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DIFC Strengthens Commitment in Driving Growth in MEASA

DIFC Ranked 8th in the Global Financial Centres Index (GFCI)

Known to have a 15-year track record of facilitating trade and investment flows across the MEASA region, the DIFC connects fast-growing markets with Asian, European and the American economies through Dubai. To date, the Centre is further strengthening their plans and programmes in hopes to drive growth in the region.

 

Dubai International Financial Centre (DIFC), one of the world’s most advanced financial centres, and the leading financial hub for the Middle East, Africa and South Asia (MEASA) regions, showed its commitment and contribution in boosting UAE’s economy on the first half of 2019.

Home to an internationally recognised, independent regulator and a judicial system with an English common law framework, DIFC sustained their growth by welcoming more than 250 new companies, fueling the creation of over 660 jobs, boosting the Centre’s combined workforce to more than 24,000 professionals in over 2,300 active registered companies, therefore resulting in the occupancy of 99 percent of DIFC-owned buildings. This entails a 14 percent increase year-on-year and a seven percent increase since the end of 2018.

Now, the Centre boasts more than 671 financial related firms, showing an 11 percent increase from last year.  The newly-joined firms include Malaysia’s Maybank Islamic Berhad, U.S.A’s Cantor Fitzgerald, and Australia’s Atlas Wealth Management and Mauritius Commercial Bank. Leading non-financial firms including Guidepoint MEA, Medtronic Finance Hungary Kft. and Network International, have also joined.

 

Driving MEASA development

DIFC has announced new expansion plans, supporting the economic future of Dubai and the UAE following the strong demand witnessed from financial institutions worldwide. The Centre’s growth plan is expected to triple the scale of DIFC and enables them to further Dubai’s growth and development, diversify and transform the financial services sector within the region.

Arif Amiri, Chief Executive Officer of DIFC Authority, said they are continuing to cement their global position as a pivotal business and finance hub, while making significant headway towards meeting their 2024 targets. 

“We are confident about reinforcing our position as a leading global financial Centre – a great place to live, work, play and do business.” Arif Amiri, Chief Executive Officer of DIFC Authority

“Our focus on innovation and technology is delivering a blueprint for sustainable growth as we continue our journey towards driving the future of finance. DIFC’s emphasis on transforming its lifestyle offering, alongside strategic investments within technology and FinTech means we are confident about reinforcing our position as a leading global financial Centre – a great place to live, work, play and do business,” he mentioned.

They have also received 425 applications from rising firms operating in the RegTech, Islamic FinTech, InsurTech and broader FinTech sectors, for the third cohort of its DIFC FinTech Hive accelerator programme, a 42 percent increase from last year. This marked a three-fold increase from their inaugural cycle in 2017, exemplifying the pace of evolution of this fast-growing industry, and the preference of Dubai and the DIFC as the home for FinTech firms looking to scale their business across MEASA.

In consultation with the Centre’s FinTech Hive’s network of 21 participating partners, including Abu Dhabi Islamic Bank (ADIB), Emirates Islamic, Emirates NBD, Finablr, HSBC, National Bank of Fujairah, Noor Bank, Riyad Bank, Standard Chartered, and Visa, 31 innovative global start-ups have been selected to participate in the third edition of DIFC FinTech Hive’s 2019 accelerator programme.

InsurTech start-ups are expected to work closely with leading insurance players such as AXA Gulf, Noor Takaful (Ethical Insurance), Zurich Insurance Company Ltd (DIFC), AIG, Insurance House, Cigna Insurance Middle East S.A.L. and MetLife, to signify their developing game-changing solutions that will address the ever-growing requirements of the industry.

DIFC’s FinTech community is known to benefit from building strong relationships they have continued with key international accelerators through ongoing delegations and partnership agreements. During the first half of this year, the Centre has signed four MoUs, such as Dubai SME to help foster entrepreneurship in the region and further the National Innovation Agenda, and three agreements with FinTech Saudi, Milan’s FinTech District and FinTech Istanbul.

 

Sustainability in efforts

The Centre remained knowledge sharing and thought leadership as their core focus for this financial year. In recognition of DIFC’s efforts towards building one of the world’s leading financial centres over the last 15 years, the Centre was the only free zone in the UAE to receive the Dubai Quality Award in April 2019. The award symbolises the financial hub’s hard work and dedication in building a sustainable and progressive business environment. 

Also, the DIFC Academy offers world class financial and legal education through strategic partnerships with 26 leading educational institutions and government entities and is part of their efforts to support continued professional growth and strengthen their talent pool.  To date, the academy has seen more than 5,500 graduates successfully undertake executive education courses and programmes in finance, business and law, and two dedicated Masters of Laws (LLM) programmes that they offer.

In May 2019, another milestone for sustainable business growth was achieved by Majid Al Futtaim, who launched the world’s first benchmark corporate Green Sukuk at Nasdaq Dubai, which supports Dubai’s growth as the global capital of Islamic economy. The corporation’s investment will be used to finance and re-finance the group’s existing and future projects, such as green buildings, renewable energy, sustainable water management, and energy efficiency. 

Highlights

• 2,289 is the total number of registered companies currently operating in the DIFC – a 14 percent increase year-on-year and a 7 percent increase since the end of 2018.

• Over  250 new companies, a 10 percent increase from the same period in 2018.

• DIFC’s financial technology ecosystem doubles in size in first half of 2019 – now includes over 200 companies, of which more than 100 are fully-licensed FinTech firms  –  a three-fold growth since the end of 2018.

• 425 applications received for third cohort of FinTech Hive accelerator programme – three-fold growth since 2017 and 42 percent increase from 2018.

 

Working under a sophisticated framework

DIFC has been known to be at the forefront of improving its legislative infrastructure to provide the community with easier access to opportunities within the MEASA region, while providing greater stability and certainty when doing business in the area. Its robust legal and regulatory framework remains the most sophisticated and business-friendly Common Law jurisdiction in the region, aligned with international best practice.

DIFC continues to support the development of the financial services sector in the region and fosters the UAE’s economic growth by encouraging the progress of the domestic funds market. In May 2019, the Dubai Financial Services Authority (DFSA), the Centre’s independent regulator, had announced that a new regime will be facilitating the passporting of funds, in collaboration with UAE’s other financial regulators.

The UAE passporting regime is a regulatory mechanism for the promotion and supervision of investment funds that encourages foreign licensed firms in financial free zones based in other countries to enter the local market. 

As part of DIFC’s blueprint for the transformation of the Centre and in line with global retirement savings trends, the financial hub launched the Employee Workplace Savings (DEWS) scheme, which favors the evolution of end-of-service benefits from a defined benefit scheme to a defined contribution scheme, while offering a voluntary savings component for its employees.

With the aim of ensuring businesses and investors who can operate across the region with confidence, the Centre has introduced a new Insolvency Law in June 2019, enacted by His Highness Sheikh Mohammed bin Rashid Al Maktoum. The law facilitates a more efficient and effective bankruptcy restructuring regime for stakeholders operating in DIFC. This continued to create an attractive environment for the 24,000 individuals based in the Centre to thrive, while having their needs and interests as both employers and employees protected and balanced. An Employment Law was also introduced to address key employment issues such as paternity leave, sick pay, and end-of-service settlements.

Not only that, but they have also unveiled a unified, simplified and more expansive Prescribed Companies regime that quickens structuring and financing, making the process more flexible and more cost-effective. The new regime encompasses structures previously offered by DIFC, such as Intermediate Special Purpose Vehicles (ISPVs) and Special Purpose Companies (SPCs), which contributed significantly to a robust track of prospective businesses from the aviation financing sector, generating substantial interest from family offices looking to utilise these structures in their succession planning.

DIFC Art Night 2018
Fintech Hive at DIFC Investor Day

 

Bringing lifestyle and retail experience to life

Hilton Hotels & Resorts announced the opening of Waldorf Astoria DIFC during the first half of the 2019. The 275-key hotel occupies the 18th to 55th floors of the Burj Daman complex, with 46 suites and 28 residential suites offering elegant and outstanding views of the Downtown Dubai skyline.

DIFC has also welcomed a number of new culinary concepts to the gourmet scene including “Marea”, a New York fine dining experience led by multi-Michelin starred chef, Michael White, and Grecian inspired “Avli by Tasha”. In March, it was announced that renowned chef Nusret Gökçe was set to launch casual dining concept “Saltbae” this year.

DIFC is home to one of the region’s largest collections of public art. With sculptures from internationally renowned artists, such as Manolo Valdés, it has become the foundation for initiatives such as the One Mile Gallery, in partnership with Brand Dubai, which showcases the best of local, regional and international design and promotes art, innovation and entrepreneurship. 

Its seventh elite art gallery, Sconci Gallery was welcomed to the DIFC as well. The gallery was established in Rome in 1977, and has collaborated with leading artists and international auction houses to showcase collections from the masters of modern and contemporary art, and emerging artists. 

In March 2019, the Centre hosted the most successful edition of the hugely popular Art Nights in the last five years. Art Dubai 2019 marked the beginning of Dubai’s coveted art season and saw participation from international and local art galleries and artists, and included installations accompanied by electric musical performances and light installations from interdisciplinary artists.

 

Continued Growth and Development

DIFC is committed to becoming the world’s top financial centre and bringing the future of finance in the region. This dedication is demonstrated through its continued investment in driving innovation and pioneering the digitalisation of the rapidly expanding financial services sector and accumulation and continued facilitation of financial knowledge and talent for its people.

Amiri said, “During the last 15 years, DIFC has firmly reinforced its position as one of the world’s top financial centres.  Our focus is to become the most advanced financial centre in the world and the only way to do this is to ensure we stay ahead of the curve.”

Ensuring the well-being of the DIFC community by continuing to attract skilled and talented people, nurturing the brightest minds to generate innovative ideas, and working towards maintaining a secure future for its people and the future generation in its community are also the core principles of the DIFC Authority that contributed to the Centres’ success.

Amiri believed and concluded that “The continued growth and development of the DIFC Authority team highlights that today, the Centre is seen not just as the jurisdiction of choice for business but also as an employer of choice. We are proud of the environment we have created, that attracts top talent but also helps them grow within the organisation, succeeding into leadership roles.”

About the DIFC

Dubai International Financial Centre (DIFC) is one of the world’s most advanced financial centres, and the leading financial hub for the Middle East, Africa and South Asia (MEASA), which comprises 72 countries with an approximate population of 3 billion and a nominal GDP of USD 7.7 trillion.

The Centre’s vision is to drive the future of finance. Today, it offers one of the region’s most comprehensive FinTech and venture capital environments, including cost-effective licensing solutions, fit-for-purpose regulation, innovative accelerator programmes, and funding for growth-stage start-ups.

Comprising a variety of world-renowned retail and dining venues, a dynamic art and culture scene, residential apartments, hotels and public spaces, DIFC continues to be one of Dubai’s most sought-after business and lifestyle destinations.

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Russia Excels at Art and Invention but Stinks at Commercial Technical Innovation

By Loren Graham

Russia has been known for its great contributions to the fields of literature, music and mathematics but never in commercial technology. Many Russian inventors could have created a breakthrough in technology if not for the unevenness of support provided by the Russian society.

 

Russian creativity presents us with a fascinating riddle.  Why does Russian creativity express itself so brilliantly in some areas but not in others?  Just think of the contributions of Russians to fields such as literature, music, and mathematics:  Dostoevsky, Tolstoy, Tchaikovsky, Prokoviev, Lobachevsky, Kolmogorov.  But it is a different story when one looks for successful Russian creativity in commercial technology.  Just when have you gone into an electronics store and seen something you wanted, turned it over, and saw “Made in Russia” on the back?  Probably never.  It is difficult to think of a single Russian technical innovation that was successful on the world market.  Russia is unique in the unevenness of the fruits of its creativity.  This uniqueness calls for explanation.

What stopped Russian inventions from success was not overt prohibition but the characteristics of Russian society.

Russian creativity in abstract thought and the arts (literature, music, poetry, mathematics, drama, theoretical physics) found public expression, recognition, and success much more often than creativity in technology.   The more the Russian creative effort was expressed in ideas recorded on paper, blackboard, canvas, or the internet1 (manuscript texts, equations, scores, paintings, verses, scripts, formulae, drawings, computer programs) the more successful it was in finding expression and recognition, both nationally and internationally.  The more the creative effort was in material objects, new manufacturing processes, or machines, the more difficult it was for that creativity to find success, especially in international markets.  All this was true despite the fact that Russian governments (tsarist, Soviet, post-Soviet) are infamous for trying to control ideas through propaganda or censorship, not for restricting new inventions.   What stopped Russian inventions from success was not overt prohibition but the characteristics of Russian society.

