By Jacob Piotrowski, CEO and founder of Give Bytes (www.givebytes.com)
The power of blockchain (a digitised, decentralised, public ledger of all cryptocurrency transactions) is yet to be truly unlocked because at this moment in time, we are only scratching the very surface of something that will likely have a huge impact on the financial sector in the near future.
Even though the barriers of entry may still seem pretty high, due to the current lack of blockchain developers, once the technology is firmly in place the advantages of using blockchain technology will prove reliable, scalable, transparent and also secure.
Whether we are referring to using external tools based on a public blockchain or building a private blockchain, the technology itself offers a lot of distinct advantages within financial services. With blockchain, many people can write entries into a record of information and a community of users can control how the record of information is amended and updated, so no one person controls the information. Due to its decentralisation there is also no single point of failure.
Changes to come
Blockchain technology will allow anyone with a mobile smartphone to instantly transact with another person making or receiving payments, which are secure, fast and involve minimal fees. This will have a huge impact on the financial industry as we know it. Many believe that the role of traditional banks will change as a result of this, to become software houses building mobile wallets where users will store their cryptocurrencies. In corporate banking there will also be more and more automation with predefined smart contracts where human interactions and therefore human errors, will be minimised and replaced by Artificial Intelligence (AI).
Like it or not, blockchain technology will force financial organisations to diversify and look for new functions. Because blockchain is trust-free and not controlled by any authority, it is disrupting the way we as people, transact together. That said, blockchain has been met with some scepticism to date, but many people do not really understand the concept of banking. Thanks to a system called ‘fractional reserve banking’, banks as we know them today, canlend money to people, which they don’t actually have. This system, protected by politicians and central banks allows printing an additional supply of money when it’s needed.
The irony is, in any other circumstance, this would be considered a non-democratic and criminal activity, which if any ordinary person attempted, they would go to prison. On top of that we have central banks, which manipulate interest rates, which further increases the gap between those who have money and those who live on credit.
With blockchain technology none of these manipulations is possible – it’s pure maths that nobody can tamper with and that’s one of the reasons for the scepticism around this technology.Smart contracts however, are becoming more and more popular within businesses. They allow a trust-less or trust-free transaction to be executed autonomously once a certain action happens. These mechanisms are already leveraged by machine learning and used for trading.
Embracing blockchain is important for the financial sector. The solutions used by banks and finance institutions today (like relational databases) require the development of custom solutions and ensuring inter-operability of multiple databases in sync with each other, across different institutions. This in truth, is inefficient and dangerous. A blockchain offers a network that replicates the entire ledger to all involved participants so there is no need to develop custom protocols or to synchronise and secure financial transactions, which can be easily encrypted on blockchain.
Because of its decentralised nature, blockchain guarantees trust, security, speed of transactions and scalability. Many would agree that this is the right way for people to be making transactions so the finance sector may find it needs to embrace and adapt to blockchain in the future or riskits survival in the future financial climate.
A mask of complexity
What we also have to understand is, there is no other system out there today that is taken for granted and misunderstood as much as the monetary system is. Established monetary institutions exist as one of the most unquestioned forms of faith today.
Unfortunately, today’s economics are often viewed with confusion and boredom. Endless streams of financial jargon coupled with intimidating mathematics quickly deter people from attempts at understanding it. However, the fact is, the complexity associated with the current financial system is a mere mask, designed to conceal one of the most socially paralysing structures humanity has ever endured. Blockchain is here to change it.
About Give Bytes (www.givebytes.com)
Give Bytes is an innovative, crowdfunding platform that gives anyone with access to a computer, the opportunity to support a fundraising campaign of their choice, regardless of financial circumstances. Traditionally, people wishing to donate to a charity or fundraising campaign would make monetary payments based on what they could afford to contribute financially, which rules out those without the financial means to donate. Thanks to the power of Blockchain technology, Give Bytes allows people with compassion to donate the excess power produced by their computer to ‘mine’ cryptocurrency (a digital currency that can be converted into funds) at the click of a button. Essentially, people can exchange the processing power of their computer for a monetary reward.
Using Give Bytes couldn’t be simpler. No installation is required, you simply visit the website, select the fundraising campaign you wish to donate to and you are one click away from making a difference and raising funds for your chosen cause.
Sunak promises to do ‘whatever it takes’ to shield the economy
LONDON (Reuters) – British finance minister Rishi Sunak plans to say in a budget speech on Wednesday that he will do “whatever it takes” to support the economy, and that the task of fixing the public finances will only begin once the country is recovering from the COVID-19 crisis.
“We’re using the full measure of our fiscal firepower to protect the jobs and livelihoods of the British people,” Sunak will say, according to excerpts of the speech to parliament released by the finance ministry on Tuesday.
“First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis,” he said in the excerpts.
