G20 leaders and their economists must take decisive steps towards the formulation of multilateral rules for the cryptocurrency market, according to Nigel Green, CEO of global investment consultancy deVere Group. Speaking in the run-up to the recent G20 summit in Osaka, Green said: “Due to the astonishing and quickening pace of the digitalisation of the global economy – and the far-reaching impact of this – political leaders, finance ministers, central bank representatives and [other voices in the] G20… must ensure decisive steps towards a multilateral cryptocurrency regulatory framework are taken. A failure to do so would be, in my opinion, irresponsible and negligent.”
Green noted: “The cryptocurrency sector continues to grow. Indeed, the value of Bitcoin, the world’s largest cryptocurrency by market cap, has soared 193% in value year-to-date. This has had the effect of pulling up all other major digital currencies. This isn’t solely an impressive rally – which it is too, of course. It also underscores that the already burgeoning sector is becoming unstoppable as institutional investors increasingly step off the sidelines and jump into the sector… By adopting a common set of regulatory guidelines, the world’s financial leaders can harness the potentially enormous economic benefits that digital money can bring and mitigate the risks.”
Green also advanced some provocative thoughts on what the launch of Facebook’s crypto offering Libra means for the wider financial system. “First, the role of traditional banks will decline at a quicker rate than many had previously predicted,” he said. “Libra… will be able to transact across traditional payment rails. They have partnered with PayPal, Mastercard, Visa and Stripe, among others, to fuel merchant acceptance of the digital currency… Second, tech giants entering the cryptocurrency sector indicates that digital money, as a concept, is fully mainstream and inevitably the way the world is going.” He added: “Banking as we have known it until now is coming to an end.”
British firms may have as much as £593 billion locked up in excess working capital, potentially hampering their growth and leaving them exposed to economic uncertainty, according to Lloyds Bank Commercial Banking. The figure has emerged from Lloyds’ Working Capital Index, which combines the bank’s proprietary research with data from the Purchasing Managers’ Index to calculate the working capital pressures that companies are under.
An analysis of almost 9,000 firms showed that they have a total of £142bn tied up in working capital – a £15bn rise on last year, and £41bn up on 2015. When compared against historical and industry-best levels of cash-flow efficiency and extrapolated across the entire landscape of UK firms with more than 50 employees, that equates to £593bn of excess working capital. The research indicates that stockpiling is the biggest contributor to the rise of cash tied up in working capital. Data shows that business inventory levels have risen every year since 2015, with firms putting more than £8bn towards them in just the past 12 months. On average, stockpiling has led larger firms to increase their inventories by 33% over the past three years. Aerospace and defence, industrial manufacturing and pharmaceuticals were among the sectors experiencing the fastest inventory growth.
Lloyds Bank managing director of global transaction banking Ed Thurman warned that, while companies tying up significant amounts of cash can be an indicator of confidence, firms shouldn’t be complacent at a time of uneven growth across core sectors. He said: “Our research confirms businesses are stockpiling as a precautionary measure, in the face of political and economic uncertainty, to ensure they are in a strong position to face into any potential challenges. Such a deliberate response to an ongoing situation can be risky, as cash invested in inventory is rarely easy to release – meaning firms are less able to invest in growth or respond to unexpected changes in demand.”
Credit specialists Mastercard have joined forces with the P27 Nordic Payments Platform in a major investment effort that aims to create “the most advanced, innovative and efficient payments system in the world”, according to a 25 June announcement. In providing a real-time and batch multi-currency platform designed to replace the region’s existing payment network, the partnership will catalyse a world first.
Participants will be able to send and receive funds across the Nordic markets immediately at a lower cost, with higher security – boosting economic growth and employment by enabling the development of new products, services and business models. The P27 Platform is owned by Danske Bank, Handelsbanken, Nordea, OP Financial Group, SEB and Swedbank.
Mastercard’s Europe president Javier Perez said: “This exciting partnership will build a world first in terms of a cross-region and multi-currency faster payments area… The Nordic markets are global leaders in the development and usage of electronic payments and this new infrastructure will maintain their advantage over the rest of the world.”
P27 CEO Lars Sjögren added: “This is change for real. By joining forces across the Nordics we will be able to develop instant payment solutions in a way that each country never would have accomplished by themselves. By sharing the costs between the Nordic countries, we will get a state-of-the-art payment infrastructure… with the highest standard when it comes to security and efficiency, further boosting innovation and growth in the Nordics.”
Some 87% of financial decision-makers in UK firms hit by payment fraud have been unable to claw back more than half their losses, according to the latest Business Payments Barometer from software vendor Bottomline Technologies. Among small and medium-sized companies, the figure rises to 93%. The Barometer puts the current, average financial loss through fraud at £240,092 – and shows that the majority of losses have moved out of the £10,000 to £49,000 bracket they occupied in 2018 and into a range between £50,000 and £250,000.
In other findings, the Barometer detected a low awareness among firms of key industry initiatives that have stemmed from regulations in the payments field – despite the growth of regulation over the past two years. Among the respondents who feel unprepared for coming regulatory shifts, the majority are unaware of the benefits of schemes such as open banking (54%), New Payments Architecture (51%) and ISO20022 (52%). Indeed, only 17% of financial decision-makers say they are fully prepared to embrace open banking. As such, many businesses may miss out on the opportunities that new rules systems can provide.
Bottomline Technologies managing director, Europe, Nigel Savory said: “Open Banking has the potential to free up time previously spent on back-office activity. For example, small businesses can easily gain access to their different banking transactions, balances and history through trusted organisations – whether that’s a financial institution of choice, or an approved Payment Service Provider.” He noted: “Those yet to embrace the new model could potentially risk falling behind the front runners when it comes creating efficiencies within their own organisations or offering new, value-added services to their customers.”
Larger UK companies – together accounting for 48% of the nation’s turnover and employing 40% of its workforce – are struggling to digitally transform, according to a joint report from the CBI and Oracle. Issues that these businesses are facing include skills scarcity, complex legacy systems and a 25% greater threat from cyberattacks compared to firms of other sizes. By contrast, smaller start-ups are more likely to adopt new technologies.
CBI director of digital and innovation Felicity Burch said: “No business can rest on its laurels when it comes to technology. Big firms must be doing all they can to stay ahead of international competitors and adopt new technologies that will boost productivity and efficiency. Many will assume that, with the resources at their disposal it’s easy for large firms to adopt new technology. But a host of challenges from ageing legacy systems, cyber security threats and agile new challenger firms can make successful innovation feel like hitting a moving target.”
She added: “For the UK’s big hitters to secure their position as world leaders over the next 10 years, senior business leaders must be prepared to challenge their established ways of operating and cultivate an environment that encourages employees to seek innovative solutions to company-wide issues or these companies risk extinction. If larger businesses don’t want to become dinosaurs, they need a long-term plan for adoption of new technologies.”
For advice on digital transformation, see our recent article ‘How do we reach the digital Promised Land?’ by futurist Rohit Talwar.