financialreads technology IFM entrepreneur Financial technologythe entrepreneur BANKING Gene Pranger has designed more Gene Pranger has designed more Gene Pranger has designed more Banking, Fintech, wealth Management, than 500 bank branches since 1995. than 500 bank branches since 1995. than 500 bank branches since 1995. START-UPS 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 FINTECH banking with the uGenius

SPECIAL FOCUS

OF JANUARY 2018 platform,ISSUE acquired by NCR in 2012.

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

platform, acquired by NCR in 2012.

PSD2 His latest venture, BankOn Mobile BLOCKCHAIN Contact: Adam Lobo Email: alobo@ifinancemag.com CRYPTOCURRENCY HACKERS CYBER SECURITY /InternationalFinanceMagazine

His latest venture, BankOn Mobile

/IntlFinanceMag

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To book your Ads, contact Benjamin Philips (bphilips@ifinancemag.com)

byte by byte

Consumers prefer security to speed As banks and payment service providers prepare for the PSD2 era, a study reveals that consumers would accept reasonable friction to enhance transaction security David Poole

International Finance Oct - Dec 2017

byte by byte

ast year, payment card fraud in the UK was estimated at £618m, with the global figure standing at $21.84bn.1 High profile breaches, consumer awareness campaigns and personal experience have all affected consumer trust levels; something vital to the success of any online or mobile payment service. With this in mind, MYPINPAD conducted an independent online survey to assess the current state of consumer confidence when transacting online. With new payments regulation looming in Europe, the results have left the payments and Fintech 1 2 3

industry debating what needs to be done to improve consumer confidence in banks and payments processors.2 What are consumers saying? The survey results revealed just over one in four respondents were ‘very concerned’ about online banking and shopping security. A further 41.5% described themselves as ‘somewhat concerned’. Only 2.7% said they were not at all concerned by the security of online banking and shopping. Even more, just under one in three of survey respondents claimed to have been a victim of online

fraud and, alarmingly, more than 9% said they ‘didn’t know’ if they have been. Consumers are worried about their security online and it has started to affect their behaviour. In excess of 60% said information about data breaches and online fraud had significantly impacted their trust in online shopping and banking. As a result, 11% stated they shopped less online and almost 1 in 10 said they did not use mobile devices to carry out transactions. Our study also confirmed that, for consumers, the security of a transaction was more important than speed and that smaller

independent online retailers were perceived to be the most vulnerable to online fraud. However, it is not only merchants which seem vulnerable in consumers’ eyes. Even though there has been a 19% fall in remote banking fraud losses last year compared with 20153, a quarter still feel that banks are vulnerable to online fraud risks. How can banks and PSPs increase consumer trust? The revised EU Second Payments Services Directive (PSD2), builds upon the foundations of the now outdated 1st Payment Services Directive (PSD),

https://www.financialfraudaction.org.uk/news/2017/03/30/financial-fraud-data-for-2016-published/ https://mypinpad.com/consumer-trust-report/

http://www.bankingtech.com/785222/financial-fraud-fools-uk-out-of-769m/

WHICH BUSINESS TYPES DO CONSUMERS BELIEVE ARE MOST AT RISK FROM FRAUD? Smaller independent retailer

65%

Large online retailers

44%

Banks

39%

Travel providers

29%

Utility companies

17%

Others:

Gaming and other companies that use subscriptions or micro transaction models.

Oct - Dec 2017 International Finance

byte by byte

implemented in 2007, and is designed to improve all aspects of electronic payments including convenience, choice and security. The new directive has the potential to disrupt existing payments models. This new regulation is expected to push banks, acquirers and PSPs to change the way business is being carried out. Both merchants and consumers will have the choice to use either their payment card or use a direct bank transfer to make and accept payments

The big changes If compliance and implementation of scalable security systems are done correctly, PSPs, issuers, acquirers and merchants will have the opportunity to transform the online and mobile industry as we know it; improving the customer experience, enabling greater transaction volumes, and adding to the value of the services they deliver. But how should they navigate this change? PSD2 will change the payments model, and with more parties being able to access consumers’ financial data, there is a growing concern for the payment environment regarding data sharing. Failure to appropriately safeguard such data could result in greater instances of data breaches and damage the trust consumers have in businesses and banks. Banking institutions and

Payments Service Providers (PSP) need to improve their security practices and educational efforts to maintain consumer confidence. PSD2 and EBA (European Banking Authority) guidelines require all Payment Service Providers to adopt ‘Strong Customer Authentication’ (SCA). This means two or more independent elements categorised as knowledge (something only the user knows), possession (something only the user possesses) and inherence (something the user is) should be used to authenticate an individual. In this way, the breach of one does not compromise the reliability of the others, protecting the confidentiality of the authentication data. Key to consumer trust One of the objectives of PSD2 is to allow new entrants into the payments industry. However, PSPs will need to provide proof of robust security measures to maintain consumer trust. Since our study showed 94% of consumers want strong security when transacting online, being able to demonstrate higher levels of security than competitors when enabling payments in a compliant manner will be key to winning consumers’ business. Our study confirms consumers would accept reasonable friction to

enhance transaction security. In fact, half of respondents believe the use of both card PIN and biometric based authentication to be the most significant step online retailers and banks could take to improve security and consumer trust. In other words, in order to gain trust, banks and PSPs should implement multi-factor authentication. The number of users accessing retail banking services via smartphones, tablets, PCs and smartwatches is forecast to rise to three billion by 2021, banks will need to focus on providing a more friction appropriate digital experience for their customers. Especially, if they are to retain customer trust and remain market leaders in the PSD2 era.4 Banks may need to compete with nimble challenger payments institutions and invest in authentication solutions. However, in many cases, banks will need to maintain legacy systems and meet regulatory compliance. As an authentication method, PIN, has been used successfully at ATMs for more than 30 years and consumers are familiar with entering a PIN code to access their bank accounts – PIN offers a strong solution and facilitates SCA. By verifying the identity of a person through something you have (a mobile device), something

https://www.juniperresearch.com/press/press-releases/digital-banking-users-to-reach-nearly-3-billion-by

International Finance Oct - Dec 2017

you know (card PIN) and with the additional layer of something you are (a biometric), not only would compliance with PSD2’s SCA be achieved and the security process strengthened, but it would also provide customers with what they need in order to boost their trust. Conclusion Our study has shown, as the popularity of online and mobile purchases continues to grow, so has the associated fraud. Across all channels, the industry needs appropriate and scalable security. Both the industry regulators and the consumers are asking for stronger authentication methods, specifically for a multi-factor, consistent and convenient process. A combination of traditional with emergent authentication methods such as PIN and biometrics in a multi-layered approach will boost consumer trust while ensuring compliance with new regulation in the industry. IFM editor@ifinancemag.com

David Poole is Business Development Director at MYPINPAD

byte by byte

How can banks and PSPs increase consumer trust?

40%

50%

of respondents would like to use cardholder PIN as a means of authenticating an online transaction

would like to use a combination of both PIN and biometrics

98% of consumers believe transaction security is more important than speed

KEY FINDINGS 2%

Only 2% of respondents believe speed is more important than security when completing an online transaction

67%

Are concerned about their online shopping and banking security, with almost a quarter of all respondents â&#x20AC;&#x2DC;very concernedâ&#x20AC;&#x2122;

61%

Stated that information about data breaches and fraud has impacted their trust of online shopping and banking

29%

Of respondents have been a victim of online fraud

1 IN 10

Respondents have no idea whether or not they have fallen victim to online fraud

40%

Of respondents want to use card PIN as a means of authenticating an online transaction

50%

Would like the option to use a combination of card PIN and biometrics

HOW CONCERneD ARE YOU ABOUT ONLINE BANKING AND SHOPPING SECURITY? 25.4%

Very concerned

41.5%

Somewhat concerned

15.5%

Netural

14.9%

Not much concerned

2.7%

Not at all concerned

Oct - Dec 2017 International Finance

Economy

No evidence that US wage growth is picking up International Finance Oct - Dec 2017

Economy

Much like a tube of toothpaste being squeezed a little too hard, wage growth can suddenly accelerate when labour markets are tight Lars Kreckel

ne thing is for sure: the US economy is closer to full employment than it was a year ago. More difficult to say is whether it is at full employment. So far, we’re still lacking much evidence that US wage growth is picking up steam. However, much like a tube of toothpaste being squeezed a little too hard, wage growth can suddenly accelerate

Lars Kreckel

when labour markets are tight. So, from an equity investor’s perspective, it’s better to think about the potential impact of rising wages on profits before it actually happens. It’s intuitive to expect rising wages to have a negative effect on corporate profits. In principle that is correct, but I would make two important qualifications because intuition often leads to an over-estimation

of the drag of rising wages on company earnings. Revenue growth is, unsurprisingly, positively correlated with margins: when companies sell more, margins expand Firstly, all else being equal, if companies have to spend more on paying wages, there should be less profit left on the bottom line. But all else is rarely equal. Wages typically rise because labour has

bargaining power, which tends to be the result of strong demand for a company’s products or services and therefore goes hand in hand with strong revenue growth. Revenue growth is, unsurprisingly, positively correlated with margins: when companies sell more, margins expand. And this tailwind tends to be much stronger than the coinciding headwind of rising wages. That’s why we get the intuitively surprising relationship in the chart below where US margins have tended to expand when average hourly earnings growth has accelerated. Secondly, we have to remember that a company has costs from many different sources; not just labour costs. There are the raw materials that go into the product, energy costs to power the factory, insurance costs, marketing costs, transportation costs, accountants, interest, taxes, the list goes on and on. Personnel costs are only one part of the equation and wages are only part of personnel costs. There are also taxes, pensions and other compulsory and voluntary social security contributions, some of which will be independent

Oct - Dec 2017 International Finance

Economy

Wages typically rise because labour has bargaining power, which tends to be the result of strong demand for a companyâ&#x20AC;&#x2122;s products or services and therefore goes hand in hand with strong revenue growth

of wages. A company has costs from many different sources; not just labour costs Taking the average S&P 500 company as an example, only a touch more than 10% went towards labour costs. This part is easily dominated by the 53% of revenues that go towards the cost of goods sold (excluding labour), 20% to SG&A (selling, general and administrative expenses), 4.6% for interest

International Finance Oct - Dec 2017

and taxes and less than 3% for depreciation. As a result, the drag of rising wages on corporate profits is only small. We estimate that a 1% acceleration in wage growth, in isolation (Scenario 3 in the table below), takes about 0.8% off the average S&P 500 companyâ&#x20AC;&#x2122;s earnings. That is clearly too much to ignore, but in the context of decent earnings growth and the general uncertainty around earnings coming

from the many factors it is influenced by, this can easily end up being a rounding error. This effect becomes clear when we assume that the 1% acceleration in labour costs coincides with 2% inflation and sales volume growth, the difference between scenarios 1 and 2 shown in the table below, where earnings growth is 5.5% instead of 7.1%. So, while we donâ&#x20AC;&#x2122;t want to make light of the

headwind that accelerating wage growth is to profits, the drag is smaller than is often assumed and the effect is easily swamped by other macro factors such as global real GDP growth and inflation. IFM editor@ifinancemag.com

Lars Kreckel is Global Equity Strategist at LGIM

Economy

Labour costs and US margins

Rising wages and S&P 500 earnings

Oct - Dec 2017 International Finance

Economy

Sharing is a growing story By 2025, total transactions in the UK sharing economy are projected to reach ÂŁ140 billion, up from just ÂŁ13 billion in 2016

International Finance Oct - Dec 2017

Economy

The sharing economy • UK and France European trailblazers, leading the charge for sharing sectors • Over 275 collaborative platforms founded in Europe as growth continues • 6 in 10 Europeans participate in the sharing economy to save money • UK sharing sectors set to grow by 60% in 2017 – creating £8 billion

n 2017, the idea of a sharing – or collaborative – economy (defined as a socio-economic system built around the sharing of human and physical resources) enveloped society. Some of the bestknown platforms of this type are Uber, Airbnb, eBay and Spotify. Businesses from the UK, to Spain and Romania are no longer looking inward – rather, outward,

toward peer-to-peer (P2P) participation and community. In fact, peer-to-peer transactions generated by the UK’s five most prominent sharing economy sectors stand to grow by 60% – or £8 billion – in 2017 alone, per recent predictions from PwC. By 2025, total transactions in the UK sharing economy are projected to reach £140 billion, up from just £13

billion in 2016: proving the progressive nature of today’s P2P business. Rob Vaughan, economist at PwC, says, “Innovation will remain crucial to success in the sharing economy. Several established players branched out into new service offerings in 2016 and we expect them to invest significantly in these this year. The success of these new services will be an acid test of whether

“

Innovation will remain crucial to success in the sharing economy. Several established players branched out into new service offerings in 2016 and we expect them to invest significantly in these this year. The success of these new services will be an acid test of whether sharing economy platforms can eventually become the established leaders of their markets, or will forever be known as the disruptors Rob Vaughan, economist at PwC

Oct - Dec 2017 International Finance

Economy

OnBuy.com: At least 275 sharing platforms have been founded in Europe; facilitating £28 billion worth of transactions in the past few years

sharing economy platforms can eventually become the established leaders of their markets, or will forever be known as the disruptors.” OnBuy.com analysed how the sharing economy in Europe is progressing and discovered at least 275 sharing platforms have been founded in Europe; facilitating £28 billion worth of transactions in the past few years. The findings showcase the UK and France as sharing economy trailblazers – with over 50 collaborative organisations founded and others continuing to grow. Following the standard

International Finance Oct - Dec 2017

set by the UK and France is Germany, Spain and the Netherlands, each contributing over 25 collaborative economy organisations; while less than 25 collaborative economy organisations were previously established in Sweden, Italy, Poland and Belgium. Evidently, the idea of a sharing economy has transitioned into something more. Today, it is a residual, socio-economic trend that is fundamentally changing the way societies – and consumers – operate around the world. Cas Paton, Managing

Director, OnBuy MD, says, “Today’s economy is prime for sharing – from freelance platforms changing the way we work, to food-sharing platforms changing the way communities connect – it’s time for businesses to embrace the concept. In doing so, businesses across the globe can achieve a sustainable way to appeal to a modern-day audience, with far higher reach that is readily accessible.” Certainly, whilst the rapid development of sharing platforms is considered as an opportunity which is beneficial to the economy, it could prove a challenge

for policy makers and regulators to keep up with the pace. However, though areas such as the UK and France appear to be more progressive than elsewhere in Europe, the fact remains that the trend is continuing to infiltrate borders; albeit more slowly, as trepidation subsides and the urge to connect increases. IFM editor@ifinancemag.com

Economy

THE ORIGIN OF EUROPEAN COLLABORATIVE ECONOMY sweden THERE ARE SEVERAL EXAMPLES OF SUCESSFUL, NON-PROFIT COLLABORATIVE ECONOMY INITIATIVES IN SWEDEN - SUCH AS RIDESHARING WEBSITE SKJUTSGRUPPEN.NU

uk THE UK IS THE UNCONTESTED LEADER IN ALTERNATIVE FINANCE AND MAKES UP 75% OF THE EUREPEAN ALTERNATIVE FINANCE MARKET

POLAND 40% OF THE POLISH POPULATION HAVE HEARD ABOUT THE COLLABORATIVE ECONOMY AND 54% AGREE PRICE IS THE MAIN BENEFIT

NETHERLANDS 550,000 DUTCH HOUSEHOLDS HAVE PARTICIPATED IN THE COLLABORATIVE ECONOMY AND PARTICIPATION AS A PROVIDER IS HIGHER THAN OF A USER

BELGIUM 8.5% OF BELGIANS HAVE SHARED A SERVICE, WITH COLLABORATIVE ECONOMY PARTICIPATION RISING TO 16% IN BRUSSELS

FRANCE PARIS IS AIRBNB’S TOP CITY REVENUE AND GLOBALLY, FRANCE IS AIRBNB’S SECOND BIGGEST MARKET

GERMANY GERMANY IS THE #2 EUROPEAN COUNTRY FOR P2P CARSHARING, WITH AN ESTIMATED 140,000 MEMBERS

SPAIN P2P ACCOMODATION RENTA;S ARE EXTREMELY POPULAR IN SPAIN AND MAKE UP ALMOST 50% OF THE ROOM CAPACITY IN URBAN TOURIST CENTRES

source: https://www.onbuy.com/

ITALY THE COLLABORATIVE IDEA OF ALTERNATIVE FINANCE IS UNPOPULAR IN ITALY, FALLING BEHIND OTHER SMALLER MEMBER STATES SUCH AS ESTONIA AND FINLAND

NUMBER OF COMPANIES FOUNDED

>50

>25

<25

Islamic Banking: GEFF2017

20 Keith Brown MSP, Cabinet Secretary for the Economy, Jobs & Fair Work, Scottish government

â&#x20AC;&#x2DC;The business as usual approach is no longer desirableâ&#x20AC;&#x2122; IFM Correspondent

International Finance Oct - Dec 2017

Islamic Banking: GEFF2017

packed audience of over 300 key ethical finance leaders from the Middle East, Africa, East Asia & Europe listened to path-breaking insights at the 2nd edition of the two-day Global Ethical Finance Forum (GEFF) in Edinburgh on September 13-14. Reflecting on the aftermath of the global financial crisis and highlighting the need of establishing a sustainable financial system, Keith Brown MSP, Cabinet Secretary for the Economy, Jobs & Fair Work, Scottish government, said, “In the 10 years following the global financial crisis, there has been something of a re-alignment in attitudes among bankers and investment managers and among customers and shareholders. There has been a recognition that ‘business as usual’ is no longer an option and

indeed no longer desirable. A recognition that there could, and should, be a practical, economic alternative to established business practices. Interest in establishing an alternative, sustainable, responsible and ethical financial system continues to grow as does interest in developing a more longterm and responsible form of economic development. “Despite the challenges which continue to exist within the financial sector in Scotland, and across the world, the industry remains in a strong position and it is crucial that we continue to rebuild its proud legacy and reputation. There is a growing demand for the financial sector to look up to its historic roots in saving, in communities and in sustainable investment and support for businesses. Those roots run deep in Scotland.” Explaining how Scotland poses as a fitting backdrop

to host the narrative due to its strong heritage in ethical finance, Omar Shaikh, Advisory Board Member, The Islamic Finance Council UK (UKIFC) said, “Globally, the city is a leading financial hub and within this, Edinburgh is a key location for asset management and banking. With Scotland’s proud heritage in prudent finance through the mutual life companies, origins of the savings bank movement, I believe that Scotland presents a natural place to convene and host this international dialogue which is pertinent now more than ever.” Frank Ross, The Rt. Hon, Lord Provost & Lord Lieutenant of the City of Edinburgh, in his welcome address, said, “Edinburgh is not riding the fintech wave, it is driving it.” However, while the three segments of ethical finance – Socially responsible investing (SRI), Environmental, Social

“

We must work together, to help people make ethical choices with their own money the norm, rather than the exception Kirsty Britz, Director of Sustainable Banking, Royal Bank of Scotland

Oct - Dec 2017 International Finance

Islamic Banking: GEFF2017

& Governance (ESG) & Islamic/faith-based finance – share the same valuebased approach, they are separated by boundaries of geography, perception and methodology. Stressing on the massive opportunity that lies for mainstreaming ethical finance, Lord Sheikh, The Baron Sheikh of Cornhill, said, “A fundamental part of the UK’s economic success strength stems from bilateral trade. This will be more important than ever before as we embark on a new era for our country post-Brexit. In particular, I believe that we must now seek greater economic and trade ties with our friends from across the globe and forge new trading agreements. In this context, the APPG believes that Islamic and ethical finance can offer a gateway to building new relationships and accessing new markets.” Explaining how it’s

International Finance Oct - Dec 2017

imperative to put ethics at the forefront of businesses, Kirsty Britz, Director of Sustainable Banking, Royal Bank of Scotland, said, “We must keep listening to all our stakeholders. We must work together, to help people make ethical choices with their own money the norm, rather than the exception.” The day started with a host of panel sessions gravitating around the key themes affecting the ethical finance industry at large – these issues comprised Sustainable capitalism, incorporating ESG into faith-based investing, scaling up impact investments, two exclusive case studies delving deep into tracking the growth of responsible investments in Japan & Malaysia and a keynote interview on ethics and morality with Prominent Banker and Business Historian Charles Munn.