The fault here is not a failure in engineering or science.  In fact, Russians were just as creative technologically as Russian novelists, poets, composers, and mathematicians were in ideas.  In almost all the forms of modern technology so important to the world today (electric lights, radio, airplanes, television, transistors, computers, lasers, rockets, space vehicles) Russian pioneers either led the world in strict priority terms or were equal to or barely behind competitors elsewhere.  However, unless that creativity was backed by a state or military program, which ignored the factors that make for commercial success, the creativity of these Russian engineers and inventors was overwhelmingly blocked by the obstacles in their environment.  They almost universally failed to bring their potential innovations to international markets, and their names usually fell into oblivion.  The clarity of this pattern can be seen in the difficulty of finding a Russian invention that became a success internationally.   The exceptions are usually cases in which Russians emigrated abroad and succeeded in different environments (e.g, Zvorykin, Sikorsky, Durov).

 

If all that a creative person in Russia needed to do to fulfill his or her idea was simply to make it known (e.g., through publication, performance, or exhibition) that person had a chance for fame.  If the fulfillment of that person’s idea was a complex matter in which publication or appearance was a first, inadequate, or even unnecessary step, the chances of success for that person were much smaller.  For a brilliant inventor, publication of an idea is easy but grossly short of its fulfillment.  Publication might, in fact, be an obstacle to ownership of the idea.  For a brilliant literary author or mathematician, on the other hand, publication is very nearly the culmination of his or her efforts.

The difference between what happens after an inventor presents something to the public and a writer or composer does the same thing is crucial for understanding the unevenness of Russia’s successful creativity. 

New technology developed by Russians, some of it brilliant, often died as a newborn baby without ever growing up. No one was interested in or took proper care of that baby.  And the materials and means necessary for that care were often unavailable.

A new technology at the moment of first presentation is usually much more imperfect than a work of art.   An anecdote about the British scientist Michael Faraday illustrates this feature of early technology:   When he developed a primitive dynamo, he reputedly was asked “What is it good for?”  We are told that he replied by asking “What is a newborn baby good for?”  New technology developed by Russians, some of it brilliant, often died as a newborn baby without ever growing up.  No one was interested in or took proper care of that baby.  And the materials and means necessary for that care were often unavailable.

The fact that a new technology is usually first presented to the public in a much more unfinished form than is the case with a new piece of art has many implications.  Since the new technology must be further  invested in, researched, improved, legally protected, manufactured, successfully marketed, and integrated with existing technology, it is much more dependent on societal infrastructure than is a piece of art.  Art demands appreciation by at least a small group of cognoscenti.  Technology demands much more. Where are the people who will see its potential and invest in further research?  Who will improve it after that research? Who will defend it legally against competitors or opponents, domestically and internationally, and what chance will these defenders have in a corrupt legal system?  Who will pay for all these investigatory, engineering, legal, and economic steps?  Who will manufacture it?  Who will advertise it?  Who will integrate it into existing technological systems?  Art usually does not face such obstacles, but technology does.  And in a country such as Russia, which is deficient in such infrastructures – especially those involving investment, legal, manufacturing, and economic issues – taking a new technology from its newborn status to adult readiness for the market is particularly difficult.  In many cases such a transition did not occur in Russia, although it should have for the good of the country and the inventor. 

A striking example of this kind of failure can be found in the development of television; the Russian originator of a basic idea in the field, Boris Rozing, was blocked in bringing that idea to fruition in Russia, but his student, Vladimir Zvorykin, succeeded magnificently with his teacher’s idea in the United States at the firm RCA.  Other examples — Shilling and his telegraph, Lodygin and his light bulb, Borodin and his chemical method of aldol condensation pointing to industrial applications, Popov and his radio, Shukhov and his method of petroleum cracking, Losev and his primitive transistors and diodes — are also relevant, along with many other examples from the history of Russian technology.  These technologies could not succeed in the country in which their originators worked.  When the Russian Sergei Sikorsky did finally succeed with his aviation technology in the United States he wrote a book in which he cited as the cause of his success the new political, economic, and social environment in which he was working after emigration.2

There are many reasons why Russian writers, composers, poets and mathematicians had (and have) an easier time fulfilling their dreams than inventors and entrepreneurs.  The inadequate infrastructure in Russia is important, but only one.  An equally important reason is elusive but basic:  attitudes prevalent in Russian society.  Artistic intellectuals are valued more in Russia than are inventors and entrepreneurs, as reflected in Russian literature extending back several centuries.3  When artists or authors suffer in Russia many of their fellow citizens sympathize with them and convert them into heroes, even martyrs.  Oppression and censorship often raise their prominence and increase the number of people trying to read, view, or listen to their works.

When inventors and entrepreneurs suffer, on the other hand, few sympathizers can be found.   Individual practical achievements are rarely objects of public adoration in Russia; should a rare entrepreneur be successful and become wealthy, that feat is often a cause for suspicion or resentment.   The celebration of beleaguered authors and the disregard of equally beleaguered inventors is a characteristic of Russian society. 

After the disappearance of the Soviet Union the newly-rich oligarchs were suspected, in many cases correctly, of criminality.  The “self-made man” was not a hero, but a person who illegally and maliciously manipulated the system to his advantage.  There are few or no “Horatio Alger heroes” in Russian literature or traditions.

Sadly, many of the obstacles to the fulfillment of creativity  – both in the arts and in technology – that were observable in tsarist and Soviet Russia are still present in Russia today, and there are even some new ones.  Both the author and the inventor need to worry about government policy as they work.   Both of them today are dependent on the permission of the government, or its leader, for support, and that government and leader have their own criteria about whom deserves their approval. Many entrepreneurs and business people have recently been arrested, including promising innovators.  As a 2017 article in the New York Times proclaimed, “Russia Wants Innovation But is Arresvting  Its Innovators.”4  Dmitrii Popov, a serial entrepreneur who came to the United states in 2014, commented, “And for the last year in Russia, I was just absorbing the total deterioration of the business environment.  Everything was becoming so bad.”5

I am a historian trained as an engineer.  As a historian most of my examples of Russian technical brilliance followed by commercial failure come from the past, but, as an engineer, let me conclude by giving an example that is very recent.  In fact, it affects the technology that you are probably carrying in your pocket right now.

The story of the Russian scientist Zhores Alferov, who just died, is illustrative here.6 A Nobel Prize winner, he was a co-inventor of an important but, to the public, underappreciated technology called heterojunction transistors.  They are used in a multitude of ultrafast electronic circuits.  The normal consumer uses them in their smart phones, which require fast and efficient circuits operating at room temperatures.  Heterotransistors can fulfill these requirements.  They differ from the older transistors by incorporating a junction (a heterojunction) of two dissimilar crystalline semiconductors.   Older transistors used only one type of semiconductor (a homojunction).   Heterotransistors permit a wider spectrum of manipulation by electrical engineers to achieve very specific effects.

At what point in time would it have been correct to judge this invention a success?  By 2000 it was a personal success for Alferov.  Receiving a Nobel Prize is obviously an achievement of a lifetime.  But it was not until 2007 that Steve Jobs of Apple introduced the iPhone, calling it “a revolutionary and magical product.”  It used at first a hetero-epitaxial layer of silicon on sapphire, a heterostructure made by Infineon, a German company.

By this time heterotransistors were being successfully manufactured in several countries.  The country of one of the inventors of this device – Zhores Alferov – is not significant on that list.  In that sense, Alferov’s creativity was never fulfilled in his own country.  Russia plays today a very small role in the manufacture of transistors.  Of the ten largest semiconductor manufacturers today, five are based in the United States, and one each in Taiwan, the Netherlands, the U.K., Japan, and Germany.  The United States dominates the industry, with over fifty percent of world-wide production.  One U.S. company, Intel, has twice the annual sales of its nearest competitor, Taiwan Semiconductor.  Of course, Russia has some semiconductor manufacturers – Angstrom, Istok, and Mikron, for example — but they are not significant in the world market.

So here we see a continuation of the pattern that we earlier have observed in Russian technological creativity:  Russia excels at invention but stinks at commercially successful innovation.

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About the Author

Loren Graham is professor of the history of science emeritus at MIT and Harvard University.  One of his many books was a finalist for a National Book Award.  He received the George Sarton Medal of the History of Science Society and a medal for “achievements” from the Russian Academy of Sciences.

References
1. The Russian mathematician Perel’man did not publish his recent epochal solution of the Poincare’ Conjecture, just posted it on the internet.
2. Igor Sikorsky, The Story of the Winged S, Dodd, Mead & Co., New York, 1941.
3. Dostoevsky, Turgenev, Ostrovsky, Saltykov-Shchedrin, Danilevsky, Gorky and other Russian authors described merchants or traders in negative terms, as vulgar and money-loving.
4. Andrew Higgins,  “Russia Wants Innovation, but It’s Arresting Its Innovators,” The New York Times, August 9, 2017,https://www.nytimes.com/2017/08/09/world/europe/vladimir-putin-russia-siberia.html, accessed 8/9/2017.
5. Puffer, et al., p. 146.
6. Paul Josephson, Lenin’s Laureate:  Zhores Alferov’s Life in Communist Science, MIT Press, Cambridge and London, 2010.

Enforcing an Invoice and Chasing Your Clients for Payment

In most businesses, the biggest headache is getting your payments processed on time. Once the work is done, it becomes the job of the company to keep asking for payments. Often clients are forthcoming and do the payments as per the terms and conditions however in most situations they may falter causing you anxiety. Here we mention the tips on how you can chase your clients for payment. 

Set your payment terms in advance 

Actually, a client would never talk to you about the money on your own. It is you who has to set their expectations straight when you are signing the deal. By informing them of the payment terms and your strictness with regards to the same you can make it crystal clear that you want your payments done on time.

Late interest charges 

It is always better to convey to clients that if they do not process payments on time there would be a late interest charge levied. This has dissuaded many people from faltering on the payments as no one wants to be penalized. Apart from that, you could also inform them about enforcing an invoice terms and conditions so that they are fully aware of what they are getting into.

Send them reminders 

Your first reminder need not be rude. Just send a simple reminder email asking them to process the payment as the invoice has been due for quite some time. However, remember that this email should be sent only if they have missed the last date by a few days. Do not send a reminder email when the date is not yet passed as that might just spoil the relations you have with them.

Statement of outstanding cost

Despite this, if you still have not received a response then maybe the problem is much deeper than you think. Plan on sending another email or rude specifying to them the details of outstanding cost and how they need to pay immediately to continue the work. If need be, keep their work on hold, telling them that the rest of the work would be accomplished only after the payments are processed.

Give a call 

When things go out of control then a polite call from your side may become necessary. Make sure that you call the person who is responsible for the payments as only he can guide you about the delay. It could be that the client has cash flow issues and just needs some extra time. By making this call you would get a fair idea of where they are standing.

Conclusion

Despite all your efforts, it is possible that the client refuses to pay heed and make the payment. As a last resort, you might be forced to take the legal route. Try to avoid this situation as much as you can.  If there is a settlement that can happen between you then make it a point to do so. In most cases, the warnings are sufficient to make the client notice and clear his dues and you may not have to adopt stricter measures from your side.

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Sustaining the African Middle Class: Leveraging Green Technologies and the Fourth Industrial Revolution

By Camaren Peter

Africa’s rapid urbanisation, steady economic growth and growing – but precarious – middle class is cause for optimism, yet critical developmental challenges persist. Leveraging the overlap between green technologies and the offerings of the fourth industrial revolution is key to stabilising the middle class and closing the vast inequality gap on the continent.

 

Africa is currently undergoing a ‘revolutionary’1 urban demographic and spatial transition that has significant implications for economic growth on the continent and the globe. The emerging – mainly urban – African ‘middle class’ is central to this transition.2 The shape and form that this transition takes will largely depend on whether stable, consistent and sustainable growth and expansion of this middle class occurs in the medium to long terms. The question of what economic diversification trajectories can contribute to stabilising the African middle class is hence an important one. On a continent characterised by high levels of poverty, inequality, unemployment, food insecurity, and severe infrastructure and basic services deficits3, a socio-economically equitable and sustainable transition is required4. In this respect, the confluence between green technologies and systems solutions5,6, and the emerging offerings of fourth industrial revolution, hosts the potential to unlock new developmental and economic growth trajectories for the continent.

128 million households will transition to ‘middle class’ status by 2020, yielding a middle class that is set to grow from 355 million in 2010 to 1.1 billion in 2060.

Background

The “Africa Rising” narrative rose to precedence in the wake of the 2008 financial crisis, when the need for global growth necessitated accessing emerging markets. The optimistic outlook on Africa was predicated by significant increases in GDP growth since the 1980’s and 1990’s, with uniform spread of growth over sectors7. In addition, early projections were that 128 million households will transition to ‘middle class’ status by 2020, yielding a middle class that is set to grow from 355 million in 2010 to 1.1 billion in 20608,9. Moreover, the African labour force is projected to reach 1.1 billion by 204010 exceeding that of China and India11.

