IBSi Blogs

Commodities have long been considered a good hedge against inflation and, true to form, with inflation in many countries now at its highest level in decades, those businesses that failed to invest in minerals, energy sources, livestock and foodstuffs face a financial squeeze to keep their supplies chains operating.

by Paul Macgregor, Head of Sales, NovaFori 

Yet, even for those businesses with foresight, that have planned and hedged, the current inflation-based pressure points on the global economy are accentuating stresses and strains that already existed in global supply chains and business value chains. Long-standing inefficiencies were exposed by the pandemic and became even more visible with the onset of the post-pandemic period. These inefficiencies could be significantly reduced by harnessing intelligent digital marketplaces.

In the world of commodities, this is particularly noticeable. It shows the use of traditional analogue as a way for businesses interact with customers, suppliers and intermediaries to be outdated and in need of a rethink. For this sector, a new way of offering efficiency, transparency and good practice is needed.

The rate of inflation in the UK reached 5.4% year-on-year in December, a 30-year high, and is sure to rise further in April when a 54% rise in the UK fuel price cap takes effect. In the US, meanwhile, consumer prices rose 7.0% in December, the highest level since June 1982. Against that backdrop, coffee, crude oil and aluminium prices have risen well over 100% in the past year, while cattle, copper and gas are up more than 50%.

Most eye-catching is lithium, up by close to 500% since the start of last year. Demand for lithium has jumped as demand for electric vehicles (EVs) has soared. Lithium is used in the batteries, which typically also include nickel and cobalt, prices of which have also risen significantly – nickel up over 30% in the past year and cobalt up almost 100%.

Fusion of analogue and digital marketplaces

Taking metals as an example, the value chain can go from mining to processing and then on to fabrication, transportation, storage and consumption, and finally, it is hopefully recycled. The more verticals within the chain that a business owns, the more scope there is to benefit from significant efficiencies.

There are points in the value chain where most businesses deal with intermediaries or brokers to advise them on both sales and purchases depending on where they fit into the cycle. These intermediaries play an important part in the process with their local knowledge, business relationships and understanding of the metal in question. Their involvement is typically in a more traditional analogue form.

Three key metals used in batteries are nickel, cobalt and lithium. All three are mined in remote parts of the world; The Democratic Republic of Congo is the world’s largest cobalt producer. The world’s largest reserves of lithium are in Australia, Argentina and Chile, while significant amounts are to be found in China and sub-Saharan Africa. Major deposits of Nickel are found in Indonesia, Canada, Russia and Brazil.

Amid the rapid growth of the EV sector globally, demand for lithium-ion batteries has soared. The rate of increase in the price of nickel, cobalt and lithium reflects, to an extent, the nature of the market in which each exists.

Given the geographies, the logistics and the local market complexity, such as grade of materials, shipment times, insurance, pricing and other local issues, intermediaries play a key role, by utilizing digital marketplaces to grow the geography of their client base. It may seem counterintuitive, but their analogue processes can in fact complement digital marketplaces with their local knowledge. The two go hand-in-hand, expanding access to the market, increasing the number of participants and adding liquidity. The result is greater price competition and a more efficient market.

Digital B2B marketplaces trusted to transact billions

Digital business-to-business (B2B) marketplaces are trusted to transact billions of dollars worth of goods annually across a wide variety of industries, including vehicle sales, leasing and re-leasing through to luxury goods and food products. They have a role to play in improving marketplaces for physical commodities.

Digital B2B markets widen distribution networks, help to ensure competition and liquidity in the marketplace, and enable price discovery using various auction methodologies. At the heart of it, buyers compete for goods or services by bidding incrementally upwards before finalising the price. The bidding process can be open or closed, during which it’s possible to capture every activity of potential buyers, including lots searched or browsed, bids submitted, and lots won or lost.

Once in operation, B2B markets can incorporate data science in the form of machine learning with the capability to make recommendations on products, buyers and timing, thereby helping sales teams to operate more efficiently.

Recommendation algorithms also point buyers to possible substitute products if they exist. For example, with EV batteries it could recommend another supplier with a similar specification and price. This enables sellers to satisfy customer demand where previously the transaction would not have been completed. The use of data science in such a way can broaden understanding of the marketplace and the wider industry.

It is fair to say that for some industry sectors, including the EV battery sector, without an efficient and digitised supply chain, achieving the end goal of a carbon-zero future becomes a far greater challenge. The issue goes beyond what is good for business, it has a real societal impact too.

In the post-pandemic environment, the commodities sector may retain some of its traditional characteristics that smooth the works of the market, but they will also have changed for good with increased digitalisation. As the world eyes the prospect of ‘building back greener’ with net-zero emissions targets, digitising the multi-billion-dollar commodity value chain has a part to play. Markets will be created where they didn’t previously exist and enhanced where they do exist. Inevitably, there will be disruption, but that will be accompanied by opportunities for those who embrace change.

As lockdowns, social distancing guidelines and a wave of uncertainty swept the world in early 2020, experts at McKinsey predicted that global payments industry activity could drop by as much as 8% to 10% of total revenue due to the then-emerging COVID-19 pandemic. Instead, the opposite occurred.

by Jairo Riveros, Chief Strategy Officer and Managing Director for the USA and LATAM, Paysend

Between 2020 and 2021, the global digital payments industry grew $5873 billion, a compound annual growth rate of 16.1%. In addition, we saw a record amount of funding with payments startups raising an estimated $31.9 billion in 2021.

