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EXTRAORDINARY RETURNS FOR EXTRAORDINARY TIMES

Katharine Wooller, Managing Director, Dacxi, UK and Eire

 

Black swan events create much opportunity, and successful investors are able to show resilience through their ability to pivot.  Warren Buffet’s oft quoted maxim seems particularly relevant to the COVID era: “be fearful when others are greedy and to be greedy only when others are fearful.”  2020 has been an annus horribilis, with most traditional asset classes falling off a cliff, and it can difficult for those with cash to know where to turn.

Indeed, the year to date figures at time of writing make for grim reading: the FTSE 100 is down 26% and the S&P 500 has delivered an underwhelming 1%.  Luckily there are a small number of assets which have shown phenomenal growth and are increasingly adopted by institutional and retail investors alike.

There are some well-established reputable cryptos that have bucked all trends.  Bitcoin is up 81%, Ethereum is up 202%, and Litecoin is up 33%.  These are some jaw-dropping returns, and it is a convincing argument for minimal diversification into, say Ethereum, when it would take more than 4 centuries to achieve the same returns as the via the S&P500 at its current rate of growth!

Recent weeks have seen solid performance in these coins.  Interestingly Paypal’s announcement in October had a very positive effect on prices, with Bitcoin alone showing 25.6% growth.

Katharine Wooller

You cannot overestimate the importance of this mainstream adoption from the addition of Paypal’s 340 million platform users having easy access to the asset.  For contrast, Bitcoin currently has 32 million non-zero addresses, effectively 10xing the potential audience.

Unsurprisingly, a good number of institutional buyers are now enthusiastically embracing bitcoin as a hedge against inflation.    The asset manager Stone Ridge Holdings Group has purchased 10,000 BTC (approx. £88m at the time of writing) as a “primary treasury reserve asset”.

Microstrategy has purchase $425m worth of BTC, and Square has invested $50m.  Mode Global Holdings, a London Stock Exchange-listed company, has announced plans to make a substantial purchase, as it looks to convert 10% of its cash holdings as part of a strategy “protect investors’ assets from currency debasement.  Even the investment banks have had reason to stem their usual vitriol: JP Morgan issued a research note on bitcoin stressing a “vote of confidence”.

Interestingly there seems to be an emerging trend to talk about crypto and precious metals as a perfect marriage.  Indeed, champion of personal wealth creation/preservation, Robert Kiyosak has given the succinct guidance: “Do not save. Buy gold, silver, bitcoin. Dollar is dying”.

Certainly, precious metals seem to be enjoying a moment in the spotlight once again.  Even Warren Buffet himself, traditionally far from a fan, has invested in gold miner Barrick Gold.

The year to date figures support this investment strategy; gold is up 25% and silver is up 29%.   Interestingly a lot of the dialogue around crypto is about wealth generation, whereas precious metals investors tend to focus on wealth preservation.  Regardless, to be returning to the very assets that were used thousands of years ago says a lot about our current global economic situation.

In conclusion, extraordinary events require a willingness to think outside the box.  Fail to diversify at your peril!  It will be interesting to see if the traditional asset classes even register as part of our new normal, or, as some suspect, we are already a fair way into a complete global economic reset.

 

Business

TAPPING INTO THE RIGHT MINDS

David Holden-White, co-founder and managing director, techspert.io

 

The world is awash with information. Analyst house IDC estimated that more than 59 zettabytes of data would be created, captured, copied and consumed in 2020, and that the amount of data created over the next three years will be more than what was created in the past 30. The boom in consumer technology and the rapid improvement in mobile connectivity has meant that the 48% of the globe that owns a smartphone has near instant access to all the digitised, publicly available information in the world in their pocket.

 

A world overloaded by information

It’s no surprise that people talk of information overload, or how much it impacts productivity. It’s not new either. A 2012 study from McKinsey & Co highlighted that nearly a fifth of professionals’ time was spent searching for and gathering information, half of the time they spent undertaking role-specific tasks. This is only likely to have increased as we’ve become more dependent on digital tools and services.

On top of that is the realisation that, thanks to social media, we’re living in a time when anyone can be an influencer or thought leader if they shout loud enough. It doesn’t matter whether you’re pushing trainers or cloud computing, whether your audience is a broad spectrum of consumers or a niche group of B2B buyers; the tools and resources are pretty much freely available to build a profile and push your message out there.

David Holden-White

The result is that it’s becoming increasingly hard to find the value amongst vast and accelerating volumes of online data and noise, and to use that data to make accurate, effective decisions.

This is something we need to be able to do. We’re all expected to work faster, to make better decisions more quickly. The pandemic showed that certain changes don’t need five committees, two working groups and a proof of concept to take place before decisions can be rubber stamped. At the same time, no matter what industry you work in, there will be competitors who are more agile, more flexible, and seem to be much better at making decisions and capitalising on opportunities.

Yet those decisions still need to be backed by evidence, by irrefutable knowledge. What’s more, there’s only so much data can give us. We need the insights stored in the minds of true experts, with lived experiences of the particular problems, markets and technologies in question. In accessing this, we can develop a decision-making edge in businesses that competitors don’t have, that can be used to drive entrance into new markets, or for winning investment decisions.

 

Limiting risk in investment decisions

As we all know, investments are inherently risk-related, so, anyone making such a decision will do all they can to minimise their risk exposure, especially in volatile post-covid markets.

To do that requires being able to identify, consume and process information quickly. Investment opportunities, particularly in industries with significant growth capacity, come around quickly and get snapped up fast.

