Monday, July 29, 2019

Frederick Achom on the likelihood and consequences of a no-deal Brexit

Frederick Achom on the likelihood and consequences of a no-deal Brexit


The country is currently waiting with bated breath to see who the new Prime Minister will be, following Theresa May’s resignation for failing to agree Brexit terms with the European Union.

As the business community waits to see what will happen, it’s still unclear how close we could be to a no-deal Brexit, and the fallout this would realistically cause. The two contenders for the Prime Minister position, Jeremy Hunt and Boris Johnson, both say they are prepared to take the UK out of the EU with no deal. So, where does this leave us?

And in particular, where does it leave the small and medium sized businesses community that makes up more than 99% of the private sector, and forms the backbone of the UK’s economy?

Industry opinion on a no-deal Brexit

In this post I’m going to look at the most recent comments from industry experts, manufacturing bodies and the Bank of England, to gauge the consensus of opinion regarding no-deal Brexit.

Make UK is a trade body that covers many businesses across 19 different sectors. Companies represented by the body include BAE Systems, Toyota, Airbus, Nissan, Ikea, Lush Cosmetics and Warburtons. The body told the Guardian that manufacturers are going through the biggest drop in orders for around seven years.

Seamus Nevin is chief economist for the group and believes that Hunt and Johnson’s tough act on a potential no deal Brexit demonstrates little practical understanding of the consequences for UK’s businesses. Johnson is the more vocal of the two regarding no-deal, basing most of his campaign on a ‘do or die’ attitude to the UK leaving the trading bloc. Hunt, on the other hand, began his campaign much more cautiously, but is now echoing Johnson’s attitude, and has pledged a deadline of 30 September 2019 for his final decision on no-deal should be become Prime Minister.

Spending decreasing across business sector

Businesses across the UK are slashing spending, and the corresponding decrease in manufacturing reflects a general mood of uncertainty across the sector. And while some commenters insist that this manufacturing decline is a direct response to the stockpiling that occurred in Q1 2019 to prepare for a possible no-deal Brexit on the original exit date of 29 March 2019, the purchasing manager’s index (PMI) suggests that it’s a continual decline, rather than a one-off event.

The PMI acts as a monthly barometer check on supply and demand across 19 different industries in the UK. The data gives an accurate view of the economic trends of the moment, as they respond to external factors. It shows whether manufacturing is contracting, expanding or remaining the same.

The latest PMI figures show the biggest contracts (50.3 to 47.2) since October 2012. Make UK says that this shows that these 19 industries are reporting fewer export deals as other countries lose confidence in the UK because of Brexit uncertainty. The British Chambers of Commerce agree with Make UK, saying that domestic manufacturing orders are at their lowest since 2012.

Government figures show that the UK’s economy grew in Q1 2019 by 0.5%. This is most likely due to the aforementioned stockpiling to prepare for a possible no-deal Brexit at the end of March. The boost this gave to the economy is now in reverse, and according to the Bank of England, growth stopped completely by April 2019.

UK would revert to WTO rules

It’s safe to say that there is little obvious support for a no-deal Brexit from high profile commenters across the manufacturing and business world. The country is currently counting down to the extension to Article 50 requested by Theresa May, which takes the date for Brexit to 31 October 2019.

And while Hunt and Johnson continue to battle it out for the role of Prime Minister, the EU has been clear that there is no more time or room for negotiation. If the country does exit with no deal, then there will be no transition period at all. This means that every current arrangement with the EU will simply stop on 31 October.

The UK would then revert to trade rules set by the World Trade Organisation (WTO), and would be subject to external tariffs by the EU. It’s also possible that the change in rules and regulations cold lead to the EU rejecting British made products.

In some ways, the business community is still uncertain as to what the consequences of a no-deal Brexit would be. However, regardless of the outcome, UK businesses and SMEs must prepare for every possible scenario. The new Prime Minister will be announced on 22 July, and after this I expect to see clarity and support for SMEs laid out by the Government. For now, however, it’s a waiting game.

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Thursday, July 11, 2019

Frederick Achom on some of the best Fintech investment apps available

There are various reasons contributing to the rise of Fintech and the plethora of all kinds of financial services apps now on the market. It can be tempting to dive into some of these investment apps without thorough research, particularly as they generally demand much lower starter fees.

