Hong Kong’s MA has already gone ahead and licenced eight virtual banks from a pool of more than 30 applicants. “The new digital bank licences mark the next chapter in Singapore’s banking liberalisation journey,” Tharman Shanmugaratnam, head of the Monetary Authority of Singapore, had said in a statement.

Singapore and Hong Kong are highly banked regions with close to 95 percent of the population in both regions having access to banking services. And the traditional banks in the region have deeply entrenched operations with a stranglehold over the banking market while enjoying high levels of customer trust. In addition, these traditional banks have enabled a fairly high level of digitalisation compared to their peers in the region.

HSBC, for example, claims that it is already a digital bank with 90 percent of transactions happening digitally in Hong Kong. So, in these highly advanced and banked markets, is there space for standalone virtual banks? What are the make and break factors that will determine the success or failure of virtual banks? And which jurisdiction among Hong Kong and Singapore is likely to see virtual banking success in five years?

Banking the underserved and unhappily served

Razer, basically a digital gaming hardware company that has achieved success with a payments app in Southeast Asia, is one of the companies interested in applying for a virtual banking licence in Singapore. As soon as Singapore’s MAS announced its decision on virtual banking licences, Razer’s chief strategy officer Lee Limeng had said in a statement that the company would ‘definitely consider’ applying for a virtual banking licence in Singapore. Razer told International Finance that the company had no further comments on the matter at this moment.

In July, Reuters reported that Grab, a Southeast Asian unicorn that started off primarily as a ride-hailing company, was gearing up to apply for a virtual bank licence. A virtual banking licence in Singapore could help Grab to benefit from its data on mobility metrics, payment transactions, and consumer behaviour.

The entry of Razer and Grab, which are companies with large existing customer bases, could shake up Singapore’s banking sector so far dominated by DBS Group, Overseas-Chinese Banking Corp, and United Overseas Bank. With a banked population of close to 96 percent, which is the demographic that fintechs like Grab and Razer are targeting at? What is the differentiated value proposition that they are trying to deliver?”

Grab first created its mobile wallet GrabPay to meet the challenges of cash in Southeast Asia. While SMEs contribute more than 50 percent of Asean’s GDP, two-thirds of SMEs cite business funding and financing as their biggest problem. Grab claims to have served more than nine million micro-entrepreneurs over the last six years.

It expects to leverage scale and data insights to bring financial services products to market at a more competitive price point than anyone else. With its Grab SuperApp, the fintech already provides a wide range of earnings and financial security opportunities for entrepreneurs in Southeast Asia. It presents a formidable challenger bank contender for the existing banks, sitting on a data goldmine.

Singapore’s 2018 SME Development Survey showed that 50 percent of Singapore SMEs face financial challenges in managing cash flow, liquidity, and credit risk, up from 38 per cent in 2017. SMEs make up close to one-third of all companies in Singapore. Regionally, more than half of all micro-enterprises and SMEs in southeast Asia faced a financing gap of about $175 billion, according to McKinsey.

Singapore’s Business Times had reported early this month that OCBC is engaged in discussions with Keppel Corporation, peer-to-peer lender fintech startup Validus, and venture-capital fund Vertex Ventures to form a digital-bank consortium.

The major banks in Singapore are risk-averse in lending to SMEs, especially those that do not have a track record of operating for more than three years. These SMEs typically address their financing gaps through financing through family and friends, angel investors, and peer to peer lenders. The virtual banks are expected to address the needs of these segments using technology and also to potentially nudge the incumbent banks to examine how to serve these small businesses.

Validus itself is a good example of a fintech reaching out to the underserved SME segment of Singapore. The P2P lender works with a number of large enterprises in Singapore to match the group of small vendors and contractors that have contracts with the large companies with financing. It is in the interest of the large enterprises to ensure that their small enterprise vendors are sufficiently financed.

Validus uses the risk profile of the large corporates to finance the SMEs at a lower cost. Validus said in the press release that it had facilitated over 5,000 loan facilities, amounting to nearly S$250 million (US$184.4 million) in growth financing to Singapore’s SMEs without needing to pledge hard collateral.

Since 2015, Validus has disbursed an average of S$20 million (US$14.8 million) per month and claims to have brought down the financing costs for SMEs by almost 80 percent as compared to other sources. A Validus spokesperson told International Finance that the company is reserving comments on the virtual banking licence for the moment.

Behind the Singapore government’s decision to licence three wholesale banks focused on SME lending is the need to digitise SME services and to increase SME productivity. A lot of SME services are not digitised while at the same time, the SMEs are getting digitised to a certain extent. Services such as invoice discounting or getting a letter of credit are not fully digitised in Singapore and Hong Kong.

Singapore has a major government programme called SME Go Digital, with a focus to increase the productivity of SMEs through digitisation. “This means that the financial services aspect of the SMEs must also be digitised. Which includes digitising their payrolls, expense management, claims management, and the reconciliation of their accounts payable and receivable to bring efficiency in all these areas,” Varun Mittal, Ernst & Young’s Global Emerging Markets FinTech Lead told International Finance.

“The overall aim is to make SMEs more efficient. Hence, the focus is to build financial institutions that can serve these types of digital-native businesses and customers. The premise is that since these niche financial institutions do not have legacy technology, they can leapfrog certain process steps, focus on innovation, and drive financial inclusion through innovation,” adds Mittal.

The three virtual wholesale bank licencees cannot take deposits from individuals except in the case of fixed deposits of at least SG$250,000 but they will maintain business deposit accounts for SMEs and other businesses. Although capital and liquidity rules or the wholesale virtual banks are the same as existing wholesale banks, and they are mandated to keep a minimum paid-up capital of SG$100 million.

” Mobile penetration is extremely high in Singapore at 144 percent and 22 percent of the population is made up of millennials. According to an Ipsos survey, 48 percent of Singapore millennials who regularly check their bank account do so through mobile phone. There is possibly another segment of the Singapore banking market who are not adequately supported by the incumbent banks – who can be called the ‘unhappily served’ segment of the population.

For example, according to a survey published by Blackrock early this year, 90 percent of Singapore millennials said that they were overwhelmed by the sheer number of investment options available while 77 percent found investing too hard to understand due to the “lack of clear and user-friendly information.” Today’s customers want banks to empower them with the right financial decisions. But are banks doing it? Probably not.

“The core function of a bank is threefold. First, to safeguard the customer’s assets. Second, to enable their lives – such as helping them make payments or lending money. Third, to help them build their wealth. Today with regard to the third aspect, there is an emerging sense from customers that banks have moved to selling products, rather than empowering them,” Harjeet Baura, Partner and Asia Pacific Digital Banking Leader, PwC Hong Kong told International Finance.  How do banks use technology to nudge customers and help them make smarter decisions? This is the function the traditional bank relationship manager used to do for customers.

“When you approach that problem from a tech mentality you look at that problem very differently compared to a bank and that is where real innovation begins. Banks in the region can do that because they still retain customer trust, unlike say, the UK banks after the crisis. But customers are not receiving that education and empowerment that they are expecting from traditional banks and many feel that they are being sold to,” adds Baura. This is one aspect in which virtual banks can bring a differentiated value proposition.

Another value proposition is convenience. An ecommerce company understands its customer’s behaviour, account, and how much the customer is selling to give a loan on the basis of the records it has. The value proposition of a virtual bank run by an ecommerce company is that the customer need not present further documents for financial services. “A ride-hailing company might be able to give a driver a loan to buy a car because it knows when, where, and how of the way he operates and issues the loan without further documentation. These kinds of user experiences can drive people towards virtual banks run by the technology companies,” says Varun Mittal of EY

Hong Kong – targeting the mobile banking underbanked

On the surface, Hong Kong might seem to have similar dynamics to Singapore in the sense that 96 percent of the population in Hong Kong is banked. But there’s a major difference – according to a JD Power survey, Hong Kong is significantly underbanked as far as mobile banking is concerned – only 30 percent of Hong Kongers interacted with their banks through mobile phones compared to 41percent in Singapore and 78 percent in China.

Also, according to the same survey, close to one-third of Hong Kongers are considering switching their main bank account compared to around one-fifth of Singaporeans. In Hong Kong, the licenced banks control virtually 99.3 percent of total loans. Among the licenced banks, Standard Chartered, Bank of China (HK Holdings), and HSBC (with unit Hang Seng Bank), — control two-third of retail banking and three-fourths of mortgages and credit cards. So, is there space for eight virtual banks?

A spokesperson for SC Digital told International Finance that the fact that Hong Kong is underbanked as far as mobile banking is concerned and also the fact that online services of traditional banks are just digitalised versions of traditional services is the reason that they believe that virtual banks can make inroads into the Hong Kong banking market with niche products.

“We will be bringing together a new brand, a new technology stack, and a whole new customer experience that will be cloud-based and service-led, leveraging on our unique partner ecosystem, including with PCCW, HKT and CTrip.com to deliver a differentiated banking experience for customers,” the SC Digital spokesperson told International Finance. We will update the market with more details of our products and services closer to launch,” the spokesperson added.

One of HKMA’s key goals for licencing virtual banks is to promote financial inclusion for target retail segments and SMEs. Of the eight licenced virtual banks in Hong Kong at least four have an explicit SME financing focus. Standard Chartered and Bank of China (Hong Kong) are among the eight virtual bank licencees in the city.

The others are ZhongAn Online, WeLab, Ping An OneConnect, a unit of Ping An Insurance Group, Ant Financial Services’ subsidiary Ant SME Services, a Xiaomi-AMTD Group venture named Insight fintech, and the Fusion Bank consortium — including Tencent Holdings, ICBC (Asia), and Hong Kong Exchanges and Clearing Limited (HKEX).

” Ant SME the virtual bank of Chinese fintech giant Ant Financial and Ping An OneConnect the virtual bank of Chinese financial conglomerate Ping An are going solo for their virtual banks. At the same time, SC Digital is a consortium between Standard Chartered, telecom majors PCCW and HKT and leading Chinese online travel company CTrip.

Chinese internet giant Tencent has won a virtual banking licence in a consortium. The impact the virtual banks are trying to make is on customer experience and the effect of the competition is already visible in the recent actions of the traditional banks who have mostly done away with or reduced minimum balance fees in Hong Kong. Virtual banks are not allowed to charge anything for low balance.

Carmen Lee, a spokesperson for Tencent, told International Finance that with regard to Fusion Bank, the consortium’s digital bank, the focus is on delivering a better banking customer experience through the use of technology. “As a virtual bank based in Hong Kong, local customers are Fusion’s primary target users as we hope to promote financial inclusion in Hong Kong. We also aspire to understand customer needs better, deliver solutions at a more cost-efficient manner, and adapt to evolving market changes quicker. Fusion is now in the preparatory stage and we are hoping to gradually put (it) into service as soon as possible,” Lee added.

Does the consortium model provide a workable model for running a virtual bank or is going solo better? “This consortium model shows how potentially powerful such partnerships can be and how they can offer services that traditional banks are not able to deliver. In addition to quickly achieving scale, partnerships also help to bring a differentiated value proposition to the market. The winners are going to be the virtual banks that bring a differentiated proposition to the market quickly – different to the way banks operate today in Hong Kong and across the region,” said Harjeet Baura of PwC Hong Kong.

Millennials have active lifestyles and they seek curated lifestyle experiences, so bank in partnership with a travel company can get involved in the end-to-end customer journey with regard to travel. The involvement can be from the moment they start planning to save for the holiday right to providing the financing for the trip and to the travel experience, the ability to pay for shopping and the transactions overseas, in the same manner, a credit card distribution bank would be doing today. In this regard, the SC Digital spokesperson told International Finance, “Leveraging available technology, we can provide products and services that are more contextual and personalised to customers.”

What makes a virtual bank successful?

Virtual banks that have attained profitability have done so by growing personal loans massively. The key make or break factors for virtual banks include achieving scale in terms of customers, lowering operating costs over time, and getting the business model right. According to Varun Mittal of EY, for digital banks, one make or break factor is whether the virtual bank can become the primary bank of its customers.

“The measures for success would be the share of wallet a virtual bank has, or the share of services that it has, the percentage of loans it gives, the insurance it sells, and the share of wealth management it does. If a virtual bank’s customers are mostly secondary accounts, the question is how can the bank be the best secondary account possible as well as how the bank can build a sustainable business out of it,” he adds.

The winners are going to be the virtual banks that bring a differentiated proposition to the market quickly. And it is also about the digital banks being able to integrate the differentiated proposition into how people live their lives, says Harjeet Baura. Integrating financial services and payments into a chat platform is a great example of such integration. Baura cites the example of Russian digital bank Tinkoff which is public about the fact that it wants customers to visit its app ten times a day. Today, banks have to be on the same real estate the customer lives his life.

