By Simon Featherstone, global CEO of Bibby Financial Services
‘The BRIC economies’ is a phrase that is understood in all corners of the world. First coined by economist Jim O’Neill in 2001, the acronym was created to identify the future global economic powers of Brazil, Russia, India and China, and signal a shift away from the traditional powerhouses of the G7 nations.
O’Neill has hit the headlines again this year by championing the next breed of economies with high growth potential – the MINT economies. Mexico, Indonesia, Nigeria and Turkey have all been earmarked by O’Neill as the countries that could succeed the BRIC nations.
Already the acronym has taken hold as journalists, analysts, politicians and businesses around the world debate and monitors this latest economic prediction. But how much of a bearing does a forecast by one economist have on the millions of businesses around the world? Should you be trying to crack the MINT economies as soon as you can?
MINT may well be the new buzz term, and perhaps with good reason, but it does not necessarily mean that they are the best growth countries for your sector, product, and service. If you are planning to enter a new market don’t just go on a hunch or the latest fad, do your research and do what’s right for your business.
One of the problems we see as a business funder is a lack of confidence to export among businesses that is caused by practical and cultural barriers, particularly in emerging markets such as the BRIC and MINT nations.
Understanding which markets are best for your business and then getting to know those chosen markets is not a quick process. It should be something that is given due consideration and time, an ongoing process of gathering and monitoring.
So was BRIC a success?
O’Neill’s latest prediction is exciting and definitely deserves greater investigation, if not action, but it does raise the question of whether BRIC, the original acronym, fulfilled its potential? Are the BRIC nations still growing? Did they achieve their expected potential after 2001? Are they still a viable target for those seeking profitable markets in which to trade or grow their operations?
There were varying theories on what potential the BRIC nations could realistically achieve and, crucially, in what timescale. In global economic terms, 13 years is probably not enough time to create a new superpower. Some thought that these economies would usurp the G7 nations within a matter of years, and others believed that it could take much longer.
Undeniably the influence China and Russia have on the world stage has hugely increased. China recorded double digit GDP growth between 2003 and 2007, whilst Russia also saw growth at around eight per cent during this period. However, Russia plummeted to around minus eight per cent in 2009 before recovering to around three per cent recently. China has also seen a fall in GDP growth in the last couple of years.
Brazil’s growth has looked far less stable with GDP fluctuating year-on-year since 2001 – although only dipping to minus 0.3 per cent at its lowest in 2009. With the FIFA World Cup arriving in Rio this summer and the Olympic Games in two years’ time, the investment, improvement in infrastructure and boost to tourism could present the opportune moment for Brazil to really reach its long-awaited potential.
India has also struggled to reach the heights of growth achieved by Russia and China, with GDP growth peaking at over 10 per cent in 2010 but falling significantly since then.
That said, these economies are still producing GDP figures that many developed economies dream of achieving. So, does this mean the BRIC prediction was right? It is too soon to be certain, but when you consider the global economic turmoil since 2007 they have definitely not been failures.
It’s worth pointing out that since the widespread adoption of the BRIC acronym, there have been many other suggestions by economists, analysts and commentators as to the next world-renowned economic acronym. The reason that MINT has really taken hold is most likely because it is backed by O’Neill, and also because, once again, it is very memorable.
There are of course many robust reasons why the MINT nations could see strong growth in the coming years. All four nations benefit from a strategic location with strong neighbouring economies. Mexico’s neighbours are the US and South America; Indonesia is at the heart of South East Asia and close to China and Australia; Turkey lies exactly where East meets West on the edge of Europe; and Nigeria has the potential to become the hub of Africa. Significantly, their populations are young rather than ageing, showing great promise for a burgeoning workforce that will all contribute to GDP and the wealth of the country.
Goldman Sachs has predicted that these factors, along with many others, will make Mexico the 8th wealthiest country by 2050; Indonesia is predicted to be the 9th wealthiest country; Turkey will be 14th; and Nigeria, which is currently 39th, is expected to be 13th.
What about other markets?
The danger of creating neat acronyms is the risk of missing out a potential high-growth market. Has this happened with MINT?
The MINT acronym is a neat and tidy way of bringing together a group of countries that have huge future potential due to a number of factors. However O’Neill’s prediction is by no means a guarantee that these markets will reach their potential; there are many things that can de-rail a growth plan – natural disasters, terrorism and political insecurity are a few that come to mind. All of these are very real risk factors that must considered by any business looking to enter these markets.
So what should businesses consider?
