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HOW AUTOMATION WILL IMPACT THE FUTURE OF FINANCE

Robert Douglas, Europe planning director at Adaptive Insights, a Workday company

 

To understand how critical automation is becoming to modern finance, take a look at the shift in what skills are highly valued for new hires. In a survey of CFOs*, three years ago 78% of CFOs said the most important skill was proficiency with Excel. Last year, only 5% of CFOs listed Excel as the top skill. So, what are CFOs looking for as they build their teams? The ability to adapt to new technologies.

Automation is becoming the norm in business, especially in areas like marketing, HR, and, most recently, in finance. As such, flexibility and adaptability are now necessary, if not imperative, assets—with speed and efficiency being the desired results. Additionally, an upgrade in technology and developing of professional skills are now at the forefront of companies’ new initiatives. For this reason, the ability to master new technologies is exactly what a modern company expects from its new recruits, and the finance team is no exception.

Today, automation in finance is mainly utilised to carry out manual tasks that are traditionally considered to be low-value, such as data entry, verification, and reconciliation. These tasks are generally spreadsheet-based and tend to be tedious and repetitive, as well as time-consuming. This is powerful, considering that as much as 34% of a financial manager’s time could be automated by adopting technology, according to a study** by McKinsey Global Institute. But two key drivers are pushing CFOs to automate even more: the increasing complexity and volume of the data to be evaluated, and the urgency with which results are needed.

 

Robert Douglas

The power of automation

In today’s “age of urgency,” the ability to make informed decisions quickly is a competitive advantage. For CFOs, automation represents an opportunity to impact the day to day work of finance, but more important, an opportunity to enable corporate agility by playing a greater role in strategy and decision support. Cracking the stereotypes of finance as back-office number crunchers, automation allows finance teams to leave time-consuming, manual tasks behind so they can focus on higher value work and become strategic partners to the business. Additionally, faster and higher-quality insights lead to more accurate reporting and planning, which increase overall productivity across the organization.

At P.F. Chang’s, which operates more than 300 Asian-themed restaurants in 25 countries, automation has been the critical first step in transforming how the company develops plans, budgets, and forecasts. By relieving the FP&A team of productivity-killing busywork gives finance time to do a better job transferring “business acumen to financial performance” –the definition of what agility really means to a business.

With the freedom to concentrate on strategic work like identifying why some restaurants were experiencing shortfalls in wine sales growth margins, the finance group at P.F. Chang’s helped those locations implement new best sales practices that led to a 300% increase in wine margins in just a month. And in 2018, when restaurants in 18 states in the US scrambled to preserve margins after minimum wage increases, P.F. Chang’s was able to analyze productivity so effectively that it optimized its cost of labor by 30 basis points, even as its publicly held competitors were walloped by an average labor cost hit of 50 basis points.

 

A new kind of strategy

A big part of the controversy surrounding automation in businesses is the concern that employees may potentially lose their jobs to machines. However, it is important to note that although automation will relieve finance employees of menial tasks, it represents a shift in skill sets, giving them the opportunity for more strategic roles rather than data entry or report building. In fact, a recent study*** by Robert Half found that automation will create more finance jobs than it replaces. This means job numbers will not be reduced, but rather new opportunities will arise.

Today, automation isn’t a nice to have, but a must have. The volume of data that businesses have to analyse daily is doubling every year, making automation critical for every business in every industry. And advances in automation continue to march on. Looking ahead, artificial intelligence (AI) and machine learning automate the time-consuming creation of ‘what-if scenario’ scenario modeling at scale. Most CFOs believe**** that the utilisation of AI software will more easily surface insights and suggest plans of attack. The automation of routine tasks such as data collection and the ability for machines to pose hypothetical scenarios in the future will enable finance to offer a fresh perspective, focus on strategy, and deliver more value to their organizations.

In the end, the days of being hired for your impressive Excel skills are over. Rather, CFOs are seeking individuals who are capable of understanding, adapting, and accepting change. The business landscape is being revolutionised by automation, allowing finance teams’ creativity and strategy plans to flourish. The end result is a new-found agility that will drive businesses to success in this age of urgency.