“Customers do not check their bank balance ten times a day, but they do live their lives on many apps and platforms – people check their chat messages with friends many times a day and they may also pay money to buy coffee and other daily goods and services many times a day through a payment app. And when you build a platform where people come in ten times a day and you enable their lives through financial services and payments on top of that, you have a great business model,” adds Baura.

Kakao Bank of South Korea, one of the few, if any, profitable virtual banks in the world, is a clear example. Launched in mid-2017, by September 2019, Kakao had over 10.69 million customers with total deposits at 19.9 trillion won ($1.7 billion) and lending at 13.6 trillion won ($1.1 billion). It made a profit of 15.3 billion won or $13.1 million in the first nine months of 2019. Kakao Bank was built off South Korea’s highly popular messaging platform, Kakao Talk.

60 percent of the Korean traditional banks costs come from branch operations. With mobile-only operations, Kakao reduced overseas remittance commissions to one tenth of existing banks and offered much better prices for deposits and loans. What’s more, it cut in half the number of steps customers need to take to open accounts and access financial services, bringing real convenience.

Fact is with virtual banks, top-class customer experience is a given expectation. Where virtual banks can make a difference is in offering differentiated products with convenience. The long-term success of the virtual banks depend upon differentiated products – technology is just an enabler. The virtual bank licencees realise this as we understand from the SC Digital spokesperson’s statement that “digital and technology, in our view, are enablers. Only when we solve real customer pain points are we bringing something real to the table, and that’s our goal.”

Hong Kong vs Singapore virtual banks: A different approach?

The HKMA and Singapore’s MAS have got their regulatory requirements right although their prerogatives and approaches are different. According to MAS, to get a virtual banking licence, a company needs to have S$15 million paid-up capital and paid-up capital of S$1.5 billion within three to five years’ time of setting up business. In addition, making the audience of the licencing process clear, MAS also stipulated that at least one company that holds a 20 percent stake in the applying group needs a track record of three years running a technology or ecommerce business. Also, MAS requires applicants to provide five-year financial projections with a clear road map to profitability.

MAS does not want consistently loss-making technology or ecommerce companies to apply for a licence. Also, it is interesting to note that Singapore does not expect the virtual banks to destroy existing value or, in other words, it does not want virtual banking innovation in a way that destabilises the existing banks’ businesses. This is also probably the reason why MAS has limited the number of licences given that traditional banks were allowed to run virtual banks outside of the quota since 2000.

Unlike the HKMA, the MAS seems to be keen to ensure that the virtual banks prove themselves first. A full-fledged bank status will be provided after MAS is assured of the management’s ability to manage risk. The HKMA’s capital requirement of HK$300 million or approximately $40 million is seen as a high bar, although the HKMA’s concern as well is about stability and safety of customer’s money.

At least one fintech startup withdrew its Hong Kong virtual banking licence citing the high cost compared to the European Union where virtual banks need only approximately $6 million to start. Given the eventual capital requirement of $1.5 billion, the MAS is ensuring that only the financially strongest of the technology companies will apply for the licences. MAS’ interest also seems to be in the need to introduce digital innovation and better customer experiences at the incumbent banks through the backdoor.

A challenge for Hong Kong virtual bank operators is the fact that millennials in the region prefer a combination of high technology integration in their banking experiences with a high touch experience, which would mean higher costs and investment in more human resources for on-demand interaction.

One pertinent question that remains is whether Hong Kong needs eight virtual banks at the moment? Is the HKMA experimenting and expecting that there will be some consolidation down the line? Outwardly, it might seem that it is willing to see out which of these challenger banks will be successful in five years compared to the MAS approach of ensuring that only the potentially successful enter the game. In Singapore, the two-staged licencing process also ensures that new entrants can course-correct after the first stage, if need be, and then target a larger market.

Both Hong Kong and Singapore are expecting the virtual banks to take their virtual banking value propositions to populations outside the cities – the Greater Bay Area, which has a population of 68 million, for Hong Kong banks, and the Asean market for Singapore banks – while retaining Singapore and Hong Kong as their headquarters.

“Hong Kong has always played a pivotal role in connecting businesses in Greater China with the rest of the world and Singapore has similarly connected Southeast Asia. In future, that will continue, but the focus with the digital banks will be around connecting the digital economy,” says Harjeet Baura adding that virtual banks in both regions will have a significant wealth play considering the concentration of wealth in the region.

Varun Mittal of EY warns that comparing virtual banks in Singapore and Hong Kong is not an apples-to-apples comparison. “It is important to note that the premise of the digital banking licence in Singapore is that it is sufficient to meet the demand for now; in future, if the country needs more digital banks, it can add more. Hong Kong has other objectives such as connections to businesses in mainland China.

So the difference between Singapore and Hong Kong is not just a matter of numbers, but it is also about the amount of capital, the extent of controls, the overall economic objectives, and the primary concerns of the banking regulator that mandates the need for more players,” Mittal told International Finance.

In Singapore, “MAS supports innovation while seeking to achieve a level playing field among the players. This is why the capital requirement and the end-stage for virtual banking licence is the same. The Singapore model seeks to serve the unserved and underserved segments of the banking market such as the SMEs, the gig economy and the silver economy,” he adds.

The post Virtual banks in Singapore and Hong Kong: Who has the edge? appeared first on International Finance.

Finnovista predicted that Mexican fintech startups have the potential of taking over 30 percent of Mexico’s banking market in the next 10 years and this is where fintech startups in Mexico can make a difference to the common man’s life considering the archaic laws under which the banking system in the country operates.  Yet another survey revealed that the business models of a majority of the fintech startups in Mexico’s are designed to tap into the need for financial services of those sections of the society that are not part of Mexico’s formal financial system.

In short, these Mexican fintechs seek to provide affordable financial services to the unbanked or underbanked Mexicans. 20 percent of the Mexican fintechs are focused on payments and remittances while 14 percent are focused on consumer lending.  A minority of the Mexican fintech startups are focused on providing services such as credit scoring and other payments solutions including cross-border trade.

In spite of the potential it possesses, the Mexican fintech system still remains relatively small. According to a report published by Ernst Young, 36 percent of Mexicans have adopted the services provided by fintechs.  The percentage is higher when compared to a global average of 33 percent.

In Mexico, the birth of fintech startups over the past few years. has prompted many traditional financial services providers to actively become interested in getting a foothold in fintech innovation through mergers and acquisitions. BBVA Mexico – Mexico’s largest financial institution with a financial services market share of 20 percent – acquired fintech startup OpenPay in 2016. Similarly, fintech startups also rely on traditional financial institutions or banks for funds or to boost their customer base. The Mexican government has brought about a number of regulatory changes to help fintechs flourish in the country. In fact, Mexico became one of the first countries to bring in a comprehensive fintech law in 2018 to regulate the sector.

Recently, the Comisión Nacional Bancaria y de Valores – the Mexican banking regulator, revealed that 85 new fintech startups have applied for licences under its new fintech law. While over the years, traditional banks have failed to accelerate financial inclusion in Mexico, fintech startups have the potential to help achieve the government’s aim to make Mexico a cashless economy while driving higher financial inclusion.

Mexican fintech startups are on investors’ radars

A research report published by Finnovista revealed that around 63 percent of the fintech startups in Mexico have received external funding. Out of those who have agreed to take part in the research, around 62 percent of them revealed that they were in the market in search of funding. These figures highlight the role of fundraising and venture capital firms when it comes to the Mexican fintech sector.

Also, 69 percent of these startups have received funding from a third party in the market. However, only 4 percent of the total startups surveyed have raised funds of more than $10 million.  While around 18 percent of them have raised around $100,000 to $500,000, interestingly, 44 percent of them have raised investment of less than $100,000. The total investment accumulated by the Mexican fintech startups is estimated to be around $800 million.

The CEO and co-founder of Smart Lending – a Mexico-based financial services company that provides mortgage loans digitally – Bernardo Silva told International Finance that, since Mexico is one of the strongest fintech ecosystems in Latin America, a lot of external investors have their eyes on Mexico. According to him, the fintech sector in Mexico provides tremendous opportunities to investors to participate in fintech projects of various dimensions.

“As for the funding environment in Mexico, it is very competitive, the private equity investors, mainly banks or investment funds, are those who participate in the financing of new or small projects in the financial sector. In our experience, we have recently been recognised by DILA Capital, Jaguar Ventures, and other international investor angels, including founders of similar companies in the United States, securing US $80 million in capital and debt to operate and grant mortgage loans,” said Silva.

A spokesperson for Albo,  a leading Mexican challenger bank, corroborated the view that Mexican fintechs were attractive targets for investors. “A lot of funds are eager to invest in the country and fintech firms. That’s why we have seen a lot of huge investment rounds. Albo, for example, managed to raise 7.4 million dollars in a Series A investment round in January this year, the spokesperson told International Finance.

Challenges with old regulations in Mexico

Prior to the introduction of Mexico’s fintech law in 2018, the sector in Mexico was highly unregulated. Some of the conventional financial activities carried out by fintechs now such as crowdfunding, financial consultation, loans to SMEs and individuals, payments and remittances and foreign currency exchange services were unregulated.

Another problem for the Mexican fintech sector was the lack of supervision from the National Banking and Securities Commission. Neither the consumers nor the investors were provided with any kind of security despite the existence of two consumer protection bodies in the Commission for the Protection and Defence of Users of Financial Services (CONDUSEF) and the Federal Consumer Protection Office (PROFECTO).

To put things into perspective, the legislations were highly inadequate to monitor the activities carried out in the fintech sector. Even though regulators amended various laws to bring in stability and bring the fintech sector under its blanket, such attempts proved futile. These very challenges faced by the Mexican fintech sector led to the creation of the new fintech law.

What is the impact of the Fintech Law 2018?

The financial technology Institutions law (Fintech Law) was enacted on March 9, 2018 to promote financial inclusiveness in Mexico and to build a regulatory framework aimed at the fintech sector. It also aims to promote the development of financial services, regulate competition, accelerate Mexico’s financial inclusion and also position Mexico as the strongest fintech ecosystem not only in Latin America, but globally. The law also aims to promote innovation and provide testing grounds for new technology; facilitate innovation experimentation; and encourage the sharing of data between different players in the financial sector.

The CNBV, Mexico’s central bank, published certain general provisions in the Federal Official Gazette on September 10, 2018. The provisions made it mandatory for the Mexican fintech startups to follow proper documentation and licencing processes before carrying out any activities related to fintech. The provisions also gave the Mexican central bank and other authorities the ability to supervise and monitor the activities being carried out in the fintech sector.

The fintech law also created the anti-money laundering provision to prevent or detect transactions that could lead to fraud or money laundering. Despite the central bank publishing the general provisions of the fintech law, it is expected to amend or further develop the provisions of the law in the near future.

While speaking about the new fintech regulations in Mexico, co-founder and CEO of Smart Lending, Bernardo Silva told International Finance,“As far as Smart Lending is concerned, the open banking regulation being pushed through by the Mexican government could provide a huge benefit. This regulation will allow us to have equal conditions in terms of obtaining information from potential clients. This will allow us to perform a better risk analysis, to better understand their finances and, therefore, will give us the opportunity to lend to more clients and at lower rates, it will be for the benefit of the entire market.” However, according to him, the legal process of recovering a property in case of defaulting customer is arduous and requires a more balanced approach.

Albo, on the other hand, believes the new regulations are necessary but calls for improvement by better understanding the new technologies and the regulator being faster in adapting to innovation and the new initiatives and services offered by the fintech companies.

Mexican fintechs drive efficiency in financial system

Fintech startups are definitely driving efficiency when it comes to the financial system of Mexico. A Mexican can today send money to another part of the globe just by logging into his mobile phone. Smart Lending, for example, has redesigned the experience of acquiring a mortgage loan focusing on the needs of the consumer, the digitalisation of operations, and the attention to customer service by leveraging a high degree of technological and financial knowledge. “We improve and update mortgage processes and procedures that are currently frustrating, bureaucratic and slow; and that without a doubt should remain in the past,” says Smart Lending’s Silva.

“We are the only automated platform in Mexico that provides a completely online experience and we have the power to adapt the credit products based on customer needs. To mention some technological solutions, we have automatic integrations for the validation of income and credit history and we make appraisals with big databases,” added Silva.

Meanwhile to access Albo’s services, a consumer does not need to walk into the nearest branch, but all he needs to do is download Albo’s app and his bank account will be ready within the next five minutes and free of cost. Such is Albo’s business model that it does not need to charge any additional cost from its clients. While the traditional way of opening a bank account by walking up to the branch and filling up paperwork would require a minimum of 24 hours, the same can be done within five to ten minutes on Albo’s app. Same goes with applying for loans, deposits, withdrawals and transfer of funds.

