International Finance - September-October 2023

SEPT - OCT 2023

Issue 36 Volume 23

UK £4 Europe ¤5.35

www.internationalfinance.com

US $6

THE EVER-ADAPTING FACE OF

UK REAL ESTATE In recent years, sustainable real estate in the UK has become a crucial factor, reflecting a growing awareness of social and environmental responsibility

The UK inflation Financial inclusion in rate surprise 1 | September - October 2023 | International the Finance digital era

Weighing Windfall Tax Impact

SEPT - OCT 2023 VOLUME 23 ISSUE 36

EDITOR’S NOTE

Decoding UK property sector

T

here has been a significant increase in the number of resignations from Twitter (now rebranded as X) after tech billionaire Elon Musk took over the microblogging platform. Key personnel from important departments such as brand safety, ad quality, and content moderation have left the company.

Elon Musk's acquisition of Twitter for $44 billion has turned out to be a huge mistake. After downsizing the company's workforce and lifting content distribution restrictions, the platform has reportedly become a breeding ground for cybercrimes.

Meanwhile, the year 2023 witnessed the emergence of generative AI tools like ChatGPT. This has sparked a debate on whether technology will eventually surpass human intelligence and replace human professionals in the formal economy. There is a growing trend of AI performing tasks that were once exclusive to human leadership roles. However, the tech industry is divided on whether this innovation will pose a challenge to human workers in the near future. This edition of International Finance will delve into this debate and provide insights on the topic.

The cover story of the September-October issue will revolve around the real estate sector of the United Kingdom, which is known for being as varied and vibrant as the European nation.

The UK property sector has something to offer everyone, from cosy cottages in the countryside to luxurious contemporary apartments in the heart of London. As the industry faces some of the headwinds generated by the ongoing economic crisis in the country, we will examine the current trends, market tendencies, and significant developments that are shaping this expanding sector in 2023 and beyond.

editor@ifinancemag.com www.internationalfinance.com

International Finance | September - October 2023 | 3

INSIDE

IF SEPT - OCT 2023

26 THE EVER-ADAPTING FACE OF UK REAL ESTATE In recent years, sustainable real estate in the UK has become a crucial factor, reflecting a growing awareness of social and environmental responsibility

INDUSTRY

ECONOMY

ECONOMY

16

48

60

UNDERSTANDING THE GLOBAL TRADE IN 2023

THAILAND'S FLOURISHING ESG LANDSCAPE

IMPACT OF INSTITUTIONAL ECONOMY

With every passing year, global trade grows faster and more robust

Banks are exposed to a range of risks, including credit risk, market risk and liquidity risk

TECHNOLOGY

BANKING

72

96

TWITTER'S CYBERCRIME MESS

IS GLOBAL FINANCIAL SYSTEM FAILURE-PROOF?

Axios Harris reputation rankings stated that Twitter under Elon Musk is the fourth-most-despised brand in the United States

Economies with significant debt and declining repayment capacity have most unstable banks

4 | September - October 2023 | International Finance

While increased equality and effective economic institutions helped Vietnam's economy flourish, Nicaragua's development was hampered

INSIGHT

36 Unlocking telecom's potential: The role of data science

www.internationalfinance.com

Director & Publisher Sunil Bhat Editorial Prajwal Wele, Agnivesh Harshan, CL Ramakrishnan, Prabuddha Ghosh

ANALYSIS

12

Rejuvenated Atlas Air eyes expansion

22

How industrialization shaped our society

44

The UK inflation rate surprise

80

‘Fediverse’ & the Threads debate

56

Weighing Windfall Tax Impact

92

Financial inclusion in the digital era

68

Quantum Computing: The mainstream technology

102 UK targets American

Production Merlin Cruz Design & Layout Vikas Kapoor

crypto refugees

Web Development Prashanth V Acharya Technical Team Sunil Suresh Business Analysts Alice Parker, Anna Price, Indra Kala, Stallone Edward, Grace Miller, Jessica Smith, Harry Wilson, Susan Lee, Mark Pinto Business Development Managers Christy John, Alex Carter, Gwen Morgan, Janet George Business Development Directors Sid Jain, Sarah Jones, Sid Nathan

OPINION

105

AZMAT HABIBULLA BANKING IN THE GEN Z WORLD

Banks have to evolve as partners in the life of their millennial customers to add value to their lives much beyond banking

REGULAR EDITOR'S NOTE

03 06 08

Decoding UK property sector

TRENDING Tesla cut prices

NEWS Eurozone economy contracted in Q3

Head of Operations Ryan Cooper Accounts Angela Mathews Registered Office INTERNATIONAL FINANCE is the trading name of INTERNATIONAL FINANCE Publications Ltd 843 Finchley Road, London, NW11 8NA Phone +44 (0) 208 123 9436 Fax +44 (0) 208 181 6550 Email info@ifinancemag.com Press Contact editor@ifinancemag.com Associate Office Zredhi Solutions Pvt. Ltd. 5th Floor, Sai Complex, #114/1, M G Road, Bengaluru 560001 Ph: +91-80-409901144 International Finance | September - October 2023 | 5

# TRENDING Apple fix iPhone 15 bug

INDUSTRY

Apple released iOS 17.0.3, including a fix for an issue that caused Apple's latest iPhone 15 models to run hot. According to the software changelog, this update provides important bug fixes, security updates, and addresses an issue that may cause the iPhone to run warmer than expected.

Over the weekend, Apple confirmed reports on social media that its new iPhones tend to run warm. Apple said the problem was a combination of some apps that were not properly configured.

Tesla cut prices

Tesla cut the price of some Model 3 and Model Y versions in the US after the company reported third-quarter deliveries that fell short of market expectations.

The starting price for the Model 3 is listed on Tesla's website at $38,990, up from $40,240 previously. The Long Range Model 3 dropped from $47,240 to $45,990.

And the Model 3 Performance dropped from $53,240 to $50,990. The Tesla Model Y Performance sport utility vehicle now starts at $52,490, down from a previous price of $54,490. Tesla is still looking to deliver 1.8 million vehicles this year.

At a Glance Top six property developers in UAE 2023 and their market share

Emaar Properties

$8.5 billion

Metro Bank Halts

Cisco acquired Splunk

Shares in Britain's Metro Bank were briefly suspended from trading twice early, in a volatile session that saw the stock fall more than 29%. The London Stock Exchange, where the stock is listed, confirmed in a public report that the brief suspensions were triggered by its hedging mechanisms due to the extent of the volatile decline. The suspensions followed reports that the bank was trying to raise 600 million ($727), bringing its debt and equity to 1.5 million euros, according to Reuters. The challenger bank, founded in 2010, has a market capitalization of less than 100 million.

Cisco is acquiring cybersecurity software company Splunk for $157 per share in an all-cash deal valued at about $28 billion, the company said. The biggest acquisition of all time, Splunk shares closed up 21%, while Cisco shares closed down 4%. Splunk's technology helps companies monitor and analyze their data to minimize the risk of hacks and resolve technical issues faster. Long the world's largest maker of computer networking equipment, Cisco is strengthening its cybersecurity business to meet customer needs and drive growth.

FINANCE

6 | September - October 2023 | International Finance

TE CH N O LO G Y

Dubai Properties / Meraas

$6.9 Billion Damac

$4.7 Billion Nakheel

$4.5 Billion Sobha

$3.8 Billion Aldar

$3.6 Billion Source: Forbes

NEWS | INSIGHTS | UPDATES | DATA

Ones to Watch

INDUSTRY

GM's stock hits three-year low

General Motors (GM) stock price fell below $30 a share for the first time in more than three years during intraday trading, as the United Auto Workers union continued to strike and a report of a potentially costly airbag recall for the automaker was reported. As UAW unions targeted strikes, shares of the Detroit automaker have fallen about 10% since trading began on September 15.

The stock closed at $30.31 per share, down 2.4%. The Wall Street

Journal reported that GM built at least 20 million vehicles with a potentially dangerous airbag part, which the government says should be recalled before more people are injured or killed.

The possible recall of approximately 52 million airbag inflators from Tennesseebased auto supplier ARC Automotive has been reported previously, but the number of GM vehicles affected has not been reported.

By the Numbers

RAY DALIO CIO OF BRIDGEWATER ASSOCIATES Billionaire investor Ray Dalio recently believes the surging 10-year Treasury yield could rise even higher to the 5% threshold as he sees hotter inflation for longer

ERIC X. LI CHENGWEI CAPITAL CHAIRMAN He says China needs improved capital markets in order to channel assets effectively. He believes the main economic drivers of the past 20 years are shifting away from real estate

Size of the global logistics industry 2013

2017

2021

2014

2018

2022

5.58 6.14

10.41 10.71

2015

2019

2016

2020

5.73 8.43

15.63 15.69

13.01 14.08

From 2013 to 2022 | In Trillion US Dollars |

Source: Statista

EYAL OFER CHAIRPERSON OF ZODIAC MARITIME He has added two more 7,000-ceu pure car/truck carrier new buildings at CIMC Raffles Offshore Engineering in China, lifting the order book for the ship type there to 10

International Finance | September - October 2023 | 7

IN THE NEWS

FINANCE

BANKING

INDUSTRY

TECHNOLOGY

The services industry in Italy contracted slightly for the second month in September

ARMs accounted for 8% of purchase applications, up from 6.7% about a month ago when interest rates were slightly lower

Eurozone economy contracted in Q3 The eurozone economy likely contracted in the last quarter, a survey suggests. It showed demand fell by the most in almost three years in September as indebted consumers held back spending amid rising borrowing costs and higher prices.

The final HCOB composite purchasing managers' index (PMI), compiled by S&P Global and considered a good indicator of overall economic health, rose to 47.2 in September from 46.7 in August. But that was below the 50 mark that separates growth and decline for the fourth straight month, although just above the preliminary estimate of 47.1. The survey showed the downturn was broad-based as, like in August, output declined in both services and manufacturing.

Meanwhile, eurozone retail sales fell significantly more than expected in August, official data showed, pointing to weaker consumer demand as inflation remains high.

"The drop in retail sales in August and weakness in the final PMIs for September are consistent with our view that the eurozone economy will fall into recession in the second half of 2023,"

8 | September - October 2023 | International Finance

Franziska Palmas said at Capital Economics.

Activity in Germany's services sector rose slightly in September, but in France, the industry contracted at its fastest pace in almost three years as falling new orders and exports weighed on the eurozone's second-largest economy, sister surveys showed.

The services industry in Italy contracted slightly for the second month in September, although Spain showed some resilience and rose slightly after the contraction in August.

In Britain, outside the European Union, services industries suffered a less severe decline than initially feared, due to a surprise drop in inflation and the Bank of England's decision to leave, putting interest rates on hold.

The eurozone's September composite new business index, which tracks overall demand, fell to 44.4 from 44.6 - a low not seen since November 2020, when the world was still grappling with the COVID-19 pandemic.

The flash estimate was 48.4. This came after a sister survey showed that manufacturing activity remained in a deep and broad-based downturn as demand contracted since 1997.

Mortgage rates continue to climb In the United States, mortgage rates continue to rise and have taken a particularly big jump recently. As a result, overall mortgage demand fell 6% compared to last year, according to the Mortgage Bankers Association's seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 7.53% from 7.41%, with points increasing from 0.71 to 0.80 (including the origination fee) for loans with a Deposit of 20%. In the September month of a year ago, that rate was 6.75%.

"Mortgage rates continued to move higher as markets digested the recent upswing in Treasury yields. As a result, mortgage applications ground to a halt, dropping to the lowest level since 1996," Joel Kan, MBA’s vice president and deputy chief economist said, CNBC reported.

Home loan refinancing applications fell 7% and were 11% lower than a year ago. Refinances now account for less than a third of all mortgage applications. Just two years ago, when interest

rates fell to record lows on multiple occasions, refinancing demand accounted for about three-quarters of all mortgage applications. Mortgage applications to purchase a home fell 6% and were 22% lower than a year ago.

"The purchase market slowed to the lowest level of activity since 1995, as the rapid rise in rates pushed an increasing number of potential homebuyers out of the market," Kan said, who also noted that adjustable-rate mortgage (ARM) applications increased.

ARMs accounted for 8% of purchase applications, up from 6.7% about a month ago when interest rates were slightly lower. ARMs offer lower interest rates but have a shorter term, usually five or 10 years.

