Why Britcoin needs to harness the power of existing fintechs
Anastasia Evans, General Counsel and Company Secretary at IFX Payments
Talk of Britcoin – a UK-based central bank digital currency (CBDC) – presenting lucrative opportunities for business has been fuelled this month by Ben Broadbent, deputy governor for monetary policy.
As we continue to digitise, physical cash and the legacy system we are accustomed to is becoming increasingly obsolete, and new products and services are rapidly being adopted by businesses seeking to stay ahead of the curve.
Estimations suggest that cash payments could fall to as little as 10 percent of all UK transactions within the next 15 years. There are even suggestions that a long-awaited digital pound is likely to materialise this decade, highlighting a growing trend towards such alternative payment options.
It now seems inevitable that a continuation of recent trends will naturally lead to the acceleration of digital payment options and currencies.
Cash is being dethroned
We can all see the inherent benefits of cash – you can hold it and spend it without record and without seeking permission. But aside from the right to privacy and the anonymity afforded by using physical cash as a means of payment, it plays a central role in illegal activity, from purchasing drugs, paying bribes, to funding terrorism.
The world of digital currencies is complex and rapidly evolving. Recent events have highlighted the palpable risks of privately issued digital currencies dominating the digital payments sphere and there are strong arguments that central bank regulation would provide greater stability, transparency, and protection for consumers, not to mention an inevitable reduction in illegal activity such as money laundering and terrorist financing. Without a robust and effective regulatory framework in place, financial crime will flourish in this space, a point highlighted by the Financial Action Task Force (FATF). FATF’s recommendations aim to strike a balance between promoting innovation and financial inclusion, while also safeguarding against the risks of financial crime.
A Central Bank backed digital currency would create and maintain records of all transactions, through the use of blockchain technology, which allows for secure and transparent record-keeping. This will ultimately facilitate greater regulation in the industry, something which neither cash or privately issued digital currencies currently provide.
A CBDC would also allow a more efficient and reliable payments landscape. In the Bank of England’s own discussion paper they describe this as “the potential to allow households and businesses to make fast, efficient and reliable payments, and to benefit from an innovative, competitive and inclusive payment system”. Yet at present, there is limited availability of digital payments and weak payment interoperability, particularly when it comes to global payments.
As long as the Central Bank remains stable, the funds within a CBDC will do so too. This could potentially aid to avoid financial crises such as in 2008, which was the worst economic disaster that most of us have experienced. We’re still asking whether it was right for us, the taxpayer, to bail out the banks. Before 2008, most of us viewed banks as imperishable and enduring. Nowadays, consumers have never been more aware that this isn’t the reality and are asking how they will be protected in times of financial instability. A CBDC can help to stabilise the financial system by providing a safe and secure form of currency that is backed by the central bank and by improving the efficiency and reliability of payment systems.
The Opportunity for Fintech
A CBDC presents a number of opportunities for fintechs to grasp a hold of. For starters, a Central Bank will likely be largely reliant on EMIs and PSPs, such as IFX Payments, to deliver a CBDC operationally. Tech-savvy fintechs such as IFX have a wealth of expertise and know-how; facilitating payments through technology is our niche. We are also nimble, agile and very used to implementing change quickly (compared to the industry’s large incumbents) meaning that we can adapt and adjust to the new ecosystem and deliver to end users as a third party service provider.
As long as EMIs and PSPs can fulfil certain prerequisites of participating in the CBDC ecosystem, who better to ‘add value’ and deliver to the end user? I’m confident that an organisation like IFX, with its robust compliance procedures and processes will be well-placed to participate.
With the support of fintechs on its side, the Bank of England would become a force to be reckoned with within the digital payments sphere and straighten out a lot of the issues presiding at the current time. But if it fails to react, it will ultimately lose the race to privately issuing contenders, a proposition that will present further complications to an already rocky industry. So to The Bank of England, I say – time is of the essence!
Efficient Ways Construction Firms Can Bring Down Costs In 2023
Consistent, high-quality construction projects being underway is often a sign of a thriving economy. The future of the US is assured when new infrastructure and homes are under constant development.
