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Breaking down the barriers to digital equity and financial inclusion

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By Vijay Guntur, President, ERS at HCL Technologies

The world is moving in a clear trajectory towards a digital future. Organisations are prioritising digital transformation, and governments are embracing digital technologies to create smart, sustainable cities. Early iterations of the metaverse – an immersive and universal virtual world – also point to a scenario where many physical interactions and transactions could take place in a digital environment. It is therefore essential that digital equity is built into the foundation of this digital era. 

 

What is digital equity? 

The concept of digital equity ensures everyone has the same access to digital technologies and the opportunities that they can create. Yet, when it comes to putting this into practice, digital equity is hard to define and action. However, it can be measured in three broad areas: age group, gender and income level. Understanding these areas can help public and private sector organisations improve access to digital. 

For example, older demographics don’t generally have access to digital technology, while younger age groups are widely enabled. From a gender perspective, access to digital technologies differs between men and women.  When it comes to income levels, this remains the biggest barrier to digital equity. Those from the lowest income households often have the least access to digital technology, whereas higher income households have more opportunities through access to platforms, such as Uber or Airbnb.

Income levels will continue play a big role in how digital equity will become available. To change the current landscape, the public and private sectors need to do a lot more to break down income level barriers 

Facilitating digital equity in the public and private sectors 

One of the main barriers to digital equity is digital infrastructure (i.e. the foundational service of a country or organisation’s digital technology capabilities). This includes the smartphone penetration ecosystem, access to broadband and availability of hardware, such as laptops and tablet devices. 

For example, if you look at cities in India, the level of digital access is approximately 45%, but in rural areas this falls to 15%. To combat the issue of broadband access, the Indian government has set up the MyBharatNet initiative, connecting rural villages with broadband access. There are numerous initiatives in other countries, aimed at making broadband access more readily available in rural areas. Private enterprise can also help here, providing mobile devices at lower price points, meaning that more people can get access to them, and gain mobile internet access. 

The second barrier is digital education and this is an area where private enterprises can have a significant impact.  At HCL, our TechBee programme helps people in India – both men and women – who have just finished their school education by providing them with a digital skills base, in order to continue their learning. This type of initiative is growing in popularity and demonstrates how through supporting digital education, organisations can improve digital literacy and equity

Digital equity in action

It’s clear that the pace of digital change shows no sign of slowing down, so we must act now. For instance, the Covid-19 pandemic accelerated eLearning and telehealth around the world. This transition to virtual environments in the education and healthcare sectors now means that those without access to digital are at risk of being neglected by these essential services. 

A digitally equal society will create greater access to education and healthcare, which are now increasingly in a digital setting. This will contribute to an increase in income levels for generations, which in turn, will create a cycle of accessibility and equitability.

We are moving in the right direction when it comes to digital equity and there are numerous examples of it in action, particularly when it comes to financial inclusion: 

In India, the Aadhaar initiative provides people with a 12-digit identification number so they can create a digital identity and have access to banking services.  While the Unified Payments Interface supports frictionless payments, by bringing multiple bank accounts, seamless fund routing and merchant payments into a single mobile application (of any participating bank).  Access to microfinancing options brings down the cost of capital significantly for people at the bottom of the pyramid which in turn can accelerate their income generation.

This, along with ecommerce platforms, like Amazon and FlipKart, is creating a level playing field and providing market access to artisans, handicraft, self-help groups and others. While aggregator platforms, like Urban Company, are improving the regularity and consistency of jobs for blue-collar workers. 

Ultimately, driving financial inclusion through initiatives and platforms like these creates opportunities for all citizens, and will be a big part of creating a digitally equitable society both now and in the future.

 

Finance

Why Financial Services must ‘Change its Change’ to deliver results

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By Hervé Mazenod, Managing Director, Financial Services Sector at Webhelp 

You can almost hear the collective sigh of relief from financial service providers following their business operations being pushed to the limits during the pandemic. But as the industry creates its new roadmap for the future, we must take care not to lose sight of the massive gains we realised, albeit inadvertently, as a result of COVID. While pain and challenge grabbed the headlines, this was also a time of unparalleled development – where financial service brands rapidly adopted a renewed sense of purpose and delivered urgent, game-changing business transformations.  