A separate daily mortgage rate survey from Mortgage News Daily found that the average interest rate on 30-year fixed loans rose even higher, reaching 7.72%. Investors are reacting to better-than-expected economic data that could prompt the Federal Reserve to adopt more aggressive interest rate policies.

Meanwhile, the rate on the average 30-year fixed mortgage increased to 7.49% from 7.31%.

International Finance | September - October 2023 | 9

IN THE NEWS

FINANCE

BANKING

INDUSTRY

TECHNOLOGY

The Kremlin said in a statement that it had lifted restrictions on the export of diesel fuel

Intel's Programmable Solutions Group will have its own balance sheet as it moves toward independence

Russia lifts ban on its diesel export

Marko braces for market plunge

The Russian government said it had lifted a ban on diesel exports delivered via pipelines to seaports, lifting much of the restrictions introduced last month. The Kremlin said in a statement that it had lifted restrictions on the export of diesel fuel, which will be delivered to seaports by pipeline provided the manufacturer supplies at least 50% of the diesel fuel produced to the domestic market.

The announcement comes shortly after Russia imposed an indefinite ban on exports of diesel and gasoline to most countries, sending shockwaves across global markets. Restrictions on gasoline exports currently remain in place.

Russia is one of the world's largest suppliers of diesel and a major exporter of crude oil.

JPMorgan's Marko Kolanovic is preparing for a 20% selloff to hit the S&P 500. According to the Institutional Investor Hall-of-Famer, high interest rates are creating a breaking point for stocks and choosing cash with a 5.5% yield in the money market and short-term government bonds is a key protective strategy right now.

"I’m not sure how we’re going to avoid it (recession) if we stay at this level of interest rates," the firm’s chief market strategist and global research co-head said, CNBC reported.

The S&P 500 closed at 4,258.19, beginning a five-week losing streak. The index is down more than 5%. Kolanovic believes the weakness is not a strong sign that a huge downtrend is already here.

Carbon dioxide removal (CDR) deliveries worldwide 2017 1,424 2021 2013 136 2018 1,568 2022 2014 289 2019 1,872 2015 652 2020 1,983 2016 1,204 10 | September - October 2023 | International Finance From 2013 to 2022 (In Metric Tons) Source: Statista

2,027 2,178

Intel to spin out chip division

Rivals eye Tesla charging tech

Intel said it would treat its programmable chip unit as a separate company, with the aim of spinning it off through an initial public offering in the next two to three years. The chipmaker's share price rose 2.3% in extended trading following the announcement.

Intel's Programmable Solutions Group will have its own balance sheet as it moves toward independence. The company will continue to support the company and retain a controlling interest and may also seek private investment.

"Our intention to establish PSG as a standalone business and pursue an IPO is another example of how we are consistently unlocking more value for our stakeholders," Sandra Rivera, who leads Intel's broader data centre said.

Hyundai Motor and Kia said that they will soon launch Tesla's electric vehicle charging system, starting in the fourth quarter of 2024 in the United States, according to a Bloomberg report.

Hyundai and Kia are joining other companies like Ford and General Motors to integrate Tesla charging ports, called the North American Charging Standard, into their electric vehicles, allowing drivers to use all Tesla charging stations.

Charging technology has gained momentum in recent months and has become a unified charging standard among electric vehicle manufacturers. South Korean automakers said all new electric vehicles built in 2024 and beyond will feature Tesla's NACS technology, giving access to more than 12,000 Tesla Superchargers.

Global carbon dioxide removal (CDR) market size worldwide 2016 741 2019 1,629 2013 440 2017 967 2020 1,763 2014 428 2018 1,532 2021 1,967 2015 652 2022 1,975 From 2013 to 2022 (In Million US Dollars) Source: Statista

International Finance | September - October 2023 | 11

INDUSTRY

ANALYSIS

AVIATION ATLAS AIR

Atlas Air will become a privately held firm after the acquisition is finished, and its shares will no longer be traded on the Nasdaq

Rejuvenated Atlas Air eyes expansion IF CORRESPONDENT

Atlas Air Worldwide offers aircraft and aviation operating services on a global scale. Atlas is the parent company of Atlas Air and Titan Aviation Holdings, and holds the majority stake in Polar Air Cargo Worldwide, with the world's largest fleet of 747 freighter aircraft.

Atlas Air will become a privately held firm after the acquisition is finished, and its shares will no longer be traded on the Nasdaq

New faces at the helm

Michael T. Steen took charge as Atlas Air Worldwide’s CEO in June 2023, succeeding John W. Dietrich.

Spencer Schwartz, the Executive Vice President and Chief Financial Officer, will also retire on the same day. Steen has over 30 years of experience in aviation and logistics, including 16 years of executive leadership experience with Atlas. He has served as the Chief Commercial Officer since 2007 and is responsible for leading the company's strategy and growing its market share. He has also been instrumental in developing and diversifying the company's roster of blue-chip customers.

David Siegel, Chairman of the Board, said, "Michael's leadership experience, strong track record of innovation and success, and consistent focus on the company's customer-centric mission make him the ideal candidate to lead Atlas forward

12 | September - October 2023 | International Finance

in its next phase of growth."

"On behalf of the Board, we look forward to working closely with Michael to execute Atlas' strategic growth plans and continue building on the company's strong commitment to safety, quality, and service excellence,” the official stated further.

Steen remarked, "I am thrilled by the opportunity to lead our incredible Atlas team as we design and execute our vision for growth and embark on new and exciting opportunities as a private company. This is a transformative time for Atlas, and the continued support from Apollo, J.F. Lehman, and Hill City will play an important role as we enhance our capabilities and deliver new solutions for our customers. I am grateful for John's leadership and look forward to building on this strong foundation of global success. I also thank Spencer for his partnership and contributions throughout his time with the company."

Dietrich added further, "I am immensely grateful for my time at Atlas over the last nearly 25 years and proud of all that our exceptional team has achieved together. Being part of Atlas' growth and global expansion has been incredibly rewarding. I know that the company is well positioned to further accelerate its growth and will continue to deliver value for all stakeholders under Michael's capable leadership."

Recent takeover A group of investors, including Apollo Global

Management, have fully acquired Atlas Air Worldwide Holdings. Although FlightGlobal claims that the final deal had a value of about $2.9 billion, the deal was initially announced in 2022 August with an equity value of about £3 billion.

Atlas Air will become a privately held firm after the acquisition is finished, and its shares will no longer be traded on the Nasdaq. The company will keep using the name Atlas Air Worldwide.

The Apollo group in charge of the transaction included JF Lehman & Company and Hill City Capital's investment affiliates. Shareholders of Atlas Air Worldwide will receive a cash payment of $102.50 per share under the deal.

The company, which has its headquarters in New York, declared about receiving all necessary clearances for the transaction in a stock exchange statement on March 14.

President and CEO John Dietrich and the present executive leadership team will continue to run Atlas.

According to Dietrich, the purchase "marks the beginning of an interesting new chapter for Atlas, and we are eager to start our partnership with Apollo, J.F. Lehman, and Hill City."

“We are in an excellent position to fulfil our expansion goals while continuing to support the increasingly complicated global supply chain thanks to the assistance and resources of our investor partners. I want to thank the Atlas team, whose commitment to the customer's needs allowed us to reach this milestone. I'm excited about this upcoming stage's possibilities for our business and team," Dietrich commented.

"We are excited to partner with the skilled Atlas team and build on the company's strong foundation as a leader in the air freight industry," said Chip Frazier, a chief investment officer of Hill City Capital, on behalf of the investor group, which included partners Antoine Munfakh and Jason Scheir of Apollo, Alex Harman of JF Lehman, and Antoine Munfakh and Jason Scheir of JF Lehman.

Although Atlas Air's profits decreased in the fourth quarter of 2022-2023, its revenues increased. If we want to locate a prospective multi-bagger, underlying trends might give indications. Typically, we'll want to note a rising return on capital employed (ROCE) pattern and an expanding base of capital employed.

This shows us that it's a compounding machine, able to consistently reinvest its revenues into the firm and

International Finance | September - October 2023 | 13

INDUSTRY

ANALYSIS

AVIATION ATLAS AIR

create better returns.

So when the International Finance examined Atlas Air Worldwide Holdings and its trend of ROCE, we liked what we observed.

Return of Capital The critical question is whether Atlas Air is worth investing in and what its return on capital is like.

ROCE measures a company's yearly pre-tax profit (its return) relative to the capital invested in the firm. Analysts use this formula to calculate it for Atlas Air Worldwide Holdings.

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) (Total Assets minus Current Liabilities) 0.10 = $551 million ($6.7 billion minus $1.2 billion) (based on the trailing twelve months to December 2022).

Thus, Atlas Air Worldwide Holdings has a ROCE of 10.0%. In absolute terms, that's a poor return, yet it's about the logistics sector average of 12%.

Even if ROCE is still low in absolute terms, knowing it's headed in the correct direction is encouraging. The figures demonstrate that in the previous five years, the returns earned on capital employed have climbed dramatically to 10.0%. The firm is making more per dollar of money invested, and in addition to that, 31% more wealth is being employed presently too.

The increasing returns on a growing quantity of cash are frequent among multi-baggers, and that's why we're impressed.

To sum it up, Atlas Air

14 | September - October 2023 | International Finance

Worldwide Holdings has demonstrated it can reinvest in the business and create greater returns on the capital used, which is excellent. Since the stock has returned 74% to owners over the previous five years, investors are beginning to understand these developments. If Atlas Air Worldwide Holdings can keep these trends up, it might have a bright future in the stock market.

The owner of the last 747 Boeing and Atlas Air Worldwide recently celebrated the delivery of the last 747 to its freighter wing, putting to an end over a halfcentury of production.

Boeing personnel who planned and built the first 747, known as the ‘Incredibles,’ returned to be recognized at the Everett factory, where the voyage of the iconic jumbo jet began in 1967. The factory produced 1,574 aeroplanes over the length of the program.

The CEO of Boeing Commercial Airplanes, Stan Deal, acknowledged the hard work of Boprogram employees who contributed to creating an aeroplane that improved air travel and cargo efficiency.

He considered this day to be an important milestone in aviation history. The final 747-8 Freighter has been delivered to Atlas Air, the biggest 747 operator, where it will continue to inspire innovation and advancement in air cargo.

John Dietrich expressed his gratitude for Boeing's shared dedication to safety, quality, innovation, and the environment.

He also mentioned that Atlas Air has a long history of flying this

Atlas Air Boeing 747

iconic aircraft for their customers around the world. Atlas Air has covered the world, flying every fleet type of the 747, including the Dreamlifter, Boeing's 747 Large Cargo Freighter, for the transfer of 787 Dreamliner parts.

As the first twin-aisle aeroplane and "jumbo jet," the "Queen of the Skies" enabled airlines to connect people across huge distances and conduct non-stop trans-oceanic flights. Its development reinforced Boeing's role as an industry leader in commercial aviation.

The aeroplane's main design, with its distinctive hump and seating on the upper deck, has charmed generations of passengers and operators alike. Boeing proceeded to improve on the cargo design with variants like the 747-400 in

1988 and the final 747-8 model that debuted in 2005; throughout all the generations, the jet has given unrivalled operating economics and come to the passenger and air freight sectors.

As a significant global aerospace corporation, Boeing develops, manufactures, and maintains commercial aeroplanes, defence goods, and space systems for customers in over 150 countries.

As a top US exporter, the company uses the talents of a worldwide supplier base to enhance economic opportunity, sustainability, and community impact.

Boeing's diverse team is committed to innovating for the future, leading with sustainability, and developing a culture founded on the company's core values of

safety, quality, and integrity.

Atlas Air Worldwide Holdings, a leading provider of outsourced aircraft and aviation operating services, has undergone significant changes in its leadership and ownership.

Also, two other interesting developments have taken place. On one hand, English football giant and European champions Manchester City has reportedly chartered a Boeing 747-400 aircraft, operated

by Atlas Air for the team's preseason trips to Japan, and South Korea. Also, the airline's new chief commercial officer Richard Broekman became the venture's new head of sustainability too.

