U.S. tax reform: The global dimension
Corporate taxpayers in the U.S. and many around the world have their hands full puzzling out the impact of the Tax Cuts and Jobs Act. The TCJA reduces the U.S. corporate income tax rate from 34% to 21%, switches the country to a territorial tax system in which businesses are taxed only on income earned within U.S. borders, and drops personal income tax rates modestly, although this provision will expire in 2025. It also encourages U.S.
17063
Related content
The shifting landscape of global wealth: Future-proofing prosperity in a ti...
In some instances the impact of this shift will be shaped by local factors, such as demographic changes. In other instances this shift will reflect shared characteristics, as demonstrated by the greater popularity of overseas investing among younger high-net-worth individuals (HNWIs) brought up in an era of globalisation. Whatever the drivers, the landscape of wealth is changing—from local to global, and from one focused on returns to one founded on personal values.
Despite rising economic concerns and a tradition of investor home bias in large parts of the world, the new landscape of wealth appears less interested in borders. According to a survey commissioned by RBC Wealth Management and conducted by The Economist Intelligence Unit (EIU), younger HNWIs are substantially more enthusiastic about foreign investing. The U.S. is a particularly high-profile example of a country where a long-standing preference for investments in local markets appears set to be transformed.
Click the thumbnail below to download the global executive summary.
Read additional articles from The EIU with detail on the shifting landscape of global wealth in Asia, Canada, the U.S. and UK on RBC's website.
Fintech in ASEAN
To better understand the opportunities and challenges in developing a fintech business in seven ASEAN markets, The Economist Intelligence Unit conducted wide-ranging desk research supplemented by seven in-depth interviews with executives in Australia and ASEAN.
Download report and watch video interview to learn more.
Risks and opportunities in a changing world
Read our Taxing digital services, U.S. tax reform: The global dimension, & Planning for life after NAFTA articles by clicking the thumbnails below.
Taxing digital services
Taxing digital services: The devil's in the details
How to tax the digital economy, i.e., commercial transactions conducted electronically on the internet, has been a thorny issue for governments and business for years. In March the European Commission unveiled a proposal for two new directives to stem what the EC considers to be revenue losses caused by loopholes in the global corporate tax system. Officials estimate that digital businesses in the EU pay an average effective tax rate of 9.5%, while traditional businesses pay 23.3%.
17062
Related content
The shifting landscape of global wealth: Future-proofing prosperity in a ti...
In some instances the impact of this shift will be shaped by local factors, such as demographic changes. In other instances this shift will reflect shared characteristics, as demonstrated by the greater popularity of overseas investing among younger high-net-worth individuals (HNWIs) brought up in an era of globalisation. Whatever the drivers, the landscape of wealth is changing—from local to global, and from one focused on returns to one founded on personal values.
Despite rising economic concerns and a tradition of investor home bias in large parts of the world, the new landscape of wealth appears less interested in borders. According to a survey commissioned by RBC Wealth Management and conducted by The Economist Intelligence Unit (EIU), younger HNWIs are substantially more enthusiastic about foreign investing. The U.S. is a particularly high-profile example of a country where a long-standing preference for investments in local markets appears set to be transformed.
Click the thumbnail below to download the global executive summary.
Read additional articles from The EIU with detail on the shifting landscape of global wealth in Asia, Canada, the U.S. and UK on RBC's website.
Fintech in ASEAN
To better understand the opportunities and challenges in developing a fintech business in seven ASEAN markets, The Economist Intelligence Unit conducted wide-ranging desk research supplemented by seven in-depth interviews with executives in Australia and ASEAN.
Download report and watch video interview to learn more.
Risks and opportunities in a changing world
Read our Taxing digital services, U.S. tax reform: The global dimension, & Planning for life after NAFTA articles by clicking the thumbnails below.
Risks and opportunities in a changing world
Read our Taxing digital services, U.S. tax reform: The global dimension, & Planning for life after NAFTA articles by clicking the thumbnails below.
More from this series
article
Taxing digital services
Taxing digital services: The devil's in the details How to tax the digital economy, i.e., commercial transactions
article
U.S. tax reform: The global dimension
Corporate taxpayers in the U.S. and many around the world have their hands full puzzling out the impact of the Tax Cuts
article
Planning for life after NAFTA
The North American Free Trade Agreement (NAFTA) is at least as controversial today as it was almost 25 years ago, when
Related content
The shifting landscape of global wealth: Future-proofing prosperity in a ti...
