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Tech’s role in retaining London’s position at the heart of banking

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Tech’s role in retaining London’s position at the heart of banking

By Stuart Templeton, Head of UK at Slack 

London’s long and proud history as the beating heart of global financial markets has been established over centuries. Despite fierce competition and concerns of a ‘Brexit bite’, the UK remains the world’s leading center for foreign exchange trading and the number one location for cross-border bank lending.

 However, over the past five years, the rise of the UK’s fintech scene has had a profound effect on financial institutions. New digital enterprises have spearheaded innovation, successfully digitising banking, peer-to-peer finance and currency transfers. Born with technology baked in, fintechs and challenger banks are able to anticipate shifting markets and provide next-generation customer experiences. Put simply, fintech has disrupted the way forward-thinking consumers bank.

Incumbents in the banking sector are working hard to improve their customer experience and to adapt to emerging technologies and trends by digitizing their services, product and processes. However, ensuring viability in a market that is rapidly changing is still a major challenge. So  what can traditional financial institutions learn from London’s new wave of fintech disruptors?

New ways of working with customers

While traditional banks are working hard to overcome the upheaval of processes and navigation of red tape, due to years of regulatory compliance, challenger banks have a head-start in focusing on using innovation to provide excellent customer service. Online-only fintechs – such as Monzo and Starling Bank – remove communication friction by leveraging instant messaging and social media to keep customers in the loop, in real-time.

London-based Monzo gained its banking licence back in April 2017 and now has over two million customers in the UK. Accounts are managed through an app, and customers are invited to help shape the brand’s future. Each quarter, Monzo publishes its product roadmap online, allowing users to vote on what features and functionality should be implemented first.

Rather than wait for customers to query outages or technological faults before revealing the state of play, Monzo prides itself on proactively communicating any issues via its Twitter account. While traditional banks are wary of this ‘radical transparency’ approach, it has the effect of turning standard customers into brand advocates – generating word-of-mouth awareness without significant marketing spend.

As a majority, traditional banks such as Lloyds and Halifax are ramping-up their digital armies and have now built apps for their customers to ease communication with a generation of customers who live on their smartphones. This is a good thing, but internally it requires banks to have the processes in place to problem solve with agility and bring relevant cross functional teams together, to ensure consumers are supported quickly. Monzo has gone a step further, giving customers a voice and allowing them to participate in the brand’s culture. Like many of London’s fintechs, Monzo proves that the ‘human touch’ needn’t look like a cashier behind a counter.

Increased virtual collaboration

The rising popularity of remote work makes virtual collaboration easier and more effective than ever before. Today’s digital natives – those who have grown up in the digital age – simply don’t feel they need to be in the office or at their desk to get the job done. In fact, a recent study reports that full-time remote workers are 22% happier in their role than those who never work remotely. 79% said they felt more productive, while 91% said they had a better work-life balance.

While incumbent banks are still coming to terms with changing workplace expectations, fintechs have embraced remote work as a ‘win-win’ opportunity. Companies get the top talent available while saving on various costs; employees can work when and where they want, eliminating the costs and challenges of commuting.

For fintechs, attracting the best talent by providing them with the tools to collaborate virtually is critical to success. As ‘analogue’ financial brands make the transition to digital, they will need to reconsider their policies to capture and retain highly specialized fintech professionals who desire the flexibility to work how and when they feel most productive.

The emergence of workplace tools that enable communication and collaboration – such as Slack, Google Drive, Dropbox, etc – have made it easy to be a productive, integrated team member from outside the office. With remote becoming the norm, traditional financial businesses stand to benefit by breaking down hierarchical internal structures and empowering teams with collaborative work software.

Leveraging tools to be more agile

For the most part, bank-customer interactions take place on a combination of digital tools. Mobile apps, voice assistants, chatbots and email are now the go-to way to communicate for many people’s day-to-day financial needs. But while the deployment of advanced, AI-augmented technology makes for an engaging and efficient customer experience, the risk of outages, software faults and malicious attacks looms large.

This presents a significant challenge for online-only fintechs whose customers rely on software to access their accounts and spend their finances. Round-the-clock management requires continuous collaboration and efficient cross-functional teamwork. And for teams tasked with resolving these technical issues, speed is of the essence.

Email is the default coordinating point for communications and information, but inside a company it works poorly. Email chains slow down problem-solving since they tend to create siloed conversations and blindspots, meaning less coordination. To proactively support customers experiencing faults, cutting-edge fintechs need to ensure teams are interconnected, in real-time.

