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12 Payment Predictions with Ingenico

12 Payment Predictions with Ingenico

By Simon Fairbairn, Director of Solution Development at Ingenico Banks & Acquiring

With almost 40 years in the industry, the collective payments expertise of the Ingenico team is unparalleled. So, as the New Year begins, Simon Fairbairn, Director of Solution Development at Ingenico Banks & Acquiring, considers 12 key payment predictions for 2020.

  1. Fraudsters Innovate Too

In 2019, Authorised Push Payment Fraud (APP Fraud) rose by 40%, costing the UK £616 million.

Thanks to PSD2 and Open Banking, we will continue to see more new players in fintech. This is brilliant, but it means fraudsters will inevitably innovate their techniques, too. As a result, in 2020 we will see banks enhance their security and implement measures to protect customers, such as payment delays, SCA, 2FA and Confirmation of Payee.

  1. Digital Payment Rewards

Alongside enhanced security, monetary savings and ease of use, digital payment rewards will increasingly become embedded in payments as a value-added service. These types of loyalty initiatives provide opportunities to engage directly with customers and are useful to increase customer allegiance with brands.

With innovative payment terminals on the rise, such as Android, that offer enhanced applications and collect more consumer data, customers will expect more personalised offers. Organisations will deliver them in 2020.

  1. More Data, More Powerful AI

Often thought of as just for use with fraud prevention, Artificial Intelligence has enormous potential to improve the payment ecosystem for banks, processors, merchants and, ultimately, consumers. Together with companies using AI to analyse certain patterns and algorithms in data to detect fraudulent activity, retail payments will also use this technology to enhance digital interactions in voice commerce and mobile banking.

  1. New Smart City Payment Options

For the last few years we have seen the beginnings of frictionless towns and cities across the globe. The TfL tube system and contactless buses are a prime example of an effective cashless system – since its inception over 1.7 billion frictionless journeys have been enabled.

In 2020, cities will implement new smart payment options by joining forces with the right partners and platforms to counteract new challenges, including ease and speed of implementation, disruption and data security.

  1. Smarter Purchase Suggestions

This year, Amazon generated 35% of its revenue from its recommendation model, which utilises customer data to deliver smarter purchase suggestions. By using data to personalise suggestions, retailers are truly listening to customers and continuously pushing the boundaries of shopping experiences. In 2020, we’re going to see more retailers following in Amazon’s footsteps, either in store or online.

  1. Generation X Demand Payment Security

A lot of the fintech revolution has been driven by millennials, for millennials. As this demographic seeks and demands new ways to pay, Open Banking continues to enable new players in the payment ecosystem for millennials as well as Gen Z, a third of whom are estimated to have opened at least two new accounts with a challenger bank within the past five years.

While the focus has predominantly been on these young demographics, their older counterparts, such as Gen X, are being left behind. As such, in 2020 we will likely see Gen X demanding that the basics of their financial services, such as security, are prioritised over anything else which might cause a generational divide.

  1. The Rise of Social Commerce

Social commerce is indisputably going to be the breakout trend for ecommerce in 2020. The line between social media and ecommerce is increasingly becoming blurred, driven by the sheer amount of time spent on social media apps.

The rise is down to popular platforms, like Instagram and Snapchat, enabling short form video content, which 91% of consumers prefer over conventional static media. What once consisted of a static online shopping experience is becoming a much more fluid ecosystem defined by multiple threads of content media.

  1. Digital ID Becomes King

At its core, identity verification has always underpinned financial services in order to protect users and meet compliance demands. Efforts to help streamline identity procedures, such as the creation of long passwords, cause friction for customers. Many inevitably forget the long passwords they create and $70 charges by banks to change passwords cause frustration. In 2020, Digital ID will help eradicate these bugbears while providing numerous economic benefits and more secure identification for consumers.

  1. Relentless Collaboration

Fintech continues to be the buzzword in financial services, relating to the rapidly evolving technology that is fast revolutionising the industry. However, in order to keep innovating within the industry we can’t rely on technology alone; it’s a team sport. Throughout 2020, as Open Banking continues to offer more opportunities within the payments ecosystem, we must continue to collaborate with other players to keep innovating.

