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How fintech is key to empowering climate action

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The Green Revolution In Investing - Sustainable Investing

Attributed to: Rory Spurway, CEO & Founder of CarbonPay

 

As human activity continues to have a significant impact on the climate in unprecedented ways; particularly through disconcerting levels of CO2 emissions that contribute to global warming, there is an urgent need  for sustainability to be an integral part of the way industries operate. Research has found that 6 in 10 consumers think UK-based businesses need to do more to combat climate change and cut emissions. To meet the target of reducing 100% of emissions by 2050, innovation and accessibility are essential.  This global crisis paves the way for fintech, a major driving source of innovation, to create new ways of decarbonisation and climate action.

Rory Spurway

Because of this positionality, the  growing fintech sector has a significant role to play when it comes to mitigating the worst of climate change. For instance, new technologies such as data analytics, artificial intelligence, and creative innovations within the payments sector have disrupted how businesses can make a positive impact on the environment. One of the most significant ways that the fintech industry can make strides towards reducing emissions comes from partnerships with other businesses. The largest firms, such as Visa and MasterCard, are already known for their environmental sustainability efforts and work with fintech companies to develop the right sustainability aids, such as carbon reduction tools. Fintech can also be used as a catalyst to enforce positive climate action from a B2B standpoint, which is particularly key in a time where many of the biggest companies globally are currently failing to meet their sustainability targets.

 

How can sustainable fintech tackle greenwashing?

A way companies demonstrate commitment to sustainability and climate action is through green pledges and activities, such as tree planting initiatives. While these are  well-meaning, they can’t be the only avenue taken to combat climate change. Relying solely on one-dimensional initiatives runs the risk of losing environmental efficacy and sometimes are unfortunately used for companies to present a sustainable front without following through — more commonly known as greenwashing. The fintech sector has the power to help companies combat greenwashing concerns, through changing the behaviours and mindset of C-suite executives, prioritising decarbonisation and  by providing tools for tracking emissions. Backed by technology led solutions, the fintech sector actually has a lot of power and capabilities when it comes to changing the face of sustainable action.

 

Changing the mindset at the C-Suite

One of the major reasons sustainability is still not properly prioritised is that not enough CEOs think like CSOs. CEOs tend to focus more on business and financial operations rather than on CSR, leaving that to CSOs (if the organisation has one). But what does this mean for climate action and sustainability? By adopting a CSO mindset and thinking about climate issues in the same way that CSOs do, CEOs and other C-Suites can make sustainability a key priority for the company rather than separating the two operations. In the same way that everyone has a part to play in ensuring the  wellbeing of our environment, it’s the joint responsibility of the C-Suites to ensure the company is doing its part as well.

 

Tracking emissions – the first necessary step to decarbonisation

The concept of digital payments is not new, but its development has transformed the way people live, and pay for things daily. Our spending behaviours are largely reliant on technology and have also had a significant impact on the environment, and this is very much tied to carbon emissions. Because of this, it’s essential we adopt tools that enable people to mitigate the negative impacts that their spending habits are having on the environment . One way in which fintech is leading this is by providing the tools to track carbon emissions, and subsequently creating a simple way to offset these emissions. Companies are able to directly and transparently view the impact of their purchases, and with the help of specialised fintech companies, these emissions can be offset. Enabling businesses and their employees to take these easy and small steps to take responsibility for their carbon footprint ensures that sustainability remains accessible and constant , even at a B2B level.

 

 

 

 

 

 

 

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How can businesses boost employee experience for finance professionals?

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By Martin Schirmer, President, Enterprise Service Management, IFS

Over the course of the last year, The Great Resignation has seriously impacted organisations across the globe. Staff are quitting in huge numbers, leaving companies unprepared and struggling to fulfil their workloads. In fact, mass departures are happening at all levels of the labour market, as employees attempt to adapt to the hybrid working model and growing socio-economic uncertainty.

In light of this, optimising the employee experience (EX) to attract and retain talent has become a top priority for employers. Organisations have come to understand the necessity of taking immediate steps to drive employee engagement and reshape workplace culture.

The financial services (FS) industry is no exception to this trend. From increasing employee burnout to growing career dissatisfaction, the pandemic has exacerbated the need for transformation across finance teams. This is exemplified by recent data from Spendesk, which found that approximately 40% of finance professionals are willing to leave their roles or already have concrete plans to do so.

Organisations looking to get ahead of the competition must put in extra efforts to retain their existing workforce. The fact is that employee expectations and requirements have irreversibly changed, with more workforces becoming increasingly distributed. Today’s hyper-connected workforce values flexibility and simplicity, and it is organisations which offer these experiences that will succeed in the long term.

As part of this process, finance companies must look towards the power of technology to create seamless user experiences across devices. From automating workflows to improving overall efficiencies, Enterprise Service Management (ESM) can help organisations to boost user satisfaction and go that extra mile for their employees.

How poor EXs are driving finance teams to quit

With over 40% of employees spending a significant proportion of their time carrying out mundane, manual tasks, it is not surprising that poor EXs are having a detrimental impact on job satisfaction. Finance teams in particular have been slower to digitise core processes, leading to a heavy reliance on manual tasks. This not only increases the amount of time spent on each task, but also impacts the engagement levels of finance professionals who cannot focus on more strategic aspects of their roles.

As a result of the pandemic, flexibility has also moved to the forefront of finance teams’ desires. Given the fast-paced nature of this industry, the conversation surrounding work-life balance has increased rapidly. Failure to offer flexible working policies, coupled with a lack of technology to facilitate this flexibility, has led to poor EXs across the board.