However, all investment carries risk, and there are no guarantees. Traditional investment rules apply to apps too. For example, it still stands that higher returns mean higher risks, and it’s important to regularly review your portfolio. But apps can absolutely take away some of the stress out of investing, saving and other financial services. Here’s a rundown of the kinds of apps available right now and their risks.

Wide range of Fintech services available

The Fintech sector covers a wide range of disruptive start-ups that use technology to simplify financial services. They offer something new to the market, or they offer something that was previously inaccessible for many users. Fintech began with the aim of disrupting traditional financial institutions and revolutionising the way we all manage finances.

More recently, established financial institutions and banks have realised the importance of this sector. They now offer their own FinTech solutions, either developed in-house, or in partnership with start-ups. The net result is a much wider choice for investors, savers and users.

Robo-advisor apps and websites

Robo-advisor services are a niche but fast-growing area of Fintech. They are online investment services that ask users a set of questions and come up with a plan based on the answers. The app uses algorithms to work out the best plan for the specific user.

There are few minimum requirements for users to open an investment account on these platforms, making them easily accessible to a wide market. They often offer low-cost, low-risk investments, which limit fees. They also reallocate assets and maintain the portfolio automatically, taking the stress away from the user.

Successful examples include Wealthfront and Betterment, but there are many to choose from. They specialise in reaching a generation of investors who do not generally use traditional investment advisors.

The biggest advantages for users are the low fees involved. For example, an online robo-advisory investment service usually charges around 0.25%, while a human financial advisor will charge around 1%. The obvious disadvantage is the robo-advisory service cannot allow for changes in personal circumstances, nor can they offer reassurance in worrying times.

Round-up savings and investment apps

Round-up apps can be thought of as the digital equivalent of hoarding spare change in a jar at home. Except that the change goes directly into a savings account or investment scheme that can accrue interest for the user.

Apps like Moneybox work by linking up with the user’s bank account or credit card. The user then sets their preferences on online transactions, and the app automatically rounds up the pound and puts the excess in the saving or investment account.

For example, a user spends £2.90 every day on a coffee. The app will take the extra 10p by rounding up to the nearest pound and transfer into the savings account. Another successful example is the digital bank Monzo, which has partnered with Investec to pay 1% interest on the savings account formed by the excess change on digital transactions.

Apps for trading stocks and shares

More seasoned investors are often interested in apps that allow them to carry out digital stock broking. Examples include Freetrade and IG Markets, which trade everything from shares, forex and bonds to commodities and cryptocurrency.
Fees are much lower than traditional broker services and are often commission free. However, they do tend to charge in other areas, such as instant orders and outgoing bank transfers, so it’s important to read the small print. These apps offer an impressive range of trading options and can work well for the right kind of investor. You can also try them out before you decide to invest, so it’s worth doing lots of research if this area of Fintech interests you.
Fintech appeals to lots of people thanks to its easy accessibility, flexibility and generally low fees. However, for serious investors with large portfolios, these apps often don’t offer the necessary levels of support. As big banks and financial institutions get on board the FinTech bandwagon, I think this is likely to change in the near future.

Tuesday, July 9, 2019

Frederick Achom unravels plans for its own cryptocurrency

Image credit: K.unshu /

While the cryptocurrency industry has had all eyes on encrypted messaging services Telegram’s moves in the space, Facebook has quietly been creating its own token.
Recently, new details emerged about Telegraph’s blockchain platform TON. I’ve been following its development since the company secured a huge amount in initial coin offerings. Last year, two private token sales rounded up $1.7 billion for Telegram.
New details recently emerged about one of the most discussed and anticipated cryptocurrency projects in the sector – TON. The new blockchain platform has been in development by Telegram, the WhatsApp rival instant messaging service.

I’ve been following the development of TON since Telegram raised one of the largest initial coin offerings (ICO) in the sector. In 2018, they made around $1.7 billion from two private token sales, and it was assumed they were leading the way in cryptocurrency development for social media platforms. However, more recently, it has become clear that Facebook is well on its way to creating its own token too.