The growth of digital payments and digital money transfers shows no signs of slowing. As we enter a new year of exciting growth in the space, we can continue to trace the path that digital payment innovation has taken since the industry’s explosive growth in 2020.

How we got here

With social distancing in effect, it’s no surprise that the COVID-19 pandemic helped digital payments skyrocket in popularity. However, what’s important to note is that three trends contributed to digital payments’ spike in utilization: rise in online consumer spending, the move to digital currency and the shift from brick-and-mortar to digital storefronts.

First, digital payments were already growing in popularity. In 2019, Americans spent about $360 billion on eCommerce transactions, and 77% of people used one or more types of mobile payments. While the pandemic caused digital payments to soar in popularity, the stage was already set for the rise of digital payments even before March 2020.

Second, physical money lost favour worldwide during the pandemic. Globally, cash use decreased to account for only 20% of all face-to-face payments. But in the U.S., it just wasn’t available—the U.S. Mint lowered its coin production from March to June 2020 to keep Americans from being exposed to COVID-19. A national coin shortage ensued that summer, but many businesses stopped accepting cash as a form of payment.

Third, lockdowns and stay-at-home orders forced us to take our financial needs from physical storefronts to digital storefronts. While this led to an uptick in eCommerce, lockdowns affected far more than just retail—60% of international and domestic cash transfers, for instance, took place online in 2020.

The trends we’ve seen

Digital payments carried this momentum into 2021 – 82% of Americans used some form of digital payment in 2021, up from 78% in 2020.

In addition to digital payments as a whole, several practices within the digital payments umbrella term have also grown more popular. The rise of the “buy now, pay later” option on eCommerce has struck a chord with consumers – about 33% of shoppers between 18 and 37 in a survey said that the option to pay in phases influenced their choice to complete their online purchase.

Further, remittances as a whole have increased in 2021, with the World Bank predicting in November that remittances would increase by 7.3% in 2021. But sending them digitally is also popular among those issuing remittances. In fact, a 2021 Visa survey showed that digital payments were the most popular method for sending money outside of the country. 23% of survey takers reported that they’d used digital payments to send money outside of the country, while 65% said they planned on doing so for the 2021 holiday season.

Digital payments have become so widespread that it’s causing some to purposely leave their wallets at home. For example, 15% of digital wallet users reported that they regularly leave their residences without bringing their physical wallets with them. With the federal government discussing standards for digital driver’s licenses, consumers will truly be able to live day-to-day without bi-folds, tri-folds, or clutches.

Where we’re headed

In 2020, digital payments became a necessity that also increased the efficiency of payments. By 2022, streamlining digital payments even further has become a hallmark of the sector’s evolution. It’s an exciting time for the digital payments industry, and we can expect several trends in digital payment innovation to emerge or continue in 2022.

Catering to customers as a whole will continue to be a focus for fintech companies as they improve their product’s user experience. Because digital payments already make financial processes more efficient compared to in-person processes, we can expect this efficiency to increase even further. For example, startups will begin to make fintech services a more seamless experience for users, as embedding financial services into non-financial companies becomes more commonplace. Additionally, both payments and credit processes are poised to become even more efficient for consumers.

Furthermore, we can also expect efficiency to be extended to international banking. Digital technology has made places around the world more accessible than ever before. Fintech is already doing its part to grow this global accessibility, with multiple banks beginning to offer multi-currency digital wallets to enable greater financial flexibility for global citizens.

At the same time, it will be important for the sector to address immigration and financial inclusion. One way the sector can innovate in this area is by introducing instant, low-cost and hassle-free remittance transfers in Latin America since digital transfers are still a budding practice in the region. Making digital payments in the region easy and inexpensive will let remote, low-income households in the region make and receive payments both quicker and more securely.

The biggest issue plaguing consumers right now are expensive transfer fees. Take the U.S. as a prime example. Consumers who don’t utilize traditional banks spend about $140 billion per year on unnecessary fees. In order to promote financial inclusion for all, it’s imperative that providers lower service fees.. We’ve seen some movement on this front within banking recently – Capital One announced in December that it was giving up $150 million in annual revenue to do away with its consumer overdraft fees.

Lowering service fees won’t impact digital payment ROI, as the global digital payments industry is expected to hit $2.9 trillion in 2030. Digital payments are also poised to continue their stark ascent in usage – one study estimates that by 2024, cash will account for under 10% of U.S. payments and only 13% of payments worldwide. Meanwhile, the same study estimates that digital wallets will be used in 33% of all in-store payments.

It’s an exciting time for the digital payments industry, and if the past two years have shown us anything, it’s that the sky’s the limit for innovations in the field.

 It’s been said that “change is the only constant in life.” The global pandemic created a wave of change for everyone. We experienced the sudden shift to remote work, the acceleration of e-commerce, and a focus on digital capabilities.

by Michael D’Onofrio, CEO, Orbus Software 

For financial services, there was the additional challenge of tighter budget control, and increased regulations around cybersecurity and data protection, in addition to rising customer expectations for stellar digital-led delivery.

