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SPANISH CRISIS COULD BE TIP OF EURO ICEBERG

SPANISH CRISIS COULD BE TIP OF EURO ICEBERG

Daniel Stanley, Option Trader at London-based foreign exchange specialists Global Reach Partners

Daniel Stanley

Daniel Stanley

To borrow from one of most famous lines from Shakespeare’s Hamlet, something is rotten in the state of Spain today. Catalonian political figures being arrested and hauled before courts in Madrid on charges of rebellion and sedition or fleeing Spain to avoid such a fate are not the usual occurrences within a modern western democracy, especially one which is a fully- fledged member of the European Union.

Regardless of any leanings towards or against Catalonian independence (or a complete indifference about it), the recent events in Spain are a real concern for the wider European and international community.

The reaction of Spain’s national government after the Catalonian leadership staged what was deemed to be an illegitimate referendum can only be described as heavy-handed. What is undoubtedly a significant political disagreement with one of its regional authorities was met with physical violence from police and the might of the country’s judiciary system. These unfortunate actions are having an adverse impact in many areas, not least the value of the Euro.

In early October, where around 90 per cent of Catalans who participated voted for independence, the Euro fell by 0.6 per cent against the dollar to approximately $1.174, one of its lowest levels since mid-August. Market analysts, who predicted at this point that the referendum would likely start a new phase of political instability for the EU, have so far been provedright. After making a small recovery, the Euro once again fell against the dollar later in the month when the Catalan regional assembly voted to leave Spain.

With the Madrid government branding the declaration illegal and Spain’s Supreme Court now pursuing rebellion charges against Catalonia’s ousted leadership, including the former regional president Carles Puigdemont, who knows what further adversity may follow. The EU’s failure to take any sort of action so far is not helping matters.

The Euro remained strong after the UK’s Brexit vote but the current Spanish crisis along with the recent German elections, which saw an unexpectedly strong showing from the right wing AfD, are now threatening to destabilise all that.

Events in Spain are worrying enough for the EU but they are also currently masking two other elephants in the room, namely Greece and Italy. While the media focus on these countries may have gone quiet for the moment, both have failed to meet fiscal reforms and austerity measures, all of which has real potential to trigger a serious economic crisis throughout the Euro-zone. Despite their dire predicament, both countries have managed to get funds, saving them from defaulting, but this situation is not viable in the longer run.

Italian banks are facing a crisis similar to the one which hit US and UK banks in 2008, sitting with around $400 billion in bad loans on their balance sheets. The country’s weak growth is making it difficult to address the problem. Meanwhile, the pain of reforming its economy continues to be inflicted upon Greece with questions still lingering as to whether it may still have to leave the single currency to free it from its current cycle of unmanageable debt.

These factors, along with Spain, have real potential to continue driving down the value of the Euro with wider global implications. Here in the UK, where manufacturing exports into the EU have recently soared on the back of a low Pound, a sustained fall in the single currency presents a major threat. While Spain itself only imports 4.1 per cent of its goods and services from the UK, its current actions threaten Britain’s trading position with all countries in the Euro-zone, including larger markets like Germany and France.

Any further pressure on the value of the Euro could see orders from these and all other EU countries decrease. This could also impact on the UK’s tourism sector, which had enjoyed a post-Brexit boost in 2016. Last year 25.3 million EU visitors came to the UK, up four per cent on 2015, a rise which was partly attributed to the weak Pound against the single currency.

A fall in the Euro is, of course, not all bad news for UK business. It presents an opportunity to lower costs for those which source goods in the EU or have employees based there. It is, however, vital that companies implement a robust and comprehensive risk-management strategy to minimise their exposure to foreign currency movements which often result from political uncertainty such as we are seeing in Spain.

Businesses with foreign currency requirements, especially those which trade across the UK and within EU nations, need to look at how they can best conduct their transfers strategically to manage their exposure and secure profitability. The starting point for developing such a strategy is to clearly understand what their level of exposure is in terms of currency movement. From there they can set out an appropriate budget rate and create a suitable hedging plan. Using a combination of forward contracts, spot deals and orders according to such a strategy can provide certainty and protection, shielding their bottom line and maximising the funds they receive.

No Shakespearian prose can gloss over what is currently happening in the rotten ‘state of Spain.’ With potential for the negative repercussions of this crisis and others looming within the EU to be felt far and wide, it’s important for businesses to safe-guard themselves and their exposure to foreign currency fluctuations which seem likely in the weeks and months ahead.

Finance

Barclaycard launches new service to redefine supply chain payments for businesses

Barclaycard launches new service to redefine supply chain payments for businesses 1
  • Barclaycard Payment Intelligence uses data to help businesses of all sizes better understand and nurture their supply chains
  • The brand-new technology analyses each supplier against a range of factors to create a bespoke payments strategy
  • The solutions help combat late payments, save time and generate savings
  • Strong supplier relationships are even more crucial in challenging circumstances

Barclaycard has launched Barclaycard Payment Intelligence (BPI), a new service which uses in-depth data analytics to provide procurement departments with the most comprehensive picture of their supply chain – driving cost efficiencies as result.