Reports break of Facebooks’ cryptocurrency plans

A major investigative report by The Information shows that Facebook’s own blockchain project is nearing completion. While this project has been discussed for a while, we’ve had nothing concrete to examine until the report was published on 5 June 2019. Based on various news stories, the report has since been partly validated by a European Facebook executive. We also know that there is a white paper due in the imminent future, which will lay out details of Facebook’s plans. Before we see that, here’s everything we know so far.

Facebook has built a team of cryptocurrency experts

The Information say that the project began roughly a year ago, when Facebook began building its team. The former president of PayPal was brought in to run the project, swiftly followed by the entire team from a start-up called Chainspace. More than 100 staff are now rumoured to be on the project.

In May, there were reports from the BBC saying the cryptocurrency is named internally as ‘GlobalCoin’, but there is much more evidence to support its name as Libra. In the same month, Facebook registered a company in Switzerland. Its name is Libra Networks. The Information claim that Mark Zuckerberg is closely involved in the direction of the project.

Facebook is targeting developing countries

As the new token will be a borderless currency, we know that it will be used seamlessly on Facebook platforms, which include Instagram, Messenger and WhatsApp. It’s also likely that marketing will initially be confined to developing countries, as it is set to launch in India.

There are around two billion users of Facebook’s network of platforms, and many of these people don’t have immediate access to financial services. They also routinely face high cross-border fees. If Libra works and people begin to use it in these countries, it could revolutionise personal finance, giving h them access to e-commerce, peer to peer lending and all kinds of other services.

In an article for Forbes, Wall Street expert Caitlin Long believes that: “Facebook’s cryptocurrency will be a powerful force for good in developing countries.”
How will the token retain value?
The report says that the token will be linked with a basket of currencies, along with low-risk securities. However, there are no further details of how this will work and which currencies will be included. Facebook does have plans to move Libra into the offline world too. They will provide ATM terminals so that Libra users can exchange their crypto for fiat currency. Facebook employees will also have the chance to be part paid in Libra.
In terms of regulation, it’s not surprising to see that Facebook is making lots of effort to show that the network will be partly decentralised. There is much made in the media of Facebook’s handling of personal user data, and whether any company should have that much influence. Now that they are making forays into financial services, it has many people concerned about how this will be regulated. Facebook’s response is to form an external body of financial institutions and experts that will provide oversight.
As for those who will be part of the network to validate transactions, this will be a premium few. Entities will have to pay $10 million for control of one of the network nodes of operation on the blockchain. It will launch with 100 nodes initially.
Reaction to Facebook’s plans

Inevitably there has already been much debate over Facebook’s cryptocurrency, and how it will affect the sector. It does look like the company is attempting to deliver user-friendly financial services to a group of people who don’t have ready access to them, which is generally being welcomed as a positive thing.
A key difference between Libra and other currencies like Bitcoin and Ethereum, is the fact that Facebook will essentially be acting like a bank. Crypto expert Jian M Villaverde told CoinTelegraph that Facebook would essentially act like current financial institutions by implementing a layer of oversight to people’s actions. This is very different to Bitcoin and other cryptocurrencies, which were formed from the ground up as disruptors to this traditional world of financial services.
Others think that Facebook will be integral in spreading general understanding of cryptocurrencies and making it more normal for people to use. For example, Caitlin Long tells Forbes that while Facebook will help people understand cryptocurrency, they are more likely to eventually choose scarce currency such as Bitcoin over plentiful tokens from Facebook.
Time will tell how Facebook’s plans play out, and the impact they will have in this space. How much they will alter the financial services sector remains to be seen.

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Tuesday, June 18, 2019

What is driving the expansion of Fintech in Europe and the UK?
While Fintech growth has exploded across Europe, there is a slower uptake in the United States. This is despite an enormous potential market in the US, thanks to a large population of consumers ready to shift over into newer technology.

The rapid development of Fintech in Europe has been due to huge amounts if investment, from banks and from venture capitalists. It’s also been helped by regulatory changes within the European Union (EU) and the UK that have opened up the market to competition.

Global investment in Fintech increasing

Fintech is a broad term used for the merging of financial services and new technology. It’s the new banking apps that are proving popular with consumers, and online payment options. These are the two areas most consumers are familiar with in their daily lives, but it also covers more in-depth areas. These include alternative lending, robo-advisors powered by AI, peer-to-peer lending and automated loans.