Apollo Global Management, JF Lehman & Company, and the investment affiliates of Hill

City Capital were among the investors who purchased Atlas Air Worldwide Holdings. The acquisition resulted in the company becoming privately held, with its shares no longer traded on the Nasdaq stock market. The addition gives Atlas Air the resources and support to pursue its expansion goals and continue serving the global supply chain. Despite decreased profits in the previous year's fourth quarter, Atlas Air's revenues have been increasing.

The company's return on capital employed (ROCE) has also shown a positive trend over the past five years, with an increase of 10.0%.

This indicates that Atlas Air has been able to reinvest its capital and generate better returns, positioning the company for continued growth and potential future success.

Furthermore, Atlas Air has been recognized as the recipient of the final Boeing 747, marking the end of over half a century of production for this iconic aircraft. Atlas Air has a long history of operating various fleet types of 747 and will continue to fly this legendary aircraft for its global customers.

With its new leadership, strong financial performance, and strategic partnerships, Atlas Air Worldwide Holdings is poised for growth and has the potential for a bright future in the airfreight industry.

editor@ifinancemag.com

International Finance | September - October 2023 | 15

INDUSTRY

FEATURE TRADE

EXPORTS

16 | September - October 2023 | International Finance

FEATURE GLOBAL TRADE

With every passing year, global trade grows faster and more robust

Understanding the global trade in 2023 IF CORRESPONDENT

O

ne of the most significant developments of the 20th century has been the integration of national economies into a global economic system. The result of this integrating process called globalization has been a striking increase in international trade.

Today's exports are over 40 times higher than in 1913. Looking at changes in trade relative to GDP offers another intriguing perspective because the global economy has had consistent positive growth over the past couple of centuries.

Less than 10% of the world's output up until 1870 came from exports on a global scale. The value of commodities shipped globally today is very close to 25%. This demonstrates that international trade has increased more than proportionately throughout the last century of economic expansion.

With every passing year, global trade grows faster and more robust. In the modern global economic system, nations trade final goods and intermediate inputs. This results in a sophisticated global network of financial relationships.

Trade volume in 2023 WTO economists are now projecting merchandise trade volume growth of 1.7% in 2023, up from October 2022's estimate of 1.0%, accompanied by

International Finance | September - October 2023 | 17

INDUSTRY

FEATURE TRADE

EXPORTS

real GDP growth of 2.4% at market exchange rates.

Growth rates for trade and output for the year 2023 are expected to be below their respective averages of 2.6% and 2.7% for the 12 years since the trade collapse that followed the global financial crisis.

Trade growth should rebound to 3.2% in 2024 as GDP growth picks up to 2.6%, but this estimate is more uncertain than usual due to the presence of substantial downside risks, including rising geopolitical tensions, global food insecurity, the monetary policy tightening fallouts, risks to financial stability, and increasing levels of debt.

Goods trade was more resilient than expected throughout 2022, despite the Ukraine war fallouts. Year-on-year merchandise trade volume growth averaged 4.2% in the first three quarters of 2022 before a 2.4% decline in the fourth quarter dragged growth for the year down to 2.7%.

The final result for 2022 was weaker than the WTO's October forecast of 3.5% but close to the earlier estimate of 3.0% from April, which relied on simulations to gauge the economic impact of the war.

A 2.7% increase in trade volume in 2022 is consistent with the WTO's initial report on the Ukraine crisis, which estimated that trade growth for the year would fall somewhere between 2.4% and 3.0%.

The final figure ended up being within this range and well above the most pessimistic scenario considered in the report, which would have seen trade growth of just 0.5% if countries had split into competing trade blocs.

Fragmentation has mostly been avoided, but it remains a significant threat that could hinder economic growth and reduce living standards over

the long term. The fact that worst-case scenarios were avoided in 2022 should not be a cause for complacency. Several factors contributed to the trade slump in the fourth quarter of 2022, the most conspicuous being the rise in global commodity prices. Although food and energy prices had receded from their post-conflict peaks, they remained high by historical standards and continued to erode real incomes and import demand.

Energy prices The impact of energy prices was most decisive during the European winter, when gas supplies from Russia were almost cut off. High food prices were also felt in Middle Eastern and African countries that relied heavily on imports from Ukraine and Russia.

On a more positive note, a WTO follow-up study marking one year of the Ukraine war found that vulnerable economies could find substitute products and suppliers to obtain essential food supplies. This response might not have been possible without an open and inclusive multilateral trading system to anchor the global economy. Rising COVID-19 infections also significantly impacted the Chinese economy in the 2022-2023 fourth quarter, where GDP growth dropped to 0.0%, and exports fell to 6.5%.

This decline may be reversed to China's advantage in 2023. The relaxation of COVID-19 controlling measures is expected to unleash pentup consumer demand in the world’s second-largest economy, which could boost international trade, particularly in travel-related services.

Finally, interest rate hikes in advanced economies may have succeeded in cooling demand. Still, they have also revealed weaknesses

18 | September - October 2023 | International Finance

Trends in global export value of trade in goods from 2012 to 2021 (In Billion US Dollars) 2012

2013

18504.18 18942.48 2014

2015

18999.68 16554.29 2016

2017

16035.88 17740.89 2018

2019

19549.33 19014.31 2020

2021

17648.47 22328.18 Source: Statista

in banking systems that could lead to broader financial instability if left unchecked.

Inflation and rate hikes After years of expansionary monetary policy, central banks find themselves struggling to strike a balance between taming inflation, sustaining economic growth, and maintaining financial stability. A miscalculation could have negative consequences for the global economy and trade.

Reversing the course on low-interest rates would take a lot of work, and the road ahead will likely be bumpy. Recent bank failures in the United States and Europe highlight the possible existence of further vulnerabilities stemming from a changed interest rate environment.

Upside surprises in inflation could raise the prospect of more extensive

FEATURE GLOBAL TRADE

rate hikes, but these would come at the risk of broader financial contagion that would reduce output and trade.

Governments and regulators must be alert to these and other financial risks in the coming months. Geopolitical tensions, inflation, commodity prices, and the lingering effects of COVID-19 were the main factors affecting trade and industrial output in 2022. The same year also saw some of the highest inflation rates since the 1980s, massive swings in commodity prices, and an appreciation of the US Dollar. Since strong price movements tend to distort trade statistics in value terms, it makes sense to focus on trade volumes when forecasting trade.

Commodity price fluctuations strongly influenced inflation and trade volumes in 2022. These swings were extreme for European natural gas prices, which rose 48% between January

and August of 2022 before falling 76%

by February 2023.

Unlike oil prices, which tend to be strongly correlated across regions, natural gas prices commonly diverge considerably. Regional gas prices might eventually equalize due to increased trade in liquified natural gas (LNG), but for the time being, pipeline and shipping infrastructure are preventing this convergence.

European countries responded to the loss of gas shipments from Russia by importing more from other suppliers, including the United States, Qatar, Norway, and Algeria. This has increased LNG prices elsewhere, including in Japan, where its price doubled between January 2022 and February 2023.

What about core inflation?

Europe was fortunate to have a mild

winter in 2022, which prevented energy prices from rising even further.

However, if European countries cannot secure sufficient natural gas supplies for next winter and if the weather is colder, prices could spike again. Prices of food commodities also fluctuated strongly throughout 2022, jumping 19% between January and May before falling 15% between May and December.

For the year, food prices were up 18% compared to 2021, including a 21% rise in grain prices. Prices of fertilizers registered an even more considerable year-on-year increase of 63%. Higher food prices should encourage more agricultural production, resulting in greater availability and lower future food prices.

On the other hand, less land under cultivation and the high fertilizer cost could lead to reduced crop yields and higher prices. Declining food and energy prices have helped bring down headline inflation in developed economies, but the core one remains stubbornly high.

According to OECD statistics, headline inflation in the United States dropped from 9.1% last June to 6.0% in February 2023, but core inflation only fell from 6.6% in September to 5.5% in February.

Similarly for the European Union, headline inflation dipped from 11.5% in October 2022 to 9.9% in February 2023, while core inflation climbed, reaching 6.6% in February. This suggests that monetary policy control has failed to tame inflation and that interest rates may have to stay high longer to have their intended effects.

The 10.4% quarter-on-quarter decline previously recorded for exports from the CIS3 region in Q2 of 2022 has since been revised to a 3.0% drop, which suggests that Russia has been able to

International Finance | September - October 2023 | 19

INDUSTRY

FEATURE TRADE

EXPORTS

Other significant risks to the forecast include resurgent inflation, slowdowns in major economies, and geopolitical tensions. Most serious would be a food crisis triggering widespread hunger and starvation in low-income countries

find new markets for its goods despite the sanctions. This revision had a strong impact on the estimated exports of the Middle East, which were expected to greatly increase to make up for shortfalls in supplies of Russian energy.

Africa was also expected to export more significant goods than it ultimately did. However, the US Dollar value of the region's exports did increase sharply (nearly 18%) due to higher commodity prices.

Exports and imports Exports from North America, South America, and Europe were broadly in line with expectations, while shipments from Asia were considerably weaker due to a sharp drop in exports in the 2022-2023 fourth quarter.

Imports from the CIS region are estimated to have plunged 20.4% in the second quarter of 2022, but they recovered more quickly than expected in the year's second half. Unfortunately, being confident about these figures is difficult due to a lack of official data.

Russian trade statistics have been unavailable for many months, but estimates based on the statistics of trading partners provide a reasonable approximation. All other regions' imports declined in volume terms in the fourth quarter of 2022 due to reduced domestic demand or, in some cases, reduced export revenues as commodity prices eased. Global food supplies are less precarious than many had feared at the start of the Ukraine war, but they remain a cause for concern.

The average price of wheat rose 44% year-on-year during this period, while the value of traded grain increased by 31%. This implies a decline of around 7.5% in the volume of world wheat trade. This may not have disastrous

consequences if consumers in all countries, including the poorest, can import sufficient quantities of wheat or some close substitute.

However, there is little margin for error if a major producer suffers a crop failure or climate-related natural disaster. Such an event could precipitate a more severe food crisis requiring increased trade. Fortunately, countries have accessed alternative sources of supply so far.

For example, between January and October of 2022, Ethiopia's wheat imports from Russia and Ukraine were 75% and 95%, respectively, compensated by increased shipments from the United States and Argentina. There are some signs of a trade turnaround in early 2023. The JP Morgan global purchasing managers' index (PMI) returned to its baseline value of 50 in February 2023, suggesting accelerating global output growth.

The new export orders sub-index, more directly predictive of trade volumes, has also risen but remained below the baseline value in February at 48.3, suggesting continued trade contraction but at a slower rate.

However, preliminary PMIs for the United States and the euro area in March 2023 point to a more robust demand recovery, which would boost

20 | September - October 2023 | International Finance

trade and stoke inflation.

Falling input and output price sub-indices in the PMI indicated that inflationary pressures appeared to be easing. Sub-indices representing delivery times and stocks of finished goods also returned to normal in February 2023, suggesting that supply chain issues mainly had been resolved.

The projected 1.7% increase in the volume of world trade in 2023 is more substantial than the previous estimate of 1.0% from last October, but it is still relatively weak. A slight increase in the consensus estimate of global GDP growth in 2023 from 2.3% to 2.4% helps to explain the discrepancy between the two estimates. This modest change at the worldwide level masks significant shifts between regions, most notably between

FEATURE GLOBAL TRADE

Europe and Asia. Around 0.7% points have revised Europe's expected GDP growth, while 0.4% points have revised Asia's. More robust than expected GDP growth in Europe would stimulate intraEU trade, which gives Europe extra weight in world totals. Europe's exports are projected to grow by 1.8% in 2023, up from the previous estimate of 0.8%.

Europe's imports are expected to decline by 0.6% in 2023, less than the previous estimate of -0.7%. It should be noted that the region "Europe" includes Ukraine, whose exports and imports fell precipitously in 2022 (33% and 23%, respectively) and have yet to recover.

North America is expected to record the most vigorous merchandise export growth of any WTO region in 2023 (3.3%), followed by the CIS (2.8%), Asia

(2.5%), and Europe (1.8%). Weaker export growth is expected in the Middle East (0.9%) and South America (0.3%), while Africa's goods exports are expected to decline (-1.4%). The relative strength of CIS exports is partly due to a reduced base in 2022 when shipments fell sharply (-4.9%).

