Finance

2019 is almost over and 2020 is nearly upon us. As expected, the world is continuously changing with new trends emerging and others dying out.

Here are 6 global trends for 2020, in no particular order.

Fintech in the Driving Seat

Business models will be driven more and more by fintech in 2020. Traditionally, entering the financial services industry was difficult, but fintechs have been finding ways in and disrupting existing status quos. This trend is, of course, driven by improved technology and adoption of such technology. Blockchain and cryptocurrencies are also contributing towards this trend.

Blockchain Coming of Age  

Real world financial services organizations are now beginning to implement and use blockchain for their day-to-day business. Euro Exim Bank, for example, uses blockchain and cryptocurrencies to settle global trade payments through its partnership with RippleNet. This trend will only grow stronger in 2020 with blockchain ultimately becoming an essential part of the IT and operational infrastructure of major financial institutions.

Banking Further on Digital

Banks have been adopting digital service channels and mechanisms for decades now, however, through 2020 and beyond, we are likely to see these businesses leaning far more towards digital. The role of physical branches is already in transformation, going from transaction-point to touch-point; a place for support, advice and human assistance rather a venue for transacting. Already, banks worldwide are reporting in excess of 50% of transactions arriving via digital and so it’s a no brainer that the trend towards digital will only further strengthen.

Robotics & AI

Financial services providers are already using robotics and AI to address pressure points, reduce costs and mitigate risks. But with robots becoming more and more advanced, and AI technology continuing to improve, it is possible that we may see the first customer service robots arrive on the scene in 2020. Of course, the first iterations are likely to be limited in their ability but over the next 3 to 5 years it is reasonable to expect further evolution of the technology and after that to see rapid increases in capabilities.

Increasing Cyber-Security Risks

Cyber-security risks are likely to further increase in 2020 and beyond. It is already one of the top business risks, especially for financial services. A 2016 survey by PWC found that 69% of CEO’s were somewhat or extremely concerned about cyber threats. The threat of a cyber-attack is only exacerbated by the following factors, which will only become stronger in the future: reliance on 3^rd party vendors, rapidly involving complex technologies, cross-border exchanges of data, increased use of mobile technology by customers, rapid growth of the internet of things and heightened cross-border information security threats.

The Asian Century

As we move into 2020, it’s only becoming clearer that we are witnessing the Asian Century. Asia is emerging as a key centre of technology driven innovation. According to figures published by PWC, Asia’s middle class is projected to grow by 180% between 2010 and 2040 and, at some point in 2020, the majority share of the population considered to be “middle class” is expected to shift from North America and Europe to Asia Pacific. Huge opportunities will open up in Asia and it will be the place to be for business in the medium and longer term, particularly for financial services.

What is ultimately clear though is that, along with increased risks and changing market environments will come abundant opportunity for trade, commerce and growth for all. Technology is levelling the playing field across the world and this will only spur growth and innovation in 2020 and beyond.

For the last few years, the word “Brexit” and the chatter around it has either set markets on fire or sent them reeling depending on how investors reacted to the news. But, what are the potential real-world impacts of Brexit, particularly on emerging markets?

Real World Impact

Whether it turns out to be a deal or no-deal Brexit, the EU will have to deal with a considerable amount of turmoil and adjustment, particularly in terms of trade. However, the same may not be true for emerging markets and perhaps even Britain’s other non-EU trade partners.

For decades now, trade with Britain has been ubiquitous with trade with the EU because of the single European Market. But this will all change with Brexit and depending on what the British Government’s stance on trade is, it could potentially be a windfall for emerging markets.

The EU Being a highly lucrative and well established market means that EU trade partners are often required to meet some very high standards, which some may even argue are too restrictive. However, once the UK leaves the EU, it has no need to continue to uphold the restrictions that the European Market places on some or all trade partners.

Post Brexit, if the British Government is one open to trade and commerce, we could see the UK becoming a far more accessible market for emerging market countries. In fact, in the immediate aftermath of Brexit, it is plausible to expect that the UK may even go out if its way to provide favourable conditions to emerging markets to incentivize trade. Let’s also not forget that most emerging market economies share historic ties with the UK through the Commonwealth of Nations and a shared history. In the most positive circumstances, Brexit could make the UK one of the most attractive and accessible developed markets for emerging market countries.