Global investment in Fintech companies reached a high of $122 billion in 2018, according to research from KPMG. This is more than double the amount spent in 2017, which peaked at $51 billion. Europe reached $37.5 billion worth of Fintech investment in 2018, more than tripling the $12.2 billion in 2017. The UK’s Fintech investment leapt from $5.6 billion 2017 to $24.1 billion in 2018, representing the biggest increase in Europe.

Banks have been forced to accept that Fintech start-ups present tangible and potentially damaging competition. This has led to more financial institutions partnering with start-ups to develop new consumer solutions. Many of these Fintech developments have taken place in Europe, with a slower growth in the US.

Europe embraces regulatory changes

Europe has shown itself to be more accepting of new technology, with the rise of Fintech bridging the gap between traditional banking and new services for tech-savvy consumers.

While European Fintech companies are thriving this side of the Atlantic, they are slow to expand into the US. This is at least partly down to the complexity of the regulations surrounding financial services in the US, and the lack of open banking.

The EU has introduced two major regulatory changes that have boosted the Fintech market in Europe. These are the General Data Protection Regulation (GDPR) and the Payment Services Directive (PSD2). The first allows consumers much more control over their data via an opt-in system, and the second allows third party providers to offer services to businesses and consumers.

PSD2 forces banks to provide consumer data in their records to third party providers. This enables Fintech firms to develop solutions to consumer’s financial needs, and to offer tailored services. This has opened up the financial services market in an unprecedented way.

These kinds of regulatory changes create a massive opportunity for small start-ups and Fintech firms to corner a market they didn’t have access to. Banks have had to play catch up, and partner with Fintech firms to try and stay ahead of the game.

Open Banking boost UK Fintech sector

The UK has also opened the market to Fintech through the Open Banking initiative. This also provides consumer data to third parties so that they can utilise it to create new financial services. Since the market opened, 63$ of start-up Fintechs have taken 14% of all bank and payment revenues in the country. This shows that the Fintech sector really does know what consumers will respond to, and how to deliver it.

Until the US alters its regulatory framework in a similar way, it’s unlikely that Fintech start-ups will be able to make the same kinds of inroads. It is up to the banks and financial institutions that hold consumer data as to whether they want to adopt Fintech into their services. This makes it a slower adoption of Fintech, but no less significant.

Fintech still has a foothold in the US, and it’s likely that this will catch up with European adoption of disruptive technology over the next few years. More US financial institutions and banks are seeing Fintech as a huge opportunity rather than a competitive threat and responding accordingly.

Tuesday, May 28, 2019

Frederick Achom looks at how the Brexit delay is affecting small businesses

Small businesses in the UK are showing signs of Brexit fatigue, according to research by the Telegraph. Its business trackers shows that morale ‘remains very low’ among small businesses, and the most commonly cited reason remains Brexit uncertainty.

The index analyses Tweets from 25,000 UK small businesses and entrepreneurs. After extracting marketing and neutral posts, it compiles the data to show how many businesses are showing signs of strain or positivity.

Government delay continues

There have been no further votes in Parliament regarding Brexit since 10 April, which has left the UK enduring a level of sustained uncertainty. As the path to leave the EU remains unclear, businesses have been sharing their opinions online.

The most recent results from Business Tracker concern Tweets from 25,000 small British businesses, start-up owners and entrepreneurs that were published between 26 March 2019 and 22 April 2019. As this is the immediate aftermath of the decision for a Brexit extension being taken by the Government, it has yielded particularly relevant data.

Overall, the tracker shows around 64% expressing pessimistic sentiments, and 35% remaining generally positive. Measured against 2018’s results, there has been a significant increase in pessimistic Tweets on a month-to-month basis. There are around 19% more negative Tweets from the representative sample of businesses compared with the same time period last year.

However, not all of the negative posts are directly concerned with Brexit. Just over half of the negative posts specifically point to Brexit as the cause for their flagging morale. So, while it isn’t the biggest concern for every business, it’s the biggest for a significant number. More than half are worried for their business’ future given the seeming lack of progress in negotiations. More than 11% are worried that the UK may still leave the EU with no deal at all.