The region is expected to record the fastest import growth of any part in 2023 (14.9%) for the same reason, with purchases having fallen 13.5% in the previous year, followed by Africa (5.6%) and the Middle East (5.5%), whose export volumes have been boosted by increased revenues from exports of natural resources.

Imports from North America, South America, and Europe are all expected to contract in 2023 (by -0.1%, -1.6%,

and -0.6%, respectively) due to weaker domestic demand. In 2024, trade and GDP growth are expected to grow at rates of 3.2% and 2.6%, but these figures should be interpreted with caution since they are highly dependent on the course of the war in Ukraine.

Other significant risks to the forecast include resurgent inflation, slowdowns in major economies, and geopolitical tensions. Most serious would be a food crisis triggering widespread hunger and starvation in low-income countries.

Wealthy countries need to be on the lookout for signs of such a crisis and take steps in advance to prepare for it.

In conclusion, the integration of national economies into a global economic system has led to a significant increase in international trade, with today's exports being more than 40 times higher than in 1913. However, the global economic system faces many challenges, including rising geopolitical tensions, global food insecurity, the possibility of unforeseen fallouts from monetary tightening, risks to financial stability, and increasing levels of debt.

Despite these challenges, the WTO predicts an increase in trade volume growth of 1.7% in 2023, up from last October's estimate of 1.0%, accompanied by real GDP growth of 2.4% at market exchange rates. As such, countries need to remain vigilant and take necessary steps to prepare for potential crises. A global network of financial relationships and an open and inclusive multilateral trading system can anchor the global economy and help mitigate the effects of such crises.

editor@ifinancemag.com

International Finance | September - October 2023 | 21

INDUSTRY

ANALYSIS

INDUSTRIALIZATION SOCIETY

International School Consultancy Research stated that around 1,003 English-medium international schools were set up in South East Asia in 2021

How industrialization shaped our society IF CORRESPONDENT

One of the most significant transformations that greatly affected humankind and the economy was the Industrial Revolution. In the 18th and 19th centuries, the development of new machinery revolutionized production methods.

These remarkable changes resulted in the development Between 1830 of goods production and 1867, methods and transportation a cholera infrastructures. Before the outbreak Industrial Revolution, goods struck were produced using basic Britain due to technology and hand tools in sewage runoff houses and neighbourhood contaminating workshops. the water, The family was critical to which resulted the production and sale of the in several goods. Because of the lifestyle's fatalities relative difficulty, people chose to make household goods and products. However, the development of cutting-edge technologies revolutionized Britain’s manufacturing sector. Moving from rural to urban regions in search of a better life was another feature of the Industrial Revolution.

Powered equipment made industrial processes more efficient, encouraging the expansion of factories and the mass production of commodities.

This situation brought about a lot of positive effects for society as well as several social issues, hardship

22 | September - October 2023 | International Finance

and societal discord. The essay sheds light on how the industrial revolution affected people's lives, paying particular attention to influencers like Adam Smith, James Watt, and Wedgwood.

Before the industrial revolution, agricultural societies powered large machines using windmills and water wheels. In the early 1700s, new technologies swiftly replaced the old machinery.

A significant development for rural culture during this period was the development and use of the first steam engine to pump water. James Watt created a new steam engine in 1782 to power factory machinery. Numerous scientific and technical advancements enhanced Britain's economic situation and citizens' quality of life.

The railway building, which allowed people to travel from their native small villages to more urbanized areas, was another significant feature of the Industrial Revolution. As more people moved into cities, there was a rising need for amenities like housing, sanitation, and entertainment areas.

Many were unhappy due to this circumstance since they were ill-equipped to cope with the new urban lifestyle. The confined, unhygienic spaces typical of the country lifestyle set it apart from city life. Factory owners understood a growing demand to develop residential homes quickly to accommodate people due to the increased migration from rural to urban areas. In the cities, back-to-back houses that shared a wall with a

factory or another building started to be typical.

These construction methods frequently needed drainage systems and were crowded. As a result, people didn't have much information about germs.

Thus, diseases like cholera, typhus, and typhoid spread widely among city dwellers. For instance, between 1830 and 1867, a cholera outbreak struck Britain due to sewage runoff contaminating the water, which resulted in several fatalities.

Over 7,000 people died in London between 1831 and 1832. The working class, considered poor, developed tuberculosis at a higher rate than the general population due to a poor diet, cramped living conditions, and moisture. In addition, city residents' lung issues increased due to air pollution from industrial gases and effluents.

The living conditions were far better than the working conditions in the cities. As factories sprang up quickly during the Industrial Revolution, people in rural areas stopped being their employers and started working for them. The development and application of machines to most tasks that once required human labour led to the displacement of worker roles. As a result, the working class was compelled to support themselves by running,

maintaining, or refuelling this industrial machinery, which was a taxing job.

As a result of inadequate urban policing, worrisome levels of poverty and despair, and increased crime, overcrowding in jails and prisons followed. Beginning in the early 19th century, more judges were available to address complaints and issue warrants to arrest criminals. This circumstance gave rise to a different problem that the middle class had to deal with. Due to the increase in industrial slums in the cities' environs, this group was afraid of crime. The middle class became anxious and started protest activities against the urban slums. Increased prosecution rates resulted from this circumstance, and most working-class members could not pay them.

Adam Smith, the "father of capitalism," was instrumental in reshaping the British economy. The Scottish philosopher held that people frequently exhibited self-interest, mainly regarding economic issues. He pushed the British government to promote free markets and trade in various instances and these ideas later emerged as the hallmarks of modern capitalism. Following the Industrial Revolution, many people toiled in mines and factories for a few pence a day.

International Finance | September - October 2023 | 23

INDUSTRY

ANALYSIS

INDUSTRIALIZATION SOCIETY

Factory owners took advantage of the lower-class people who merely needed a few pennies to survive. Smith established that labour, manufactured goods, and agricultural outputs together made up a nation's wealth to refute this motivation. As a result, for a country to increase its economic output, it had to ensure the division of labour.

Workers began to specialize in various occupations. According to the philosopher, everyone would benefit from a free market because there would be no government involvement in company decisions.

This included persons from disadvantaged backgrounds.

But around this time, child labour started to pose a severe hazard. In fact, during the Industrial Revolution, children made up nearly 80% of the labour force. If accidents happened in manufacturing, they were simple to replace and quick to hire for employers. Due to their disadvantaged upbringing, several affluent factory owners offered food and shelter for kids in exchange for labour. Additionally, recruiting kids was less expensive than hiring adults. However, this circumstance puts kids at risk for factory mishaps.

Children continued to work in these factories, generation after generation because there were no laws protecting them.

Numerous commodities, especially luxury goods, were only available to the privileged members of society due to the social and economic changes brought on by more incredible agricultural innovation, proto-industrial activity, and the expansion of international trade. However, when more people

24 | September - October 2023 | International Finance

Industrialization Statistics • Only about one in three small manufacturers are benefiting from a loan or line of credit • Global manufacturing production grew by 7.2% in 2021, surpassing its pre-pandemic level • Between 2015 and 2021, 4G network coverage doubled, reaching 88% of the world’s population • The global share of manufacturing value added to total GDP increased from 16.2% in 2015 to 16.9% in 2021 • Globally, the share of manufacturing jobs in total employment declined from 13.7% in 2019 to 13.1% in 2020 • Around 15.7% of small-scale industries in Africa and 44.2% in Latin America and the Caribbean received the forms of credit Source: un.org

moved into cities, they had more access to luxury items, which eventually trickled down to the middle class. Therefore, the merchant wanted to exploit the market and the rising demand.

Due to this circumstance, regional goods were created to compete with imports from other nations. Due to increased technological advancement during this time, the manufacturing of ceramic goods improved. Josiah Wedgwood, in particular, fueled the eighteenth-century demand in England for porcelain goods,

such as tableware and decorative items. His involvement and actions in the market for luxury goods helped others recognize the sector's significance. Most individuals preferred to work for pay in factories due to improved agricultural innovations, which accelerated rural-urban migration.

As a result, the need for excellent goods that set some people apart from the rest of society grew. Eating behaviours evolved for the middle class. For instance, introducing Chinese tea sparked the growth of teaware, tearooms, and tea breaks.

Sociological changes during the era Industrialization profoundly impacted the social class structure, leading to significant societal changes.

With the rise of factories and mass production, a new social class, the industrial working class or the proletariat, emerged. This class consisted of manual labourers who worked in factories, mines, and other industrial settings. They often faced harsh working conditions, low wages, and long hours, forming the lowest stratum of the social class structure.

Industrialization also gave rise to a middle class, which comprised professionals, managers, skilled workers, and entrepreneurs. This class benefited from the expanding industrial economy and enjoyed a higher standard of living than the working class. They often held white-collar jobs and had greater social mobility.

As industrialization progressed, there was a shift from agrarian-based economies to industrial economies. This led to a decline in the agricultural class, as traditional farming methods were replaced by machinery and large-scale farming practices. Many individuals from rural areas migrated to cities in search of factory employment, contributing to the growth of the working class.

Another creation was in the form of significant wealth distribution disparities.

The capitalist system, which accompanied industrialization, allowed small individuals to accumulate vast wealth by owning industries and businesses. This resulted in a widening wealth

gap between the wealthy elite and the working class, leading to increased social inequality.

However, industrialization also created opportunities for upward social mobility. Education became more accessible, and lower-class individuals could acquire skills and education to improve their social standing. The middle class, in particular, experienced upward mobility as individuals moved from lower-class backgrounds into professional and managerial positions. It challenged traditional social hierarchies based on birthright and land ownership.

The influence of nobility and aristocracy declined as wealth and status became more closely tied to industrial and commercial success.

Economic power and meritocracy began to replace inherited social status as the primary determinants of social standing.

The industrial working class often developed a sense of solidarity and recognized shared interests in improving their conditions. They organized strikes, protests, and collective actions to exert pressure on employers and governments. These movements aimed at immediate improvements and fostered the development of broader political ideologies, such as socialism and communism, which sought to address the underlying issues of inequality and class exploitation. Over time, societal and political pressure led to the introduction of social reforms and workers' rights. Governments enacted legislation to protect workers, including establishing minimum wage laws, limitations

on working hours, workplace safety regulations, and recognizing labour unions. These reforms helped improve the lives and working conditions of industrial workers.

It's important to note that the impact of industrialization on the social class structure varied across countries and regions, depending on factors such as the pace of industrialization, political systems, and cultural contexts.

Nevertheless, automation was central in reshaping many societies' social classes and power dynamics.

The Industrial Revolution was a transformative period that positively and negatively impacted society. It brought about significant changes in production methods, transportation infrastructure, and living conditions. However, it also led to social issues like poverty, disease, and inequality. The emergence of the working class, the middle class's growth, and the agricultural class's decline were significant changes in the social class structure.

While industrialization initially led to increased inequality, it also created opportunities for upward social mobility and challenged traditional social hierarchies.

Ultimately, the Industrial Revolution laid the foundation for modern society and set the stage for further technological advancements. Therefore, it is essential to understand the effects of industrialization on society to address current and future challenges effectively.

editor@ifinancemag.com

International Finance | September - October 2023 | 25

COVER STORY INDUSTRY

In recent years, sustainable real estate in the UK has become a crucial factor, reflecting a growing awareness of social and environmental responsibility

26 | September - October 2023 | International Finance

THE EVER-ADAPTING FACE OF

UK REAL ESTATE CL RAMAKRISHNAN

International Finance | September - October 2023 | 27

COVER STORY REAL ESTATE

INDUSTRY

PROPERTY MARKET UNITED KINGDOM

T

he real estate sector has always been centred in the United Kingdom. The UK real estate market is as varied and vibrant as the nation. The UK property sector has something to offer everyone, from cosy cottages in the countryside to luxurious contemporary apartments in the heart of London.

We examine current trends, market tendencies, and significant insights that characterize this expanding sector in this cover story.

COVID-19 impact and post-pandemic era The COVID-19 pandemic irreparably altered the UK real estate market, producing upheavals and redefining industry norms. Property sales were momentarily halted by lockdowns and social restrictions, which left the market uneasy. Potential buyers and investors were less eager to enter into real estate deals as a result of the economic consequences.

But there were also major changes in demand on the market. Due to a demand for more roomy and private accommodations brought on by the expansion of remote work, there was an increase in interest in rural and suburban homes. On the other hand, as individuals sought out homes with more outside space, urban centres, particularly London, experienced a decline in the market for city apartments.