‘Restore reputation’ Building on the proceedings of Day 1, the second and final day of the 2nd Global Ethical Finance Forum witnessed further insights critical for the industry going forward. In an exemplary opening keynote address and what was possibly a fitting case study, Jameel Ahmad, Deputy Governor, State Bank of Pakistan (SBP), took the audience on Pakistan’s journey to embracing financial inclusion, wherein he spoke about responsible finance and its prerequisites and cited some informative statistics highlighting Pakistan’s global recognition in embracing financial inclusion. He further expanded on State Bank of Pakistan’s impressive strategic approach towards responsible finance, in particular strengthening the

“

It is the need of the hour to bring back meaningfulness and reputation to the financial sector Ugo Biggeri, Chair of the Board of Directors, Banca Etica

Islamic Banking: GEFF2017

framework for microfinance consumer protection and the national financial literacy programme being rolled out. He also took into account the obstacles that may pose a hindrance in achieving the goal of effective financial inclusion. In a scintillating plenary session that focused on the importance of putting sustainability at the heart of banking practices, Ugo Biggeri, Chair of the Board of Directors, Banca Etica, said, “It is the need of the hour to bring back meaningfulness and reputation to the financial sector. Ethical finance is also about possessing social and environmental goals, ways to measure them, a sound disclosure policy and investment criteria. Through this way, we can certainly narrow the wide gap that presently exists between finance and the real economy and ultimately bring finance closer to

people and the planet.” Reduction in communication gap Expressing his views during the informative panel session on ESG Screens and risk mitigation, Anthony Hobley, CEO, Carbon Tracker Initiative, said, “We need to see a paradigm shift whereby ESG reporting becomes the norm and is just an integral part of any financial decision. For that to happen, it needs to be seen as critical to the management of financial risk and achieving better returns. This goes to the Holy Grail at Carbon Tracker, how does one translate the environment, climate energy transition risk into quantitative financial risk and opportunity? To achieve this, ESG needs to be much more forward-looking than backward-looking, it must be capable of stresstesting business models

against foreseeable risks and transitions and capable of flagging the collapse in valuation we have already seen in US coal European energy utilities.” Elaborating on the challenges of aligning the financial system with sustainable development, Nurlan Kussainov, CEO, Astana International Financial Centre (AIFC) Authority, said, “Within the current business model in the financial services sector, the speculation and arbitration are always based on asymmetric information. People from low-income groups, who have less access to the information, end up suffering more. With the financial services sector rapidly embracing technology, there is a strong belief that in the near future there will be a reduction in the current communication gap that the sector presently faces. This will bring a very positive impact on to the

development of Islamic and ethical finance across the world, helping it to realise its global value proposition.” In his closing keynote address, Nigel Kershaw, Chair, The Big Issue, said, “There is a lot of talk about ethical finance and in particular ESG and social impact because it’s talked about primarily by people involved in the financial sector. I believe the democratisation of capital is extremely central to what we do. Quite often, the discussion is top-down supply and product-led and for me, it often misses one of the most important social outcomes that is quite often forgotten – that’s the opportunity for ordinary people to invest and save in creating a better place to live for themselves, their families and the community around them. It’s not about mainstreaming ethical finance; it’s all about bringing the mainstream to us.” Convened by Middle East Global Advisors in strategic partnership with the Islamic Finance Council UK (UKIFC), the Forum was held under the patronage of the Scottish government, supported by the UK government and hosted by the Royal Bank of Scotland (RBS) at its headquarters in Edinburgh. IFM editor@ifinancemag.com

Oct - Dec 2017 International Finance

OPINION

Daryl Liew 24

New Moon rising in

Korea Insight on the Korean equity market

International Finance Oct - Dec 2017

OPINION OPINION: Markets

oohorang, the white tiger, is the official mascot for the Winter Olympics to be held in PyeongChang, South Korea in February 2018. Considered Korea’s guardian animal, the mascot symbolises protection, a much desired quality for athletes and spectators alike considering the current tensions with the North. Meanwhile, animal spirits have taken over South Korea’s stock market as it has surged 20% in local currency terms this year, making it one of the best performers in Asia in 2017. This price appreciation has been driven by earnings with Korean companies delivering the strongest earnings growth in Asia this year. As a result, the

KOSPI remains one of the cheapest markets in the region, trading at a forward price-toearnings (PE) ratio of just 9.6x. Reasons for the Valuation Gap Indeed, the chart illustrates the large valuation gap between Korean and other Asian stocks – MSCI Korea currently trades at a whopping 40% discount against MSCI Asia ex-Japan which has a PE of 14.4x. This discount can partly be explained by the return on equity (ROE) delivered by Korean companies, which is 15% lower compared to regional competitors. A geopolitical risk premium also needs to be factored in, with the threat of a military confrontation with North Korea a real and ever present danger.

There is however also a structural reason for the lower ROE and steep market discount, namely the presence of inefficient family owned conglomerates or “chaebols” in South Korea. These chaebols typically have complex and opaque cross-shareholdings, a poor culture of corporate governance leading to high profile corruption cases, and a poor track record of delivering value to shareholders evidenced by Korean companies having one of the lowest dividend pay-out ratios globally. While these chaebols have played a significant role in building up the country, these conglomerates may now be stifling small enterprises and inhibiting innovation. Indeed, the sluggish

economy may be another explanation for this valuation gap. As an open, exportdriven economy, South Korea suffered from the plunge in global trade since the 2008 Financial Crisis. The heady days clocking double-digit GDP growth as one of the four original Asian Tiger economies is long gone, and South Korea has since had to adapt to a much slower pace of growth – averaging between 2.5-3.5% in the last three years. Traditionally strong industries like shipbuilding and logistics have fallen on hard times epitomised by the bankruptcy of Hanjin in February. The poor economic conditions has resulted in a worrying rise in the youth unemployment rate which now stands

PE Ratio & ROE Comparison

Oct - Dec 2017 International Finance

OPINION OPINION: Markets

at over 10%. Meanwhile, consumer indebtedness has also been trending higher with household debt-to-GDP close to 95%, an indication that South Koreans may be over bingeing on debt, which could be a potential risk when interest rates start heading higher. Enter President Moon Despite all these problems, there is growing optimism that South Korea could be turning the corner. A big reason for this is new President Moon Jae-in. Assuming office at a challenging time for the country, President Moon has quickly started to fulfil his campaign promises. On the economic front, he has already hiked the minimum wage by 16.4%, bringing it closer to the KRW10,000 target to be achieved by 2020, an initiative to reduce income inequality. Next steps include launching a KRW10 trillion (US$9 billion) fiscal stimulus budget and to create over 800,000 more public sector jobs – an immediate strategy to tackle youth unemployment. A middle-to-long term strategy to recalibrate the economy entails the support of the fourth

industrialisation of SMEs – recognising the need to involve SMEs, who are still the main source of job creation, as the country seeks to make the paradigm shift to a more digitalised economy. President Moon has also taken steps to restructure corporate Korea. Reforming the chaebols is a key priority which has seen the appointment of Mr. Jang Ha-Sung, a longtime corporate governance activist to fill a newly created position chief of staff for policy. This comes on the back of “chaebol sniper” Mr. Kim Sang-jo, another vocal chaebol conglomerate critic, being tapped to run Korea’s anti-trust regulator. These key appointments will likely continue to drive the reform process of large conglomerates and lead to fairer business practices between small and large organisations, potentially boosting SMEs. Anecdotally, there are signs of progress in corporate Korea, with the Lotte group announcing corporate restructurings

to reduce cross-holdings, and Samsung committing to share buybacks to boost shareholder returns. Also, Korea’s National Pension Service, the world’s third largest pension fund, is reportedly preparing to adopt the Stewardship Code, a set of guidelines promoting responsible investment practices that was launched in December 2016. Encouraging large institutional investors to demand good corporate governance practices will assist corporates to speed up the reform process. As a case in point, Japan, another country previously tarnished with a poor corporate governance record, has seen a marked improvement in ROE since the launch of Japan’s corporate governance and stewardship codes and pressure to be included in a new Nikkei400 index which rewards companies with strong ROE. A similar development in Korea, could easily close the ROE gap between Korean and Asian stocks, and trigger a re-rating for the market.

On the foreign policy front, President Moon has announced an ambitious 2020 goal for the complete denuclearisation of North Korea in return for a peace treaty between the countries. Negotiations with Pyongyang will undoubtedly be challenging and President Moon will likely pursue a dual track of pressure and dialogue. By taking the lead on North Korea, President Moon will help dampen down tensions in the region, balancing the conflicting interests of both the US and China. These discussions will test President Moon’s diplomacy skills but he has thus far given us a glimpse of his qualities in how he deftly defused the tensions surrounding the controversial THAAD missile defence system by delaying its full deployment, pending an environmental review. Any progress with Pyongyang will reduce the geopolitical risk premium. Various events could still derail President Moon’s laudable initiatives, but at least he’s off to an encouraging start after less than 100 days in office. We will have better visibility on South Korea’s progress when the world descends onto PyeongChang in 200 days’ time. IFM editor@ifinancemag.com

Daryl Liew is Head of Portfolio Management at Reyl Singapore

International Finance Oct - Dec 2017

OPINION: Markets

Wealth Management

First alternative

finance index is launched

Highlights the emergence of alternative finance as a new asset class

ambridge-based data intelligence firm TAB has launched the worldâ&#x20AC;&#x2122;s first index into the health of the global online crowdfunding and marketplace finance industry. The new Crowdfunding and Marketplace Finance Index (CAMFI) has been launched in partnership with China-focused big data firm BBD, Hangzhou Ling Hao Technology

International Finance Oct - Dec 2017

Co., Ltd. (JZT Data) and academic advisor Academy of Internet Finance in Hangzhou, and aims to become the main financial barometer for the new asset class of alternative finance. CAMFI analyses more than 4,800 global platforms to estimate the overall monthly climate of the global marketplace finance and crowdfunding industry, weighting the rewards, equity and

debt markets, to create a single global metric. According to CAMFI figures, the industry experienced an overall downward trend in June, with CAMFI dropping from 103.40 in May to 87.95 in June, a decrease of -14.9%. â&#x20AC;&#x153;CAMFI is a true world first in

Wealth Management

distilling the overall health of the alternative finance market down into a single number, and will be the single measure by which the world identifies trends and patterns, and assesses the strength of the industry,” said Emily Mackay, CEO, TAB. The index comprise three sub-indices for equity, rewards and debt. The subindices show the variation across the industry’s sector in June. The Debt SubIndex fell from 101.25 in May to 96.61 in June, the Reward Sub-Index moved from 107.29 to 91.65, and the Equity Sub-Index decreased from 102.18 to 72.87 (-28.7%). The change in the Debt SubIndex is mainly due to the contraction of the global market on the previous month, but the financing efficiency improved. The size and the financing efficiency of rewards both declined between May and

June. Activity in the equity industry reduced markedly from May to June (the index falling from 102.75 to 69.62), which added to the sharp downside of CAMFI in June. Each month a report will present the index, and analyse the metric across the three dimensions of scale, efficiency and transparency. Scale refers to the whole industry’s market volume, which is a principal factor affecting the health of the industry. In June, the scale of trading in the three major sub-sectors (debt, equity and reward) declined to varying degrees, which resulted in a slight decline in the total scale, hovering around 100. Within the three major segments, equity crowdfunding fell by 40% in June. Efficiency means the average financing rate of the market, i.e. the amount of financing by unit of time;

the allocation efficiency of market resource and market information efficiency is also closely related. Compared with May, the financing rate of the debt and rewards sectors fall sharply in June. Transparency refers to the level of information disclosure by the platform. Compared with May, the transparency of the equity and reward sectors in June is at the margin of 100, remaining unchanged from May, with the debt sector showing a slight increase. “CAMFI means there is now a whole market measure including subindices, a powerful tool in trend tracking and informing the global market about this emerging asset class,” continued Emily Mackay, CEO, TAB. “Online finance is a sector that overall is showing considerable growth globally year to year, and CAMFI is a major development in

assessing this sector for public bodies, financial analysts, academics, SMEs, corporates and other interested parties.” Dr. Ben Shenglin, Professor & Dean, Academy of Internet Finance, Zhejiang University and Chairman, Zhejiang Association of Internet Finance, China, added: “Since its inception in 2005, marketplace finance has grown across the world in volume and variety, and the platforms have developed in various forms and shapes globally due to different market and policy environments. Standardisation is a key opportunity for industry players, investors, regulators and academia. Having an index to capture the overall development of the sector is something desirable but to develop one is an extremely daunting challenge because the availability, integrity and comparability of the data are notoriously poor across various markets. I am pleased that three companies from China (the largest market) and UK (the birthplace of the industry) have joined hands to tackle this challenge thanks to their collective strength and wealth of data they have accumulated over the years. Academy of Internet Finance is proud to have served as the academic advisor for this groundbreaking initiative.” IFM editor@ifinancemag.com

Oct - Dec 2017 International Finance

COVER STORY

‘New aviation services mean challenges and opportunities’ Interview with Khaled A Al-Sughaier, CEO of Finance and Administration, KASCO IFM Correspondent

International Finance Oct - Dec 2017

COVER STORY

Khaled A Al-Sughaier, CEO of Finance and Administration, KASCO

Oct - Dec 2017 International Finance

COVER STORY

uwait is constructing a much larger, sophisticated, new airport. Once complete, it is expected to cater to the increase in demand for travel in and out of the Gulf nation. Services companies are in the process of coming up with ways to cater to the

What were the reasons for setting up KASCO? Kuwait Airways and others viewed the arrangement of a flight kitchen working to five-star universal models at Kuwait International Airport as a basic requirement for the future development of Kuwait airport. With a growing requirement for ground handling expertise, a separate company was established in 1981. It was named Kuwait Aviation Services Co (KASCO) and started operations in 1983.

International Finance Oct - Dec 2017

anticipated increase in demand from passengers. International Finance spoke to Khaled A Al-Sughaier, CEO of Finance and Administration of Kuwait Aviation Services Co (KASCO), about the companyâ&#x20AC;&#x2122;s plans for the future. Excerpts from an interview:

Where did KASCO start work? KASCO started at the Kuwait International Airport. What services does the company offer? Today, after nearly 35 years in operation, in addition to its flight kitchen, KASCO is operating Kuwait International Airportâ&#x20AC;&#x2122;s restaurants and cafeterias, supervising the First Class and Business Class Lounges (Dasman), overseeing VVIP services, and managing the food and beverage operation of the airport transit hotel.

KASCO also started providing catering services to the local and government markets under the name KASCO Gourmet. This section specialises in providing catering services for buffets and banquets, as well as meal plans for individuals, private institutions, and some governmental sectors. We also provide VIP and VVIP privileges and services to our customers. How many people does KASCO cater to? Over 20,000 passengers every day.

COVER STORY

With a growing economy and a fast-growing population, the aviation sector in Kuwait was facing several challenges. Services companies needed to come up with a new strategy to cater to a growth in demand due to an increase in the number of flights in and out of Kuwait

In which areas did KASCO expand outside the airport? When did this foray begin? Why? With a growing economy and a fast-growing population, the aviation sector in Kuwait was facing several challenges. Services companies needed to come up with a new strategy to cater to a growth in demand due to an increase in the number of flights in and out of Kuwait. Privatisation and decentralisation were the main factors to push investors toward innovation and competitiveness in order to survive. Furthermore, construction of a much larger, sophisticated, new airport is under way, which only meant the creation of more complicated challenges for aviation-related services. With such challenges, we saw opportunities to grow by transforming

KASCO from a traditional mealserving company to one providing a vast variety of culinary arts. Meals that will cater to different palates and appeal to various cultures. In 2016, profit increased by 40%, thanks to a series of strategies to improve the efficiency and productivity of the company. The measures that were introduced covered cost reduction, corporate restructuring, refining and remodeling of the resource-intensive procedures with the aim of overcoming the obstacles before KASCO. Out of all these measures, a more competitive and cost-effective giant was born. We have introduced new services catering to schools and hospitals, and enhanced the banqueting services to cater to the demand for special events, such as weddings.