Underlying this growth is rapid urbanisation, with the continent’s highest performing 18 cities projected to achieve a purchasing power of USD 1.3 trillion by 203012,13.Africa exhibits the highest city growth rates in the world (i.e. above 4% between 1950-1990 and will remain at or over 3% to 2035-204014), with over a quarter of the 100 fastest growing cities residing on the continent15. Urban dwellers are set to increase from 400 million in 2010 to 1.26 billion in 2050, increasing its global share of urban dwellers from 11.3% in 2010 to 20.2% in 205016,17. Recent data puts African urban dwellers at 548 million and is likely to almost triple to approximately 1.5 billion between 2018 and 2050, constituting around 22% of the global urban population at that stage18.

Two critical and peculiar factors characterise urbanisation in Africa. First, that in contrast to the first wave of global urbanisation in the developed world, which coincided with the industrial revolution, urbanisation in Africa is unfolding largely with low levels of industrialisation19,20,21. Second, that 63.9% of urban growth – according to revised data published in 2012 – was occurring in small (54%) to intermediate cities (9.9%), that is; cities that range from under 500,000, and 500,000 to 1 million, respectively22.

With the majority urban condition being characterised by severe infrastructure and service provision deficiencies, the growth of small to intermediate cities presents a unique opportunity to leapfrog development and economic growth at relatively manageable scales23. In contrast to the development demands of megacities such as Lagos and Kinshasa, which are ‘locked in’ to patterns of spatial development that are characterised by high levels of slums and informality, small to intermediate cities offer the potential to work at manageable scales and still create wide scale impact.

This is not to de-emphasise the importance of larger cities on the continent, but simply to point to the opportunity that resides in small to intermediate scale cities to seed and catalyse broader scale developmental transitions. With average densities set to increase from 34 to 79 persons per km2 between 2010 to 205024, urban spatial development choices (i.e. infrastructures, technologies, urban design and planning) will likely prove critical in respect of what kind of foundation for economic growth is put in place. A low resource consumption and carbon intensive approach is necessary25,26.

 

This is emphasised when considering that the African population is projected to grow from 1 billion in 2010 to 2 billion in 2020, surpassing 3 billion by 207027. Moreover, with 226 million of the African population between the ages of 15 and 24 years of age in 2015 (i.e. roughly 20% of the population, while around 40% are under 15), the “youth bulge” in Africa is projected increase by 42% by 2030 and to double by 205528,29. African youth constitute around 60% of unemployment in Africa30 yet will constitute a labour force that surpasses India and China by 2040, constituting 1.1 billion31. Clearly, an equitable transition that breaks with the history of poverty and inequality on the continent requires catering explicitly for this emerging force for change on the continent.

The question of the African middle class requires additional scrutiny in respect of transition. It is defined as people living on between USD 2-20 per day, constituting around 34% of the African population by 201032. Around 60% of this 34% live on between USD 2-4 per day and are referred to as the “floating middle class”33. With a remarkably small quotient of only 4% of people on the continent earning more than USD 10 per day (i.e. only 2% of the global middle class who earn between USD 10-100 per day) and about half living on less than USD 1.25 per day  34(i.e. below the global poverty line), Africa’s middle class is key to closing the inequality gap.

An enduring middle class ‘precariat’ is undesirable, as it mitigates against engendering socio-economic and political stability into the medium and long terms. Hence, the question of how to stabilise middle class household budgets is central to actualising an equitable transition that yields sustainable growth and diversification into the long term. In this respect, the vulnerability of poor and middle-class African households to the food-water-energy “nexus”35 is important to take into consideration.

The dependence of most African economies on imports is projected to increase in the food  and energy sectors. This in turn impacts their ability to save, service their assets, initiate and sustain entrepreneurial activities, and satisfy their basic needs.

With between 50 to 70% of household expenditure attributable to food36, water37 and energy38 (including transport39) costs, the nexus serves as an obvious intervention ‘point’40 through which household budget stability can be achieved41. Moreover, the dependence of most African economies on imports is projected to increase in the food42 and energy sectors43 (especially fossil fuels such as refined oil). These can combine, resulting in double and triple ‘squeeze’ effects that render households particularly vulnerable to exogenous changes in the availability and cost of related goods and services, periodically plunging them into poverty and near-poverty conditions.

This in turn impacts their ability to save, service their assets, initiate and sustain entrepreneurial activities (i.e. whether formal or informal), and critically, enjoy access to basic services and satisfy their basic needs. It also negatively impacts the ability of local authorities to collect revenues, which in turn increases their dependence on centralised political authorities; restricting their ability to engage in local development planning and implementation. This heavy dependence on central authorities generally slows local development down and renders it vulnerable to undue influence and corruption.

 

A sustainability-oriented infrastructure boom as a basis for growth and transition

The key opportunity for leapfrogging developmental and economic transition in Africa lies in what infrastructural and technological choices are made now in the course of the profound urban transition that the continent is undergoing. By targeting urban populations, greater impact per unit spend can be achieved, due to the higher densities of people and settlements in urban centres. By conceptualising urban centres and towns as ‘acupuncture points’ for leveraging transition, a significantly different set of developmental and economic diversification trajectories can be unlocked, especially when considering how areas of overlap between green technologies/solutions and the offerings of the fourth industrial revolution can be harnessed. The question of how this can be achieved is hence worth exploring.

African cities are typically characterised by the proliferation of slums and informal settlements, piecemeal planning, large infrastructure and service provision deficits, uneven and unplanned spatial development patterns, and high levels of informality in production, trade and service provision activities. The implementation of bulk infrastructure and technology provisions in this context is problematic, as it will necessitate ‘sweeping away the poor’44 through the inappropriate adoption of developed world styled urban master-planning. Not only will this likely encounter local resistance, it is also likely unaffordable as the escalating costs of bulk infrastructure provisions can prove significantly high, even over a short time period. 

Given these considerations, the decentralised and semi-decentralised offerings that green technologies offer, are particularly well suited to the African developmental context; both in urban and rural settings. Most households, whether urban or rural, largely lack access to reliable bulk infrastructures and service provisions. Supply is usually irregular, requiring parallel provisions by private and informal sector actors and agencies.

Decentralised and semi-decentralised offerings are suited to an “in-situ”45 approach to development in this urban context, primarily because; (1) they can exist independently of bulk infrastructures, (2) they can be scaled up to the neighbourhood scale (e.g. micro-grids linked to renewable energy technologies), and (3) they can ultimately be linked to bulk infrastructures if necessary. Moreover, green technology offerings are generally easy to install, service and maintain, requiring low levels of skills to roll-out; unemployed and un-skilled youth and others can play a key role in this kind of infrastructure roll-out.

There are exceptions such as large wind turbine technologies, which require highly skilled engineers to install and maintain, but many low-cost and low-tech green technologies exist and can be deployed in the African context. Green technologies that are suitable for the African context include the following examples; solar panels, solar water heaters, grey- and black-water recycling systems, biogas digesters, energy savings devices, energy savings companies, renewable energy micro-grids, small-scale wind and hydro energy technologies, urban agriculture and permaculture operations, agro-industrial processing, public transit systems, and waste recycling systems.

Rolling out these technologies, however, requires developing an appropriate skills base for implementation, as well as the financial, banking and credit services that low-income households require for absorption of these technologies. In this respect, the emerging and yet-to-emerge offerings of the fourth industrial revolution hold some promise. For example, platforms such as Blockchain and Etherium allow for new provisions to be developed that forgo the need for 20th century institutional infrastructures, (for example, in; training, skills development and certification, as well as financing, banking and micro-credit), significantly reducing the costs of providing these services.

Examples of appropriate 4IR offerings that can help support and catalyse rollout of green technologies and solutions include; financing, insurance, micro-credit and banking services; advanced revenue collection systems; sharing economy offerings; education and skills development; real-time data and information synthesis and analytics; data integration, visualisation and analytics; smart materials, smart systems; coordination of resource and other material flows; automation, 3-D printing, mechanisation and robotification; logistics, transportation, and planning and spatial development.

Additionally, a key opportunity exists in small to intermediate cities, which are largely growing along the corridors that connect larger urban metropoles. Here, the potential for innovation, learning and leapfrogging is greatest, as the risk is relatively lower than in larger urban metropoles. They can hence serve as ‘test-beds’ for implementation of new, customised systems solutions46 that adequately address local contextual specificities. Learning from innovation and implementation in these contexts can be harnessed to scale up efforts in larger urban locations, as well as in rural and quasi rural-urban settings.

 

What kind of transition?

In this model of development, a sustainability-oriented infrastructure boom that leverages green and fourth industrial revolution offerings to close “the twin deficit in infrastructure and inclusive finance 47” in Africa. Adopting decentralised and semi-decentralised infrastructures and technologies that lower the costs in the food-water-energy nexus, will help provide a stable foundation for additional growth and diversification. By stabilising the middle-class consumer base, other tiers of economic activity can take hold and grow.

Local authorities can then engage in more reliable revenue collection and be empowered to act locally without being heavily dependent on the influence of central governments. Moreover, if households are more dependent on decentralised and semi-decentralised infrastructures and technologies than bulk infrastructures, bulk infrastructure provisions can be freed up for entrepreneurial, agricultural and industrial activities. Critically, if adequate consideration and planning goes into how local systems can scale up – i.e. in near-seamless, nested scales – additional resilience can be achieved, buffering economic activities at different scales from exogenous change impacts.

It is also important that the African transition is predicated on absorbing the large youth bulge into employment by creating new avenues for large scale growth of small, micro and medium sized enterprises48 in both formal and informal sector activities, as well as increasing their appeal to investors49. A skills transition is hence required; one that targets the – majority unskilled, but tech savvy – youth heavily, but also targets unskilled, semi-skilled and skilled workers from other sectors that may face the prospect of increases in unemployment as robotification, automation and advanced data analytics systems replace them. A multi-level skills transition that is driven by clear and strategic decision-making, resource allocation and institution building is needed to boost innovation and the development of systems solutions that are customised to local African contexts.

Boosting local economic diversification through a sustainability paradigm that embraces the fourth industrial revolution has foreseeable benefits, in particular; improving the quality of life for African citizens and ensuring more sustainable and equitable use of resources. The potential exists to leapfrog the developmental trajectories that were adopted in the Global North, granting regional African economies a new footing upon which to diversify economic activities. Ultimately, seeing through this agenda will require that political stability is engendered through leadership that is bold, transparent, accountable, responsible and effective.

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Camaren Peter (PhD) is an author and Associate Professor with the Allan Gray Centre for Values-Based Leadership at the University of Cape Town’s Graduate School of Business. His research and practice is concerned with the grand challenges of the 21st Century. These range from political, technological and socio-cultural transitions, to powerful global change phenomena such as urbanisation, resource scarcity, ecosystems degradation and climate change.

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25. United Nations. (2014). The State of African Cities 2014. Reimagining Sustainable Urban  Transitions. Nairobi: United Nations Human Settlements Programme,UN HABITAT.
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The 2011 Revision, United Nations Department for Economic and Social Affairs (UNDESA), New York.
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29. United Nations. (2015). Population Facts (No. May 2015/1). Retrieved from United Nations Department of Economic and Social Affairs (UN DESA) website: https://www.un.org/en/development/desa/population/publications/pdf/popfacts/PopFacts_2015-1.pdf
30. AfDB. (2016). Jobs for Youth in Africa. Catalyzing youth opportunity across Africa. Retrieved from African Development Bank (AfDB) website: https://www.afdb.org/fileadmin/uploads/afdb/Images/high_5s/Job_youth_Africa_Job_youth_Africa.pdf
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37. De Magalhães, L., & Santaeulàlia-Llopis, R. (2018). The consumption, income, and wealth of the poorest: An empirical analysis of economic inequality in rural and urban Sub-Saharan Africa for macroeconomists. Journal of Development Economics, 134, 350–371. https://doi.org/10.1016/j.jdeveco.2018.05.014 http://r-santaeulalia.net/pdfs/CrossSecSSA.pdf
38. De Magalhães, L., & Santaeulàlia-Llopis, R. (2018). The consumption, income, and wealth of the poorest: An empirical analysis of economic inequality in rural and urban Sub-Saharan Africa for macroeconomists. Journal of Development Economics, 134, 350–371. https://doi.org/10.1016/j.jdeveco.2018.05.014 http://r-santaeulalia.net/pdfs/CrossSecSSA.pdf
39. Kojima, M., Zhou, X., Han, J. J., de Wit, J., Bacon, R., & Trimble, C. (2016). Who Uses Electricity in Sub-Saharan Africa? Findings from Household Surveys. https://doi.org/10.1596/1813-9450-7789 http://documents.worldbank.org/curated/en/967821470756082684/pdf/WPS7789.pdf
40. Water, Food and Energy | UN-Water. (n.d.). Retrieved August 16, 2019, from https://www.unwater.org/water-facts/water-food-and-energy/
41. https://unhabitat.org/books/state-of-african-cities-
2014-re-imagining-sustainable-urban-transitions/
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44. Watson, V. (2009). The planned city sweeps the poor away…’: Urban planning and 21st century urbanisation, Progress in Planning 72, 151–193.
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-20-changing-the-system-for-sustainable-development/
47. Africa Progress Panel. (2014). Africa Progress Report 2014. Fish, Grain Money: Financing Africa’s Green and Blue Revolutions. Africa Progress Panel.
48. World Bank: SMEs have $1.6tr clean tech opportunity | Eco-innovation Action Plan. (n.d.). Retrieved August 16, 2019, from https://ec.europa.eu/environment/ecoap/news/world-bank-smes-have-16tr-clean-tech-opportunity_en
49. Verdolini, E., Bak, C., Ruet, J., & Venkatachalam, A. (2018). Innovative green-technology SMEs as an opportunity to promote financial de-risking. Economics: The Open-Access, Open-Assessment E-Journal. Retrieved 25 August, 2019, from  https://www.g20-insights.org/wp-content/uploads/2017/04/05_Climate_Innovative-green-technology….pdf

On the Symphony of AI and Humans in the Work Context

By David De Cremer

“AI and human employees will form the teams of the future and will have to be led in such ways that both actors can bring their best abilities to the table to create outcomes that cannot be achieved outside the context of this new diversity.”