The Other Possiblity

While Brexit could be great for emerging market countries under the right conditions, things could easily go the other way too, particularly if Britain becomes more protectionist; following in the footsteps of the USA under Trump. With Boris Johnson at the helm, such a scenario is certainly a possibility. In such an event, countries like China, Japan and the USA will have an advantage since they already face high tariffs when accessing the European Market. Products from these countries will immediately be more competitive without the high tariffs imposed by the EU.

Some emerging markets that rely heavily on EU trade incentives and treaties such as GSP+ may also be adversely affected by Brexit regardless, unless the UK is willing to continue to provide such concessions or to adopt a near totally “free trade” stance.

Therefore, under these circumstances it’s difficult to be entirely certain of the impact of Brexit on emerging market countries’ trade with Britain. However, it is safe to say that, even if the UK was to adopt a middle-ground stance with regard to international trade, there would still be advantages to emerging market trade partners or, at the very least, no significant long-term impact to trade relationships with the UK.

While the EU’s PSD2 regulations became law in January of 2018, it was only in September 2019 that all of its effects came into full force.  PSD2 stands for “Payment Services Directive 2” and it has been hailed as a great revolution for financial industry, as it encourages competition by allowing non-banks to participate in the market and allows for standardized compliance standards for payments providers.

Why it Matters Globally?

While PSD2 is intended only for the European Union, it will have impacts around the world. This is because the EU is the world’s largest single market area and trades with partners across the world. PSD2 imposes severe penalties on those who don’t comply with them, and necessitate that all service providers to the EU comply in order to serve EU citizens.

The Impacts

PSD2 builds on older legislation such as the original Payment Services Directive of 2007. The laws affect the regulation of payments services in the EU and EEA and create a framework for information sharing between banks and 3^rd Parties. Readers may be familiar with the idea of “Open Banking”, which calls for banks to allow 3^rd party payments services providers to interact with banks via APIs. APIs provide standardized access protocols to ensure security of data and integrity of information.

PSD2’s overall impacts will be felt in three key areas of the payment services industries:

Consumer Rights: The regulations include large enhancements for consumer rights and call for increased transparency in payments processing and fee structures and also provides a clear framework for complaint handling.

Third-Party Access: As discussed above, banks must provide access to 3^rd party payments services providers.

Security: Strong customer authentication criteria is one of the most important features of these new regulations as they mandate 2 factor authentication and other security requirements when processing payments.

Global Impact Will Most Widely Be Felt Online

While PSD2 regulations many not have a major impact on day-to-day operations in other economies, for businesses connected online and or providing goods and services online, PSD2 will have numerous impacts.

On the positive side, enabling 3^rd party access to account information means that big banks will no longer hold a monopoly on payments services. 3^rd party service providers will be able to provide high quality of service and eventually competition will lead to innovation and overall benefits to the customer.

On the negative side, one of the more complex things for service providers, particularly in emerging markets, will be to ensure compliance in order to avoid penalties.

Overall Impacts

Ultimately PSD2 and the EU’s status as the world’s largest single market, is likely to drive change globally, particularly online. Numerous banks and other financial institutions around the world are adopting PSD2-like practices, some voluntarily and others as a matter of legislation.

Furthermore, the most significant benefit will be information sharing and an opening up of the payments services space. This will likely reduce costs in the long run and create an environment conducive to innovation and progress. More secure handling of information and transactions will also protect unwitting consumers from exploitation.

This environment will also create great opportunities for the more widespread adoption of alternative payments solutions, such as digital currencies and tokens, and also serve to create better and more efficient interfaces between traditional and alternative payment methods.

Regulatory compliance will be the main hurdle facing all participants, but this should be ironed out with time. All in all, PSD2 may well usher in a new “golden age” for the payments industry, this time for both consumers and providers alike.

For many investors who are not positively leveraged, hedged or otherwise financially positioned, a recession can mean large drawdowns in capital gains and serious reductions in or even complete cessation of dividend income. Unless you pay constant attention to markets, price data and other economic indicators, a recession could also take you by surprise. This is because, while signs appear long before the onset, they are subtle and easy to miss while onset is often rapid and chaotic. The Great Recession of 2008 is a perfect example.

However, there are ways to insulate your portfolio against recession risk by dedicating a sizeable amount of it towards industries that do well in recessions or those that aren’t significantly affected by them. With the last recession in the US now almost 12 years behind us, it’s important to prepare for the next one as they do historically tend to occur every 7 to 10 years.