In some instances the impact of this shift will be shaped by local factors, such as demographic changes. In other instances this shift will reflect shared characteristics, as demonstrated by the greater popularity of overseas investing among younger high-net-worth individuals (HNWIs) brought up in an era of globalisation. Whatever the drivers, the landscape of wealth is changing—from local to global, and from one focused on returns to one founded on personal values.
Despite rising economic concerns and a tradition of investor home bias in large parts of the world, the new landscape of wealth appears less interested in borders. According to a survey commissioned by RBC Wealth Management and conducted by The Economist Intelligence Unit (EIU), younger HNWIs are substantially more enthusiastic about foreign investing. The U.S. is a particularly high-profile example of a country where a long-standing preference for investments in local markets appears set to be transformed.
Click the thumbnail below to download the global executive summary.
Read additional articles from The EIU with detail on the shifting landscape of global wealth in Asia, Canada, the U.S. and UK on RBC's website.
Fintech in ASEAN
To better understand the opportunities and challenges in developing a fintech business in seven ASEAN markets, The Economist Intelligence Unit conducted wide-ranging desk research supplemented by seven in-depth interviews with executives in Australia and ASEAN.
Download report and watch video interview to learn more.
Resetting the agenda: How ESG is shaping our future
The Covid-19 pandemic has exposed a wealth of interconnections – between ecological and human wellbeing, between economic and environmental fragility, between social inequality and health outcomes, and more. The consequences of these connections are now filtering through, reshaping our society and economy.
In this setting, the need to integrate environmental, social and governance (ESG) factors when investing has become even more critical. Institutional investors must employ ESG not just to mitigate risks and identify opportunities, but to engage with companies to bring about the positive change needed to drive a sustainable economic recovery in the post-Covid world.
In order to understand how ESG could be both a new performance marker and a growth driver in this environment, as well as how institutional investors are using ESG to make investment decisions and to assess their own performance, The Economist Intelligence Unit (EIU), sponsored by UBS, surveyed 450 institutional investors working in asset and wealth management firms, corporate pension funds, endowment funds, family offices, government agencies, hedge funds, insurance companies, pension funds, sovereign wealth funds and reinsurers in North America, Europe and Asia-Pacific.
Download the report and infographic to learn more.
The rise of startup Japan
Related content
The shifting landscape of global wealth: Future-proofing prosperity in a ti...
In some instances the impact of this shift will be shaped by local factors, such as demographic changes. In other instances this shift will reflect shared characteristics, as demonstrated by the greater popularity of overseas investing among younger high-net-worth individuals (HNWIs) brought up in an era of globalisation. Whatever the drivers, the landscape of wealth is changing—from local to global, and from one focused on returns to one founded on personal values.
Despite rising economic concerns and a tradition of investor home bias in large parts of the world, the new landscape of wealth appears less interested in borders. According to a survey commissioned by RBC Wealth Management and conducted by The Economist Intelligence Unit (EIU), younger HNWIs are substantially more enthusiastic about foreign investing. The U.S. is a particularly high-profile example of a country where a long-standing preference for investments in local markets appears set to be transformed.
Click the thumbnail below to download the global executive summary.
Read additional articles from The EIU with detail on the shifting landscape of global wealth in Asia, Canada, the U.S. and UK on RBC's website.
Fintech in ASEAN
To better understand the opportunities and challenges in developing a fintech business in seven ASEAN markets, The Economist Intelligence Unit conducted wide-ranging desk research supplemented by seven in-depth interviews with executives in Australia and ASEAN.
Download report and watch video interview to learn more.
Risks and opportunities in a changing world
Read our Taxing digital services, U.S. tax reform: The global dimension, & Planning for life after NAFTA articles by clicking the thumbnails below.
The Future is Now: How Ready is Treasury?
The traditional role, structure and staffing of treasury are being challenged on all sides. Customers, supply chains, banks and transaction services providers alike are being disrupted by digitalisation and new technologies. Corporate treasurers face the direct challenges of new compliance, tax and regulatory initiatives in Europe, the US and elsewhere while coping with the ongoing evolution of their own companies’ existing business models.
Related content
Eurofinance 2018: Tech adventures in treasury
“The Treasurer: Agent of change”, a session sponsored by Deutsche Bank, considered how treasurers can best prepare for the industry disruption stemming from technological evolution. Michael Spiegel, global head of cash management at Deutsche Bank, was joined by John Ferguson, director of global forecasting and country analysis at The Economist Intelligence Unit, Jörg B Bermüller, head of cash and risk management at Merck, and Gurjit Pannu, treasury manager EMEA at Uber, for a discussion on treasurers’ expectations and readiness for technological change, evolving business models and new regulatory initiatives.