We all know that our current work settings are being transformed by technology at a rapid pace. One important transformation that is happening concerns the use and implementation of Artificial Intelligence (AI) into the practice of managing organisations. AI runs on algorithms that make calculations based on a rational set of rules that can produce output relevant to a wide variety of decisions and problem-solving operations. Research has convincingly demonstrated that judgments, advice and decisions emerging from algorithmic operations reveals superior outcomes relevant to human experts and judges (Kleinmuntz & Schkade, 1993). Based on these insights it has become apparent to organisations that the employment of algorithms in the context of managerial decision-making can reduce costs and promote efficiency significantly. In fact, the cost saving potential of managing organisations is so enormous that in 2016 a report from the World Economic Forum predicted that AI is expected to replace 5.1 million human jobs by 2020.

These developments have put the question whether AI will replace people’s jobs center-stage. This challenge is taken serious as exemplified, for example, by the existence of a BBC website where one can find out what the likelihood is that your job will be automated – and thus likely disappear – in the next 20 years. The hype of replacing employees (at all levels) by AI has spurred fear among the ranks of the working crowd. This rather pessimistic view is endorsed further by claims of so-called tech gurus saying that the rapid development we are witnessing today in the AI-field will for sure make that everything is going to change. At the moment, we seem to be heading towards a business environment where algorithms will be implemented with such ease that we will have to decide how and where humans can still play a role. In other words, AI is supposed to lead and humans will have to see how and where they can follow. 

 

However, is this transformation maybe too drastic and will such idea of business in the future ensure that problems at the level of humans will emerge? Autonomous AI may indeed provide superior performance in specific areas that goes beyond the expertise of any single human. However, much of today’s work is still conducted within the realm of teams and as such one important feature is that companies thrive because employees can connect and thus collaborate to promote performance. In this reality, it is clear that humans cannot be replaced that quickly because algorithms do not have the social skills to easily initiate and guide cooperation. From this point of view, we could say that AI in the work context implies that we use a framework where in the context of cooperation we have to decide how and where AI will have its place. One area of expertise where this collaboration between AI-driven systems and humans will have to take place concerns the promotion of creative ideas and the resulting development of innovative solutions.

Diversity in ideas, perspectives and approaches may enhance the potential of a team to be truly creative. So far, however, very little is known about the role of diversity in the digital era where AI and humans have to collaborate in the decision-making process.

We know from research that to promote more creative outcomes, teams benefit from diversity. Diversity in ideas, perspectives and approaches may enhance the potential of a team to be truly creative. So far, however, very little is known about the role of diversity in the digital era where AI and humans have to collaborate in the decision-making process. In fact, so far, we have accumulated insights into how humans can move towards a collaborative relationship with their technological counterpart when it comes down to fostering creative work dynamics. With the focus on the AI-human collaboration to drive creativity I have introduced the challenge in the 21st century for team leaders as one where the new diversity has to be managed (De Cremer, 2019). Indeed, the time seems to have arrived that the diversity needed to transform a work setting into one where different perspectives and skills can contribute to creative outcomes includes a new kind of diversity, which is one where humans and non-humans (i.e. AI) find ways to collaborate and be effective. Recently, such an approach was launched to explore whether this “new diversity” type of collaboration is effective in bringing forward a creative product. Specifically, AI-technology was used to complete Schubert’s Symphony No.8 that was started in 1822. The first two movements of the symphony were completed by the master himself, but the last two, for unknown reasons, were never completed. To see whether in today’s world Schubert’s could be replicated and extended by employing artificial intelligence, AI technology was used and provided by the Chinese company Huawei. 

Huawei is a Chinese telecom giant that was founded in 1987 in Shenzhen. Its founder is Ren Zhengfei and the company is known for telecommunication equipment and infrastructure and their focus on smartphones (Tao, De Cremer, Chunbo, 2017). Specifically, in the fiscal year of 2018 Huawei´s revenue reached CNY721.202 billion (US$105.191 billion) and CNY59.345 billion (US$8.656 billion) in net profit. The company has risen to global stardom. For example, in 2018 they surpassed Apple to become the number 2 in sales of phones and about 67% of its revenue is from outside China (even though the Chinese market is the biggest in the world for any company).

 

The project: AI – Human collaboration to be creative

Creativity is usually defined as generating new outcomes that are meaningful and useful (De Dreu, Baas, & Nijstad, 2008). In the context of completing Schubert’s Symphony No.8, this would suggest that a creative outcome is one where new pieces as constructed by means of AI-human collaboration will be experienced by human listeners as coming from the master himself. In other words, if the AI-human collaboration is able to work together in creative ways, then human listeners should feel, perceive and think that the completed pieces were not put together by a new diversity team but rather by the composer himself. Why would a company like Huawei engage in this kind of challenge?

To respond to this question, Walter Ji, the president of Huawei Consumer Business Group, Huawei Western Europe, had to say the following: “At Huawei, we are always searching for ways in which technology can make the world a better place. So we taught our Mate 20 Pro smartphone to analyse an unfinished, nearly 200 years old piece of music and to finish it in the style of the original composer could achieve this ambition. We used the power of AI, to extend the boundaries of what is humanly possible and see the positive role technology might have on modern culture.” His words can thus be seen as the company accepting that one of their aims should be to ensure that technology can promote and make more efficient or human ways of working. In this context, it meant being creative to produce a master musical piece.

Interesting in this project, the company used the technology in their smartphones. Specifically, Huawei used the AI in its Huawei Mate 20 Pro smartphone. This in-built advanced technology has been specifically designed to complete AI-based tasks and was applied to study the 90 pieces that Schubert in his life time put on paper. All these 90 pieces were translated into code and the AI-driven technology of Huawei’s smartphone then worked to extend these codes. AI also listened to the first two movements of Schubert’s Symphony No. 8, and analysed the key musical elements to combine it with the knowledge it acquired from Schubert’s pieces to ultimately end up with a new melody for the third and fourth movement. In itself, AI thus provides ways of working that can systematically scan and analyses existing work but then at a much higher pace than humans work. As a result, AI can come up with many more combinations in the short term than any human can do.

The one-million-dollar question is, of course, whether AI can also decide which new combination represents best the emotions and atmosphere Schubert wanted his music pieces to communicate. AI cannot feel nor is it possible to understand the soul of an artist. As such, at this point humans have to enter the work equation. The human person asked to lead this specific project was the composer Lucas Cantor – who writes for the company Dreamworks and is known for many movie music pieces. His main task was basically to avoid that the ending to Schubert’s Symphony No. 8 would sound like a kind of elevator music. Indeed, a human touch was considered necessarily to ensure that the combination of music notes that AI would come up with would not be a boring string of sounds but would include a human reference that the human audience could connect to.

AI works fast, recognises patterns with extreme precision and generates many more combinations than any human can do. The human collaborator brings emotions into the music, connects it with the ability to take the perspective of the human audience by reflecting on and showing empathy for what this audience will feel.

Cantor himself was very positive about the collaboration and compared it to working with an actual other composer. So, the work experience for the human seemed to be acceptable and even enjoyable. One reason, according to Cantor, why this was the case is that he compared AI to a composer who did not have an ego that he would always have to take into account. It made that the AI-driven type of composer was never in a bad mood and never protested when Cantor was sending pieces back with the request to re-work. Also important was the fact that because of the work process and the incredible work pace of AI itself, the new piece of 18 minutes was written in just a few exchanges. Looking at these outcomes, it can be concluded AI appears to be the perfect partner to create something beautiful and creative like music. Indeed, AI works fast, recognises patterns with extreme precision and generates many more combinations than any human can do. The human collaborator brings emotions into the music, connects it with the ability to take the perspective of the human audience that will listen to the piece by reflecting on and showing empathy for what this audience will feel.

The “new diversity” collaboration thus seems to be well equipped to produce creative outcomes in a fast way where AI very much advises and humans converge all the advice into a product that is accepted and embraced by human end users. And, listening to the personal experience of Cantor, all of this can be achieved without any conflict at work. No frustrations and no wasted energy in dealing with the emotions of the other party, because those elements are not there. After all, AI is your collaborator. An important question that the comes to mind is whether the non-existence of conflicts is a good thing for creativity to emerge?

On one hand research shows that not having much conflict is actually a good thing for teams to perform (De Wit, Greer, & Jehn, 2012). Less conflict will help to keep the team productivity up because it avoids that people engage in power struggles and experience the presence of a conflict to be a personal thing (Greer, de Jong, Schouten et al., 2018). As a result, there will be less distraction, people will be happier and the focus on the job and the resulting outcomes will remain constant and strong. It is exactly this kind of work context the new diversity may be able to deliver.

However, on the other hand, research also shows that conflicts can be constructive to some extent, especially when it comes down to being creative. The reason for this is that when disagreement exists different perspectives are brought to the table and this process can help identifying new ways of thinking. It is important to stress, however, that these kind of conflicts have to be accompanied with a sense of mutual respect and a willingness to listen to these different perspectives. Only this way the diversity in ideas can find its way to the minds of everyone and can be used in constructive ways to fine-tune the outcome.

In conclusion, AI and human employees will form the teams of the future and will have to be led in such ways that both actors can bring their best abilities to the table to create outcomes that cannot be achieved outside the context of this “new diversity.” When the new Schubert piece was performed at the Cadogan Hall in London, it made clear that artificial intelligence needs human intelligence and vice versa to create true authentic value, but then in more accurate and fast ways than ever done before. It makes that technology connected to people is the future way of creating value. But, even though it is a future direction, one thing does stay the same and that is the power of connection. Huawei are in the telecom business to connect people.  With this experiment, Huawei’s purpose to connect people was translated into an exploration of whether AI and humans can connect effectively to deliver versions of a human music treasure that did not exist yet.

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David De Cremer is Provost Chair, Professor of Management and Organisation at National University of Singapore (NUS) Business School, a fellow at the Judge Business School, University of Cambridge, and a fellow at the Hoover Institution at Stanford University. Before moving to NUS he was the KPMG endowed Professor in Management Studies at Cambridge Judge Business School. He has published over more than 250 academic articles and book chapters and is the author of the book Pro-active Leadership: How to overcome procrastination and be a bold decision-maker and co-author of “Huawei: Leadership, culture and connectivity”. 

References
1. De Cremer, D. (2019). Leading Artificial Intelligence at work: A matter of facilitating human-algorithm co-creation. Journal of Leadership Studies, 13(1), 81-83.
2. De Dreu, C.K.W., Baas, M., & Nijstad, B.A. (2008). Hedonic tone and activation level in the mood-creativity link: Toward a dual pathway to creativity model. Journal of Personality and Social Psychology, 94(5), 739-756.
3.De Wit, F.R.C., Greer, L.L. & and Jehn, K.A. (2012). The Paradox of Intragroup Conflict: A Meta-Analysis. Journal of Applied Psychology, 97(2), 360-390.
4. Greer, L.L., Bde Jong, B.A., Schouten, M.E., et al. (2018). Why and When Hierarchy Impacts Team Effectiveness: A Meta-Analytic Integration. Journal of Applied Psychology, 103(6), 591-613.
5. Kleinmuntz, D. N., & Schkade, D. A. (1993). Information displays and decision processes. Psychological Science, 4(4), 221-227.
6. Tao, T., De Cremer, D., & Chunbo, W. (2017). Huawei: Leadership, culture and connectivity. Sage Publishing.