As a result, we’re seeing three key challenges emerge for financial services CIOs:

• addressing disruption from new technologies and emerging business models,
• achieving a first-class customer experience,
• maintaining business as usual.

What links these challenges is the balancing act of controlling risk while enabling technology-driven transformation. Organisations with a more proactive and collaborative approach to risk management fared better during the pandemic than those with a defensive and reactive approach.²

However, Gartner notes that “almost half of global financial services organisations are still in a very early or even immature stage of their digital transformation journey”³ and rely on traditional business growth or are still working on digital optimisation (versus digital transformation) efforts. When confronted with the above challenges, those with strong Enterprise Architecture were more equipped with the tools to assess and respond.

Addressing market disruption

A 2022 Alix Partners study found that “70% of business leaders report high disruption to their company, up 11% in the past year. 94% of executives say their business model must change in the next three years.” The pace at which disruptive forces impact businesses today means leaders can no longer “wait and see.” The best-performing companies disrupt and reinvent themselves on a continual and ongoing basis.”¹

Technology is the foundation of the modern bank and at the heart of much of this reinvention. But many financial services firms rely on customised and legacy systems (about 55% of enterprise applications!) and are only very slowly migrating to cloud-based options. Outdated technology infrastructure reduces agility, flexibility, and organisational resilience. You just can’t pivot or bounce back from a threat or transform as quickly.

Rising from disruption requires executing on increasingly integrated capabilities. This requires clarity and alignment on the challenge being faced, the systems, people and processes impacted, the strategy to move forward, and the shifts already underway. Many organisations don’t have the tools needed to cut through this level of complexity.

Enterprise Architecture supports the ability to execute through a shared common language across lines of business, an understanding of the layers of the organisation impacted, and a toolset to respond. A microservices and service-oriented architectural approach supports greater business agility. EA improves speed to market for application and data integrations, and the automation of business processes or workflows while establishing control over scenarios. For CIOs, speed, executional clarity and alignment make the difference in responding to change – and, planning for the future.

Achieving a first-class customer experience

To remain competitive retail banks need to ensure customers can move between communication channels easily and that they personalise online interactions to maximise customer interactions and additional revenue opportunities. McKinsey reported that 76% of US consumers moved to digital channels for the first time during the pandemic, while a survey by Accenture²  showed that 58% of customers want to be able to switch between human and digital channels.

In order to achieve a first-class customer experience, financial institutions need to focus on delivering true omnichannel: offering the same services to customers across all digital and offline channels, synchronising their data for reuse across channels in real-time. For many FIs, this trend accelerated the need for digital transformation and increased focus on digital customer experience.

The challenges CIOs face here are threefold:

• Cost and complexity of adopting omnichannel technology often spiral out of control
• Omnichannel technology projects are sometimes impeded by disconnected silos of enterprise information
• Security and compliance risks are not always visible and not accounted for

The delivery of integrated channels and seamless end-to-end transactions relies on Enterprise Architecture. Enterprise Architecture can not only help with the delivery of such things but also enable the creation and deployment of digitally-enabled business strategies and new operating models using those technologies.

Enterprise architecture can help control investment across IT portfolios, create a single source of truth of all enterprise information from all areas that are to be integrated, and gain visibility into compliance and security to anticipate and prevent potential threats.

Reinventing Business-As-Usual

According to an FT article from last summer, banks in the US and Europe were starting to show signs of being back to Business as Usual, moving away from the negative effects of the pandemic. This does not mean we are out of the woods. But it is a start.

The pandemic highlighted two things: the need for and benefits of cross-departmental collaboration, and the importance of “as is” and “to be” planning. Organisations need to start moving away from a reactive business model to a proactive one where the focus is back on winning against the competition. This is also the time for financial services firms to reassess the short-term fixes they put in place over the last two years and look at long term designs.

We know change is a constant. What differentiates resilient organisations is the ability to endure and even benefit from change. They have the agility to align IT assets with risk, resiliency and business processes & programs around an actionable plan.

Enterprise Architecture is the missing link between technological resilience and operational resilience. Enterprise Architecture provides organisational clarity to accelerate this transformation in a strategic and purposeful way, mapping the process of a desired future state. Overcoming these challenges in the coming year will be key for FIs in order to be truly resilient and be able to weather the next storm.

BaaS (Banking as a Service), is the enabler of contextual and embedded finance. It presents a huge opportunity – and threat – to all participants in today’s financial services ecosystem. Customers increasingly expect financial products and services to be brought to them, wherever they are. They expect them in the right context. With forecasts showing that the total market opportunity for BaaS will exceed $7 trillion by the end of the decade – the impact of BaaS simply cannot be ignored.

by Eli Rosner, Chief Digital Officer, BaaS and Platform, Finastra

To gain revenues from high growth sectors or geographies banks must adopt new scaling strategies. They must leverage partnerships, to get them to where the customer is and what the customer wants, today and in the future. They must meet the customer where they are in their journey, whether the customer engages directly through established banking channels, or whether the customer consumes the bank’s services contextually, as an integral part of their journey with another brand.

Traditional channels will not deliver the radical value that’s being offered by BaaS and Bank as a Platform models. These models leverage platform ecosystem advantages to create better customer experiences. Unless banks embrace these models, they will face a tougher fight for revenue in ever-decreasing addressable markets.