What are the services being offered by KASCO today? Today, we offer a wide range of services. These are: 1. Inflight Catering 2. Meals for hospital patients 3. Banqueting and Gourmet services to the public, and for governmental establishments 4. A new line of healthy and low calorie meals under the name KASCO Delite 5. Meals for schools What has been the impact financially of the corporate restructuring carried out since 2015? A net profit of 228% and a reduction of 39% on cost was achieved after the restructuring in the first year. For the first half of 2017, a gain of 61% on net profit was achieved compared to the first half of the preceding year. What social causes does KASCO take up? In 2017, KASCO took the initiative to provide free meals for the needy during the holy month of Ramadhan. A gesture that will always ensure that the company remains in the minds and hearts of the people. Other social work involves giving free water bottles during funeral services and in the middle of the burning heat of the summer in Kuwait. IFM editor@ifinancemag.com

Oct - Dec 2017 International Finance

Appointments

Nasdaq elects new board member He is John D. Rainey, Executive Vice President and Chief Financial Officer of PayPal Holdings Inc

N 34

asdaq (Nasdaq:NDAQ) has brought in John D. Rainey to the Board of Directors following his election by the board on July 25, 2017. John is Executive Vice President and Chief Financial Officer of PayPal Holdings, Inc. John oversees financial stability and growth at PayPal, which includes leading its financial operations, regional finance teams and investor relations. Prior to his role at PayPal, John was Executive Vice President and Chief Financial Officer at United Continental Holdings, Inc.’s United Airlines. He was responsible for

the company’s financial operations and corporate strategy, and helped lead the merger of Continental Airlines and United Airlines. Over his 18-year career at Continental and United, John held several roles with increasing responsibility and helped lead the company to its most profitable era. John currently serves on the March of Dimes National Board of Trustees, is an inaugural member of the CNBC Global CFO Council and is a member of The Wall Street Journal CFO Council. He holds a Bachelor’s degree in Business Administration and a Master’s in Business Administration from Baylor University; he is a Certified

Public Accountant. “After conducting an extensive search to ensure that the next board member would maintain our focus on business technology, we are thrilled to have John join the board,” said Michael R. Splinter, Chairman of Nasdaq. “With John’s proven track record of financial analysis and strategic planning at innovative technology-driven companies, I am confident he will have a positive impact on Nasdaq.” “I am very pleased to welcome John to our board and we look forward to his contributions,” said Adena Friedman, President and CEO, Nasdaq. “John’s insights will be instrumental as we move forward with our strategy and vision as a global leader in financial technology and client-centric organisation.” IFM editor@ifinancemag.com

GFG Alliance ropes in commodities expert Jean-Francois Lambert, a leading global trade finance specialist, becomes adviser to group firm Wyelands Capital

he GFG Alliance has received a further boost with the appointment of leading global banking figure Jean-Francois Lambert as strategic adviser to the metals, industrials, energy and resources group. Lambert, former Managing Director, Global Head of Commodity and Structured Trade Finance for the HSBC Group, will support the development of Wyelands Capital, the financial pillar of the GFG Alliance, as well as assisting with the continued

International Finance Oct - Dec 2017

expansion of the group’s global commodity trading, industrial and energy businesses, which have a combined annual turnover of $10 billion. The Group, which includes metals and industrial business Liberty House and sister energy and resources business SIMEC, is currently pursuing opportunities to acquire assets in several countries across the world, including USA, France, the Netherlands, India and Australia, among others. During a 34-year finance career Lambert has held a succession of

top-level international positions with the HSBC Group and, prior to that, with Credit Commercial de France. During his six years leading HSBC’s commodity and structured trade finance operation, he helped the bank become one of the world’s major financial players supporting commodity supply chains, with operations in 15 countries and a team of over 160 frontline specialists. IFM editor@ifinancemag.com

presents

banking & fintech

SPECIAL FOCUS

pg.58

The Klarna lesson for retail banks: find your â&#x20AC;&#x2DC;paper invoiceâ&#x20AC;&#x2122;

Technology is changing the branch experience

pg.52

Itâ&#x20AC;&#x2122;s vital we all understand the nature of money launderers and the impact they have on our lives. Itâ&#x20AC;&#x2122;s just as important for businesses to know how to defend against them â&#x20AC;&#x201C; and in the process play a role in protecting our societies from crime. To help businesses start the fight back, experts at BAE Systems have identified the motives and modus operandi of the criminals behind money laundering. www.baesystems.com/invisiblenetwork

Now, Banking comes with Fintech

intech is driving change in the banking sector in a way that nothing else has in several decades. Being the bastion of tradition and shackled by regulations, banks simply donâ&#x20AC;&#x2122;t have it in them to compete with the guerilla warfare of startups. The new entrepreneurs are tech-savvy, small and nimble, shun bureaucracy and often offer ways to get around archaic rules. Basically, they try to make life simple whereas banks are seen as monsters that we have to deal with for the sake of our hard-earned money. So, startups actually had it easy. All they had to do was come up with a product. Just about any product would do

because banks have simply not bothered to innovate, or even look at what is happening outside the stone walls of their offices. No wonder we have a deluge of startups and apps offering so many products and services that now we need a book the size of the Oxford English dictionary to list all of them. That may be exaggerating a bit, but the bottom line is that banks had it coming. Being unused to swift changes, banks have been slow to respond. That is why they are now

facing PSD2, which is expected to change the character and business model of banks. Our special section on Banking & Fintech will take you through some of these developments and the changes that seem imminent. We say some because the sheer volume of changes taking place is too much to capture in one issue of a magazine. This volume is an outcome of the internet, which has empowered smart people. In the 20th century, most of the innovation came from either the US, Europe or Japan. Today, with an internet connection, any teen in any part of the world could be coming up with the next big thing in fintech. Without further ado, we welcome you to the new world of Banking & Fintech.

Oct - Dec 2017 International Finance

banking & fintech index October - December 2017

Volume IV Issue 1

58 62 66

Daniel Döderlein

The Klarna lesson for retail banks: find your ‘paper invoice’

Frans Labuschagne

Be ready before PSD2 is upon you 5 fintechs to watch for

pg.40

‘There will be two major trends worth looking out for’

Norris Koppel

The fee in a free current account

Technology is changing the branch experience

Banks owe no duty of care to customers

International Finance Oct - Dec 2017

pg.48

Spike in interest in biometrics

INTERVIEW INTERVIEW

‘There will be two major trends worth looking out for’ Interview with Dr Nelson Holzner, CEO of AEVI, which offers SmartPOS devices and payment solutions Rahil Shaikh Miya

International Finance Oct - Dec 2017

INTERVIEW

Dr Nelson Holzner, CEO, AEVI

Oct - Dec 2017 International Finance

INTERVIEW INTERVIEW

intech is ushering large-scale changes in the world of banking and business. In most cases, it is about apps that reduce the bottlenecks and facilitate business. One of the points where these apps interact with the customer is the POS terminal. In Europe,

In the last 30 years, credit card terminals have become ubiquitous. Visa and Mastercard became the default payment gateways around the world. Now, fintech companies are introducing new payment systems. But the problem is that in every country there is a different app to download and a different set of regulations to comply with for the app developer. What is your experience so far on this count? We want to provide choice of the best devices in the market, combined with the best high-quality apps, instead of locking banks, acquirers,

International Finance Oct - Dec 2017

one of the most established companies in POS terminals is AEVI. The German-based fintech company provides an open B2B marketplace for business apps, SmartPOS devices and payment solutions. International Finance spoke to Dr Nelson Holzner about the changes he is witnessing.

ISOs and VARs into one single device or system. Thatâ&#x20AC;&#x2122;s why we have created an open solution, by connecting not just our own hardware (Albert) on to our Marketplace, but also 3rd party devices through the AEVI-Enablement process. It gives banks the chance to pick and choose from a wide array of high quality B2B apps, and AEVIenabled devices to build tailor-made solutions that enrich the payment experience for their specific merchant verticals. The introduction of B2B apps at the Point of Sale is yet another innovation that requires a heightened level of security scrutiny not previously necessary for legacy POS systems.

With apps now being deployed directly on the payment terminal, they all need to be checked to ensure that they are as secure as the payment devices on which they operate. Therefore, a comprehensive vetting process is deployed to check that the apps are not only fit for usability, but are also secure. Multiple regulations and solutions in every country have created a complex environment. Our transaction service removes this complexity for banks by leveraging a centralised payment platform that allows merchants to accept and process cashless payment transactions made through diverse payment terminals (multi-vendor)

INTERVIEW

and from different countries and currencies. We route transaction data through a single gateway, making it more accessible while providing our customers with a comprehensive suite of cloud-based back office reporting tools. Why did you opt for the open, collaborative payments ecosystem? What are the advantages? The open ecosystem we have created is the real USP of our solution, as it is enables our customers to connect to any device and choose the payment services that suit their needs. Being open means we can connect multiple devices and applications to the ecosystem, making it a truly unique proposition for our merchant bank and acquirer customers to offer their merchants. This makes an open ecosystem the natural progression, as it will encourage app developers to make the marketplace more interesting for

merchants. I believe an open market construct is more beneficial than a closed loop construct, and far more attractive to developers of business-tobusiness apps. This will ultimately lead to great applications being developed that we probably donâ&#x20AC;&#x2122;t even know about yet. What is the role of AEVIâ&#x20AC;&#x2122;s app store, Global Marketplace, in your scheme of things? At its core, our Global Marketplace is there to provide our customers, the merchant banks and acquirers, with choice. This allows them to break free from the shackles of legacy payment systems and control their own destiny. The Global Marketplace already contains 70+ B2B apps supporting a variety of different merchant use cases, and enriching their checkout experience. I believe app content is key and this approach allows for leveraging a variety of different, tailored, merchant scenarios.

Our goal is to enable banks, acquirers, ISOs and VARs to create a unique merchant offering with a choice of hardware and app content for their preferred merchant verticals. All this leads to stronger bank-merchant relationships whilst at the same creating new app-led revenue streams. With a lot of innovation taking place in the payments sector, it is very difficult to tell what will succeed. What criteria should an investor or acquirer employ to pick up a company? The rate of innovation will mean that payments will continue to be a fragmented and complex sector. In terms of criteria for success in payments, I think scalability and monetisation are key. If a new payment solution doesnâ&#x20AC;&#x2122;t solve a real and sizable problem without a clear understanding of how to earn money, it will likely be very difficult to build a sustainable business out of it. Over time, I think there will be two major trends that will be worth

Oct - Dec 2017 International Finance

INTERVIEW INTERVIEW

The second big trend is very different, but just as important; enhancing the check-out experience through value-added apps and services that put a smile on the face of the consumer at the Point of Sale. This is the trend AEVI is shaping with our Marketplace of business apps and SmartPOS devices, and is one that is growing rapidly

looking out for. Firstly, payments will become invisible, and reach a point where you don’t even realise that you are paying. You use a service, like UBER for examples, and the payment is so seamlessly integrated that by the time you’ve left the car, the payment has been made and processed. So, it becomes less about payments and more about the service or purchase experience. Any company that is attempting to reduce the complexities involved in real-world payments, so that the experience starts to match the seamless experiences found in e-commerce, is certainly worth keeping an eye on. The second big trend is very different, but just as important; enhancing the check-out experience through value-added apps and services that put a smile on the face of the

consumer at the Point of Sale. This is the trend AEVI is shaping with our Marketplace of business apps and SmartPOS devices, and is one that is growing rapidly. App developers and Fintech start-ups are driving the innovation in this space, creating new and exciting services that are attractive to merchants and their customers. You sold your company BillPay to Klarna. And then joined AEVI. Do you now see Klarna as a competitor? Is it likely that in the future you will? We certainly don’t regard Klarna as a competitor as we operate in very different spaces at the moment, but it could end up being a very interesting partnership. It would be great to have a BillPay or Klarna type app on our Marketplace that would allow us to

bring their product offline and into the real world. So many businesses struggle to get to the Point of Sale in the real world and it is a tough job to push yourself there because it is so complex and fragmented. They often have old fashioned technology which makes it difficult, but now AEVI can make that a lot easier for online payment providers as we have created a great platform to roll out their products into the real world. Klarna has now got a banking licence. Does this change the equation for its competitors? Do you see other payment service providers following in the footsteps of Klarna? Payment and lending services have been regulated for quite some time. PayPal has had a banking licence for years and Klarna has been a banklike regulated institution before. Also, other players are beginning to see value in getting such licences for one reason or another. Other payments businesses go down the alternative route of cooperating with banks to be able to use their existing banking licences. As the regulation around licencing increases, so too will the number of licenced payment businesses. What is the role of e-wallets going forward? There are so many e-wallets around these days, so there is clearly customer demand and they appear to satisfy the customer’s needs. Given the rate

International Finance Oct - Dec 2017

INTERVIEW

of adoption, I would envisage that e-wallets will be around for quite some time. How will PSD2 change the landscape for AEVI and the payments industry? What is the size of the opportunity that PSD2 opens for the payment industry? Do you expect a spurt in startups to take advantage of this opportunity? The European markets are focused very much on PSD2 right now. Most people are worried about what they must provide in the near term to comply with the directive before it goes live. The more traditional players arenâ&#x20AC;&#x2122;t embracing it fully; they see it as more of a hindrance with the additional levels of complexity, and the fact they will be forced to open their systems. From an entrepreneurial stand point, however, we see it as a fantastic business opportunity especially for new companies who, through the help of PSD2, will be able to get access to very interesting new data. But still there are many questions surrounding it, such as what access do I get? What does access mean? When do I get it? Will I have to pay for it? We embrace the changes PSD2 will bring to the sector and believe that the clarity and opportunity provided by PSD2 are good for the market and our business. As a company fostering and living innovation every day, we see the

regulation as an opportunity rather than a threat. Why should banks share the data they have gathered over several decades with start-ups that are less than a decade old? PSD2 provides a framework which sets the rules and requirements for access to data. If the requirements for the data access are met by the recipient, then the access should be granted regardless of how long the recipient has been in business. Openness and collaboration will help the industry to innovate and to create new products and services for customers. So, access to data can also be a big opportunity for the banks as they partner with innovative Fintech start-ups to drive progress in the financial services sector. I believe that more and more banks will embrace these opportunities as a result of PSD2. Till the end of the first decade of this century, innovations were the reserve of the US, followed by Europe. But now, China is setting the pace in some sectors. Do you see the need to tap into talent beyond Europe? Which markets do you keep tabs on? We have a very strong foundation currently in Europe and Australia upon which to build. We have already seen great success in Australia with the Commonwealth Bank of Australia,

and on top of that, we announced several very promising partnerships in Europe last year. Over the next few years, we will enhance our global reach and expand our suite of solutions even further. Our current focus is on the North American payments sector, which we have identified as a growing market that will be very receptive to our solutions, and we already have some very exciting opportunities in the pipeline in that part of the world. The key mission for me is to build a fully blown company, with increased collaboration between our Marketplace business, built around B2B apps and services, and our strong payments business. This will create an even more interesting value proposition for our customers, whilst connecting all the dots to create a great team spirit and company culture. Once this has been achieved and we are established in our target regions, we can start exploring markets beyond Europe and North America. IFM editor@ifinancemag.com

Dr. Nelson Holzner is CEO of AEVI, a German-based Fintech company providing an open B2B marketplace for business apps, SmartPOS devices and payment solutions to banks and acquirers around the globe.

About Dr. Nelson Holzner Prior to joining AEVI as CEO, Dr. Nelson Holzner was the founder and CEO of BillPay, a leading provider of payment by invoice or instalments for e-commerce, which was acquired by Klarna in 2017. He started his career as a lawyer at an international law firm. He was Vice President at Cerberus Capital Management, an international investment firm. He is an active business angel in Fintech.

