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ASSET MANAGERS ARE TURNING TO AI TO DELIVER HIGHER RETURNS AND MEET INVESTOR EXPECTATIONS

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Francesca Campanelli, Chief Commercial Officer, Axyon AI

 

The world has certainly been shaken by the global economic impact of the COVID-19 crisis, with the uncertainty causing market volatility across the board. The issue for asset management firms now is that they’re under pressure to adapt to this new post-COVID landscape and their focus is on demonstrating investment resilience to their clients.

So why the more positive outlook, and, therefore, expectations for 2021? Many people expect this year to be a better one for the stock market as the world economy beings to recover from the crisis. This time last year the world was in the middle of a vast market crash, caused by a global disaster that no one could have predicted.

2020 sparked a boom in first-time investors, with research from Alliance Trust suggesting that 66% of investors between the ages of 18 and 34 invested for the first time. Despite the financial strain the pandemic caused for many, others were left with extra disposable income and time on their hands during lockdown. These budding investors are more aware about technology and innovation and they ask for this in portfolio management.

Many investors will also be expecting better things in 2021 to make up for disappointing results in 2020 – the market shock caused by the pandemic hit fund managers hard. World stock markets plummeted during the initial uncertainty of the pandemic and, to give us an idea of the impact, in the first quarter of 2020 only 17% of U.S. large-cap quant mutual funds outperformed their benchmarks after fees.

Now however, the COVID-19 vaccine is being rolled out en masse in many countries and governments around the world have put together stimulus packages and policy changes in an attempt to protect businesses and individuals from financial difficulties. When the vaccine was first announced in the UK last November, for example, the stock market rose by 14% in just a week, and there’s hope that other markets will see the same happen as 2021 continues.

 

Asset management firms call for change

While the economic outlook for 2021 is brighter and people are willing to invest, fund managers are faced with a potential retention issue in the face of further volatility. Despite the fact that experts are predicting a strong global economic rebound, it’s almost impossible to predict what’s going to happen. But investor expectations remain high, and if those expectations aren’t met, the drop in business could be dramatic.

Traditional risk management methods faced some issues during the pandemic. The severe market shock at the onset of the COVID-19 pandemic pushed a large amount of chaotic data into the quantitative models. These models simply couldn’t cope – the predictive market views were also erratic.

Investors cannot tolerate huge drawdowns and they ask for more effective risk management to avoid unexpected loss. There’s also the very real possibility of a second market shock – for example, what happens if the virus mutates and impacts the efficacy of current vaccines? Despite the positive socio-economic changes that are happening globally, the world is still in the grip of a crisis and there’s no way of knowing whether the markets can avoid another drop.

 

Superior analytical power

The risk of investors losing confidence in their funds is a real one, so it’s crucial that asset management firms take steps to ensure they’re prepared for any potential future crashes. Using AI and deep learning systems to mitigate risk will go a long way towards making smarter and more profitable decisions and meeting investor expectations. AI-led hedge funds are proving to be high performers even in the wake of the pandemic, producing cumulative returns of 34% between May 2017 and May 2020 compared to only 12% for the global hedge fund industry.

Advanced AI systems are better equipped to weather volatile market conditions, picking up anomalies in the data and long-term trends that many traditional quantitative models could miss. Deep learning, an AI function that takes the technology to an even more advanced level, would further strengthen a model against chaotic data by allowing fund managers to see non-linear, complex patterns in asset behaviour. This leads to market view predictions of a much higher level, no matter how changeable market conditions become.

Asset management firms that don’t harness the superior analytical power of AI to meet their investors’ expectations will find themselves trailing behind the competition. 56% of hedge funds have said they planned to take advantage of machine learning in their trading process by 2021, and global investors were predicted to spend $900 million on alternative data by 2021 , almost doubling the 2017 spend.

 Implementing these innovative technologies will undoubtedly be a powerful and intuitive solution to the problem of meeting investors’ expectations of mitigated risk and higher returns. It will also allow asset managers to demonstrate a tangible difference in their strategies. Rather than risking the repeat of an inability to manage chaotic data during a market crash, a better and more efficient usage of available data will help to mitigate downside risks and generate alpha, no matter how unpredictable world events become.

 

Business

How app usage can help brands increase their online revenues and customer retention

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Arunabh Madhur, Regional VP & Head Business EMEA at SHAREit Group

 

Brands are continuing to invest heavily in the e-commerce market despite current market and economic challenges – and they need to. Indeed, the current global e-commerce market is valued at around $5.5 trillion. Further to that, estimates show that online retail sales will reach $6.7 trillion by the end of 2023 – and e-commerce making up 22.3% of those sales.

So despite the economic and market climate, businesses must still plan for success and cater to customer demands to make the most of the global e-commerce opportunity.

 

Mobile apps are key

Mobile apps are now a fundamental component of retail, as they provide customers with a convenient and engaging way to shop from their phones. The past couple of years has been rocket fuel for digital transformation, providing an opportunity for the retail industry to innovate. Whilst global trends continue to point to the user growth of Facebook, TikTok and Instagram, the trends underneath the headlines highlight significant opportunities to drive new customer acquisition, which in turn demands a targeted customer retention strategy from companies.

According to research from Baymard Institute, 69.82% of online shopping carts are abandoned and with demand expected to continue, pressure is growing on retailers to expand current offerings and create personalised experiences to tackle this. One of the big challenges e-commerce companies face, though, is analysing and maximising the behaviour of users, and bringing down the cost of their marketing and engagement against how much is earned through a customer making a purchase.

