Lorenzo Pellegrino, CEO of Skrill, NETELLER and Income Access at Paysafe
According to the World Bank, 1.7 billion adults around the world remain unbanked. One of the main reasons why this figure remains so high is because adults in developing countries feel they don’t have enough funds to justify opening an account. Without enough finances to make any significant transactions, keeping your money in any form other than cash doesn’t seem worth it. Often, people don’t have the documentation required to open an account either.
In developing countries one of the most effective economic factors helping people to grow their wealth to warrant opening a bank account is remittances. The World Bank reports that economic migrants sent $689bn home in 2018, of which $462bn was sent to low- and middle- income countries such as India ($79bn), and Mexico ($36bn). The data shows that more finance was injected into low- and middle-income countries via remittances than foreign direct investment ($344bn).
These results clearly show why migrants sending money back home is a vital step towards promoting financial inclusion, establishing a personal finance foothold, and contributing to the economic growth of regions around the world.
However, the negative perception surrounding many cross-border payment methods could be affecting the potential positive impact that remittances can have on regional growth. The most pressing problem facing people who want to send money home is that many methods of remittances rely on the recipient having a bank account. This eliminates one avenue of remittances for those that wish to send money home to loved ones in developing countries. If a desired recipient of a remittance doesn’t have a bank account, opening one often isn’t easy.
Of course, there are other options available to those wanting to send money back home to those that don’t have access to a bank account. However, these options are typically less sophisticated, and the costs of these money transfer services can be unnecessarily expensive.
As we gain more insight of the full economic potential of the remittances market, we start to see that the full picture can only be seen if recipients receive the maximum value of the transfer. This then allows people in the remittance community to have more flexibility and motivation when it comes to accessing financial services, but also be able to inject more value into their local economy through spending. By compromising on the monetary value they are sending home, the impact remittances might have on regional economies is limited.
Ultimately, for economic migrants to maximise the benefit of the finances that they are transferring overseas, using a remittances solution that is both low-cost and is user friendly and that isn’t designed around a traditional bank account, is crucial.
Developing the gig economy in growing regions
If companies were to remove transaction fees from the remittance process, both migrants and regional economies stand to benefit. One of the fastest growing employment sectors in developing countries is freelance specialists selling digital services such as website design or coding to overseas companies that want to outsource. For this form of the gig economy to be feasible and successful, service sellers must focus on firstly making invoice settlement as efficient for overseas businesses as possible, and secondly remaining competitive in the rates they charge.
Avoiding traditional overseas bank transfers that involve a lot of sensitive financial information to be disclosed and stored is one method for enabling a more efficient settlement process. Where an email address is the only piece of information needed to make a transaction, both the buyer and the seller are free from the rigmarole of securely collecting and recalling multiple pieces of personal data.
When it comes to staying competitive, one tactic service providers in developing countries can use to keep their rates low is maximising the value they receive when being paid in a foreign currency. Where a freelancer is losing a percentage of their fees to marked up foreign exchange rates, they may be compelled to pass the cost on to the business commissioning the work. Likewise, the business will have to take up the cost of the transaction fees; where this is substantial the overall expenditure increase makes the freelancer a less attractive proposition.
Paying invoices for overseas freelancers by bank transfer might become too costly; so much so that businesses will start to think twice before outsourcing outside their own borders. And the greater the volume or value of the work a business wishes to outsource, the greater the probability the high cost of settling invoices with cross-border payments becomes a factor.
The gig economy is already playing a considerable part in boosting the growth of economies in many regions across the globe. Low cost cross-border transactions can play a huge part in helping this industry flourish. The immediate and trickle-down effects of growing this sector would be highly effective in promoting financial inclusion and prolonged economic growth.
TIPS FOR BUSINESS EXPANSION
Alan Sutherland, CEO of Kind Consumer
Every successful business had a beginning. Its founders usually looked for ways to gradually expand, attract new customers and increase monthly revenue. From the outside looking in that type of success often feels as though it requires some form of magic or hidden formula.
So how do you drive success? There are two which are fundamental to success. On first glance they may seem obvious, but they are often neglected.
Do you have a strong team?
No matter how great your business or idea you will not drive it to its full potential without a strong team behind you.
The process of recruiting and finding the best talent is never easy. You must over-invest time in the process as it is a fundamental investment and future growth driver. Two principles I have learned over the years when looking at recruitment are, to surround yourself with people who are better than you and do not be afraid to recruit someone who could make you redundant.
If you can achieve these, the benefits are clear. Better business results, stronger talent pool, and with capability future fit plus built-in succession planning.
Have you created a road map?
Strategy should not be complicated, as it is the set of choices you make to help you deliver your goals. It is your roadmap.
In thirty plus years of corporate life I have reviewed many. Countless textbooks have also been written on the subject, but there are some basic principles that I firmly believe work best. Namely, the vision should be clear, motivating, and understood by all in the organisation. In addition, it’s important to remember ‘less is more’. Too often strategy papers can be voluminous and complex. The best strategy work I have seen is on one piece of paper with clear, simple articulation of the choices you will do and equally what you will not do. It is very empowering to tell a team what you are not going to do.
Have you established a core market?
In any business, the “core” needs to be healthy before you divert any significant level of resource to expansion, there are thousands of examples where enthusiasm to grow has caused companies to fail.
As you evaluate expansion, having an array of ideas and opinions needs to be balanced with a clear brand that consumers feel they relate to. Whilst adding new products or services is an organic part of company growth it needs to be tempered, so you do not drift too far from your core market.
Therefore, before ploughing resources into new markets, you do need to ensure that new product and services will be of value to existing (or new) customers. You may need to ask some critical and challenging questions such as, is there a clear need for this? Is it marketable? Does it sit within the brand equity? How much will consumers pay for it?