First, utilise the guidance and expertise that is available both in the domestic market and also in your target markets. Seek out similar businesses and competitors and find out as much as you can about their operations – where are they trading? How did they enter the market? What practical, legal and financial barriers did they need to overcome?
Understand the trading cycle
When conducting your research make sure you take time to understand the trading cycle. We find that it can be overlooked by SMEs entering a new market, particularly if a business is not well versed in the process of trading internationally.
Negotiating at which point the purchaser takes responsibility for the seller’s goods is critical, as responsibility for insurance and transportation costs can jeopardise the protection of the goods and dramatically increase the overall costs of sale.
Businesses can sometimes get caught up with the excitement of new orders from abroad and then find they are liable for the delivery of the goods, all the way to the buyer’s door. Without checking the terms, they can also find themselves responsible if something happens to the goods during the exporting process.
Funding a move into a new market and managing cashflow are also key concerns for many businesses at this critical time. Cashflow in particular can come under considerable pressure due to the investment required, payment terms lengthening and orders picking up pace.
The good news is that there is a wealth of flexible funding products beyond bank loans and overdrafts that are ideally suited to supporting high-growth exporters experiencing cashflow pressure.
Ultimately, there are endless opportunities around the world, particularly as many emerging economies are reaching a critical stage in their growth and development, and there is ample room for businesses of all sizes in all sectors to seize these opportunities and grow.
My advice is to do research, understand the trading cycle and seek the right funding solution that will support your specific needs.
Economists and analysts will always be looking for the next big thing, the next memorable acronym and new global trends. Whilst it is useful to keep abreast of this information, remember that every business is different, each opportunity is unique and there will never be a one-size-fits-all approach.
Satisfaction with Credit Card Issuers in Canada Remains Flat Amid COVID-19, J.D. Power Finds
Tangerine Bank Ranks Highest in Overall Credit Card Customer Satisfaction for Second Consecutive Year
With 73% of credit card customers in Canada saying COVID-19 has negatively affected them financially and 24% who say they are unable to make monthly credit card payments, overall satisfaction with their primary credit card issuer remains relatively flat year over year at 764 (on a 1,000-point scale), according to the J.D. Power 2020 Canada Credit Card Satisfaction Study,SM released today.
“While credit card issuers in Canada are faring somewhat better than their U.S. counterparts in averting the negative effects of COVID-19 on customer satisfaction, they are not out of the woods,” says John Cabell, director of banking and payments intelligence at J.D. Power. “Credit card companies are falling behind in key areas related to the customer experience, especially in factors linked to financial sensitivity and customer support channels, which are crucial during the pandemic.”
According to the study, despite a one-point increase in overall satisfaction from 2019, credit card issuers have experienced a year-over-year decline in key performance indicators (KPIs) related to interactions with credit card customers, such as showing concern for customer needs; appreciating customer business; problem-free experiences; card activation; and reward redemption. As a result, satisfaction is down 12 points in assisted online experience and down 11 points for call centres.
More than half (55%) of cardholders acknowledge COVID-19 has changed their card usage habits, mainly by spending less. Understanding customers’ needs and addressing their changing priorities can help card issuers to mitigate future decline in satisfaction and elevate loyalty. The study shows that offering free or discounted services in response to COVID-19 are the actions driving a more positive impression of the issuer (39% and 35%, respectively), followed by gestures such as employee support (33%); waiving fees (32%); and community support (32%).
“The pandemic presents an opportunity for issuers to align their card services and benefits with customers’ evolving needs,” Cabell said. “Issuers can increase the perceived value of the card and strengthen loyalty. Offering discounted airline tickets or free airport lounge access is probably not as lucrative these days for cardholders as, for example, it would be to extend the duration of annual fees.”
Following are additional key findings of the 2020 study:
- Satisfaction declines with household income: With 29% of cardholders earning less during the pandemic, many are looking for relief from their credit card company and are more critical of card issuers. In fact, credit card satisfaction among customers whose household income has declined due to the pandemic is lower than among those whose income remained unchanged. The largest gaps in satisfaction are in rewards (-12 points); benefits and services (-11); communication (-8); and customer interaction (-8).
- Call centre woes: The pandemic has put a greater strain on call centres, which has negatively affected satisfaction. Caller wait times jumped to more than 12 minutes during the pandemic compared with less than 8 minutes prior to the pandemic. Also, caller satisfaction with the level of courtesy exhibited by call centre representatives declined significantly, which calls out the need for card issuers to restore best practices among their reps and identify better ways to manage customer support.
