By Theodora Lau and Bradley Leimer, in partnership with Money20/20 Europe
We are experiencing an unprecedented global shift in demographics. Our society is aging; we are living longer, healthier, and more productive lives. Life expectancy has improved significantly, and we have added decades of healthy living since the early 1900s. Along with longer lifespans, we are also staying employed longer than before. Soon, we will have five generations working alongside each other. Not only “when” or “how long” we are working has changed, “how” we are earning a living has changed as well. There are an increasing amount of contingent workers participating in the gig economy. There are also more women joining the workforce or even starting their own company than ever before. According to the Women’s Business Enterprise National Council (WBENC), there are 12.3 million women-owned businesses in the U.S., and women now own 4 out of every 10 businesses. Gone are the days of single-earning households with one steady paycheck. Adding to the increasingly complex picture is our varied financial obligations, from tuition for our children to financial caregiving for our parents. How do our financial institutions innovate to meet the needs of our evolving world? One could perhaps take a page of the playbook from the East.
The story of Grab
Grab started as a ride hailing company in 2012 in Singapore. Since that time, it has evolved to Southeast Asia’s leading super app, fueled by US $1.46 billion in fresh funding from the Softbank Vision Fund. In addition to transportation, it now has a robust food delivery business, and an ever-expanding financial services platform, with the goal of becoming the region’s largest merchant network, insurtech policy provider, and fintech lender. Their newly launched financial services offerings branded “Grow with Grab” will include payment and microlending, aimed especially at the 9 million micro-entrepreneurs that Grab serves today.
Elsewhere in the U.S., various fintech companies are enabling companies to pay workers instantly for completed work. For example, Caviar couriers using the Square Cash can access funds immediately after completing delivery. Marketplaces using Stripe Connect can send Instant Payouts to sellers or service providers. Meanwhile, Uber and GoBank have partnered to provide Uber drivers instant access to accrued funds via GoBank checking accounts and debit cards; and Earnin sends a workers’ earnings instantly to their bank accounts – instead of having to wait. All of these seemingly small innovations are important, especially for many consumers today, where bi-monthly pay cycles do not line up with their bills, leading them to turn to credit card debt and overdraft fees to bridge the gap.
The multistage life
But the story doesn’t stop at payroll. If we are living longer and healthier lives, what do we do with those extra years? Traditional pension schemes and retirement plans assume a direct path of education, career, and a hard stop at age 65. But a longer lifespan will enable us not only to work longer, but also take more risks and try out new things – re-invent, re-skill ourselves, perhaps even start a new company. In fact, over half of all new entrepreneurs in the U.S. are over the age of 45, according to the Kauffman Foundation. And as much as 85% of jobs that will be available in 2030 do not exist yet for today’s graduates – it is never too late to disrupt ourselves. 50 is indeed becoming the new 30.
Given this new paradigm, is retirement still relevant? Or should we retire the traditional notion of retirement, and re-think how we should manage and grow our savings? As Professor Andrew Scott wrote in his best-selling book 100 Year Life: “The simple truth is that if you live for longer then you will need more money. This means either saving more or working for longer.” But with relatively low rate of savings and investments, what can financial services companies do to help nudge consumers into healthier financial habits?
Part of this lies in to understanding the current longevity trend. While aging is universal, how we age is not homogeneous – and we can no longer segment individuals and their needs by age. A 50-year old today is vastly different than a 50-year old twenty years ago. A 50-year old in China is also different than a 50-year old in Europe or the US. Their financial needs, aspirations, and obligations are also likely different. Perhaps the best way to serve them is to better understand where they are in their life stage. Someone putting children through college will likely have very different needs than someone as an empty-nester – though they could be of the same biological age. Likewise, an entrepreneur starting up a new business will have different needs than those still in traditional corporate or manufacturing roles. In an increasingly connected world where we are leaving digital breadcrumbs of nearly every aspect of our lives, emerging technologies such as data analytics and artificial intelligence could prove useful in not only providing contextual insights based on habits, but also guidance or even decisions made automatically on our behalf.
