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Wealth Management




By Seth Ward, Co-founder of PYNK


Even before Covid-19 began its global rampage, businesses, investors and traders were exploring new ways to deliver investment. Driven by environmental and social concerns, and sceptical of banks’ fees and integrity following the global financial crash, investors wanted more direct access to investments and businesses wanted to minimise transaction fees.

Following a slight wobble in 2008/9, global alternative investments began growing at seven times that of traditional asset classes, with a number of crowdfunding sites launched around the same time. Crowdfunding and alternative investment markets have continued to grow, reaching market caps of nearly £800m and £104bn, respectively, by the end of 2019.

Ever since coronavirus reached pandemic status, however, the markets have tumbled. Reduced or stopped trading has obliterated profits for the quarter while government bailouts are all that have been keeping some industries, such as airlines, afloat. Fortunately, activity is expected to rebound quickly, with the anticipated transaction value for crowdfunding in 2021 topping £818m.

A recent survey of PYNK members found that 38% predicted that the Dow had already reached its lowest point and 31% predicted that the lowest point would come before August. As such, 45% said that they think now is the best time to invest in startups, providing an opportunity to rapidly grow as the world exits lockdown.

How has coronavirus impacted the investment market? 

Diversification of markets, investment vehicles and investors is, in general, good for the economy. More people have access to investments leading to a more diversified shareholder base. A diverse shareholder base means more reliable and robust financing ‒ no longer do businesses need to bend to the will of a single large investor or risk a run on their shares.

That being said, the coronavirus lockdown has made everything a bit weird and surreal. Now there are anecdotal reports of a 10-year-old struggling to play Fortnite as half his squad are off day trading on Robinhood.

However, trading platforms, like the crowd-led Robinhood, are creating large markets of unsophisticated investors. These investors are then having the wool pulled over their eyes by less-than-scrupulous CFOs, such as the recent case of Hertz.

The car rental company recently declared bankruptcy due to a rapid fall in revenues, yet then sold $1bn in equity to independent investment bank Jefferies who in-turn began selling it on Robinhood, effectively transferring that money from daytraders to impaired debtors.

This led to a jump of over 100% in Hertz share price after the company declared bankruptcy. That means those shares may end up worth 35 cents on the dollar or even completely worthless, with unsophisticated investors bearing the brunt of the losses.

Where will the future of investments and trading take us?

Clearly, in a world where 10-year-olds are taking long positions on bankrupt stock, some strange bubbles are going to appear. Traditional investment intelligence is struggling to adapt, adding more hot air to the bubbles. So how can traders be confident in their investments?

Our answer at PYNK is to turn to the power of AI and Crowd Wisdom. For some years now, AI has been heralded as the answer to accurate investment analysis. The ability of AI to identify patterns in large data sets makes it good at anticipating future events/movements and at making decisions.

AI has already been used to provide automated insights, alternative datasets, growth opportunities, improve risk performance, generate reports and much more besides. This makes information gathering and analysis much quicker and more accurate, yet it lacks the human element.

That’s why, at PYNK, we combine our AI algorithm with the power of crowd wisdom. The idea behind crowd wisdom came about in 1907 when a statistician named Francis Galton asked people to guess the weight of an ox. Galton found that, while individual guesses varied wildly, the median guess was within 1% of the ox’s actual weight.

Since then, statisticians have been finding ways to minimise participant bias and improve the accuracy of crowd wisdom. We incorporate our learning into our AI algorithm, using machine learning to improve results over time.

The results have been startling. One market we’ve been tracking the longest ‒ Bitcoin ‒ is notoriously unreliable and tempestuous. Yet, using the power of crowd wisdom and AI, our platform anticipated every single major movement!