If you conclude that the demand is there, only then should you move onto executing that new idea because it will require a significant amount of investment of time, resources, and money. If the market entry cost is potentially high, you should also evaluate a test & learn approach by launching in a limited way and, if early traction is good, then expand.
Once you have revised your existing offering, you need to engage with these new consumers to increase brand recognition. If your business is not online, add this to your to-do-list because in today’s era, convenience is key.
A website is the shop window to your brand and, done well, can allow you to build up a direct one-on-one relationship with your customers. If it was already an important criterion before, the impact of Covid-19 will make it indispensable.
With social media and the abundance of mobile technology, it is not difficult nor expensive to drive traffic to your site, so you need to ensure the site is engaging, easy to navigate, informative with a call to action to purchase. Loyal customers who return to your site are worth their weight in gold!
Do you have a healthy working capital?
Finally, a healthy working capital is essential not just for growth but for the day-to-day operations of running a business. Even as you start to see your business develop, you must keep a scarcity mindset with cash and make sure you have some reserves for when something goes wrong. This has caused thousands of start-ups to fail as they hit unexpected turbulence and had no contingency in place.
In today’s global economy, there is a lot of uncertainty so there has never been a more important time to maximise liquidity to meet short term obligations and avoid going bust. Not to mention, flexibility is key when a business is looking to expand and without enough working capital a business can lose this flexibility.
BITCOIN COMES OF AGE
Katharine Wooller, Managing Director, UK and Eire, Dacxi
The Bitcoin halving event, which occurred on the 11th May, has been a watershed moment for the industry. It has been a deafening theme for crypto narrative in recent months, and more recently has caught the eye of professional investors and conventional media alike, with some predicting it will be the catalyst for a substantial boom. It appears bitcoin, finally, has a hard-won place in the mainstream.
Halving: In a nutshell
Bitcoin has a key feature; there are a fixed amount available, and, crucially it has a pre-programmed supply reduction built in. The miners, who maintain the bitcoin network, validate transactions and add them to the blockchain when they are verified. They do this at considerable electrical and computing cost and thus are paid in bitcoin. Periodically, the reward for doing so halves. In the past this supply reduction, which previously occurred in 2012 and 2016, has coincided with a strong run-up in its price.
Bitcoin has now been in existence more than ten years and has survived the doubters, the scammers, the hackers, government attempts to quash it, and along the way it has given rise to new innovations using the blockchain technology that underpins it. To overstate this amazing “survive and thrive feat” as well as the innovation it represents would be difficult. Bitcoin, conceptually, has exceeded expectations. Alas the 5,000+ crypto currencies that have sprung up alongside it include the good, the bad, and so very ugly. Nearly all of these should fall away as Bitcoin dominates; at time of writing it is 67% of daily traded volumes. Understandably, there is a very short list of 3 what we call blue-chip coins (LTC, BTC, ETH) that the institutional investors have shown interest in.
Solving some our largest problems
There is a clear appeal of digital currencies to the cashless internet economy based, including 24/7 price transparency that is available, cross border usage, divisibility to many decimal places, as well as third party oversight and controls. Bitcoin has been on a roller coaster ride over the last two years and has held its value throughout the current dramas and even increased in value as governments have stimulated their economies on a massive scale via printing cash endlessly to avert a market meltdown. This is likely to create a massive inflationary environment into the future and sets the stage for Bitcoin to make its next move upwards after stocks and real estate prepare to reset valuations and attractiveness.
A new gold?
A lot of the dialogue around bitcoin talks about an improved version of gold, as a medium to convey value. Improved by virtue of the technology being quicker, and cheaper to both store and move. Indeed, a recent transaction of $1.1bn worth of bitcoin, by bitfinex, cost $84. Unsurprisingly this has caught the imagination of the financial infrastructure industry. Some market commentators postulate a 10x increase in prices in the next 12 months, based on a few % of the global appetite for gold switching to crypto, with bitcoin being the heir apparent.
For the industry as a whole, it is great news that bitcoin is now demonstrably decoupled from traditional markets. It is apparent that the price of Bitcoin is outside the traditional assets’ ecosystem, and the market is determined by a new set of criteria. Bitcoin now has the crucial “social proof” that it cannot be altered by external forces, no matter how powerful, bringing much joy to the libertarians and retail investors alike. Indeed, google searches for ‘bitcoin halving’ hit an all-time high in the late April, suggesting firm interest from newbies. Further, the quality of exchanges available to both retail and institutional investors has improved substantially in recent years, providing a much-needed ease of entry into the market.
Indeed, leviathan investors, such as Paul Tudor Jones, coming out in praise of bitcoin, as a viable hedge against inflation, saw bitcoin enter – unexpectedly – stage left to a much broader financial audience. Bitcoin is viewed as what gold was in the 1970s, thus driving increasing interest from his fellow baby boomer cohort. Indeed, Dacxi, a digital exchange focusing on educating retail investors, saw some of its busiest weeks in the run up to halving. The addition of global pandemic and imminent worldwide recession has been the perfect storm for the world to crave safe new assets. Crypto is firmly out of the niche and into the zeitgeist.
In my opinion, crypto has reached critical mass in terms of adoption. There’s no going back. I was delighted to wake up in London on the 12th May and see the BBC reporting on halving – it doesn’t get much more mainstream than that!
As digital currencies become the increasingly dominant technology, anyone with an interest in markets and investing would be well placed to educate themselves on this seemingly unstoppable asset class. With the recent momentum gained from the halving, crypto is likely to be a broader theme of daily life for decades to come.
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