Where Mexican fintechs outdo banks

Fintech startups in Mexico have been so successful because they tap into those sections of the market which are often overlooked by traditional banks. In Latin America, Mexican fintech startups have caused disruption throughout the lending, payments, trading and crowdfunding sector.

While traditional banks in Mexico have been operating in the country for a very long time, they are still not easily accessible by the unbanked or underbanked Mexicans. The very problem of access is being solved by the fintech startups. The digital products and services offered by fintech startups are easily accessible compared to products of traditional banks.

Traditional banks offer their products with high commission and long operating processes. Fintech startups such as Albo are taking on the traditional banks by providing affordable services that are accessible through a digital device.

Many fintech startups have taken advantage of the low-quality service provided at a high cost when it comes to cross-border transfer of funds. Similarly, fintech startups have also targeted the 69 percent of Mexicans who still do not have access to credit. Many startups are now offering fast and easy international money transfer services and also offering credit products at a lower and competitive rate.

Collaborate or compete with banks?

But are traditional banks willing to willing to collaborate with fintech startups? When International Finance asked the same questions to Smart Lending’s Bernardo Silva, he said that there is a huge possibility of collaboration between with traditional banks in Mexico because fintech startups could gain from these banks’ size and the scale they operate in, the way they raise capital and the cheap capital cost they handle. He revealed that Smart Lending seeks such kinds of collaboration as it would improve its product offerings.

Albo, too believes there is potential for such collaborations as its ultimate goal is to improve client experience. However, Albo did also point out that many traditional banks in Mexico currently do not have the technological infrastructure to form alliances with fintech startups. Similarly, PayU the fintech and electronic payments division of Prosus, also revealed its priority is growth and to improve Mexico’s financial ecosystem. Therefore, it is open to and actively seeking partnership opportunities. PayU is also working closely with banks in Mexico to improve its product offerings

Are digitalising banks a threat to Mexican fintechs?

While the transition of many Mexican traditional banks into the fintech sector provides an opportunity to collaborate and form alliances, it also brings along a degree of threat to the fintech startups. The size and structure of the traditional banks that are operating in the market for years might overshadow the newly formed startups. But according to SmartLending’s Bernardo Silva, the fintech startups have an edge over the traditional banks because of characteristics such as speed, convenience, and transparency.

In this regard, he told International Finance, “It is true that every day more traditional Mexican banks add similar products and services to fintech companies, they don’t want to be left behind in this technological revolution, but it’s also true that fintech’s DNA is made up of innovation, extensive use of technology and a 100 percent customer-oriented approach, which makes it difficult for banks to compete against fintech.”

While PayU, on the other hand, sees the traditional banks’ entry into the fintech sector as a possible sign. PayU believes it represents an understanding across the industry that there is a need to innovate especially in the way the players in the fintech sector deliver banking services, particularly within densely underbanked populations.  However, PayU highlights that the investment from fintech in technology is superior to that of the legacy banks as it underlines its core business approach. PayU even states that the real threat is faced by the traditional banks and not the fintech startups as technological investment is key to survive in the Mexican financial ecosystem.

Regulatory flexibility and dynamism is key for Mexican fintechs

Authorities in Mexico are not oblivious to this fact and the fintech law proves that. Even though it is at its initial stage and various amendments are anticipated, the law aims to provide a regulatory framework and protect the players in the sector. It is highly important that regulators understand the rapid changes taking place and keep themselves up to date with regards to innovation in fintech. The growth of fintech will also depend on the rules and regulations that the regulators will set and the enabling ecosystem they create.

The post Mexican fintechs are daring to take risks which the banks didn’t appeared first on International Finance.

The KPMG Pulse of Global Fintech report published early this year showed that there is an increasing interest in Ireland from fintech companies looking to establish a European presence. One report showed that 55 fintech companies established a base in Ireland creating at least 4500 jobs in 2018.  “In 2018, we’ve seen a lot of financial services companies and fintechs establish operations or grow their footprint in Ireland” Anna Scally, Partner and Fintech Lead, KPMG in Ireland, said in a press release.

Scally also added that traditionally these companies might have built their businesses in the UK but are choosing Ireland because of the Brexit uncertainty. She noted that many of these companies were at that time working with the Central Bank of Ireland to obtain licences that would enable them to continue to deliver their products and services across the European market in the event of a hard Brexit.

AssureHedge is an example of how Irish fintech companies are leveraging Brexit to their advantage. The company offers a range of hedging instruments to help clients prevent unexpected currency losses — and is making its products available to smaller corporations, SMEs and new entities.  AssureHedge’s differentiator with respect to competition are products that also help clients to benefit should the rate move in their favour.

An AssureHedge spokesperson told International Finance that Brexit might be Ireland’s opportunity to grab the European fintech hotspot advantage from London. “Ireland has strong competitive advantages and is uniquely positioned to be a significant global fintech hub. Our vibrant tech talent-based ecosystem and low tax rates make us a highly attractive destination for international fintech firms.

As a currency hedging fintech, AssureHedge expects to gain from Brexit. Brexit has heightened many businesses awareness of the need to hedge currency exposure to protect profits. “As Brexit drags on, we have seen an increase in the level of understanding businesses now have to their hedging needs. With this increase in the potential customer base and our unique offering in the marketplace, Brexit offers a unique opportunity for Assure Hedge to capture a greater market share sooner than might have been possible in less turbulent market conditions,” the AssureHedge representative told International Finance.

In the view of J.F. Clarke, Market Advisor for Financial Services at Enterprise Ireland, there is a possibility that Brexit could give Ireland a competitive advantage in financial services. The reason is that regulatory changes around Brexit will give the Irish business ecosystem a boost — and reroute companies seeking to trade in the EU to Ireland.  With Brexit, Irish companies will be able to operate and move easily across Europe compared to UK companies as the Common Travel Area shared between the two countries predates the EU.

The main factors supporting Ireland’s fintech growth have been in place for a number of years.  “Brexit has, however, increased the interest of investors in Irish firms, creating a broader range of players to support early-stage and Series A growth potential and, following recent clarification around the common travel area, Brexit has heightened interest in Ireland as an EU-based headquarters location.  It remains a story built around people, and Ireland, has over the past several years, attracting international talent to drive the fintech sector forward.  Our stability should continue to encourage and promote that flow of talent,” said a spokesperson from Corlytics, a growing Irish fintech.

A spokesperson for Carne, a global provider of fund management solutions from Ireland told International Finance that the company is enjoying the twin benefits of being English-speaking and Brexit-proof — although it operates within Europe, mainly concentrated in the UK, Ireland, and Luxembourg.  Ireland’s wealth of fintech talent from around Europe has helped Carne to meet its diverse technical requirements.

Ireland’s fintech scene has over 400 companies employing roughly 37,000 people in the sector. An enabling technology ecosystem and a skilled workforce are certainly empowering Ireland’s fintech sector. Ireland’s academic institutions have developed excellent manpower with a sophisticated set of skills and access to both the EU and the UK marketplaces to lay the foundation for fintech innovation.

The government of Ireland’s national financial services strategy, also known as IFS2020, has supported financial services businesses and helped scale up exports.  In addition to these, there has been a strong presence of international financial services institutions operating in Ireland including fund administration and middle office services that boosted the quality of skills available before Brexit.

Government support critical for Irish fintech

So far, the Irish government has played a pivotal role in supporting Ireland’s fintech industry. Enterprise Ireland has also been helping Carne to expand its business for over many years now, according to its spokesperson. This is especially true in helping the company to locate centres of operational excellence outside of Dublin, where it has been attracting a diverse highly skilled workforce.

The IFS2020 strategy and the new 2025 strategy have put in place a framework to coordinate between agencies and government departments. Clarke explained that Enterprise Ireland assists fintech companies planning to set up or scale up their existing businesses. A long term view of the fintech situation gives international clients certainty — positioning Ireland as an ecosystem with unique capabilities to support fintechs.

In fact, IDA Ireland, an agency designed to streamline foreign direct investment provides critical support to  foreign fintech startups seeking establishment in the country, compared to Ireland’s rivals like Malta, Clarke said.

Regtech Ireland’s stronghold

In one of 2019’s biggest rounds of Irish fintech funding, regtech Fenergo raised $66 million in July. Led by CEO Marc Murphy, Fenergo is one of Ireland’s fastest-growing companies. It now has a dozen offices spread across the world. J.F. Clarke told International Finance, “Being a small territory has enabled Ireland to develop a more effective and collaborative business network. In turn, this has played a significant role in Irish businesses meeting legally binding targets and attracting bigger and smaller businesses alike to look at investing in Irish fintechs.”

According to Colm Heffernan, COO, Fenergo, Ireland has demonstrated a unique ability to create progressive entities that draw from a diverse pool of talent stimulating global digital growth.  Even though one might notice a particular strength in regtech or compliance in Ireland— the truth is that it is the pedigree of software innovation that works as the foundation for Ireland’s fintech innovation.  Fenergo helps solve regulatory challenges for financial institutions by streamlining the end-to-end client lifecycle management processes for investment, corporate, commercial, and private banks.

Regtech and identity tech are particularly strong fintech sub-sectors in Ireland. After the financial crash of the late 2000s, a raft of new legislation governing financial services was introduced across the world. This, in turn, necessitated the industry to remain vigilant with the new laws in the picture.  Irish entrepreneurs have been proactive in identifying the role technology can play in this regard leading to the rise of a robust regtech and identity tech sector in the Irish fintech ecosystem.

Irish companies such as Corlytics have devised regulatory technology solutions that are globally perceived as rigorous in their approach to compliance. The reputation of the Irish regtech sector is rapidly growing on a global scale.  Regtech has reinforced its role in the country “from a combination of experienced market professionals, entrepreneurs, and an academic network that supports both technical and

subject matter development. The clustering effect also helps support startup companies, as firms, at different stages, tend to help and support each other. We have been building the fintech sector for a long time, but there is now real global momentum,” a Corlytics spokesman told International Finance.

Corlytics’ system tackles 80,000 regulatory notices a year. Its cloud-based service collates, structures, and organises data in a manner that helps clients manage their regulatory risks effectively. The company uses leading data techniques such as AI and machine learning coupled with the expertise of legal and financial subject matter expertise to deliver solutions covering EMEA, North American, and APAC regulations.

Fenergo, on the other hand, differentiates itself from its competitors through financial industry expertise, pre-packaged future-proofed data solutions, and community-based product development model. With that, clients are empowered to build a robust product development roadmap to address their regulatory and technology needs.

It has built a regulatory community with 20,000-plus risk and compliance experts that convene on a regular basis to thrash out regulatory and compliance challenges.  In fact, these sessions ensure that the Fenergo Regulatory Rules Engine is able to track all known and planned regulations — and allows teams to explore upcoming regulatory risks.  To accelerate growth, Fenergo continues to invest in R&D ($10 million in FY18) so that its solution can respond to market demand. Showing the truly global scope of Irish fintech innovation, the company’s coverage extends over 70 regulatory jurisdictions worldwide.

Irish fintech aspirations are all global

Scaling up a global fintech startup from Ireland is a challenge but there is persistent support from the government through Enterprise Ireland, IDA Ireland, and the embassy network — all aimed at delivering a global clientele base to Irish fintechs. The Irish by large carry an innate ambition to be global which is perceived as an advantage to companies such as Corlytics, a leader in regulatory risk intelligence, a Corlytics spokesperson told International Finance.

In the globalisation context, Corlytics explained that having team members who worked closely with US banks has been an advantage, for its solution.

And Fenergo is thriving on the global fintech-regtech stage. Last year, Fenergo’s revenue growth in APAC rose 256 percent from the previous year. With offices in Tokyo, Singapore, Hong Kong, Sydney and Melbourne to support regional clients, Fenergo attributes its growth to unrelenting regulatory changes and intensifying regulatory scrutiny. Recently, the company partnered with TUNG-I, a Taiwanese solutions provider to drive growth in APAC, including Taiwan and China.

Carne, an older fintech company, similarly innovates with a global scope. Carne’s fintech solution CORR (Compliance, Oversight, Risk and Reporting system) has been designed to streamline the traditional processes of the financial services industry that have, up to now, been predominantly manual in nature.  “These governance and oversight functions exist globally and are comparable, so like many global tech firms the development is scalable, particularly by location,” a Carne spokesperson said.

Irish fintechs breach the US market but need more support

Older Irish fintechs have successfully breached the ultimate tech frontier market – the US. The Irish network in the US and its connectedness are established through Enterprise Ireland and IDA Ireland that has given Corlytics a range of entry points to the US. Also, partnering with early-stage Silicon Valley companies such as Digital Reasoning has provided opportunities for it to effectively compete with larger global incumbents.