Outlook for BaaS

BaaS is expected to grow at more than 25% per year for the next 3-5 years. Players across the BaaS value chain are seeking to monetize the opportunity and deciding on the role they want to play.

Recent Finastra research on BaaS has found that some 85% of senior executives in the financial services ecosystem are already implementing BaaS solutions. It also identified that areas such as SME lending, corporate treasury and foreign exchange services are poised to gain the highest traction.

The research goes on to outline the key players, exploring where they are on their journey and what they anticipate in the future:

• First you have the BaaS providers – financial institutions holding a banking license and manufacturing regulated and compliant financial products. Our research shows that some 42% of those surveyed are already in the advanced stages of implementing BaaS. These providers expect the BaaS market to grow by more than 50% per year over the next five years.
• Next you have the BaaS enablers – usually BigTechs and FinTechs that help to embed financial services into third-party platforms and apps. Some 50% are already in the advanced stages of implementing BaaS. Enablers see high growth potential from offering payments and credit cards. In addition, 40% believe checking accounts offer high growth potential.
• Finally, you have the BaaS distributors – consumer brands such as retailers and e-commerce brands that will supply embedded financial products to retail or corporate customers. Some 33% of these organizations in our research are already in the advanced stages of implementing BaaS. Distributors expect BaaS revenues to increase by more than 15% per year over the next five years.

Unlocking success

Monetising BaaS is a lot harder than embedding it. Not all BaaS strategies will succeed – and it’s vital to first understand the ecosystem in depth and to take a structured, programmatic approach to developing a use case in close collaboration with partners.

To succeed, financial services providers need to have an open API platform in place, as well as integrated data and analytics to support specialized digital solutions. They also need to create dynamic and compelling products that stand out against competitors. Winning in BaaS requires a focus on discrete, profitable and differentiating use cases that align to the bank’s overall strategy, and play to key differentiators, alongside a good understanding of where they will be able to exert the greatest influence over positioning and pricing.

Knowing the players and their ambitions is key to unlocking the value of contextual finance beyond just the redistribution of financial products, helping create new retail and wholesale marketplaces.

Some banks are already making significant inroads. UK digital bank Starling, for example, launched its BaaS offering in the UK back in 2018. Today it has 25 payment and banking services customers, including Raisin, CurrencyCloud, Moneybox and Vitesse, and is in the process of expanding into Europe. Starling’s ethos is simple: allowing businesses to build their own financial products on the bank’s platform while it handles the technical and regulatory demands behind the scenes.

Payment processing platform Stripe has also established itself in BaaS. The firm took the decision to work with Shopify as a distribution channel, and to partner with Goldman, Citi, and Barclays to provide Stripe treasury services globally. The Stripe example demonstrates the value to be found in partnerships and leveraging existing distribution channels which can help fuel exponential growth at speed.

Other examples include Uber working with Square, and Goldman Sachs expanding its footprint through digital lender GreenSky. In the corporate banking space, HSBC is working with Oracle NetSuite to embed international payments and expense management services into the SuiteBanking solution so that customers can access these services exactly when they need them.

In essence, the potential to create entirely new retail and wholesale offerings as a service is vast, restricted only by imagination. The most important thing is for financial services providers to start taking action today, exploring BaaS use cases and putting the tech and partnerships in place that they will need to maximise the opportunities ahead.

Hack to the future: supporting innovation in embedded finance

To help drive innovation and explore new ideas in the world of embedded finance, Finastra is inviting participants to sign up to the hackathon which opens on 8 March. This year we’ll be focusing on the three key themes of embedded finance, DeFi and sustainability. The hackathon is open to all, as everyone has a role to play in defining the future of finance.

Low costs, accessible services, and an excellent customer experience have long been the core criteria consumers expect banks to meet. But, today they’re not enough. Good value is being overtaken by good values in the minds of many consumers, giving rise to an army of ‘ethical bankers’ who expect more and tolerate less from the financial institutions they partner with.

by Eelco-Jan Boonstra, Managing Director, EMEA, at Mambu

In a survey of more than 4,500 banked consumers globally, Mambu found that the majority (73%) are more likely to use banks that put purpose before profits. In fact, 58% are prepared to pay a premium for financial services that help the environment or local communities, suggesting an overwhelming shift in attitudes supporting Environment, Social and Governance (ESG) criteria not seen in the industry before.

So, how can banks effectively engage this tribe?

Who are ethical bankers?

One of the fastest-growing tribes with the loudest voices, almost half (49%) of ’ethical bankers’ is between 18 and 34. These younger generations account for the largest proportion of consumers globally and have growing spending power, making them particularly valuable customers that banks must cater for to future proof their business.

As consumers become increasingly aware of global issues, expectations of the brands and companies they associate with grow. Whilst this trend is being seen across a collection of consumer finance tribes, almost a third (31%) of consumers identify themselves as part of a cohort of ‘ethical bankers’ whose ethics, values and social responsibility drive their decisions – including spending and saving habits.

Young, well-educated and hungry to make a positive difference, these socially-conscious consumers prefer to pay for access to goods and services than ownership, valuing experiences over traditional assets. And they’re putting pressure on financial institutions to take responsibility for social and environmental issues at both a local and global level.