To meet customer demand, mobile apps offer a variety of features such as push notifications, product recommendations, exclusive discounts and offers, and easy checkout processes, to make the shopping experience easier for customers. By leveraging the power of mobile technology, brands can create an immersive shopping experience tailored specifically to their customer’s needs, and this in turn helps increase customer loyalty, customer return rates, and maximise online revenue.

 

Re-targeting and re-engaging customers

Brands should focus on re-engaging with returning consumers through a personalised strategy as this can help increase the lifetime value of users, which in turn helps brands bring the cost of their marketing down knowing that brand loyalty has been achieved. According to research from Google and Storyline Strategies study, 72% of consumers are more likely to be loyal to a brand if they offer a personalised experience.

Optimising the online shopping experience is crucial in retaining customers. Today, consumers need a more ‘human’ touch, i.e., smart product suggestions based on buying history & behaviour that helps build a one-to-one relationship between brand and buyer. In particular, push notifications haven’t just enhanced personalisation but also increased app engagement by up to 88%. Push notifications have also proven to get disengaged users back, too, with 65% returning to an app within 30 days of the push notification.

Another strategy to consider is the option of adding buy now pay later (BNPL) options at checkouts for customers. Brands that add the option of financing at the checkout allow customers to spread the cost over time, which according to Klarna has resulted in a 30% increase in checkout conversation rates.

Publisher platforms allow brands to leverage their reach and sticky user base. Especially with open platforms such as SHAREit, which can help e-commerce brands create a strong revenue conversion with higher average order value with unique retargeting and user acquisition solutions. Because users are not just sharing product links, but also sharing e-commerce apps and deals among their community. Users of these publisher platforms are also encouraged to share products and apps through platform activities.

 

What the future of e-commerce holds for brands

E-commerce is positioning itself as a key facet in retail, and its future. With Advancements in technology, customers can access various products and services worldwide through their smartphones – making shopping more accessible than ever. Brands must put consumers at the heart of everything they do, like never before. Offering incentives and payment options, personalising customers’ experiences and re-engaging them, as well as targeting new customers, in an effective and un-intrusive way, are all ways in which they can influence purchasing decisions and improve retention figures.

 

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Business

Does the middle market have a financial edge?  

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Ilija Ugrinic, Commercial Solutions Director at Proactis

 

Companies tend to look up the ladder when searching for ways to improve efficiency and business performance. What are larger competitors, or others outside their industry, doing right that they can learn from and implement?

What smart technologies or bright ideas do they have that could create efficiencies for them, too?  

As we enter yet another likely volatile year for business, punctuated by recession, should businesses continue to only look up? And could the approach of a slightly smaller business offer more of a competitive edge? 

Large corporates tend to pioneer innovation in automation by simple virtue of the resources they have. Home to transformation directors and departments, with the ability to implement large overarching software systems, they pave the way for others and are often the first to digitise their source-to-pay cycle at pace. 

Ilija Ugrinic, Commercial Solutions Director at Proactis

While growing businesses understand the merits of full automation, implementing it is often too expensive and it doesn’t bring the rapid realisation of benefits that they need. They need to consider what will bring them the biggest return on investment – and the reality is that those in the middle market don’t necessarily need all the elements of an ‘all-doing’ piece of software. What’s more, without dedicated personnel to project manage a transition, they frequently lack the currency of time to be able to comfortably transform working practices, and take staff with them on the journey, without taking resource from other areas of the business.  

For SMEs, digital transformation has never been quite as seismic a shift. Instead, they tend to take a modular approach, employing digital solutions only for particular areas of their finance department, where they need them. This has never been a particularly strategic move. Rather, for a growing business that values quick results and watches their outgoings with greater scrutiny than their larger counterparts, it’s something that suits them better. A modular approach also comes with very little disruption and can be implemented relatively seamlessly into their existing organisational setups. 

But while growing businesses are opting for a modular approach because it’s the most cost and time effective option for them, the benefits go far beyond that. The beauty of a modular approach is that it is agile. The last three years – with pandemics, an increasingly challenging climate and shifting geopolitical tensions impacting our global economy – have only served to remind us of how suddenly, and drastically, a business landscape can change. The companies that have weathered the storm are those that have reacted and adapted quickly – those that have been capable of changing the way they do things with little impact on day-to-day operations. A modular approach can offer just that.  

Businesses using modular finance technology can integrate small solutions that sync up with the rest of their processes, quickly and seamlessly – and these systems can be integrated into their existing Enterprise Resource Planning (ERP), too. There’s no restriction of a monolithic or aging piece of software either – finance teams can add and update small solutions to their daily operations without the upheaval of having to replace or update large IT infrastructures or wider working practices within the business to accommodate the new software.

Unrestricted by entrenched and hard-to-change systems, the speed with which SMEs are able to react to market changes is miles ahead. A prompt software add-on to manage risk, or create a quick fix in response to a market shift, can be virtually a knee-jerk reaction. SME’s abilities to bend and flex to today’s world efficiently is seeing them reap the benefits of a modular approach. It’s lean, it’s fast and it’s facilitating their growth with a strong competitive edge. And as some of these companies’ growth propels them into the large corporate sphere, they’re choosing to keep a modular approach to finance.  It will certainly be interesting to watch those middle-sized companies which grow to the extent that they find themselves competing in the same space. With no financial remodelling to assume a large ‘all-doing’ piece of software, they’ll be competing against their counterparts with completely different tools in their arsenal.  

With technology, working life and business needs continuing to change day to day, we have another year ahead of us that will see companies running to keep pace with each other – and fast-growing companies’ approach to finance could be the silver bullet that enables them to catch up with, and even take on, big enterprises. It might just give them a competitive edge against large corporates in these turbulent times.

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