“Second, once we are on the way to recovery, we will need to begin fixing the public finances â€“ and I want to be honest today about our plans to do that. And, third, in today’s budget we begin the work of building our future economy.”
Britain has suffered the biggest COVID-19 death toll in Europe and the heaviest economic shock among big rich countries, according to the headline measures of official data, after shrinking by 10% last year, its worst slump in three centuries.
Sunak has so far spent almost 300 billion pounds ($419 billion) on emergency support measures and tax cuts.
But Britain has also rushed out Europe’s fastest COVID-19 vaccination programme, raising the prospect of an economic bounce-back once its current, third lockdown is relaxed.
Sunak said in media interviews on Sunday that he would not rush to start addressing Britain’s yawning budget deficit, which is approaching 400 billion pounds – its highest as a share of the economy since World War Two.
Prime Minister Boris Johnson plans to lift lockdown measures gradually, starting with next week’s reopening of schools in England, before most measures are removed by late June.
Sunak is expected to announce an extension of his emergency support measures, including huge income subsidies that are on track to cost more than 100 billion pounds, to provide a bridge for the economy until then.
But he has also said he will “level with people” about how Britain’s 2.1 trillion-pound debt pile would carry on growing without action, which is likely to mean future tax increases.
(Writing by William Schomberg; Editing by Catherine Evans)
UK gilt issuance to be second-highest on record at almost 250 billion pounds – Reuters poll
By Andy Bruce
LONDON (Reuters) – Britain is likely to sell nearly 250 billion pounds ($347 billion) of government bonds in the coming financial year – the second-highest total on record – to help power an economic recovery from the COVID-19 pandemic, a Reuters poll of dealers showed on Tuesday.
The survey of all 15 wholesale primary dealers, or banks tasked by the government with creating a market for its bonds, pointed to gilt issuance of about 247.2 billion pounds for the 2021/22 financial year starting in April.
Such a sum marks a sharp drop from the 485.5 billion pounds of gilts that the United Kingdom Debt Management Office (DMO) plans to issue in the current 2020/21 year to finance the economic response to the COVID-19 pandemic.
Finance minister Rishi Sunak is due to deliver his budget around 1230 GMT on Wednesday, after which the DMO will publish its 2021/22 gilt issuance remit.
Sunak has said he would not rush to fix the public finances as he readies a budget, which will add more borrowing to almost 300 billion pounds of COVID-19 spending and tax cuts.
In November, the Office for Budget Responsibility (OBR) forecast borrowing in 2020/21 would reach 393.5 billion pounds, or 19% of GDP, a peacetime record. The latest official data suggests borrowing will fall below this, partly because more taxpayers than expected have opted against deferring payments to 2021/22.
The poll showed Sunak is expected to announce a budget deficit forecast for 2021/22 of 180 billion pounds, 16 billion pounds more than the OBR had predicted in November.
“Our current estimate is that the latest lockdown will ‘cost’ around 16 billion pounds in terms of additional fiscal support,” said RBC economist Cathal Kennedy.
He cited the fact that more workers are now furloughed than the OBR had assumed in November, as well as expanded support for self-employed people and business grants announced in January.
In addition to the budget deficit, the government must also refinance 79.3 billion pounds of gilts due to mature in 2021/22.
As in the current year, much of the issuance will be soaked up by the Bank of England’s asset-purchase programme, which is due to buy around 100 billion pounds of government debt during the next financial year.
The poll suggested the government will finance borrowing almost entirely through gilts in the next financial year, rather than additional issuance of T-bills or via the government’s retail investment arm.
The DMO is likely to ramp up its issuance of inflation-linked gilts in 2021/22 to around 14% of the total, compared with 7% in the current financial year, the poll showed.
The DMO reined in sales of index-linked gilts through most of 2020 due to uncertainty caused by a review into the future of the retail prices index measure of inflation, which is used to price the bonds.
“Given pent-up demand, we think that this target is achievable,” said Deutsche Bank analysts Sanjay Raja and Panos Giannopoulos.
The dealers did not expect much change in the split between short, medium and long-dated gilts. Britain already has a longer average maturity for its debt than any other major economy, but the recent jump in global bond yields has prompted some commentators to say the DMO should do more to lock in low rates.
The government has also said it will issue the first “green gilts” – bonds to finance environmentally friendly projects – in 2021/22. Most respondents expect one or two bonds to be issued, of around 10 billion pounds in total.
(Reporting by Andy Bruce, editing by Larry King)
Why local currency payments are critical to cross-border commerce success
By Nikhita Hyett, Managing Director – Europe at BlueSnap
Online shopping has been a lifeline for many during the pandemic. But with the increased volume of online orders, one area that’s been overlooked is the importance of local currency options.
As more transactions are made on mobile devices, customer service channels proliferate and social media becomes a popular sales channel, merchants around the world are closer to their customers than ever before.
But this increased proximity doesn’t always translate when customers hit the buy button.