Service-specific needs

Banks must listen to customers in every cohort to understand what’s important to them or risk leaving them dissatisfied. For the ‘ethical bankers’ tribe, digital accessibility is key – with respondents in this group saying it’s important to be able to use an online or digital banking service to open new accounts (69%) and deposit cheques (51%).

They’re also on the brink of significant milestones possibly accelerated by the pandemic. For example, our research revealed that almost half (46%) of ‘ethical bankers’ have become more likely to buy their own homes over the past eighteen months. Offering seamless services that meet specific needs means financial institutions can add value and position themselves as trusted partners.

Make values valuable

Ethical banking services come at a cost, and it’s easy to assume that consumers won’t pay extra to make them viable. However, research shows, many are open to premium options as long as sustainable values are truly embedded across a business. And that’s where the hard work begins.

There’s no point in preaching about a commitment to solving social injustice or improving environmental outcomes if an action does not accompany it. Simply paying lip service is a waste of time and can erode trust in a brand, particularly amongst customers that prioritise purpose. Banks must be brave and put their money where their mouth is – and trust that customers will do the same.

Make it easy to stay

‘Ethical bankers’ are among the most spontaneous in their spending habits, with 42% describing their spending habits as spontaneous or very spontaneous. But this spontaneity comes with transience and demanding expectations of digital services.

A fifth (19%) of respondents in this tribe said they’ve switched banks in the past 18 months, with over two fifths (43%) claiming they’ve become more likely to make a change since the pandemic began. With services under scrutiny, banks must work harder to earn such custom. Their loyalty certainly shouldn’t be taken for granted. To prevent them from jumping ship in search of a better customer experience, banks should offer an unrivalled combination of tailored services and flexibility they won’t find elsewhere.

Taking social purpose seriously

Every bank claims to be customer-centric, and many are making concerted efforts to walk that talk. But consumer behaviours have changed, and expectations have risen. Banks whose plans for transformation are based on pre-Covid predictions risk being left behind by customers who have found new ways to manage their money during the pandemic.

Banks must take social purpose seriously if they want to survive. Rather than talking about products and services, they need to think about broader values aligning with those of their customers. To remain competitive in a post-pandemic world, they must shift their role from service provider to lifestyle partner – and this requires an intimate understanding of customers’ wants, needs and values.

Get it right and, instead of an expense, purpose can be part of the path to profit.

In 2021, so much of the attention was focused on collectible NFTs, gaming and the metaverse. Their popularity took many by surprise and benefitted tokens that are linked to these powerful trends. In 2020, decentralised finance was the star of the show before NFTs stole the limelight. The DeFi ecosystem continues to expand and new opportunities open up, despite token performance not being on par with some of the newer use cases.

by Martha Reyes, Head of Research, BEQUANT 

There are several compelling protocols that should not be ignored, such as those that bridge the real-world economy to the blockchain. This can include financing for SMEs or facilitating global trade transactions. While perhaps less attention-grabbing than other token-backed protocols, the total addressable market is vast.

Remittances are one of the most widely known applications

One better-known use case that has risen to prominence is the trillion-dollar money transfer industry. Tokens’ ability to on-ramp any global fiat currency and off-ramp it into another at lower rates than the traditional transfer methods, securely and almost instantly, makes them a real disruptor in an archaic corner of finance. Strike, the company using the Lightning Network on Bitcoin rails, is one of the most successful examples, with entities as disparate as Twitter and El Salvador relying on the technology for international payments and remittances.

Global trade is an even larger market ripe for improvement

The technology can extend to other areas of the old economy. Global trade, a $5.6 trillion market and growing, is one such segment and it’s larger than remittances. Buying goods and services across borders is complex, with lengthy processing times and high transaction fees. It also requires financing, creating barriers for small and mid-size companies.

Businesses can utilize smart contracts on the blockchain, storing agreements and documents and guaranteeing traceability. Smart contracts allow the two parties to specify the terms of an agreement and ensure that those are transparent by virtue of being on the blockchain.

Many other possibilities being explored

In the NFT space, applications are not limited to digital objects but also to physical ones, hence the birth of NFT mortgages backed by real assets or tokenized ownership of real estate and expensive artworks.

Blockchain’s potential is by no means limited to these examples. Others include secure sharing of data such as medical data, music royalty tracking, real-time IoT operating systems, personal identity security, anti-money laundering tracking systems, supply chain and logistics monitoring, voting mechanism, advertising insights, original content creation, and real estate processing platforms.

What makes for a successful project?

When evaluating a project, retail and institutional investors sometimes focus on different properties of a project. Key metrics to keep in mind are the strength of the underlying technology, use cases, total addressable market and adoption trends.

One example is the XDC Network, a hybrid, delegated proof of stake consensus network, with developer-friendly architecture. As a third-generation blockchain, the technology is more advanced than some of the more established blockchains. Bitcoin can handle between 3 and 6 transactions per second, Ethereum’s blockchain can handle 12 to 16, while XinFin’s can handle more than 2000.