Like Cream Rising, Online Slots’ Growth is Unmatched in iGaming

The iGaming sector has experienced a lot of new developments in recent years. Advances in technology have had a real impact on how customers gamble online, but the most effective type of games in iGaming has been the rise of online slots. The fact that iGaming has become so popular is primarily due to the convenience of it. No longer are people having to spend time traveling to a physical casino to play some blackjack or multiple slot machines, when it can be done from the comfort of home. The lack of physical limitations as to the number and variety of machines also works in favor of online casinos. Today iGaming manages to provide the same kind of games found in a physical casino – and slots are biggest winners.

 

The growing market share of iGaming

In 2012, the online gambling sector was estimated to be worth over $417 billion (including online casinos, poker sites and sports betting) and online casinos’ share was $34 billion, a figure that was estimated to double by 2020. A lot of that growth has been influenced by two factors. Firstly, sports betting was legalized in the US in 2018 and this has helped to further support the iGaming market; and secondly, more people are now enjoying the wide variety of games from online casinos, specifically online slots.

 

Mobile gaming is the biggest driver of iGaming growth

One of the biggest areas of growth in iGaming has been mobile gaming. In 2019, gamers of all ages are mobile-savvy. They want games they can play on the go, whenever and wherever; games like League of Legends or Fortnite. The iGaming industry has followed this trend closely, creating intuitive, mobile versions of online slots and table games for people to play when they’re on the move.

Being able to make mobile games that look and play the same as desktop versions is the goal for most iGaming software developers. Online slots manage to do this effectively. Some online casinos have excelled at producing online slots and mobile slots that can challenge even the best online games. Take the progressive jackpots at Spin Casino, for instance, which feature slots that can be played through both the app or the browser of mobile devices. They house some of the most popular titles, successfully crossing over into the gaming sphere like slots from the Hitman or Tomb Raider series.

 

Gaming with guaranteed added value

Online slots have also benefited from the growing trend of offering something for free to entice and maintain player interest. That added value often comes in the form of bonuses, reloads and loyalty rewards which beat anything that can be offered in either physical casinos or from table-based games.

Image source: https://pixabay.com/

 

Technology using virtual and augmented reality

Globally, the virtual reality model of gaming seems to work. Research done by Rhythm One has shown that customers are 27% more invested in a product if they experience it through virtual or augmented reality. AR and VR are two sides of the same iGaming coin. Although we’ve seen limited application of these two technologies so far (the same goes with other types of video games), players are looking forward to their adoption on a larger scale, fantasizing about the day where their favourite online casino’s lobby can be browsed in VR. According to reports, several slot game developers are exploring the possibilities of VR and AR in the same way that tech companies like Google or Bill Gates’ Microsoft are, but there are very few readily available games at the moment. 

How iGaming customers experience their favourite games and slots is vital to keep them returning. Online slots have mastered this through mobile gaming interfaces, bonuses, safer online payments and adapting interesting themes and storylines to keep players entertained and engaged. Slots are ideally adapted for iGaming and continue to dominate online casino play in the same way they do in Vegas.

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Identifying key drivers to help transform African agriculture

By Mills Soko

The Green Revolution propelled India from a country plagued by famine and drought to the top wheat-producer in the world. It helped to fuel one of the fastest-growing global economies and it could be the example so many African countries need to realise their agricultural potential.1

 

While countries on the African continent have shown impressive economic development and growth over the past decade and are expected to grow on average by about 4% in 2019, the African Development Bank (ADB) has warned that there may be trouble ahead.2 The continent is likely to be negatively affected by increasing tension stemming from global trade wars, Brexit and the resulting changes to investment and lower demand for exports from Africa. This is in addition to the crop failures and lower yields that are already being experienced as a result of climate change due to higher temperatures and lower rainfall.3

To mitigate some of these impacts, the ADB has reiterated the need for greater trade amongst countries on the continent as well as placing more emphasis on generating and improving the state of agriculture in the region. Sub-Saharan Africa (SSA) has enormous agricultural potential – the region has 60% of the globally available, arable land, but has been unable to capitalise on it.4  The continent has gone from being an exporter of food in the 1960s to an importer of food and agricultural products. Agriculture currently accounts for nearly 24% of gross domestic product (GDP) in Africa.5

Farming in SSA is largely small-scale, with insufficient irrigation, a lack of modern technology and fertiliser resulting in poor output. Meanwhile, hunger is growing on the continent with the fastest growing population on the planet. According to the Food and Agriculture Organisation of the United Nations (FAO), 31% of the 821 million people globally who are affected by hunger come from Sub-Saharan Africa.6

 

Yet, the World Economic Forum estimates that agriculture is 11 times more effective when it comes to reducing poverty in Sub-Saharan Africa than other sectors.7 And at the first Africa Food Security Leadership Dialogue held in August 2019 in Kigali, the ADB, FAO, the International Fund for Agricultural Development and the World Bank underscored the need to step up agricultural production in order to exploit its potential.

At the event, Rwandan President Paul Kagame stated that: “Increased agricultural productivity is essential for eradicating hunger and undernourishment. But food security is not where we stop. We want a continent that is truly prospering in every sense of the term. And agriculture is undoubtedly the foundation of Africa’s prosperity. That is the larger ambition we must challenge ourselves to achieve. We owe it to the generations that follow us.”8

 

Modernising agriculture

While trade agreements like the recently concluded African Continental Free Trade Agreement hold much promise in terms of reducing tariffs, promoting digital payments and improving African trade agreements, there is a more pressing need to modernise African agricultural practices, expertise and processes.9

African countries could learn so much from the example of India and its Green Revolution.10 After years of famine and food scarcity, the Indian government in the mid-1960s initiated a slew of reforms in agricultural practices, bringing in new technologies coupled with government funding for farmers. Within ten years, India had become the top wheat producer in the world. Some of the successful initiatives included:

• Introducing high-yield seed varieties;
• Making fertiliser and insecticides more freely available;
• Producing farm equipment;
• Improving irrigation practices;
• Supporting farmers with subsidies, research into new seeds

In parts of Africa, like Ethiopia, new crop varieties have also been seen to drive growth.11 The introduction of a new kind of bean has helped local farmers move from subsistence farming to bigger operations capable of producing export crops. Beans currently contribute US$150m annually in exports.

Research into new seeds and crop varieties is critical – and making this information accessible to farmers and local producers even more so. Higher-yielding, stronger crops like semi-dwarf rice and wheat were central to India’s Green Revolution.12 Hybrid maize seeds have also been introduced in Ghana, allowing farmers to produce more tons per hectare, with crops that mature earlier and result in farmers increasing revenue.13

Another area is the so-called agri-tech field, where farmers invest in high-tech farming methods to reduce waste and raise productivity.14 New technologies that allow farmers to gather data on soil, plants and weather – and to even use drones to spray crops – are changing the farming landscape in more developed African countries like South Africa. While more cost-efficient than traditional crop-spraying equipment, drones can reach difficult areas, spray pesticides and fertilisers with precision, increasing crop yield as well as reducing costs.

 

Greener infrastructure

Closely linked to a more modern agricultural sector, is the development of infrastructure to support farming operations, aid in manufacturing products and distributing foods – access to energy and water is vital.  Green infrastructure is a growing trend that has the potential to solve many of the complex dilemmas faced by rural African farmers. These include innovative solutions, like solar irrigation devices that make use of new technology to solve problems. In Uganda, a company called GrowFast  provides thousands with pay-as-you-go solar irrigation via a smartphone and an app. The business concept enables farmers to rely on more than rainfall for irrigation, allowing for greater productivity as well as for insurance in the event of unexpected crop loss.15

In one of the continent’s poorest countries, Malawi, local farmers struggling to survive due to drought are also making use of solar-powered pumps while also choosing to grow drought-hardy sweet potatoes to supplement maize crops. Water pumps installed with the backing of the Global Environmental Facility move water from new borehole wells into reservoir tanks, where it is then piped to hydrants into nearby fields as well as for use in local houses. The water systems can irrigate about 20 hectares of land each.16

Water is needed not only for irrigation – but also to produce electricity. In Ethiopia, hydropower accounts for about 90% of electricity.17 This makes the country particularly sensitive to droughts and lower rainfall – or floods. Even a 5% decrease in rainfall can cause nearly a 10% decrease in agricultural productivity.  Workers from the REACH programme, a global research programme to improve water security for the poor, recommends that climate-resilient policies for allocating water and planning for reduced water availability ought to be implemented to support farmers in the area. They underscore the need to provide easier access and dissemination of scientific information and an understanding of current and future hydroclimatic situations. Their research points to the need to sustainably develop additional water sources like ground water, and to educate government officials and employees in related institutions about climate change and water management. While their research pertained to Ethiopia in particular, such recommendations could be applied to the rest of Africa as well.

Agriculture is heavily reliant on energy and the lack of stable sources of electricity hamper many farmers and manufacturers in the sector. In more developed areas, where better infrastructure exists, like South Africa, for instance, larger-scale farmers have installed solar panels to generate their own power and reduce dependence on the national supplier.18 Other farmers have even built their own hydroelectric plants – like the small L’Ormarins Hydro Plant on a wine estate in Franschhoek, which is able to supply not only the farm itself but could also provide additional energy to the national power utility. Unfortunately, red tape, policy uncertainty and political tensions have adversely affected the productivity of the plant.19

 

An integrated approach needed

A recent report by McKinsey&Company researchers examined what was needed for a Green Revolution to succeed on the African continent.20 They concluded that the solution lies with developing an integrated approach that includes market-friendly policies and greater investment in agricultural sectors as well as attracting investment for farming-related initiatives. The authors point to the efforts of bodies like the Comprehensive Africa Agriculture Development Partnership Platform, an annual forum that aims to address the issues related to agricultural transformation in Africa, and to support local governments in dealing with challenges such as:

• A lack of technical agricultural knowledge and skill;
• Corruption,
• Political tensions and instability;
• Inadequate infrastructure;
• Shifting priorities.

The McKinsey report assessed ways of implementing agricultural development plans in more than 10 African countries, across public, private and social sectors. Their findings included:

 

• Focusing on higher-impact initiatives

Instead of having many strategies and programmes, efficacy improves when there are only a few targeted programmes with high-level support. In Morocco, for instance, the government decided to invest in a couple of high-value crops that would raise GDP growth while increasing income for farmers. Hundreds of thousands of acres were converted from cereal to citrus fruit and tomato cultivation, while in Ethiopia, a switch in the 1990s saw the agricultural sector revived through government and private sector collaboration in sesame and cut flower production. In 2011, oilseed and flowers were Ethiopia’s fastest-growing exports.

 

• Developing markets

This is a critical and often overlooked area – looking at where the increased agricultural output will go. Exploring export markets, domestic urban markets and the possibilities around food processing can determine much of the success of farming efforts. In Morocco, government helped facilitate the export of high-value crops to Europe by assisting farmers to meet European certification requirements, as well as through technical assistance and reaching agreements for tariff-free access for Moroccan producers. And in the Ivory Coast and Ghana, by cutting export taxes, these countries increased their share of cocoa processed in the country by up to 50%.

 

Producing for local populations comes with a few requirements as well. The need for quality standards, roads for transportation, and electricity for processing and storage is important.

• Improving local infrastructure

Producing for local populations comes with a few requirements as well. The need for quality standards, roads for transportation, and electricity for processing and storage is important. In 2002 in Ethiopia, a maize surplus went to waste as the crop could not be moved to areas with food shortages due to the high cost of transportation and the lack of existing export infrastructure.

 

• Better partnerships with the private sector

Agricultural programmes that are built through public and private sector collaboration have a greater chance of success. The McKinsey researchers found evidence that the active engagement of private agents like farmers organisations, input suppliers, warehouse operators, buyers, traders and international trading programmes are hugely beneficial to agricultural efforts. Linking small farmers to markets, educating them about soil conditions or new seeds, even private investment to improve roads and ports make a vast difference. Private sector participants have competitive know-how as well as operational expertise that can plug the gaps that exist in local authorities’ knowledge banks. 

In many instances, a case can be made for simply working smarter. Like cluster farming, which has helped farmers in the Arsi Zone in Ethiopia to increase production of wheat, barley and other crops. The cluster farming model often sees farmers grouped together and given communal access to farming equipment, fertiliser etc. with the help of government funding. Due to the success of the cluster farming programmes, Ethiopia is on track to within a few years stop importing wheat and solely relying on national production of wheat.21

But what works in one country will not work in another. There is no one-size-fits-all solution. Africa is a vast continent with 54 countries, some with unstable governments, ethnic conflicts as well as serious developmental, health and economic challenges coupled with rising environmental concerns. But even in these countries – some might argue that especially in these countries – the need to transform agriculture is critical not only to improve economic conditions but also to transform communities from day-to-day subsistence farming to surplus-providing farmers, business owners and proud members of their societies.