As the bank’s central collaboration hub, Slack helps every employee connect with their teams in channels and coordinate efforts around the various projects they’re working on. The #OutagesDiscussion is a dedicated Slack channel created by Monzo to serve as the central hub for all communications around an outage, be that updates from the engineers on the source, status and expected resolution time of the incident, or pulling together a push notification explaining the situation to customers.

Accenture estimates that competition from digital players could erode as much as one-third of traditional retail bank revenues by 2020. As customer expectations continue to change quickly, especially around the end-user experience, few consumers select a bank based on proximity to branch or interest rate. Instead, today’s consumers – particularly those who live on their phone – want the same personalized, on-demand experiences they have with brands like Netflix, Uber and Amazon. In the age of disruption and customer centricity, traditional financial institutions will need to future-proof by following fintech’s lead.

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Sterling rises above $1.37 for first time since 2018; UK inflation rises

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Sterling rises above $1.37 for first time since 2018; UK inflation rises 1

By Elizabeth Howcroft

LONDON (Reuters) – A combination of heightened risk appetite in global markets and UK-specific optimism lifted the pound on Wednesday, as it strengthened to its highest in nearly three years against the dollar and five-month highs against the euro.

The dollar weakened against major currencies for the third straight session, helped by U.S. Treasury Secretary nominee Janet Yellen’s urging lawmakers to “act big” on spending and worry about debt later.

The pound rose above $1.37, hitting $1.3720 — its highest since May 2018 — at 1045 GMT. By 1136 GMT it had eased some gains and changed hands at $1.3687, up 0.4% on the day and up 0.2% so far this year.

Versus the euro, the pound hit a five-month high of 88.38 pence per euro, before easing to 88.51 at 1137 GMT, up around 0.5% on the day.

The pound’s recent strengthening can be attributed in part to relief among investors that the impact of Brexit has not caused the chaos some feared, as well as a lessening of negative rates expectations, said Neil Jones, head of FX sales at Mizuho.

“Going into early 2021, there was a bearish sentiment building into the pound on the Brexit deal, in terms of maybe it had a limited reach, and then secondly an expectation of negative rates and so to some extent the market has been cutting down on sterling shorts because neither of those things have been quite so apparent as they were,” he said.

Bank of England Governor Andrew Bailey said last week that there were “lots of issues” with cutting interest rates below zero – a comment which caused sterling to jump.

The UK’s progress in rolling out vaccines is also seen as a positive for investors, Jones said.

Currently, the United Kingdom has vaccinated 4.27 million people with a first dose of the vaccine, among the best in the world per head of population.

“Further progress in vaccinations (a pick-up in the daily rate) by the time the BoE MPC meeting takes place on 4th February may prove enough to hold off on any additional monetary easing,” wrote Derek Halpenny, head of research for global markets at MUFG.

Inflation data for December showed that prices in the UK picked up by more than expected in December, to a 0.6% annual rate.0.6

Inflation has been below the Bank of England’s 2% target since mid-2019 and the COVID-19 pandemic pushed it close to zero as the economy tanked.

(Graphic: CFTC: https://fingfx.thomsonreuters.com/gfx/mkt/oakpeyayxpr/CFTC.png)

(Reporting by Elizabeth Howcroft, editing by Larry King)

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Euro sinks amid broader risk rally against dollar

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Euro sinks amid broader risk rally against dollar 2

By Ritvik Carvalho

LONDON (Reuters) – The euro struggled to join a broader risk rally against the dollar on Wednesday as analysts said the risk of extended lockdowns in Europe to combat the spread of COVID-19 and the continent’s lag in a vaccine rollout were weighing on the currency.

Down 0.1% against the dollar at $1.2117 by 1130 GMT, Europe’s shared currency had only the safe-haven Swiss franc and Sweden’s crown for company in resisting a broad rally against the greenback by the G-10 group of currencies.

“We’re getting more headlines that the current lockdowns will be extended further, which could mean that the euro zone would be flirting with a double-dip recession before long,” said Valentin Marinov, head of G10 FX research at Credit Agricole, noting Europe’s lag in rolling out a coronavirus vaccine compared to the United States and Britain.