The UK government took action to reduce the economic effects of the pandemic by enacting policies like the stamp duty holiday to encourage home buying.

As companies reevaluated their space needs, concerns

28 | September - October 2023 | International Finance

about the future of office space emerged in the commercial real estate market.

While this was going on, lockdowns and the rise of online shopping presented difficulties for high-street shops and shopping malls.

Lockdowns and supply chain issues caused construction projects to be delayed, which had an impact on the supply of new homes and perhaps affected home prices.

Despite the difficulties the pandemic brought, the UK real estate market has demonstrated adaptability and endurance in the post-pandemic age, particularly in the previous 12 months.

The dynamic UK rental market The UK rental market is a diverse industry that

COVER STORY SAFE

is essential to the country's housing landscape.

It serves a broad spectrum of tenants, including young professionals, families, students, and seniors. The rental market in the UK is characterized by a number of significant trends and traits.

First of all, there is still a strong demand for rental apartments. Renting has been a popular choice due to issues with house affordability, changing lifestyles, and mobility. Particularly young professionals frequently decide to rent in urban areas in order to access work possibilities and active social scenes.

In the UK rental market, build-to-rent (BTR) has become a substantial trend. BTR complexes are specially designed rental homes

that frequently include cutting-edge facilities and qualified management. These buildings provide a hassle-free living for their occupants, and they have grown in popularity because of their practicality and neighbourly amenities.

Another significant element of the UK rental industry is student housing. The top colleges in the country draw both domestic and foreign students, fueling a constant need for purpose-built student accommodations (PBSAs). These residences offer students secure, up-to-date living quarters that meet both their needs for academic and personal needs.

Rent affordability is still a serious challenge, particularly in big cities like London. Discussions concerning rent control measures to shield tenants from disproportionate rent increases have been

International Finance | September - October 2023 | 29

INDUSTRY

COVER STORY REAL ESTATE

PROPERTY MARKET UNITED KINGDOM

sparked by high housing costs relative to salaries.

A greater emphasis has been placed in recent years on the calibre of rental homes. Renting accommodations must now adhere to rules and specifications to guarantee that they are safe, healthy, and energy efficient. The general standard of rental housing in the UK has improved as a result of this.

Sustainable real estate takes over the UK In recent years, sustainable real estate in the UK has become a crucial factor, reflecting a growing awareness of social and environmental responsibility. This industry is being shaped by a number of significant trends and behaviours.

Building research establishment environmental assessment methods like BREEAM and LEED, as well as other green building certifications, have been gaining popularity. These accreditations serve to increase the appeal of certified properties to both investors and tenants by demonstrating a dedication to energy efficiency, minimal environmental impact, and sustainable construction methods.

In sustainable real estate projects, integrating energy-efficient technologies is now considered best practice. In addition to reducing environmental impact, features like solar panels, cutting-edge insulation, and energy-efficient heating and cooling systems also provide long-term financial savings for building owners and residents.

Sustainable real estate has been fueled by the switch to electric cars (EVs). As the use of electric vehicles increases, there is a high demand for real estate that has EV charging infrastructure. To fulfil this growing demand, many developers are now adding EV charging stations in their brand-new complexes.

In the real estate industry, there is a rising commitment to reaching net-zero carbon emissions.

Through a combination of energy-efficient building design, renewable energy sources, and sustainable property management methods, investors and developers are vowing to lessen their carbon footprint.

Embracing property technology The property industry in the UK has enthusiastically embraced technology and PropTech, or property

30 | September - October 2023 | International Finance

Value of the commercial property market in the United Kingdom from 2018 to 2022 (In Billion US Dollars)

2018 2019 2020 2021 2022

1,538.78 1,545.23 1,543.65 1,636.33 1,683.22

Source: Statista

technology. This adoption demonstrates the industry's dedication to improving client experiences, reducing procedures, and maintaining its competitiveness in a setting that is changing quickly.

In the UK real estate industry, virtual property viewings have completely changed the game. Potential tenants and buyers can examine homes remotely using augmented reality (AR) and virtual reality (VR) technologies, which eliminates the need for in-person inspections.

This offers a handy way to view homes while also saving time.

Online real estate search engines like Rightmove and Zoopla have become indispensable in the UK. These platforms provide a sizable database of property listings, comprehensive property details, and market analytics, arming buyers and renters with crucial information they can use to make wise choices.

With the help of smart home technology, homeowners can now control lighting, security, heating, and other features from their smartphones. As tech-savvy purchasers look for modern, connected homes, these technologies not only provide convenience but also raise the value

COVER STORY PROPERTY MARKET

of real estate.

The adoption of blockchain technology holds the promise of streamlining real estate transactions by delivering open and secure record-keeping systems. This might lessen fraud and simplify the frequently difficult process of buying and selling real estate.

The COVID-19 pandemic has expedited the use of PropTech for lease signing, tenant communication, and property management.

More and more, landlords and property managers are using digital platforms to improve productivity, offer contactless services, and streamline business processes.

The adoption of technology and PropTech by the UK real estate sector has ushered in a new era of comfort, effectiveness, and creativity. The industry is set to offer even more customized and frictionless experiences for property buyers, sellers, renters, and investors while remaining

at the forefront of technical breakthroughs as these technologies continue to develop.

Affordable housing: Still a concern The lack of affordable housing supply, slow income growth, and rising property prices have all contributed to an ongoing problem with affordable housing in the United Kingdom. These difficulties have broad social and economic repercussions.

The high expense of property, especially in major cities like London and regional hotspots, is one of the main problems. Homeownership has become a distant dream for many due to skyrocketing property prices, pushing a sizable section of the population into the rental market, where affordability issues still exist.

The issue is made worse by the vast disparity between availability and demand for affordable homes. In brand-new complexes, local authorities frequently fail to satisfy the necessary quotas for affordable housing.

Although there are government incentives to promote

International Finance | September - October 2023 | 31

TECHNOLOGY

COVER STORY DRIVERLESS CARS

ARTIFICIAL INTELLIGENCE AUTONOMOUS VEHICLES

the building of affordable dwellings, supply still does not meet demand.

Housing associations are essential to the provision of affordable housing because they fill the gap between the demand for and supply of cheap houses. However, there might be a long waitlist for these homes, placing many people and families in unstable living situations.

Rent that is priced affordably and shared ownership plans are two popular methods for achieving affordable housing. Low-cost rental properties are made available via affordable rent, and renters can gradually build up equity in their homes thanks to shared ownership.

Although the availability of both choices and the eligibility requirements vary by region, both aim to increase housing accessibility.

Policymakers, developers, and housing associations are working to find creative solutions to the affordable housing shortage as the UK struggles with a continuous housing crisis. This will guarantee that more people have access to stable and cheap housing.

UK property sector: Attracting international investors The real estate market in the United Kingdom has historically been significantly influenced by foreign investment, which has boosted its vibrancy and appeal on a global scale. International investors are still drawn to the UK because of its reputation for stability, an open legal system, and a broad real estate market. There are several important factors to consider when it comes to investing in real estate in the UK as a foreigner.

Historically, foreign investors have concentrated on coveted areas in large cities, particularly London.

Luxury homes, exclusive locales, and well-known landmarks have all proven to be extremely alluring targets, frequently acting as long-term investments and value stores.

The UK commercial real estate market is dominated by institutional investors, notably sovereign wealth funds, pension funds, and real estate investment trusts (REITs). These organizations are looking for assets that would generate steady revenue, and the UK market's durability appeals to them.

Brexit originally led to considerable ambiguity in the environment of foreign investment, with worries

32 | September - October 2023 | International Finance

about changes to regulations and market access.

However, as the post-Brexit landscape became more evident, the market showed resiliency, and investor confidence rose.

Beyond just residential and commercial properties, foreign investment in UK real estate also affects other areas. The country's overall economic growth and infrastructural development are aided by the investments made in development, logistics, and infrastructure projects.

The diversity of international investors is noteworthy, with interest coming from the Middle East, Europe, Asia, and North America, among other places. Each area brings to the market its distinct investment preferences and methods.

Large-scale real estate developments have been financed with the help of foreign investment, which has also boosted the economy and produced jobs. The requests for more balanced investment have, however, been spurred by discussions about housing affordability and its possible effects on nearby towns.

The COVID-19 pandemic, the Russia-Ukraine war, demographic changes, and sustainability concerns are just a few of the many factors that have an impact on the UK real estate market.

Understanding these trends and insights is crucial for everybody involved in the UK real estate industry, including buyers, sellers, investors, and developers. The UK real estate market will continue to be a fascinating and lucrative industry for years to come, even as the market adjusts to the changing circumstances.

Recently, International Finance caught up with GMS Kumar, CEO of MAI (Myproject.ai) and Work-tops.

GMS Kumar embarked on his journey in the construction industry at Work-tops.com in the UK, where he put to use his 10+ years of experience in the Stone Industry, and eight years in Recruitment and Education consulting. He is also set to venture into the world of marketplace with MAI (Myproject.ai), a platform catering to diverse construction needs for the people of the UK through mobile application.

COVER COVERSTORY STORY DRIVERLESS LDB CARS

GMS Kumar, CEO of MAI (Myproject.ai) and Work-tops

His track record includes pioneering Microsoft Dynamic CRM in international student recruitment, implementing SAP at a prestigious Solicitor Firm, launching a PHP-based Stone Industry marketplace, and integrating cuttingedge Artificial Intelligence into Work-tops.com.

During his interview, GMS Kumar sheds light on various aspects of the UK real estate market.

He talks about the application of blockchain and AI in the property market and how real estate professionals are adapting to the digital era.

Additionally, he discusses the key factors that influence real estate prices in the UK and provides further insights into the market.

IFM: How has the UK real estate market evolved in response to changing economic conditions in 2023, and what trends can we expect in 2024?

GMS Kumar: In my opinion, in the UK, the

construction industry is embracing sustainability.

The UK has reduced its reliance on raw materials and is increasingly using reusable products. Moreover, the industry is integrating technology into property construction to lower energy consumption and electricity usage.

We anticipate a shift towards using more local raw materials, supported by the government's initiatives to reduce carbon footprints. Expect the emergence of innovative recycling methods for raw materials through government schemes and support.

How can one determine the current market value of his/her property?

In the UK, property owners can easily determine their property's value through the England Land Registry, where data is submitted and third-party companies evaluate market property values. The UK is also promoting individual builders and self-building activities, emphasising the use of leftover materials to

International Finance | September - October 2023 | 33

TECHNOLOGY

COVER STORY DRIVERLESS CARS

ARTIFICIAL INTELLIGENCE AUTONOMOUS VEHICLES

increase property value. Proper maintenance of the property is crucial, and various communities provide guidance on enhancing property value through sustainability. Having a property that has incorporated more sustainable methodologies will increase its value in the current trend.

Contests for people who build with sustainability are being held. The best ones get financial aid, awards, etc. This encourages people to move more towards sustainability.

How are blockchain and AI used in real estate and property management in the UK? Blockchain and AI are being integrated into the real estate sector. For instance, my soon-to-belaunched startup, MAI (Myproject.ai), aligns with the UK Prime Minister's zero-carbon scheme by helping property owners and traders list leftover construction materials on our platform, reducing carbon footprints and maximising value. MAI also serves as a platform for homeowners and construction-related service providers to find solutions to construction-related challenges.

This technology is set to play a significant role in property management in 2024, backed by years of industry research and insights.

What are the key factors influencing real estate prices in the UK? The United Kingdom's real estate prices are influenced by several factors like the location of the property, condition of the property, and age of the property. Notably, properties older than 75 years cannot have even one brick removed/repaired without proper approval in order to preserve heritage. The government provides financial support to maintain such legacy properties and offers funds for repairs or purchases.

How are rising construction costs and supply chain disruptions affecting new development projects in 2024?

Rising construction costs and supply chain disruptions have had a significant impact on new development projects in 2024. Events such

34 | September - October 2023 | International Finance

MAI (Myproject. ai), aligns with the UK Prime Minister's zero-carbon scheme by helping property owners and traders list leftover construction materials on our platform, reducing carbon footprints and maximising value

as China's container backlog, the pandemic, the Russia-Ukraine war, and the Suez Canal blockage have driven up container costs from around $1500 in 2021 to $7000 to $8000. Despite these challenges, the construction industry remains robust due to increased interest from migrants and buyers, even after the UK government scaled back some policies for first-time property buyers.