AssureHedge will be expanding its operations to the US in the fourth quarter this year. “We have already made our first hire there in Chicago. This decision was made after an EI Fintech trade mission to Chicago last year,” the AssureHedge representative said.

Likewise, a major percentage of Carne’s clients are US-based or owned by US parent companies. Its fintech solutions are mainly designed to operate on a global scale — to support companies from its Irish operational support centres.

But it is questionable whether Irish fintechs entering the US have a level playing field in the US while jousting with well-funded US fintechs. “We strongly need government policy innovations to support indigenous fintech firms to compete for tech talent with the US tech giants. The US tech giants have lower tax rates and deeper pockets which then is utilised to increase the cost of employing the talent pool. This impacts indigenous fintech firms in obtaining talent which could have been used for the product and service offerings,” the AssureHedge spokesperson said.

Local VC funding limited and conservative

One aspect in which Irish fintechs lag their British counterparts is in raising venture capital funding. According to the Irish Venture Capital Association, VC investments in Ireland’s tech sector dropped to €430 million during the first six months of 2019. But funding increased over 90 percent to €233 million in Q2 2019 compared to Q2 2018.

The Irish VC sector is small and often conservative in its approach – but Irish fintech startups can easily access capital next door in the UK.  “Of course, the UK is a global hub for fintech and fintech investment. We strongly advise any Irish fintechs to engage with the London VCs as early as possible. Being an Irish firm does not put you at any sort of disadvantage to a UK firm, other than the 55-minute flight to get there,” the AssureHedge spokesperson told International Finance.

Ireland has, however, built a supportive business landscape where access to global talent is easy. The Corlytics representative said, “We are very fortunate, although we’re based in Dublin, our team of 35 people comes from 10 countries.” Ever since Apple’s arrival in Cork in 1980 — technology companies have been establishing their operations in Ireland — with Dublin becoming the headquarters for some of the world’s leading corporations. The fact that technology skills are transferable has added to the ease of locally finding highly skilled talent for Ireland’s fintech startups, the Carne spokesperson said.

Ireland confident of its position as the Silicon Valley of fintech

According to the Ireland Fintech Census of 2018,  32 percent of Irish fintechs foresaw global revenue growth of between 100 percent and 500 percent, while 17 percent of them anticipated growth of more than 500 percent in the future.

Although Ireland’s fintech leadership aspirations are well known, it has formidable challengers in Europe – both established technology innovation hotspots and upstarts. In Europe, the one country that rivals with Ireland in fintech innovation is the UK. “As long as Britain remains in the EU, it is the biggest market for fintech innovation. Aside from that, there are a number of countries with forward-looking attitudes to fintech. Estonia, Germany and Malta are some of the countries that have vibrant fintech ecosystems, that would appear to have government support,” Clarke said. However, “Ireland is well placed and confident in its capacity and skills to continue being the Silicon Valley of the fintech world.

The post Ireland: Is the Silicon Valley of fintech facing a Brexit windfall? appeared first on International Finance.

Currently, the UK has established itself as the “heartland of European healthcare AI,” while Germany and France are evolving at a rapid pace. The UK government has committed to invest $300 million in the AI, which will be used by the public healthcare system — also known as the National Healthcare System (NHS). The NHS is setting up an exclusive lab that will work toward enhancing AI tools within its healthcare delivery. The lab will act as an interface for both experts and academicians to drive innovation and study the biggest healthcare challenges, including early cancer detection, new dementia treatments, and enhanced personalised care.

AI in healthcare is still in the development stages, although there are many areas in which the technology could be useful: imaging, ophthalmology, genomics and intensive care. “At University Hospital Zurich, we are working on projects regarding using AI on our images. These projects are still in work in progress at the present time,” Andreas Boss, professor and doctor of medicine at the Department of Diagnostic and Interventional Radiology, University Hospital Zurich, said in an emailed interview with International Finance.

Consulting firm LEK published a report on AI: Six challenges for the European Healthcare Sector, which stated that the technology is being developed to work with multiple data types. Citing its versatility, the report said that AI has the potential to perform across the entire patient care pathway — starting from the point of early detection to diagnosis to treatment management and to monitoring of ongoing treatment.

Commonly, radiology and oncology are the two health branches that see more types of AI algorithms. “In radiology, we are currently using AI for standardisation and quality control of mammograms,” Dr Boss says. “The technology is not applied for diagnostic purposes or treatment monitoring. However, a lot of research is going on in that direction.”

In another example, Geneva University Hospitals (HUG) is using IBM’s Watson for Genomics in the field of diagnosis. In theory, Watson for Genomics is an AI tool for oncologists to provide patients with more personalised, evidence-based cancer care. “Patients who need and are able to undergo additional treatment after having exhausted the standard treatments can be candidates for extended genomic analyses,” a HUG spokesperson tells International Finance.

In practice, the spokesperson explains, genomic data is compiled in a text file containing descriptions of the gene alterations, their location, and their frequency. The file is analysed securely by Watson for Genomics which scans nearly three million publications to find articles evaluating potential treatments. After that, the oncologist will receive a multi-page report reviewing the literature, including article references with abstracts and direct links to publications. Clinical trials are also suggested based on the tumour profile matching the inclusion criteria.

eHealth professionals in Europe predict AI to become dynamic, useful and widespread by 2023, according to HIMSS Analytics. The prime reason for that is because the technology has capabilities that can demonstrate robust performance in both frontline care and back office tasks in hospitals. “AI’s biggest potential is seen in workflow improvements and standardisation. If repetitive tasks are performed using AI, more resources can be used for interaction with patients,” Dr Boss says.

The NHS of UK, for example, has 45,000 clinical job vacancies and 50,000 non-clinical open roles — and a similar situation can be seen in hospitals across Europe. Usually, hospitals tend to alleviate staff shortage using a temporary solution that only puts them under further financial strain. So the possibility of using AI applications to conduct triage before patients arrive at the hospitals will not only speed up the healthcare delivery process, but allow overstretched clinicians to focus on interacting with patients effectively.

Transformative with unintended effects

LEK in its report has classified AI to have ‘transformative capabilities’, but involving algorithms and systems, can cause unintended effects in both clinical legality and decision-making.

Data sharing is a case in point. Hospitals in the NHS system offer a treasure trove of patient data, that is built on an extensive medical history of each patient. Inevitably, data sharing between partners is expected to increase as connected devices, data volumes, and applicability of AI continue to evolve in healthcare delivery. This form of interconnectedness is a major cause for concern for AI developers and healthcare facilities because failing to comply with the General Data Protection Regulation (GDPR) while developing or using the software is a liability.

In a nutshell, data privacy in healthcare gives patients the right to control how their data is used, which is expected to become the industry norm over time. Programming that leads to control over evolving technology platforms will allow AI developers to preemptively avoid serious consequences.

“Sharing patient data between different institutions for the development of AI solution is a danger to patient privacy. Patients need to be protected against unauthorised sharing of medical data with AI companies, such as Google, Facebook or Chinese companies even. The Swiss Personal Health Network (SPHN) is implementing the required infrastructures among universities,” Dr Boss explains.

AI has to survive Europe’s stringent standards

Europe’s protection standards are stringent. “In Europe, medical software requires a CE marking with a strict approval process,” Dr Boss says. Algorithms to be used in European healthcare must apply for CE marking, which is a certification mark that conforms with health, safety, and environmental protection standards for products sold within the European Economic Area — and have to be categorised according to the Medical Device Directive. Also, independent algorithms that are not fed into a physical medical device must be classified as a Class II medical device.

In the big picture, actual data is more valuable than clinical data. “Today, therapy decisions are often made empirically, based on the experience and knowledge of those involved. It would be desirable to support the decisions with real-time data analyses and state-of-the-art medical knowledge from other sources, such as globally harmonised databases,” Emanuela Keller, professor and doctor of medicine, Institute of Anaesthesiology, University Hospital Zurich tells International Finance.

With so much data on hand, identification and cleaning of credible information to form core data sets is a complex feat in the development phases of AI programmes. “Conventional monitoring systems trigger around 700 alarms per critical patient each day and a significant proportion of those alarms are false,” says Keller. For that reason, the neurosurgical intensive care unit of the University Hospital Zurich, ETH Zurich and IBM Research, as part of the ICU Cockpit Project, are working to reduce data volume, increase accuracy in critical situations and improve patient safety.

Keller, who is also the principal investigator describes the project’s long-term goal is to “initiate a fundamental development in emergency and intensive care medicine — and thus, significantly improve the way hospitals work in day-to-day practice.”

Many European hospitals and research institutions are wary of cloud platforms and choose to use their own servers because patient data is typically not allowed to exit Europe. The use of AI in patient care at HUG does not involve sharing large volumes of data. “At the HUG we are customers who do not need to provide large amounts of data to use the solutions because we need answers for one patient at a time by using only the patient’s data. Even if Switzerland is not in the European Union, we tend to apply the GDPR rules and fully respects its constraints in order to remain EU compatible,” says the HUG spokesperson, emphasising on the fact that “companies providing AI solutions need big volumes of data to train their models.”

For AI developers, another subsequent concern while developing healthcare tools is the black box issue, which typically stems from incomplete information. A blurry image, for example, can make the algorithm arrive at an inaccurate conclusion. Sometimes, what happens is that AI technologies result in key algorithms that are not exposed to enough peer review or a detailed scientific analysis.

“Before algorithms for automated detection of critical complications can be implemented into clinical practice they have to be extensively tested in clinical studies and validated according to the directives for medical device software,” Keller explains. A limited testing process is highly consequential because it can lead to malpractice risk, an important factor that cannot be overlooked by chance.

Physicians cannot impulsively rely on clinical software recommendations alone, as they consistently do not match physicians’ judgement in accordance with the standard of care. “One of the most important challenges is the validation of the software. AI software should not be implemented in the clinical workflow until it is properly tested and validated,” Dr Boss says. “I am deeply sceptical, when I hear of 99 percent accuracy of AI for reading mammograms. It sounds very much like propaganda. But, I admit that there is large potential for AI reading X-ray images.”

The European healthcare industry aims to create tailored treatment interventions with higher first-time success rates for patients using AI. The LEK report suggests that AI developers will have to work closely with lead adopters to ensure transparency in clinical software and to build sound approaches in liability management for algorithms to consistently reproduce results.

The post European healthcare: AI faces data and black box challenges appeared first on International Finance.

Their reliance on the informal financial instruments which involves acquiring loans from moneylenders, landlords, or a companions limits their ability to get the benefits of carrying out financial activities through the formal financial sector. Overall, financial inclusion has been poor in Nigeria. So was the case in many African countries.

However, in recent times, mobile money has brought in a revolutionary change in the continent and countries like Kenya have embraced the change. Data released by the Central Bank of Kenya revealed that mobile money transactions in the country stood at $38.5 billion last year, a 10 percent increase when compared to 2017. The face of Kenya’s financial sector changed after the establishment of M-Pesa in 2007. By the end of 2017, 83 percent of Kenya’s population had access to financial services, according to its apex bank.

But compared to Kenya, Nigeria does not have a similar story. The launch of the first mobile money service in Nigeria dates back to 2009. Over the years, a dozen new mobile money service providers have popped up in Nigeria. Around 90 percent of adults in Nigeria claim they have a mobile phone as well as a SIM card, however, mobile money hasn’t boomed in Nigeria as of yet.

The primary advantage mobile money enjoyed in Kenya over Nigeria was the regulator’s adoption of a wait-and-see approach at inception. Secondly, M-Pesa, the global poster child of mobile money in Kenya, was launched by the dominant telco in Kenya, and was able to piggyback on their already existing network of airtime distributors, thus eliminating the need to build out an extensive distribution network. Also, M-Pesa rode on the wave of political unrest in Kenya. During the 2007 and 2008 election crisis, there was political unrest that resulted in road closures and this affected the financial flows.

How mobile money is impacting banking in Nigeria

Authorities in Nigeria have finally amended rules and regulations that previously prevented wireless carriers to transfer cash. Around 50 million Nigerians still do not have a bank account, and the central bank finally realised that it must rely on wireless carriers in the country to improve financial inclusion.

Finally, telecom companies in Nigeria will be able to collect money, carryout payments, issue cash cards, and also provide financial advisory services. Under a new scheme introduced by regulators in Nigeria, telecom companies can apply for a payment service bank licence.

In July, MTN secured a licence from the Central Bank of Nigeria to provide financial services in the country. MTN Nigeria’s Yello Digital Financial Services will provide financial services in Nigeria such as money transfers. However, some experts believe it is the banks in Nigeria who will most benefit from it.