Confidence measuring index

The Federation of Small Businesses (FSB) runs its own confidence measuring index (SBI). And the most recent data from the index concurs with the Telegraph’s findings. It shows almost 90% of small businesses completely ceasing to recruit new staff, and 12% actively reducing their workforce.

Out of the small businesses that rely on European exports for trade, expectations are the lowest in the eight-year history of the index. Just over 25% of SMEs that rely on trading overseas expect to see their exports rise during Q2+3 2019, compared with 42% last year.

Around 68% of small business say that international sales are either declining or failing to rise, up 3% since Q1 2018. And looking ahead to the near future, under 40% expect to see revenue rising, a fall of 45% from this time last year.

What the SME community can do

The SBI measures small business confidence at -5.0 for Q1 2018, compared with +6.0 from Q1 2018. Can Brexit be blamed for the sharp drop? Mike Cherry, Chairman of the FSB believes so. He says: “Small firms… have suffered 1000 days of uncertainty since the Brexit referendum, leaving us unable to plan, invest and grow.”

As a community of small businesses, entrepreneurs and investors, we must accept that, for now, the position remains uncertain. Starting from this basis, we must find ways to remain resilient and continue our contribution to the UK economy. The Brexit transition period is particularly difficult for the SME community, as they are lighter on resources and less likely to weather cashflow storms.

Some small businesses that rely on European trade are simply refocusing on different regions, such as the US and Asia. By transferring business operations to countries outside of the EU, they can retain some balance and remain in business.

We also shouldn’t ignore the positives showing in the economy nationally. We have decreasing levels of unemployment, for example, with 32.7 million currently in work. Additionally, data shows that small businesses outside of London are finding positives in the support they are receiving. About 12% of the Tweets in the Telegraph’s business tracker are enthusiastically positive about the high levels of support available to UK SMEs. This is where we can find the positive of the current situation and continue working towards a brighter future.

Tuesday, May 21, 2019

Frederick Achom explains the complexities of Fintech


Fintech is a topic you hear a lot about in the media right now. It’s long been a key interest area for me as an investor and supporter of start-ups and disruptors. But it’s more than just a buzzword.

Think of Fintech as an umbrella term for a variety of working based on developing new, innovative technology to improve the financial services sector. There is no definitive definition, and it’s changing all the time. In this blog, I’ll talk about what I believe encompasses Fintech, and breakdown some of its sub categories.

What makes a business ‘Fintech’?

First things first. The word Fintech derives from two words: financial technology. Most people understand it as a descriptor for agile start-ups that focus on delivering financial services using technology. And many Fintech companies do come under this description.

Broadly speaking, Fintech companies are smaller businesses that are flexible, agile and quick to disrupt a traditional sector. But it’s worth remembering that many well-established financial institutions, including the major banks, are also working in this sector too. Most are using Fintech in the background and working with consultants and Fintech start-ups behind the scenes to come up with new ways to streamline and improve the financial services sector.

What does a Fintech business provide?

A confusing aspect of Fintech for those new to the sector is whether it should be used to describe the companies providing technology, or the companies providing the end service to the consumer.

I think it’s both. Some businesses use digital platforms which have been developed by Fintech companies to deliver financial services. Other use different aspects of financial technology to deliver services directly to the consumer in a more traditional manner.

So, while a company providing technology may be using a service model, they’re still ultimately delivering financial services. The Fintech sector is constantly evolving, and in many ways is in its infancy. With the advent and use of automation and artificial intelligence (AI), we can expect to see the sector continuing to create new business models, new technology and new products, apps and processes.

Fintech subcategories

Fintech encompasses a broad range of services and platforms. Here’s how some of its subcategories fit in.

·         Online payments

One of the most obvious and commonly used manifestations of Fintech is online P2P (peer-to-peer) payment platforms. Many of us are well used to using the likes of PayPal, Apple Pay and many others to complete day-to-day transactions. We pay with QR codes and our smartphones, as well as specific platforms and banking services.

The ability to make fast, secure, online payments without even using a bank or traditional financial institution is one of the revolutions created by Fintech. This also means businesses can quickly scale their operations without having to wait on financial institutions to go through their often-slow processes.