What are the current trends in urban vs. suburban vs. rural real estate markets, and how are they expected to evolve in the coming days?

Currently, urban areas are expanding rapidly, with London now encompassing a larger area.

Rural areas, on the other hand, are primarily inhabited by retirees seeking a peaceful environment, subject to strict government approval for property construction or repairs.

The population influx is leading to the urbanisation of suburban areas. Rural areas may remain largely unchanged for the next few decades due to regulatory hurdles. To rent a property in London, people are waiting in lines for hours just to take a look at the property. So, there’s a property crisis in the UK and it could increase in the near future.

COVER STORY PROPERTY MARKET

This estimate saw a substantial revision upward following data revealing that UK inflation displayed greater resilience than initially anticipated. As a result, there were predictions that rates could peak at 6.5% by the first quarter of 2024.

Nevertheless, an unexpected decrease in UK core inflation occurred in August. Consequently, it is now reasonable to anticipate that interest rates might settle within the range of 5.25% to 5.50% by the end of 2023.

In light of climate change concerns, what sustainability and energy-efficient features are becoming more important to homebuyers and property investors?

How can an individual effectively stage his/her home for sale to attract buyers?

In the UK, selling a property is relatively straightforward, with most properties selling within 15-90 days, thanks to online availability of property data. To attract buyers, it's essential to maintain the property well, consider renovations to enhance its appeal, and prioritise sustainability features. Sustainable properties tend to sell faster. Additionally, legal transactions involving property sales are handled by lawyers, ensuring a secure and trustworthy process.

What is the outlook for mortgage rates in 2024, and how might they influence homebuying decisions?

UK interest rates have experienced a rapid ascent since December 2021. Initially, these rates reached historically low levels in August 2020, when the Bank of England (BoE) reduced the base rate from 0.25% to 0.10% as a response to the COVID-19 pandemic. However, recent months have witnessed significant shifts in market expectations regarding the trajectory of UK interest rates.

As of the end of 2022, projections indicated that interest rates in the UK could climb to approximately 4.5% within the next 12 months.

Homebuyers and property investors are placing greater importance on sustainability and energy-efficient features in response to climate change concerns.

Advanced technologies like wall cladding are being adopted to protect the interior from external weather conditions. Properties with energy ratings above the C level are favoured, reflecting the country's energyconscious stance. Smart devices like motion sensor lights are also gaining popularity for their energysaving benefits.

How are real estate professionals adapting to the changing landscape of marketing, sales, and property management in the digital age?

Real estate professionals are gradually adapting to the digital age, but trust-based transactions remain prevalent. Positive word-of-mouth reviews still drive success in the industry, with traditional methods valued. While digital marketing is growing, property management is largely handled through traditional channels. Real estate agents play a vital role, as around 90%-95% of property transactions involve their expertise. Collaborative communication among existing brands and professionals is essential for effective property management and sales.

editor@ifinancemag.com

International Finance | September - October 2023 | 35

INDUSTRY

INSIGHT

TELECOM DATA SCIENCE

In the telecommunications industry, data science enables service providers to foresee client needs and identify potential problems before they materialise

Unlocking telecom's potential: The role of data science IF CORRESPONDENT

Data science is one of the most cutting-edge developments in the telecommunications sector. Telecom operators are increasingly using data science techniques and artificial intelligence to make sense of higher-than-ever data quantities. Since data transfer, exchange, and import are the primary operations of businesses in the telecommunications sector, it is critical that telecom providers invest in data science solutions that can manage and extract valuable insights from the enormous amount of data generated every day. The telecom sector offers a wide range of data science examples. Let us check out some of the best applications of data science in the telecom sector.

Fraud Detection & Price Optimization Being able to spot fraudulent activity is one of the biggest issues facing the telecoms sector. It is such a difficult task since the telecom industry has such a large number of users and even more locations that are prone to security breaches. Application of unsupervised machine learning to customer and operator data, fraud detection tools and methodol-

36 | September - October 2023 | International Finance

ogies that can be used to identify odd user behaviours, and proactive fraud prevention methods are some examples of data science applications in telecom fraud detection. Telecom operators can easily undertake network performance monitoring and visually identify the traits of regular traffic and trends linked to problematic traffic thanks to data science tools with visualization capabilities.

Price optimization is a common data science use case in many sectors. There is intense competition among telecommunications companies, and because there are so many possibilities, clients are more likely to choose the services of businesses that are providing the greatest deals. Pricing was created as a strategy to both reduce congestion and boost revenue with the aid of cutting-edge data analytics.

Pricing plans are intricate and take into account a wide range of elements, such as competitor pricing, time of year, operating costs, macroeconomic variables, sentiment analysis of customer reaction to different prices and perceived value of services, and more. All of this data may be ingested and consolidated, showing how they interact and relate to one

INSIGHT BANKING

Use of BaaS worldwide in 2022, by sector (In Perecentage) General Fintech RegTech InsurTech AgTech Business Administration Information Tech Supply Chain

14% 10% 8% 2% 2% 2% 2% 1%

Source: Statista

another, and informing an effective plan that will keep positive revenue while also retaining pleased clients is made feasible by data science tools.

Network Optimization & Real-Time Analytics Network health, optimization, and profitability are crucial for all telecom providers. Utilizing AI-powered technology at every stage of the network lifecycle streamlines this difficult and time-consuming process and makes it possible to access internal and external data instantly. With the help of this information, the network's performance can be compared to set strategic goals. When determining where and when to increase capacity for the most benefit, data science tools use real-time monitoring and forecasting to anticipate future network demands. This is particularly crucial for 5G infrastructure optimization. As more 5G use cases emerge, including those for network anomaly detection and 5G network design optimization, telecom companies must be prepared to anticipate and adjust to continually shifting customer expectations.

Data science use cases in telecom involve a great deal of real-time data. The telecom sector has evolved, and in order to satisfy ever-changing customer demands, providers are now adopting analytical tools to track data in real-time. Providers have a continuous, 360-degree view of data about customer profiles, networks, locations, traffic, and usage thanks to real-time streaming analytics.

Regular and frequent examination of this data enables service providers to enhance customer service by better understanding how customers react to and use their goods and services. Real-time analytics assists providers in meeting these expectations with real-time analysis and real-time reactions as subscribers' demands grow and traffic gets more active every day.

Preventing Customer Churn & Targeted Marketing In the telecommunications industry, data science enables service providers to foresee client needs and identify potential problems before they materialise. This results in satisfied clients, and sat-

International Finance | September - October 2023 | 37

INDUSTRY

INSIGHT

TELECOM DATA SCIENCE

Worldwide revenue of the telecommunications services industry

Information technology (IT) spending on telecommunications services worldwide

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

2.8 2.9 3.0 3.2 3.8 3.9 4.1 4.6 5.3 5.5

From 2013 to 2022 (In Trillion Dollars)

isfied clients don't churn. Because it offers precise insights into customers' thoughts and habits, data analytics is highly useful for customer church analysis in telecom. The data will be able to reveal information if a customer is dissatisfied with their service and assist the business in effectively increasing satisfaction. To forecast customer churn and create proactive client retention tactics in the telecom business, data science technologies incorporate data related to elements including transactions, real-time communication streams, and social media sentiments.

Telecom data science technologies assist providers in predicting what clients may require in the future, by analyzing historical trends. People are more inclined to purchase from a company when they are presented with offers that are tailored to their particular interests, hence this technology

38 | September - October 2023 | International Finance

1,500 1,560 1,640 1,690 1,754 1,760 1,780 1,803 1,855 1,970

From 2013 to 2022 (In Billion Dollars)

is largely utilized for customer segmentation and targeted marketing. For example, if you notice someone frequently calls one particular country, you might offer them a monthly service plan with some exciting add-ons. A recommendation engine selects the most pertinent service or item for a specific user based on machine learning algorithms and data analysis methods. This increases revenue generation and client happiness to the fullest.

Location Based Promotions & Product Optimization Location-based services are a highly lucrative use case for telecom data science. Location-based marketing connects points of interest with opted-in, privacy-compliant location data sent from smartphones. It takes a lot of real-time data to be able to offer discounts to people based on their current location. Customers' real-time locations are tracked by telecom carriers, who may then text them with promotional messages for nearby businesses. This is done by partnering with various retailers and employing data science to determine the customer's location. The majority of contemporary network

INSIGHT TELECOM

Increase in mobile communications worldwide

Revenue of the communication services market worldwide

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

1.5% 1.7% 2.0% 2.2% 2.7% 3.1% 3.3% 3.5% 3.8% 4.1%

From 2013 to 2022 (In Percentage)

0.3 0.6 0.9 1.1 1.6 1.8 1.4 1.2 1.6 1.5

From 2013 to 2022 (In Trillion Dollars)

operators have used analytical tools that can handle client geodata both internally and externally.

Data science enables telecommunications companies to offer the goods best suited to the requirements of their consumers. These companies can supply goods that meet their customers' and their own demands by using the customer data they gather. The product development process primarily utilizes data about client usage and feedback, which reduces time, cost, and risk. Before releasing a new product or service, as well as to improve an already existing product or service, customer feedback and usage analysis are used.

The HEAVY.AI Advantage Data science applications in the telecom industry are only as useful as our ability to interpret and leverage the data they generate. The telecom business is rife with growth prospects and has enormous potential for optimization, and only the most advanced big data analytics tools can truly harness the vast data streams that telecom assets and customers generate. HEAVY.AI's hardware-accelerated analytics delivers greater speed and performance

than any legacy system could handle. Instant interaction and dynamic big data representations promote quicker action and better judgment.

HEAVY.AI for telecom facilitates faster insights and improves our capacity to ask the right questions, define objectives, close data gaps, analyze data and formulate hypotheses about issues, conduct effective CLV predictions, perform quick data discovery, train precise predictive models, monitor ML models, optimize networks topology and customer service strategies, and create interactive data visualizations that clearly communicate hidden insights.

When HEAVY.AI gives data scientists and utility managers the power to explore big data at the speed of thought, the questions you can answer are limitless.

editor@ifinancemag.com

International Finance | September - October 2023 | 39

Business Dossier - The Access Bank UK Limited

Tailored services Key behind The Access Bank UK Ltd’s success The Access Bank UK Ltd provides a number of services to support business activities in Africa and across the world

Jamie Simmonds Chief Executive Officer/ Managing Director 40 | September - October 2023 | International Finance

The Access Bank UK Limited is a whollyowned subsidiary of Access Bank Plc, a Nigerian Stock Exchange listed company.

The bank provides Trade Finance, Commercial Banking, Private Banking and Asset Management products and services for customers in their dealings with Organisation for Economic Cooperation and Development (OECD) markets and supports companies wishing

to invest in and trade in Africa, MENA and Asian markets.

“We are authorised by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA) and the PRA. The Access Bank UK Limited – Dubai Branch, situated in the iconic Gate Building of Dubai International Financial Centre (DIFC) is regulated by the Dubai Financial Services Authority (DFSA),” the bank said.

“Like our parent, we are committed to developing a sustainable business model for the environment in which we operate. This is reflected in our moderate appetite for risk, our passion for customer service and our commitment to building longterm relationships by working in partnership with our customers,” the company stated further, while adding, “We play a key role in our Group’s vision ‘to be the world’s most respected African bank’.

As such, we refuse to chase unsustainable yields as a route to growth. Instead, we focus on building our business through the strength of our customer relationship.”

The Access Bank Ltd is a direct member of the three key UK payment clearing systems, namely BACS (Bankers’ Automated Clearing Services), C&CCC (Cheque and Credit Clearing Company’s Image Clearing System) and Faster Payments.

The Access Bank UK Ltd’s Chief Executive Officer and Managing Director, Jamie Simmonds said, “This is a great landmark for us,

The Access Bank UK Ltd DIFC Branch situated in the iconic Gate Building of Dubai

enabling us to build a sustainable platform with direct entry into the UK payment clearing system. We have a clear commitment to strong customer service and we anticipate and respond quickly to market needs with the right technology, products and services. Joining the UK payment clearing system is a clear example of meeting the needs of our customers.”