According to the terms and conditions of the licence, MTN Nigeria will have to tap into those Nigerians who still do not have a bank account. As a result, a lot of data about the unbanked Nigerian population will flow into the country’s banking sector. This data will help the banks in Nigeria target the ones who are unbanked and bring them under the banking umbrella.

Nigeria’s mobile wallet and payment market

At present in Nigeria, even though cash transactions still continue to be the most preferred choice for Nigerians, mobile money is seeing steady growth as well. Currently, there are 21 licenced mobile money services providers in the country. Paga, which was launched in 2009, continues to dominate the market with more than 8,000,000 users. However, the number is very small given that Nigeria is Africa’s most populous country.

Experts predict the mobile money market will grow substantially in the next five to six years in Nigeria. The market is expected to grow at a compound annual growth rate (CAGR) of 25.6 percent to reach $73 billion by 2025. Its mobile wallet segment, which is also experiencing strong growth, is also expected to grow at a CAGR of 25.7 percent between 2019 and 2025.

Besides issuing mobile banking licences to telecom companies in the country, the Nigerian Central Bank has taken the help of the Shared Agent Network Expansion Facility (SANEF) to improve financial inclusion in the country. The central bank aims to achieve a minimum of 80 percent financial inclusion by 2020. However, currently, 53 percent of the adults in Nigeria still do not have access to financial services.

Why is it important for Nigerians?

With the Central Bank of Nigeria determined to accelerate financial inclusion in the country, mobile money may prove to be the tool to do so. Around 90 percent of adults in Nigeria claim they have a mobile phone but most of them do not use mobile money services for various reasons. One of the major reasons that Nigerians do not use mobile money is the lack of infrastructure. Secondly, many prefer to use cash as a mode of transaction because the person they do business with prefers cash as a mode of payment. Also, many Nigerians are sceptical when it comes to giving up carrying transactions through cash.

It is highly important for Nigeria to improve the mobile money infrastructure in the country as more and more Nigerians will have access to financial services and they will come under the formal financial sector. This will ultimately accelerate Nigeria’s financial inclusion.

At the same time, the growth of mobile money in Nigeria will also help the country tackle its unemployment problem. With the issue of more licences, more players will enter the mobile money market in Nigeria. This will lead to the creation of various jobs within the sector.

Why mobile money concept is not successful in Nigeria

While mobile money has revolutionised how Kenyans deal with their money, make deposits, receive money or save money, Nigeria has failed to duplicate the same despite being the largest economy in the continent. It’s not just Kenya, but other African countries such as Uganda, Tanzania, Rwanda, Botswana, Senegal, Cote d’Ivoire and neighbouring Ghana have benefitted from the introduction of mobile money in their economies. Mobile Money has helped these countries stimulate financial inclusion.

The introduction of the Bank Verification Number policy in 2016 in Nigeria did not help either. According to the policy, every Nigerian who owns a bank account was required to link their biometric details with their bank account. This policy was introduced by the government so that every transaction carried out in the country could be traced. However, this led to Nigerians distrusting the financial sector and abandoning their savings out of fear of being interrogated.

In a bid to discourage cash transactions and at the same time encouraging more electronic-based transactions, the government in 2012 introduced a cash-less policy. As per the policy, the government charged a cash handling charge on daily cash withdrawals over N500,000 for individuals and N3,000,000 for businesses.

But all these policies seem to have failed in Nigeria. When it comes to mobile money, Nigeria is classified alongside Morocco and Egypt as sleeping giants by experts.Some of these headwinds are constraining factors limiting mobile money growth and success. They include insufficient infrastructure, inadequate knowledge about the underserved, financial literacy and consumer education and identity poverty. In the northern regions of Nigeria where exclusion is highest, infrastructure like power, roads and even mobile network connectivity are deficient and have significant implications on mobile money access and quality.

Some of the other challenges faced by Nigerians include their ability to access national identity documents. All the Nigerians who are not a part of the financial sector are not necessarily poor. Some of them may be cash-rich but they do not have access to national identity documents and their inability to fulfil mandatory customer due diligence (CDD) requirements are challenges they face in spite of the tiered KYC regulation. Also, awareness of mobile money in Nigeria is under 5 percent. Consumers can’t adopt what they don’t know or understand.

With regard to this, Dr. Olayinka David-West, from the Operations, Information Systems and Marketing Division of Lagos Business School and the academic director at the Enterprise Development Centre (EDC) of Pan-Atlantic University, told International Finance that, “I would like to introduce a new perspective – mobile banking – that has been remarkably successful. Nigeria is a mobile-first market and so, while mobile money (using a wallet as the store of value) has not been widely adopted, mobile banking on the other hand has. Mobile banking solutions provide access to bank accounts using either mobile apps (available on smartphones) or unstructured supplementary service data (USSD) protocol (available on all phone types). Mobile banking’s popularity continues to rise year on year, based on transaction figures reported by the Nigerian Inter-bank Settlement System (NIBBS). Hence, I can narrow the perceived failure of mobile money in Nigeria to the lack of acceptance of the wallet as a store of value.”

How regulators promote mobile money in Nigeria

With authorities making amendments to rules and regulations and introducing new policies, telecom companies in Nigeria can provide financial services which were once limited to banks. Telcos in Nigeria can now apply for a payment banking licence and carry out all banking activities such as collecting deposits, making payments, issuing cash cards and also providing financial advisory services.

While MTN has already acquired a licence from the Central Bank of Nigeria, Bharti Airtel, another telecom giant in Nigeria is also in line to acquire a licence. Over the years, many in Nigeria have argued whether the decision to provide payment banking licences to telcos is a good idea. But the current Nigerian government has realised telecom companies should be allowed to provide financial services, especially after witnessing the mobile money revolution in Kenya.

Many banks in Nigeria also feared that the entry of telecom companies as payment banks would hurt their business and they will end up losing their customer base. This led to years of lobbying by the Nigerian banks which delayed the Nigerian government’s decision to issue payment bank licences to telecom companies.

The National Communications Commission and the Central Bank of Nigeria finally signed a memorandum of understanding in 2017. A year later, authorities revealed the guidelines for the licencing and regulation of the payment bank licences.

How can MTN make mobile money work?

In a bid to tap into the mobile money sector, MTN Nigeria’s subsidiary Y’ello Digital Financial Services Limited launched its mobile money services in the country called MoMo agents.

Y’ello Digital Financial Services Limited has been issued a super-agent licence, which allows them to manage and sustain a network of financial service agents and provide services on behalf of licenced financial services providers. This is very different from the Payment Service Bank licence which is a recent development within the Nigerian financial service industry and allows licencees to offer payments and remittance services, issue debit and prepaid cards, deploy ATMs and other technology-enabled banking services.

To avail the services, all the user needs to do is send a free text. As a response, the user will get a list of active MoMo Agents near him, through a text message. To send money, the user pays the MoMo agent the sum who in return generates a code. The receiver can walk up to another MoMo near him and collect the transferred sum with the help of the same code.

Dr. Olayinka David West told International Finance, “As such, MTN’s entry into the financial services industry is still early. The super-agent licence is a good foundation for the company to build out its financial services distribution network which is critical to the success of any mobile money operation.”

MoMo has been a success story for MTN in other markets especially Ghana. Experts predict that the launch of MoMo in Nigeria will prove to be significant for MTN. Besides funds transfer, through MoMo, a user purchases data and airtime, and pays bills.

During the launch, the company said it will roll out about 500,000 MoMo Agents across all 36 Nigerian states. MTN, which is the biggest telecom company in Nigeria, acquired a licence to provide financial services from the Central Bank of Nigeria earlier in July.

When International Finance asked how mobile money operators in Nigeria create profitable operations, Dr. Olayinka David-West said there are five important parameters the operators in Nigeria must understand.

First, They need to understand that the mobile money business is a long term investment and requires patient capital to get to profitability. They also need to understand the market they serve and provide compelling value propositions to meet the needs of customers. This can only be done by using the appropriate customer segmentation frameworks to inform the design and delivery of their services, Dr David-West said.

Distribution is important, according to Dr David-West. Providers should consider extending their business to the areas where exclusion is highest, especially the northern regions and rural areas. The uniqueness of the Nigerian market requires mobile money operators to think creatively about customer acquisition and retention. They also need innovative business models that will optimise their reach while reducing operating costs.

Operators in Nigeria also need to forge strategic partnerships that will enhance the reach of their services, reduce their cost to serve, improve affordability as well as their value proposition.

Dr. Olayinka David West added that the quality of the service needs to be good enough to provide a positive experience for the consumers and hence, reduce customer churn. This means operators need to invest in efficient IT platforms with appropriate interfaces and an overall positive user experience.

The post Mobile Money in Nigeria: Will MTN succeed where others failed? appeared first on International Finance.

Thye Chor and his brother Teo Thye Hong, who accompanied him from Fujian, continued to buy more greenfield land in the city’s suburbs. Tapping into Tong Eng’s already existing tin can business, the brothers sold the land to major oil refining companies such as Shell and Mobil to build petrol stations.

In 1968, Thye Chor’s eldest son Teo Tong Wah, together with his uncle Thye Hong, took over the company’s reins and developed the company’s land while pursuing Thye Chor’s legacy of land banking. A visionary, Tong Wah acquired the pre-war rent control shop houses adjoining Tong Eng’s own three units at Cecil Street in the heart of Singapore’s Central Business District and built a 26-storey office building known as Tong Eng Building, where the company’s headquarters is now located. The group has developed real estate across the residential and commercial sectors, including condominiums, landed housing, apartments, offices, and retail projects.

Although the third generation of the family is now running the day-to-day operations, the strong mentoring of the second generation ensures that the group is able to maintain its stellar track record over 60 years. With careful financial planning and prudence, the group has come on top of each boom and bust cycle that the Singapore property sector has witnessed. The group cushions the impact of property downturns by cleverly using a mix of investment and development properties in its portfolio and using the cashflow from the investment portfolio to weather downturns.

Tong Eng Group is today known for ensuring the utilitarian layout of all living and commercial spaces through creative and spatial planning. It is also the first to embrace new design concepts and construction technologies, while following a diligent material selection process and robust project management to ensure all construction is done with excellent quality and finishes. By being on top of market trends and demand patterns, the group stays ahead of competition. In an exclusive interview with International Finance, Tong Eng Group’s Group Managing Director Teo Tong Lim tells us more about its unique approach to business, its marquee projects, and expansion plans outside Singapore, especially Australia.

International Finance: Tong Eng Group has used innovative ways to build spaces while delivering value to buyers. Could you please tell us how you achieve this?

Teo Tong Lim: For all its residential projects, Tong Eng Group pays careful attention to spatial planning by ensuring that the spaces provided are functional, efficient, and utilitarian. In some of our past residential developments, we chose to erect a loft in selected units with higher floor-to-ceiling heights for creating a dual use as a living space. In addition, in many of our previous residential projects, we adopted bay windows for aesthetic appeal, versatility in space usage, as well as ventilation.

In one of our two new commercial developments in Singapore, we have creatively adopted the use of bay windows. This garnered positive feedback from office workers who have found that the extended space can be used functionally as an additional sitting area, for low shelving, display cabinets, and for plants and green pottery.

Furthermore, in both commercial projects we mentioned, we have magnificent floor-to-floor heights of close to 5 metres and the effect of the bay window not only allows more natural light and ventilation to be brought in but it also enhances the already impressive view experience.

Can you tell us more about your marquee projects so far and what are the features that distinguish Tong Eng Group as a developer of such niche projects?

We single out two marquee projects. ARC 380 is a 16-storey office building that has garnered several design awards in Singapore and overseas. Fully clad in light green curtain wall and adopting a stunning curved form, the building users benefit from sweeping panoramic views across the heritage Jalan Besar District as well as Singapore’s Kallang river.

Other special features include a roof top swimming pool, gym, and clubhouse that offers a panoramic view of the surroundings and a covered terrace garden of 9.8 metres height on each level of office floor. Located on the city fringe, ARC 380 provides qualities akin to a Grade A office with an open column-free internal layout. Each office floor features 4.9 metre floor height and is designed with individual toilets and air-condition (AC) ledges that enable occupants to install their own AC units after normal office hours.

Utilising the principle of ‘form follows function’, the AC ledges are designed to articulate the stunning façade, creating juxtaposing punctures through the glazing. Communal facilities such as the infinity pool, indoor gym, and clubhouse were introduced to create  opportunities for social interaction and encounters. The concept of designing spaces for work-life balance continues on the alternating cantilevered sky terraces that act as private relaxation spaces.