·         Banking services

Technically, there are very few pure banking services that come solely under the banner of Fintech. This is because in most countries, banking services are highly regulated and controlled. However, there are many Fintech companies working in different parts of the banking delivery chain.

For example, a Fintech start-up could offer a service that focuses on opening and account quickly and easily and moving money between accounts. Along the way, they will also be working with a licensed financial institution or bank, although it may not be immediately apparent.

There are some hybrid companies that offer both tech and banking services, including solarisBank, which is based in Germany. They are both tech companies that also own and operate a banking facility. They’re not common, and most Fintech companies are facilitating a portion of the chain, rather than offering an entire banking service.

·         Money lending services

Another category within Fintech that is already commonly used by consumers. Both individual people and companies can use technology platforms to access funding of all kinds. This could be a simple loan, right up to business finances and mortgages.

·         Personal finance and investment assistance

There are many tools available, and plenty in development, to help people manage their personal finances and make investment decisions. Examples include comparison websites for credit cards and loans, to automated investment apps.

Fintech companies are present within every part of the financial services sector. You’ll find them in the cryptocurrency and blockchain space, as well as crowdfunding and much more. It covers a wide range of services, products, apps, many of which are in the background of the services delivered to the consumer.

Thursday, April 25, 2019

Frederick Achom reviews Apple’s new credit card announcement 

Apple Pay is now an every day way to pay for goods and services for millions of people. And Apple is set to capitalise on its success and cement its place in the financial sector, with the announcement of its new Apple Card.

Partnered with Mastercard and Goldman Sachs, the Apple Card offers a host of benefits and easy-to-use features that could have Fintech competition deeply worried.

How will the Apple Card work?

The first notable feature of the Apple Card is how simple it is for customers to access it and use it. There is no waiting period to be accepted, no gap between applying and using it to pay, in fact, nothing that could be associated with traditional credit cards.

Some Fintech companies already include simple online sign up for credit cards, but there is always some kind of a delay between applying and using. The Apple Card will be included as a built-in feature of the Apple Wallet on iPhones. All customers need to do is sign up and they are immediately able to use it.

Apple say that the card offers a ‘healthier financial life’ to its customers. As well as 2% cashback on every transaction paid daily, it is designed to help people make smarter financial choices.

All of these features are tried and tested with the millennial generation, who respond to rewards, loyalty offerings and, crucially, easy to use products. This is how Apple is tapping into the zeitgeist to beat Fintech start-ups at their own game.

When will Apple Card be available?

By September 2019, iPhone customers in the US will be free to sign up for an Apple card. As they already tend to have heavy loyalty towards Apple and are used to its first foray into the financial sector with Apple Pay, the transition to their credit card should be seamless.

Apple have simplified the sign-up process, they’ve made it easy and immediately available to use, and they offer all the other benefits associated with credit cards. This includes automatic categorisation of transactions. This is something that is already used a lot in Fintech products, and there is no direct evidence yet to show that it’s beneficial for customers in any meaningful way. However, it is what consumers expect, and it is a trend Apple intends to have a slice of.

Payments will go into separate categories, and Apple will use machine learning to accurately label every payment with the merchant and location of the transaction. This is several steps further than most categorisation offerings in financial products and is likely to strike a chord with Apple’s customer base.

Key features of Apple’s credit card

The idea of taking a trend and improving it is behind other offerings from the Apple Card. Cashback has become extremely popular among Fintech companies as a way of guaranteeing customer loyalty.

Apple Card takes it a step further by offering ‘Daily Cash’ on transactions. This will be 2% of every purchase the customer makes, and they will be able to use that cashback straight away. They can either use it on Apple Pay, send to family and friends in Messages or use it to go towards their Apple Card balance.

Perhaps the most attractive feature of all for customers, the Apple Card will have no fees attached. Apple says there will be “no annual, late, international or over the limit fees…” However, the small print shows that it’s not quite as perfect as it sounds. Late payments will mean extra interest added onto the Apple Card’s balance.

The Apple Card looks set to offer everything other credit cards and products do, but with more finesse, shine and benefit for the customer. Apple already has millions of loyal customers and a vast swathe of consumer data at their fingertips. It seems the appetite is there for the Apple Card, and it’s difficult to imagine that it won’t be a soaring success. All of which will disrupt a sector more used to disrupting the traditional banks.