Almost one third concerned about ability to meet financial commitments over next six months
Online research from Equifax, the consumer and business insights expert, reveals that 43% of British adults don’t have any personal savings set aside for unexpected financial events such as unemployment, illness or urgent repairs to their home.
The survey, conducted by YouGov ahead of the recent Bank of England rate rise, found that nearly one third (29%) of people , are concerned about their ability to meet all their financial commitments, for example rent, utility bills or mortgage payments, over the next six months. People are even more worried about their longer term financial commitments, with 37% concerned about meeting their obligations over the next two years. This figure rises to 48% for 35-44 yearolds.
Half as many renters (33%) have savings set aside to fall back on compared to homeowners (67%), despite 43% of people who rent expecting their rent payments to increase to some extent in the next year, and of these people, 42% say they’re unable to afford any increase.
Jake Ranson, Banking and Financial Institution expert at Equifax Ltd, said: “The extent to which people live pay cheque to pay cheque with no financial cushion is a particular concern in the current uncertain economic environment. Debt levels are on the rise and wherever possible consumers should budget for unexpected expenses. The recent interest rate hike highlights the importance of setting aside some cash to counter any financial shocks.
“To help consumers better manage their finances, companies must ensure they offer products that match an individual’s financial capacity in the long term, taking into account economic jolts that could impact their ability to meet repayments.”
Cash in the time of Covid-19: A tale of financial exclusion
By Matt Adam, company’s chief executive, We Are Digital
Financial exclusion rates are on the rise thanks to Covid-19. But what are the solutions to this significant finance problem in a post-pandemic world, asks Matthew Adam, chief executive, We Are Digital?
Cash is fighting to survive Covid-19. Globally, from the UK to Australia, contactless payments have become a necessity for shoppers. Various retail outlets, responding to reports that Covid-19 could be transmitted through handling money, quickly put up “no cash” signs, cutting off millions of shoppers worldwide from access to essential goods.
Bank branches across the world closed or pared down operations. In Australia, open ATMs are at their lowest number in 12 years (Australian Payments Network), leaving 2.5 million elderly Australians, some of whom fear being scammed online, compromised.
Finance providers in countries including the UK, the Netherlands, Belgium, France, Germany and Luxembourg have raised the amount consumers can spend just by tapping a debit or credit card to move shoppers further away from physical money. In the UK, the use of ATMs has dropped by 80%.
But cash remains key for millions across the world, and some are fighting to keep it. In July, US banks were told they would not be able to use Covid-19 as a cover to close branches or win permanent regulator concessions by Officer of the Comptroller of the Currency (OCC) acting head Brian Brooks. In Britain the Financial Conduct Authority warned that banks must protect consumers’ access to cash, providing alternative ATM services for elderly and vulnerable customers elsewhere if they close further branches.
Not every economy is reacting in this way. China and Sweden have already seen the top-down imposition of a digital currency; the Chinese central bank’s digital yuan plans currently dominate fintech media headlines. Sweden’s Riksbank is testing the e-krona and has even set a date by which the country intends to become cashless in 2023.
Sweden, however, is a country where even the poorest have access to tech and digital exclusion is almost non-existent and where cash reserves will still be available for the elderly and vulnerable. On a global level, with high rates of digital exclusion still prevalent, is a wholly digital currency achievable? Or even desirable for millions across the globe?
An anxiety-inducing shift
In much of the world, the swift shift to digital for the bulk of consumer transactions has, for some, caused a great deal of distress and anxiety. This is especially the case for those for whom contactless payments are not an option.
Financial exclusion – the inability to access finance, banking and income – is not as uncommon as you may think. Nor is it entirely the preserve of the elderly, vulnerable or poor. In the UK, one in four adults will experience financial exclusion at least once in their lives (The Inclusion Foundation), while 7.4 million people rely on a basic bank account, products designed for those with poor credit scores – the provision of which costs banks £350 million each year in administrative fees.
The world’s ‘unbanked’
In 2017, the BIS found that 10% of Europeans don’t have a bank account. Italy is home to the highest rate of financial exclusion at 16%. For the world’s poorest, online banking is a huge stumbling block – one which keeps millions in a state of poverty. The world’s ‘unbanked’ are charged much higher fees for basic transactions, while their access to other financial products and services like savings accounts, insurance and pensions is often limited.
The pandemic has merely highlighted this significant social issue. Globally, regardless of Covid-19, those who are unable to embrace a move to cashless risk being left behind and stuck in the poverty premium of financial exclusion. This is the condition around 14 million people in the UK who are forced to pay extra for essential goods find themselves in.
Research from the Personal Finance Research Centre at the University of Bristol suggests this costs the average low-income household £490 each year. For more than one in ten of these households, this figure rises to a staggering £780. Thanks to Covid-19, this figure is likely to be even higher when reassessed.