Oct - Dec 2017 International Finance

OPINION

Norris Koppel

The fee in a free current account 46

Banks should be transparent about the cost that a current account will incur from the very beginning

International Finance Oct - Dec 2017

OPINION: banking OPINION

uch of the FinTech innovation we have seen in recent years revolves around removing the unnecessary middleman and putting an end the opaque, and often misleading, fees that banks charge for their services. From international payment fees to costs associated with withdrawing cash abroad, the tide is now turning, and consumers are becoming much less willing to pay fees into a ‘black hole’, without understanding exactly what this cost will deliver for them. The problem with current accounts, however, is that traditional banks have long been advertised and promoted to them as ‘free’. How can you improve the value of something that costs nothing? The root of the problem When setting up a current account, customers are led to believe that this is a free service – that they will be able to store their money, receive payments, arrange direct debits and similar, all for no cost. This may be true at the point of opening an

account. However, with no credit or lending involved with this basic service, there isn’t a way for banks to make money here. It does, however, cost them to run the service, so they must find a way to make this up elsewhere. This is where banks introduce ‘hidden fees’, such as unarranged overdraft charges, extortionate money transfer fees, and heavy missed payment penalties – to name just a few examples. New research from moneyfacts found that a staggering 66% of financial service providers charge an unauthorised usage fee, and that the average cost of a so called ‘free’ bank account amounts to £147 year. Charges such as these often come as a nasty surprise to customers who had assumed that their ‘free’ current account would be just that. Not only that, but it forces people to spend money that they simply hadn’t accounted for, and in some cases, just don’t have. Reevaluating the fee structure The Financial Conduct Authority (FCA) has now

turned its attention to the issue of unarranged bank fees, saying that ‘fundamental changes’ must be made to the way in which unarranged overdraft fees are provided in particular. While this is a welcome step in the right direction, there are many other fees that need to be addressed and stamped out, in addition to these overdraft fees. Banks should start by being clear about the cost that a current account will incur from the very beginning. There is no harm in charging people for this – it would be naïve to think that it costs nothing to provide the service. We must see a change, however, in the way in which these costs are presented, and then charged to customers. Banks would be wise to take a leaf out the book of some of the most popular media tech companies, such as Netflix and Spotify. These businesses have a clear fee structure, built on a transparent and static monthly cost. There’s no reason that financial services shouldn’t follow this model. Current accounts should come with a small, clear monthly fee

that outlines exactly what services the customer receives for this outlay. Educating consumers Unfortunately, because the myth of free banking has existed for so long, financial service providers operating this model must explain why it is that they charge for the service, and banks (apparently) don’t. Of course they do, but in stealth mode, making up their profits from some of their most vulnerable customers. Free banking is not a reality – it costs a banking services provider to enable what they do. However, these fees needn’t be so high – and they certainly shouldn’t be systematically collected from the most vulnerable. It’s time for financial service providers to begin supporting customers to save and spend responsibly. Anything that adds to financial stress is a concern, particularly for those individuals who are unaware of the ways in which banks could potentially catch them out with hidden fees. If providers can begin to charge honestly and openly for their services, they can put customers back in control, allowing them to truly understand the service they are buying, and building trust and loyalty that will pay dividends for the bank in the long run. IFM editor@ifinancemag.com

Norris Koppel is Founder and CEO of Monese

Oct - Dec 2017 International Finance

Banking

Spike in interest

in biometrics International Finance Oct - Dec 2017

Banking

Awareness and confidence has increased; for many consumers, this technology is likely to serve as an attraction to financial services providers Thomas Bengs

he financial services sector is at serious risk of digital disruption. In fact, 61% of global financial services firms believe that their organisation will not exist by 2021, as a result. There are clearly threats from within the sector, as challenger banks and new start-ups take market share from longestablished incumbents. However, strikingly a fifth

of European consumers would also buy banking or insurance services from companies like Google, Facebook and Amazon. This highlights a critical shift for financial services: the changing demands of the modern consumer. Customers want banks and insurers to offer the latest technology, in services that not only enhance the security, speed and convenience of transactions, but also deliver an exciting

customer experience. And if their bank doesnâ&#x20AC;&#x2122;t offer those services, they will leave them for the provider that will. Biometrics sits exactly at this intersection of usefulness and excitement, and could be one of the most crucial tools for financial services firms looking to thrive in the face of digital disruption. The driver for demand Biometric technologies

have been with us for many years, but recently there has been a spike of interest amongst both banks and consumers. Earlier this year, MasterCard announced that it would be launching a payment card with a fingerprint reader, while Barclays has implemented voice biometrics in its call centres. In Brazil, Banco Bradesco is using Fujitsuâ&#x20AC;&#x2122;s palm vein reading technology to identify users of cash machines, with the

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Thomas Bengs is Director & Head of Biometrics at Fujitsu in EMEIA

Oct - Dec 2017 International Finance

Banking

aim of eliminating ATM fraud. All of this is being driven in large part by growing consumer demand. In fact, 93% of UK consumers would choose biometrics over passwords. So what is behind this surge in interest? First of all, concerns about security are at an all-time high. In both customer and business circles, there is growing awareness of the threat of fraud and identity theft, as well as the weaknesses of security measures like PIN numbers and passwords. Robust security measures are a must – and a clear attraction for consumers. Added to that is the fact that over recent years the cost, speed and accuracy of biometrics have all improved, making the mass

International Finance Oct - Dec 2017

roll out of these solutions more feasible. And now that almost every consumer has a smartphone, many of the practical challenges of scaling a biometric security scheme have been overcome. However, perhaps most important of all is the rise of the bold and progressive consumer. People are now very used to digital services, and the convenience and enjoyment that they offer, in almost all areas of their personal lives. They now expect – and demand – the same up-to-date technology from their banks. In fact, 37% of consumers say that they would leave their bank if they didn’t provide the latest technologies. Biometrics represent just that kind of bold, exciting new service – enabling users to physically ‘experience’

security in ways that they have often seen in films. Consumer familiarity with biometrics has grown, as many mobile phone users can unlock their devices with either a fingerprint or an iris scan. A tablet has also been released which can be unlocked with palm vein authentication, which identifies users by the unique patterns of veins in their hands. Awareness and confidence in biometrics has increased; now for many consumers, this technology is likely to serve as an attraction to financial services providers. The potential in banking Biometrics offer significant advantages for financial services firms, in the level of security they offer. Biometric-based security services deepen and

strengthen bank defences by providing an unequivocal link to an individual, event or transaction. Biometric signatures are very hard to forge; palm vein authentication, for example, maps each person’s unique pattern of blood vessels in the hand, which cannot easily be replicated. Upcoming regulation will make biometrics even more attractive. The implementation of PSD2 in the European Union will require ‘strong customer authentication’ methods to be deployed whenever an electronic payment transaction is initiated. The legislation defines this as two or more of three elements – knowledge (for example, a PIN); possession (such as a token); and inheritance (something the user is,

Banking

In fact, 37% of consumers say that they would leave their bank if they didn’t provide the latest technologies. Biometrics represent just that kind of bold, exciting new service – enabling users to physically ‘experience’ security in ways that they have often seen in film

such as biometric data). In practice, this means multifactor authentication, and is likely to result in more and more banks deploying the strongest authentication measure available – biometrics. For consumers, biometrics offer more than simply peace of mind. Transactions and log-on processes can be conducted more quickly, without the

need for security questions or passwords. Biometric solutions could also be used in branches to replace photographic identity documents to support large cash withdrawals. Biometrics can also provide an audit trail for transactions. Biometrics then can benefit both consumers and banks, in many ways.

The new age of biometrics Today’s digitally progressive consumers are more demanding than ever. In banking, customers want services that are convenient and effective, utilising the latest technologies. Biometrics can be used to offer a new level of customer experience, allowing consumers to physically engage with their security

systems while improving safety and speed. The use of biometrics amongst European banks is only set to grow. Those who can offer the technology quickly will secure their place in the digital future. Those who are slow to act may very well find themselves at the wrong end of digital disruption in four years’ time. Banks must look to be as bold as the customers they now serve. IFM editor@ifinancemag.com

Thomas Bengs is Director & Head of Biometrics at Fujitsu in EMEIA

Oct - Dec 2017 International Finance

Banking

Technology is changing the branch experience Mark Aldred

International Finance Oct - Dec 2017

Banking

New digital branches have numerous benefits for banks, with data analytics technology providing more information about their customers

e are starting to see a growing number of banks opt to close branches, often citing pressure to reduce operational costs. Advancements in technology as well as customer behaviour have also led some industry experts to suggest that the

Mark Aldred

age of the bank branch is over, and that we are entering an age of digitalonly banking. This does not follow, however, as confirmed by a new report from Boston Consulting Group, which has urged banks to keep their branches alive. Physical branches remain the cornerstone of sales and customer advice

and are central to banks’ relationships with their customers. Studies clearly show that the branch channel remains very important to the public (62% of British adults prefer face-to-face service in comparison to internet banking on 28%). The recent BCG report examines digital transformation in the

banking sector and states that the blending of digital and personal interactions will be key in creating a more responsive and costeffective branch. However, as banks increasingly digitalise their services, it’s essential that they retain the human touch. Customers want the convenience of online banking, without losing the personal service they get when they visit a branch. This has led to the emergence of a new breed of branch. The hybrid branch Lloyds is one of several banks that has announced adoption of this approach, which is characterised by smaller branches that are equipped with much more powerful technology to take them into the future. This reduced physical presence and increased adoption of technology will not hinder the customer experience – indeed, if banks take the correct technological approach, it will be dramatically improved. This merging of digital and personal service is a strategy that European banks have embraced well-ahead of their British counterparts. They benefit from being able to offer customers a wider range of services, using selfservice technology such as ATMs, which customers

Oct - Dec 2017 International Finance

Banking

are already familiar with. The use of kiosks can also be incredibly useful, for customers to carry out routine transactions without needing to queue to see a member of the staff. This means bank staff have their time freed up to advise customers on more complex or unusual transactions. Some Italian banks, like Cariparma (part of the Credit Agricole Group), have used the space freed up by technology to create community areas, designed to provide support to local businesses and community groups. There is an opportunity for banks to be creative here, by finding novel ways of using the new-found space to forge long-lasting relationships with their customers and communities to encourage loyalty. Some use the space to create areas with

International Finance Oct - Dec 2017

sofas for customers, with access to tablets featuring video tutorials and demos to show them how to use certain banking products. Others partner with local businesses, such as estate agents, and bring the services which customers need together in one place. To ensure that onboarding more technology truly benefits customers, the service must be consistent and streamlined across all banking channels. Making the hybrid bank experience a success depends on striking the right balance between digital and personal service. This is a delicate challenge, and one that technology can play an instrumental role in, by improving the customer journey through greater personalisation and by smoothly integrating

solutions across a range of different channels. Self-service Todayâ&#x20AC;&#x2122;s ATM technology in particular can transform dull bank branches into highly-automated environments, where customer service is the number one priority and customers have quick access to the services they need. These new digital branches also have numerous benefits for banks, with data analytics technology providing them with more information about their customers. This new wealth of information will enable them to understand their customers better, which can help improve customer loyalty by offering new services to the right customers at the right time. Adoption of new technology will also create

more opportunities for staff to connect with customers. For example, when customers are using an ATM to carry out a transaction, bank staff can be immediately alerted via their tablet about any specific assistance or intervention the customer may need, as well as new products and services they may be interested in. Customers should never be taken for granted, so the bank should make it a priority not to miss any opportunity to interact with them in a branch. Freeing up more space with the adoption of new technologies gives banks the opportunity to explore how they can meet needs that they have not previously been addressing. The client should be at the centre of the branch to guarantee a consistent and personal

Today’s ATM technology in particular can transform dull bank branches into highly-automated environments, where customer service is the number one priority and customers have quick access to the services they need

customer experience. Everything must be done by the bank to guarantee a service that is secure, personalised and efficient across all channels. Challenges ahead Of course, adopting new technology and rethinking how the space is used within a branch poses technological and marketing challenges for banks – can your existing self-service estate keep up to date with service

demands? Is your solution scalable enough to adapt to the new environment? Which software and hardware will you deploy to make sure that your branch staff is empowered to help customers? What is really needed is a mind-set change, from the current position of reducing operating cost, to a more optimistic outlook of expanding revenuegenerating consumer services. Done effectively,

reduced operating costs will follow. The hybrid branch is on the brink of some very exciting developments, as technology looks to become a central component of the new bank branch – with ATMs, artificial intelligence, data analytics and chatbots poised to bring an even better branch experience and free up space for alternative services – but without the right infrastructure in

place banks, branches and their customers could risk missing out. One of the critical challenges for banks is to make sure that they strike the right a balance between customer autonomy and personalised support and advice. This hybrid approach to bank branches should result in a positive benefit to relationships with customers, who should see real benefit from the introduction of new technology. IFM editor@ifinancemag.com

Mark Aldred is a banking technology expert at Auriga

Oct - Dec 2017 International Finance

Banking

Banks owe no duty of care to customers Judgment was handed down by the Court of Appeal in London on three joined appeals Abdulali Jiwaji

with the Financial Conduct Authority (FCA). The judgment, passed on July 24, 2017, is significant because it was a marked departure from Suremime Ltd v Barclays Bank Plc — where permission was granted for pleadings to be amended to include a claim for breach of duty — and clarifies the uncertainty following conflicting first instance judgments. It confirms the courts’

Abdulali Jiwaji is a Partner at Signature Litigation

he Court of Appeal in London recently handed down judgment on three joined appeals, CGL Group v RBS, Bartels v Barclays and WW Property v NatWest. The appeal related to whether the banks owed a duty of care to their customers in the framework of a review by the banks of their sales of interest rate hedging products, under a settlement agreement

International Finance Oct - Dec 2017

Nikoletta Beneki

reluctance to recognise private rights of action against a regulatory and statutory framework where the FCA holds a central role. The background of the case stretches back to when the FCA agreed with various banks in June 2012 that they would review their sales of interest rate hedging products to “nonsophisticated customers”. They also agreed that they would provide appropriate redress in cases of mis-selling. The process would be verified by an independent reviewer appointed under section 166 of FSMA. The agreement also asserted that no person, except the banks and the FCA, would have any rights to enforce any term of the agreement. In 2013, the Appellants received notifications from their banks informing them that they were eligible to take part in the review,

which they did. They were made redress offers but then brought proceedings against the banks for mis-selling. They also applied to amend their pleadings to include a claim in respect of the banks’ conduct in relation to the review. The misselling claims failed and the applications to amend were dismissed. Permission to appeal was granted on the common issue of whether the review conducted by the banks gave rise to a duty of care owed to the customers to carry out those reviews with reasonable care and skill. The Court of Appeal referred to three tests to be used to determine whether a duty of care has arisen, including: 1. Whether the defendant assumed responsibility to the claimant. 2. The threefold test in Caparo Industries plc v Dickman [1990] 2 AC 6057 of whether: (a) Loss was a predictable

Banking

test, the Court concluded that it was not “fair, just and reasonable” to impose a duty of care on the banks. Factors that led to this conclusion were the fact that: 1. The supposed infringements of duty were a restatement of the original misselling claims, which however had been time-barred. 2. There was no “lacuna” in law, which a common-law duty of care needed to rectify, since it was the FCA which was authorised to carry out inquiries and to decide whether to bring enforcement proceedings when a review was not conducted properly 3. A duty of care could put the banks in a position of conflict with their customers. Also, the incremental test was said to be of little value by itself and it was

Nikoletta Beneki is an Associate at Signature Litigation

result of the defendant’s actions/inactions. (b) The relationship of the parties was adequately close. (c) It would be fair, just, and reasonable to enforce a duty of care on the defendant towards the claimant. 3. The incremental test. The Court found the assumption of responsibility inappropriate. First, the regulatory context of the cases went against the imposition of a duty of care. This was a highlyregulated situation prescribed by statute within which the FCA had a wide range of powers. Second, the communications between the banks and the Appellants about the review did not suggest that the banks assumed voluntarily responsibility towards the customers; instead they were simply fulfilling their regulatory obligations to the FCA in carrying out a review that had been effectively imposed on them. Turning to the threefold

not the focus of the Appellants’ case. It was held that no duty of care was owed to the bank’s customers and the appeals were dismissed. This underlines the need for both the FCA and the independent reviewer to be proactive and rigorous in their approach to redress schemes, as the scope for civil remedies may be limited. The role of the independent reviewer will be further scrutinised by the courts considering the

appeal of the decision in R (Holmcroft Properties Limited -v- KPMG LLP & Ors) (where the court found that a skilled person’s actions were not amenable to judicial review), which is due to be heard in December 2017. IFM editor@ifinancemag.com

Abdulali Jiwaji is a Partner at Signature Litigation, and has over 15 years of experience of litigation, arbitration and contentious regulatory matters, with particular expertise in handling disputes relating to financial products.

Nikoletta Beneki is an Associate at Signature Litigation, with experience in commercial litigation and international arbitration in a range of sectors, including general commercial, banking, IT and shipping.

Oct - Dec 2017 International Finance

OPINION: Fintech OPINION

OPINION

Daniel Döderlein

The Klarna lesson for retail banks: find your ‘paper invoice’ The likes of Visa are buying stakes in fintech solution providers to enable them to go direct to market while banks risk being cut off from both sides

International Finance Oct - Dec 2017

OPINION: Fintech OPINION

Oct - Dec 2017 International Finance

OPINION: Fintech OPINION

larna is an e-commerce company whose retail payments solution allows customers to ‘buy now, pay later’. Their model cuts out the cumbersome card payment process for those purchasing goods online from sites who use the Klarna solution. The testimonials of their big clients, such as wish. com, Arcadia and Hype, say that allowing customers an invoice functionality has increased their sales by an impressive 40 per cent. This almost guaranteed increase in sales means these customers are willing to (and do) pay Klarna a higher margin (than they pay card companies) for every sale. Customer experience and the resulting increased conversion for businesses is a powerful thing. On June 19 came the announcement that the Sweden-based company had been granted a full

International Finance Oct - Dec 2017

banking licence. They are the largest European fintech company to get this licence. Their chief executive and founder, Sebastian Siemiatkowski, openly said of the announcement that he wanted Klarna to play a large part in disrupting and reshaping the retail banking industry. At the time, I came out and said this was the worst possible news for retail banks and card companies, alike. I even told Business Insider that I believed this meant Klarna was on track to becoming the next Visa. This is because with more than 60 million customers and, post PSD2, direct access to all European bank accounts, they are certainly well-positioned to become a favoured credit provider. Not just for bigger ticket items, but also for everyday household goods, that are increasingly being purchased online. The difference between Klarna and a big card

company like Visa is, of course, the fact that money is offered to people as a direct line of credit. The bank who ordinarily provided this service behind a credit card is no longer relevant in more and more situations. So as cards become more and more irrelevant and the strong relationship between banks and consumers is challenged, distribution of cards, and thus Visa’s products, will drop. Was it something I said? A week after this original announcement, there came another announcement. Visa had now taken an undisclosed stake in the payments technology company. Despite Klarna’s chief commercial officer, Michael Rouse, admitting to being “somewhat enemies in the past in terms of competing”, the deal confirms that Visa is (rightly) looking to strengthen their alternative

payments technology. In fact, a quick Google of Visa (or Mastercard, etc.) + partnership sees the most recent news results return a string of similar announcements about partnerships with various fintechs who will help them to safeguard their future. That’s all good for card companies, but what about banks? For almost two years, retail banks in Europe have been (or should have been) conscious of the second payments services directive (PSD2). Its most pertinent article directing that they must be able to comply, via API access, with requests from licensed third-parties to access customer account information. The European Commission introduced the new directive in an attempt to create a safer payments system and foster innovation in an industry that has remained relatively

OPINION: Fintech OPINION

personal banking will be easier and there will be a great deal more choice — not only from the major banks but from tech companies who people might previously have just thought of as a social media site or a search engine.