A use case is reducing friction and expanding access to trade financing for SMEs and creating yield opportunities for investors. Agreements and documents are stored in interoperable smart contracts, and transactions are settled on the blockchain more efficiently than in the legacy systems. There is also higher security as there is clear evidence and traceability of ownership.  The smart contract transactions feature digital tokens, which represent the value of off-chain, the bank originated assets and can generate yield for investors.

This means that when individual purchases and makes an investment into the XDC token, they are investing in the underlying technology which can be used to develop payment solutions and other blockchain apps.

Fees have also greatly reduced over the span of three generations, from $15 to $0.00001 per transaction, with confirmation speeds cut from 1-60 minutes to around 2 seconds. With an increased capacity and lower fees, the barriers to access the technology fall away. Energy consumption has also been reduced from 71.12TWh on Bitcoin to 0.0000074TWh on the XDC Network.

Many alternative Layer 1’s such as XinFin’s XDC Network, have been developed or are in development to challenge those popular in the NFT and DeFi space that have struggled with scalability issues. Developers are working to increase the number of transactions processed and reduce gas fees, as users have been stung by high costs on the Ethereum blockchain.

Now, blockchains are being developed to be cheaper, faster and more energy-efficient, albeit with compromises on decentralization, to address growing demand. Thus, they are generating interest from individual and professional investors alike. Scalability will unlock important avenues of growth in the digital economy as well as the physical one. It will be an important theme in 2022.

Businesses of every kind have been affected by the COVID-19 pandemic. The banking sector has not been immune: for some banks, the economic impact has been notably acute. In response, the move to online financial services has accelerated at a dramatic rate as a plethora of fintechs, so-called “neobanks” and non-traditional financial service companies, continue to expand their activities. As the payments phenomenon became truly global during the pandemic, Africa has emerged as a new FinTech hub.

by Manoj Mistry, Managing Director, IBOS Association

An increase in investment has led to African FinTech companies expanding their services across the continent. The potential is enormous, particularly in sub-Saharan Africa – a region that has traditionally suffered from limited access to financial services. As Africa’s largest economy with a population of nearly 210 million, Nigeria received more than 60% of Africa’s inbound FinTech investment in 2021. But over 50% of Nigerians do not yet have a bank account.

Last year, four African FinTech companies achieved unicorn status with $1bn+ valuations: OPay, a mobile-payments company, which raised funds from investors including SoftBank; Wave, a Senegal-based mobile money network; Chipper Cash, a peer-to-peer payments operator backed by Jeff Bezos; and Flutterwave, which offers payments services to businesses.

If the future of the banking sector in Africa seems promising, then open banking looks set to play a pivotal role, providing third-party financial service providers open access to consumer banking, transaction, and other financial data through application programming interfaces (APIs). As an open-source technology, it allows third-party developers, such as fintechs, to access data held by banks and to develop applications or services based on such data. Through this seamless connection of data, open banking enables customers to access products best suited to their needs, lowering costs, as well as facilitating innovation and inclusion.

Africa’s latent demand for open banking requires the banking sector to adopt fintech solutions. Some of that is already underway. In December 2020, Kenya’s Central Bank released its four-year strategy which highlighted Open Infrastructure as one of its main strategic objectives. In 2019, two large South African banks embraced open banking at the height of the pandemic. The number of South African banks offering open banking services has since grown to six. Meanwhile, South African and Nigerian start-ups TrueID and Okra, respectively, announced they had received significant funding to develop open banking infrastructure.

The UK and EU have already addressed the legislative challenge. At the heart of the Competition & Markets Authority (CMA) Order and the Second Payment Services Directive (PSD2) is customer consent. In Sub-Saharan Africa, the regulatory frameworks that are integral for the operation of open banking in the future, such as data protection laws, have largely yet to materialize.

Meanwhile, a significant part of the population remains unbanked or underbanked across much of the region. Taking South Africa as an example, a great opportunity exists for banks across the continent to become involved in open banking solutions, meeting the needs of the consumers and revolutionising the concept of African banking. African legislators, therefore, need to recognise the enormous potential that open banking creates to facilitate financial inclusion, especially its beneficial impact on access and affordability.

For banks around the world, leveraging an eco-mindset is becoming increasingly crucial as consumers consider their role in environmentally damaging CO2 emissions and climate change. As challenger banks, such as Starling and Monzo, drive up social initiatives and commit to net-zero pledges,  more traditional banks are shifting their public perception of climate change and making investments in greener services.

by Dr Carsten Wengel, Head of Global Sales & Distribution in the Card & Digital Payments Business, Giesecke+Devrient

In fact, the latest research by YouGov finds that 58% of consumers in the USA and 57% in the UK are now willing to spend more on sustainability in the banking sector. Banks are a mirror of the societies they serve, and as a result, they need to decide if they want to be the driver of or driven by the global trend of sustainability. But how best can they achieve this, and which methods can they adopt to win the eco-conscious consumer?

Sustainable banking cards for a sustainable consumer

Over the recent years, more consumers have come to realise their purchasing decisions have the power to impact positive change. As such, they now expect sustainable offerings from any company they engage with. This includes banks too, with consumers increasingly demanding their banks’ support to help them shift to more sustainable payment practices. One way to meet this growing demand is for banks to introduce sustainable banking cards.