In the UK, just one in eight low income households have managed to strengthen their finances since the start of the crisis compared with two fifths of higher income families (Joseph Rowntree Foundation, June 2020). Meanwhile youth unemployment levels are on course to more than triple the highest levels since the early 1980s (The Resolution Foundation, October 2020).
For some, cash is still preferential too. When asked what types of payments they expected to use in the next six months, more people responding to ING International Surveys picked cash than any other method, despite Covid-19 (September 2020).
Breaking down the barriers
There are millions in desperate need of positive and practical solutions to break down the barriers financial exclusion raises. Training across all the areas touched by financial exclusion – online banking tuition, debt management and advice, provision of a wider range of financial products and services – is a measurable route out of poverty for the world’s financially excluded.
Over the course of the pandemic, we have worked with our corporate and banking clients to ensure the UK’s most financially excluded gain the financial understanding and digital skills they need to stay on top of their finances. We’ve seen first-hand how critical financial inclusion is to maintaining quality of life. It has been a privilege to witness the impact we’ve made in just a few months of working with banking customers and referrals in the charity sector.
To have any hope of solving this issue, it is key to acknowledge the full social scope of the problem, which is associated with poor levels of both mental and physical health and wellbeing and low quality of life. Community investment must be at the heart of any financial training or fintech programme and a joined-up approach pooling the resources of both financial sector and government is essential.
Campaigning for change
In the UK we hope to see central government directly acknowledging and tackling the issue of financial exclusion. A parliamentary Select Committee on Financial Exclusion (March 2017) called for the appointment of a minister responsible for financial exclusion to champion the rights of Britain’s financially excluded and to campaign for both recognition and change.
We believe it’s time such an idea was seriously considered – not just in the UK, but globally, even, considering the scale of the issue. Improved mental health, higher quality of life, better
physical health and wellbeing are all additional outcomes of improved levels of financial inclusion. Educating the financially excluded on what so many take for granted as the basics of life truly is an opportunity for societal and economic change none of us should allow to fall by the wayside.
Digital Finance: Unlocking New Capital in Disrupted Markets
By Krishnan Raghunathan, Head of Finance & Accounting Services at WNS, explores how a digitally transformed finance department can give enterprises the ability they need to improve cash flow and revenue through better use of data and improved analytics-driven visibility.
Businesses everywhere are scrambling to recover lost revenues and protect cash flow. But as countries globally grapple with a dreaded second wave of the pandemic, imposing far more stringent localised lockdowns and new restrictions, it is set to be the hardest winter in living memory for many sectors.
The likelihood of winter peaks, so often the saviour of sectors such as travel and hospitality, benefitting businesses is diminishing rapidly. While many have pivoted to a greater or lesser degree, few have been able to offset the impact of falling revenues on cash flow. Even retail, riding an e-commerce boom in many regions, is finding itself in choppy waters, with 17 percent of consumers switching brands due to the economic pressures and changing priorities caused by the pandemic.
As one McKinsey article notes, “With some companies losing up to 75 percent of their revenues in a single quarter, cash isn’t just king – it’s now critical for survival”. Where then do businesses find new sources of cash to sustain their operations through the coming months?
Tapping Overlooked Cash Opportunities
For many, the answer could depend on whether they have digitally transformed their finance department. Why? Because many organisations are sitting on unidentified opportunities, funds that could be vital in shoring up businesses over the next few months or plugging the gap between operating costs and government bailouts. Yet those that have been slow to start their digital transformation journey are at a disadvantage;. At the same time, it is possible to identify these hidden seams in an analogue organisation, the process is time-consuming, manually intensive and, without the right digital tools, prone to human error.
Where deploying digital tools helps is by bringing speed, automation and reliable data to the fore. Connecting them with digital finance and accounting systems can give businesses clear insights into how money is being spent, where wastage is occurring, and where opportunities for optimisation exist.
It might be something as simple as automating the accuracy checking, issuing and chasing of invoices and late payments. This could reduce errors and invoice disputes and ultimately lead to faster payments. Accuracy and organisation are also important in billing – better records enable faster billing for work completed, and in turn, should deliver quicker payments.
It could also be around having the ability to review the supply chain and procurement data and identify where a supplier is subsidising a larger customer’s product line through drawn-out payment terms, or where a variety of vendors are on different terms across the business. Using that data and overall knowledge of the business to negotiate better terms that work for both supplier and customer can create new opportunities. It could even be to identify late-paying customers, determine the reason for late payments, and use that intelligence to develop products or financing solutions that continue to support those customers (and improve loyalty) without increasing the burden on the balance sheet.