The Access Bank UK Ltd provides a number of services to support business activities in Africa and across the world.

The bank was awarded Confirming Bank status by the International Finance Corporation as part of their Global Trade Finance Programme.

“We were the first Nigerian Bank in the UK to be appointed as correspondent bank to the Central Bank of Nigeria to undertake infrastructure work on behalf of the Nigerian government. We also issue Letters of Credit on behalf of the Nigerian government and Nigerian National Petroleum Corporation (NNPC),” the bank commented.

The Access Bank UK Ltd’s

‘Commercial Banking Team’ offers relationship-based service for its corporate and individual customers, as well as a wide range of financial products and services with a choice of competitive rates, market-leading systems and top-quality service.

“Our Global Private Bank has been built around our passion for delivering excellent service.

We deliver innovative investment solutions to our discerning clients who value trust, integrity and accountability as well as investment performance. We take a proactive approach to product and service delivery and offer unique investment solutions, which are tailored to the needs of our customers by a highly experienced Private Banking team,” the bank remarked.

The Access Bank UK Ltd’s Dubai branch offers a broad range of products and services to assist customers in the MENA region, who have trade and investment needs in Nigeria and Africa. The DIFC Branch has been entrusted with the job of building a long-lasting business relationship in the region, which is in line with the approach that has

International Finance | September - October 2023 | 41

Business Dossier - The Access Bank UK Limited

proven effective for The Access Bank UK Ltd. “The combination of the Dubai branch together with our presence in the UK and Nigeria delivers a wealth of expertise that significantly benefits our customers,” the organisation stated.

A more international presence Securing the approval of French regulators for the Bank to open a regulated branch in Paris was the highlight of a strong financial and operational performance in 2022. This is a significant development because, under a mandate entrusted to us by parent, it represents the Bank’s latest success in expanding the Group’s international footprint beyond Africa, the City of London and our branch in Dubai. The opening is scheduled for the first half of 2023 and coincides with the start of the next five-year strategic plan, which identifies measured international growth as one of its core objectives.

Further overseas representation is planned and this will be announced as it comes closer to fruition.

Led by a team of industry professionals The Bank is led by a team of experienced people dedicated to delivering superior financial solutions to businesses and individuals. The staff have worked in the African, MENA and other international marketplaces, and offer a wealth of knowledge and indepth experience.

“We provide our employees with ongoing support and development opportunities, which reflect in their dedication and professionalism.

We are very proud that Investors

in People (IIP) have awarded us Platinum Status,” the bank commented.

“In common with parent, the Bank is committed to developing a sustainable business model for the environment in which it operates.

This is apparent in our moderate appetite for risk, a passion for customer service and a commitment to working in close partnership with our customers to forge long-term relationships with them,” The Access Bank UK Ltd stated.

A strong future ahead In the recent Report and Statutory Accounts for 2022, the bank has demonstrated another year of significant all-round growth, while achieving and exceeding its target for all the main growth strategies.

The report titled ‘Growing Internationally’ highlights The Access Bank UK Ltd’s strong operational performance by the main ‘Strategic Business Units’, along with the continued expansion in Africa and the MENA region.

Also, continuing income growth saw the bank pass the $100 million milestone for the third year in succession and achieve $131.5 million for the 2022/23 financial year, thus witnessing an 18% profit increase.

“In size terms, Trade Finance continued to be the largest SBU, growing overall income by 12% to $62.6 million, up from $55.8 million in 2021. Correspondent banks, excluding parent, contributed income of $32.6 million, representing 17% growth over the $27.8 million in 2021,” the bank commented further.

Commercial banking showed

42 | September - October 2023 | International Finance

the largest growth of The Access Bank UK Ltd’s strategic banking divisions, with the total income reaching $49.7 million against the 2021 figure of $37.6 million, an increase of 32% on a year-on-year basis.

“Leveraging our proven relationship-based model to support customers at a critical point in Nigeria’s post-pandemic economic emergence was a key factor here.

Asset Management showed a significant uplift in income to $8.1 million, a 62% increase on $5 million in 2021,” the bank stated further.

The Access Bank UK Ltd CEO

‘The Access Bank UK Limited offices in the heart of the City of London’

and Managing Director Jamie Simmonds commented on the recently published results.

He said, “A difficult global trading environment did not impact on another strong core performance, with the Bank increasing operating income to $131.5 million, the third year in succession that it has passed the important $100 million income milestone. The Bank increased operating income in 2022 to $131.5 million, a rise of 18% on the $111.1 million achieved in 2021, despite the negative impact of the Russia-Ukraine conflict on global financial markets, inflation, Central Bank rates and commodity

training.”

“Throughout my experience in financial services, my guiding principles have been to deliver excellent customer service and provide innovative solutions for the customers and markets that we serve. I have been involved in the turnaround of several existing businesses by going back to these basic principles and rebuilding from the ground up,” he stated further.

“When I established The Access Bank UK Ltd in January 2008 it was at a turbulent time in banking but we set the risk appetite, the processes and procedures and developed products that

our customers wanted,” Jamie Simmonds remarked.

Herbert Wigwe, Chairman and Non-Executive Director, added, “Securing the approval of French regulators for the Bank to open a regulated branch in France was the highlight of a strong financial and operational performance in 2022.”

“Finally, I offer thanks to our customers for their support and for entrusting us with their funds which, for the first time, now exceed $1.25 billion, in terms of customer deposits,” he concluded.

International Finance | September - October 2023 | 43

ECONOMY

ANALYSIS

UK INFLATION RATE BREXIT

Interest rates are a blunt tool to combat inflation, but they remain central banks' main tool

The UK inflation rate surprise IF CORRESPONDENT

According to Bank of England policymaker Catherine Mann, the UK has a bigger inflation problem than either the US or the eurozone.

The latest official UK inflation figures show that inflation in the UK has slowed from double digits to 8.7% over the 12 months to June 2023. But Two specific this is still above the 8.2% problems in interest rate forecast by the the UK are Bank of England earlier in compounding the year. The UK interest the country's rate is also almost double inflation woes: the corresponding US rate the negative and significantly higher than economic the eurozone inflation rate of shock of 7% in May, which slowed to Brexit and 6.1% in June. the UK's All three regions reliance on experienced the economic the financial shock of the COVID-19 services pandemic. EU countries and sector the UK have struggled with dramatically rising energy prices due to the Russian war in Ukraine. But two specific problems in the UK are compounding the country's inflation woes: the negative economic shock of Brexit and the UK's reliance on the financial services sector. Therefore experts think rate hikes by the Bank of England will not be enough to bring inflation down.

44 | September - October 2023 | International Finance

The UK government should also play a role in re-balancing the post-Brexit economy away from financial services and towards other traditional sectors such as manufacturing. Interest rates are a blunt tool to combat inflation, but they remain central banks' main tool. They affect the economy in various ways. The most obvious is to reduce the demand for goods and services by increasing the cost of various forms of debt (e.g. mortgages).

However, interest rates also affect the ability of companies to repay their debt and reduce debt.

In the 1950s the UK had a balanced economy, more evenly split between manufacturing and services. Manufacturing (including gas, electricity and water utilities) accounted for over 40% of total UK economic output, while the service sector accounted for 50%. The UK was responsible for a quarter of world trade in manufacturing. The government of the time prioritized production for export, making the UK a leading shipbuilder and a European centre for the production of cars, coal, steel and textiles for sale to other countries. Sciencebased industries such as electronics, computers and engineering also thrived in the UK and the country benefited from this third technology revolution.

However, advances in science-based industries have not been rapid enough to offset the decline in employment in manufacturing in the UK from the 1960s onwards. In the 1970s, the government

embarked on economic policies centred on a housing boom and financial markets, the focus of the City of London. The British public has been told that their future lies in working with their brains, not their hands.

The deindustrialization policy was initiated

by British Prime Minister Margaret Thatcher and continued under Tony Blair and David Cameron.

These policies were presented as economic modernization that would improve workers' wages and society at large. Even the Labor government, traditionally associated with the working class, believed that the future lay in the knowledge economy and set out to transform Britain into a global service provider.

By 2011 around 80% of UK workers were employed in the service sector and only 10% in manufacturing. Various factors explain this decline in manufacturing jobs, including the replacement of routine labour by robots and computerized systems, rising imports from China and other emerging economies, and government policies.

The rise of the City of London, finance, insurance and property industries under Conservative and Labor governments has transformed Britain's economic trajectory. For example, the city has attracted the besteducated people from other regions and professions into high-paying London jobs. People who might have become scientists or engineers instead became bankers or hedge fund managers. So although the city generates €85 billion a year and employs over 580,000 people, it's not a goose that lays Britain's golden eggs, but rather a cuckoo in the nest. It has crowded out other sectors that traditionally provided prosperity to the whole country.

The UK financial sector is now causing another problem: its dominance has made it harder for the Bank of England to control inflation amid concerns that higher interest rates will weigh on banks' balance sheets. For this reason, monetary policy alone will not be able to contain inflation in the UK. The bank has spoken about the difficulties it faced in forecasting the recent surge and continued inflation. But advances in statistical techniques and computing power have

International Finance | September - October 2023 | 45

ECONOMY

ANALYSIS

UK INFLATION RATE BREXIT

Annual inflation rate of the Consumer Price Index in the United Kingdom from 2013 to 2022 2013

improved the ability to forecast inflation.

On the other hand, according to Edward Thomas Jones, Lecturer in Economics, Director of the Institute of European Finance, Bangor University and Yener Altunbas, Professor of Banking, Bangor University, potentially unanticipated government policies and the structure of the UK economy posed a greater challenge.

Banking models had little chance to accommodate the political turmoil and policy changes resulting from Brexit. For example, post-Brexit trade between the UK and the EU has become significantly more difficult, leading to a drop in supply and rising prices. Also, more people from the EU are leaving the UK than arriving, putting downward pressure on wages in certain sectors and exacerbating the inflation problem. Brexit, coupled with the UK's oversized financial sector, is making it too much harder for the Bank of England to control inflation. The government needs to rebalance the UK economy, with science-based industries playing an important role. This would ensure that the Bank of England can adjust interest rates to fight inflation without having to worry about how that will affect the outsized financial services sector.

Brexit to blame for rising inflation When the UK voted to leave the EU on June 23, 2016, financial markets were caught off guard and the sterling exchange rate depreciated sharply. Since then, British imports have become more expensive. The

46 | September - October 2023 | International Finance

2014

2.6%

1.9%

2015

2016

1.1% 2.7% 2017

0.7% 2.9%

2019

2020

3.1% 5.9% 2021

(In Percentage) | Source: Statista

CERP.org column, published in November 2017, found that the weaker sterling boosted consumer prices in the UK by 1.7% in the year after the referendum. Updating the analysis with more recent data, it's estimated that Brexit depreciation has boosted UK consumer prices by 2.9%. This means an increase in the cost of living for an average UK household of 870 per year, meaning people have to work 1.4 weeks longer to afford the same goods and services.

The Brexit referendum took place over three years ago and the United Kingdom officially withdrew from the European Union on January 31, 2020. While the debate on the economic fallout from Brexit has focused on forecasting long-term impacts, enough time has now passed to examine how the UK

2018

3.3% 6.1% 2022

economy has been impacted by the Brexit vote. There are two aspects of impairment which are worth highlighting. First, the sudden drop in sterling, which was the sharpest exchange rate depreciation since the collapse of Bretton Woods in any of the world's four major currencies.

Second, despite some short-lived appreciation, sterling's decline has proved unusually persistent.

Currently, the Sterling exchange rate is $1.30 against the US Dollar and $1.20 against the Euro. These values are similar to those after the referendum.

Textbook economics predicts that imported goods and services will become more expensive when the exchange rate depreciates. But the experts examine this mechanism in detail using consumer price data collected by the Office for National

Statistics (ONS) to calculate the UK's official consumer price index (CPI).

The main variation they use to find out the impact of the weaker exchange rate is the difference in import risk across 84 product groups.

The aggregate import share is a weighted average using 2016 CPI expenditure weights. The standard deviation is unweighted and calculated across 84 COICOP (classification of individual consumption by purpose) classes.

It shows import shares across 12 spending categories in UK consumer spending, accounting for both direct import consumption and indirect consumption of imported inputs used by domestic producers.