  1. Make Payments with Cars

The Internet of Things (IoT) is making devices smart.For many years we’ve heard about fridges that consumers can make payments on, but cars have been noted as the next big thing to be inter-connected. Research highlights that the automotive industry could be the most lucrative IoT platform, and by 2023 it’s estimated that 775 million cars will be connected through telematics or in-vehicle appsaccounting for $63 billion in transactions that year.

If these estimations are to be achieved, over 2020 we’ll start seeing IoT payments for petrol, tolls and food.

  1. Banks and Card Payments Converge

Due to Open Banking and PSD2, the ability to have a card or bank account payment in near-real time starts to enhance the possibilities for how a consumer may wish to pay at the point of sale in 2020.

We will likely see consumers offered with the choice of paying by real time payment rather than by card; same outcome through a different route with a different charging scheme. This may extend to initiating a sequence of recurring payments, the first in real time, the remainder in a Direct Debit format.

  1. Invisible Payments

Invisible payments are dominating the payments industry with the likes of payments rings, Uber and Amazon Go, all of which are completely frictionless, with payment details stored inside the product. Across all sectors in 2020, businesses will need to keep up with convenience-led lifestyles, placing it at the heart of financial services product design.

Finance

From accountants to advisors: changing roles and expectations

From accountants to advisors: changing roles and expectations 1

By Chris Downing, Director for Accountants & Bookkeepers at Sage

The line between strategic advisor and traditional accountant is blurring. Over the last year, 82% of accountants said their clients were demanding a wider service offering, including business and technology implementation advice. In the current climate this transition has only been accelerated.

Clients increasingly expect their accountants to take a more active role in change management and predicting their cashflow months into an uncertain future. This is enabling businesses to tackle the challenges of day-to-day operations, while keeping an eye on what the post-COVID world will look like, and the support they will need to return to strength.

To solve these new and complex, expectations accountants must develop a different way of working. They will be required to increasingly supplement the traditional, compliance and reporting aspects of their work with business advice and consultancy. To do this, accountants need the ability to move quickly and efficiently, with a firm grounding in technology and data control.

Get straight to the point

The priorities of yesterday are very different to the goals of today. Where businesses once focused on driving growth and efficiency, the objective for many now is continuity – understanding what government support is available and for how long. In the current climate, speed of delivery and client care are top of the agenda.

But the way accountants go about this is very important. Rules are changing every day – the definition of an ‘essential business’, government support and bank loan programmes are constantly in flux. In normal times, an accountant’s role is to ensure their clients are aware of and reactant to these changes. Yet, how much value does this create for them in the ‘now’?

To be valuable, new information must be delivered quickly but it should also be succinct. It isn’t useful for clients to be bombarded with email updates, or reports running into hundreds of pages, trying to explain the week’s changes. With so much present noise, it’s the accountant’s task to break through the information overload and provide the client with crucial resource only.

To understand client pain points and get to the heart of what they really need, a running dialogue is essential. Building individual client relationships will unlock the potential to deliver tailored experiences that meet their business demands. Armed with this insight, accountants can then distil complex information into digestible chunks.

A more entrepreneurial spirit 

Sharing insight is only the start.  The other half of the story relies on consultancy. In the Covid-19 environment, the routine aspects of an accountant’s work are being supplemented with the transformative changes they can make for clients. Cashflow projections for the next six months are crucial, but even more so is the advice an accountant can offer on improving the financial outlook of a business.

Chris Downing

Chris Downing

To provide this balance, accountants should embrace a more entrepreneurial way of thinking. Not only advising on how clients can meet current challenges, but also how they can innovate to drive new revenue streams in the future. Part of this means being willing to step outside of their comfort zone. Many firms are already investing in the skills and technologies they need to service novel demands – like advising on relevant accounting and finance technologies.

While many businesses remain closed to the public, even as lockdown eases, they have increased capacity and flexibility to shift operations towards what will be most effective and profitable. Clients will be open to changing their business focus to meet demand spikes in other areas as they do not have to account for a disruption to customer service. For example, many distillers shifted production from beverages to hand sanitiser while bars and restaurants were closed.

With their contextual understanding of client finances, accountants are uniquely placed to advise their clients on change and guide them through the transformation process. Though this requires a more innovative model of accounting, and one that is willing to embrace the latest technologies.

Truth in the cloud

Business advice needs to be backed by data, especially for accountants engaging directly with the CFO. Scenarios need to be modelled, analysed, tracked and compared over time to arrive at the most effective proposal for the client. This is outside the wheelhouse of traditional accounting, but it’s becoming necessary in an industry heavily disrupted by new technologies.

