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PROTECTING YOURSELF AGAINST LOSS OF FUTURE INCOME IN A RECESSION

Loss

By Gerard Visser, Financial Planning Consultant at Alexander Forbes Financial Planning Consultants.

 

With low GDP growth, credit ratings downgrades and the COVID-19 pandemic, our economy has taken a knock, leaving many investors’ reluctant to save and invest.

This hesitance is understandable, especially when one sees the daily drop in your actual investment values, and many investors might be looking at changing their current strategy by switching portfolios out of markets. However, success takes time, and a good investor must not base long-term decisions and strategies on short-term concerns.

Investors need to know what value they are getting for their investments and whether it is competitive or not. Short term market fluctuations and low economic growth environments can be ridden out where your investment period is over a long term.

If you find yourself in a low economic growth environment, it is a good time to assess your current financial habits and make the necessary adjustments.  It is important to understand the different types of investments you hold and determine the risks associated with them.

 

A low economic growth environment highlights the importance of keeping to good financial habits, like spending within your means to help get you through the tougher times. There are certain investment strategies you can follow to assist your investments during these times to be correctly set up for future growth.

 

Gerard Visser

It is important not to panic and switch your portfolios from your investments, especially if they are standing at an all-time low. You could erode significant future value should you choose to sell an investment at a loss. Quite simply if you sell at a loss, you will realise the loss and lose money in the long term. Your best bet is to keep your money where it is and wait for markets to recover.

 

Asset allocation involves deciding on the different mix of asset classes you hold in your portfolio, for example local and offshore exposure of shares, property, bonds, and cash. All asset class returns behave differently and offer different returns for different periods. Having a mixture of these asset classes will help grow and protect your investment though uncertain times. A portfolio with exposure to the different asset classes will offer protection and diversification in low economic growth.

 

Investors should not have all their money in one company or industry. If that industry or company takes a hit, so will your portfolio. This highlights the importance of diversification.

It is important to set up an investment strategy for the specific investment you are taking out as the allocation to the different asset classes will vary and in turn either increase or decrease the volatility and chance to make returns.

The stock market is cyclical and while it is useful to check your portfolio occasionally, to give you a general idea of how it is performing. It will not be helpful to check the value every day. When you invest in the stock market, you have to ride out tough times in order to come out on top.

 

Talk to your financial adviser to help with your investment strategy, they will be able to recommend investments that match your risk appetite, investment period and financial goals.

 

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FINASTRA GLOBAL SURVEY SHOWS APPETITE FOR OPEN BANKING PICKING UP PACE WORLDWIDE

  • 86% of global banks surveyed are looking to use open APIs to enable Open Banking capabilities in the next 12 months
  • Banks believe regulators are stifling innovation: almost half (48%) believe ‘regulation is too tight’ and that there is ‘not enough government or industry support to foster innovation’

Finastra research reveals that 86% of global banks are looking to use open APIs to enable Open Banking capabilities in the next 12 months. In addition, 30% of banks surveyed believe Open Banking is already making a tangible impact in delivering improved overall customer experience. This is against a backdrop where regulation is perceived to be tighter than a year ago and close to half (48%) of those audited believe that regulators are holding back innovation.

The research, which was conducted prior to the Coronavirus outbreak amongst 774 financial institutions and banks across the US, UK, Singapore, France, Germany, Hong Kong and UAE1, shows a maturity of API adoption and calls for the harmonization of regulations between geographies.

Key findings include:

  • Open banking is on the up in 2020 compared to 20192: The percentage of financial institutions looking to leverage open APIs has substantially increased in the US (+23%) and UK (+17%), while Singapore (+1%), France (-1%) and Germany (-4%) are relatively stagnant since our research in 2019.
  • Improvements in the overall customer experience accelerate API adoption: the US (45%), Hong Kong (42%) and France (36%) are leading the way in harvesting this benefit of Open APIs (UAE: 32%; Germany: 20%; Singapore: 20%; UK: 19%). Overall, 41% of global banks say that they are ‘still in the early stages of adoption’, so it’s difficult to measure the impact of Open Banking on their business so far.
  • Regulation is perceived to be tighter than a year ago and industry or government support is required to foster innovation: Almost half of those audited believe that regulations are holding back innovation. 48% state that ‘regulation is too tight’ – 10% more than 2019 – and the same percentage (48%) believe there is ‘not enough government or industry support to foster innovation’, particularly so in Hong Kong (62%), France (50%) and Singapore (49%), compared to 38% in the UK.
  • A call for harmonization: 83% of financial institutions and banks agree that regulations regarding fintech innovation should be harmonized across different geographies.
  • Cost of fintech research and development is of concern in some regions: Cost of R&D in the US, UAE and APAC regions is highlighted, more so than in the UK. (USA: 55%; Hong Kong: 55%; Singapore: 51%; UAE: 46%; France: 43%; Germany: 34%; UK: 33%).

 

Simon Paris, CEO at Finastra said, “It’s encouraging to see Open Banking maturing on a global scale, but it’s still seen by many to be in its teenage years, with scope for creating even greater opportunities. We believe it will be the first step towards Open Finance which will see the next wave of innovation in financial services being created through collaboration on open platforms, like FusionFabric.cloud, using open APIs and open software solutions.

“Currently banks and technology vendors are rightly focused on business continuity and keeping their workforces safe. We’ve also seen many of these firms moving with amazing pace to bring innovative solutions to market, with the help of technology, to support customers in this new environment. As we come through this situation together, we must endeavor to emerge stronger, and it will be interesting to see how Open Banking and collaboration accelerate when this outbreak ends.”

 

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LIBERTY BANK REINFORCES ITS FRAUD STRATEGY TO FURTHER PROTECT ITS CUSTOMERS

Liberty Bank, the third largest bank in the Georgia, has reinforced its fraud strategy to address the rising volume of fraud the industry is currently seeing. The bank has teamed up with long-term partner Compass Plus to launch a new fraud detection and prevention system built on their solutions.

 

Following the completion of the project, which was implemented with technological support from Compass Plus, Liberty Bank can efficiently and effectively monitor and act on suspicious transactions, enabling them to substantially reduce the risk and losses associated with a wide range of fraudulent activities, while protecting their customers.

 

The key drivers for Liberty Bank choosing Compass Plus software were the ability to quickly create their own algorithms to detect and prevent suspicious transactions, the integration of the solution within their existing infrastructure, and the capability to provide services to sponsored banks.

 

“The partnership between Liberty Bank and Compass Plus began in 2005, and the implementation of this project has, once again, demonstrated the flexibility of Compass Plus’ software and its ability to meet the latest industry requirements and trends. With the help of our new fraud detection and prevention system, we are able to combat fraud on a brand new level – not only can we promptly respond to any potential threats, but also prevent suspicious transactions, making our card products convenient and safe for customers,” said Levan Tkhelidze, Deputy Director General  at Liberty Bank.

 

“Our long-term partnership with Liberty Bank is important for us, and for them to choose our software to build their fraud strategy around showcases not only the strength of our relationship, but the reliability and robustness of our solutions. This project has once again confirmed that Compass Plus solutions meet the advanced industry standards and correspond to market conditions, in which the volume of card fraud is constantly growing, and methods used by fraudsters are becoming increasingly complex,” said Dmitry Lenshin, AVP & Regional Business Development Director at Compass Plus

 

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