Those decisions will incorporate analysing and drawing insights from raw data, using publicly available and analyst-produced information. But there is also an opportunity to draw on human insights, from leading experts in relevant fields, to get a sense of the story that 0s and 1s can’t properly tell yet. Tapping into the right minds  is essential to informing investment decision-making in 2021.

In an ever-growing haystack of information, the challenge is finding them quickly. Plus, once they are found, there’s a tendency to keep using them, or to use them as a gateway to others in their network. While there’s nothing inherently wrong with this approach, it leaves investors exposed to a lack of diversity in thought that makes getting to an unbiased view of the world impossible. At the same time, casting their net wide and finding lots of experts is resource and time-intensive, at a point when time is one commodity in short supply.

So, what’s the solution? Ironically, given that the challenge is bringing the right human insight into the process, the answer could lie in technology, specifically artificial intelligence (AI). AI-powered platforms can take a request for expertise and run searches through all available published and credible material to recommend the most appropriate experts for the project in question.

It’s true that there are already services that recommend experts, but they are heavily manual and therefore slow and imprecise. It’s also true, there are also both negative and positive connotations being attached to AI. No technology is without its flaws, and if investors were relying on the AI platform itself to provide expertise then there would be cause for concern. Services that provide access to the experts themselves, however, are providing a fast way through the noise and data – it’s a car to the destination, not the destination itself. Once investors and experts are connected, the former has access to the relevant insight the latter holds in their heads. What AI has done is rapidly scan through millions of people of talent to highlight the relevant knowledge holders with pin-point accuracy.

 

Using technology to highlight the best human knowledge

Using an AI technology platform to find the most relevant human is a way of taking a resource-consuming process and finding what’s needed in a thousandth of the time. In that way, investors can get fast access to the human insight they need to make the best decisions,  allowing them to capitalise on opportunities and not miss the next big growth opportunity.

 

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FINANCE DERIVATIVE 2021 TRENDS – NUAPAY

By Brian Hanrahan, CCO, Sentenial, parent company of Nuapay

 

The past year has accelerated payments trends that already existed, as consumers looked for alternative ways to manage their money and purchase goods and services during the pandemic. In 2021, it’s easy to see how these trends have been cemented into the mainstream.

Digital payments grew significantly in 2020, as a direct result of the pandemic. Open Banking payments in particular increased significantly, with research from the UK Open Banking Implementation Entity (OBIE) showing that the ecosystem set to hit three million users shortly , despite disruption caused by COVID-19. This can be partially attributed to the growth in Alternative Payment Methods (APMs) enabled by Open Banking, particularly in mobile commerce but also in some physical scenarios using technology such as QR codes.

Quick Response (QR) codes enable consumers to make payments securely and efficiently from their mobile devices. Recent research concluded that customers across the UK and Europe are increasingly relying on QR codes, with 80% of smartphone users saying they had scanned a QR code at least once in their lifetime, and 40% added that they scanned one in the last seven days. Respondents named, among others, cafes and restaurants as places where they used a QR code as a payment method, demonstrating that this increased adoption goes beyond Covid related Track and Trace schemes.

Importantly, more than 50% of all respondents said they expected to use QR codes for payments in the near future, indicating that consumers will begin to expect QR codes to be available in face-to-face payment environments like brick and mortar stores.

Brian Hanrahan

Another range of APM use cases that will become more commonplace after a relatively slow start in the UK are wearable payment devices. The wearable tech market was valued at approximately $27 billion in 2019, and is expected to rise to $64 billion by 2024, partially due to a greater increase in consumer adoption in 2020 than had been predicted.

Innovative wearable technology, like K Wearables’ K-Ring, enables consumers to seamlessly make payments while eliminating the need to handle cash or touch a card terminal PIN pad. When enabled by Open Banking technology, rather than traditional card rails, merchants also benefit by receiving their funds significantly faster and much lower processing costs. As merchants become more familiar with the benefits of accepting payments via Open-Banking enabled wearables, I anticipate we’ll begin to see merchants incentivising their customers to use them.

Indeed, recent research found that 30% of consumers said that a trusted brand could encourage them to use Open Banking as an alternative to credit or debit cards, while more than one in six said a retailer could incentivise them to use Open Banking through loyalty schemes. Additionally, more than half of all UK consumers, and over 60% of mobile banking users would be willing to pay via Open Banking if provided with the opportunity.

Consumer subscriptions powered by recurring payments will also continue to grow throughout 2021. Subscription-based models have traditionally been difficult to implement for SMEs, due to the difficulties surrounding collecting recurring payments. As the Account-2-Account payments market has become more competitive, providers have raced to provide technologies that enable recurring payments seamlessly, primarily based on direct debits. In turn, this has meant that SMEs can provide an efficient and secure payment experience, and meet the ever-growing demand for subscriptions from their customers.

Even pre-pandemic, more than 60% of adults worldwide used at least one subscription service, and in Europe alone spent an average of €130 per month on subscriptions. With millions more consumers discovering the convenience and even excitement of a monthly coffee, pasta, and even toilet roll subscription in 2020, I foresee recurring payments staying the course through 2021 and beyond.

Overall, Covid-19 has advanced the migration of business to online and mobile, in order to maintain their service to customers who they can no longer attend to in person.

Competition has dramatically increased in the digital space, and delivering seamless customer journeys has become a necessity for businesses to survive. This is particularly true for retailers, who are already turning to alternative ways for their customers to pay.

 

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