So, if you feel we’re in for the next recession shortly or if you simply want to insulate your portfolio against the risk of recession, here are some “recession resilient” industries to put your money into.

The Industries for All Seasons

There are some industries that, as a result of their very nature, tend to carry on business as usual, even if the world is collapsing around them; because their products and services are “essential”, they tend to continue to maintain profitability and revenue during a recession with little to no adverse effects. These industries include:

Pharmaceuticals & Healthcare: People require medicines and medical care even if the economy is collapsing.

Waste Disposal: Waste disposal businesses and recyclers will continue to operate normally even during a recession.

Tax Service Companies: Surely, even in the event of an apocalypse, governments will find a way to still collect taxes.

Funeral Service Providers: Funeral service providers and associated industries will continue business as usual even during a recession, for obvious reasons.

Most of these industries aren’t high profit or high growth, but while others suffer in a recession, they will most likely continue to operate normally.

Good Time Industries

In bad times, people need something to take their mind off things and relax. During a recession, instead of shopping and big-ticket spending, people will look to make life a little better with small, easily and cheaply accessible pleasures like a beer or a bar of chocolate.

Good Time Industries include:

Alcohol and Beverage Producers

Chocolates and Confectionary Producers

Tobacco Companies

Streaming Services

Keep in mind though, that not all good time industries will do well during a recession. For example, restaurants and casinos tend to see significant declines as people feel less lucky and have fewer things to “celebrate”.

Selected Services & Discount Retail Industries

While most service industries will face hardships during a recession, some services like repair and maintenance will thrive. This is simply because people will be more interested in keeping what they have working, rather than buying new things or making large investments.

Another sector that actually does well during a recession is the discount retail sector. Large retailers that supply everyday items at cheap or discounted prices will see an upswing in business during a recession as people strive to stretch their limited resources as far as possible.

Why a Recession Can Be Good for Investors

Whether or not your portfolio is insulated against a recession, a recession can be a boon to investors in the long run. This is because, during a recession, companies that are inefficient or not competitive enough will be weeded out of various industries. This will ultimately leave only the highest quality companies remaining and also open up space for genuine, innovative new entrants once the recession ends. Ironically, strong companies are much easier to spot during a recession.

ODL or On-Demand Liquidity is the next frontier in the settlement of cross-border payments. It’s a massive enhancement to existing payment networks, which usually require participants to have pre-funded accounts and correspondent relationships, across all markets. To better illustrate this quantum leap in technology, ODL vs. Traditional is like going from VHS straight to Netflix.

At Euro Exim Bank, we are proud to be at the cutting edge of global payments through our partnership with RippleNet , the world’s pioneer and foremost provider of ODL payments networks.

OLD Vs. Pre-Funding: What’s the Difference?

To put it simply, ODL is significantly cheaper and less resource intensive than Pre-Funding.

When using traditional payments networks, participants are required to already have accounts in the origin and destination countries with funds already in these accounts, hence pre-funded. This is expensive as there are costs associated with maintaining availability of funds. Furthermore, the complex system of payments that traditional networks use, including numerous intermediaries, adds to cost.  

An ODL network connects participants to a digital asset exchange where liquidity is available on-demand in the form of a cryptocurrency such as Ripple. These cryptocurrencies or digital tokens can then be transferred to the receiving party, who can then exchange the cryptocurrency back for the fiat currency of their choice, or even hold on to the digital asset for future use.

With an ODL network, the need for intermediaries has been eliminated and because of the nature of digital assets and transactions, value transfer can happen instantaneously. The nature of blockchain and digital value transfer also mean that this whole process doesn’t cost that much and the infrastructure required to operate it at the point of payment and receipt of payment is minimal.

Here’s a graphical illustration of how it works:

Great News for Emerging Markets

The biggest beneficiaries of ODL international payments networks such as RippleNet are emerging markets and markets in troubled areas of the world. As with much of the digital revolution, the digital finance revolution is levelling the playing field and democratizing global payments networks. This is allowing for everyone to have a fair chance at a reasonable price. Here are some of the most important benefits of ODL networks for emerging markets:

Low Cost – For emerging markets cost is a huge factor. Due to competition, margins are sometimes razor thin and a low-cost payments system can ensure that entrepreneurs get to keep more. Low cost can also be a barrier to entry and systems such as these can make international markets more accessible.