Treasury is “future” ready, to various degrees
Mr Ferguson opened the session with the observation that there is “a real sense of divergence between those who have the resources, and those who do not—those being left behind”. Merck’s Mr Bermüller brought a different perspective, focusing more on the cultural divide between more “old school” treasury and treasury innovators. Mr Bermüller revealed that his discussions with treasury peers indicated that many are already prepared for tech disruption. He said that companies’ difficulties with tech disruption could be attributed to the time needed to respond rather than an unwillingness to deal with the disruption. Uber, for instance, clearly see themselves as a disrupter—in all their business lines and functions. Because it’s hard to evaluate his company’s future needs, Mr Pannu explained that the treasury team’s priority of “keep up with the business” is taking an organic approach. This means trialling technology options that are able to grow with and adapt to the companies ever changing objectives.
Taking on new technology is vital
Technology can assist with adapting to the upcoming changes, but treasurers need to be more proactive in seeking out and adopting appropriate solutions. While Mr Spiegel noted that he wasn’t surprised by the report’s findings into the current state of innovation of the treasury function, he felt that the potential scope and power of application programming interfaces (APIs) may be underestimated by treasurers.
In the report, 56% of respondents cited APIs as one of the most beneficial new technologies, yet only 13% are thinking of using these. Moreover, companies need to be careful when selecting what technology they take on. As Mr Pannu pointed out, “everything is in flux”, and making big investments in technology that requires a long onboaring and heavy resource requirements as risky, as it may be rendered obsolete in the not so distant future. Moreover, deploying technology is not enough, companies need to hire (and train) the right people who will know how to use it.
Collaboration and prioritisation
Panellists remarked that developing a true partnership between treasury and other functions is essential for adapting to changing environments. However, this doesn’t only involve internal relationships, as Mr Pannu stressed: there needs to be a close alignment with banking partners, which provide local knowledge for a centralised treasury strategy. Across the board, treasury is now part of launch teams, and that’s why the function deserves a proper seat at the table. In terms of next priorities to help the business, Merck’s Mr Bermüller believes the biggest trends are big data and cloud technology. Merck created a cloud to analyse data across the organizations. Treasury started to analyse internal and external payment patterns and is also looking into RBA to handle tasks where highly skilled people are not needed. With changes in many industries happening much faster than can be foreseen, being ready is a different question now than it was in the 1990s, the panel concluded. “Stay nimble and agile, as you don’t know what challenges you may face in the future,” Mr Pannu said.
For more details on The Future is Now: How Ready is Treasury, sponsored by Deutsche Bank, click here
The Future is Now: How Ready is Treasury?
The Corporate Treasury viewpoint: An interview with Johan Bergqvist, Vice-president, Treasury, Spotify
Creating better retirement outcomes using data, technology and transparency
In the US, 95% of salaried new hires have defined contribution (DC) plans as their only employer-sponsored retirement plan option, according to Willis Towers Watson (1). Other markets around the world are following a similar path. But the societal shift from defined benefit to DC plans has not always been smooth for employees. Thus, there’s a clear impetus for retirement stakeholders to forge plans that work for DC participants.
17026
Related content
The shifting landscape of global wealth: Future-proofing prosperity in a ti...
In some instances the impact of this shift will be shaped by local factors, such as demographic changes. In other instances this shift will reflect shared characteristics, as demonstrated by the greater popularity of overseas investing among younger high-net-worth individuals (HNWIs) brought up in an era of globalisation. Whatever the drivers, the landscape of wealth is changing—from local to global, and from one focused on returns to one founded on personal values.
Despite rising economic concerns and a tradition of investor home bias in large parts of the world, the new landscape of wealth appears less interested in borders. According to a survey commissioned by RBC Wealth Management and conducted by The Economist Intelligence Unit (EIU), younger HNWIs are substantially more enthusiastic about foreign investing. The U.S. is a particularly high-profile example of a country where a long-standing preference for investments in local markets appears set to be transformed.
Click the thumbnail below to download the global executive summary.
Read additional articles from The EIU with detail on the shifting landscape of global wealth in Asia, Canada, the U.S. and UK on RBC's website.