The other marquee project by the group is the three phases, Belgravia Villa, Belgravia Green, and a remaining housing phase. This currently constitutes the largest cluster of freehold strata landed housing in Singapore totalling 306 units. The three phases are freehold strata housing developments that have a multitude of communal condominium-like facilities, with each unit still retaining all the features of a landed house.

Private lift access in each home allows smooth access to all levels in each home and all homes also come complete with two designated basement covered car park spaces. In the developments, there are a range of amenities such as a clubhouse, gym, barbeque decks, playgrounds, a tantalising number of infinity edge swimming pools, water features, landscapes, themed gardens and nature pathways and even hydrotherapy equipment to create a complete landed lifestyle.  With particular emphasis shown in the facade treatment, the design ethos are homes that are contemporary and distinctive, with indoor spaces connected seamlessly to outdoor greenery. At the same time, we focus on internal living spaces to deliver airy, contemporary homes that offer an optimal level of shelter, privacy, and shade.

With the limited space available in Singapore, Tong Eng group has developed close to 200 acres of land. Could you please tell us more about your land bank strategy?

In the past, the company’s first-generation founders amassed large tracks of greenfield land whose values rose in tandem with Singapore’s economic growth attributed to a good, strong, business friendly Singapore government. This was also possible due to the freehold nature of the land acquired. Today, land banking for residential developments has become difficult and expensive due to the additional land tax associated with the buyers stamp duty. However, we still look out for land banking opportunities in Singapore and overseas.

What is your outlook for the Singapore premium residential property market in the next 5 to 10 years and what are your plans for the time period?

Despite the latest residential cooling measures, we believe that there will always be demand for residential premium housing as Singapore continues to rank highly in liveability polls and the country is seen as a safe haven by foreign investors with no restriction on ownership of residential property except landed property. Moreover, Singapore ranks top in the world for education with renowned educational institutions attracting families from all over the world. Furthermore, there is a strong demand from locals who aspire to own premium residential property. Tong Eng Group  has successfully completed several premium residential properties recently. The company is currently developing Wilshire Residences, View at Kismis, and Belgravia Green.

What is your outlook for Singapore’s premium retail and office property markets in the next 5 to 10 years and what are your plans in that space for the timeframe?

The Asia Pacific region is the fastest growing economy in this era. Foreigners looking to invest in this region will always look to Singapore to set up their headquarters or base due to Singapore’s political stability, transparent governance, state-of-the-art infrastructure, low corporate tax environment, highly educated and skilled work force, and pro-business environment. Furthermore, we believe Singapore will continue growing as an Asian financial business hub and thus, we remain positive on the premium office property market.

The retail sector in Singapore faces challenges and downside risks amidst an uncertain trade environment, and global uncertainty. Moreover, with the impending increase in goods and services tax in 2020, the premium retail property market will face downward pressure. However, Singapore’s reputation as a place for good food options ranging from hawker food to Michelin star restaurants will help sustain demand for food and beverage spaces.

There seems to be an increased interest in Singapore office real estate from foreign investors and entrepreneurs who seek a competitive first world business environment with political and economic stability. How will Singapore meet this demand for office real estate and what role will companies like Tong Eng Group play?

The supply of office space is provided by government land sales and rejuvenation of old office buildings. Tong Eng Group is currently developing Centrium Square, a 19-storey mixed use commercial development in the city fringe that comprises  a retail podium with food and beverages, a multi-storey car park, and a tower comprising medical suites and offices. Our other completed building ARC 380, a 16-storey retail, food and beverage, and office building, is substantially leased to multi-national corporations which includes technology and professional firms and co-working space providers.

Similarly, in Singapore, there seems to be an increasing demand for premium residential property set in sylvan and lush green surroundings from local and foreign investors. How will Singapore meet this demand and what role will Tong Eng Group play to meet this demand?

Transforming our modern cityscape from a garden in a city to a city in a garden, the Singapore government’s commitment  to enhance the quality of our living environment through greenery and recreation is still as strong as ever today. The Urban Redevelopment Authority of Singapore plans and facilitates Singapore’s physical development, in partnership with other government bodies and Tong Eng participates in URA’s initiatives through the provision of high rise green communal spaces.

What is Tong Eng Group’s real estate development strategy outside Singapore, especially Australia?

We are committed to growing our existing presence in Australia where we currently own four office buildings in Sydney and Melbourne. We are still sanguine about the commercial market in Australia and continuously look to increase our portfolio. We are taking a measured approach to the Australian residential market at the moment, but keeping our finger on the pulse.

Does Tong Eng Group see further value in real estate development projects outside Singapore and which are the key areas and markets that interest Tong Eng Group and why?

We see value in offices and hotels in Asia Pacific where the office sector will see continued growth momentum in Asian economies, while the hospitality sector in Asia will benefit from a robust growth in tourism activity.  In addition, we are focused on other key capital cities such as London, and cities in Japan, and are exploring opportunities in these global cities where we can continue to explore commercial opportunities as well as residential opportunities.

Joint ventures and partnerships have been a feature of Tong Eng Group’s operational strategy. Will you continue this strategy into the future and what are the typical terms under which you enter into such JVs and partnerships?

Joint ventures and partnerships will continue being a feature of Tong Eng Group’s operational strategy – we believe in collaborating with joint venture partners with the same vision, core values, and alignment of interest as us. And we continuously manage each asset with integrity and excellence.

The post Tong Eng Group: Singaporean developers going global appeared first on International Finance.

During the last decade from 2009 to 2019, the value of the assets under management (AUMs) of Mexico’s pensions management system went up from 1.1 billion pesos to 3.7 billion pesos representing 15.5 percent of Mexico’s nominal GDP. These figures stand testament to the fact that the pensions reforms were a success. It was in this context that Afore Profuturo entered the retirement savings scene. A pioneer in the Mexican savings system with complete focus on Mexico, it is the only retirement savings manager that offers its services in three different fields: Afore, pensions, and loans.

Afore Profuturo, a part of leading Mexican group Grupo BAL, is among the top three leading fund administrators in the country, managing a capital of around $28 billion. It is also the only Mexican retirement fund to survive the pension reforms of 1997. Over the years, Afore Profuturo has become a leading retirement fund in Mexico through organic growth and numerous acquisitions. Since its inception, Afore Profuturo has been offering the most competitive returns in the sector. Afore Profuturo’s dominance in the market is evidence that its funds are outperforming most others in the long run.

Over the years, Afore Profuturo has stood out in the Mexican market, not only for offering higher returns but also for managing approximately 15 percent of the gross savings of Mexico’s working class.

Preparing for yet another reform

Currently, a reform of the Mexican pension system is being discussed to adopt the generational funds framework, which is already being implemented by  some developed economies. With around $14.5 trillion in the market, the new structure will strengthen the investment system and provide a robust operating framework. The new structure, which will come into effect by the end of the year, will  confirm Afore Profuturo as a top fund manager in Mexico.

With the objectives of improving Mexico’s pension system and adopting guidelines that will position Afore Profuturo as one of the most important pension funds in the world, it has formed alliances with global institutions. In two of Afore Profuturo’s major projects – the creation of the new generational funds – target date funds (TDFs) – and the diversification of alternative investments outside of Mexico, the company has worked closely with global experts to incorporate their inputs and guarantee the success of these projects. Afore Profuturo is also creating 10 target-date funds – one of them called ‘Initial’ and another one ‘Basic Pension Siefore’. There are eight basic generational Siefores with five-year age groups.

Global alternative investment alliances and options

While Vanguard, one of the world’s largest investment companies with 30 million investors,  is  exclusively advising Afore Profuturo with the creation of a glidepath, experts such as Spruceview Capital Partners, a US-based investment management company, and StepStone are advising the company on issues related to global private equity investments. These alliances not only provide access to different markets, but also distinguish Afore Profuturo from its competitors in the domestic market. This strategy helps Afore Profuturo diversify, break away from its main portfolio exposures, and increase returns without incurring additional risks while also reducing the overall risks of these portfolios. So far, Afore Profuturo has invested in sectors such as energy and tourism and in the US and Europe.

Ultimately, Spruceview Capital Partners and StepStone’s vast experience and their successful track record convinced Afore Profuturo that these two firms could provide the requisite support and guidance, and the company ventured into the alternative investment market.

Afore Profuturo chose these firms with a broad and deep network that can give it access to the best funds and support Afore Profuturo in developing direct contacts with the most prestigious global funds. Similarly, Afore Profuturo chose Vanguard after a due diligence process to oversee its transition process by using its demographic data for portfolios and its capital market assumptions (CMA) for each asset class.

Vanguard’s model seeks to build a consistent and objective retirement investment framework, based on the characteristics of Afore Profuturo population, that strikes the right balance between investment risks and expected rewards through retirement. The alternative investment markets Afore Profuturo seeks to tap are the US, Europe, and Asia, especially the developed markets. With the help of its allies, Afore Profuturo is determined to penetrate these markets with the best possible strategy and better risk-performance profile.

Afore Profuturo’s investment strategy

With a team of experts led by CIO Antonio Sibaja, Afore Profuturo makes sure that it invests in accordance with the established guidelines and in compliance with regulations, maintaining its strategic mission – ensuring Mexicans can save for their future.

Similarly, the integration of technology has helped Afore Profuturo enhance its multi-asset strategy. It was the first administrator in Mexico to incorporate the Findur system, a world-class, end-to-end platform that facilitates control and recording of operations, transactions, and accounting processes into management process.

In 2018, the Findur system helped Afore Profuturo win the 4TIC Prize from the National Chamber of the Electronic, Telecommunications and Information Technology Industry (Canieti), in the category Intersectoral Impulse 4.0. All the nominees in the category were evaluated not only on the basis of their contribution to productivity in the sector, but also on the basis of their contribution to the development of the country.

In the last two years, Morningstar, a company that carries out independent analysis of investment companies across different countries, has rated Afore Profuturo’s performance as positive. Morningstar’s analysis highlights that Afore Profuturo possesses one of the most robust investment teams in the sector and it has the ability to identify new investment opportunities and to adapt to the constant changes in the market.

Earlier in the month of September, Afore Profuturo became a signatory of the Principles of Responsible Investment (PRI), joining a list of global investors to contribute to the development of a more sustainable global financial system. It is also a member of Mexico’s Green Finance Advisory Board (CCFV).

Wealth management of global standards

With the support of Grupo BAL, Afore Profuturo also manages the wealth of many Mexican families. It always seeks to provide the best possible services while maintaining global standards when it comes to ethics, transparency, and social responsibility. Afore Profuturo’s motto is to increase the profitability of the assets it manages.

In this regard, CEO Arturo García says, “In Mexico, Afore constitute a major pillar for the investment and infrastructure development of the country. Afore Profuturo is a pioneering institution in the sector and is recognised in the field as a very solid company consisting of professionals in all its departments, and that has the backing of BAL Group.” One of the most important fundamental pillars under which Afore Profuturo operates is the commitment to provide the best services without compromising with quality. Afore Profuturo has strengthened its investment processes by adopting innovative techniques with a focus on asset allocation while keeping in mind three simple points:

1. Goal: Achieve competitive and stable returns with results based on replicable processes.
2. Risk tolerance: Achieve results within a specific framework of tolerance and risk control.
3. Best practices and technological innovation: Align operations with international best practices and incorporate technological innovation to improve results.

Profuturo’s role in mitigating Mexico’s pension challenges

One of the main challenges faced by the Mexican pension system is the low replacement rate, which is estimated to be around 30 percent. To tackle the issue, Afore Profuturo has raised various campaigns highlighting the importance to save for retirement. One of Afore Profuturo’s advertising campaigns this year was themed – it’s time to believe in savings—which aims to improve the replacement rate in Mexico.

The Mexican pension system is a defined contribution programme in which savings depends on factors such as the rate of savings, years of contribution, and age of retirement. The low replacement rate in Mexico is not expected to improve due to the factors such as the existence of a large informal sector in the economy, lower-income, lack of voluntary savings, and also the lack of financial knowledge among its people.

In order to improve the situation in Mexico, Afore Profuturo is working on a research report and will soon present it to the government. It is also sponsoring financial education programmes such as Profukids, in which kids who excel academically receive a prize in their retirement account. Another programme called ‘Dialogues for the future’ aims to inspire young Mexicans to think about their future and understand the importance of savings and also create innovative solutions for their needs.

The post Afore Profuturo: Ensuring Mexicans save for their future appeared first on International Finance.

AI brings in targeted customers

Last year, Singapore Airlines embarked on a digital journey using artificial intelligence to rebrand itself and drive sales. The airline worked closely with technology firm Rocket Fuel to target users based on online behaviour. The two noticeable outcomes from the activity were bookings to offbeat destinations such as the Philippines, Vietnam and Myanmar increased and 14 percent of total website bookings in May occurred after seeing ads powered by Rocket Fuel.