Generating Reliable Insights for Faster Decision-making
To do any of these manually would take months, generating data slowly that would quickly go out of date. But digital finance departments have evidence they can trust to inform business decision-making. That’s because old, manual processes built around Order-to-Cash lack the flexibility and agility that businesses require in today’s markets. The fact is that even before the global pandemic crisis, the pace of digitisation across all sectors was demanding new approaches to finance and book balance.
The opportunities are significant – from cognitive credit and improved forecasting accuracy to enhanced customer analytics. All use similar tools, based on artificial intelligence and quality, trusted data. Cognitive credit can be deployed to quickly make decisions on whether to advance or restrict credit, based on individual company positions and available data. Doing so enables businesses to either capitalise on opportunities (for instance, agreeing credit for a supplier that has run out but is a supportive and integral partner) or avoid risk (in the cases where a business might be in administration).
With more accurate forecasts, businesses can better manage their currency purchases and deposits, selling currency that is not required or buying more where predictions identify an upcoming demand.
It is the same with customer analytics – with a greater understanding of customer needs, businesses can make decisions based on the right mix of the product (and how it meets demand) and supply chain suitability (such as production costs and location in relation to customers).
In many ways, the events of the past year have accelerated the process. In doing so, the problem is the pandemic has also accelerated the speed at which failure to act can lead to obsolescence. Therefore, it is vital that businesses, and more particularly their finance and accounting departments, kick start their digital transformation. This will enable them to deploy the tools and analytics that is needed to capture data, generate insights and drive fast, accurate decision-making to uncover previously untapped sources of cash and reverse revenue degradation.
The Importance of Digitally Enabled Finance Teams
Forward-thinking CFOs have already begun the process of digitising their departments, but for those that have been slow to start, now is the time to push forward. It is only through digital tools and analytics that finance leaders can identify both the internal and external opportunities to recover revenue and improve cash flow. Whether that’s releasing working capital, minimising revenue loss and accelerating revenue recovery, reducing total cost of ownership or enhancing customer retention – only digitally enabled finance teams will be in a position to capitalise and, ultimately, bolster business performance during what will be a trading period like no other.
O-CITY enters Kenya to drive contactless payments across Matatu bus service
Up to 10,000 buses to become cashless with O-CITY’s M-Pesa-based ticketing solution
O-CITY, the automated fare collection provider by BPC, today announces its initiative to drive contactless payments across bus services in Nairobi, Kenya. The O-CITY pilot, designed to reduce the use of cash in response to the COVID-19 pandemic, was launched in partnership with transport savings and credit specialists, NikoDigi, and Kenyan payments firm, Tracom, to accelerate the deployment of cashless fare collection.
Used by 70% of the population in Kenya, Matatu buses are a dominant transport mode across the country whereby passengers traditionally pay in cash. O-CITY’s automated fare collection platform leverages the M-Pesa mobile wallet, which is used by 90% of the population in Kenya. Passengers enter a code on their phone and a debit is made on their wallet, which can be instantly seen by drivers to grant access to ride. The platform removes unnecessary tickets and cash payments, instead offering an accessible payment solution that consumers already use, via a device already in their hand.
O-CITY’s platform is also built to make fare collection more transparent between the bus owners and drivers. Buses and routes are privately owned by several operators who ‘lease’ to drivers who must meet daily financial fare targets, before generating their own earnings. Fare pricing differs depending on the route and a range of factors, so digitising the transactions enables visibility and reliability of fare data. With heavily congested routes in Nairobi, digitising fare collection also serves to remove the friction of exchanging money and time taken for drivers to pick up passengers.
An important part of O-CITY’s pilot is an educational campaign to get the bus owners and drivers on board to become champions on the service. With teams on the ground at drop off points promoting the benefits of the service, buses and drivers can enrol in as little as 10 minutes. Local marketing on buses also promotes the ability to pay digitally to passengers.
Patrick Karera, MD at Nikodigi: “Having provided savings and credit management solutions for both the Matatu and Boda Boda (motorbike taxi) sectors, Nikodigi understands the needs of vehicle owners and drivers. Together with our partners, we have designed a product that automates fare collection without taking control away from the drivers and conductors or radically changing how they operate. We dubbed the solution “Lipafare” meaning ‘pay fare’. The platform has been embraced by passengers because of its ease of use, but also because it eliminates cash transactions during the COVID-19 pandemic.”
Tokhir Abdukadyrov, SVP of smart city and transport solutions at BPC: “A mobile money revolution has been happening in Kenya with the ubiquity and success of M-Pesa. The move away from cash to contactless public transport is an important part of this movement. At O-CITY, we know that innovation does not always require new technologies, but instead new ways of performing a task. By connecting our O-CITY platform to mobile wallet M-Pesa, we’re able to build a simple contactless fare solution that is familiar to the customer and likely to encourage adoption. Moreover, it enables us to scale fast to rollout the service at a time when cashless payments have a newfound importance.”
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