dormant in this area for some time. Those most affected by the directive — that is, European retail banks — have, for the most part, missed the innovation memo. The exception to this is Scandinavia, where retail banks enjoy the highest percentage of bank-issued mobile payments users in the world, per capita. Right now, banks are mainly relying on partnerships or trying to build their own NFCbased wallets (which are all doomed). One of the biggest bank/tech company partnerships most are familiar with is the partnership many banks have with Apple. But what happens when Apple can drop the required partnerships once PSD2 gives them direct access to their customers’ bank accounts? The same question applies to similar situations with Facebook and Google. Further, the most popular mobile wallet solutions, outside of the EU,

are all owned and operated by non-banks. Think Venmo in the US, and Alipay and WeChat Pay in China. So whilst Visa is in a tough situation, compared to many retail banks, it’s nothing They (the likes of Visa, for example) are busy buying up stakes in solutions like Klarna to enable them to go direct to market with Visabranded solutions. Banks, however, risk being cut off from both sides. Their allies — the card companies — will likely join their growing list of competitors. The likes of Visa are in a position to buy companies or stakes in companies to help them pivot their strategy and stay relevant. I predict that Visa will go direct to consumers as banks struggle to stay relevant and thus become negligible distribution channels for Visa, compared to Klarna, for example. Klarna is, in fact, a bank for all intents and purposes, but a new breed. Traditional banks are then left in the

middle with competition from all angles. Why aren’t banks doing anything? Right now, banks are still extremely profitable. It’s hard to change when you’re riding the (albeit final) waves of success. Another reason for a lack of action amongst many is the use of extremely old infrastructure and legacy systems. However, banks mustn’t let legacy systems overshadow their need to get ready for PSD2 and the shift toward a new way of banking and personal finance management any more than they should let current success hamper a shift to prevent disruption. The entire point of PSD2 is: change. What has worked, in many ways, for the preceding decades isn’t cutting it any more. Banks who come out the other end of PSD2 — in say, a year or two — will look very different from the traditional retail banks of today. For consumers,

So, what can banks do now? In a nutshell? Accept that change is coming and that it will have a massive impact. It’s this acceptance that then will lead to the deep disruption that is needed to weather the PSD2 storm. The big disruption case studies we all know — the likes of Kodak or Blockbuster — had plenty of time to change their core business. This is especially evident in hindsight. I am certain that the same will be said of the many retail banks who fail to do what it takes to stay relevant. So, my advice is: be bold, take risks and create customer-centric solutions — like Klarna did. While banks pushed cards, they saw the need for a simple yet powerful solution — by sending out invoices, on paper! There are millions of problems waiting to be solved. To stay relevant, banks must find their own paper invoice, fast. IFM editor@ifinancemag.com

Daniel Döderlein, CEO and founder of Auka

Oct - Dec 2017 International Finance

Be ready before PSD2 is upon you Payment institutions that act now to deploy secure authentication methods that are future-proof will put themselves in good stead to manage the next couple of years

OPINION: Fintech OPINION

OPINION

Frans Labuschagne

he payment industry is undergoing phenomenal change. Thousands of fintech and insuretech companies have attracted the interest of the global venture capital community. More established financial service providers have, meanwhile, been forced to reassess their business models in order to remain relevant as well as compliant with ever more stringent regulations designed to protect customer data and prevent fraud. With these top-down directives continually shaping the fast-paced payments industry, it can sometimes

be difficult to keep up. One of the latest such directives is PSD2, which constitutes a major update of the EU’s first Directive on Payment Services from 2007. The regulatory technical specifications (RTS) for the implementation of PSD2 are still under review, and meeting the January 2018 deadline for transposing PSD2 into national legislations is bound to be a challenge for governments. The earliest starting point for the enforcement of PSD2 by law, namely September 2018, is also barely more than a year away. Payment institutions that act now to deploy

secure authentication methods that are future-proof will put themselves in good stead to manage the next couple of years. A breakdown of PSD2 The original Payment Services Directive (PSD) established the legal foundation for creating an EU single market for payments. The objective was to make cross-border payments as easy, efficient and secure as ‘national’ payments within a member state. This objective was largely achieved. In 2013, the European Commission realised it would need to revise

Oct - Dec 2017 International Finance

OPINION: Fintech OPINION

the regulations to cater for new mechanisms of payment as a result of technological advancements. The revised regulations now have the following core objectives: • To contribute to a more integrated and efficient European payments market • To level the playing field for payment service providers (including new players) • To promote transparency and competition in pricing of financial services • To make payments safer and more secure How PSD2 affects customer interactions The European regulators have gone to great pains to ensure that the consumer will be the ultimate winner. PSD2 fundamentally changes both how consumers access their financial data and how they transact, and with whom. Currently, consumers holding

International Finance Oct - Dec 2017

accounts at multiple institutions need to log into each account via that institution’s proprietary digital interface, whether this be via mobile app or online portal. But to promote competition in financial services and improve ease of use for the customer, PSD2 makes provision for data aggregators, which allow for a single view of accounts at multiple providers (insurance companies, payments services, credit card issuers, mortgage lenders). All account information, all financial products, and all transactions will be viewed on a single dashboard. To make this possible, PSD2 will compel banks and other financial service providers to open their data and payment initiation capabilities to third parties via an API or enterprise service bus. The term account information service provider (AISP) is applied to third parties that aggregate account information for consumers. The consequences While these ideals are laudable, any new regulations, and particularly

ones as far-reaching as these, always come with unintended consequences. The legal, technical and operational challenges (and opportunities) of PSD2 are landing on board meeting agendas across Europe and beyond. From a technical standpoint, a key requirement of PSD2 will be the focus on security and authentication. All payment service providers (PSPs) will be required to apply strong customer authentication (SCA) each time a payer initiates an electronic payment transaction. This means that, except under specific exceptions, all PSPs will be required to use SCA whenever a payer: • Accesses a payment account online • Initiates an electronic payment transaction • Carries out any action through a remote channel which may imply a risk of payment fraud or other abuse Of note to banks is that the cost of designing, implementing, and auditing the effectiveness of the SCA procedure

OPINION: Fintech OPINION

Market analysts already believe that by 2020, 80% of all transactions using mobile phones as a second factor of authentication will be based on out-of-band push – even though the figure is currently only 15%

will fall to the account servicing payment service providers (ASPSPs), i.e. the banks themselves. Meanwhile, payment initiation service providers (PISPs) and AISPs must ensure that SCA is applied appropriately, although they do have the right to rely on the authentication procedures provided by banks. This further reinforces the pressure on banks to be compliant. PSD2 authentication requirements The latest RTS stipulate that a procedure can be considered to comply with the requirement of strong authentication when at least two of the following elements are implemented: •

•

Knowledge – something only the user knows (e.g. password, PIN, or identification number) Ownership – something the

user possesses (e.g. token, smart card, mobile phone) • Inherence – something the user is (e.g. a computer-readable biometric characteristic) In addition, the elements selected must be mutually independent, i.e. the breach of one should not compromise the other. At least one of the elements should also be non-reusable and non-replicable (except for inherence), and incapable of being stolen via the Internet. A future-proof strategy If that “something the user possesses” can be an object that is conveniently to hand, that we carry with us as a matter of course, so much the better. Enter the ubiquitous mobile phone. If you can uniquely identify the customer-held mobile device with a

digital certificate, and can ensure that only the owner can access sensitive communications to that device, you have the most reliable authentication factor – possession – covered, with zero input needed from your customer. The second factor could then just be a quick fingerprint scan or simple PIN. This achieves not only the strong security specified in PSD2, but also a much more pleasant user experience. Market analysts already believe that by 2020, 80% of all transactions using mobile phones as a second factor of authentication will be based on out-ofband push – even though the figure is currently only 15%. It is true – security and userfriendliness do not often go hand in hand. But for banks and payments providers, choosing an authentication solution that leverages the convenient mobile phone while also adhering to the strictest standards in security will be a safe bet for years to come. IFM editor@ifinancemag.com

Frans Labuschagne is UK & Ireland country manager at Entersekt

Oct - Dec 2017 International Finance

fintech

FINTECHS TO WATCH FOR

International Finance Oct - Dec 2017

fintech

Since London Fintech Week launched in 2013, London has steadily become a hotbed for startups within the sector. Their presence has only been made more abundant through the introduction of accelerator programmes and communities such as Startupbootcamp, Fintech Innovation Lab and Rise London.

A look at five promising fintechs. FIDOR BANK

Fidor Bank initially launched in Germany in 2009, followed by the UK in 2015, and since has become one of the main challenger banks that is changing the digital banking landscape with their unique online community banking model, which focuses on putting the customer at the heart of all their product offerings. Tech innovations and changing the way consumers bank is at the center of everything Fidor undertakes and most recently Fidor Bank launched a digital fintech marketplace to enable customers to find all products they need right from their banking application. Customers can ‘shop’ for trusted fintech and InsurTech apps, and fintechs such as Seedrs and Nutmeg, which have already been integrated onto the platform.

CURVE

Curve is an easy to use application that saves the space in your wallet by bringing all your bank cards together to allow you to see, spend and save from one place. It has received backing from Santander InnoVentures and Oxford Capital.

YOYO WALLET Yoyo Wallet is a mobile wallet application that helps to bridge the relationship between retailers and their customers by integrating loyalty programs with fast, secure and easy payments. Since launching in London in 2013, Yoyo Wallet has grown significantly, partnering with brands such as Planet Organic and Caffe Nero. More recently, they announced the closing of a round of investment at a staggering £12 million. So we can only expect bigger and better things from Yoyo in the future!

FREEAGENT

FreeAgent is a multi-award winning cloud accounting software designed to meet the needs of contractors, freelancers, micro businesses and the accountants they work with. FreeAgent helps over 50,000 customers manage and maintain their business accounts, track time, log their expenses, create and send invoices and forecast their tax bills. In 2016 alone, they facilitated the processing of more than 3.15 million invoices worth more than £4.5 billion pounds. With their IPO at the close of last year (valued at £34.1 million on their debut) and recent partnership with RBS and Natwest at the beginning of 2017, there’s no doubt some exciting movements for them on the horizon too.

BACKBASE

Backbase are the creators of the Backbase Omni-Channel Banking Platform, a state-of-the-art digital banking software solution that helps banks and non-financial institutions in their digital banking transformation. The company is well-known for being a leader in this field, having worked with over 70+ banks across the world, and receiving awards from numerous organisations for their continuous contribution to banking innovation for their Everyday Banking, 60 seconds onboarding, as well as being recognised by industry analysts as one of the main leaders in engagement platforms. IFM editor@ifinancemag.com

Oct - Dec 2017 International Finance

Banking

Awards 2017

Catch all the action at Jumeirah Emirates Towers Dubai, UAE 18th January 2018

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Appointments

RISK IDENT sets up US office in Cambridge Innovation Center Leading European machine learning expert appoints Dustin Clinard as Managing Direct for US operations

ISK IDENT, a leading provider of fraud prevention software supported by machine learning, is expanding its international operations and opening its new US headquarters at the Cambridge Innovation Center (CIC) near Boston, Massachusetts. The center is home to more startups than anywhere else worldwide, while its proximity to customers, talent, and investors makes

this location ideal for RISK IDENT’s future developments. For RISK IDENT, the US headquarters represents a further step in its globalisation strategy. The new subsidiary gives the company access to the large US ecommerce market, where it will specialize in supporting large enterprise customers to identify and prevent online fraud, including payment fraud, account takeovers, and identity theft. RISK IDENT has appointed Dustin Clinard as the Managing Director of RISK IDENT Inc. (USA) and added substantial funding to set up the US team. “We are delighted to have attracted Dustin Clinard as Managing Director for our US operations. With the organisational and personnel setup, our goal is to strengthen our position within the US and to further support our enterprise customers in protecting their businesses from fraud with our innovative and efficient fraud prevention products,” says Roberto Valerio, CEO of RISK IDENT. “I’m very excited about this new

role. RISK IDENT is a powerful company with an experienced team in fraud prevention, machine learning and data analytics,” says Dustin Clinard. “All retailers that process online payments are facing an increasing fraud threat in many respects, and our US expansion allows us to serve the needs of our existing clients as well as strengthen the base of clients operating both internationally and domestically.” RISK IDENT has successfully become one of the leading fraud prevention software providers, on-boarding numerous enterprise customers. The company’s products regularly outperform existing solutions by a considerable margin. RISK IDENT’s parent company, Otto Group International, is Europe’s second largest eCommerce company and maintains strong ties to the MIT Media Lab. IFM editor@ifinancemag.com

Oct - Dec 2017 International Finance

INTERVIEW INTERVIEW Business Leaders

â&#x20AC;&#x2DC;We are in the business of creating opportunityâ&#x20AC;&#x2122; Interview with Opportunity International CEO Atul Tandon and Opportunity Bank Serbia CEO Vladimir Vukotic

n July 2017, a global benchmark was set by Opportunity Bank Serbia, after receiving RSD 615 million (approximately $6 million) in funding from the European Fund for Southeast Europe (EFSE).

What is the significance of receiving long-term funding in domestic currency from an international financial institution (IFI)? As you know, markets are always subject to volatility, which means that funding often varies when tied to foreign currency. Receiving long-term funding in domestic currency unhinges the funding from this dependency and secures the amount that our operation will receive. The benefit of this security is that Opportunity Bank Serbia can forward-plan, based on a known value of commitment. It will allow our organisation to continue to grow, while preserving debt to deposit ratios at an acceptable level and enable us to operate with resiliency when faced with potential shocks and movements in

International Finance Oct - Dec 2017

In a three-party agreement with the European Bank for Reconstruction and Development (EBRD), this was the first time that a Serbian bank received long-term funding in domestic currency from an international

the marketplace in future. Today, 68% of OBS clients reside in villages and rural areas of Serbia. As a result, their preference is to receive loans in domestic currency, so as to avoid shifting exchange rates and uncertainty. By receiving our funding in domestically denominated notes, we can enable clients to take out longer-term loans sustainably. In fact, this domestic funding has enabled Opportunity Bank Serbia to increase the share of its dinar loan portfolio, which is now close to 50%. What are the other significant features of this funding? Opportunity Bank Serbia focuses on providing micro, rural, agro, and micro and small enterprise (MSME) loans to those in Serbia whose access to financial services is

financial institution. International Finance asked Opportunity International CEO Atul Tandon and Opportunity Bank Serbia CEO Vladimir Vukotic about the significance of this funding.

difficult. For the past 15 months, Opportunity Bank Serbia has been leading this tripartite agreement between the European Fund for Southeast Europe (EFSA) and European Bank for Reconstruction and Development (EBRD). It is a milestone for us, therefore, to have achieved such a partnership among three parties, and it is, in fact, the first deal of its kind in Serbia to date. This is perhaps the most significant feature of the funding, and we look forward to a continued relationship with the EFSE and EBRD in the future. How does Opportunity Bank Serbia plan to use the RSD 615 million ($6 million) received from the EFSE? Since Opportunity Bank Serbia was founded in 2002, we have disbursed

over $500 million through 145,000 loans to micro entrepreneurs and small rural farmers, enabling them to pursue their entrepreneurial goals and better their living conditions. This long term funding in domestic currency will enable us to stay in line with our mission by making increased and longer term funding available for loans and reaching a larger potential client base. In addition, this allocation will allow us to give our clients greater access to financial services, technology and connections so that they can grow their businesses, their income and provide for their families. OBS plans on better leveraging its network of 8 branches and 18 smaller outlets, which cover 80 percent of the country, to serve less populated

Atul Tandon, CEO, Opportunity International

Oct - Dec 2017 International Finance

Vladimir Vukotic, CEO, Opportunity Bank Serbia

International Finance Oct - Dec 2017

BusinessINTERVIEW Leaders

areas and ensure strong relationships with its clients. We will increase our outreach to clients in rural areas across the country, and provide better access and customer service to those presently receiving financial services, such as loans. At Opportunity Bank Serbia, what is the definition of poverty? By adopting SPM (Social Performance Management) as one of our main goals back in 2013 under the guidance of Opportunity International, Opportunity Bank Serbia has developed very precise methodology for measuring share of poorer loan clients, based on the Statistical Office of the Republic of Serbia’s data. At Opportunity Bank Serbia, we focus on Very Poor, Poor and Low Income clients and our goal is to have at least 40% of our loan clients belonging to these three incomebased categories. These individuals do not have access to financial products,

especially to lending for their micro enterprises and for this reason they are unable to participate in the greater financial world – as they are excluded from the marketplace and unable to turn possibilities into longterm opportunities to better their lives. Governed more broadly by Opportunity International (http:// Opportunity.org), our organisation seeks to eliminate extreme poverty in our lifetime and help people in Serbia work their way out of these conditions. While global poverty levels are decreasing outright, to the point where we are in striking distance of ending extreme poverty in our lifetimes, by 2030, they continue to affect 750 million poor and often, uneducated. At Opportunity Bank Serbia, we use the capabilities of a financial institution to gather deposits in more prominent and vibrant parts of Serbia such as the capital city of Belgrade and Vojvodina, while focusing the majority

of our lending on micro and small sized enterprises (MSME) and farms from economically disadvantaged and depressed rural parts of Serbia. We are in the business of creating opportunity – both for our clients to work their way out of poverty, but to also allow these clients to pursue the entrepreneurial dreams that have the power to reshape whole communities. We focus on building strong partnerships with our clients, donors, and partners, so that we can together facilitate sustainable development and truly make an indelible impact. Our microfinance loans unlock new possibilities for individuals and MSMEs alike that may have never seemed possible before – or even imaginable. Poverty may mean different things to different people. Is it possible to set a benchmark across the globe? As I mentioned, Opportunity is aligned

with the goal of the World Bank and the United Nations to end all poverty by 2030. That means addressing those who do not have access to safe and reliable financial services by focusing on graduation programs for the ultra-poor to financing for small to medium enterprises and everyone in-between. Our work is far from over, as alleviating poverty is more than just providing access to quality education, healthcare, electricity, and water. With the goal in mind to eradicate extreme poverty by 2030, we need to be able to help our present and future clients get out and stay out of poverty. Global issues such as economic shocks, and socioeconomic factors continue to create ramifications to economic stability in the emerging markets in which we operate, and it is for this reason that we are trying to provide tools to empower – rather than merely offering a ‘quick fix’. While the exact monetary value deemed to be living in poverty may fluctuate across the globe, based on living conditions and availability of services, it is possible – and necessary – to set a benchmark so that as a global community, we can guide work towards achievable goals, and accountably measure success. IFM editor@ifinancemag.com