Fintech in ASEAN
To better understand the opportunities and challenges in developing a fintech business in seven ASEAN markets, The Economist Intelligence Unit conducted wide-ranging desk research supplemented by seven in-depth interviews with executives in Australia and ASEAN.
Download report and watch video interview to learn more.
Risks and opportunities in a changing world
Read our Taxing digital services, U.S. tax reform: The global dimension, & Planning for life after NAFTA articles by clicking the thumbnails below.
The Future of Infrastructure Finance in MEASA
However, particularly in emerging economies, there is a chronic shortage of necessary investment to build transport, communications, energy and water infrastructure. In the Middle East, Africa and South Asia (MEASA) region, the funding deficit amounts to over US$500bn annually.
17024
Related content
The Next Frontier: The future of finance in the Middle East, Africa and Sou...
The Middle East, Africa and South Asia (MEASA) region is already poised to shape financial innovation. With a combined population of over 3bn, deepening mobile connectivity, and growing prominence as a trade and investment hub, MEASA will be a source of both demand and supply for more and better financial services. For companies that move quickly, this is a multi-billion-dollar opportunity to bank on the future of a diverse region.
Some firms are at the vanguard of financial innovation, using smarter business models and the latest technologies. The rise of “challenger” providers—often from different industries, such as telecommunications and e-commerce—is bringing even more varied financial services offerings to a far larger community of individuals and businesses. This report, which draws on expert interviews and country analysis, assesses the state of finance in MEASA, the factors shaping the future of key financial subsectors, and the regulatory framework and best practices required to enable the delivery of these services.
Key findings of the report:
Gaps in financial services present an opportunity for financial companies—both traditional and nontraditional players. A growing young population across MEASA is increasing demand for digitally delivered financial services. In addition to this, women’s access to finance substantially lags behind that of men, particularly among low-income groups, as regulatory requirements for accessing formal finance, such as official ID or billing documentation, create bias against them. Even among wealthier segments of the population, many individuals remain underbanked. Taken together, this untapped potential presents an attractive opportunity for companies providing financial services. As trade and investment increase in the MEASA region, there will also be a growing market for wholesale banking and capital markets.
Overcoming a strong preference for cash in the MEASA region will be imperative to move towards a cashless economy. Across the region, the majority of utility bills, school fees and even wages are paid in cash. Building trust in digitally delivered finance will take time, despite a growing preference for it among the younger generation. A fully cashless economy may be decades away.
Blockchain has the potential to change the financial architecture in MEASA, particularly for banking. Blockchain is helping to reduce high money-transfer and exchange costs by bypassing intermediaries, and blockchain-based digital registries could tackle other problems, like land expropriation. While these applications are experimental and pose regulatory difficulties, the core technologies can help to overcome some of the challenges of the existing financial system, such as money-laundering and corruption in a cash economy. More importantly, they are expected to reduce costs for financial institutions, particularly around compliance with anti-moneylaundering (AML) and Know Your Customer (KYC) rules.
New business models are being developed to reach the “missing middle” of retail investors and medium-sized businesses. The rise in equity crowdfunding platforms and lower-cost portfolio investment products is unleashing new capital for entrepreneurs and businesses, and is giving middle-and lower-middle-income citizens the ability to become investors. Growth in the provision of credit, an increasing interest in private equity and a rise in venture capital are also helping to drive growth in the middle market.
In Islamic finance, the approach is shifting from “sharia-compliant” to “sharia-based”. The approach to Islamic finance thus far has been to adapt existing products and services so that they comply with sharia law, for instance eliminating interest charges on credit cards and loans. Enabled by technology, companies are now developing fresh products and services that follow the spirit rather than adhering strictly to the letter of sharia principles.
Governments and regulators have a crucial mandate to drive financial innovation. Governments and regulators must ensure that regulation keeps pace with advances in technology in the financial sector. There are examples across MEASA of legislation that enables a wider array of providers to enter financial services, from postal systems and telecoms companies to e-commerce platforms. Developing regulation around the latest developments, such as blockchain, will prove challenging, but governments in the region are adopting strategies to test the water. Other key roles including increasing financial literacy to ensure that widening access to finance does not lead to debt spirals, and ensuring that government payments systems are also digitised and technologically advanced, to help drive the shift away from cash.
Innovations in Identity in Financial Services
Many citizens in the Middle East, Africa and South Asia (MEASA) region lack standard identification documents such as passports, or the credit data needed to secure loans. However, technological innovations are presenting new opportunities to collect, validate and store client information that are driving efficiencies and reducing costs for financial institutions.