The service combines hundreds of accounts payable data points with internal and third-party data. This helps customers develop the right payment solutions for their various suppliers in a fraction of the time it would take to do manually.

The technology helps businesses catalogue their suppliers based on the number and value of transactions as well as their size, location, industry and whether early payment is likely to generate savings, to create a comprehensive overview of the entire supplier framework. For companies with thousands of suppliers – big and small – on their books, the new product can offer a significant time and cost saving for key decision makers.

Specifically, Barclaycard Payment Intelligence allows business buyers to understand:

  • Their current supplier payments profile, analysed and presented in different formats
  • Their suppliers’ payments preferences and capabilities – such as being able, and willing, to accept card payments
  • How critical, as a buyer, their business is to each supplier in their chain
  • The best timeframe for paying a supplier to ensure early payment discounts are taken advantage of, and to protect the supplier’s cashflow

A set of algorithms created by Barclaycard Payments then translates these insights into a bespoke payments strategy, which allows customers to:

  • Combat late payments: The Federation of Small Businesses estimates that 50,000* small and medium sized businesses close each year due to late payments. Combatting this builds stronger relationships with critical suppliers and often results in better deals for the customer.
  • Save time and resource: Initial findings from Barclaycard Payment Intelligence research testing show that, on average, 20 per cent of supplier costs are made up of low-value, one-off transactions too often settled inefficiently via invoice. Automating these payments through a card solution can save an organisation valuable time and resource.
  • Generate savings: Barclaycard research** shows that UK CFOs are missing out on £6.7 billion in savings by not taking advantage of early payment discounts. Barclaycard Payments Intelligence enables businesses to fully capitalise on early payment discounts and generate a better return on capital employed.

Anna Porra, Commercial Strategy Director for Barclaycard, said: “Clunky and complex supplier payments processes mean that businesses of all sizes are losing out on time and money.

“Barclaycard has looked to make use payments data to identify opportunities for improvements across the procure to pay process and drive actionable insights for both buyers and suppliers. Barclaycard Payment Intelligence is a new suite of tools that harness state-of-the-art data analytics and financial modelling to devise tailored, actionable solutions for our customers.

“This approach not only brings tangible benefits to the bottom line, but it also helps to strengthen relationships between buyers and suppliers. As we navigate our way through this difficult period, safeguarding supply chains is a key way of future-proofing operations, and it’s part of Barclaycard’s mission to help businesses realise these benefits.”

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Finance

Younger generations drive UK alternative payment method adoption for online transactions

Younger generations drive UK alternative payment method adoption for online transactions 2
  • 42% of Millennials and 35% of Generation Z feel confident using alternative payment methods, or have used them previously
  • 81% of consumers agree security of their data and money is the most important aspect when choosing a payment method

UK London, 11th August 2020 – As the migration away from traditional payment methods in the UK accelerates, younger generations are leading the adoption of alternative payment methods (APMs) such as bank transfers and e-wallets, reveals a new study from PPRO. According to the findings, 42% of Millennials (born between 1980-1993) and 35% of Generation Z (born between 1994-2001) feel confident using, or have used, these methods of payment before.

In the UK, any payment method other than credit or debit cards is viewed as an alternative payment method (APM). However, across the globe, these forms of payment are considered local payment methods (LPMs) due to their broad adoption. In fact, there are over 450 significant local payment methods currently available worldwide, which account for more than 70% of global e-commerce transactions.

Ongoing COVID-19 restrictions have seen a surge in e-commerce in recent months, with many consumers forced to shop online for everyday goods. As a result, UK consumers have been more inclined to try a range of digital payment methods to enable a convenient transaction experience. Currently, 89% of UK consumers are confident using PayPal, whilst a further 31% express the same confidence in using mobile wallets such as Apple Pay or Google Pay. This form of payment is particularly high for younger generations, with 68% of Generation Z stating they use mobile wallet technology.

For younger generations, seeing a buzz about new payment methods in the news and on social media has been a key driving force for local payment adoption, 31% of Generation Z consider this the biggest motivation to try new payment methods. For Millennials, 37% said that merchant acceptance is their main driver.

For the overall UK population, however, security was ranked the top adoption driver, even above reputable brand image, with over half (59%) of UK consumers stating security is the most important influence on their usage of new payment methods. This highlights the growing need for online merchants, Payment Service Providers and FinTechs to address consumer perceptions around trust and assure the security of payment methods at checkout.

“Local payment methods, such as direct bank transfers and pay later schemes, are considered new ways to pay in the UK. However, for online merchants that sell to consumers across borders, these local methods are the norm and must be offered at the check out to reach international consumers,” comments James Booth, VP Head of Partnerships, EMEA at PPRO.