Oct - Dec 2017 International Finance

Sector Insight

Changes in PSC regime will impact UK property investments The aim of the changes in Persons with Significant Control regime is to enhance transparency in business interests and assets 76 Alexander Pelopidas

International Finance Oct - Dec 2017

Sector Insight

K corporate structures will have to adhere to new regulations following recent changes to the Persons with Significant Control regime (PSC), which aim to enhance transparency of business interests and assets. In addition, proposals for a new register are being put forward to impose similar disclosure on overseas entities with an interest in UK property and procurement. Anyone involved in investing in UK and Europe will be familiar with the significant political and regulatory pressures that are being exerted on corporate structures, particularly those with off-shored elements. This has been driven by international concerns about money laundering, corruption, tax evasion and terrorist financing. Instances like the infamous ‘Panama Papers’ in April 2016 (which involved the leak to a global organisation of journalists of millions of confidential papers held by the Panamanian law firm Mossack Fonseca) left many embarrassed and demonstrated how corporate structures could potentially be used for wrong doing. 1.1 UK Corporate structures 1.2 Since 2011, under the former prime-minister David

Cameron, the UK had been pushing for a public register of ‘Beneficial Ownership’ to enhance transparency concerning business interests and assets. The development of the register was linked to the implementation of the European Fourth Anti-Money Laundering Directive (“4th Directive”), as well as the UK’s involvement in the G20 Anti-Corruption Working Group. 1.3 There was a consultation on a new beneficial ownership register in 2013. A law was passed in late March 2015 for the UK to adopt a register for Persons with Significant Control (“PSC”) over corporates from April 2016, which was a year earlier than it was required to do so under the 4th Directive. 1.4 The 4th Directive came into effect on June 26, 2017 requiring all member states to hold information as to the beneficial ownership of corporate entities within their territory. The UK has implemented the 4th Directive by passing the titled Money Laundering, Terrorist Financing and Transfer of Funds (Information on Payer) Regulations 2017 (the “Regulations”). The Regulations

make a few additions to the already established UK PSC Register. 1.5 PSC Registers pre-4th Directive 1.6 From April 2016, UK companies and limited liability partnerships (unless exempt) are required to keep a PSC Register and file information of their PSCs at Companies House. A PSC is someone who: 1.7 • Holds more than 25% of the shares of a company, or the right to more than 25% of the assets of an limited liability partnership on winding up; 1.8 • Holds more than 25% of voting rights (if a company) or more than 25% of the rights to vote on such matters decided on by the members (if a limited liability partnership); 1.9 • Has the right to appoint or remove a majority of the board of directors of the company or those entitled to take part in management of the limited liability partnership; 1.10 • Exercises, or has the right to exercise significant control over the company or limited liability partnership; 1.11 • Has the right to exercise, or actually exercises, significant influence or control over the activities of a trust or firm which would itself satisfy any of the above conditions in respect of either a company or limited liability partnership, if it were an individual. 1.12 PSC Registers post-4th Directive As of June 26, 2017, Changes have been introduced to the PSC regime, in order to comply with the 4th Directive, which requires member states to ensure that corporate and other legal entities incorporated within their territory, hold adequate, accurate and current information on their beneficial ownership, and that this information is held on a central register. Two key revisions introduced to the PSC regime are: • Updating Companies House

Oct - Dec 2017 International Finance

Sector Insight

obligations as other companies by holding a PSC Register and recording PSC information at Companies House.

Under the old regime, most companies and limited liability partnerships under the PSC regime opted to notify Companies House of their PSCs in the submission of the annual Confirmation Statement (which has replaced the Annual Return). Under Article 30 of 4th Directive, Member States must hold ‘current’ information of companies and so, as of June 26, 2017, companies and limited liability partnerships are required to update their PSC register within 14 days,

Alexander Pelopidas

International Finance Oct - Dec 2017

•

and Companies House within 28 days, where there have been changes to the information on their PSC Register. Alternative Investment Market (“AIM”) Companies Under the old regime, certain companies (including AIM companies) were exempt from the requirement to maintain a PSC register, because they are subject to the disclosure requirements contained within Chapter 5 of the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules (“DTR5”). From June 26, 2017, the DTR5 exemptions changed. Companies traded on an European Economic Area or Schedule 1 specified market, will still be exempt. However, the PSC regime now applies to AIM companies (and companies on other prescribed markets including NEX Exchange companies). Under transitional requirements, AIM companies and NEX Exchange companies now falling within the PSC regime had until July 24, 2017 to comply with the same

Overseas companies Whilst the PSC Regime makes it easier to trace the true owners of a UK company or limited liability partnership, the UK government announced at the anti-corruption summit in May 2016 that the UK would create a register showing the owners and controllers of overseas companies that own property in the UK or participate in UK government procurement (“Overseas Register”). The UK property industry attracts a lot of foreign investment and is often held by overseas entities (many nominee companies), which are not subject to the PSC regime. Purchasing property is a classic way of laundering illicit funds and opaque offshore ownership structures can cause great difficulty for regulators and enforcement agencies trying to prevent this criminal enterprise. The suggestion is that the register will also extend to entities bidding for government contracts so that the government can know who they are dealing with. The government is currently analysing feedback following its consultation on the proposed Overseas Register, which ended in May 2017. It has been proposed that the information contained within the Overseas Register will largely mirror the disclosure requirements for UK companies under the PSC regime, with the register being publically available at Companies House. Non-compliance with the Overseas Register could have a very serious impact on UK property investors under the proposals. Already own UK property? The proposal is that overseas entities that already own UK property will have a one-year transitional period to register their beneficial owners. If they do not want to disclose this

Sector Insight

Purchasing property is a classic way of laundering illicit funds and opaque offshore ownership structures can cause great difficulty for regulators and enforcement agencies trying to prevent this criminal enterprise

information, they may opt to dispose of their UK property, or restructure the way they hold assets. If, after the transitional period, an overseas entity still holds UK property, and they have not registered their information with the Overseas Register, they will be prevented from dealing with their property. A note will be added to the title register of the property to reflect that the entity will not be able to transfer, charge or grant a long lease of the property, unless they comply with the Overseas Register registration requirements. A similar concept exists under the existing PSC Regime, where non-disclosure can lead to an owner being prohibited from exercising their rights under their shareholding in a company or their rights in their membership of a limited liability partnership.

Want to acquire UK property? Under the proposals, overseas entities that wish to buy property will be able to apply to Companies House to participate in the Overseas Register and will be allocated a registration number. When the overseas entity acquires the property, a note will be put on the title register that reflects the restrictions (on transferring the title of the property or registering a long lease or a charge) over the property if the entity is not fully compliant with the requirements of the Overseas Register. Whilst the restrictions on disposal may incentivise most to participate in the Overseas Register, some entities may not look to deal with the property, so the government is considering whether to make it a criminal offence to fail to provide or update information to the Overseas register.

The future Clearly the government is committed to increased corporate transparency for those investing in the UK, particularly into the vital property industry; however, this is not without its problems. Some question the legitimacy of these registers and whether they really do help to combat money laundering and corruption. Despite increasing pressure, some offshore tax havens are still resistant to these publically accessible registers. Some are concerned for those who have a legitimate need to protect beneficiaries such as the vulnerable for whom assets are held on trust. We will have to see how far the UK is willing to take its commitment to being a world leader in corporate transparency. The right balance will have to be struck without deterring investment at a time when the UK is facing economic and political uncertainty. IFM editor@ifinancemag.com

Alexander Pelopidas is a Partner at solicitors Rosling King

Oct - Dec 2017 International Finance

INTERVIEW INTERVIEW Interview: Technology

‘Most payments are free in the LakeBanker system’ Interview with Dr. Andrew Joseph McCarthy, CSO, LakeBanker

ryptocurrencies are the talking point around the world even though they are yet to be fully understood by a majority and are not accepted by many governments. Yet, current acceptance levels are leading to the launch of more options.

What is the LakeBanker project? Our mission is free banking for the world. In particular, we want to challenge the status quo where moving money around the world in electronic transactions is associated with heavy fees. All that’s moving here is information. It shouldn’t cost more

International Finance Oct - Dec 2017

International Finance interviewed Dr. Andrew Joseph McCarthy, CSO, LakeBanker, which wants to challenge the status quo where moving money around the world in electronic transactions is associated with heavy fees.

to send a payment than it does to send an email. In our system, payments, both domestic and international will be free, for everyone, forever. This includes user-to-user and user-to-merchant payments. We thus present a huge challenge to bank wires, remittance

services like Western Union and payment processors like VISA and Mastercard. We expect our free options to attract many, many users. In this way, the model is similar to many of the world’s leading technology companies: Google charges users nothing to use their

Dr. Andrew Joseph McCarthy, CSO, LakeBanker

Oct - Dec 2017 International Finance

INTERVIEW INTERVIEW Interview: Technology

search engine or send an email, for example. These free services attracted billions of users. With that many users, it is not difficult for a company to generate revenue: Once we have attracted many users, we can offer them a rich ecosystem of financial services.

How does your system work? We use the latest technology — particularly mobile and artificial intelligence technologies — and an innovative business model. The LakeBanker system will coordinate a massive network of individuals, merchants and other institutions who will provide banking services to users. The nodes in our network are called ‘LakeBankers’. The network is accessed through a mobile app, which uses AI to match requests dynamically based on real-time supply and demand conditions. Our technological solution effectively replaces traditional banking infrastructure with a peerto-peer market, sometimes known as a ‘matching market’. We call this concept ‘Crowd-Banking’. What are the standout features of this model? 1. Risk Management: Through

International Finance Oct - Dec 2017

our crowd of users, we can do more due diligence than any regular bank could do. And, since LakeBankers will tend to be local and know their communities well, we can do it better. 2. Massively Reduced Overheads: We don’t need high street branches, large corporate offices or many thousands of salaried employees. 3. Exponential Growth: When we enter a country, one LakeBanker can service say 10 users. The system incentivises users to become LakeBankers and service a further 100 users who can then service a further 1,000 and so on. 4. Reach Underbanked Populations: Networks of LakeBankers can be created wherever people have access to smartphones. What is the BAC? BAC is a functional utility token that drives transactions in the LakeBanker system. BAC is based on the Ethereum Blockchain and is ERC20 compliant. All fees and interest in the LakeBanker system will be denominated by BAC.

Here’s an example of how it works: Imagine the system extends a line of credit of $5,000 to a user. At the month-end, they may owe 200 BAC in interest. The user can buy 200 BAC from the market to pay that interest. If they don’t want to buy BAC, they can become a LakeBanker and serve others to earn BAC. So BAC is well integrated into our Crowd-Banking model. What was the trigger for the LakeBanker project? The financial industry desperately needs change: • Banking is too expensive. Credit cards charge up to 3% on payments, bank wires can cost $50 or more, and remittances are charged on average over 7% of the amount sent. Trillions of dollars circulate the globe in such electronic transactions each year. But all that’s moving here is information. It shouldn’t cost more to send a payment across continents than it does to send an email or a text message. • The traditional banking sector simply does not reach enough people. Roughly 5 billion of the world’s people have poor access to mainstream financial

INTERVIEW Interview: Technology

• •

•

services and must rely on nontraditional forms of banking often most associated with the disadvantaged. And we saw the reasons for these failures: The technology banks employ is decades old. Physical debit cards were introduced in 1966. The first ATM was installed in 1969. Banks still use paper. The common language for international finance message, SWIFT, was founded in 1973 — 16 years before the World Wide Web. Technology has advanced at an accelerated rate in recent decades. Many industries have been completely revolutionised. The banking industry has hardly changed. Their business model is out of date. Banks still rely on brick-and-mortar branches and tens or sometimes hundreds of thousands of employees: Wells Fargo has roughly 280,000 employers and over 6,000 branches; the Agricultural Bank of China has approximately 450,000 employees and 24,000

branches. These massive overheads mean that banking is needlessly expensive and risk management is inefficient. How will BAC be different from BTC and other cryptocurrencies? 1. BTC is a decentralised cash system while BAC is based on the Ethereum Blockchain 2. There are 21 million BTC; there are 500 million BAC 3. BTC creation is via mining while BAC are distributed in our Token Sale 4. BTC is intended to function like cash while BAC is utility token in LakeBanker system. In some sense similar to XRP in Ripple’s system. The difference is most payments are free in the LakeBanker system. They do not involve BAC hence they are not sensitive to the cost, transaction throughput issues and capacity issues of Blockchain transactions. In Ripple’s system, ALL transactions involve their token, and hence they cannot be free and may one day become very expensive. All existing Blockchains have some

limitations: for example, capacity, throughput, security, reliability, complexity, vulnerability, price volatility, high transaction cost and long confirmation times. There’s still a very long way to go before they can reach to billions of people. BAC can be considered as a layer above the underlying Blockchain technologies. This is why LakeBanker/BAC can encapsulate the complexity, increase the capacity, boost the throughput, enhance security, cut the transaction cost to zero to bring cryptocurrencies to billions, and offer free banking to the world. If BAC is an alternative to BTC, it will also be a competitor. Where does that leave LakeBTC? BAC can be considered as a layer above BTC. It’s not a competitor or alternative. It will have a much wider user base and set of applications. It will help bring all cryptocurrencies including BTC to billions of people. LakeBTC is the professional exchange supporting all fiat currencies and cryptocurrencies. It will provide an efficient market for professional traders and institutions, including

Oct - Dec 2017 International Finance

INTERVIEW INTERVIEW Interview: Technology

LakeBanker. LakeBanker users will be able to trade BAC on LakeBTC shortly after Phase 2 of the Token Sale and before November 1, 2017. Liquidity is important to investors, especially in cryptocurrencies. But it is rarely available for new cryptocurrencies: the majority of tokens might never even be traded in exchanges. That is not the case for BAC: we are offering near immediate liquidity. There are great synergies between LakeBanker and LakeBTC.

You say LakeBanker will come up with an end-user product. How would you then describe the existing eco-system of cryptocurrencies and users? Existing users are mostly limited to tech savvy individuals and a small group of sophisticated traders. There are so many limitations before cryptocurrencies can reach average users, merchants and traditional financial institutions. This is why BAC/ LakeBanker comes into play. Our enduser facing App is easy to use, even for those in developing countries.

International Finance Oct - Dec 2017

What prevented cryptocurrencies from being a product for the masses? The barriers to using Bitcoin itself along with other financial instruments based on Blockchain technology are very high: • They are too complicated for many, and the perceived complexity is growing as more and more cryptocurrencies are created. At the level of software, cryptocurrencies are difficult to use for many. At the level of security, many are unable to safeguard their own wallets, stolen coins are not recoverable, incorrect transactions are not reversible and misplaced wallet/password are not recoverable • Transactions are becoming very expensive. This has an especially negative effect on the accessibility of cryptocurrencies in remote or developing areas of the world • Price volatility is too high for average users • Confirmation times, transaction

throughputs and overall capacity are bottlenecks When was your app ready? The beta version has been around for 1.5 years in stealth mode. In this time, we proved the concept, streamlined the process, and improved its features. It works perfectly on all devices. We plan to release native apps in q4 2017. Can you share the findings of your tests? Findings: 1. Demand is very strong, often exceeding our current capacity 2. Cryptocurrency investment demand is strong in many countries, including Africa, South America and South East Asia. Nevertheless, many are overwhelmed by basic concepts of cryptocurrencies 3. There is strong remittance demand from foreign students and workers. But the price fluctuation and transaction costs of cryptocurrencies are big concerns among them

INTERVIEW Interview: Technology

4. User age range is very wide: from 18 - 85 years old There is no app like ours because our free payment options are unprecedented. Domestic and international payments will be free for ordinary users. This includes user-touser payments and user-to-merchant payments. Currently these services attract heavy fees. As the LakeBanker system matures, bank wires, Western Union, MoneyGram, Visa, Mastercard and so on will have to change or go out of business. How will you establish and maintain the low overhead cost that you are promising? Our Crowd-Banking model does two things exceptionally well. 1. Any financial institution needs to deal with all sorts of risks, including credit risks, compliance risks, market risks, operational risks, and so on. Such risks are effectively costs to the institution. Our business model, along with the technology we employ, will do significantly better risk management and AML (Anti Money Laundering) at a much lower cost than traditional banks. • Multiple independent LakeBankers can be assigned to do the due diligence and KYC. In our Crowd-Banking model, we have few employees but millions can work for us. We can do far more due diligence than any regular bank. • Due diligence/KYC can be requested by the system at any time: before loans, during, after, or any time it is deemed necessary • LakeBankers are usually local and know their communities well • Big Data analysis can provide real-time status and alerts of any abnormal or suspicious activity When regular banks undertake due

diligence or KYC, typically just 1 or 2 checks are done. In the LakeBanker system, where necessary, we can perform as many as 30 independent checks of the target customers or businesses during the entire lifecycle of the loan. This is comprehensive and continuous risk management that traditional banks cannot do. 2. We have no high street branches, few employees, no large corporate offices and no ATM machines. If a traditional bank wishes to expand its supply in a given location, they need to build a new branch, hire many employees and so on. In contrast, we expand supply just by having more users install our app. As a result, our marginal cost of supply falls exponentially and approaches zero. Here is a comparative example: Traditional Bank: A user in Hong Kong wishes to make a cash deposit into his regular bank account. This is done in a branch. Real estate in Hong Kong is expensive — over $2,000 per square foot per annum in prime areas where high street branches need to be. Assuming a modest sized 2,000 square foot branch, the user deposits his money in a building which costs the bank $4 million dollars per year. LakeBanker: The same user wishes to deposit money into the LakeBanker system. He pushes a button on our app and the app transmits the request to nearby LakeBankers. Within seconds, the request is accepted. For the sake of the example, imagine the LakeBanker here is a nearby convenience store. The user walks to the store and hands over his money. The clerk presses a button on our app and the user’s account is credited with the appropriate amount. The cost to us of accepting the deposit is close to zero. What services do you visualise LakeBankers offering to endusers? They can facilitate deposits/ withdrawals from the system and

conduct KYC (Know Your Customer) verifications on other users. We will be offering a rich ecosystem of financial services. For example, p2p lending, credit cards, car loans, student loans, micro loans, residential and commercial mortgages, insurance, equities, financial advisory, funds, trusts, asset-backed securities, mortgage-backed securities and crowdfunding. IFM editor@ifinancemag.com

Andrew McCarthy, CSO, LakeBanker.com, obtained a Ph.D from the University of Oxford. He taught logic there for 10 years before moving to Shanghai to teach for New York University. He was an early investor in Bitcoin and has for long been interested in the power of blockchain technology to change the world.