- Cardholders are digitally savvy: Nearly two-thirds (64%) of cardholders solely rely on digital channels to manage their primary credit card activities, and those cardholders are more likely to say it is easy to understand information about their account and do business with their issuer than do cardholders who do not rely solely on digital channels. In fact, one of the bright spots in the study is improvements in customer satisfaction with mobile and online interaction of 8 points and 7 points, respectively, from 2019.
Tangerine Bank ranks highest in overall customer satisfaction with a score of 825, which is 61 points higher than the industry average of 764. American Express (801) ranks second and Canadian Tire (793) ranks third.
The Canada Credit Card Satisfaction Study measures satisfaction of cardholders’ primary credit card issuer. The study measures performance in six factors critical to the customer experience (in alphabetical order): benefits and services; communication; credit card terms; customer interaction; key moments; and rewards. The study includes responses from 6,728 cardholders who used a major credit card in the past three months and was fielded in May-June 2020.
The impact of the Accounts Payable risk landscape
By David Thorley, Director of Customer Development, FISCAL Technologies
The current economic climate has never been so uncertain. Not since the 2008 financial crash has there been a period where organisations are mindful about how the markets will play out and the effect this will have on economies around the globe. As a result, organisations have become increasingly conscious about the way they spend money, but they have also become more aware about how they save money.
The Accounts Payable (AP) department aims to reduce the amount of money lost in an organisation, making sure all payments are completed on time and are done so correctly, but this is unfortunately not always the case. For example, half of large organisations have duplicated or misdirected a payment to suppliers. This roughly accounts for £3 million being directed to the wrong supplier and resulting in a long and lengthy process in getting this money reclaimed. On top of this, 33% of organisations experience internal fraud every year, with an average loss of half a million.
Therefore, it is clear that in almost every financial department things slip under the radar, but what are some of the risks in the AP department and how can they impact a company?
Lost opportunities reducing income
The capacity for AP resources to work on higher value activities is reduced due to error and query resolution, this can range from anything from chasing up suppliers to looking for a misplaced document. As a result, those within the department are limited to what they can do due to these mundane, repetitive tasks.
Ultimately, lengthy pre or post audit activity reduces the ability of the business to transact, limiting growth and reducing competitiveness, all of which can be avoided if the correct tools are in place.
In some geographies and industries, errors and adverse findings in statutory audits can lead to financial penalties. These penalties can be anywhere from a few thousand pound to tens of millions. Just last year a leading consultancy was fined almost £20m for poor auditing. Payment Policy infringements can reduce an organisation’s ability to bid for certain types of contracts; critical infrastructures for example, which can have a significant impact on the way an organisation operates.
Payment errors and fraud directly affects the bottom line, which can result in a major impact in the financial reporting. Often financial reporting is skewed resulting in liquidity and profits being reduced. In public sector organisations, these lost funds reduce the capital available for frontline services, which can not only impact the quality of service provided but could also affect the reputation.
Increased processing costs
Invoice exceptions prevent supplier invoices being processed automatically. AP staff spend an inordinate amount of time checking, correcting and managing invoice exceptions, which significantly increases processing costs and time. Given the current climate, this time and money could be put to better use, helping a company grow and expand.
Organisations making overpayments – paying duplicate or incorrect invoices – and fraud are a common problem. Together, these account for between 0.5% and 1.5% of the number of invoices processed, with the cost running into millions in many cases.
As a result, whenever an audit is conducted, the AP team spends time finding and providing information and documents. The more issues that are found, the more time audits take to identify and recover lost cash.
AP teams will frequently need to check supplier records during their normal transaction processing. Large, unmanaged MSF hold numerous duplicates and no-longer-required records that create more payment errors and hours spent investigating and resolving queries.
Whether a private or non-profit organisation, fraud, errors, compliance breaches or poor financial results all heighten the risk of reputational damage for the organisation generally and the finance director in particular. The reputational damage caused by a high profile incident of fraud can be significant, affecting the business’ credibility and even the share price.
The shockwave from fraud can be more damaging than the financial loss. After a fraud is discovered, considerable time will be taken up investigating every new potential risk of fraud. Whatever the outcome of the investigation, this is an unwelcome distraction for the managers concerned. But, more importantly, the effect on morale and belief in the leadership’s capabilities throughout the organisation – not just the finance team – will be harmed.