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Mills Soko is Professor in International Business and Strategy at Wits Business School.  His research focuses on business strategy, international trade, economic diplomacy, emerging markets especially the BRICS countries, regional integration in Africa, financial globalisation, and business-government relations in South Africa.


References
1.https://www.thehindubusinessline.com/opinion/the-paradox-of-indias-green-revolution/article27472671.ece
2.https://www.businesslive.co.za/bd/world/africa/2019-08-18-risks-to-growth-increase-daily-african-development-bank-warns/
3.https://reliefweb.int/report/world/2018-africa-regional-overview-food-security-and-nutrition-addressing-threat-climate
4.https://www.farmersweekly.co.za/opinion/by-invitation-africa-can-emulate-indias-agricultural-success/
5.https://www.modernghana.com/news/948444/how-agriculture-impacts-african-economies.html
6.https://www.weforum.org/agenda/2016/05/3-ways-to-transform-agriculture-in-africa/
7.https://www.un.org/en/sections/issues-depth/population/
8.https://www.newtimes.co.rw/news/kagame -end-hunger-africa
9.https://mg.co.za/article/2019-07-10-africas-free-trade-agreement-curse-or-blessing
10.https://www.farmersweekly.co.za/opinion/by-invitation-africa-can-emulate-indias-agricultural-success/
11.https://www.syngentafoundation.org/news/recent-news/breeding-better-crops-home-and-abroad
12.https://www.devex.com/news/opinion -protect-our-food-fund-the-seed-95295
13.https://www.ghanaweb.com/GhanaHomePage/business/Seed-producers-schooled-on-hybrid-maize-seeds-774251
14.http://www.702.co.za/articles/356195/crop-spraying-drones-are-taking-africa-into-greener-pastures
15.https://www.esi-africa.com/industry-sectors/future-energy/uganda-solar-irrigation-solution-enables-agricultural-benefits/
16.https://www.engineeringnews.co.za/article/as-crops-dry-malawi-turns-to-solar-irrigation-2018-07-23
17.https://www.cnbcafrica.com/news/east -africa/2019/08/22/this-east-african-countrys-future-is-tied-to-water-a-vital-yet-threatened-resource-in-a-changing-climate/
18.http://netwerk24.com/ZA/Eikestadnuus/Sake/green-energy-gaining-momentum-20190717-2
19.https://www.news24.com/Video/SouthAfrica/News/watch-red-tape-thwarting-sas-green-energy-projects-analyst-20190822
20.https://www.mckinsey.com/industries/public-sector/our-insights/four-lessons-for-transforming -african-agriculture
21.https://reliefweb.int/report/ethiopia/cluster -farming-improving-farmers-productivity-food-security-arsi-zone

Argentina & the next Global Financial Crisis

By Jack Rasmus

Since Macri took the office the Argentina president on 2015, inflation has accelerated and chronic job loss was reported. Despite the record of receiving $56 billion loan from the IMF, it did not go to the real economy of Argentina but to the global bankers and investors to whom they owe their debt. What’s next to Argentina after being indebted to the US vulture capitalists?

 

On August 12, 2019, financial markets in Argentina crashed. The stock market contracted 38% in just one day. The currency, the Peso, fell 20% after falling as low as 30% and recovered to 20% only when Argentina’s central bank raised its interest rate to 75%. Watch next for bond interest rates, both government and corporate, and especially dollarised bonds which Argentina has loaded up on in recent years, to freefall as well.

What’s going on in Argentina? What’s likely to happen next? And what do the events in Argentina have to do with falling financial asset prices—i.e. stocks, currencies, derivatives, commodity futures, real estate prices, etc.—now underway globally as well?

The precipitating cause of yesterday’s crash in Argentina stocks, peso, bond rates, etc. was the primary presidential election results over the weekend. The election was a preview for the general election that will happen this October. Macri, the current president, a businessman whose election in 2015 was assisted by US interests, lost heavily to his challenger, Alberto Fernandez. Fernandez got 48% of the vote; Macri only 32%. A gap that is likely insurmountable for Macri. It’s almost certain now that Macri will now lose in October. That prospect has global bankers and investors quite worried. For Fernandez is associated with the Kirchner government that held office prior to Macri from 2002 to 2015, and that government refused to pay US hedge funds and other investors the exorbitant rates on Argentina bonds they demanded ever since the last crisis in 2001-02.

 

The US media and business press today expressed deep confusion over the weekend’s political results. They just can’t understand how Macri could have done so poorly in the primary. As the talking heads put it, ‘Macri’s been putting the economy in order’, why did he lose so badly to Fernandez?

But all the perplexed ‘talking heads’ in the US media needed to do was to look at the facts: Inflation has been running at 56% per year, one of the highest in the world. The pundits say Macri has done well, bringing inflation down from 70% in 2018. But annual inflation rates, whether 56% or 70%, have been devastating real incomes of workers and small businesses. The currency has also been collapsing for two years now, having fallen from an exchange rate of roughly 16 to the US$ in 2017 to 52 to the dollar, after hitting a 60 to the dollar low yesterday. That falling will almost certainly continue in coming weeks. And with the 20% collapse of the peso this past weekend, inflation will now accelerate even faster once again.

Add to that the Argentine real economy has been in recession, contracting the past four quarters on average by more than -5%, with unemployment officially at double digit levels and likely much higher. Industrial production has fallen nearly -10% over the past 12 months, with manufacturing double that, at around -20%.

In other words, living standards have been falling sharply due to both accelerating inflation and chronic double digit job loss for the vast majority of workers and small businesses ever since Macri took office in 2015 and instituted his austerity reforms demanded by the IMF. That austerity has included cutting pensions, slashing government jobs, raising utility costs, eliminating past household subsidies. A third of all Argentina households now officially live in poverty. Is it any wonder then that Argentinians expressed their discontent in the primaries this past weekend? US business media and pundits of course don’t choose to look at this human cost of US neoliberal policies and its corollary of Argentina austerity. For them, it’s just about whether Argentina continues to service its debt to global bankers and whether the stock market in Argentina, the Merval, continues to produce capital gains profits for investors.

But wait. Didn’t Argentina recently receive a record $56 billion loan from the IMF? Isn’t that boosting the economy? No, it isn’t. Because the $56 billion is not going into the real economy. So where is the $56B IMF loan going? It’s going to pay the debt that Argentina owes to global bankers and investors, including the ‘vulture capitalist’ hedge funds, who Macri welcomed back in 2015 after he took office.

The IMF never gives money to a country to spend on stimulating its real economy. Quite the opposite. It extends loans with the condition that the country introduces austerity measures that reduce government spending or raise taxes. So what if that does the opposite – i.e. slows and contracts the real economy. That’s not its objective.

The IMF officially says it lends money to help stabilize a country’s currency. Translated, however, that means lending with the understanding the country first pays off foreign investors to whom it owes money. In fact, IMF loans never even get routed directly to the country. The IMF loan goes directly to paying of principal and interest to the investment banks, hedge funds, and billionaire ‘vulture capitalists’ who get the country indebted in the first place. The IMF actually pays them off and then send the ‘bill’ to the country for repayment – i.e. payment of the principal and interest on the debt it owes the IMF now instead of the private investors. And the debt payments are made with the money extracted from austerity programs levied on workers and the real economy. The IMF is thus the bill collector for big finance capital, and transfers the debt owed from their private investor and banker balance sheets onto its own IMF balance sheet.

The IMF recently loaned Argentina the largest amount it has ever loaned a country, the $56 billion. But it wasn’t the first time it did so. In 2001, caught in a recession that originated in the USA, Argentina couldn’t repay interest on the $100 billion debt it had incurred with private investors in the late 1990s. The IMF stepped in and did its duty. It loaned Argentina money to bail out the private investors. But some of them – led by hedge fund US billionaire Paul Singer – didn’t think the IMF loan terms didn’t pay them enough. Singer and his consortium of vulture capitalist hedge funds kept demanding Argentina pay more. The dispute went on until 2015, when the pre-Macri government was replaced by Macri, an election engineered with the assistance, financial and otherwise, of the Obama government on behalf of Singer and his buddies.

The first thing Macri did when he took office was to pay off Singer and friends the full amount they were demanding since 2001. Where did he get the money for that? From the IMF of course, which loaned Argentina the $56 billion. The payoff also opened the door for Macri & his business friends to get more private loans from US investors. They immediately trotted off to New York, met with the US bankers, and came back with a bag full of private loans. In other words, they loaded up on more private investor debt after ‘borrowing’ from the IMF to pay off the old private investor hedge fund debt.

So how is it that Macri – with big loans from not only the IMF but from New York bankers as well—couldn’t get the Argentina real economy back on its feet the past four years? The IMF money went directly to the hedge funds and vultures. But where did the new private money go? It certainly didn’t go into the real economy – i.e. investment, jobs, household income for consumption, and thus GDP. Likely it’s been skimmed off the top by Macri and his friends in part. The rest diverted to financial markets in Argentina, in the USA, or Europe.

Despite the nearly $100 billion in capital provided by the IMF and New York investors, the Argentina economy has performed poorly ever since Macri took office. In 2016 the Argentina economy contracted. It recovered briefly and slightly from recession in 2017. But in 2018-19 it has fallen into recession once again, this time more deeply as its currency has collapsed, from 16 to the dollar to more than 50 to the $US – with more collapse to come. The loans it arranged since 2015 from New York investors, moreover, have been heavily denominated in US dollars. Argentina has one of the worst run-ups in dollarised private bond debt in the world. That means as the US dollar rises the cost of making payments on that debt also rises.

Not only is the prospect of default on the IMF $56 billion debt in the near future now rising, but the parallel default on corporate debt is also rising. The value of a US dollar denominated bond dropped since last week to 58 cents on the dollar, from 77 cents. Defaults are on the horizon, both government and private, in other words.

Rising domestic interest rates further slow the real economy. In turn, the slowing real economy results in domestic stock and bond markets collapsing further—thus feeding back into the financial sector and making it even more unstable and driving financial asset price deflation even more.

The peso’s precipitous collapse also has further ‘knock on’ negative effects that are now intensifying the crisis in the country. Here’s how: As currencies fall in relation to the dollar, what happens is capital flight accelerates from the country. That reduces investment further in the country, in turn exacerbating the recession and layoffs even more. To slow the capital flight from the country, its central bank then typically raises interest rates dramatically. Argentina’s central bank benchmark rate is now an amazing 75%. Rising domestic interest rates further slow the real economy. In turn, the slowing real economy results in domestic stock and bond markets collapsing further—thus feeding back into the financial sector and making it even more unstable and driving financial asset price deflation even more.

What results, in other words, is a negative feedback effect between all financial markets in the country, an effect that dries up the availability of credit in general forcing more layoffs and a deeper recession. That’s what is going on now in Argentina.

But Argentina is just the leading edge of a similar general process of global financial asset price deflation. Argentina is just an intense example of financial asset markets declining everywhere globally. And in that sense its current financial and economic collapse may be the harbinger of things soon to come.

USA and other emerging market economies’ stock markets are now contracting sharply since the beginning of August. The 20%-30% decline of US stock markets last November-December 2018 has resumed. We are beginning to see November-December 2018 events déjà vu all over again. The 2018 stock market contraction was halted temporarily by the US central bank, the Fed, capitulating in late December to Trump and financial interests demanding the bank stop raising interest rates. The Fed halted raising interest rates in January 2019 and both US and emerging market economies’ financial markets regained their losses in the first quarter 2019. Aiding the halt of rate hikes by the Fed was the appearance of an imminent agreement between the US-China on trade, as negotiations resumed between February to May 2019, which also helped to restore stock market losses of 2018.

But two events happened in late July-early August 2019 that have resulted in stock and other financial markets resuming their trajectory of decline of last November-December 2018: the US Federal Reserve cut rates on July 28 by only a token 0.25% when financial markets expected more aggressive action by the Fed; and Trump a day later scuttled the prospect of a trade deal with China by raising more tariffs on $300 billion of China imports. Add to these two events the rise of Boris Johnson as the new UK prime minister and the almost now certain ‘hard Brexit’ coming after October 2019; evidence of German and Italian banks increasingly in trouble; and central banks around the world in a ‘race to the bottom’ to cut their domestic interest rates to lower their currencies exchange value to boost exports as global trade stagnates—now growing at only 0.5% annually and is about to contract for the first time since the 1930s.