Following the financial crisis of 2008-09, financial institutions have tightened lending in markets across the MEASA region. In parallel, rules on money-laundering, bribery and terrorism-related financing have also become stricter, making lenders more reluctant than ever to take risks. This has led financial companies to focus on clients that they consider “safe”.
While well intentioned, financial reforms and more stringent Know Your Customer (KYC) rules make it costly to process individuals and businesses, particularly small and medium-sized enterprises (SMEs), which often lack formal accounts or official documentation. “KYC is quite a cumbersome activity,” says Lutfi Zakhour, financial services lead at Booz Allen Hamilton, a consultancy. The process starts with the collection of documents at a branch, he explains, and the bank then has to validate these, conducting enhanced due diligence on high-risk accounts. This information not only has to be stored securely, but must be updated regularly. “This is time-consuming, for bank staff or financial institutions in general, and for consumers.” Applicants may be rejected because the risks are not worth the financial reward, which further widens the lending gap in emerging markets.
There are better ways to balance compliance with financial deepening. “Although they’re spending billions of dollars already on KYC-related technology and upgrades, banks still recognise that they have a lot more to do,” says Susan Starnes, head of strategy, trade and supply-chain solutions at the International Finance Corporation (IFC), part of the World Bank. A growing army of technology firms—and some banks—are using algorithms, machine learning, blockchain and biometrics to help. These technologies are being applied to securing and storing information on clients and assessing creditworthiness.
Download Article PDFThe shifting landscape of global wealth: Future-proofing prosperity in a ti...
In some instances the impact of this shift will be shaped by local factors, such as demographic changes. In other instances this shift will reflect shared characteristics, as demonstrated by the greater popularity of overseas investing among younger high-net-worth individuals (HNWIs) brought up in an era of globalisation. Whatever the drivers, the landscape of wealth is changing—from local to global, and from one focused on returns to one founded on personal values.
Despite rising economic concerns and a tradition of investor home bias in large parts of the world, the new landscape of wealth appears less interested in borders. According to a survey commissioned by RBC Wealth Management and conducted by The Economist Intelligence Unit (EIU), younger HNWIs are substantially more enthusiastic about foreign investing. The U.S. is a particularly high-profile example of a country where a long-standing preference for investments in local markets appears set to be transformed.
Click the thumbnail below to download the global executive summary.
Read additional articles from The EIU with detail on the shifting landscape of global wealth in Asia, Canada, the U.S. and UK on RBC's website.
Innovations in Identity in Financial Services
Many citizens in the Middle East, Africa and South Asia (MEASA) region lack standard identification documents such as passports, or the credit data needed to secure loans. However, technological innovations are presenting new opportunities to collect, validate and store client information that are driving efficiencies and reducing costs for financial institutions.
17023
Related content
The Next Frontier: The future of finance in the Middle East, Africa and Sou...
The Middle East, Africa and South Asia (MEASA) region is already poised to shape financial innovation. With a combined population of over 3bn, deepening mobile connectivity, and growing prominence as a trade and investment hub, MEASA will be a source of both demand and supply for more and better financial services. For companies that move quickly, this is a multi-billion-dollar opportunity to bank on the future of a diverse region.
Some firms are at the vanguard of financial innovation, using smarter business models and the latest technologies. The rise of “challenger” providers—often from different industries, such as telecommunications and e-commerce—is bringing even more varied financial services offerings to a far larger community of individuals and businesses. This report, which draws on expert interviews and country analysis, assesses the state of finance in MEASA, the factors shaping the future of key financial subsectors, and the regulatory framework and best practices required to enable the delivery of these services.
Key findings of the report:
Gaps in financial services present an opportunity for financial companies—both traditional and nontraditional players. A growing young population across MEASA is increasing demand for digitally delivered financial services. In addition to this, women’s access to finance substantially lags behind that of men, particularly among low-income groups, as regulatory requirements for accessing formal finance, such as official ID or billing documentation, create bias against them. Even among wealthier segments of the population, many individuals remain underbanked. Taken together, this untapped potential presents an attractive opportunity for companies providing financial services. As trade and investment increase in the MEASA region, there will also be a growing market for wholesale banking and capital markets.
Overcoming a strong preference for cash in the MEASA region will be imperative to move towards a cashless economy. Across the region, the majority of utility bills, school fees and even wages are paid in cash. Building trust in digitally delivered finance will take time, despite a growing preference for it among the younger generation. A fully cashless economy may be decades away.