With that in mind, we decided to survey PYNK members to apply the power of crowd wisdom to broader market categories. Key results of the survey include:

  • Energy (24%) and HealthTech (20%) are predicted to be the most promising sectors over the next 5 years
  • 45% said that now was the best time to invest in startups
  • 38% predicted that the Dow has already hit its lowest point
  • 31% predicted that the Dow would hit its lowest point by July-August
  • 34% said that Asia and Australasia was the most overvalued regional market

Source: Survey of 1,471 PYNK members between 27th March and 10th April

Combining the power of crowd wisdom and AI with the rise of a diversified investor base, it seems clear that the future of trading and investment will be much more globalised, democratised and personal. Individual day traders will end up having access to the same information and marketplaces as large banks and financial institutions, while social media and other digital communications platforms will organise traders into nebulous groups.
Ultimately, it will be these crowds which fund the future.



Why indirect tax continues to cause headaches for the finance, IT, and tax teams




By Roger Lindelauf, Director, SAP Centre of Excellence, Vertex Inc


Businesses across Europe continue to navigate a complex tax landscape as they attempt to automate their indirect tax determination and calculation requirements. However, many tax professionals use the limited functionality offered by their organisations’ ERP systems, or the in-house software developed by their IT departments to perform the task.

Unfortunately, these solutions are just not sophisticated enough to keep up with the frequent changes to the tax rules and regulations businesses are often subjected to across Europe.

Companies need to deliver accurate and timely finance reports to avoid being fined by tax authorities or being ear-marked for an audit. As a result, tax teams are under increasing pressure to make sure their calculations are right first time, every time. But with organisations typically reliant on the solutions available to them to automate the process, errors are all too frequent and leave businesses wide open to compliance failures.

To look in more depth at the raft of challenges experienced by tax, finance and IT professionals across Europe who use SAP to manage their indirect tax automation process, we recently surveyed their views. The research showed that one of the biggest challenges for 38% of our respondents, is managing tax requirements for multiple geographic jurisdictions, and for a 30%, it’s staying on top of legislative changes to tax and ensuring they’re applied effectively within the solution. And if the tax landscape wasn’t already complicated enough, 30% of respondents cited managing disruption caused by COVID-19 as an ongoing issue, closely followed by Brexit for 29%. Managing accounts payable (AP) determination was also highlighted as a painful task for 29%.

Another cause for concern flagged in the research is the lack of connection between the needs of the tax team and IT’s ability to understand and act upon these requirements using their tax automation solutions. Almost 30% of respondents admit that IT’s lack of knowledge in recognising how to keep up with the solution updates is a real issue. When asked about the limitations of their current indirect tax solutions, 41% agree that there are insufficient internal skills within the business to manage them effectively.


Joining forces for a future-proofed tax automation

The frustrations felt by tax and IT when it comes to tax automation are made abundantly clear in the research. Along with finance, tax and IT need to work together to find a better way to manage their indirect tax calculation and determination needs. They also need to agree on a future-proof solution capable of managing whatever changes are likely to be applied to tax rules and legislation further down the line.

When asked about their key requirements from a third-party indirect tax automation solution, tax and finance pointed to reliability, usability, and efficiency for integration as their key priorities. APIs are another future requirement to help build system implementation processes that are more streamlined and create scalability throughout all business and global operations.

Increasingly, we’re seeing more and more businesses across Europe turn to more sophisticated third-party tax automation solutions, accelerated by the adoption of SAP S/4HANA. There’s been a real shift towards organisations opting for a solution that integrates into SAP, improving accuracy for VAT applications on transactions, automatically.

Joining forces with key stakeholders is a crucial step to finding an approach that works successfully for all. However, with tax regulation complications showing no signs of diminishing any time soon, can businesses really afford to stay as they are and take a chance on tax compliance or is it time to invest in a new, more reliable, efficient, and future-proofed approach?

A study carried out by independent market research specialist Vanson Bourne. 420 finance, tax and IT decision makers were questioned across Europe.

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Why the rise of millennials spells change for insurance companies




By Stephan Kaiser, CEO at KoverNow


Most of us, regardless of our age, use our phones to inform shopping decisions, make purchases, order deliveries and carry out even complex banking transactions. What most of us are not doing is managing our insurance policies through our mobiles. This seems odd, and for the millennials amongst us, it’s even more unfathomable. Why should so many other functions of our lives be enabled by mobile apps when accessing a simple insurance arrangement is not?

