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Supporting migrants can contribute to our economies

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By Guy Kashtan, co-founder & CEO of Rewire

 

As inflation in the UK hits a 40-year high, millions of people are being forced to cut their cloth accordingly. News stories of people struggling to afford even the most basic of commodities seem to be everywhere. And the situation only looks set to deteriorate, with the Bank of England predicting inflation could climb from 9 per cent – the highest it’s been since 1982 – to 11 per cent.

The effects on communities across the UK have been swift and far reaching. Citizens Advice, for example, said only last month it had referred on average more than 750 people a day to food banks. And so far this year, the charity has supported almost 30,000 people with energy debts – 26 per cent more than in 2021. Meanwhile, the situation extends beyond just the UK. A new 11-country Ipsos survey by the World Economic Forum in May 2022 shows that a quarter of people are struggling financially.

Those from the lowest income bracket – which includes many migrant workers and their families – are feeling the effects disproportionately. According to the Institute for Fiscal Studies, in April 2022 the lowest 10 per cent of the population in terms of income faced an inflation rate of 10.9 per cent. This was 3 percentage points higher than the inflation rate of the richest 10 per cent. Most of this disparity stems from the fact that the poorest households spend 11 per cent of their total household budget on gas and electricity, compared to 4 per cent on average for the richest households.

This could not come at a worse time. The UK is dealing with an acute labour shortage after around 1.3 million foreign workers fled the UK at the height of the Covid-19 pandemic. This was compounded by the fact that net migration also fell considerably during this period. Figures from the ONS show that net migration in 2020 was only around 34,000 people, representing an 88 per cent decrease when compared with the 2019 figure of 271,000.

Guy Kashtan

Then followed the ‘Great Resignation’, which saw millions of workers resign en masse as they sought out new career paths. Sectors from hospitality and retail to food and drink, manufacturing, construction, and transport all took a major hit. Many of these industries are still recovering, culminating in the widespread disrupted services and volatile market prices we are currently experiencing.

And, sadly, migrants’ crucial role in supporting our economies – and the economies of their home nations – is still overlooked. Instead, many people revert to an outdated, negative perception of migrants as a drain on the economy and a barrier to local employment. This is far from the truth. And if we put the right support in place, to enable migrants to actively participate in economic activities, then they can have a positive impact on the economy of their host nation. Through financial services that address their unique cross-border needs, they can also better support their families back home, and contribute to the economies of developing countries.

Migrants help strengthen the workforce by plugging gaps in industries where there is a relative need for workers. The supply chain sector is one example – arguably one of the most affected sectors in the current inflation storm. They help host nations meet labour shortages while spending wages locally, and contributing to economies back home, where they still have family ties. But they need the right financial tools in order to be able to do this effectively. Banking across borders has traditionally been a very expensive process, but even more so in recent times with the faltering pound.

Unfortunately, migrant workers have been seriously impacted by the pandemic, and are now dealing with an even more uncertain economic situation. Inflation has eroded the value of remittances and the ability of migrants to support their families and loved ones back home. This is damaging both to the host and home country.

Access to affordable cross-border financial solutions – such as digital wallet Rewire – have become more important than ever. Fintech solutions have democratised once complicated, expensive financial processes that can now be completed at the swipe of a finger. Migrant workers, who may not have gained the financial knowledge needed to make use of traditional banking products, are finally able to access services which many of us take for granted – debit cards, local payment accounts (IBAN) and insurance products – all in their native language, which saves time and hard-earned money.

With issues around inflation only set to be compounded over the coming months, a shift in perceptions is needed. Migrant workers should be recognised for the value they can bring to the economy, not just ‘at home’, but locally too. And fintech has an important role to play in helping underbanked populations play a more active part in the economy. As well as boosting economic activity at home and abroad, we can help migrants, and other financially underserved populations, better manage their finances and plan for the future.

 

About Guy Kashtan, co-founder and CEO of Rewire

Guy Kashtan is a co-founder and CEO of Rewire, a cross-border financial services platform designed to meet the unique needs of migrants. The fintech provides money transfer, debit cards, local payment accounts (IBAN), insurance products and the ability to make cross-border bill payments.

The team were inspired to set up Rewire after one of them highlighted the financial struggles of a Filipino caregiver close to the family. By providing fair access to financial services Rewire is working to narrow global financial gaps, reduce inequality and promote financial inclusion for migrants.

Business

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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