“Traditionally, the UK and US alike have stuck to using credit and debit card payments for online transactions. However, for merchants, local payment methods (LPMs) are much more secure in comparison to card payments, due to chargebacks and being prone to digital theft and fraud. LPMs, such as bank transfers, are more secure and a lot cheaper for merchants to process,” adds Booth.

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Finance

Teaching children about wealth management and why there has never been a better time

Teaching children about wealth management and why there has never been a better time 3

By Annabel Bosman is Managing Director and Head of Relationship Management at RBC Wealth Management

As we approach the end of week sixteen in lockdown, I am breathing a sigh of relief at having successfully navigated another week of juggling work and client commitments with the increasing demands of my children – age six and nine.

My day job is to lead RBC Wealth Management International’s relationship management efforts in the British Isles, but my toughest challenge right now is educating and entertaining my new junior co-workers each day.

While my children’s school has done a great job at setting up daily tasks and learning activities, there is only so much ‘teaching’ they can take from me without World War III breaking out. So instead of rigidly sticking to the school curriculum each day, I have taken the opportunity to educate my young children about a topic that is often not discussed enough in school — money.

Why now?

What I do for a living has become a central discussion in our co-working space — also known as the dining table. I have found that investment concepts can be grasped quite well by young children and this has led to some interesting conversations about which businesses are doing well in the current situation, and those that are not. Children are often more logical than adults, and in my house, this logic is helping them grasp the basics of an investment philosophy. As a result, I have even passed conversations around stock markets off as maths classes!

For young children like my own, helping them learn the basics of managing money is something that will hopefully set them up well in life. There are some great tools to help them do this – we use GoHenry, which provides children with a pre-paid card to learn about budgeting. Likewise, encouraging conversations around how they spend virtual money whilst gaming on apps like Roblox can give some really important lessons around how you look after the money you have earned – and how if something seems to be too good to be true, it probably is.

The most important thing is not to underestimate your children. Whether it is the application of a “mummy-tax” when they want chocolate or applying interest rates (albeit nominal!) if they want to borrow money, teaching our children the basics around money is something we can all do.

Incorporating new lessons

The first step is to identify the best way to approach teaching these topics in a way they will understand. Resources such as the Usborne Money for Beginners are really helpful to start conversations. There are also several YouTube clips and even TikTok channels dedicated to helping children think about money. I tend to think about what is important to them and use that as a catalyst to start conversations; for example, it could be how they can monetise their love of the gaming app Roblox.

Ending the taboo

Any conversation that leads to a greater awareness around financial discipline and security has to be a positive, no matter what the age – and there are certainly parallels with my experience and that of my clients. There seems to have been a shift in HNW and UHNW families’ willingness to talk about money. Whereas previously it was seen as very un-British to speak about money, the pandemic has meant that a more open conversation is taking place.

Whatever our financial position, we often bury our heads in the sand when it comes to money, and don’t always have a clear financial plan, but when we start to put down on paper what’s going in and out, we immediately start to feel more in control, thus becoming more engaged. It can be uncomfortable to have that conversation with your family, but we regularly speak with our clients about all manner of sensitive subjects including putting wills in place, inheritance and protecting loved ones. Naturally, this is also bringing conversations to the fore around succession planning, legacy, philanthropy and even one’s own mortality. When times are good, it’s easy to not have these thoughts at the forefront of your mind, but in challenging times like these, it highlights how essential it is to talk. And just as with my children, there are plenty of apps and websites that can help you take the first steps.

Varying generational approaches

There is no one way to educate your children about money — what worked for one generation will not necessarily work for the next. Different generations have had to address the different approaches they might take in thinking about money and try to reach a common language to agree on common goals. Whilst many of us grew up with physical pocket money from our parents after completing household chores, today’s young children rarely even touch money, they receive their allowance on an app.

A 2019 study commissioned by RBC Wealth Management and conducted by The Economist Intelligence Unit found that seven in ten younger affluent respondents think that their beliefs about wealth are very different to those of their parents; with a similar percentage, 78%, believing that wealth is less easily attained or preserved today. Early, open and continuous dialogue can only help confront obstacles head on and smooth the path ahead.

These talks also allow HNW individuals and their families to talk about how they can address their non-financial goals, such as fighting climate change or supporting social agendas – something that the younger generation is acutely focussed on. Indeed, more recent social events have led to an ongoing and overdue debate around what privilege looks like and how society needs to change.

What next?

With the summer holidays fast approaching, the struggle to keep children occupied will continue, but without the pressure of the school curriculum. This is an opportunity to continue discussions with children about where money comes from and where its value lies.

I have found it tremendously empowering to talk to my children about money and getting back to basics — it may not be school learning, but it is real life learning. And as I say to my clients, the initial step to start a conversation is always the hardest.

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