 

* https://www.adaptiveinsights.com/cfo-indicator/automation
** https://www.forbes.com/sites/workday/2017/11/03/how-ai-and-automation-will-shape-finance-in-the-future/#771cd18f481b
*** https://www.zdnet.com/article/automation-will-create-more-finance-jobs-than-it-replaces-robert-half/
**** https://www.adaptiveinsights.com/cfo-indicator/automation

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Finance

WILL BLOCKCHAIN REVOLUTIONIZE FINANCE?

By Ken Timsit, ConsenSys

 

Over the last 10 years, researchers, software developers, start-ups, and large companies have been conducting experiments aimed at determining whether networks based on blockchain technology can ultimately – in whole or in part – replace the infrastructure on which financial institutions and capital markets are built.

 

In today’s electronic databases, any information can theoretically be replicated at will. This is why most governments allow only regulated actors to keep records of digitized assets (banks, depositories), to avoid pitfalls such as the execution of misleading transactions or the creation of artificial assets. With blockchain, these pitfalls can be avoided at the source code of the technology, which is available to all members of the network. The creation of Ethereum enabled a more robust blockchain network capable of “smart contracts”, which once programmed, can run automatically without the results being modified or manipulated.

 

Contrary to what some critics argue, the potential of the blockchain is not the creation of a free and unregulated space in which everyone can invent new financial instruments. Rather, the potential lies in creating a much more efficient and globalized commercial and financial infrastructure, in which many layers of control and intermediation are no longer needed as they are replaced by transparent and immutable IT rules that ensure the same risk management functions.

 

For example, bonds are essential financial instruments on which a large part of our economy and savings are based. The issue and exchange of a bond requires the intervention of several dozen financial institutions (issuers, intermediaries and investors). Some regulated players in this intermediary chain exist mainly to ensure that it is possible to know, at any time, who holds each bond, in order to guarantee their rights to its bearers.

 

It is theoretically possible to simplify these stacks of operators by linking them to a global blockchain network, open to all stakeholders in the industry. The blockchain network can thus ensure at any time that the number of outstanding bonds corresponds exactly to the number of bonds issued, and that each exchange transaction is carried out without the risk of default.

 

The blockchain revolution is first and foremost the reduction of costs and delays caused by the current financial infrastructure. The blockchain revolution also creates innovation opportunities for consumers, savers, and investors.

 

 

The Web3 revolution, often used to refer to the blockchain revolution, will be driven by the reduction in transaction costs, allowing the emergence of new peer-to-peer business models that we are not yet able to accurately predict, but which will probably participate in a rebalancing of the relationships between financial institutions and their clients. Some international peer-to-peer payment and loan-to-peer savings investment models are already attracting increasing interest from the most sophisticated consumers.

 

Where are we in 2020?

Today, the blockchain revolution is still in its infancy. Transaction volumes through blockchain networks, public and private, are low compared to those of existing systems. The fixed costs of the technology are still relatively high, and the user experience leaves something to be desired.

 

However, innovations abound. It is already possible for me, from my smartphone, to buy digital assets whose value is equal to about one US dollar, and to lend them in three clicks to other users who will pay me between 1% and 10% per year for this service, depending on the type of platform.

 

The number of large operational business projects is still small, but very promising. Numerous international commodity trading players have joined forces to create Vakt and komgo, two platforms that contribute to a significant simplification of trade and oil financing. Similar and competing projects, Voltron and Marco Polo, are being launched. On the corporate side, the Capbridge 1x platform (Singapore) already allows shares to be traded on an Ethereum blockchain network. Other important projects such as LiquidShare (France), SIX Digital Exchange (Switzerland), Daura (with Deutsche Borse and Swisscom in Switzerland), Synapse (Hong Kong Stock Exchange) are in preparation. The World Bank, Société Générale and Santander have issued bonds on an Ethereum blockchain network. These initiatives are still experimental but have attracted significant interest from financial institutions around the world.

 

And of course, many projects aim to revolutionize global payments by creating digital assets on blockchain networks that are fixed in Euros, U.S. Dollars or other currencies, such as those of the Monetary Authority of Singapore, the South African Reserve Bank, and Union Bank of the Philippines. Since the announcement of the Facebook-initiated Libra project, many governments have expressed concern about the possibility of private companies controlling global payment flows, and have asked their domestic financial institutions to redouble their efforts to explore competing initiatives.

 

All of this is to say that adoption is happening, albeit gradually. The middlemen and intermediaries of the financial world will not be replaced overnight. Moreover, the exact formation or architecture of the new financial system is impossible to predict with accuracy. However, it’s safe to say that blockchain will enable a financial system that is more efficient and yields more value-add to consumers, users, and investors.

