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NOVICE INVESTORS LISTEN: LEAVE YOUR EMOTIONS AT THE DOOR

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Maxim Manturov, Head of Investment Research at Freedom Finance Europe

There was a sizeable rise in new investors during the pandemic as rates sank to record lows in March and April 2020, and a new breed of bargain hunters sought to make money fast. In fact, a surge in new accounts showed that younger, less experienced investors viewed this sudden downturn as the perfect opportunity to dip their toes into the stock market for the first time. Other motivations include affordable retail accounts with zero commission and new trading platforms for Millennials, all of which inspired newcomers to take the plunge.

Maxim Manturov

However, while the actual process of buying stocks is not particularly difficult, what can be challenging for novice investors is choosing to put money into companies that consistently beat the stock market. This requires a lot of background knowledge and research, meaning investors must put in extra time and effort if they wish to benefit from long-term gains. Put simply, investing is not a one-shot process.

Alongside this, younger, more self-confident investors often make riskier choices based on gut instinct, which explains why regulators are cautious about this sudden flux. While it is encouraging to see that younger generations are trying to get stuck into investing, it is important they act with caution and do the research before splashing the cash. They have time on their side to get to grips with the do’s and don’ts of the stock market, so they must ensure they leave their emotions at the door.

In light of this, below I share my top tips for investors who are looking to enter the stock market for the first time, make data-driven decisions and seize ripe financial opportunities. Ultimately, the stock market, unlike the racetrack or casino, is a generous bookie in the long run. People tend to get more money back than they put in and investors must learn that high-risk investments are not always the way to go.

 

Background research holds the key to success

First and foremost, it is beneficial to do some background research into the company. For more in-depth knowledge, Warren Buffett, one of the world’s most successful investors, advises against choosing a company whose business model is unclear. As such, before choosing to invest, regardless of the size, reputation or hype surrounding a company, you should always do your research and understand its operations. In other words, you should never simply rely on what one person is saying. As an investor who is eager to learn new things, you need to feel comfortable and become well versed in undertaking independent research.

First-time investors should also follow the diversification concept to limit the risks of specific sectors or businesses, and not commit more than 5-10% of their portfolio volume to a single company. Emotion is the single greatest impediment to investing. Investors must not allow fear or greed to influence their judgments. Instead, they should consider the larger picture and think about their decision carefully. Stock market returns can vary considerably in the short term, but historical returns for large-cap stocks can average at 10% in the long run.

 

Get to grips with fundamental and technical analysis

Becoming acquainted with fundamental and technical analysis is another key step, not only to gain a better understanding of what to invest in, but also to determine trends, support and resistance levels. For example, studying basic indicators such as the relative strength index (RSI) is crucial, as it enables investors to achieve at least a certain degree of success in the markets. It is also necessary to determine the initial investment amount, which should be enough to eliminate any negative influence on investment decisions. First, it is important to determine whether the company has a fundamental potential for growth. And then, technical analysis will start to establish if the stock is steadily rising or moving sideways.

 

Create a smart  investment strategy

Finally, you should always create an investment plan to develop your own strategy for stock market trading. This includes setting specific and realistic goals, taking the time to understand your current financial situation and developing your risk profile. You should also pay attention to financial performance and choose a company with a good balance sheet, low debt burden, high margin and sustainable average annual growth, as well as other positive financial indicators. Smart, pre-planned strategies can help first-time investors to build wealth efficiently and securely, while also moving them closer towards their end goals.

 

The current economic outlook

In general, larger, more mature firms still have significant growth potential, so I would suggest investors pay attention to tech giants and major banks, as well as the healthcare and cyclical industries that are speeding with economic growth, given the current economic outlook. IPOs, in general, will also complement portfolios extremely well. If the risk is larger, investments in IPOs have more growth potential, and with sufficiently solid fundamentals, such investments are more likely to provide a favourable outcome. Just make sure to follow the basic investment guidelines before coming to a decision.

 

Banking

WHY THE TIME IS NOW TO BANK BEYOND BORDERS

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by Lili Metodieva, MD of Monneo

 

As our world becomes more interconnected, so too does the need for banking systems to follow suit. In the past, businesses and individuals were often restricted to banking in a single country, but the rise of borderless banking is enabling both to benefit from greater financial freedoms. In this article, we will examine why this trend is so important and explain how Fintech companies are helping to make it possible.

 

What is borderless banking?

Simply put, borderless banking refers to any bank account, which allows users to spend, send and receive money across different countries and currencies, without incurring heavy fees. The concept has become increasingly popular in recent years, with more people now working in cross-border job roles and with many businesses requiring capital in a different currency than that of their country of origin.

For customers, borderless banking is making cross-border financial transactions more efficient and cost-effective. Through its rise, businesses and individuals can gain easier access to international streams of capital, which is crucial in this current moment of economic uncertainty. In fact, 74% of companies say cross-border payments have helped their business to survive [1].

 

Where do IBANs come in?

International Banking Account Numbers (IBAN) play a crucial role in facilitating borderless banking. The globally recognised system enables cross-border transactions to happen safely, by providing each international bank account with its own unique 36-digit alphanumerical code. On account of this code, financial institutions can quickly identify where funds are coming from, as well as where they’re going to.

More recently, providers such as us have been able to deliver Virtual IBANs (vIBAN). Working alongside a network of well-established European and International banks, we’re able to offer businesses a single platform interface that consolidates the management of all IBAN accounts. In turn, our multi-currency service makes conducting global financial transactions incredibly straightforward.

 

How has Brexit affected borderless banking?

The COVID-19 pandemic has accelerated the growth of borderless banking and services related to it, but other developments, such as Brexit are beginning to stand in its way. Most notably, the drawn-out withdrawal process has seeded a growing reluctance amongst risk averse, larger organisations to settle transactions using UK bank accounts or IBANs, due to unfounded concerns around regulatory complexity.