To keep up with the ever-growing need for rapidly available data and analytics capabilities, more and more accountants are turning to the cloud to consolidate and use their data estate, while automating the time-consuming tasks of data management. Indeed, the majority (91%) of accountants have said new technology has delivered fresh value to their business in the last year, whether it increases productivity or frees up more time to focus on client needs.

Against the backdrop of coronavirus and technological disruption, a new breed of accountant is quickly emerging. Innovation is possible for those who stay ahead of client expectations and are aware of their needs, embrace an entrepreneurial mindset and adopt the latest cloud and automation technologies. In this way, an accountant becomes an integral part of their client’s business.

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Finance

Preparing for the new normal and building a financial plan

Preparing for the new normal and building a financial plan 2

By Donna Torres, director of small business at Xero UK

There is some light at the end of the tunnel for small businesses. As the lockdown continues to ease many retailers and hospitality businesses are now opening up again, or preparing to return soon.

Preparing for what’s around the corner has always been key to business success. Whilst there is still much uncertainty, it’s more important than ever that businesses get in control of their finances and create a solid plan.

Having a strong understanding of your cash flow and a plan for the months to come is vital to helping you prepare for what’s ahead. If you’re unsure where to begin, here are five ways to start:

Take stock

Financial experts Lauren Harvey (Founding Director of Full Stop Accounts) and Jonathan Graunt (Founder of accountancy firm FD Works and Xavier Analytics) recently spoke with Xero about the uplift in businesses taking an interest in their finances and understanding their financial position.

Businesses should be using this time to review their processes and really understand their numbers. It can be helpful to reflect on your original statement – what do you really want your business to do? And has the pandemic changed this? Use this as the fuel to drive your business vision forward.

Consider the risks

The government has provided SMEs with a number of support schemes, but the conditions and capital being offered is changing.

For example, the Furlough Scheme will currently only run until the end of October and the deadline to furlough new employees has now passed. The government will also gradually be reducing the amount it pays under this scheme. Make sure you’ve accountanted for this in your financial plan so you have a clear picture of how furlough tapering off will impact your business and any adjustments you might need to make.

If you’ve taken out one of the Government backed loans, now is the time to start building repayments into your financial plan. Building a solid plan will also help to ensure that you use the money in the best way to support your business in the long-term. It can be tempting to fight the most immediate fires with your capital, but try to think about the longer term health of your business – and where the money is going to have the most impact.

Adapting to a change in demand

Covid-19 has forced businesses to adapt to a lot of changes and SMEs should be thinking carefully about how their customer demand has changed. What do customers expect from you now? For example, many are still apprehensive of shopping on the high street. This might mean some of the options you offered during lockdown like deliveries or online services should remain.

Communicate with your customers as much as possible to get an accurate view of what they need from you now and in the future. How can you fulfil this? Then it’s important to look at the numbers and scrutinise which areas are going to provide the most return on investment.

Financial Planning: where to start?

For financial planning to be effective, it’s helpful to get into habits that will provide an accurate snapshot of how your business is performing. Reconciling bank transactions daily, creating a daily simple cash flow check-in habit and examining your profit and loss statements weekly will give you a better understanding of where your business stands.

Apps like Float or Fluidly will help to give you an accurate look at your cash flow in an easy to read visual. And the recently launched Xero Short-term Cash Flow tool can help you project your bank balance 30 days into the future, showing you the impact of existing bills and invoices if they’re paid on time. You can then work out which invoices you should follow up on.

Some people can find this task daunting, but your accounts aren’t just being kept for reporting to HMRC, they are also there to give you invaluable insight into your business and to plan for the future.

Ask for help

Your accountant is there to help you to understand your finances. This is likely to be one of the biggest economic challenges you have ever faced as a small business owner. Now, more than ever, it is time to lean on your accountant to help create a robust plan.

If you do not understand something, or need guidance or clarification, get in touch and ask for their expertise and advice. If their advice doesn’t help, ask them to explain it again.

You can also check out Xero’s online guide to managing cash flow here.