Oct - Dec 2017 International Finance

OPINION

Mustafa Al-Bassam

Bitcoin fork: what we can expect now International Finance Oct - Dec 2017

OPINION: Technology OPINION

Stakeholders could be more co-operative, as no one wants to see a fork every time there’s a disagreement, which weakens the cryptocurrency

n August 1, the world-famous cryptocurrency Bitcoin officially forked and split in two: Bitcoin (BTC) and the newborn Bitcoin Cash (BCH). Bitcoin Cash was the result of discontent among a group of users, miners and developers in regards to the Bitcoin system, which they believe is limited in transaction capacity to the point of becoming a hurdle. Indeed, the network is

almost 10 years old. Bitcoin was the pioneer of digital currencies introducing a new concept called blockchain, a technology in which transactions are independently verified and confirmed by a decentralised and open network of computers running the Bitcoin software. All computers participating in the Bitcoin network need to agree on a set of rules that dictate which transactions are valid,

to agree on which blocks of transaction can be added to blockchain - the ledger storing Bitcoin’s transaction history. Bitcoin ‘miners’ generate these blocks by using large amounts of computing power, and they are rewarded with new Bitcoins and transaction fees in the process. A fork is when computers in the network disagree about those rules, and so one side of the network may include transactions in the ledger that the other

side considers invalid. This creates two different blockchains and splits the network in two, because one side refuses to accept the other’s ledger. The Bitcoin Cash fork exists because a group of users disagree about what those rules should be. Despite breaking away being a drastic solution, a dissatisfied group decided to break away due to latent inaction over their complaints. They claimed that the

Oct - Dec 2017 International Finance

OPINION: Technology OPINION

number of transactions that Bitcoin could handle per second is too low and could not bear the evergrowing scale of the Bitcoin network. This was causing transaction fees to rocket up to $5 per transaction, as users increase the fees they provide with their transactions to ensure that their transaction would be prioritised by Bitcoin miners over other transactions, especially during peak times.

Overcoming the hurdle They were not the only ones to think so, as this was a general concern as well. There had been desire for Bitcoin to have greater transaction capacity, where it is currently averaging under 3 transactions per second. In reality, greater capacity is vital for Bitcoin

International Finance Oct - Dec 2017

to scale to hundreds of millions of users if it’s to be used as an electronic cash system. However, people disagree on the technical and political details of how Bitcoin should scale. There is a rule in the pre-fork Bitcoin network that sets an arbitrary limit that restricts the network to handling a maximum of a one megabyte block of transactions every 10 minutes, which is under 3 transactions per second in practice. The breakaway plan created a new network with new rules that increases this arbitrary limit. This increased capacity is also intended to reduce transaction fees by increasing capacity, thus reducing competition by users to get their transactions included in a

block On the other hand, developers and defenders of the pre-forking Bitcoin network want to keep the existing limit, and scale Bitcoin by evolving it into a settlement network containing only large transactions. The plan is to create a network of payments hubs run by organisations or individuals that settle on the blockchain, which can be used for smaller transactions. This system is called the “Lightning Network”. Opponents of the plan argue that by increasing the limit, the blockchain will grow too big, and therefore fewer people will have the storage space required to run a full Bitcoin node. It is said that this will make Bitcoin more centralised,

as only organisations with substantial resources will be able to store the whole ledger. Another reason behind the breakaway, apart from scalability, is a new feature that was introduced in Bitcoin before the fork called Replace-by-fee (RBF). This allows transaction senders to cancel the original transaction before it has had any confirmations. This harms merchants’ ability to accept transactions with no confirmations with some degree of confidence that they would be confirmed, meaning that they would have to wait at least 10 minutes for small transactions to be confirmed in a block, instead of a few seconds. The alternative In summary, Bitcoin

OPINION: Technology OPINION

Bitcoin Cash had a lukewarm start in the market on August 1. It started trading in the range of $200 to $300 for most of the day, until it escalated to $700 before settling around $400.

Cash works identically to Bitcoin in almost every way except that it supports bigger blocks and removes controversial features such as the RBF. It is unlikely to cause any major disruption for merchants who deal with Bitcoin. But if Bitcoin Cash becomes very successful, there could be a short-term reduction in transaction capacity in the current network, as miners shift their mining hardware to process Bitcoin Cash transactions instead. In such a case, merchants accepting Bitcoin should temporarily increase the number of confirmations

they require before they accept a transaction as this comes with security implications. The network may be theoretically easier to attack now because the mining power of the network splitting it into two different networks. Bitcoin is secured by miners who validate transactions and create the next blocks in the blockchain; thus, the more miners, the harder it is to attack the blockchain and reverse transactions. Nevertheless, in reality, such an attack would be prohibitively expensive for most malicious actors and so is unlikely to have a large

consequence. No more fighting? If anything, this breakaway may cause the different stakeholders of the system (users, miners and developers) to be more co-operative, as now there are two sides with two different visions, and large compromises are no longer necessary. No one wants to see a fork every time thereâ&#x20AC;&#x2122;s a disagreement, as it weakens the cryptocurrency, so there is a big incentive to work together. For Bitcoin traders, the fork might have been good news. Anyone who has a Bitcoin on August 1

would automatically have the equivalent amount of Bitcoin Cash, meaning that they now have two publicly traded Bitcoin assets. Bitcoin Cash had a lukewarm start in the market on August 1. It started trading in the range of $200 to $300 for most of the day, until it escalated to $700 before settling around $400. But letâ&#x20AC;&#x2122;s not forget that Bitcoin itself started the year trading at $750, and now one single bitcoin is worth over $2,500. For the moment, Bitcoin Cash is the third biggest cryptocurrency by market capital, behind Ethereum and Bitcoin, the latter remaining in pole position despite speculation over the fork and its implications. In the end, the fork shows that Bitcoin is still a highly experimental and volatile system, and disagreements could be viewed positively, as it enables the market to choose which version of Bitcoin is more valuable. IFM editor@ifinancemag.com

Mustafa Al-Bassam is Security Advisor at Secure Trading

Oct - Dec 2017 International Finance

INTERVIEW INTERVIEW

‘ATM has absorbed needs that aren’t of high added value’ International Finance Oct - Dec 2017

INTERVIEW

Elenice Macedo, Head of Financial Services Solutions, Industry Consulting and Software Solutions BAS, Fujitsu EMEIA

Oct - Dec 2017 International Finance

INTERVIEW INTERVIEW INTERVIEW: Technology

An interview with Elenice Macedo, Head of Financial Services Solutions, Industry Consulting and Software Solutions BAS, Fujitsu EMEIA

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ujitsu is helping Spanish retail bank Ibercaja to digitally transform banking and offer a better customer experience with Fujitsu smart ATMs. International Finance asked Elenice Macedo,

What is the threat to ATMs from fintech? Traditionally, ATMs were introduced as a practical means of securing finances, providing a 24/7 banking opening time. For customers, it offers a quick route to access money without having to enter the bank. As long as people use cash, ATMs will continue in operation but as fintech creates easier and convertible ways to use money, this will change. There are now much more convenient ways to transfer money and pay for goods:

PayPal, contactless cards, mobile banking, cash cards etc. There’s no hiding the truth that the ATM will become less important, but fintech offers an easier route to securing finance for customers and that is good. Is the growth in ATMs slowing because of the alternatives offered by fintech? For banks, ATMs are a necessary means of driving footfall and fintech companies represent a partner in this respect. Delivering technology-

Head of Financial Services Solutions, Industry Consulting and Software Solutions BAS, Fujitsu EMEIA, about the future of ATMs in the face of fintechs coming up with cashless alternatives.

driven solutions that enable a bank to connect with the customer securely will help them reach out to the customer in the mobile world. Our partnership with Ibercaja will see the Spanish bank introduce smart ATMs that reduce waiting times, offer biometric security and the highest level of reliability. Giving customers fast and simple access to day-to-day banking services is key to providing a consistent omni-channel experience, as well as a flexible technology platform. The use of ATMs isn’t

growing, but technology can make banks of the world more customer-friendly and mobile. ATMs have improved vastly over the last 50 years and increased the reach of banks. But would they survive another 50 years? It’s fascinating to observe how things change so quickly over such a short time period, and to see how quickly technology is driving change in finance. ATMs were actually introduced as a novelty in the 70s but are observing the biggest change in the modern day. Banks’ branches have now become about the consultative sale in store, while the ATM has absorbed needs that aren’t of high added value. Banks must now reinvent themselves to survive and ATMs are still a largely safe, convenient place for the customer to interact with the bank. I’m certain that ATMs will not die, and as long as we continue to use cash, the ATM will live on. IFM editor@ifinancemag.com

International Finance Oct - Dec 2017

OPINION: Technology OPINION

OPINION

Lewie Miller

Sales update How RFP automation can extend your financial business reach International Finance Oct - Dec 2017

inancial businesses today must work globally, striving for wider reach through international expansion to survive. With such growth, financial services firms must remain compliant with varying regulations to effectively serve and retain existing customers while courting prospects in new territories. Take a hypothetical US financial institute seeking business in the Far East. Prospects in this region need different assurances and have different requirements from those on home turf.

OPINION: Technology OPINION

Therefore, organisations must be able to provide pitches and proposals targeted to these new prospects’ concerns and needs. Supplying the most relevant information quickly and accurately increases the chances of winning the business. Many factors can threaten global expansion if not managed effectively — organisations must build the foundations necessary for successful growth. Winning international business contracts calls for a strong process to ensure timely and precise RFP responses as well as a plan to expand on new business wins. Building up a global set of clients and partnerships increases the likelihood of business in other territories recognising the potential in your organisation, proving that you are a capable and agile player in global business. Smoothing out the creases This is where automation software and cloud content libraries can work

wonders for your business at the international level. Companies are quickly moving to adopt automated software solutions that can manage, track and recommend content to RFP and sales teams. Such systems enable various stakeholders collaborating on the same projects to increase accuracy and certify compliance in their content. Automated solutions can help procurement teams respond to myriad questionnaires covering pricing, compliance, due diligence, security and RFP questions. Once the proposal software has examined the document and its questions, it will scan a centralised content library and provide relevant answers for each question. Often, the information required to complete the documentation sits in various systems such as CRMs and databases used for different applications, or on different shared or local drives. Traditionally, stakeholders would have to

trawl each system to find the relevant information for each bid, or collaborate with different system ‘owners’ to gather the right data for the deal. A unified view of the data By providing a centralised content repository, automated solutions help teams create documents more relevant to each deal in a fraction of the time. These solutions also provide access to valuable analytics on deals, enabling teams to make better decisions about opportunities worth chasing instead of gambling time and resources on others they are less likely to win. So, with the accuracy of the bid documentation increased, the chances of making the shortlist of a prospective customer are far greater. Yet, proposal win rates also depend on timely document completion and bid submission. ‘Grab and go’ content An RFP solution offering a centrally-managed

cloud content library eliminates concerns around version control, which has traditionally been a major pain point in the collaboration process. Access to a single, shared document guaranteed to include the latest revisions cuts out time-consuming back-and-forth between stakeholders on which version of a document is the most current. A cloud content library can also speed collaboration among stakeholders spread across various departments, offices and locations while maintaining content fidelity. Libraries can also be organised to help users quickly find content that reflects the language, currency, and regulations used in the prospect’s region. Not only does this save time in the response process, it also reduces the likelihood of bids lost through the submission of the wrong version of a document. Attracting new customers in different territories requires financial services businesses to demonstrate they understand prospects’ pains and can solve their most pressing problems. Quickly delivering bids that tick all the right boxes is essential for any financial organisation striving to expand globally. And a proposal automation software solution is just the ticket to help win business in new markets. IFM editor@ifinancemag.com

Lewie Miller is CEO of Qvidian

Oct - Dec 2017 International Finance

smart tips

reasons why millennials make great employees One of the most common criticisms is that theyâ&#x20AC;&#x2122;re self-entitled, but who says you canâ&#x20AC;&#x2122;t benefit from that Nick Pollitt

International Finance Oct - Dec 2017

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illennials have had more than their fair share of bad press lately. Dubbed the ‘go nowhere’ generation, they’re often associated with a lazy, riskaverse attitude, but are they just misunderstood? With inspirational millennial entrepreneurs making headlines and many businesses investing in a millennial workforce, it would seem so. Speaking to a range of businesses revealed that millennials could be one of your business’s biggest assets. 1. They crave responsibility and thrive when empowered One of the most common criticisms aimed at millennials is that they’re self-entitled – possibly down to their parents’ openness to involve them in family decisions as children. Giving them a sense of responsibility from a young age, this kind of parenting has led many young people to feel they should also be able to have similar input in the workplace. However, this trait can actually be

of significant benefit to employers if they approach it in the right way. Give a millennial employee ownership of a particular area (no matter how small), and they’ll feel infinitely more valued, and that their work is having a real impact on the wider business. Joshua Hebert, CEO of Magellan Jets, says, “Give millennials a boring task without a reason, and they’ll give you boring results. Give them a share in the idea you’re putting into play, however, and they are more likely to turn in work you never imagined.” Boosting morale and motivation, businesses adopting a team structure that focuses on empowering younger employees are likely to see a happier, more dynamic workforce. This kind of environment also breeds skilled workers, with further benefits down the line when these employees are able to step up to higher positions without hesitation thanks to their experience

“

Give millennials a boring task without a reason, and they’ll give you boring results. Give them a share in the idea you’re putting into play, however, and they are more likely to turn in work you never imagined Joshua Hebert, CEO of Magellan Jets

2. They’re open to change Thanks to their parents encouraging them to speak up, millennials are conditioned to openly question

Oct - Dec 2017 International Finance

smart tips

processes in a business if they think they can be improved. Rather than starting work and blindly following the rules because “that’s how things have always been done”, millennial workers are open to change and likely to challenge things when older workers would perhaps be more reserved. People development consultant Susy Roberts says, “Generation Y aren’t more demanding – but they are different. They’ve been brought up in a team environment and encouraged to speak up when things aren’t right. And this, as any good business coach will tell you, is simply best practice. With millennials, it’s definitely not all about money. An open working culture that respects individual views and opinions is essential.” While some business owners may see this as a lack of respect for authority, that is simply not the case. Keen to make their mark and not afraid to challenge the status quo, millennials can help shape a business for the better, bringing in inventive ways of thinking that can streamline processes and increase efficiency.

International Finance Oct - Dec 2017

3. They’re on a constant mission to better themselves (and your company) Another frequently discussed millennial attribute is their desire to develop and progress. While some people may see this as a negative thing (and the reason for a higher turnover of millennial staff), it can also be seen as highly positive. Who wouldn’t want a workforce that’s driven to improve and expand their skillset? 95% of millennials (report from the US Chamber of Commerce Foundation) said they are motivated to work harder when they understand the importance of a particular task within the context of a company’s big picture goals. One way to harness this is to actively help and encourage them to learn everything they can about the operation at hand. Through learning new things, millennials can quickly become experts in their field, becoming serious assets to any business in the process. 4. They’re digital natives Raised by computers and smartphones, millennials are the first

“

Generation Y aren’t more demanding – but they are different. They’ve been brought up in a team environment and encouraged to speak up when things aren’t right. And this, as any good business coach will tell you, is simply best practice. With millennials, it’s definitely not all about money. An open working culture that respects individual views and opinions is essential Susy Roberts, People development consultant

smart tips

generation born in today’s tech-centric world. An essential part of their daily lives, 53% of millennials (NewsCred Insights) say they’d rather lose their sense of smell than access to their devices. With advancements in technology changing businesses all over the globe, the digital-savvy nature of millennials means they’re immune to change. Able to adapt almost effortlessly, the younger workforce requires next to no training when it comes to adopting new processes. Not only does this save businesses a lot of time, it means you have a workforce that is instantly familiar with the latest tools (e.g. social media) and knows how to use them to produce results. 5. Their productivity is through the roof (in the right environment) Even if the lazy stereotypes are true

under normal conditions, there’s a relatively simple solution to unlocking the incredible potential of the younger generation in the workplace. Forward-thinking businesses are coming to the realisation that, when it comes to millennials and productivity, creating the right environment is a key factor. Gemma Spinks, Director at Neo PR, says, “At Neo PR we love hiring young, vibrant, hard-working millennials, but we appreciate that they do like to work in a slightly different way. We have tailored our office to keep our employees motivated, engaged, active and enjoying themselves.” Ben Garry, a 20-year-old SEO executive, is a big fan of vibrant work spaces. Speaking about his time at Impression agency in Nottingham, he says, “For me, working in this kind of environment has really helped me to integrate with the wider team. It makes collaborative working much

easier; not only do we have plenty of spaces for meetings, but the more informal chats over a table tennis game or a beer on a Friday evening can lead to new ideas and more creative strategies.” Whether you believe the stereotypes or not, investing in millennials is the future for every business. IFM editor@ifinancemag.com

Nick Pollitt is Managing Director of office furniture provider DBI Furniture Solutions

Oct - Dec 2017 International Finance

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3 in 10 workers tolerate or hate their job More than half of US workers feel they have just a job, not a career, according to a survey by CareerBuilder International Finance Oct - Dec 2017