Just as much as we need to become more flexible in the new era, it is paramount that financial services innovate and adapt to the changing needs of our society. With longer lifespan and longer earning power, we could afford to take more financial risks than ever before; saving smaller amounts will have a much larger impact on our lives with this extended time. We need to be more fluid than ever when it comes to managing our assets, expecting more up and down cycles, and matching our financial tools to help us plan for a greater frequency of multi-generation households and the growing complexity of our financial obligations.
It is more important than ever for us to invest in our future selves – and to take advantage of the extra time that we have. The question is, will financial institutions guide us through this new normal, or will we increasingly rely on fintech and big tech platforms to meet our financial needs? After all, the future of aging should not be a story of survival – but one of living.
Join us at Money20/20 Europe this June in Amsterdam, as we dive further into the game-changing stories and trends, driving forward the global Financial Services, Payments and FinTech community. Find out more about the Money20/20 Agenda and Stories by clicking on the links below.
TIPS FOR BUSINESS EXPANSION
Alan Sutherland, CEO of Kind Consumer
Every successful business had a beginning. Its founders usually looked for ways to gradually expand, attract new customers and increase monthly revenue. From the outside looking in that type of success often feels as though it requires some form of magic or hidden formula.
So how do you drive success? There are two which are fundamental to success. On first glance they may seem obvious, but they are often neglected.
Do you have a strong team?
No matter how great your business or idea you will not drive it to its full potential without a strong team behind you.
The process of recruiting and finding the best talent is never easy. You must over-invest time in the process as it is a fundamental investment and future growth driver. Two principles I have learned over the years when looking at recruitment are, to surround yourself with people who are better than you and do not be afraid to recruit someone who could make you redundant.
If you can achieve these, the benefits are clear. Better business results, stronger talent pool, and with capability future fit plus built-in succession planning.
Have you created a road map?
Strategy should not be complicated, as it is the set of choices you make to help you deliver your goals. It is your roadmap.
In thirty plus years of corporate life I have reviewed many. Countless textbooks have also been written on the subject, but there are some basic principles that I firmly believe work best. Namely, the vision should be clear, motivating, and understood by all in the organisation. In addition, it’s important to remember ‘less is more’. Too often strategy papers can be voluminous and complex. The best strategy work I have seen is on one piece of paper with clear, simple articulation of the choices you will do and equally what you will not do. It is very empowering to tell a team what you are not going to do.
Have you established a core market?
In any business, the “core” needs to be healthy before you divert any significant level of resource to expansion, there are thousands of examples where enthusiasm to grow has caused companies to fail.
As you evaluate expansion, having an array of ideas and opinions needs to be balanced with a clear brand that consumers feel they relate to. Whilst adding new products or services is an organic part of company growth it needs to be tempered, so you do not drift too far from your core market.
Therefore, before ploughing resources into new markets, you do need to ensure that new product and services will be of value to existing (or new) customers. You may need to ask some critical and challenging questions such as, is there a clear need for this? Is it marketable? Does it sit within the brand equity? How much will consumers pay for it?
If you conclude that the demand is there, only then should you move onto executing that new idea because it will require a significant amount of investment of time, resources, and money. If the market entry cost is potentially high, you should also evaluate a test & learn approach by launching in a limited way and, if early traction is good, then expand.
Once you have revised your existing offering, you need to engage with these new consumers to increase brand recognition. If your business is not online, add this to your to-do-list because in today’s era, convenience is key.
A website is the shop window to your brand and, done well, can allow you to build up a direct one-on-one relationship with your customers. If it was already an important criterion before, the impact of Covid-19 will make it indispensable.
With social media and the abundance of mobile technology, it is not difficult nor expensive to drive traffic to your site, so you need to ensure the site is engaging, easy to navigate, informative with a call to action to purchase. Loyal customers who return to your site are worth their weight in gold!
Do you have a healthy working capital?
Finally, a healthy working capital is essential not just for growth but for the day-to-day operations of running a business. Even as you start to see your business develop, you must keep a scarcity mindset with cash and make sure you have some reserves for when something goes wrong. This has caused thousands of start-ups to fail as they hit unexpected turbulence and had no contingency in place.
In today’s global economy, there is a lot of uncertainty so there has never been a more important time to maximise liquidity to meet short term obligations and avoid going bust. Not to mention, flexibility is key when a business is looking to expand and without enough working capital a business can lose this flexibility.