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Finance

The impact and implications of Covid-19 on financial reporting

The impact and implications of Covid-19 on financial reporting 3

By Mark Billington, Regional Director, Greater China & South-East Asia, ICAEW

The economic consequences of Covid-19 have been unprecedented, affecting activity in nearly every country in the world. Indeed, the latest forecast from the Institute of Chartered Accountants in England and Wales (ICAEW) projects that most economies in South-East Asia (SEA) would fall into recession in the first half of 2020 and Gross Domestic Product will contract by 1.9 percent over the whole year[1]. Across the region, governments have had to bring in various fiscal stimulus measures to protect the economy.

Exceptional times bring tremendous challenges for businesses and requires leaders to have a clear view on the short- and long-term effects of Covid-19 on their businesses, and to respond accordingly. This starts with taking extra care to recognise the impact of Covid-19 in financial reports, especially of events which have occurred between the balance sheet date and the date when the accounts are authorised for issue.

Distinguishing between adjusting or non-adjusting events

As the coronavirus outbreak continues to evolve and more information comes to light about the nature of the virus and its impact, companies with 2020 year-ends need to consider how it has affected their business and how the effects should be reflected in the accounts at the end of their reporting period. This boils down to distinguishing whether Covid-19 should be accounted as an adjusting or non-adjusting event.

In December last year, China alerted the World Health Organisation (WHO) to several cases of an unusual form of pneumonia in Wuhan, central China’s Hubei Province. But it was only early this year when substantive information on what has now been identified as coronavirus (Covid19) came to light. As a result, for companies with a 31 December 2019 year-end, Covid-19 is generally considered to be a non-adjusting event.

This changes for companies which have early 2020 year-ends, who will need to consider the timelines more carefully to assess the conditions at the end of their relevant reporting period. For companies with 31 March 2020 year-ends, Covid-19 is likely to be considered a current-period event, which means that companies need to assess and record all events and conditions that existed at or before the reporting date. When it is determined to be an adjusting event, a business will need to review all areas of the accounts that might be adversely affected by the COVID-19 virus.

There may be a greater degree of judgement required when identifying the conditions at the end of the reporting period, and a closer assessment needed of whether developments are adjusting or non-adjusting.

Exercising judgement about conditions at the balance sheet date

Companies have to exercise significant judgement to determine the conditions that existed at the balance sheet date. This is heavily dependent on the reporting year end in question, the company’s own individual circumstances and the events which are under consideration.

A number of factors should be considered when making judgements about conditions at the balance sheet date. This includes the timing and impact on stakeholders such as staff, customers, and suppliers, of travel restrictions, quarantines and lockdowns, closure of businesses and schools; and government support initiatives. With each of these events, companies have to determine whether an event shines a brighter light on conditions at the balance sheet date or if conditions changed after the reporting date.

Mark Billington

Mark Billington

This evaluation in financial reporting is important because it affects the forecasting of future income and cash flows, which are based on conditions that existed at the balance sheet date. Estimating recoverable amounts might be very different for the same asset if the calculation was performed for a 2019- or 2020-year end.

Upholding values of corporate transparency and trust

In these times of uncertainty and crisis, it is even more important to be transparent about risks and assumptions used in financial reports, and to make disclosures as specific to the business as possible, to avoid the risk of financial reporting being downplayed. In fact, market regulator Singapore Exchange (SGX) and rating agency Fitch Ratings have recently cautioned companies against using alternative performance measures such as Ebitdac (earnings before interest, taxes, depreciation, amortisation and coronavirus) in their interim financial reports to flatter results, and stressed that “disclosures must be balanced and fair and avoid omission of important unfavourable facts”[2].

More than ever, businesses must continue to diligently uphold values of corporate transparency and trust and continue to disclose transparent and quality information to investors and other stakeholders. In order to do this, directors are tasked with the important responsibility to comply with various reporting standards and understand the circumstances of particular disclosures to provide a fair and balanced assessment of the company’s financial position and performance.

Covid-19 also has significant implications for audit reports on company financial statements. Preparing and auditing financial statements poses tough calls in difficult and unclear circumstances for directors and auditors. It is vital that these uncertainties are interpreted appropriately and in the context of the current unprecedented circumstances

As the business impact of COVID-19 continues to unfold and affect economies and the future of many organisations, businesses should continue to consider both their situation but also the wider economic landscape they operate in and reflect that in their financial reports.

[1] ICAEW, “Coronavirus Global Outlook: after the outbreak”, May 2020

[2] SGX warns against use of ‘earnings before coronavirus’ metric, The Business Times, 27 July 2020

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