No Requirement for Pre-Funding or Foreign Exchange – As already discussed, ODL networks remove the need for pre-funding. They also remove the need to find foreign currency such as USD or EUR to settle transactions. Many emerging markets often face foreign exchange shortages, leading to exorbitant exchange rates adding to costs and reducing efficiency. ODL networks allow for direct conversion between the digital asset and the destination fiat currency and vice versa.

Fast & Secure – ODL networks, blockchain and cryptocurrencies all combine to form a highly secure, highly efficient and virtually instantaneous settlement system. What normally took 3 to 5 business days can now be accomplished in less than 3 to 5 minutes. For entrepreneurs in emerging markets who often face cash-flow difficulties, this increase in speed can be a life saver.

Reduced Restrictions – As digital payments are democratizing the payments landscape, they are also reducing restrictions on doing business. Payments are no longer subject to the whims of payment networks owners. This means all parties are free to transact, bypassing various restrictions, sanctions and other unfair and punitive measures in place on traditional networks.

A New Era of Global Payments

As other industries have jumped into the digital age, now finance is too. While the road ahead for cryptocurrencies, blockchain and ODL networks is long, it won’t be long before adoption rates skyrocket as people around the world experience the ease, security and convenience of futuristic global payment settlements.

If you are interested in using ODL via RippleNet to settle your trade payments, speak with one of Euro Exim Bank’s experts today.

How Honey is Helping Diversify Zambia’s Economy

Zambia is traditionally known for its copper exports, being the world’s second largest miner of the metal. The country is also one of the fastest growing economies in Africa. However, Zambia is still held back by unemployment, underemployment and poverty. To combat these issues the government has taken various steps to diversify Zambia’s economy and reduce its reliance on mining and minerals.

One of the industries springing from this push for diversification is bees honey. Zambian honey has since grown in popularity and has transformed into one of the businesses that is providing opportunities for entrepreneurship and empowerment, for women as a well as men.

A Sweet Business

Zambian honey is distinct in terms of the diversity of its flavour profile. As the honey is cultivated and cultured using traditional methods, as opposed to commercial scale farming, each hive is able to offer its own flavour profile. The flavour of the honey is impacted by what the bees in each hive are feeding on and thus, from locality to locality, there is a massive diversity of flavour. This helps distinguish Zambian bees honey from other origins, which are often pretty homogenous in terms of flavour profile.

With the increase in popularity of the product, the bees honey industry in Zambia is seeing much investment into the sector. With this investment is also coming modern methods of farming, which are reducing the labour intensiveness of the process whilst increasing productivity and also access for women into the industry.

For example, female bee keepers in the town of Kapiri Mposhi, a town north of Lusaka, came together to form a cooperative called the Kabule Women’s Group. The cooperative organized for and received 150 modern hives, which transformed the community’s productivity from 45 buckets of honey to 300 buckets of honey in a single cycle.

An Opportunity for Entrepreneurship and Economic Emancipation

The Zambian Government’s decision to push for diversification has seen it providing various incentives to the beekeeping industry. This has led to many new opportunities for both men and women in terms of entrepreneurship and an escape from poverty.

The positive change is visible in the numbers as Zambia’s official export figures presently indicate that, over the last 5 years, bees honey exports have increased by 700%. This is a significant achievement and is providing much needed income for many Zambians. Small businesses and women entrepreneurs are particularly benefiting from this.

Going Big

With the success that Zambian honey has enjoyed in the region, the industry now has its sights set on the big markets in Europe, the US and Asia. Exports to these markets have already begun and this is doing wonders for the industry as a whole as these markets expect high standards and various certifications.

As a result of this and joint efforts by various collectives, many producers are now HACCP and ISO certified for food safety, bringing Zambian honey in line with international standards. Honey exports are positioned to be a key component in the future growth of Zambia’s economy and its people’s fight for economic emancipation through job and wealth creation.

Facing the Challenges of an Emerging Market

Being an economy in an emerging market, particularly in Africa, presents certain challenges. One of these is cross-border trade settlements, which can be cumbersome and expensive when done using traditional methods. In fact, the smallest producers are at the greatest disadvantage when using traditional payment networks such as SWIFT.

That is why we at Euro Exim Bank are part of a revolution in global trade settlements, through our partnership with RippleNet, which uses on-demand liquidity and the digital asset Ripple (XRP) to facilitate virtually instantaneous cross-border payments that are cheap and accessible to even the smallest of businesses.

If you are looking to make or receive international payments quickly, easily and economically without discrimination, speak to one of our trade experts today.