Blockchain has the potential to change the financial architecture in MEASA, particularly for banking. Blockchain is helping to reduce high money-transfer and exchange costs by bypassing intermediaries, and blockchain-based digital registries could tackle other problems, like land expropriation. While these applications are experimental and pose regulatory difficulties, the core technologies can help to overcome some of the challenges of the existing financial system, such as money-laundering and corruption in a cash economy. More importantly, they are expected to reduce costs for financial institutions, particularly around compliance with anti-moneylaundering (AML) and Know Your Customer (KYC) rules.
New business models are being developed to reach the “missing middle” of retail investors and medium-sized businesses. The rise in equity crowdfunding platforms and lower-cost portfolio investment products is unleashing new capital for entrepreneurs and businesses, and is giving middle-and lower-middle-income citizens the ability to become investors. Growth in the provision of credit, an increasing interest in private equity and a rise in venture capital are also helping to drive growth in the middle market.
In Islamic finance, the approach is shifting from “sharia-compliant” to “sharia-based”. The approach to Islamic finance thus far has been to adapt existing products and services so that they comply with sharia law, for instance eliminating interest charges on credit cards and loans. Enabled by technology, companies are now developing fresh products and services that follow the spirit rather than adhering strictly to the letter of sharia principles.
Governments and regulators have a crucial mandate to drive financial innovation. Governments and regulators must ensure that regulation keeps pace with advances in technology in the financial sector. There are examples across MEASA of legislation that enables a wider array of providers to enter financial services, from postal systems and telecoms companies to e-commerce platforms. Developing regulation around the latest developments, such as blockchain, will prove challenging, but governments in the region are adopting strategies to test the water. Other key roles including increasing financial literacy to ensure that widening access to finance does not lead to debt spirals, and ensuring that government payments systems are also digitised and technologically advanced, to help drive the shift away from cash.
The shifting landscape of global wealth: Future-proofing prosperity in a ti...
In some instances the impact of this shift will be shaped by local factors, such as demographic changes. In other instances this shift will reflect shared characteristics, as demonstrated by the greater popularity of overseas investing among younger high-net-worth individuals (HNWIs) brought up in an era of globalisation. Whatever the drivers, the landscape of wealth is changing—from local to global, and from one focused on returns to one founded on personal values.
Despite rising economic concerns and a tradition of investor home bias in large parts of the world, the new landscape of wealth appears less interested in borders. According to a survey commissioned by RBC Wealth Management and conducted by The Economist Intelligence Unit (EIU), younger HNWIs are substantially more enthusiastic about foreign investing. The U.S. is a particularly high-profile example of a country where a long-standing preference for investments in local markets appears set to be transformed.
Click the thumbnail below to download the global executive summary.
Read additional articles from The EIU with detail on the shifting landscape of global wealth in Asia, Canada, the U.S. and UK on RBC's website.
Fintech in ASEAN
To better understand the opportunities and challenges in developing a fintech business in seven ASEAN markets, The Economist Intelligence Unit conducted wide-ranging desk research supplemented by seven in-depth interviews with executives in Australia and ASEAN.
Download report and watch video interview to learn more.
The Next Frontier: The future of finance in the Middle East, Africa and South Asia
The Middle East, Africa and South Asia (MEASA) region is already poised to shape financial innovation. With a combined population of over 3bn, deepening mobile connectivity, and growing prominence as a trade and investment hub, MEASA will be a source of both demand and supply for more and better financial services. For companies that move quickly, this is a multi-billion-dollar opportunity to bank on the future of a diverse region.
Related content
Innovations in Identity in Financial Services
Many citizens in the Middle East, Africa and South Asia (MEASA) region lack standard identification documents such as passports, or the credit data needed to secure loans. However, technological innovations are presenting new opportunities to collect, validate and store client information that are driving efficiencies and reducing costs for financial institutions.
Following the financial crisis of 2008-09, financial institutions have tightened lending in markets across the MEASA region. In parallel, rules on money-laundering, bribery and terrorism-related financing have also become stricter, making lenders more reluctant than ever to take risks. This has led financial companies to focus on clients that they consider “safe”.
While well intentioned, financial reforms and more stringent Know Your Customer (KYC) rules make it costly to process individuals and businesses, particularly small and medium-sized enterprises (SMEs), which often lack formal accounts or official documentation. “KYC is quite a cumbersome activity,” says Lutfi Zakhour, financial services lead at Booz Allen Hamilton, a consultancy. The process starts with the collection of documents at a branch, he explains, and the bank then has to validate these, conducting enhanced due diligence on high-risk accounts. This information not only has to be stored securely, but must be updated regularly. “This is time-consuming, for bank staff or financial institutions in general, and for consumers.” Applicants may be rejected because the risks are not worth the financial reward, which further widens the lending gap in emerging markets.