Most notably, the overarching move to omnichannel, digital-first approaches has dramatically reset both customer and employee needs. Finance is the third-slowest running corporate function behind legal and IT. Operating in a competitive environment, 73% of finance operations are facing pressures to speed up, improve efficiency, and prioritise automation.

Mitigating the problem using technology

ESM, an offshoot of IT Service management (ITSM), is the cornerstone of smart digital transformation for organisations. It can help finance teams to streamline and automate routine processes, such as monitoring the status of service requests, approving expenses, sending invoices, and tracking payments. In turn, this will free up employees’ time, reducing the burden of manual tasks and enabling them to focus on the more strategic tasks.

Another advantage ESM can offer finance teams is the ability to adapt to each department’s minimum requirements for data privacy. Accounting, for example, needs additional layers of compliance built into the system.

ESM can also facilitate cross-departmental collaboration, helping finance professionals to communicate with the wider business and perform tasks more effectively.  Organisations can use ESM to incorporate all internal services into a single platform, offering employees a well-rounded view of the business and promoting a sense of community across all levels of an organisation. This will boost productivity, whilst enhancing visibility and control.

Ultimately, the current job landscape has brought with it a new set of challenges. Organisations in the FS industry looking to navigate the storm and retain top talent must refocus their efforts on bolstering the EX. Embracing a new era of technological innovation that empowers employees and boosts engagement is a critical step in this process.

 

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CBDCs: the key to transform cross-border payments

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Dr. Ruth Wandhöfer, Board Director at RTGS.global

 

If you work in finance, you’ll have been hearing a lot about central bank digital currencies (CBDCs) and the moves different markets are making towards using, regulating and evaluating the viability of moving to an economy based on digital currency.

We are already seeing progress in the research, piloting and introduction of CBDCs into the financial system. The Banque de France for example, recently launched its second phase of CBDC experiments in line with the “triple digital revolution” unfolding in the financial sector. The infrastructures of financial markets and fintechs, however, are not prepared to accommodate their security, stability, and viability.

This could be an issue in the not too distant future. Each year, global corporates move nearly $23.5 trillion between countries, equivalent to about 25% of global GDP. This requires them to use wholesale cross-border payment processes, which remain suboptimal from a cost, speed, and transparency perspective. In fact, the G20 cross-border payments programme considers improving access to domestic payment systems that settle in central bank money, as one of the key components in facilitating increased speed and reducing the costs of cross-border payments.

The current state of cross-border payments

International transactions based on fiat are currently slow, expensive, and highly risky due to today’s disconnected financial infrastructure, messaging, and liquidity. Wholesale cross-border payment settlement can take 48 hours or longer, which is not practical in today’s digital world. Even if not every market moves to CBDCs, in an increasingly digital era, cross-border settlements between central banks will unavoidably involve dealing with CBDCs. So, not only will we have different currencies, we’ll have different technical forms of currency being exchanged – digital and fiat – as markets adopt CBDCs at different rates, adding another layer of complexity to cross-border settlements.

While there is much anticipation about the opportunities CBDCs can bring, the adoption of this technology will only be widespread if payment and settlement capabilities are overhauled to allow for new innovations in currencies.  This need for transformation represents an opportunity to redesign existing infrastructure to support cross-border CBDC transactions.

The current cross-border payments system involves correspondent banks in different jurisdictions using commercial bank money. Uncommitted credit lines used in cross-border transactions are a potential risk for any bank that relies on credit provided by a foreign correspondent bank. Interestingly, there is no single global payment and settlement system, only a complicated network of interbank relationships operating on mutual trust. While trust has allowed financial systems to function smoothly, when it begins to fail, as it did during the 2008 financial crisis, the result can be catastrophic.

Following the crisis, the Bank for International Settlements (BIS) implemented the Basel III agreement, which required banks to maintain additional capital against correspondent banking account exposures. These risk-weighted assets impose a costly capital charge on positions held by banks at other banks under correspondent arrangements. While this framework helps combat risk, it neglects to address the inherent problems in traditional correspondent banking that contribute to these risks.

Making the case for CBDCs

CBDCs can offer an improvement in settlement risks and are certainly thought to have potential benefits by the BIS. If implemented correctly, wholesale CBDCs can indeed accelerate interbank transactions while eliminating settlement risk. They can also encourage a more efficient and straightforward method of executing cross-border payments by reducing the number of intermediaries.

It is likely the evolution towards CBDCs will initially see the financial market supplement rather than replace existing payment instruments with new types of digital currency. CBDCs will coexist with current forms of money in a wholesale context, and their payment rails will also work alongside the existing payment systems. In simple terms, CBDCs will need to be linked to the broader capital markets ecosystem and applications such as securities settlement, funding, and liquidity.

If built with an innovation-first mindset, the future of banking infrastructure should provide full interoperability and convertibility between fiat, CBDCs, and any other type of digital money used in wholesale payments.

The future of CBDCs

To unlock the full potential of CBDCs, a ‘corridor network’ will need to be formed. This involves combining multiple wholesale CDBCs into a single, interoperable network under common governance agreed upon by all central banks involved. The legal framework of this platform would then allow for payment versus payment (PvP) or, where applicable, delivery versus payment settlement.

Practical wholesale CBDCs appear to be on the horizon, either as a supplement to existing financial systems or as part of a transition to a digital, cashless world. Looking ahead, central banks would benefit from collaborating with fintechs that provide innovative cloud native technology to enable seamless wholesale cross-border payments without interfering with the flow of funds. If wholesale CBDCs are to become a reality, fintechs must be prepared to accommodate them.

 

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