Despite leaving the EU, the UK remains a member of the Single Euro Payments Area (SEPA), so it’s unclear why these concerns around British IBAN accounts exist. Regardless, this unfortunate development must be addressed quickly as it has the potential to adversely affect the livelihood of businesses and individuals at a time of critical need.

 

What does the future hold for borderless banking?

There’s clear demand for borderless banking and borderless payments, but the discrimination of certain IBAN accounts represents a major obstacle, which could stand in the way of their widescale adoption. Moving forward, there needs to be a push towards borderless IBANs, which will make international financial transactions more reliable. At the end of the day, this is what IBANs were originally created for, so it’s important the current problems are rectified quickly.

To ensure this can happen, the industry needs protection and clarity from regulators. Likewise, it’s now time for membership organisations to stand up on behalf of the sector and lobby for the financial inclusion of businesses.

If the confusion regarding UK IBAN accounts can be sorted in a timely manner, businesses across the nation, as well as those further afield can look forward to a future of more streamlined and effective financial services. With this support, the diverse sector can deliver further access to innovative financial services and products, which improve outcomes for businesses and consumers alike.

As a sector, Fintech has the potential to provide vital assistance to the wider economy, particularly in an era of increased cross-border business. At Monneo, we’re committed to being part of that change and as a part of organisations like ‘Accept my IBAN’, are working towards reporting and ending IBAN discrimination.

[1] – https://www.mastercard.com/news/research-reports/2021/borderless-payments-report/

 

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IT’S TIME FOR BANKS TO SIT THEIR CUSTOMERS DOWN AND TALK OPEN BANKING

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Eugene Danilkis, CEO at Mambu

 

We are living in an experience economy, and banking is no different. Customers need innovative payment and finance management solutions. New entrants are edging into the landscape and challenging existing players. This should mean users have a better view of their finances and the tools they need to manage their money – but banks are failing to deliver.

Personal finances are a complex beast, emotional pulls are strong, and the worry of financial security is always on the mind. It’s the job of banks to be the shoulders customers can lean on and trust.

Open banking was supposed to take this to the next level, enabling banks to deliver personalised products and services based on improved data sharing and customer insights. But three years on, adoption remains sluggish. So, why is open banking failing to live up to its promise?

 

A missed opportunity

Open banking was introduced to the UK in 2018, but consumers are still mired in confusion as to what it means and how it helps them. According to Mambu’s global open banking survey, 61% of consumers say they’ve never used open banking, despite more than 8 in 10 using one or more mobile banking apps.

Eugene Danilkis

This is a problem for banks and consumers alike. Lack of understanding around the technology is hindering its adoption, despite this being in the best interests of both. By enabling the secure sharing of financial information, open banking creates an improved customer experience. Not only does this minimise friction and make online payments faster and easier, but allows for personalised services and greater automation, enabling customers to take advantage of tools like budgeting apps.

For banks, open banking is an opportunity to build innovative new products that will improve the customer journey, helping them retain accounts and acquire new ones. By collaborating with third parties, banks can hyper-target customers and build services that address specific user needs, increasing customer satisfaction and in turn brand loyalty.

It’s true there’s been a recent spike in open banking users. According to Juniper Research global, open banking users rose from 18 million in 2018 to 40 million in 2021. But this can be traced to the necessities of a pandemic rather than any sudden clarity in communications.

 

Putting customers at the heart of communication

Mambu’s research shows more than half of consumers (52%) have never heard of open banking. COVID-19 may have increased the uptake of the technology, but it hasn’t increased understanding among users.

So, what can banks do to encourage consumers to embrace open banking? Fundamentally, they must better educate their customers in terms they understand. This means talking to them like human beings, using clear and transparent language to simply explain the personal benefits open banking brings and why it’s really just smart banking.

The understanding gap between technology and terminology shows that consumer demand is there, but better communication is needed. Making sure consumers truly understand the tools they’re using, the control they now have over their finances and how open banking improves the customer experience is vital to dispersing the current fog of confusion. It’s the benefits of this technology that banks need to hone in on: customers ultimately care about what open banking can do for them and how it’s going to make their lives easier.

Centering the customer and their needs in this way will allow banks to fully realise open banking’s potential. The technology has already given them the opportunity to develop valuable services for customers that help build brand loyalty. But the industry has failed to put the customer at the heart of their communications and processes, and show them how much better banking can be.

 

Building trust

Key to reversing this trend is addressing consumer concerns around data privacy and financial safety. Yes, banks need to prioritise simplicity and clarity in messaging, but this isn’t an excuse to shy away from important conversations. Just because there’s an understanding gap around open banking doesn’t mean consumers aren’t switched on about tech and financial issues.

Mambu’s survey found nearly three in five customers have concerns about privacy and security in relation to open banking. So, it’s vital that banks provide reassurance and relevant information about data sharing from the outset if they’re to assuage these fears.

The industry can also encourage greater adoption by developing and improving open banking interfaces. Banks are the gatekeepers to how easily end-users can authorise certain actions, manage third-party access and navigate different open banking functions. If the interface is user-friendly, customers will have a better experience of the technology and be more likely to use and recommend these services.

 

Time to get talking

Customer communication is holding the industry back.. The ability of open banking to transform financial services is a concept that industry players are well-versed in. But the feeling isn’t mutual for customers.

Banks are failing to capitalise on the open banking opportunity by engaging with new and existing customers about what the technology can do for them. Debunking  common myths can open the door to increased growth and trust for banks, as they seek to open up new revenue streams post pandemic..

Make no mistake, open banking isn’t going away. But customers will if banks don’t get talking.

 

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