As has been well-documented already, construction isn’t as productive as it could be in the US today. Numerous factors are causing these types of projects to be stalled and subsequent price hikes to occur. Economic and sector-wide conditions could be far better.
That said, it’s important for construction firms to feel like they have some say in their future. While things aren’t ideal, there’s plenty these entities can be doing that can bring down costs for the remainder of the year.
We’re a good way into 2023 now, but bringing down costs is not work that can be postponed to 2024. So, here are some efficient ways construction firms can do just that in 2023.
Review Fleet Logistics
It might seem like a curious place to start, but it’s a good idea to review how you utilize your fleet if you have one. The operational costs can sometimes be underestimated, and mismanagement in this area can be more costly today for firms in any sector.
Some companies bring their fleet management costs down by optimizing the routes they travel. Others will run tighter maintenance programs to avoid damaging repair costs in future. Some firms will rent out their vehicles, too, rather than purchasing them outright. Drivers may be subject to refresher training courses, ensuring they adhere to their employer’s money-saving policies.
Then there’s the matter of going green, which more companies are turning their attention to. For example, PepsiCo Vice President, Mike O’Connell, stated at the end of last year that, despite hefty costs around the infrastructural changes, his company believed that “the operating costs over time will pay back” to make the arrangement worthwhile in the long run. That sentiment applies to construction firms as well.
There’s also fleet management software to consider. These digital tools can be encrypted on a cloud server and give all users insights into things like fuel usage, the condition of the cars, and the routes travelled. More intricate oversights can be gleaned from fleet usage, and associated costs can be tallied up instantly. Consequently, construction firms would do well to get that installed.
Install Management Software for Construction
Sticking with software ideas for a while longer, construction management software can come with an onslaught of cost-saving advantages for a construction firm. It’s a principle similar to fleet management software in that more detailed real-time analytics can lead to strategy adjustments.
Cost change management can be streamlined with the use of these tools. Project team communication can also be simplified, which leads to time and money being saved all the more. There’s often a modern and intuitive AI to make these systems operational in days, too, which means construction firms can quickly adapt.
Firms like Kahua are often the obvious choice for these solutions. Their cloud-based project management software in construction has been fine-tuned to be tailored perfectly to a firm’s needs. A flexible approach can be undertaken when utilizing it, and firms can be confident that both their present and future business processes can be more carefully managed.
Create Stronger Supplier Links
Suppliers are the lifeblood of any construction business. It’s possible to work more closely with them.
At the end of 2022, Forbes reported that inflation and supply chain disruptions made getting the necessary construction materials more costly and time and consuming today. Their recommended solutions included rather expected budget control measures, but more notably, fostering stronger supplier relations. That way, construction firms can better understand the factors leading to surging material costs.
It may also be better for construction firms to work with local suppliers where possible. That way, they have a better chance of establishing common ground, supporting the local economy and perhaps having more mutual connections in the industry. Delivery costs can also be slashed along with emissions, which are factors that also contribute to a more robust working relationship.
Outsource Where Possible
Construction firms can depend on more than their suppliers to bring costs down. Further help is available.
Such support is usually accessed via outsourcing. Opportunities to do this may involve:
- Outsourcing waste management – some of these firms may pay closer attention to the potential of recycling and reusing materials, creating further cost savings.
- Outsourcing IT infrastructure – Construction firms have sensitive data they need to protect like any other company and are becoming more digitized like their peers too.
- Outsourcing to off-site construction firms – These entities will design and assemble building components away from the area they’ll be used. They’re often pitted against onsite firms, but both can be required for large-scale development projects.
Outsourcing can reduce costs in the long run, but it isn’t an answer to every struggle. Construction firms must continue doing many things for themselves – even monitoring the weather to ensure potential storms won’t cause hazardous work conditions or delays. That self-starter spirit that often drives construction firms should never be lost.