Managing these risks
AP assures the protection of cash within an organisation, identifying risks and resolving them. To do this effectively and efficiently it’s imperative AP departments have the correct tools in place to ensure they follow a simple process that allows them to save time and money, helping their organisation both in the short and long term
 (The Hackett Group, Key Issues Study 2020)
 Source: https://www.qsoftware.com/fraud-prevention-and-detection/erp-fraud-prevention-key-measures/
Regulating innovation: the biggest challenge in payments
By Fady Abdel-Nour, Global Head of M&A and Investments, PayU
Over the course of the last six months, the payments industry has been lauded as one of the most impressive in its agility responding to Covid-19. Consumers and merchants have flocked online and safety has been a significant driver of the move to digital as entire countries discourage the use of cash – but what of financial and data security?
As digital payments adoption accelerates, there’s no time to waste. The pressure is on for governments and regulators to not only ensure security keeps pace with new consumer demand, but to look ahead and clear the road for future innovation.
Acceleration in digital payments
At PayU, we operate in 20 markets across the globe. Since the start of the pandemic, every single one of these markets has seen a seismic shift in consumer habits. In Poland, for example, the number of new onboarded e-shops was three times higher between March and May than in previous months. And in Colombia, e-commerce activity was 282% higher than pre-lockdown levels. Some merchants across our markets saw year-on-year revenue growth of a staggering 500-1000% during April and May.
New merchants are seeing this potential, moving online to increase their customer base and keep economies ticking. But with great innovation comes corresponding regulations. How can regulators keep up?
Innovation vs. regulation: an incompatible duo?
New ideas and technologies are undeniably critical to ensure services keep up with consumer behaviour. However, for this to happen safely, there needs to be collaboration between our industry’s innovators and regulators. Progress requires us to challenge and expand existing boundaries, holding our shared goal in mind.
Important as this concept is, it is by no means revolutionary. The widely pedalled narrative that innovators and regulators are at loggerheads is, quite frankly, outdated. It is not true that innovation in financial services has to disrupt existing systems and infrastructure. We have already seen countless examples of regulators working with the fintech ecosystem to enable and support innovation.
Across the emerging markets that PayU operates in, innovation initiatives are in place to educate entrepreneurs on the regulatory environment in which they operate. In Brazil, the central bank has established a sandbox, the Laboratory of Financial and Technological Innovation, to help fintech startups work more closely with regulators and government and accelerate the development of their ideas. The aim is to create a more efficient financial system, increase financial inclusion and reduce the cost of credit through better regulation. As the country rolls out Open Banking, acknowledging fintech’s potential to drive better socio-economic inclusion is incredibly encouraging.
It would be remiss of me not to mention The Monetary Authority of Singapore (MAS) here. To date, it has excelled in driving positive change by ensuring new players and services can operate within regulatory constraints. If they are unable to do so, the MAS reviews its framework and, where appropriate, adjusts it to safely progress innovation rather than stifle it. In 2019, for example, it issued five new digital bank licenses. Later in the year, it launched the Sandbox Express to help create a faster option for testing innovative financial services in the market.
The open-minded and collaborative approach of these regulatory models marks the future of financial regulation to me. The world is changing quickly and the parameters that keep us secure have to adapt and morph more than ever before. The job is not simple, but it can boost innovation and build a safe and sustainable financial environment, where pioneers are empowered to set the pace for change.
Consumer demand is only one side of the (digital) coin
The other trend creating complexity for regulators is the move towards embedded finance and Big Tech’s involvement in this.
Broadly, embedded finance means that fintech services are expanding beyond the walls of banks and becoming part of other business models rather than a standalone entity. This is a challenge in itself, as regulators will need to be vigilant to ensure that payments, credit and other financial services remain secure and customers are protected.
Across Europe, the US, Latin America, Asia and Africa, governments have also been grappling with how to regulate Big Tech. Facebook, for example, has launched ‘Facebook Financial’ to pursue opportunities in digital payments and e-commerce. Similarly, regulators in Brazil and India have been trying to navigate WhatsApp’s attempts to establish its new payments feature in both markets. These features were suspended by Brazil’s central bank and have been in testing in India for over two years.
The good news is that regulators are paying attention. The pushback we’re seeing is not simply aversion to change, but industry experts exploring how these developments can keep consumer needs at the heart and enhance the current payment ecosystem. New business models and new players are important to keeping us all at the top of our game.
Regulating a changing financial ecosystem
We’re in a truly remarkable age, where the role of regulation is being tested again and again. I believe that regulators have a more vital role to play than ever. Covid-19 has been a powerful catalyst in the financial sector and there is some positive change to be harnessed from the disruption.
If navigated shrewdly, regulators will succeed in capitalising on new trends to retain their core purpose: to ensure the safety and security of the customer and support positive change. The whole industry will need to work together closely to build a regulatory framework that is fertile for innovation and allows us to realise the enormous potential of payments in this new decade. So, what are we waiting for?
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