“So all of that plays into the story that tomorrow’s ECB meeting, while uneventful in terms of policy announcements, could convey a relatively dovish message to the market. On top of that, President Lagarde could once again jawbone the euro, so the euro is kind of lagging behind.”

Marinov also noted price action in the pound, which hit $1.3720 – a 2-1/2-year high – and 88.38 pence – its highest since May 2020 against the euro – as a contributing factor to euro weakness. [GBP/]

There was also focus on a story by Bloomberg News, which reported the European Central Bank was conducting its bond purchases with specific yield spreads in mind, a strategy that would be reminiscent of yield curve control.

Elsewhere, the risk-sensitive Australian dollar gained 0.4% to $0.7727. The New Zealand dollar, also a commodity currency like the Aussie, gained 0.25% to $0.7133.

DOLLAR WEAKNESS

While the world will be watching Joe Biden’s inauguration as U.S. president at noon in Washington (1700 GMT), traders were more focused on his policies than the ceremony.

U.S. Treasury Secretary nominee Janet Yellen urged lawmakers at her confirmation hearing to “act big” on stimulus spending and said she believes in market-determined exchange rates, without expressing a view on the dollar’s direction.

The index that measures the dollar’s strength against a basket of peers was up almost 0.1% at 90.510. The euro forms nearly 60% of the dollar index by weight.

It also fell 0.1% against the Japanese yen to 103.81 yen per dollar.

While the dollar has perked up in recent weeks on the back of a rise in U.S. Treasury yields, investors still expect the currency to weaken.

“We remain bearish U.S. dollar, and expect the downtrend to resume as U.S. real yields top out,” said Ebrahim Rahbari, FX strategist at CitiFX.

“Continued Fed dovishness remains important for our view, in addition to global recovery, so we’ll watch upcoming Fed-speak closely.”

Positioning data shows investors are overwhelmingly short dollars as they figure that budget and current account deficits will weigh on the greenback.

(Graphic: Dollar positioning: https://fingfx.thomsonreuters.com/gfx/mkt/oakveyombvr/Pasted%20image%201611132945366.png)

UBS Global Wealth Management’s chief investment officer Mark Haefele reiterated a bearish view on the dollar, saying that pro-cyclical currencies such as the euro, commodity-producer currencies, and the pound would benefit “from a broadening economic recovery supported by vaccine rollouts”.

The cryptocurrency Bitcoin fell 4%, trading at $34,468.

(Reporting by Ritvik Carvalho; Editing by Angus MacSwan)

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England soccer star Rashford nets younger buyers for Burberry

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England soccer star Rashford nets younger buyers for Burberry 3

By Sarah Young

LONDON (Reuters) – Burberry stuck to its full-year goals on Wednesday after a media campaign fronted by high-profile English soccer star and social justice advocate Marcus Rashford drew a younger clientele to the British luxury brand.

Higher full-price sales would boost annual margins and Asian demand remained strong, Burberry said, while warning that it could suffer more sales disruption from COVID-19 lockdowns.

Manchester United striker Rashford, 23, has won plaudits for his campaign to help ensure that poorer children do not go hungry with schools closed during the pandemic.

A first coronavirus wave last year cut Burberry’s sales by as much as 45% before a bounce back on strong demand in mainland China and South Korea, which continued in the last few months.

Shares in Burberry were up 5% to 1,825 pence at 0905 GMT, with Citi analysts saying that improved sales quality from fewer markdowns would drive full-year consensus upgrades.

Burberry’s 9% sales decline in its third quarter was worse than the 6% fall in the second, and the company said that 15% of stores were currently closed and 36% operating with restrictions as a result of measures to curb COVID-19’s spread.

“We expect trading will remain susceptible to regional disruptions as we close the financial year,” Burberry said, adding that it was confident of rebounding when the pandemic eases given the brand’s resonance with customers.

In the third quarter, comparable store sales in Europe, the Middle East, India and Africa declined 37%, hit by shops shut in lockdowns and a lack of tourists visiting Europe, but in the same period, it posted sales growth of 11% in Asia Pacific.

Burberry said that Britain’s new relationship with the European Union would cause headwinds, warning of a modest increase in costs to comply with new rules and also the impact of an end to a scheme for VAT refunds for non-EU tourists.

This would make Britain a less attractive destination for luxury shopping when tourism returns after the pandemic, Burberry said, adding that it would try to mitigate the effect.

(Reporting by Sarah Young; Editing by Kate Holton, James Davey and Alexander Smith)

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