Since then, we’ve seen a slowdown in momentum – despite there being more pressure to optimise operational resilience, cost and service. In parallel, members of the public still rank financial services 15th out of 16 industries in terms of public trust, according to the 2022 Edelman Trust Barometer. That’s despite a slight increase of 3% from last year. 

It’s no secret that the financial services industry is grappling with a ‘perfect storm’ of political, environmental, social, technological, legal, and economic (PESTLE) challenges. All that, alongside managing pressure from shareholders to reduce the costs of service, improve revenue and delivery, and protect people and organizations from risks. 

But there is another, harder reality – it’s time for some brands to face a few home truths regarding their response. The global financial services sector makes up around 20-25% of the global economy – we have the people, brains, passion, and power to proactively steer and redesign the global industry around challenges. So, by definition, we must accept some level of responsibility for the business pains we are now facing.  

Creating great customer experiences, digitisation, responding to stricter regulation – these themes are nothing new. Over decades, scores of banks and insurers have responded to PESTLE challenges by implementing ambitious change programmes. And while there’s absolutely nothing wrong with aiming high, the problem comes when brands are unwilling to consider better ways of working than delivering big batch, inflexible, four-year plans. It can take months just to scope out the work, design a change, or run some trials. By the time brands implement these plans, everything has changed – they’ve got a new political situation, interest rates have gone up and they’re already behind the curve.  

That way of working isn’t right for customers either. A key way for financial service firms to build trust with customers is to solve their problems when things go wrong. But research shows that 25% of customers couldn’t get their problem solved completely on the first contact – be it poor customer journeys, poorly-designed apps/tech, or failing automation.  

These glitches could be viewed as being at odds with requirements of the FCA’s new Consumer Duty. It requires financial service companies to “deliver good outcomes for retail customers” and to compete “vigorously in the interests of customers, in line with its mission to better protect customers.

The financial services industry is working hard to deliver customer experiences – bringing in new products and services, available easily through apps, and supported with ever-increasing due diligence requirements. And so change itself is not a problem – it’s the methodology that is. We cannot solve this by either tinkering around the edges or preparing wholly unwieldy plans. We must ‘change the change’, stop ‘analysis paralysis’, and take a more agile view in order to be more responsive – especially amid the looming recession – when financial services are grappling for talent in an employees’ market. 

Retail and fintech: beacons for future innovation?  

It’s widely acknowledged that fintech is leading the way in enabling rapid change and delivering milestones at pace. In parallel, we take lessons learned from the ‘best in class’ innovation emerging from retail, which has optimised customer journeys to a different level. 

Take The Very Group for example – the company created a Customer Closeness Center (CCC) – an environment they can use to identify and test improvements to CX, customer journeys, and user experiences in a real customer environment, in real time. This involved gathering insights which inform key business changes and rolling out digital technologies such as chatbots. The Very Group also improved voice and email services on the front line, upgraded complaints management, and are delivering significant transformation of back office. 

This transformation led to a 33% year-on-year reduction in average contacts, reduced cost by over £5 million in contact reductions alone, and achieved a 73% First Contact Resolution rate. It also achieved a 35% score on Net Promoter, based on customers who made contact using the telephone, which is more than 20% better than the industry average. It was effort, not luck, that saw them win several CX and innovation awards – particularly the way in which the group implemented change; linked up technology, data, process, and people; and tested and continuously improved the solution daily and weekly.  

Changing the change brings happier customers, better employee engagement, and improved resilience and overall profitability. And there’s nothing stopping the rest of the financial services industry from becoming the next globally-leading industry for transforming operations and delivering integrated customer experience.  

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Mini-Budget 2022:

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Tax giveaway is a boost for business, but will it drive growth or fuel inflation?