BITCOIN COMES OF AGE
Katharine Wooller, Managing Director, UK and Eire, Dacxi
The Bitcoin halving event, which occurred on the 11th May, has been a watershed moment for the industry. It has been a deafening theme for crypto narrative in recent months, and more recently has caught the eye of professional investors and conventional media alike, with some predicting it will be the catalyst for a substantial boom. It appears bitcoin, finally, has a hard-won place in the mainstream.
Halving: In a nutshell
Bitcoin has a key feature; there are a fixed amount available, and, crucially it has a pre-programmed supply reduction built in. The miners, who maintain the bitcoin network, validate transactions and add them to the blockchain when they are verified. They do this at considerable electrical and computing cost and thus are paid in bitcoin. Periodically, the reward for doing so halves. In the past this supply reduction, which previously occurred in 2012 and 2016, has coincided with a strong run-up in its price.
Bitcoin has now been in existence more than ten years and has survived the doubters, the scammers, the hackers, government attempts to quash it, and along the way it has given rise to new innovations using the blockchain technology that underpins it. To overstate this amazing “survive and thrive feat” as well as the innovation it represents would be difficult. Bitcoin, conceptually, has exceeded expectations. Alas the 5,000+ crypto currencies that have sprung up alongside it include the good, the bad, and so very ugly. Nearly all of these should fall away as Bitcoin dominates; at time of writing it is 67% of daily traded volumes. Understandably, there is a very short list of 3 what we call blue-chip coins (LTC, BTC, ETH) that the institutional investors have shown interest in.
Solving some our largest problems
There is a clear appeal of digital currencies to the cashless internet economy based, including 24/7 price transparency that is available, cross border usage, divisibility to many decimal places, as well as third party oversight and controls. Bitcoin has been on a roller coaster ride over the last two years and has held its value throughout the current dramas and even increased in value as governments have stimulated their economies on a massive scale via printing cash endlessly to avert a market meltdown. This is likely to create a massive inflationary environment into the future and sets the stage for Bitcoin to make its next move upwards after stocks and real estate prepare to reset valuations and attractiveness.
A new gold?
A lot of the dialogue around bitcoin talks about an improved version of gold, as a medium to convey value. Improved by virtue of the technology being quicker, and cheaper to both store and move. Indeed, a recent transaction of $1.1bn worth of bitcoin, by bitfinex, cost $84. Unsurprisingly this has caught the imagination of the financial infrastructure industry. Some market commentators postulate a 10x increase in prices in the next 12 months, based on a few % of the global appetite for gold switching to crypto, with bitcoin being the heir apparent.
For the industry as a whole, it is great news that bitcoin is now demonstrably decoupled from traditional markets. It is apparent that the price of Bitcoin is outside the traditional assets’ ecosystem, and the market is determined by a new set of criteria. Bitcoin now has the crucial “social proof” that it cannot be altered by external forces, no matter how powerful, bringing much joy to the libertarians and retail investors alike. Indeed, google searches for ‘bitcoin halving’ hit an all-time high in the late April, suggesting firm interest from newbies. Further, the quality of exchanges available to both retail and institutional investors has improved substantially in recent years, providing a much-needed ease of entry into the market.
Indeed, leviathan investors, such as Paul Tudor Jones, coming out in praise of bitcoin, as a viable hedge against inflation, saw bitcoin enter – unexpectedly – stage left to a much broader financial audience. Bitcoin is viewed as what gold was in the 1970s, thus driving increasing interest from his fellow baby boomer cohort. Indeed, Dacxi, a digital exchange focusing on educating retail investors, saw some of its busiest weeks in the run up to halving. The addition of global pandemic and imminent worldwide recession has been the perfect storm for the world to crave safe new assets. Crypto is firmly out of the niche and into the zeitgeist.
In my opinion, crypto has reached critical mass in terms of adoption. There’s no going back. I was delighted to wake up in London on the 12th May and see the BBC reporting on halving – it doesn’t get much more mainstream than that!
As digital currencies become the increasingly dominant technology, anyone with an interest in markets and investing would be well placed to educate themselves on this seemingly unstoppable asset class. With the recent momentum gained from the halving, crypto is likely to be a broader theme of daily life for decades to come.
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