Despite a common misconception, banking cards can in fact be environmentally-friendly. They can be made of climate-friendly materials such as renewable plant fibres that are entirely compostable under industrial conditions. Even though the material has similar characteristics and strength to petrol-based plastic, it is nothing like it as no additional greenhouse gases are released during the combustion process. Compared to the production of conventional cards, sustainable banking cards can save up energy and harmful gas emissions of as much as 68%. This can significantly reduce their impact on the planet considering the volumes produced each year.

With 91% of the world’s plastic not yet recycled, sustainable banking cards can also have their bodies made entirely of recycled PVC, driving the circular economy and taking appropriate steps to end planned obsolescence. A smarter use – or re-use – of materials can help reduce waste and pressures on the environment whilst stimulating innovation and boosting economic growth.

It’s not just the physical banking card, however, that should be put through a sustainability check and replacement. Every new card requires a PIN which is often sent to consumers by post, creating more paper waste. Banks should therefore consider an eco-friendlier alternative – a digital way to send PINs. For example, by a text message, QR code or provide secure access to new PIN via the app and multi-factor authentication.

Such a step towards sustainability can not only be life-saving for our planet, but it can also act as a powerful business tool for banks. In the hands of customers, sustainable banking cards can create a successful brand multiplier effect and help reinforce the bank’s mission, purpose and commitment to becoming more environmentally friendly. Customers will naturally become advocates of sustainable lifestyle banking, helping traditional institutions stand out with their eco-offerings amongst fierce competition.

Joint efforts needed to reduce climate impact

The fight against climate change does not have to be a lonely one for financial services institutions. To ensure greater results and a real impact, banks and fintechs should create fruitful partnerships and in a joint effort, satisfy consumer demand for more sustainable means of payments and offerings. Together they could develop and promote new services that calculate how much CO2 a consumer contributes each time they buy something.

Through an API, for example, banks could integrate such calculations into their digital wallets, which would analyse all types of transactions a consumer completes each month and showcase their carbon footprint through a visual dashboard. This could not only help consumers become better informed but also prompt them to make changes. Sweden-based company Doconomy is one fintech that has been making progress in this area, giving its customers more transparency on how their decisions impact the planet, encouraging them to change their behaviour and practices into more sustainable ones.

Taking the learnings and innovations that fintechs are pioneering, traditional commercial banks should follow their footsteps and build a more sustainable financial services ecosystem in which knowledge and best practice are shared regularly. It is apparent that banks need to become partners, or even drivers of change, however, they can only achieve that with the support of other, more experienced financial institutions to create a strong, reliable and transparent environmental initiative. It could be that through introducing concrete, climate-positive policies in the near future, banks and fintechs will be more encouraged to collaborate and form such a crucial ecosystem, meeting consumer needs for sustainable banking practices and ultimately achieving the international environmental and global warming goals.

Achieving a climate-friendly banking future

Fuelled by consumer demand for a green value proposition, traditional banks have started waking up to the need to act positively when it comes to payment sustainability. Through the introduction of sustainable banking cards, leveraging technology to raise greater carbon footprint awareness amongst consumers and joint actions between all financial ecosystem players, the industry can foster a greener future and make a real, positive difference for generations to come. As banks look to become more competitive and innovative, ensuring sustainable products and services could not only be life-saving for the planet, but also a new, profitable avenue worth exploring.

Online auction platforms have accelerated the digital migration of the art market, which has traditionally been slow to embrace innovation. Whilst this may seem unsurprising amid the headlines of NFTs taking the art world by storm, it is all the more interesting that online auctions have driven the continued robust distribution of physical art.

by Garry Jones, CEO, NovaFori

This rapidly growing technology, therefore, gives us a glimpse of the future of fine art and collectibles, not by dispensing with the physical in favour of the digital, but by uniting the two in a more symbiotic ecosystem that better serves both those who collect works of art and those who facilitate their sale.

Online auctions in fine form

Leading auction houses such as Christie’s have now firmly embraced online auctions, with the pandemic accelerating uptake significantly since the early months of 2020. This has enabled auction houses to retain some semblance of business as usual amid the disruption caused by Covid-19, and now, nearly two years later, online auctions are expected to account for 25% of all art sales by the end of 2021.

Auction houses are clearly not looking backwards, not least because this digital migration of art sales has unlocked a much more extensive geographical and demographic customer base. Online auctions hold far more appeal among younger people, for instance, compared to the financial and environmental cost of travelling to an auction in person.

Moreover, the data-driven insights gained from the most innovative auction platforms empower those facilitating sales to make the most of these demographic shifts. Platforms equipped with a machine learning function, for example, can help auctioneers become attuned to the appetites of registered consumers based on their bidding history, enabling them to set pricing estimates more effectively.

NFTs: An auction(ed) token

While online auctions have helped keep the traditional art market relevant for new audiences, they also allow auctioneers to explore a new aspect of their business which is entirely online: Non-Fungible Tokens (NFTs). As a purely digital asset class, NFTs are only bought and sold via online marketplaces – and the burgeoning popularity of these once-obscure assets has thrust them into the limelight.

Indeed, institutional auction houses have now begun to heed the gradual increase in consumer confidence around this new breed of collectible. Following its landmark sale of digital artist Beeple’s ‘The First 5,000 Days’ in March 2021, Christie’s has now sold more than $100 million-worth of NFTs, not including the recent $29.8 million sale of Beeple’s ‘HUMAN ONE’ artwork.