There are better ways to balance compliance with financial deepening. “Although they’re spending billions of dollars already on KYC-related technology and upgrades, banks still recognise that they have a lot more to do,” says Susan Starnes, head of strategy, trade and supply-chain solutions at the International Finance Corporation (IFC), part of the World Bank. A growing army of technology firms—and some banks—are using algorithms, machine learning, blockchain and biometrics to help. These technologies are being applied to securing and storing information on clients and assessing creditworthiness.
Download Article PDFThe Future of Infrastructure Finance in MEASA
However, particularly in emerging economies, there is a chronic shortage of necessary investment to build transport, communications, energy and water infrastructure. In the Middle East, Africa and South Asia (MEASA) region, the funding deficit amounts to over US$500bn annually.
Domestic sources of capital—the mainstay of infrastructure development in emerging markets—fall short, owing to fiscal pressures from the chronic deficits run by many countries in the MEASA region, or because of the risk of overindebtedness arising from excessive borrowing. Similarly, funding from multilateral development banks (such as the World Bank), regional development banks (such as the Africa Development Bank and India’s Infrastructure Development Finance Company) and country donor partners (notably China) cannot hope to close the investment gap completely. Fresh sources of funding and new funding mechanisms will be essential if governments are to make progress in addressing their countries’ infrastructure needs by building roads, connecting populations to power, and providing clean drinking water and sanitation.
In the MEASA region, when infrastructure is not paid for directly by governments themselves, it is primarily financed by banks, rather than through capital markets or public-private partnerships (PPPs). “But we think that those conditions are changing and that the region will be less reliant on bank financing for infrastructure in the future,” says Michael Grifferty, president of the Gulf Bond and Sukuk Association. He cites several reasons for this. Among them is the mismatch of timelines between infrastructure projects and banks: banks prefer shorter-term debt to meet short-term obligations. In addition to this, regulatory changes such as concentration limits and those stemming from Basel III, such as increasing minimum capital-adequacy ratios, may constrain growth in banks’ balance sheets. “Enforcement of banking regulation will inadvertently result in pushing some financing towards capital markets,” says Mr Grifferty. Such shifts will create an opportunity for greater use of PPPs, capital markets, and alternative sources of finance such as pension funds and insurance companies that value predictable long-term income.
Download Article PDF
The shifting landscape of global wealth: Future-proofing prosperity in a ti...
In some instances the impact of this shift will be shaped by local factors, such as demographic changes. In other instances this shift will reflect shared characteristics, as demonstrated by the greater popularity of overseas investing among younger high-net-worth individuals (HNWIs) brought up in an era of globalisation. Whatever the drivers, the landscape of wealth is changing—from local to global, and from one focused on returns to one founded on personal values.
Despite rising economic concerns and a tradition of investor home bias in large parts of the world, the new landscape of wealth appears less interested in borders. According to a survey commissioned by RBC Wealth Management and conducted by The Economist Intelligence Unit (EIU), younger HNWIs are substantially more enthusiastic about foreign investing. The U.S. is a particularly high-profile example of a country where a long-standing preference for investments in local markets appears set to be transformed.
Click the thumbnail below to download the global executive summary.
Read additional articles from The EIU with detail on the shifting landscape of global wealth in Asia, Canada, the U.S. and UK on RBC's website.
Whose customer are you? The reality of digital banking in Asia-Pacific
China leads Asia’s diverse digital banking markets
If you want to see what universal digital banking looks like, skip Silicon Valley or London’s fintech hubs. China’s Alipay and WeChat Pay show how to do smart, mobile-based banking on a massive scale. Regulators are now adapting to new customer demands.
17019
Related content
Whose customer are you? The Reality of Digital Banking in Latin America
Banking with a social cause
Latin American banks and fintechs are racing to lower costs and access for the unbanked millions.
Just over half of all Latin American adults now have bank accounts. But credit and debit card ownership and usage lag that in the US and Europe. This has a subsequent effect on e-commerce purchases: 41% of internet shoppers paid cash on delivery last year.
However, an increasingly confident fintech sector that puts simplicity, low cost and social inclusion at the top of the agenda means that digitisation is a tool for improving access and equality in Latin America. Banks have responded by accelerating their digitalisation strategies.