 

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Finance

RECOLLECTING 2019 CRYPTOCURRENCY TRENDS & LOOKING FORWARD TO 2020

Marie Tatibouet is the CMO at Gate.io

 

It has been a bold and progressive year for the digital asset market with exciting announcements flowing in from technology behemoths and government bodies around the world. However, Facebook’s launch announcement of Libra (though they are now facing regulatory issues) and China’s new cryptocurrency law caught all the attention, affecting the Bitcoin price, and the overall market sentiment.

In 2019, the global market saw several catalysts emerging for mainstream adoption despite increased scrutiny around several burning issues such as wash trading and security breaches. For over 400 cryptocurrency exchanges in the world, being able to constantly improve on aspects around user experience and fund security is the only way to be sustainable. However, only a handful have real trading volume and technical expertise to build strong trust in the community. For instance, global wash trading has been the hottest topic of discussion in 2019 but new rankings on CoinMarketCap clearly indicate that the industry is working towards eliminating market manipulation.

 

Looking back at 2019

In 2019, digital asset organisations have constantly innovated to attract users but at the same time, the trading process has become increasingly fragmented, spiking the time gap between new users becoming long-term users.

 

Marie Tatibouet

Holding & Lending Funds

Since 2014, the Bitcoin margin trading market has expanded from $10 million to $100 billion. Margin trading has been a great use case in the cryptocurrency space. Many exchanges launched the feature to provide diversity to the trading experience and attracting a huge amount of users to the platforms. It allows traders to multiply their profits on successful trades, providing a range of possibilities for both profits and losses.

Staking is a process where users can buy digital assets and earn interest by keeping (holding) them in a cryptocurrency wallet for a particular period of time. It has proved to be a strong use case for digital asset companies as it encourages user participation. In 2019, staking programs brought stable earnings for cryptocurrency investments made by the users. For instance, HODL & Earn launched by Gate.io in August 2019 has been bringing stable earnings for cryptocurrency investments made by its users. The competitive advantage for HODL & Earn is its annual interest rate, which is as high as 32%.

 

IEO

Crowdfunding as an approach to build and grow products has seen a lot of traction over the last decade or so. One of the highlights this year was the emergence of “Initial Exchanges Offerings”, more commonly termed as IEOs, an alternative to traditional IPOs where companies can raise funds by selling a quantity of digital assets to investors, supervised by cryptocurrency exchanges. With over 1.5 Billion funds raised, IEOs shook the entire cryptocurrency space in 2019.

Owing to the richness and variability that we have seen so far, there has been no one clear winner to pick, but there’s also no ignoring the leaders; Gate.io has the second best average IEO returns, raising over 80 million dollars in its first 5 projects and has similar offerings panned out for 2020.

 

Source: https://medium.com/@neironix.io/top-8-largest-ieo-whats-happening-to-them-now-f7e60a638dda

 

Deals and Discounts 

Discount deals are being increasingly leveraged by digital asset companies, encouraging users to maximize their capital. Holiday seasons such as Black Friday are packed with jaw-dropping discounts. However, as an industry, we should aim to integrate discounts in digital currencies into the mainstream world, which would bring price stability.

 

Dynamic User Relationship

Cryptocurrencies are being taken seriously and companies are designing consumer-specific strategies. It is a great indication of the fact that more and more people are interested in trading digital assets. However, we have a long way to go when it comes to tackling the industry challenges and unlocking value for the entire ecosystem.

 

Regulation, Security, and Mass Adoption 

Central banks of the US, Europe, China, and Ghana are looking at creating their own central bank digital currencies, putting a structure to the adoption of the blockchain technology across finance and other industry verticals. Japan’s recent regulation amendments, China’s new crypto law have laid the right frameworks for mainstream crypto adoption.

While we have major countries pushing for the mainstream adoption, security remains a major concern. Cryptocurrency thefts and frauds in Q3, 2019 annual stand at USD 4.4 billion and this will only increase if fund safety mechanisms aren’t strengthened. Therefore, the strongest will survive as far as digital asset security is concerned.

Nonetheless, blockchain technology is helping to create an innovative and accessible financial system around the world and its mainstream adoption is closer than we can fathom.

 

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