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ith 6.2 million job openings, and 7 million unemployed, it’s never been more important for job seekers to stay one step ahead of the competition. More than half of US workers (55 percent) feel they have just a job, not a career, and 38 percent of these workers are likely to change jobs in the back half of 2017, according to CareerBuilder’s latest survey. Almost three in 10 workers (28%) tolerate or hate their job. Of those who tolerate or hate their job, some of the top reasons for staying in a current position are the need to pay the bills (74%), its proximity to home (41%), needing the insurance (35%), it pays well (30%), or the job market is too tough (27%). The national survey, which was conducted online by Harris Poll on behalf of CareerBuilder from May 24 to June 16, 2017, included representative samples of 2,369 full-

time employers and 3,462 full-time US workers across industries and company sizes in the private sector. “Unfortunately, more than half of workers feel they have just a job, not a career, and almost three in 10 say they dislike their job,” said Rosemary Haefner, chief human resources officer at CareerBuilder. “When workers don’t enjoy what they are doing, they are more inclined to pursue other options, and there are many routes for them to take as the US continues to add jobs. Arming themselves with what employers are looking for will help job seekers stand out from the competition — ultimately landing a new opportunity that will be more personally rewarding for them.” What employers are really looking for To get the right attention from a hiring manager, job seekers should stay away from crazy stunts and keep

it simple. Haefner shares five tips that every worker needs to remember when hunting for a new gig. Customise your application and resume for the job. Approximately a third of employers review resumes for less than one minute (32%), but 49% of employers say they would pay more attention to job applications with a resume customised for the open position. Take the time to personalise — it might just get you to the next round. Review your references: Think through your references – pick colleagues who can speak to your strengths. More than half of employers (51%) say that a candidate’s reference has not given positive feedback about the candidate, and 54% have changed their mind about a candidate after speaking with a reference. Tell the truth: More than half of employers (55%) have caught a lie on a resume, and over a third (39%)

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have caught someone providing a fake reference. The truth is always your best bet. Provide your profiles: Seventy percent of employers use social media to screen candidates — and 57% of employers are less likely to interview a candidate they cannot find online1. Do their work for them by providing handles to your online portfolio, website and social media handles — just be sure you are presenting a professional image. Prepare for the interview: So you got the interview — congrats, but

the work does not stop there. Fiftynine percent of employers said asking good questions in the interview is important to them when considering a candidate for a job, and 48% said it was important to come to an interview prepared with ideas. Be remembered for the right reasons Hiring managers gave the following examples of unusual tactics job seekers used to stand out: • Candidate gave the hiring manager a baseball that read:

•

“This is my best pitch of why you should hire me.” Candidate sent the hiring manager daisies with a note that said “Pick me, pick me.” Candidate brought their mother to the interview as an in-person character reference. Candidate developed a whole website dedicated to the hiring manager, asking to be hired. Candidate hugged the hiring manager when introduced instead of shaking hands. Candidate got up from

This survey was conducted online within the US by Harris Poll on behalf of CareerBuilder among 2,380 hiring and human resource managers (employed

full-time, not self-employed, non-government) between February 16 and March 9, 2017

The national survey, which was conducted online by Harris Poll on behalf of CareerBuilder from May 24 to June 16, 2017, included representative samples of 2,369 full-time employers and 3,462 full-time US workers across industries and company sizes in the private sector

International Finance Oct - Dec 2017

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28% of workers say they hate or tolerate

their job

- Primarily stay because of bills, proximity to home and insurance need

38%

of workers who feel they have just a job, not a career, are likely to change jobs in the back half of 2017

•

interview and started waiting on customers because the business got busy. Hiring manager had a candidate volunteer to work at the business for a month before submitting an application to show that she was able to do the job. Candidate presented a thick scrapbook of certificates, awards and letters.

•

Candidate sent a Christmas card every year for three years. • Candidate sent a cake with their resume printed on it. But stunts can have a negative impact on your chances of getting the job — more than a quarter of employers (26%) say unusual attention seeking antics from job seekers would make them less likely to call a candidate in for an interview.

Survey methodology This survey was conducted online within the US by Harris Poll on behalf of CareerBuilder among 2,369 hiring and human resource managers ages 18 and over (employed full-time, not self-employed, nongovernment) and 3,462 employees ages 18 and over (employed full-time, not self-employed, non-government) between May 24 and June 16, 2017 (percentages for some questions are based on a subset, based on their responses to certain questions). With pure probability samples of 2,369 and 3,462, one could say with a 95 percent probability that the overall results have sampling errors of +/- 2.01 and +/1.67 percentage points, respectively. Sampling error for data from subsamples is higher and varies. IFM editor@ifinancemag.com

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US dominates in millionaire producing universities The only university outside the US making it to the top five is Oxford University in the UK

International Finance Oct - Dec 2017

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• US fills 17 of the top 20 places • UK manages to bag the remaining three • Cambridge is in 8th place

s students arrive at universities around the world to begin studies they hope will set them on the road to riches, business news and analysis website Verdict and GlobalData WealthInsight have teamed up to look at which universities around the world produce the most millionaires. Institutes of higher education in the US dominate the top 20, with the only university outside the US making it in the top five being Oxford University

in the UK. Six of the Ivy League schools in the US make it to the top 20, with Harvard sitting comfortably in pole position. Oxford University, which beat out Cambridge University to claim the top spot in the Times Higher Education World University Rankings, has also beaten its historic rival when it comes to making millionaires. Cambridge University makes it into the top 10 with some breathing room, at 8th.

Almost all of the schools in the Times Higher Education World University Rankings top 20 feature in the 20 universities that produce the most millionaires. The five that do not are New York University, University of Michigan, University of Texas, Southern California University and University of Virginia. The first university that’s in neither the US nor the UK is Tel Aviv University in Israel, which comes in at 27th.

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This list does not include the 1.3 percent of millionaire alumni who dropped out of university to pursue their entrepreneurial dreams. The likes of Mark Zuckerberg and Bill Gates famously abandoned Harvard – which produces more millionaires than any other university – to pursue billion dollar businesses Oliver Williams, WealthInsight

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The UK is the second most popular country for foreign would-be millionaires. Oxford and Cambridge rank 5th and 8th place on this ranking as much due to the success of their international students as their British alumni

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After that the list becomes much more diverse, featuring schools from Australia, France, Canada, Mexico, Italy, and Singapore in the top 50. WealthInsight’s Oliver Williams said, “With some of the world’s best institutions making up the top 20 millionaire making universities, it is evident that education is an essential step to becoming a millionaire. However, it is

outside the classroom where the next millionaires will be found: Entrepreneurial ideas are nurtured on campuses where recruiters from the world’s leading corporations can be found scouting for the brightest minds. As the US is home to more millionaires than anywhere else in the world, it is no surprise to see its Ivy League schools dominate the top 20. “But US universities have

also trained more foreign millionaires than any other country. Scions of business empires and budding entrepreneurs the world over aspire to be admitted to Ivy League schools. The UK is the second most popular country for foreign wouldbe millionaires. Oxford and Cambridge rank 5th and 8th place on this ranking as much due to the success of their international students as their British alumni.

“This list does not include the 1.3 percent of millionaire alumni who dropped out of university to pursue their entrepreneurial dreams. The likes of Mark Zuckerberg and Bill Gates famously abandoned Harvard – which produces more millionaires than any other university – to pursue billion dollar businesses.” IFM editor@ifinancemag.com

Editor’s notes Millionaires are defined as people living in the city with net assets – not including the value of their first home – worth $1m or more. This ranking draws on WealthInsight’s database of millionaires from around the world, which includes where they studied.

International Finance Oct - Dec 2017

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Top 20 millionaire-making universities Rank

University

Country

Harvard University

Stanford University

University of Pennsylvania

Columbia University

Oxford University

Massachusetts Institute of Technology

New York University

Cambridge University

Northwestern University

University of Chicago

University of Michigan

University of Texas, Austin

Cornell University

Yale University

University of California, Berkeley

Southern California University

Princeton University

University of California, Los Angeles

University of Virginia

University of London, LSE

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To be a billionaire,

start with sales First jobs & education of the richest people

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hat type of person is more likely to become a billionaire? New research from Aaron Wallis Sales Recruitment suggests that people who start their career in

International Finance Oct - Dec 2017

a salesperson role are more likely to make it to the rich list. A study of the richest 100 people in the world investigated whether there is any trend between your first career steps and how rich you become. The

research suggests that engineering and business graduates are most likely to become billionaires, and if you want to become one of the worldâ&#x20AC;&#x2122;s richest, you should start your career in a sales or stock trader role.

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Furthermore, you are far more likely to make the top 100 list if you are a graduate – 75% of the top 100 have earned a degree. The research into first career steps looks at the billionaires who started

Job Role

working in an organisation that was not their own, or family owned. These billionaires were then grouped into type of first job, which gave the following job roles as the top 5 results:

Job Category

Salesperson

Stock Trader

Software Developer

Engineer

Analyst (Varied)

Rob Scott, Managing Director at Aaron Wallis Sales Recruitment, said, “Today we are seeing that nearly all of the top people in business are graduates and that a degree can be a great first-step into preparing you for your career ahead. It’s also unsurprising how many of the top 100 billionaires started working as salespeople, which can give you the communication and negotiation skills which are vital to succeed.”

Wallis Sales Recruitment, researching the top 100 richest people in the world based on Forbes data. Research on the billionaires came from a range of sources, mixing Wikipedia data with reports from publications and outlets to collate the first career moves and education of the world’s richest people. IFM editor@ifinancemag.com

“

Today we are seeing that nearly all of the top people in business are graduates and that a degree can be a great first-step into preparing you for your career ahead. It’s also unsurprising how many of the top 100 billionaires started working as salespeople, which can give you the communication and negotiation skills which are vital to succeed Rob Scott, Managing Director at Aaron Wallis Sales Recruitment

About the study The study was conducted by Aaron

The study also looks at the top degree subject by type Degree type

Count of degree studied

Engineering

Business

Finance & Economics

Law

Computer Science

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First Job - Entrepreneur, Family Owned Business, or Another Organisation

110

First Roles of The Billionaires Working in â&#x20AC;&#x2DC;Other Organisationsâ&#x20AC;&#x2122;

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Percentage of Top 100 Billionaires With a Degree

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Billionaire Degree Subjects

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Young women’s

‘vote of no confidence’ for career in tech International Finance Oct - Dec 2017

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Survey reveals a worrying trend among university students

survey of more than 1,000 university students, conducted by KPMG and independent market research company High Fliers, has identified a worrying crisis in confidence among young women with regards to their digital skills. The poll found that only 37 percent of young women are confident they have the tech skills needed by today’s employers, compared with 57 percent of young men. This is despite scoring on a par with their male counterparts when assessed on digital skills such as data manipulation and use of social media. There is evidence that this lack of confidence could be putting many young women off applying for jobs: 73 per cent of female respondents said they have not considered a graduate job in technology. Aidan Brennan, KPMG’s head of digital transformation, said: “The

issue here isn’t around competency – far from it – but rather how businesses understand the underlying capability of an individual and how to unlock it. This research highlights the work that needs to be done to show the next generation that when it comes to a career in tech, gender isn’t part of the equation. “Competition for jobs is tough, and we know that female job seekers can be less likely to apply for a role than their male counterparts if they don’t feel they already possess every pre-requisite the job demands. Businesses committed to building a truly diverse workforce need to adapt their recruitment processes to reflect this, and ensure they don’t fall into the trap of listening only to those who shout about their capability loudest.” Mary Smith, who studied history and politics at university, recently joined KPMG’s tech consulting graduate programme.

She said: “If you look at the subject I studied at university, you might wonder how my background makes me a good fit for a tech career at a professional services firm. KPMG saw something in me that at the time I may not have seen in myself. Now I am in the role, it is clear that the skills that I already possessed are very much transferrable to the job I am doing. I would encourage more young women to not be deterred by jobs which include an element of tech, and to instead have the confidence and belief in your own capabilities to apply and succeed.” Anna Purchas, interim head of people at KPMG in the UK, says that the firm is already taking action to tap into this pool of talent and target women who are digitally capable, but may not yet be confident in their skills. “We recruit around 1,000 graduates each year through our graduate recruitment

process, Launch Pad, and we are proud to have reached a 50/50 gender split amongst our graduate intake. However, to maintain this level of equality in an increasingly digital world, it’s vital that more women like Mary have the confidence that their tech skills will be applicable for a role at a professional services firm like ours. “Earlier this year saw the successful launch of ITs Her Future, our initiative aimed at encouraging more women to consider a career in tech. This summer we also launched Future Ready, our online tool designed to help young people who may not yet have experienced working in an office understand how the skills they do possess could be applicable in the workplace. “We are now open for applications for our tech-related graduate programmes. Undergraduate work experience schemes will open later this year, such as Women in Technology, designed to help female applicants find out more about a career within technology at KPMG. “As business leaders, we must take positive action to bust the myth that there is just one type of person for any one job, highlight the value of diversity, and boost the confidence of young people as they prepare for the world of work.” IFM editor@ifinancemag.com

Oct - Dec 2017 International Finance

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YOUNG WOMEN’S ‘VOTE OF NO CONFIDENCE’ FOR CAREER IN TECH

2. Rate your ability for each of the following NOVICE

INTERMEDIATE

ADVANCED

Word processing FEMALE

MALE NONSTEM

33 31

STEM

Coding

1. How would you rate your current level of technology skills and knowledge STEM NON-STEM MALE FEMALE

48 45

FEMALE

MALE

NONSTEM

STEM

35 10

14 24

Manipulating data FEMALE

59 10

MALE

NONSTEM

STEM

Creative/design 37

FEMALE

MALE

NONSTEM

STEM

FEMALE MALE NONSTEM STEM

3 6 3 6

Social media 32

4 1 5

13 13 10 10 6 0

Creating databases 7

FEMALE

MALE

NONSTEM

STEM

1v low

5v high

35 49

9 5

36 40

3. As the demand for a technology-enabled workforce increases how confident are you that you have the skills needed by today's employers? 33 16 5

1 not very confident

37 31

No interest in tech

No never

Accountancy

10 30

40 22

1 no tech skill needed

Consulting 5 very high level needed

12 8 9 10

1 no tech skill needed

Software development

4 3 2

1 no tech skill needed

92 6

37 26

career could be interesting but I would need to learn too much

Employers I have not I have had no researched the would not want formal me as degree training in tech opportunities not relevant

96 3

I have no idea how tech is used in business

6. Adjectives most associated with a graduate role that involves a significant amount of technology MALE Innovative Cutting-edge Complex Challenging Creative

42%

FEMALE Innovative Complex Challenging Cutting-edge Well-paid

50%

5 very high level needed

27 25

38 14

5 very confident

No never and decided against

5.What level of technology ability do you think you need for each of the following careers? 4

Yes and Yes but applied decided not to

20 22

40 18

MALE FEMALE

4. Have you considered applying for a graduate job in technology? 73

5 very high level needed

MALE FEMALE

STEM NON-STEM

CALENDAR INTERVIEW

14-15 November 2017 Equity Research and Valuation (Finance)

Calendar

New York, USA

MARK YOUR

London, UK

Insurance Risk North America (Insurance) New York, USA

Quezon, Philippines

28 November 2017 Banking Book Risk Summit (Banking) London, UK

29 November 2017 FX Week Europe (Foreign Exchange) London, UK

Structured Products Awards Europe (Awards) London, UK

ConTech Moscow (Technology) Moscow, Russia

16-17 November 2017 30 November -01 December 2017

09 November 2017 London, UK

WITM B2B Philippines 4th edition (Business)

16 November 2017 29 November -01 December 2017

01 November -02 November 2017

Custody Risk Global Awards (Awards)

23 November 2017

16 November 2017

Budapest, Hungary

London, UK

16 November 2017

MICE Business Day (Trade show)

Network Theory & Analytics London (FinTech)

European Fund of Hedge Funds Awards (Awards)

14-16 November 2017

Market Data Training London 2017 (Technology)

116

23 November 2017

CFA Institute European Investment Conference 2017 (Investment)

Inside Fintech Conference & Expo (FinTech) Goyang-si, South Korea

Berlin, Germany

30 November-01 December 2017 22 November 2017

29 September -01 October 2017 Finance Credit Insurance & Audit Expo (Banking Insurance and Finance) Yerevan, Armenia

Energy Risk Asia (Energy) Singapore

Validating 05-07Market GovProcure Models: TRIM (Conference) (Banking)

December 2017

Sydney, Australia

London, United Kingdom International Finance Oct - Dec 2017

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OUT OF OFFICE

‘The best way to de-stress is hanging out on weekends’ Brian Hoffman is the CEO of OB1, the parent company of the decentralised marketplace OpenBazaar Are you a sports person or a creative one? I’d say more creative than sports, but I do enjoy sports as well even if I don’t have much time for it. I like playing around with music, recording keyboards, guitars, etc.

118

Post-work, what do you look forward to? I am working almost 24/7. But if I’m not working, I spend the day with my wife and two sons, or with friends. The best way to de-stress is hanging out on the weekends, and stop watching the price of Bitcoin. What is your concept of an ideal leisure time? I enjoy cooking and good music. So, we usually try cooking something different or new recipes. Do you have a passion for gadgets? Which was the last gadget you bought? I am definitely nuts about gadgets. The latest thing I’ve gotten is HTC Vive VR setup. It’s pretty amazing. This is for personal reasons although we have thought from time to time on how OpenBazaar could have some kind of VR component.

The most expensive purchase so far? VR because I also got a new PC that had all the equipment necessary for powering the VR hardware. What is the last book you read? Grit by Angela Duckworth

How often do you take a vacation with your family and friends? By far, which is your best-spent holiday? Every few months. We usually take the family to Orlando every year and also to Virginia Beach. We really enjoy being near the water. Which is a desired destination yet to be ticked off your list? Definitely want to go to Tokyo. Cooking or enjoying a good meal? I love cooking and then enjoying the meal! What is your favourite cuisine? Any type of Asian food is right up my alley – Chinese, Thai and Japanese… Anything spicy. Is there any social cause you are passionate about? I am not involved directly in any serious causes, but there are so many great ones. In particular, I’m very concerned about the situation in Syria and try to support causes that help relieve the suffering of children. As a father, it kills me to see children getting hurt in any way, whether it’s cancer or just being in a terrible part of the world.

As told to Madhurima Roy

International Finance Oct - Dec 2017

Oct - Dec 2017 International Finance For all magazine stories, visit www.internationalfinance.com/magazine/all-ifm-issues/

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