Although some critics have decried the nascent NFT market as a bubble waiting to burst, such a fall in demand may in fact yield a slower, more sustainable level of growth which will facilitate the long-term maturity of the market. Thus, the outlook for NFT sales remains optimistic, and so too does the outlook for the online infrastructure which underlies it.

Growing, growing, gone?

Online auction platforms, therefore, retain considerable scope for growth, far beyond the pandemic which has accelerated the early stages of their development. In fact, a survey conducted in 2020 found that 56% of art buyers foresaw a permanent switch to digital sales. Considering the aforementioned benefits of online auctions for both buyers and facilitators of sales, it is easy to see why this would be so popular.

Moreover, platforms that facilitate online sales, whether the items themselves exist on a physical level or not, will remain viable precisely because of their usefulness for different types of auctions. Their rapid rise is by no means the death knell of the physical art market; it is instead part of the increasing convergence of the physical and digital worlds.

Finally, bridging the gap between the physical and the digital will only grow in importance as in-person auctions return in some form. These will most likely consist of hybrid events, where participants can attend online as well as in-person depending on their preferences. In the uncertain pandemic context, leveraging technology capable of delivering robust buyer and auctioneer experiences will be all the more critical and not just in the art world.

Financial services are increasingly implementing AI technologies in order to help analyse massive volumes of data, identify market trends and prioritise tasks. On top of this, it is being used to identify fraud, personalise the customer journey, as well as cyber security and general risk management.

by Dr Leslie Kanthan, CEO and Co-Founder, TurinTech

The volume of information and data generated by financial institutions is huge, and AI is proving to be a pivotal cog in the sector machine by handling this data more efficiently. 

According to a past Accenture report, banks could increase revenue by 34% by this year if they invest more readily in artificial intelligence. Fortunately, this report also concluded that in general the banking industry and its executives and employees were optimistic and positive about the impact AI could have on their organisation. 

It comes as no surprise that as of February 2022, 56% of financial firms have implemented AI in business domains like risk management and 52% in revenue generation areas.

So where are we today? Is AI just another buzzword or can it really help deliver efficiency and increase productivity in the financial sector? Let’s dive into three important ways AI optimisation can revolutionise the financial sector.

Empowering innovation at speed and scale

Operationalising AI at scale is still a big issue for many companies, with IDC citing only 25% of firms running an AI project having developed an “enterprise-wide” AI strategy and many of these projects are doomed to fail. 

Operating in a highly regulated industry, financial institutions often have to trade-off between model performance and explainability. But this is where AI optimisation can help, which uses AI to optimise model and code, enabling full transparency and explainability, without compromising on the accuracy and running speed of the model.

Unlike other AI automation tools, AI optimisation platforms can help financial firms build custom models with multiple criteria, at scale. What this means for financial services is that these tools can create better and faster algorithms for their unique business problems, optimising business processes efficiently and effectively.

Elevate ESG compliance with greener AI

A Global Data survey reported how the pandemic has pushed ESG executives to increase their focus and action on ESG issues. 

As an industry, it’s time to reconsider our carbon footprint and start to prioritise sustainable change. WWF and Greenpeace report that UK Financial Institutions were responsible for 805 million tonnes of CO2 emissions, almost 1.8 times the UK’s domestically produced emissions.

AI optimisation will be a force for good in meeting sustainability goals, with machine learning models becoming faster, more efficient, and consuming less energy. Green AI ultimately integrates technology and sustainability into a unified ecosystem. 

With more change and uncertainty to come in the year ahead, AI optimisation will be there to support and transform those businesses that are willing to rethink existing processes and agendas. Ultimately every organisation has a responsibility to be contributing positively to the climate crisis, and optimising processes is certainly a step in the right direction.

Accelerate algorithmic trading speed and improve accuracy

According to Coalition Greenwich’s report, 28% of FX executives said they are currently using execution algos, with 51% confirming they intend to increase their use of algos. 

If and when applied correctly, AI can bring impactful benefits to algo trading. Take, for example, a case when a hedge fund’s statistical models are underperforming, unable to take advantage of more complicated patterns in ever-increasing data types and volumes (e.g. Market price and volume data, third party data, proprietary data).

What can the trading team do? 

By leveraging AI optimisation platforms to accelerate the end-to-end trading strategy development process,  they can create dozens of optimal models in days for different prediction needs, such as the price, price percentage change, up/down momentum, on large amounts of data. The fund can then automatically identify the most effective signals among thousands of data features, avoiding spending hours to do so manually. Applying this to the real world can make trading strategy development 25 times faster and increase the annual return rate by 90%. 

The bottom line

Through the use of AI technology, the financial sector is able to significantly improve its performance and revenue in more ways than one. McKinsey estimates that AI could generate up to $1 trillion additional value annually for the banking industry globally.

Furthermore, in today’s constantly evolving landscape, staying innovative and agile is crucial. Having technology that not only empowers this change and innovation at scale but compliments it with ESG  considerations will be of huge importance to the sector moving forward. Vital innovation is required to be implemented at speed and scale in order to keep up with competitors, which can be achieved through the implementation of AI.