Together, all these current events have translated into investors worldwide selling their stocks and other financial assets, and diverting the money into ‘safe havens’ – like US Treasuries, the Japanese Yen, and gold. Argentina’s economic mismanagement by Macri has occurred in the context of a global financial asset deflation that only exacerbates Argentina’s crisis – and makes it increasingly difficult to deal with by Argentina alone, notwithstanding the record $56 billion IMF loan.

Look around. The global economy is on the precipice of a potential financial asset market price deflation not seen since 2008. It’s not quite there yet. But the momentum is now clearly in that direction.

Not only have stock prices globally contracted sharply worldwide in just a few weeks, but so too have other financial market prices:

Government bond interest rates are falling rapidly everywhere in the advanced economies. More than $15 trillion in bonds globally are now yielding negative rates. Trillions of Euro bonds are now in negative territory, up more than a $trillion in just the past year, including in Germany, and are continuing to fall further. Currencies are also contracting everywhere (driving up the value of the US dollar). Property prices are leveling off, and have begun to drop. Global oil futures, a financial asset, have fallen 20% again, from $75 a barrel to the low $50s and may soon to fall below $50. The same for many other commodities.

Financial asset prices are deflating across the board and investors are dumping them and converting to cash – i.e. a sure sign of pending global recession. What’s rising in price are the ‘safe havens’ into which the cash is flowing: gold, the Yen, US Treasuries, high end residential properties in select markets in the advanced economies, art works, and even cryptocurrencies. Also rising sharply is the cost of insuring bonds with credit default swap derivatives. In Argentina the CDS cost has accelerated to $38 for every $100 of Argentina debt, and that’s in addition to regular debt principal and interest payments.

Argentina today is therefore likely a harbinger of things to come, i.e. the canary in the global economy coal mine, and the victim of a ‘made in the USA’ global slowdown driven by Trump trade and US monetary policies.

But Argentina is just the ‘worst case’ scenario of this global financial asset deflation underway. Its financial asset prices are deflating faster and deeper than others at the moment. It is just the worst case of a more general scenario emerging globally. Global trade volumes have already collapsed, and a recession in the global economy will necessarily follow. Global manufacturing is already in recession. And a global recession tomorrow will only exacerbate Argentina’s current recession today.

Argentina today is therefore likely a harbinger of things to come, i.e. the canary in the global economy coal mine, and the victim of a ‘made in the USA’ global slowdown driven by Trump trade and US monetary policies. Of course, Argentina’s economic crisis can’t be explained alone by US government policies. Macri’s austerity and loading up again on private foreign investor debt and IMF loans since 2015 is also responsible. And Macri’s recent austerity policies to pay for that debt by cutting more pensions, social subsidies, raising utility costs and taxes on households has contributed heavily to Argentina’s current crisis. But that debt and austerity too can be traced back to US vulture capitalists and their friends in the IMF and among New York bankers.

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About the Author

Dr. Jack Rasmus is author of the forthcoming book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity press, October 1, 2019. He blogs at jackrasmus.com and his website is http://kyklosproductions.com. He tweets at @drjackrasmus and hosts the Alternative Visions radio show weekly on the Progressive Radio network.

Euro Exim Bank: Ahead of the curve in the trade finance industry

Interview with Mr. Graham Bright JP, Head of Compliance and Operations

Amidst tightening regulations and increased compliance requirements in the financial sector, Euro Exim Bank maintains undisputed quality services for its clients. Graham Bright, JP, Euro Exim Bank’s Head of Compliance and Operations, shares with us how EEB leverages the latest technologies to offer innovative services in the global trade industry, gives us his view of the cashless society, talks about the significance of women working in EEB, and more.

 

Thank you so much, Mr Bright, for sharing your time with us. To start with, for a successful business leader like you, what are the best morning routines to jump-start a busy day, and your quick tips for improving productivity for a day’s work?

Firstly, making sure the mind and body are prepared for work.  Take on fuel for the day – no rushed coffee, eat a balanced breakfast. Secondly, use the first 30 minutes at work to focus, read, plan time effectively and set goals for the day, uninterrupted by calls or emails. And, listening to self-affirmation statements to stimulate the brain and enhance well-being, for better, informed decision-making.

 

We see that you have a very successful career journey in the financial industry. Would you tell us about the important highlights of your professional career so far?

Fortunately, I have experienced diversity of roles and industries encompassing pharmaceuticals, credit analysis, trading and banking systems, with each business sector adding focus, perspective and knowledge. 

Highlights include achieving market penetration in African and Indian Ocean banks, making a real difference for the population and allowing organisations to compete more effectively in international markets with greater confidence and social benefit.

Also, becoming a UK Justice of the Peace, applying the sense of fair play, gravitas, trust, focus, logic, tolerance and process where the impact of decisions is potentially life-changing.

Other highlights? Working with like-minded professionals, speaking at events and being recognised as a thought leader, with every day different.

 

Corporates and SMEs all need simplified processes and payment corridors, and we are actively expanding our operational footprint to enable corporates to pay global suppliers both rapidly and seamlessly, without the need for complex payments infrastructures.

Euro Exim Bank is an international financial institution headquartered in St Lucia in the West Indies, holding a Class ‘A’ licence, with a representative office in London. Can you tell us more about the company’s strategic role and ethos, in terms of your expertise and the clients that are most likely to benefit from your services?

We have built an impressive team with years of experience in trade, and this is showing benefits for our clients in our ability to rapidly generate instruments drafts, complete complex KYC processes and send instructions.

Corporates and SMEs all need simplified processes and payment corridors, and we are actively expanding our operational footprint to enable corporates to pay global suppliers both rapidly and seamlessly, without the need for complex payments infrastructures.

Euro Exim Bank is also developing trade services to small and mid-tier merchants in traditionally unbanked and challenging jurisdictions, allowing them access to funds and to compete effectively in world markets.

 

Last year, Euro Exim Bank received the 2018 Best Global Trade Services Bank Award. What are the outstanding features that set you apart from your competitors in the facilitation of trade finance?

Primarily, building long, lasting relationships with the clients. Finding and keeping clients is key to cash flow and ongoing business, supported by our advanced technology platform, accessibility and participation with payments technology leader, Ripple.

Coupled with our competitive rates and market focus across Asia and Africa, we, along with our agents and partners in strategic locations, serve corporate clients in connecting the players in the trade ecosystem and doing things right.

 

With today’s fast-expanding market and government initiatives such as One Belt One Road (OBOR) driving demand for global trade and infrastructure, how do you see the future of trade finance and the role of Euro Exim Bank in this challenging time?

Trade finance remains a paper-based and complex business, and services offered by banks are equally restrictive, costly and time-consuming for bank customers.

Time-honoured open account trade and supply chain financing continue to grow, and it is only recent innovation in technology that may modernise the trade finance business.

New markets are emerging along the new Silk Road, with major manufacturing centres in Asia importing raw materials from Africa, remanufacturing and repurposing goods to meet the demand from western Europe. China has a growing economic footprint in Africa, where they own airports, ports and infrastructure, with opportunities to build and supply local markets with greater ease than ever before.

The most effective long-term strategy for the industry will be to embrace document digitisation and promote standard interoperability and interconnectivity between all parties to the transactions.

We at the bank have designed and built in scalability, workflow and document digitalisation, not only for initial drafts and remittances, but also handling real-time settlement through connectivity across a variety of payment channels.

Our development teams have incorporated blockchain capabilities built on Hyperledger, and we are ready to enrich blockchains with trade data where possible.  With this advanced approach, we are positioned to  go live with any counterparty, although, given current take-up, the industry as a whole will not be actively using this technology for some years yet. 

 

Euro Exim Bank partnered with Ripple for cross-border payments. How do you see this partnership bringing globally competitive services to your clients and customers?

Firstly, it is important to remember that Ripple is not just about cryptocurrency. It is an innovative technology company with a financial network capability (RippleNet), handling real-time, frictionless transmission of payments across a secure, decentralised DLT infrastructure, covering both fiat and non-fiat currency.

We use two unique Ripple services, namely xCurrent, speeding up and securing real-time payments, and xRapid, enabling pay-outs in local currency without the need for exchange into dollars or for traditional correspondent banks, through use of the XRP digital asset, which is a game-changer in reducing capital liquidity requirements.

Whereas, in the past, client access to funds and foreign currency meant competition in world markets was impossibly expensive and restrictive, through service delivery with other RippleNet participants, customers can achieve high-volume, frictionless, low-cost, secure, fast, guaranteed payments and instrument movement across the globe.

 

Along with the rapid innovations and disruptions happening globally in the banking sector, what other new technologies has Euro Exim Bank adopted to upgrade their offerings and quality of services?

We have always seen the value and impact of technology and, as such, continue to automate and improve our internal Simplex trade finance platform capabilities and, importantly, extending real-time payments functionality with Ripple for an enhanced customer experience. Additionally, we are creating sophisticated mobile apps and, in light of recent cryptocurrency regulation and opportunities, building a crypto exchange.

Today, innovation is the answer to serving the world’s three billion unbanked people, with better identity checking, faster remote account opening, access and control through mobile phones in developing markets, allowing more control to the end user. Ultimately, this will lower account maintenance costs and increase overall coverage, with immutable, blockchain-enabled technology making delivery, maintenance, security, trusted services and banking system participation easier.

With advanced mobile, smart connectivity, customer expectation is driving demand for more-efficient and ever-cheaper services from financial institutions. 

With the tightening regulations and increased compliance requirements in the financial sector, how do you leverage the latest DLT/blockchain solutions for anti-fraud, AML and KYC among banking and financial industries?

With advanced mobile, smart connectivity, customer expectation is driving demand for more-efficient and ever-cheaper services from financial institutions.  However, if new Open Banking is available, IoT is expanding, faster mobile networks are becoming common, why is it still taking weeks or months to open an account or complete a KYC process? 

How will banks change legacy systems and deliver the services that connected people demand today, if they are to survive the next wave of growing competition from agile challenger institutions? Is compliance at fault?

The perception of compliance is that it is bureaucratic, burdensome, costly, slow, repetitive and frequently stifles entrepreneurial flair to the detriment of lasting business. And for many, this is no different in practice.   

The use case for DLT in payments is strong, and even more so when assessing the issues and possible remedies in tackling fraud with KYC/AML and compliance.

Fortunately, DLT can provide the technology to improve the heavy, data-bound process. Addressing the fundamental issues of internal, intra- and interbank data sharing, DLT will assist submissions and oversight with regulators, and more rapidly identify foreign accounts used for illegal and fraudulent drug- and terrorist- financing transactions.    

For KYC, AML and due diligence across an enterprise, proliferation of paper, identification of false positives, multiple submissions of data, identity assurance and manual reconciliation times can be drastically reduced.

Coupled with efficient verification of KYC data, through DLT technology, rapid cost-effective on-boarding, faster loan servicing and efficiency in creation, communication and one-touch handling of trade documents will enable banks to offer systems enabling long-lasting, cost-effective customer experience. 

Whilst banks should not underestimate the investment and commitment in terms of budget and resource to implement such DLT/blockchain technologies, failure to plan, act and compete will have a serious impact on long-term institution viability.

About Euro Exim Bank

Euro Exim Bank Limited is an innovative global financial institution with head Office in St. Lucia and representative office in London.

They hold a “Class A” international banking license from Financial Services Regulatory Authority (FSRA) of St. Lucia. This license provides authorisation to conduct business with third parties across industries and geographies worldwide, exercising strong due diligence, full compliance and operational excellence in our processes.

Euro Exim Bank is an associate member of the Caribbean Association of Banks Inc (CAB). Being a member of CAB offers them opportunities and knowledge sharing with industry leaders that are applied to modernise their operations and customer service.

 

Customers nowadays demand more-secure, fast, mobile and customised financial services with more-transparent fee structures. What do you think are the important trends regarding customer expectations in trade finance, and how does Euro Exim Bank cater to their ever-changing needs?

Clients want simplicity, low risk cost-effective instruments, with guarantees of delivery and a borderless trading environment, regardless of jurisdiction.

As major banks re-risk, merge and close customer accounts, doing business has become more challenging. Smaller agile providers have emerged, able to handle trade instruments for clients previously disintermediated and left uncompetitive.   Access to fiat currency and even sufficient local funds to trade on the international stage has prevented companies in emerging countries from being able to export. But trade does not have to stop.

Flexibility is the key in our approach to markets, fee structure and service level agreements and, with our eye on new technology, our systems deliver cost and time benefits internally and for end users.

Whilst our Simplex trade platform embeds DLT/blockchain technology, we continue to look at payment APIs and how they may be fully automated and integrated regarding individual identity, real-time company data access, PEP and sanction lists, and so on. 

Leading all our activity is listening to and building relationships with clients. We are constantly analysing emerging market flows in terms of volume and value, the impact of the OBOR initiatives and ease of instrument delivery with advanced payment channels. We remain vigilant and mindful of the continual changes and innovations that dominate the trade space and strive to be recognised as one of the best trade services institutions in the industry.