Much of this regional change is being driven by changing customer behaviour and demands—often at a phenomenal pace.
But with over 200m potential new customers also at stake, Latin American banks see a bigger impact coming from new entrants than their peers see in the rest of the world (48% v 36% globally).
However, for the established banks, new payment players are the biggest threat, according to 51% of respondents. This is followed by neo-banks (23%), which offer bank-like transaction services without a full service current account.
Mobile money operators have also taken root in Latin America, with the number of registered accounts growing by 35% in the year to December 2016. Yet, just 10m mobile money accounts were active at the end of that year, leaving many consumers still without the means to make online, mobile or point-of-sale payments electronically. Accordingly, just 21% of Latin American bankers think that non financial firms, such as telecommunications or retailers, could become the biggest competition threat by 2020.
Download complete article hereWhose Customer are you? The Reality of Digital Banking
This report, the fifth in The Economist Intelligence Unit’s series on the future of retail banking, marks a significant shift in the strategic concerns of banking executives worldwide. Previous reports tracked the shift in customer expectations and its likely impact on distribution and product design. Now the focus is firmly on implementing open banking and dealing with its consequences.
Technology and digital are now bigger—and more important—trends than regulation. Changing client demand, the rise of the smartphone and the introduction of new digital technologies have replaced post-financial crisis regulation as the drivers of strategic thinking at banks around the world. Integrating open banking that allows apps to initiate payments and other financial transactions is core to adapting to the digital banking age. No single digital strategy suits every bank in every market. Respondents say their banks are adopting different strategies. While 61% want to develop niche propositions, others are, to varying degrees, opening up and giving access to new third parties. Some banks will view regulatory and technological change as opportunities to recreate themselves and build new ecosystems, while others may simply comply with emerging norms and regulations by granting access to customer data and payments via competitors’ smartphone apps. Going with the easiest options may leave banks, and their products, at risk of being assimilated, aggregated and unbundled by agile competitors, leading to a loss of brand and product visibility. Banks must become more agile. The development of agile products requires improved organisational agility as well. According to 52% of survey respondents, product agility is now their top strategic priority. New payment players and the likes of Google, Apple, Facebook and Amazon, collectively known as GAFA, know what their clients want and are able to adapt quickly. Banks have to keep up, restructuring their business models to ensure that new products and features can be integrated quickly across physical and digital channels. The impact of open banking and tighter security and data rules—and the conflicts between them—do not appear to be fully understood. While 71% of respondents are focusing their digital investment on cyber security, only 17% are concerned about a third-party relationship vulnerability being exploited as a result of open banking. The biggest danger to a sustainable banking model is the loss of valuable data on customers’ lifestyles and needs. Without that insight, all banks will struggle to upsell more profitable loan, investment and retirement products. Customer and regulator concerns about data security may limit some of the big banks’ ambitions. The larger banks can take the fintechs on by building all-encompassing platforms that offer a seamless interaction with other products, services and comparison tools. Offering greater functionality means banks can learn more about customer needs and tailor new products to match. Artificial intelligence and chatbots have a role in customer services, authentication and fraud, but banks are taking a cautious line as they do not want to lose their customers’ trust. Just over 20% of respondents think artificial intelligence (AI) will improve the user experience. However, banks need to appease customers’ uncertainty about the security of their personal information and how these data about them may be used. They will need to do this while maintaining a frictionless user experience that still takes into account individuals’ needs.
The shifting landscape of global wealth: Future-proofing prosperity in a ti...
In some instances the impact of this shift will be shaped by local factors, such as demographic changes. In other instances this shift will reflect shared characteristics, as demonstrated by the greater popularity of overseas investing among younger high-net-worth individuals (HNWIs) brought up in an era of globalisation. Whatever the drivers, the landscape of wealth is changing—from local to global, and from one focused on returns to one founded on personal values.
Despite rising economic concerns and a tradition of investor home bias in large parts of the world, the new landscape of wealth appears less interested in borders. According to a survey commissioned by RBC Wealth Management and conducted by The Economist Intelligence Unit (EIU), younger HNWIs are substantially more enthusiastic about foreign investing. The U.S. is a particularly high-profile example of a country where a long-standing preference for investments in local markets appears set to be transformed.
Click the thumbnail below to download the global executive summary.
Read additional articles from The EIU with detail on the shifting landscape of global wealth in Asia, Canada, the U.S. and UK on RBC's website.