 

Chancellor Kwasi Kwarteng has announced a comprehensive wave of tax cuts and other incentives for individuals and businesses, as well as confirming some of the announcements made earlier this week.  The measures are part of a new Growth Plan, which is aiming to boost economic growth. However, only time will tell if they will curb inflation and temper recession concerns.

Richard Godmon, tax partner at accountancy firm, Menzies LLP, said:

“With another fiscal statement to follow, this mini-Budget is a defining moment for the new Government and tax cuts are firmly back on the agenda.

“The biggest surprise was the decision to simplify Income Tax by moving to a single higher rate of tax for high earners of 40%, with effect from April next year. This will encourage a spirit of entrepreneurialism by incentivising work and putting money back into the economy. The flip side is that the Government might also be hoping that the move increases the tax take, as it could help to draw people back to the UK who may have previously chosen to live and work elsewhere, while encouraging others to stay put.

“The reduction in dividend tax rates and the abolition of the additional rate of tax from April 2023 means that business owners will need to consider carefully the timing of dividend payments over the next few months.”

Up to 40 new Investment Zones

The Chancellor also outlined plans to create up to 40 new ‘investment zones’ in England, with the potential for more in Wales, Scotland and Northern Ireland. Businesses in these zones will benefit from wide-ranging tax breaks including 100% tax relief on investments in plant and machinery, and no National Insurance Contributions will be payable on the first £50,000 earned by new employees.

Richard Godmon, tax partner at Menzies LLP, said: “The new Investment Zones are reminiscent of the former Enterprise Zones, but they will provide a much more favourable tax environment for businesses and they promise to become a magnet for inward investment. There are currently 38 areas in England on the list for consideration and we look forward to finding out which ones will be selected.”

Incentivising business investment and Corporation Tax rise ‘cancelled’

The limit of the Annual Investment Allowance (AIA) will not revert to £200,000 as planned in April next year, it will now permanently stay at £1 million.

Richard Godmon, tax partner at Menzies LLP, said:

“Capital allowances are highly valued by businesses and they will be pleased that this one in particularly is going to stick at £1 million and that this is no longer being described as a temporary measure, but is to be made permanent.

“The decision to cancel the planned increase in Corporation Tax (due to tax effect next April) will be a relief to many small and medium-sized businesses who have been concerned that this increase would erode profits further and make it even more challenging to remain viable.”

Incentivising entrepreneurial investment

The Chancellor highlighted plans to increase the cap on investments that can be made under the Seed Enterprise Investment Scheme (SEIS) from £150,000 to £250,000. Individuals making investments in start-ups up have had the limit doubled to £200,000, with the 50% income tax relief remining the same. The Government also gave its commitment to continuing to back the Enterprise Investment Scheme (EIS).

“These announcements send a signal to entrepreneurial investors that tax should not be a barrier and the Chancellor wants to expand incentives in this area,” added Richard Godmon, tax partner at Menzies LLP.

Stamp Duty Land Tax

The threshold at which Stamp Duty Land Tax (SDLT) becomes payable on residential property purchases in the UK has been raised to £250,000, double its previous level in a bid to boost the property market. In addition, first-time buyers will not have to pay SDLT on property purchases up to a value of £425,000 (up from £300,000). Both measures will take effect from today.

Richard Godmon, tax partner at Menzies LLP, said:

“The decision to raise the SDLT threshold is designed to build consumer confidence and boost the housing market generally. For property developers it will fuel activity by creating demand, particularly from first-time buyers, and help to free up finance to front-end development projects.”

IR35 Changes

Richard Godmon, tax partner at Menzies LLP, said:

“The repealing of the 2017 and 2021 IR35 changes will be hugely welcomed as it will remove an administrative burden, risk and cost, enabling businesses to devote resources to furthering their growth strategies.

“It is important to recognise that IR35 has not been abolished and the result of the changes is that the risk and compliance costs are being returned to the individuals and their personal service companies.  HMRC will no doubt redirect their focus towards the contractors, which will bring challenges and make enforcement more difficult.”

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