 

In addition to having an international team of experts with years of trade finance and SWIFT experience supporting clients from around the globe, Euro Exim Bank also puts great value on diversity, having five females holding senior/executive positions. What would you say are the advantages of having more females on the senior/board levels in the firm? 

We hire staff according to experience and suitability for the role and, as with all small companies, need to consider each role carefully.  Our employees are from eight countries and different cultures, and we firmly believe that women have a key role in making and assisting better-considered decisions on strategy and tactics.

Women focus on detail, with empathy, intuition and creativity, in a non-patronising way. This has helped  fashion our corporate culture,  working with common goals in an atmosphere of collective responsibility, mirroring recent employment reports that diversity leads to more profitability. In our experience and environment, women are truly valued for their contribution.

 

What is your opinion about the push for a cashless society?

We are some way off. 

Imagine the future with no coins or bank notes, no banks or money-service companies, with all financial transactions activated and automatically exchanged via mobile, or through contactless cards, and all in real time. An interesting aspiration but, given current progress, perhaps the UK at least should eliminate cheques before the debate turns to cash.

There is no doubt that traceability, audit, mobile stores of wealth, contactless operations with credit cards, payment apps and even cryptocurrency (if and when global regulatory approval is achieved) can benefit large sectors of the economy and communities.

Mobile payment mechanisms and digital wallets are taking the place of traditional bank accounts, but there are still three billion unbanked people, mainly reliant on cash, especially in rural economies, and the age demographic remains important – often resisting the latest technology trends.

Cash remains quick, accepted universally, and above all anonymous. Psychologically, the elderly still like holding physical cash, and a wallet of £50 notes still speaks more as a tangible symbol of wealth than waving a mobile phone with a banking app balance.   

But there are considerable, but not unsurmountable, issues.

Firstly, privacy, trust and confidence. With every transaction checked, recorded and available electronically, anonymity no longer exists. So, where is my data, who can see it, are they entitled to see it and will they use this data for my benefit or detriment?

Secondly, bad customer experience. Banks have suffered network outages, causing denial of service, delays in wages, savings, pensions and other instrument credits, leaving clients financially disadvantaged for days at a time. 

Thirdly, digital crime. The new criminals of our times now hack and launch cyber attacks, not only for cash but information, anonymously targeting bank systems and processes, where the spoils are far greater than stealing individual purses.

Ultimately, cashless societies will emerge, possibly within two generations, something that will take beyond my lifetime to fully realise.

 

Financial institutions are expected to play an important role in creating a sustainable and socially responsible future. What are Euro Exim Bank’s strategies and practices to further this aim? 

Our CSR policy is clear and fully in operation. From charity fundraising events, raising thousands of pounds supporting hospitals and the underprivileged, to local sponsorship of cultural events at home, in the Caribbean and in Africa, our organisation is pleased to provide regular support and awareness to those less fortunate than ourselves.

From a business perspective, before embarking on any agreements, we are careful to assess the environmental impact of trade and types of goods (responsibly sourced), working with buyers with whom fair trade prevails, and where sellers/manufacturers pay fairly and treat their workforce with consideration and respect.

 

On a lighter note, what does success mean to you? Can you also share with us your favourite life mantra?

For me, success is not about social-media likes, working all hours to become a millionaire or blindly building wealth.

It is an accumulation of smaller experiences: meeting people and creating lasting, honest relationships, sharing love and laughs with family, being a grandparent, respecting and emulating the legacy of my father, looking forward to sharing new experiences, appointment as a magistrate, having a book published, acting on the London stage, on TV and in film, scoring under 85 at golf, and driving the car I always promised myself!

My favourite life mantra? Life is short. Wake each day with a new passion, staying balanced through highs and lows and, not being too proud to ask for help.

 

Thank you very much Mr. Bright. It was a pleasure speaking with you. We learned a lot.

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About the Interviewee

Graham Bright is the Head of Compliance and Operations at Euro Exim Bank. He has more than 35 years of experience in the finance industry in a number of roles, working collaboratively with industry utilities, regulators and central banks, and in consulting and partner/channels management. He holds a BA (Hons) degree in Business Studies, and is also a serving UK Justice of the Peace in the magistrates’ court, having sat on criminal and proceeds of crime trials, and he also sits on Crown Court appeals. Graham is a regular contributor to trade journals (GTR, TFR), with published thought-leadership articles in the financial technology press, and a speaker at international trade industry conferences, such as SIBOS, GTR and Ripple Regional events.

Getting Metro back on track

By Matt Brown

To retain its position as a leader in terms of hard customer numbers and profit, Metro needs to revisit its challenger values. It needs to refresh them for a new decade, aligning them with customer needs today, rather from 10 years ago when it first launched and redefine how customer data can inform and drive the business forward.

 

What is the definition of a challenger today? Not in the Rocky Balboa sense, although of course there’s a metaphor there if you’re willing to look for one. Even in business, it seems to personify the plucky outlier, shaking up convention, bringing novelty and, hopefully, changing things for the better.

This is certainly what seemed to happen when the first of the challenger banks, Metro, emerged to put a rocket under the decades – sometimes centuries – old UK retail banks. Like the branchless, mobile-only banks that came after, Metro seemed to offer customer-friendly banking. No delayed transactions pushing the unwitting into unarranged, expensive overdraft, and none of the whiff of scandal that has tainted most of the incumbent banks at one stage or another over the years.

That was until Metro started looking suspiciously like the establishment and suffered its own financial crisis with a £900 million accounting error and criticism of its leadership.

But despite this, Metro remains a strong leader in disrupting the financial services sector, and it has the potential to create positive opportunities for growth and transforming its connection with customers. For a start, it continues to top the customer satisfaction league tables. It ranks top for overall service, just beating First Direct, the only bank belonging to the traditional cohort and even then, only just as it is also a new bank in relative terms and itself online only. However, it’s worth noting that the Competition and Markets Authority (CMA) that ran the poll does not count the app-only challengers such as Monzo or Starling who have shaken the market up further still and who continue to gain users hand over fist.

To retain its position as a leader in terms of hard customer numbers and profit, rather than just sentiment (although also an important metric, just not enough on its own) Metro needs to revisit its challenger values. It needs to refresh them for a new decade, aligning them with customer needs today, rather from 10 years ago when it first launched and redefine how customer data can inform and drive the business forward, putting clear water between in and old-style banking that still fails to satisfy.

 

The banking customer 2020 onwards

SYZYGY conducted extensive research among financial services consumers to discover their key attitudes to banking today and going into the next decade. It uncovered a landscape where customers are happy to share data with institutions, provided there is something of real value in return. And that value comes in the form of transparency and ease of use, and anything that consigns traditional banking ‘trickery’ to the past.

 

Driving customer satisfaction

30% of UK consumers say that their experience of handling financial affairs would be improved if the information were easier to understand and free of jargon. This quick win is even more attractive to younger consumers, where 38% of 16-24 year-olds want a plain English approach. Nearly a third (31%) also want just the process of tracking down their financial details simplified, saying their experience would be most improved if they had access to all their services in one place.

The results of applying this kind of data is two-fold. Firstly, understanding what customers want from their service and offering solutions will help to stabilise the customer base, and secondly, it can help to reduce costs. By unleashing this data in the right way, it will lead to positive business transformation. Its insights can highlight where is best to pool money, what will work most efficiently and give banks like Metro a lever to control the flow of cash within its wider infrastructure. Orientating around the customer means more than working with new technology. It involves a fundamental reset of strategy, culture and process across all departments from marketing to sales and HR.

But when it comes to securing that data from customers, it is a myth to suggest that since data scandals like Cambridge Analytica that UK consumers are unwilling to share data. More Brits are happier to share their data with financial companies (55%) than with health and wellbeing (52%), technology (48%), retail (48%), entertainment (45%) and automotive companies (43%). Men were generally more willing than women, with nearly a fifth of the former (19%) content to share data compared to 13% of women.

However, the more personal the data, the more reticent consumers are about sharing it with financial services companies. Their professional lives are open books for 52% of consumers but that falls to 42% when it comes to family, medical (41%) and spending behaviour (41%).

Ultimately, this is great news for the likes of Metro because financial services companies that can optimise the customer journey and make best use of customer data to anticipate needs, reduce friction and maximise conversion are on the way to developing a sustainable competitive advantage. However, they need to gauge what kinds of data their customers are comfortable sharing and their ‘elasticity’ to share, if they don’t want to undermine trust or drown in their own data lake.

 

Injecting Innovation

Financial services customers are neither naïve, nor underinformed. Few may themselves be experts, but they understand how their data relates to the services they receive and generally, they approve.

Customers aren’t impressed by banks touting the technology itself, but rather what it can do for them. So, software like AI and machine learning didn’t score highly, but related innovations that then delivered a higher return on savings were top of consumers’ wish lists with 49% saying this was most attractive.

Real-time, up-to-date information on personal investments came second with 34%, as well as real-time notifications on transactions and account balances. With the latter already a reality for most, particularly among challenger bank customers, there seems little barrier to transferring this service to the investment product range.

Improving account management was next ranked, with 31% anticipating that lower management fees would be possible due to automation and 25% felt they should be receiving more relevant calls, emails and text messages.

Tailored investment recommendations came last on the list at 19% which is surprising. This is highly valued in other sectors like ecommerce and retail which suggests that something is still getting lost in translation when it comes to explaining more complex financial instruments.

In the end though, it pays not to over-think the value exchange. Our consumer research showed that cashback was the favourite incentive, encouraging 58% of customers to part with their data. Second was discounts or cheaper premiums for insurance at 54% of respondents. Related offers came in at 43% while ‘member privileges’ such as exclusive access to events was popular with 41%. Money management ranked the least exciting at 36%, telling because this is already a significant feature of the app-only bank accounts. It is difficult to tout something as an exclusive benefit when it’s seen as a hygiene factor for many competitors.

 

[su_pullquote]Transparency is key. The customer may be well-informed but there are still areas of data collection and its use that seem hidden behind the veil and it is the collection of more peculiar data points that can set the customer relationship off-kilter.[/su_pullquote]

Managing growth through transparency

While consumers are increasingly willing to share data, its collection must neither be gratuitous, nor murky. Transparency is key. The customer may be well-informed but there are still areas of data collection and its use that seem hidden behind the veil and it is the collection of more peculiar data points that can set the customer relationship off-kilter.

The most scepticism is retained for social media influence. What are you collecting about me? What does my interaction say about me? The drop in willingness to share family data can be linked here, with consumers unsure of just what sort of picture institutions are building about them through their unwittingly unguarded posts. The solution would seem to be hyper-transparency.

When Metro first arrived in the challenger market, it grew at an exceptional rate. In this first phase of growth, managing it required having messaging that aligned with what the customer was looking for. Now, at the heart of managing its next phase of growth is transparent change. This involves knowing its current capabilities and resources, identifying where it is lacking and formulate a plan that will propel it towards a successful transformation into a customer-focused organisation. To do this, Metro needs to evaluate its internal processes, use customer information to determine where to channel the growth- all while being fully transparent about the data it collects and where that data is used.

 

Investing in the future

Ten years is a long time in digital banking, and perhaps as the granddaddy of challenger banks, Metro needs to refresh its approach considering new consumer attitudes. Customers have seen what can be done by applying the right data to the right algorithm. Expectations of money management as standard, real-time transactions and even investments and AI-driven financial solutions are rising.

That Metro has branches where other app-only banks – and increasingly some traditional, so-called retail banks – do not is still a bonus. It handily bridges the gap between the standard banking customer and the early adopter. But it must strive to remain current – or even futuristic.

What does that future look like? App-only banks face their own challenges so they’re not about to sweep the board just yet, but Metro can learn from their approach to using customer data ‘out in the open’ so to speak. All those data points that usually work in the background to score interest rates or select products are now scrolling down users’ mobile screens in the form of spending analysis and saving advice. Expenditure data that used to tell an underwriter that someone was a higher mortgage risk using some very shadowy calculations now appears on screen as ‘cut down on the takeaway lattes and you could save £2,000 a year’. Although perhaps best to ignore the stainless-steel challenger take on the iconic Black Amex. A nice headline-grabbing gimmick but of little customer value in the long run.

Metro Bank already enjoys that peculiar position of having a foot in both worlds. It is a retail bank in the traditional sense with branches and tellers and all that gives comfort to customers who value that sort of thing. On the other hand, it is a fully digitised, customer experience-led challenger bank with the access to data and the expertise to deliver highly personalised, innovative financial instruments that can only improve customers’ financial health. It’s not a case of restoring its position alongside the other challengers, it’s about redefining its place as the leader.

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Matt Brown have 18 years’ digital marketing experience. He oversees delivery and execution at SYZYGY to help clients drive measurable impact from their investment.

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