Another technology driven model used by Singapore Airlines was natural language processing and machine learning. “As part of efforts to expand the airline’s digital servicing channels for customers, the public will be able to chat with our chatbot Kris via Facebook messenger as well as on our website. Kris can provide immediate and accurate responses to customers on topics such as baggage allowance, seat selection, and flight updates among others, thus improving staff efficiency and productivity,” a representative from Singapore Airlines told International Finance.

Collaboration and research is of utmost importance while developing new digital business models. Singapore Airlines also works with Agency for Science, Technology and Research and Rolls Royce to develop a predictive maintenance solution to enhance aircraft reliability and flight punctuality.

This model is a wholly data driven solution. Machine learning techniques are used to predict aircraft component failure based on historical flight recorder data—a similar method that many airlines are adopting as a criteria. “This prevents flight delays and ensures aircraft safety,” the Singapore Airlines representative said. “We are able to develop and deploy a machine learning algorithm using historical flight recorder data from both normal flights and flights with component failures,” the Singapore Airlines representative added.

The component algorithms developed by Singapore Airlines with Agency for Science, Technology and Research have been deployed since the end of last year. Essentially, the algorithm will give an output that reflects the health of the aircraft’s component, which allows analysts to calculate the probability of failure or identify a pattern.

“The component algorithms developed with Agency for Science, Technology and Research have been deployed since end 2018. The airline has managed to mitigate more than 500 minutes of flight delay time across all the component models developed by the Agency for Science, Technology and Research and Rolls Royce,” the Singapore Airlines representative added.

It is important to understand that all machine learning algorithms become adept as data is repeatedly fed into them over time. Singapore Airlines and Agency for Science, Technology and Research’s Predictive Maintenance Joint Lab will continue to create additional training events and data to retrain the deployed models, improve accuracy and lead time. “The team is poised to embark on new predictive maintenance use cases related to emerging issues, possibly utilising new and appropriate methods including unsupervised learning,” the Singapore Airlines representative said.

AI and IoT take care of dirty engines

Malaysian budget airline AirAsia is leveraging AI to a great extent in its critical functions as part of its digitisation strategy. Last year, AirAsia partnered with Google Cloud to integrate artificial intelligence and machine learning into its business culture. The airline has pre-installed more than 10,000 IoT sensors into its aircraft to help engineers to save time in aircraft maintenance and reduce wastage of spare parts.

With the help of artificial intelligence, the data collected from those sensors is being used to implement predictive maintenance. Defect analysts can simply understand what is to be done on a specific aircraft component or system as a turnaround action by anticipating and mitigating failure. The result is significant cost-savings for the airline.

An AirAsia representative told International Finance earlier, “Dirty engines consume more fuel, and while engine cleaning is regularly scheduled, monitoring the data allows for adjustments and cleaning. What we can do now is if an engine is starting to burn more fuel, we can go ahead and send it in for washing earlier. Now, we can be more proactive and these things will save us money.”

Those sensors can collate up to 24,000 data parameters related to aircraft systems or component sensors in every flight it is installed. The data is gathered as soon as the aircraft is switched on and is captured by the maintenance management systems. In the next step, a predictive maintenance machine learning algorithm analyses the data to predict failure of a specific target system, such as depletion of oxygen from the crew oxygen bottle.

AirAsia is also exploring other business models and methods to limit its exposure to volatile fuel prices. It has partnered with American conglomerate General Electric to use Flight Efficiency Services to make its aircraft more fuel efficient in terms of cost and carbon footprint. The technology used by General Electric is the Industrial Internet that can enhance the airline’s efforts in fuel cost management.

In theory, Flight Efficiency Services will amplify airlines’ precision to follow advanced routes, that are otherwise estimated to be 20 percent inefficient across the aviation industry. AirAsia predicts that it will save between $30 million and $50 million over the next five years by using this technology.

Machine learning which is a subset of artificial intelligence is also useful for weather pattern prediction, that is an extremely important part of flight management. AirAsia has been assessing the technology to equip its passengers with flight delay predictions ahead of time.

Earlier getting customer feedback through surveys and polls was a cumbersome exercise that they have now streamlined the feedback process fully using artificial intelligence for constructive data. AirAsia is exploring sentiment analysis that could scan pictures of passengers as they board and leave the plane to determine their level of satisfaction with the airline.

Last year, AirAsia introduced Fast Airport Clearance Experience System to improve the boarding experience for its passengers. This facial recognition technology identifies enrolled passengers as they come closer to the automated boarding gate—and therefore, will not have to submit their travel document.

For now, the technology is only operational at Senai International Airport in Malaysia. The airline’s representative said, “The more things we can digitise, the better we can improve our efficiency and our operations.”

AI to prepare airline food

China Eastern Airlines is another case of using artificial intelligence to create a better customer experience. Its data lab unit is trying to solve problems even before they could occur by developing a pilot service. For example, the in-flight meal preferences and feedback given by passengers will be gathered, analysed and and the data crunched will be used to prepare meals in future.

Another model that the state-owned airline’s data lab worked on is how to automatically classify thousands of complaints. The idea is to shorten customer response time that will positively impact the overall experience. This is especially relevant to the airline because complaints regarding its in-flight meal service stacked up quite a lot and managing them became a hassle.

Refined monitoring of customers’ response patterns and data analytics is a transformative step for the airline. Other airlines in the country might follow suit if the approach tested by China Eastern Airlines show significant improvement.

For many years, disruption has been the main concern in the aviation industry. Now Southeast Asian airline companies are swiftly marching toward artificial intelligence capabilities to manage an overwhelming customer base. The Asia Pacific region in particular is leading the aviation industry’s growth in terms of size—and is anticipated to handle more than 4.1 billion passengers by 2036.

SITA’s 2018 Air Transport Insights research explained that artificial intelligence has become a sophisticated technology offering strategic and operational advantages to airline companies. Japanese flag carrier Japan Airlines has replaced a decades-old passenger management system with Amadeus’ Altea programme to automatically to adjust ticket prices to match flight demand for higher revenue.

For Japan Airlines, the technology complements the task of optimising ticket prices, helps to understand losses from wrongly calculated demands and offsets the impact of high fuel prices on earnings. The upgrade has been referred to as a switch from bamboo spear to a machine gun — which firmly suggests the effect that artificial intelligence has on Southeast Asia’s aviation industry.

Self-service check in set for mass adoption

What does the future of AI in the Southeast Asian aviation industry look like? Passenger numbers are expected to double at Southeast Asia’s airports in a decade. At that level of passenger traffic, maintaining efficiency with human-controlled systems will become acutely challenging. This is where the impact of AI is expected to make drastic changes to aviation operations efficiency.

AI is today understood to be capable of handling end-to-end passenger handling and check-in operations on its own. In future AI combined with facial recognition technology will make self-service check in a reality at most major airports, possibly the first mass adoption will happen at airports in China. AI could also be used to maintain and repair aircraft at more Southeast Asian airlines.

One possibility is that AI can reduce the need for routine maintenance by triggering repairs only when they are needed. Also by using data from in-service aircraft, AI might be able to predict flight delays and faults to avoid traffic disruption and to enhance customer satisfaction. Essentially AI is taking aviation in Southeast Asia to a new elevated plane.

The post Operations: Southeast Asian airlines leverage the precision of AI appeared first on International Finance.

Most of the GCC nations are proactively taking steps to create a conducive business ecosystem for foreign investors. A tentative step toward firming up their non-oil economy was the liberalisation of the foreign ownership limit in local companies. On July 2 this year, the UAE cabinet announced that the government would allow 100 percent foreign ownership in 122 business activities specifically in agriculture, manufacturing, and services. Even then, the Department of Economic Development of each emirate has the authority to decide the extent to which a foreign investor can own a proportion of a local business.

The Dubai DED is said to be considering applications of companies with activities in the positive list on a case by case basis.  In a milestone decision, the Saudi markets regulator also announced in June that it was removing a cap on foreign ownership in publicly traded companies enabling foreign investors to take control in sectors from banking to petrochemicals. Even though the Captial Markets Authority has removed the cap, caps placed by other regulators or the companies themselves remain. In banking, telecom, and insurance the authorities still have to approve deals that cross a pre-established threshold. This allows foreign banks to take majority stakes in Saudi banks for the first time since 1970 when foreign lenders were forced to sell their majority stakes in their local operations to Saudi nationals.

In the UAE, the largest banks quickly warmed up to the prospect of welcoming more foreign investors and announced strategic moves to relax their foreign ownership caps. UAE’s largest bank, First Abu Dhabi Bank, increased foreign ownership limit from 25 percent to 40 percent. The bank has been jockeying for a full removal of the cap, although that decision would depend on the regulators.

“The potential for more foreign investment in banks is large in the UAE with existing quotas largely unfilled. For example, In Abu Dhabi Commercial Bank the foreign ownership is only 13.37 percent when compared with the foreign ownership limit of 40 percent, FAB has 11.30 percent against foreign ownership limit of 40 percent, Mashreq Bank at 2.99 percent against foreign ownership limit of 49 percent and for Emirates NBD it currently stands at 5.61 percent.

In fact, on an average 88.55 percent of the foreign ownership limit is unused in DFM listed banks while for ADX listed banks about 83.54 percent of the limit is unused.  The UAE has taken various steps in the recent past to attract foreign investors such as 100 percent ownership in certain sectors and issuance of 10-year visa,” Vijay Valecha, CIO of Century Financial tells International Finance.

More recently, Dubai’s largest bank, Emirates NBD, raised its foreign ownership limit from 5 percent to 20 percent—and had announced its plan to further increase the limit to 40 percent in the future. One benefit from liberalising the limit is the bank’s potential inclusion on the emerging market indices by MSCI and FTSE Russel, which is expected to increase passive inflows. Even with a 20 percent foreign ownership limit the bank could see foreign fund flows of up to $425 million.

“The earlier foreign ownership limits of some banks were very low, acting as impediments to foreign investments. Emirates NBD, the second largest bank in the UAE by market capitalisation had a very low foreign ownership limit earlier at five percent and has been subsequently increased to 20 percent,” MR Raghu, Executive Vice President Research of Kuwait Finance House, tells International Finance.

“The changes in ownership limits are expected to remove constraints for index providers such as MSCI and FTSE to assign higher weightages to the UAE banks in their indices, consequently resulting in higher passive inflows into the UAE banking stocks. A foreign ownership cap of 40 percent would provide the necessary headroom in the medium to long term to attract more foreign investments,” he added.

The Capital Market Authority of Saudi Arabia has developed significant reforms to foster capital market development and boost investor protection since 2014. The reforms that have been implemented can be categorised into four groups: operations, regulatory framework, corporate governance and investor protection. All listed companies in the Kingdom have adopted IFRS.

How attractive are GCC banks to foreign investors?

Standard & Poor in its global rating report GCC Banks 2020 Industry Outlook stated that prominent banks in the GCC countries should remain stable in 2020, with the exception being the influence of any significant increase in geopolitical risks or a drop in oil prices.

GCC banks adopted the International Financial Reporting Standards (IFRS) 9 last year to maintain financial stability. The banks currently demonstrate strong capitalisation by industry standards.  The report said that the average tier 1 capital in GCC banks increased by 100 basis points between 2015 and 2019 owing to various capital boosting initiatives — such as muted lending growth, IFRS 9 adoption rate, higher dividend payout ratios and hybrid issuances.

According to an S&P report published in 2017, banks across the GCC are expected to maintain robust capital levels till at least 2019. A Saudi Arabian Monetary Authority (SAMA) report also said that growth in capital levels are positive in the Saudi banking system as it succeeded to increase capital during a period of negative credit.

“The UAE and the Kingdom of Saudi Arabia banks are robust, fundamentally strong and command high capital levels. Improved disclosures, higher level transparency of operations and better corporate governance measures would entice foreigners to invest in the UAE and the Kingdom of Saudi Arabia’s banks,” Raghu said.

The Kingdom’s recent efforts to remove the cap on foreign ownership are expected to benefit domestic banks in the long term despite the threshold barrier. “The Kingdom’s move to remove the cap on foreign investment by strategic investors is a positive step for the long term as it allows foreign investors to increase their exposure to Saudi banks and acquire strategic stakes that was previously not possible,” Raghu said. Foreign banks are already strategic investors in some the Kingdom’s listed companies. Some of the examples of foreign strategic investors in the Kingdom’s listed companies include HSBC, Royal Bank of Scotland, and Credit Agricole.