Much of it has to do with the technology underpinning the insurance value chain. Regulatory changes have put continuous pressure on the cost-income-ratio of banks for the last decade.  This has led to many innovations, including our banking apps (the first mobile banking app was only launched in 2011), but the insurance sector has not kept up, or focused in the same way on efficiency gains and consequently has invested significantly less in IT. We calculate that insurance IT spending as a percentage of revenues has been at about 50% that of banking IT spending over the last 10 years (7-8% for banking and 3-4% for insurance). As a result, we have no apps in insurance for today’s consumers who use their phones to shop around, compare prices, and only pay for what is needed.

Millennials, understandably, want to know why they can’t have more choice, why they can’t select cover just for the items they really value and quickly, without any fuss, from an app. Traditionally selective insurance in which individual items are named comes at a premium price, but not everything that any of us, particularly millennials, own needs to be insured in one job lot.


The Millennial mind

In an effort to delve into the attitudes that millennials have to their belongings and insurance, we recently ran a survey targeting 500 people aged between 25 and 39. Our cohort live and work in Singapore, but they are all well-travelled and educated.

We discovered that almost 74% of respondents to our survey already owned health insurance and a fraction below 73% also had life insurance. For this group, this type of insurance was essential. We asked them what items would cause them distress if they were lost, stolen or damaged. Unsurprisingly, given their age and circumstances, almost 80% said it would be a smartphone or tablet, while 71% said it would be their laptop. However, only 12% had taken out insurance cover on these precious belongings.

When we asked further questions, we found that our respondents were willing to purchase insurance for their items, and in fact, just under 80% would pay a monthly amount to secure their electrical goods. The same is true for fashion items such as jewellery, luxury watches and luxury handbags. While they would be less distressed to lose them than their smartphones and laptops, they would still be willing to insure these items.

And how do they seek out suitable financial products or services? Around 45% said they used online search engines and word of mouth recommendations, but 40% said that online reviews, articles and/or videos informed their purchasing decisions.

As expected, most of this young cohort is open to using a mobile app to purchase insurance. When we asked them what the top four most common insurance products they would consider buying through an app were, they said: health, mobile device, life and travel insurance.

This attitude to sourcing services through mobile apps is to be expected. Millennials are a generation that have entered a digitalised workplace and they lead digitalised lives. They expect the services they are offered to be personalised and adaptable, and if they own only a few items that they consider to be precious, why should they have to pay a standard amount for a standard policy? To this cohort, the concept of a mobile insurance app is regarded as convenient, easy to use and user-friendly.


Keep up, or lose out

These findings throw out a challenge to the insurance industry to change. What is more, the clock is ticking. While millennials have paved the way for digital transformation, it is the Gen Z generation of digital natives snapping at their heels that will reject anything not available as an app or as part of the digital ecosystem.

So what can insurance companies do to compete? Developing apps is not the difficult part; building them to provide a holistic service that meets the lifestyles of young customers is trickier. When asked what the most important attributes were that would impact their experience when they were using a mobile app, price advantages topped the list, then a hassle-free claims process and easy to use interface, and the responsiveness of the support team.

Millennials are looking for speed and efficiency without compromising their security, which is why banking mobile apps have found such favour. They are also receptive to brand influence, and strategic co-operation with well-regarded brands would be a good step for insurers to take if they want to reach this audience.

Agility, however, is what insurers really need to develop. Standardised policies that cannot be researched, selected, purchased and managed through an app will struggle to find favour with young consumers. But if the policy also lacks flexibility, is too expensive or too complex to provide cover for a handful of precious items, they will reject it outright.

To millennials the apps on their smartphones are the doors to all the services they need and want. If insurance policies cannot be accessed through apps, they are unlikely to be found, let alone used. Insurance companies must change to take advantage of this growing sector of the market, and they need to do it now.


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