When shopping online, I’m often shown ads from businesses who sell to me and ship to me, yet their pricing is in euros or US dollars. We hear a lot from sellers about offering a personalised customer experience in the age of e-commerce, but a failure to make the transaction feel local is holding them back.
In fact, it still surprises me how many merchants don’t offer customers the ability to pay in their local currency, even though this move could increase their conversions by an average of 12% according to BlueSnap data.
Any online business would agree that the checkout process is the most important part of the purchase journey – and should be as a simple and painless as possible.
But when presentment currencies, or the currency a customer is charged in, differs from that of their local geography, buyers are often left confused and struggling to calculate costs when making a purchase from an international seller.
This prompts shoppers to leave the checkout page to convert costs – creating a major barrier to sale at the point of conversion. Friction enters the buyer’s journey, and businesses see an increase in purchase abandonment.
Disputes and chargebacks
Even if a customer perseveres with the transaction, that’s not always the end of the story. Another major benefit of offering local currency payments is that customers are less likely to challenge the final total of cross-border transactions.
But if there’s confusion around exchange rates, customers are entitled to dispute the transaction with their bank, which can result in a lost sale in the form of a chargeback fee for the vendor.
This is a lose-lose for sellers which not only miss out on revenue due to increased purchase abandonment but also post-purchase disputes around order settlement.
If that wasn’t enough, buyers who have encountered friction in the purchase journey are unlikely to be satisfied with their experience, deterring them from making repeat purchases, recommending the business or leaving a positive review.
Brexit and cross-border fees
But going truly local extends beyond currencies and the customer experience – and can have a big impact on a company’s bottom line. In a post-Brexit world, businesses can take the localisation of their payment processes a giant leap further through local acquiring.
Following the introduction of new trading laws for cross-border sales in January, Mastercard has announced that it’s hiking interchange fees for UK merchants fivefold for all online purchases made by EU cardholders.
The increase will see interchange fees between the UK and the European Economic Area (EEA) rise from 0.3% to 1.5% – with these transactions now defined as ‘inter-regional’ – and other banks likely to follow suit.
In practice, this means UK merchants will now have to pay a higher proportion of the sale to the payments provider for enabling cross-border transactions within the EEA, and vice versa, reducing profit margins on every purchase.
At a time when retailers are already having to adapt to new regulations and Brexit ‘red tape’, they now face another unenviable choice. Absorb these increased costs or pass them on to customers by raising the price of products or services – a move that could deter future sales.
Avoiding interchange fees
But there is another way. E-commerce sellers can avoid cross-border fees altogether by routing payments through local banks in the same region as the cardholder.
By localising the transaction, it’s estimated that merchants can reduce cross-border fees from card issuers by 1% – meaning a total saving of £100,000 for every £10 million in sales.
Of course, if this were simple, the debate over cross border fees would be long over.
To process a transaction locally requires merchants to have a legal entity in each region they sell to. This used to mean that the more online business a retailer does, the more connections they need and the more complex this process becomes.
On average, international sellers have five different payment gateways to route cross-border transactions via local banks – with the costs of developing and maintaining this infrastructure able to quickly outweigh the savings of processing payments locally.
A better way
Thankfully, new technology is changing all that. With the next generation of fintechs ‘rebundling’ financial services under one roof, forward-thinking businesses are taking advantage of all-in-one solutions that automate payment routing via a network of local acquiring banks.
By harnessing innovative payments technology, which automatically recognises card types, location of issue and local currency, merchants can effectively localise any incoming payment from any customer, anywhere in the world – through a single integration.
In doing so, they’re also able to increase payment authorisation rates, as banks are more likely to approve purchases made locally.
With e-commerce experiencing its strongest growth in over a decade last year, merchants understandably want to embrace the opportunities brought about by this exciting shift in the way we buy and sell goods.
As the rise in online sales shows no sign of slowing down, those businesses that offer local currency payments can transform the customer experience and increase conversions, while merchants that embrace local acquiring will make their bottom line soar.
Boeing cites risks in design of newest Airbus jet
By Tim Hepher PARIS (Reuters) – Boeing Co has raised concerns over the design of arch-rival Airbus’ newest narrow-body jet,...
UK extends furlough scheme by five months, gives more help to self-employed
LONDON (Reuters) – Britain will extend its huge job-protecting furlough programme by five months until the end of September and...
Dollar dips, Aussie gains on improving risk sentiment
By Karen Brettell NEW YORK (Reuters) – The dollar dipped on Tuesday and riskier currencies including the Australian dollar gained...
Stocks edge down as investors hit pause, watch bond yields
By Suzanne Barlyn NEW YORK (Reuters) – Global equity markets were little changed on Tuesday as Wall Street retreated and...
Robinhood now a go-to for young investors and short sellers
By John McCrank NEW YORK (Reuters) – Robinhood, the online brokerage used by many retail traders to pile in to...