Top banking trends of 2023 and global outlook of banking and fintech for the year ahead
Author: Professor Marco Mongiello, Pro Vice-Chancellor, The University of Law Business School
You’d be forgiven for assuming that the global outlook for banking and fintech will be dominated by the usual suspects:
Artificial Intelligence – AI plays an increasingly prominent role in banking and fintech by enabling personalised services, fraud detection, predictive analytics, use of chatbots and robo-advisors.
Blockchain and Cryptocurrency – the secure, decentralised and swift system for financial transactions that blockchain has brought to the fore a few years ago, is now becoming ubiquitous. An increasing number of transactions are recorded through blockchains technology, primarily in the cryptocurrency market.
Digital Banking and fintech – accelerated by COVID-19 pandemic, the adoption of digital banking is a trend that will persist as customers have become accustomed to the convenience and efficiency of digital banking. Moreover, fintech enables access to financial services for previously underserved populations in developing countries or less affluent social groups in more affluent societies. This includes mobile banking services, peer-to-peer lending platforms, and microfinance solutions.
Open Banking – another global trend is the use of open APIs (Application Programming Interfaces) that allow third-party developers to build apps to facilitate customers’ access to financial data and services from banks.
Nonetheless, the challenges posed by these rapid changes are reminders that banking, an industry that by its very nature needs to be conservative, risk averse and solid, wobbles on the unchartered grounds of fast and turbulent innovation, where entrepreneurship instead thrives. The underlying rationales of banking and fast digital innovation are not incompatible but do need solid operations and thought-through decision-making to avoid causing catastrophic collapses.
The recent examples of Silicon Valley Bank, Silvergate, FTX and Wirecard are stark reminders that digital entrepreneurship applied to banking doesn’t just bring to customers the visible transformation of valuable new services, but also dents (perhaps as an unexpected consequence) the rationale itself of the role of banks in the global economy. Moreover, the central banks’ ability to contain the effects of single banks’ defaults is no longer a certainty, as experienced just over a decade ago and more recently. The markets’ sentiments are hardly reassured by the commitments of even the most coveted players, such as the European Central Bank, the Federal Reserve, and the President of the United States himself.
Regulators are lagging behind and their attempts to catch up may cause further seismic shocks to the global banking system. For example, another trend that is emerging is one of artificial intelligence decision-centres (i.e., decentralised offices of banks which take autonomous decisions on behalf of investors) outside the most stringent regulatory environments, enabling banks to operate globally more efficiently and more competitively. And we can expect that regulators will close the gap either abruptly, as it is currently happening in China, where private banks are subject to an escalation of regulatory and monitoring restrictions, or more gradually as it is happening in Europe and in the US.
The questions we face, as individual or trade customers of our high street banks, as direct investors or clients of managed funds, are whether banking will become more user-friendly yet, for our daily use but riskier, too, or is it simply becoming more efficient, transparent and also safer.
I’m afraid that the answer is by no means an obvious one. Therefore, caution, level-headed decision- making and critical thinking have never been as important as these days. Whether you are looking after your family savings or growing your pension reserve, the imperative is that you keep updated about the providers of the financial services you rely upon as well as about the general regulations that apply to your financial transactions. This is where, for example, you need to be familiar with your rights in case of cyber fraud, as well as learning how to minimise the risk of becoming a victim thereof. Also, taking additional steps to evaluate the credibility, solidity and reliability of the online provider of that app that was recommended by a trusted friend, may prove a very good move.
Similarly, whether you are the CFO of a medium or large company, or are a sole trader wrestling with your own business’s finances, you need to reflect on what you really want from your bank in the first place. That is before you started to be swayed by the whirlpool of offers of ‘opportunities’ to multiply your financial investments. Chances are that your initial approach to your bank was dictated by either a need for financing your working capital, as per your budget and strategic plans, or to find a safe place for your temporarily idle liquidity. Perhaps you were also after some basic treasury services such as swift payments and debt collection. Maybe some other financial services closely related to your business operations, e.g. factoring. The advice is to give very careful consideration to services that are more remote from your business, because the trend for the next years is that more and more of those will be offered to you. But many new services will disappoint those who, sadly, cannot afford financial mishaps as they look to run and grow their business.
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