So who are the foreign investors likely to be interested in investing  in the banks in the UAE and Saudi Arabia? “The valuations at which the UAE and the Kingdom of Saudi Arabia banks trade are attractive compared to their Emerging Market (EM) peers. Now that the foreign ownership limits are relaxed, we could expect them to be included in various indices and attract capital inflows into their stock. This presents an opportune moment for investors to consider increasing their exposure. We expect global fund managers, insurance firms, pension funds and endowments to be interested,” Raghu explains.

Saudi, UAE banks will benefit form foriegn investment

The removal of the foreign investment limit is expected to enhance the due diligence process for foreign investors who demand operational transparency and additional disclosures specific to strategy and long-term goals.

GCC banks are already making moves to bring governance at par with global standards. According to Valecha, financial institutions in the region are already making progress in implementing blockchain enabled technologies, digitisation of documents which enable standardisation, reusability, and monetisation of data, vital to strengthening the internal systems and client experience. For example, the Kingdom has introduced an electronic investor protection system to promote investor interest.

The GCC countries believe that a broad range of investors will boost their banks’ liquidity and strengthen the pool of industry expertise. “Increased foreign investment into domestic banks offer manifold benefits for the institutions concerned. Foreign investors, especially those with management expertise can help improve the risk management practices and increase transparency, thereby leading to better corporate governance standards. They also bring in specific domain knowledge which helps in improving the skills of local management,” Valecha explains.

If the foreign investment cap in the UAE banks is removed it will impact the knowledge transfer and reskilling of the workforce. “The presence of a foreign strategic partner like a bank will enable in increasing the product diversity and deepening the financial market. Most are motivated by profits and they tend to promote M&A’s, if it leads to a better cost to income ratio for the banks. Increased foreign investment is beneficial for the UAE in the form of economic development, employment boost, improved productivity, knowledge transfer and facilitation of international trade. Moreover, it will strengthen the UAE’s image as an international trading hub that is friendly to business,” Valecha says. Foreign strategic investors can also introduce specific domain knowledge in the Saudi Arabia’s banking sector to improve local management skills.

The regulators and the banks have got their timing right

The timing of the Saudi regulator lifting the foreign investment cap and the UAE banks raising their foreign ownership limit is apt, especially with the trade war looming and the economic uncertainty that comes along, Valecha explains. “While Long drawn out trade wars uncertainty surrounding it is certainly damaging to those in conflict, this creates opportunities for investments in other jurisdictions. Due to its strategic location between the East and the West, and being the link between MENA, Asia, Africa and Europe—the UAE offers easy access to investors from all around the globe. Most of the foreign investments in UAE and Saudi Arabia in the past have been from countries like India, the USA, the UK, Thailand, France and Spain and this is expected to continue in the future. Large financial institutions and wealth funds seeking income or dividend growth coupled with capital advance will be particularly enticed to invest in the UAE and Saudi banks.”

Kuwait Finance House’s Raghu shares similar views on the timing of the banks’ and regulators’ moves to remove the cap on foreign investments. “The relaxation of ownership limits to attract foreign investments is a step in the right direction at the current juncture. It also aligns with several other structural reforms introduced by the UAE government in recent times to improve foreign trade and capital inflows,” he said.

The post GCC and trade war: Time for foreign investment in UAE, Saudi banks? appeared first on International Finance.

The effects of new digital capabilities, according to an EY report, will improve strategic alignment, create appropriate demand for IT services, and manage the slow evolution of core platforms. The EY analysis showed that 23 percent of wealth managers perceive digital transformation to be relevant to their business within the next one year, 36 percent in one to three years and 42 percent in three to five years.

China, the UK, the US and Singapore are the four major markets for wealth management — with China’s wealth management market exceeding $21 trillion last year, it has become the third-largest wealth management market in the world.

What drives wealthtech

Typically, client and shareholder expectations and new regulations open up the industry to use technology to drive future growth opportunities. Research suggests that technology will be the key driving force behind most innovations in wealth management practices. For example, recently, a new wealth management service was launched that allows clients to open accounts using video conferencing. Now other wealth managers are also digitising client on boarding processes using electronic signatures and biometric signatures — but there is a huge difference in the approaches to leveraging technology for wealth management across markets.

For example, China and the UK have developed competitive advantages from their fintech ecosystems in recent years. For China, the ecosystem is largely underpinned by global fintech powerhouses, state-owned funds,  and access to an active IPO market. Chinese fintechs are particularly strong in wealth management. For instance, in China, companies have built technology-designed business models built for investment advisory services, or for providing trading access to the mass market. In comparison, the strength of the UK’s fintech ecosystem mainly stems from a supportive policy environment comprising tax incentives, regulatory initiatives, and government programmes.

Keith MacDonald, Partner, Head of Wealth Management at Ernst and Young UK, told International Finance, “The wealth sector’s use of technology is at best mixed in the UK. The last few years have seen heavy lifting around regulatory work such as MiFID and GDPR to name but a few. Some firms have replatformed and built out their front office during this time, but many are only now turning to the task now.”

Most UK wealth managers lack embedded technology

Although value creation opportunities remain stark for both new and existing clients in the UK wealth management industry, most wealth managers lack embedded technology. Sergel Woldemichael, an analyst from GlobalData told International Finance, “Technology has recently begun cementing itself in the UK wealth management industry and usage is expected to continue growing in the future.”

Clients are mostly given a one size fits all approach. This approach is adopted because the power of technology is not fully realised — and it is creating an opportunity as well as a threat to the current market situation. Another interesting point that Eric Mellor, Wealth Management Strategist at Temenos,a leading provider of software for global financial services companies, tells International Finance, is that the UK industry previously adopted fee-based models on hourly rates for holistic planning or percentage-based assets under management charges for portfolio management. Because of that many wealth managers are compelled to focus on high net worth individuals — leaving behind small investors unadvised.

Temenos conducted a survey The Next-Generation Wealth Manager with Forbes, which found that three years ago, only 33 percent of wealth managers in Europe believed digitisation is important to do business. Currently, 52 percent of European executives find digitisation of wealth management services essential. According to the survey, executives are by a vast majority aware of the need to incorporate technology in virtually all aspects of wealth management.

Cognitive computing the new reality

It is possible for wealth firms to deliver deep cognitive personalisation and address complex client questions in real-time through virtual advisers. According to a Capgemini report published last year, automated advisers using artificial intelligence are expected to have assets worth $2.2 trillion by 2020.

An example of cognitive computing-led personalisation is the fact that  investment managers are using predictive analysis to create investment ideas or to detect assets at risk in early stages. A report published by BofA Merrill Lynch found that advancements in computing technology, machine learning, and user-friendly interfaces will generate higher efficiency and output worth $5.2 trillion to $6.7 trillion. BofA Merrill Lynch is testing an AI stock-picking tool to identify potential value in small-cap stocks. This will help to cover the loophole of what conventional analysts might miss while doing the same.

To common knowledge, the crucial aspect of a wealth management firm’s appeal is client engagement. Globally, high net worth clients between the age group of 20s and 30s generally seek a good mix of digital investing tools and human advisers for their wealth management needs. For that reason, a new hybrid strategy is what is necessary for wealth firms to draw value out of client data and align with evolving industry demands.

Wealth managers should consider robot advisers because they function similar to self-driving cars. Essentially, the algorithms will handle basic services but won’t completely replace the human presence. That sort of an approach will help them to progress from selling basic services to advanced market insight, while the full extent of technology is being offered to the industry’s tech-savvy wealth clients.

Woldemichael of Global Data explains that, “From robot advice to software that can automate compliance tasks, wealth managers are now at a stage where technology can no longer be ignored in this historically paper-based and aged industry. Robot advice remains top of the list when it comes to what technology players are using, with both startups and incumbents introducing their own platform.”

However, the Financial Conduct Authority’s 2017 report showed how UK millennials are wary of robot advisors. The report showed that only 20 percent of 18 to 34 year olds in the country would consider using a robot adviser, while 40 percent of them distrust the technology. “Robots and robot advice are at an early stage in the UK wealth market, and we are seeing the smarter firms look at customer segments in terms of their propensities to use technology rather than traditional asset under management measures.  For most clients, some form of hybrid solutions are favoured, with a heavy dependency on what service or transaction is being looked at,”  EY’s Keith MacDonald explained.

Trust lacking in technology

Trust plays a vital role in establishing a fundamental rapport between top-end clients and relationship managers. A hybrid approach will enable clients to access self-service capabilities through fintech interfaces, while advisers will be able to focus on higher value-added activities, such as on boarding more clients or spending more time with those top end clients. Temenos’ Mellor said, “This model is unlikely to change dramatically, but evolving hybrid advisory solutions are likely to become the new standard, providing the best of both worlds.”

Eric Mellor says that younger investors still favour human expertise and personal interaction with an adviser, despite increasingly positive attitudes toward the adoption of technology and robot advisors in wealth management.

But this is not to say that robot advisors have no effect on the investment landscape. They target the mass affluent segments which are not catered to or underserved by wealth management firms. Despite assorted views in the current climate, the technology is likely to become sophisticated and relevant to high net worth and ultra-high net worth individuals in the future.

GlobalData’s 2018 observations suggested that only 1.6 percent of UK mass affluent population were using robo advice as their main investment provider. As of 2019, the number has jumped to 4 percent.

“Although many players are yet to make profit from such platforms, in the long term, our data shows that demand is increasing and will be even more important to the next generation of investors. Furthermore, 46 percent of UK millennials prefer to use online methods through smartphones, tablets, or desktops when arranging their investments according to our 2019 Banking and Payments Survey. And so technology is definitely infiltrating the UK and is here to stay,” Global Data’s Woldemichael explained.

Chinese mass affluent – a study in contrast

In their scepticism toward robo advice, UK investors show a noticeable difference in approach with their Chinese counterparts. Even though using wealth managment technologies is perceived as an opportunity to grow wealth, the majority of UK wealth managers are not fully convinced — as opposed to their Chinese peers about deploying technology to the extent that Chinese wealth managers have.

“The proportion of Chinese wealth managers using blockchain, voice-activated technology and robo advice is higher than in the UK,” Global Data’s Woldemichael said.  This is because the emergence of digital wealth management clients in China is changing the game in the segment. Those clients’ online managed assets represent more than 30 percent of their total investable assets — showing higher trust in wealthtech among Chinese investors.

Findings published by research firm Boston Consulting Group (BCG) last year found that the affluent middle class has formed the majority pool of digital wealth management clients in China. The Chinese wealth management market is set to grow exponentially in size as the this middle class becomes increasingly wealthier. The study points out those digital wealth management clients continue to invest in fixed income products — with 55 percent of them showing a higher risk tolerance.

In the last five years, the digital finance boom in China has led to digital wealth management transformations on two fronts. China has become more receptive to online wealth management and has witnessed the first development of independent internet wealth management platforms.

By closely observing the extent of private wealth in China and the mass adoption of technology, it seems that Chinese wealth managers  and investors are more positive toward new technologies than UK investors. For example, China Merchants Bank launched a robo advisor Machine Gene Investment with characteristics of both human wealth management practices and fund research experience through machine learning algorithms.  The use of such goal-based planning tools  can help clients target objectives more effectively and drive discipline into their investing behaviour.

Eric Mellor of Temenos explains that quant tools and Monte Carlo performance simulators, for example, will help clients to better understand investment risk. Even auto-balancing features in most robot solutions will enable quick rebalancing of portfolios. That said, Woldemichael of Global Data emphasises the importance of hybrid strategy, where the presence of a human is not all dispensed away with.

“The hybrid strategy is the best option at this current time, rather than a purely digital investment platform.  Yes, users want a digital platform, but they also want someone to talk to for their emotional needs regarding their investments,” he said. “They still want guidance or advice from a human being as the technology is yet to answer every question investors have.”

One of the reasons for wealth management clients to develop distrust in the technology is cyberattacks and hacking. Their primary cause for concern rises when investing large amounts of wealth with higher risk factors attached. For that reason, “We are seeing robo startups such as Nutmeg, the UK’s largest robo-advisor by assets under management, recognise the importance of having human advisors as they have introduced human advice into their platform last year following client demands,” Woldemichael said.

Elders still hold much of the wealth in UK

It is important to understand that “The trend is China is likely a reflection of the mass affluent client demographic,” Eric Mellor said. According to the BCG report, two thirds of the world’s mass affluent will be based in Asia and only one fifth will be from Europe or the US by 2030.  Also, 64 percent of the mass affluent in China are under 40 and 24 percent are less than 25 years of age. Meanwhile, the majority of wealth in the UK still remains in the hands of an older demographic — suggesting that they are likely to continue to seek advice from banks and advisers.

The post China embraced wealthtech; why hasn’t the UK done so? appeared first on International Finance.