Oct 19, 2020

‘No-deal’ Brexit speculation fuels uncertainty for investors

Traditional banking
Fintech
Brexit
Investors
William Girling
2 min
The news from UK Prime Minister Boris Johnson that the country should prepare for a ‘no-deal’ Brexit is creating pessimism for investors, says deVere Group
The news from UK Prime Minister Boris Johnson that the country should prepare for a ‘no-deal’ Brexit is creating pessimism for investors, says deVer...

The news from UK Prime Minister Boris Johnson that the country should prepare for a ‘no-deal’ Brexit is creating pessimism for investors, says deVere Group.

With both sides of the negotiations apparently at an impasse, Johnson’s remarks have stoked business anxieties that the situation will not be resolved by the end of 2020.

There is a caveat: “The EU is preparing for more trade talks in London next week, because the Prime Minister did not explicitly say he was walking away from negotiations,” clarified Nigel Green, CEO of deVere Group. 

However, with the exact motives on both sides of the debate still unclear, he added that this alone was not necessarily a cause for optimism. “The uncertainty will make the UK and international investors already invested in UK-based financial assets increasingly nervous.”

A struggling economy

Uncertainty, Green notes, has a deleterious effect on financial markets: following Johnson’s statement, “the pound has fallen 0.2% against the euro and 0.1% against the dollar”.

“Should the UK leave with no-deal, the already weak pound - which is one of the world’s worst-performing currencies this year - is likely to remain weak for several years to come until Britain and the EU readjust,” speculates Mr Green. The consequent effects would be:

  • A reduction in UK purchasing power and more expensive imports, meaning that domestic quality of life would fall as costs are passed on to the consumer.
  • Less money for UK expats living on GBP-based incomes.
  • A more volatile and therefore less-attractive investment market overall.

Could fintech yield a solution?

Combined with ongoing COVID-19-related complications, Brexit is fundamentally uprooting the nation’s financial status quo. Therefore, new and innovative solutions will be needed to guide reconstruction and the return to ‘normality’ that investors crave.

Earlier in the month, we spoke with Pierre-Antoine Dusoulier, Founder and CEO of iBanFirst, who suggested that fintech could be instrumental in solving the issues with cross-border payments that traditional banking infrastructure is struggling with:

“A service that can facilitate cross-border payments is an attractive option. Businesses can easily open a GBP account to receive GBP payments from their British customers, receive intracompany transfers from their UK subsidiaries and optimise their consolidated cash flow. At the same time, European businesses will be able to pay their suppliers in their own currency.

In a separate interview, James Lynn, Co-Founder of Currensea, held similar opinions about the ‘stabilising’ power of fintech-based solutions to mitigate the economic effects of the pandemic.

As both scenarios continue to play out, Green intimates that successfully navigating through them will be an unprecedented challenge, “What we do know is that 2020’s only certainty is more uncertainty.”

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Jun 10, 2021

FIVE things fintechs must do to keep investors onboard

Fintech
Investment
venturecapital
AI
Brandon Rembe, CPO, Envestnet...
5 min
Fintech innovations drew in first-time investors who reshaped the markets. What new advancements will help them continue their rise?

New investors flocked to the stock market during the COVID-19 pandemic. Thirty-eight percent of investors said they had never had a brokerage or similar account before opening one in 2020.

Low or no-fee trading options have helped accelerate the trend – nearly half of new investors said they accessed their account primarily through a mobile app. As FinTechs, how do we create the trust needed to keep new investors in the market and create a fruitful customer experience for them?

The financial industry does a disservice to individual investors if we merely offer tools that focus on making money quickly, an approach that usually backfires. Instead, the surge of interest presents an enormous opportunity for those who want to help more consumers use financial technology to educate them on responsible spending, saving, and investing in order to achieve financial wellness current fintech tools have welcomed individual investors in the door.

Now, it’s time to focus on education and improving their experience going forward. There are several ways those of us in fintech can step up to shape the future of retail investing so that it works better for everyone, starting with the following areas.

Equal access to financial wellness education

Financial health should be available to everyone — but today, not everyone has the educational resources to achieve it. One study shows that only 3.9% of students from low-income schools were required to take a personal finance class. What they aren’t learning in school or from family members, fintech companies can provide on their platforms.

The companies should move from solely offering financial services to a more responsible model of education, advice, and prescriptive choices to help consumers develop better habits and make wiser financial decisions. Not only can they empower consumers and bridge historical wealth divides, but they can also stimulate growth by opening up new consumer segments.

More personalisation

Just as we’ve come to expect that our fitness routines are tailored to our individual bodies, we’re also ready for finance tools that go beyond one-size-fits-all solutions. But only six percent of financial institutions say they’re using the kind of technology that allows them to deliver a deeply personalized experience. Fintech tools need to reflect that financial success looks different for each of us.

For one consumer, it may mean providing guidance on how to pay off student loans early; for another, it may mean prescriptive actions that enable them to stick to a budget for the first time; for a third, it could look like prioritizing environmental, social and governance (ESG) investments, so that her portfolio aligns with her political beliefs.

Now, we are seeing financial technology beginning to meet the demands of personalized finance in a substantial and meaningful way.

The rise of AI-Powered Advice

Big-picture advice and predictive guidance used to be a feature of high-end financial advisory firms — a perk only available to those who could afford it. But thanks to rapid advancements in data analytics and artificial intelligence (AI), that kind of holistic advice is now more accessible than ever. AI-driven robo-advisors can parse many different streams of financial information, delivering customized answers to key questions: Is it time to buy a home, or is it smarter to keep renting? Can I afford to take out another student loan?

Intelligent connectivity powered by AI can anticipate consumers’ needs and next steps, making proactive suggestions that guide them along the path to financial wellbeing. Fintech companies can also help consumers identify when their financial picture becomes too complex for a robo-advisor, and help them find a human financial advisor to meet their needs. 

Focus on financial mental health

New investors are quickly finding that the market can be overwhelming. That’s not surprising, financial anxiety is common and studies show that financial stress can have an impact on mental health for some.

It’s not enough for fintech companies to give retail investors access; they also must provide the guidance and support that help consumers manage their financial well-being. Educational tools can ensure that consumers are well informed about their options.

Predictive analytics can anticipate consumers’ questions, serving them key information and insights before they ask. Features that emphasize a comprehensive notion of financial well-being, rather than short-term wins and losses, can also help ensure that consumers are keeping their eyes on the bigger picture.

Gamification for good

The surge of gamification apps has done an impressive job making investing as engaging as playing a video game or joining a social media platform.

Much of the current use of gamification emphasizes short-term thinking, but there’s also an opportunity to help consumers think more broadly about their overall financial picture. One example is peer benchmarking, a feature that enables help consumers to see how their financial habits compare to those of friends and fellow consumers.

Gamification can also be used to incentivize making smaller, smarter choices — for example, rewarding saving over making an impulse buy.

The future of fintech is about more than just broadening access to the markets. It’s about making sure more individuals have access to the tools that can help improve their financial well-being—in the ways that suit their own circumstances and needs. The potential to act within their own set of individual priorities, with their long-term financial wellness in mind is much more empowering to a consumer than simply relying on short-term, high-risk investments.

About the author: Brandon Rembe is CPO at Envestnet Yodlee. He has over 18 years of experience building high-growth technology, software, and information service companies, Brandon has worked across a broad spectrum of enterprises from early-stage ventures to global businesses.

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