Import shares tend to be relatively high in manufacturing, being highest in clothing and footwear. For every pound spent, British consumers spend 49p on imports in this category. In the case of services, the import shares tend to be significantly lower. For example, education only has an import share of 5%, while restaurants and hotels have an import share of 17%. The import

share of total UK consumer spending is 29%, with direct and indirect import consumption split roughly equally. Product groups with higher import shares are more exposed to sterling depreciation, which is the reason consumers experience the rise in prices of these products.

Also, experts officially estimate the impact or pass-through of sterling depreciation on UK consumer prices using quarterly data from 2011 to 2018 at the product group level. They found convincing evidence for a high pass-through. The findings stated that if the pound sterling were to depreciate, the price increase for each product group would be the proportion of product imports multiplied by the extent of the devaluation.

The results suggest that the exchange rate pass-through of the Brexit devaluation on the overall CPI corresponds to the overall import share. The Sterling depreciated by around 10%, given that the import share is 29% for the UK. They estimate that Brexit devaluation

boosted consumer prices by 2.9% in June 2018. This represents an increase in the cost in the UK. Experts noted that there is some uncertainty in this estimate, but it is clear that the effect is large. In the absence of evidence of an opposite increase in nominal wages, results suggest that the Brexit devaluation has had a significant negative impact on real wages and average living standards in the UK. Comparing the spending patterns of households in different deciles of the income distribution shows that the costs of devaluation are evenly distributed across all income levels, since there is no systematic relationship between income and the share of imports in household spending.

However, the impact on inflation differs significantly across regions. Households in Northern Ireland and Wales fared the worst as they spend a relatively higher proportion of their income on highly imported products such as food and drink, clothing and fuel.

In contrast, households in London were least affected as they had comparatively higher expenses for rent, which has a low import share. Consumer prices rose by 0.7 percentage points more in Northern Ireland than in London.

The decision to leave the EU is the most important change in British economic policy in a generation. There is a broad consensus among economists that the long-term welfare effects of Brexit will be negative, but it will be years before these predictions can be rigorously tested. editor@ifinancemag.com

International Finance | September - October 2023 | 47

ECONOMY

FEATURE SUSTAINABILITY

THAILAND ESG LANDSCAPE

The Thailand government reintroduced sustainable development promotion in 2020 by introducing the ‘Sustainable Development Plan 2030’

48 | September - October 2023 | International Finance

FEATURE ESG LANDSCAPE

Thailand's flourishing ESG landscape International Finance | September - October 2023 | 49

ECONOMY

FEATURE SUSTAINABILITY

THAILAND ESG LANDSCAPE

IF CORRESPONDENT

The results also indicate that ESG initiatives have dropped globally from being the top organizational priority in 2022 to number three in 2023. Taiwan executives have ranked ESG as their third organizational priority, which is consistent with the overall trend, while the business leaders in Japan ranked ESG as their fifth organizational priority.

A crucial corporate concern, sustainability affects everything from clean air and climate change to legal compliance and brand integrity.

Some 1476 senior executives from 16 markets, were polled as part of The Harris Poll's second annual CXO Sustainability Survey, which Google Cloud commissioned. It highlights the precautions that leaders must take to prevent new risks when it comes to sustainability: stagnant progress and a failure to execute.

Thailand hasn't always been a sustainability innovator. It was only 154th in the Global Sustainability Index just three years ago. But now, the nation is exhibiting genuine climate ambition.

These measures are not only lip service.

They stand for a sincere attempt to support sustainable development through policies and mere words.

Thailand's government unveiled "Thailand 4.0" in 2019 to address some of the country's long-standing economic

50 | September - October 2023 | International Finance

FEATURE ESG LANDSCAPE

D

espite economic challenges, Thailand has emerged as one of the three unique markets, where business executives rank Environmental, Social, and Governance (ESG) efforts as their top organizational priority, along with Germany, according to Google Cloud's Asia Pacific (APAC) findings.

problems. Heavy industry dependence and the enduring middle-income trap are two of them. It serves as a plan to make the Southeast Asian country a high-income, value-based nation. And within it is a persistent commitment to sustainable growth, whether by emphasizing social well-being, human capital, environmental preservation, or other factors.

The government reintroduced sustainable development promotion in 2020 by introducing Thailand's 'Sustainable Development Plan 2030.'

This plan included explicit goals for lowering emissions, raising the proportion of renewable energy sources in the energy mix, and encouraging environmentally friendly land use.

There is a movement toward ESG-focused funds and products in Thailand, along with this country-wide focus on ESG elements. Combined with the government's policies, these developments will probably move the Southeast Asian country toward a better, more sustainable future.

What is ESG? ESG (Environmental, Social, and Governance) is a framework used to evaluate a company's or investment's sustainability and ethical impact. Let’s break down the key components of the ESG.

Any standard ESG effort carries an environmental aspect, thus summarizing a company's business impact on the environment, including carbon emissions, energy efficiency, waste management, water usage, pollution control, and biodiversity conservation. Companies with strong environmental practices strive to reduce their ecological footprint and promote sustainable practices.

The social component of ESG refers to a company's treatment of people.

It encompasses labour standards, employee well-being, diversity and inclusion, human rights, community relations, customer satisfaction, and product safety. Socially responsible companies prioritize fair and ethical practices, respect for human rights, and positive community engagement.

Then arrives the governance element, which refers to the systems and structures that guide and oversee a company's operations. It includes corporate ethics, transparency, board independence, executive compensation, shareholder rights, and risk management. Strong governance practices ensure accountability, fairness, and integrity within a company's decision-making processes.

Investors, asset managers, and other stakeholders use ESG criteria to assess companies' sustainability and

societal impact. It helps these parties to set the long-term viability and ethical performance of investments and aligns with the growing interest in sustainable and responsible investing. ESG considerations are also increasingly integrated into corporate strategies as companies recognize the importance of environmental and social factors in maintaining their social license to operate and attracting investor interest.

Decoding Thailand’s ESG necessities The Southeast Asian country is now emphasizing ESG principles across all of its industrial sectors.

The country has introduced various policies and guidelines to encourage corporate entities to align with global ESG standards. Although a unified legal framework on ESG has yet to be established, stakeholders are witnessing a significant shift in corporate behaviour, reflecting the growing importance of ESG considerations. This article highlights the latest developments in Thailand's ESG landscape, specifically in policy development, finance, and environmental conservation.

Thailand has been making significant progress in developing its ESG policy framework, which consists of nonmandatory guidelines that enterprises

International Finance | September - October 2023 | 51

ECONOMY

FEATURE SUSTAINABILITY

can observe. Despite the fragmented nature of these guidelines, several key updates have been implemented, either as legally required measures or as voluntary guidelines for action.

The Bank of Thailand (BOT) has introduced the policy on ‘Business Operations of Financial Institutions’ in consideration of 'Environmental Perspectives and Climate Change.'

This policy encourages financial institutions to integrate environmental considerations into their operations, governance, strategy, risk management, and disclosure. Financial institutions are expected to adopt this policy to manage risks, attract investors and customers, and contribute to long-term business viability.

The BOT is also preparing a draft Thailand Taxonomy, a common framework for classifying economic activities aligned with sustainability goals, which is expected to play a crucial role in Thailand's green financing market and align the country's standards with international benchmarks.

The Securities and Exchange Commission (SEC) in Thailand actively promotes the issuance and sale of environmental conservation bonds, including green, social, and sustainability bonds. These bonds are subject to specific regulations and disclosure requirements to ensure they finance sustainable projects.

The SEC has also established rules and guidelines for Sustainable and Responsible Investing (SRI) funds, offering fee exemptions for ESG-related bond issuance and establishing SRI funds in 2023.

Thailand has seen progress in other ESG-related areas as well. The Equator Principles, a risk management

THAILAND ESG LANDSCAPE

framework for financial institutions, have gained traction in the country, with the Siam Commercial Bank becoming the first bank to join. Other financial institutions may consider similar principles when investing in projects. Additionally, although recent and non-binding in Thailand, the global guidance on Human Rights Due Diligence (HRDD) from the United Nations Development Programme encourages companies to examine their human rights commitments within the worldwide supply chain, reflecting increasing stakeholder expectations.

Thailand's voluntary emission reduction program, known as the T-VER Program, allows projects to generate carbon credits that can be used to offset emissions or sold to businesses. The program recently introduced the T-CER premium standard, incorporating international methodologies, although approval and verification for T-CERs are still pending.

These developments highlight Thailand's commitment to sustainable development and responsible business practices. While a unified legal framework is yet to be established, the country is taking important steps to encourage corporate entities to align with global ESG standards.

These policies and guidelines, along with the introduction of various initiatives in the financial sector and efforts to address environmental conservation and human rights, demonstrate Thailand's dedication to advancing its ESG agenda. By embracing ESG principles and incorporating them into their operations, businesses in Thailand can enhance their long-term financial performance, manage risks, attract investors and customers, and contribute

52 | September - October 2023 | International Finance

to a more sustainable and prosperous future.

What are the implications?

The ESG framework represents the company's actions and effects on society, the environment, and corporate governance. These three elements largely influence all organizations' long-term financial performance and sustainability.

For some firms, implementing an ESG framework and incorporating ESG principles into business operations might take a lot of work. Adopting an ESG framework and incorporating ESG

FEATURE ESG LANDSCAPE

considerations into operations can take time for businesses, despite the positive response from society when corporations support ESG measures.

The lack of agreement and consistency in ESG reporting and measures significantly hinders ESG adoption by corporate organizations and tiny and medium-sized businesses. ESG factors are intricate and multidimensional.

When looking at the big picture of ESG, stakeholders may have different viewpoints on what is relevant.

For instance, information on fuel, power, and water use should be

included in the ONE Report by the Stock Exchange of Thailand (SET) as information on clean energy, renewable technology, and other related innovations (if any). If a company is unfamiliar with the global sustainability reports standard, such as GRI, TCFD, or CDP, it may initially need clarification.

Another barrier to implementing an ESG framework for small local enterprises is data management, such as the expense and difficulty of collecting and evaluating ESG data. However, many companies need more staff or the

tools necessary to put in the substantial work required to gather and analyze ESG data.

ESG data can often be confusing and challenging to understand, and there might be discrepancies between different data sources. As a result, businesses could find it difficult to gather and analyze reliable ESG data, making it challenging to evaluate their ESG performance precisely.

Business companies must strike a balance between traditional business goals and ESG issues. Benefits and doing the right thing for business entities

International Finance | September - October 2023 | 53

ECONOMY

FEATURE SUSTAINABILITY

cannot be compromised. Investments in renewable energy, for instance, may be viewed as having long-term ESG benefits, but they may also be expensive and hurt short-term profitability.

Due to their perception that investing in ESG projects may harm their financial performance, firms may be reluctant to do so. Some organizations have shown how they manage this difficult issue by cooperating with local and international partners, utilizing technology, and sharing resources and responsibilities.

In Thailand, where wealth disparity is considerable and social unrest is a concern, social considerations and the interaction between business and society are especially crucial. By implementing fair labour standards, going through individual human rights due diligence procedures, fostering diversity and inclusion, and cooperating with local communities, many Thai businesses are working to improve social conditions.

Several challenges continue to be unaffected by the social efforts taken by enterprises. These include promoting real skills for individuals with impairments, same-sex marriage, and welfare for LGBTIQ+ in a genuine way. It is clear that the Thai government has also put into practice a number of steps to support social sustainability, including adopting policies to combat poverty and inequality, forming a social assistance system, and promoting education and healthcare. The business sector must collaborate with important players like SET and the local government to pursue these challenges beyond general social issues.

To complete their ESG initiatives, businesses in Thailand must work with various stakeholders. For most companies, dealing with governance issues takes a lot of work. Formal

THAILAND ESG LANDSCAPE

systemic corruption and a lack of openness are the main impediments to improving governance.

By implementing high ethical standards, encouraging transparency and accountability, and assuring adherence to legal and regulatory obligations, many Thai businesses are working to strengthen corporate governance.

The formation of the ‘National Anti-Corruption Commission’, the application of corporate governance rules, and the development of policies to support accountability and transparency are just a few of the steps the Thai government has taken to promote good governance.

There are several reasons why Thai organizations should adopt an ESG framework and incorporate ESG

54 | September - October 2023 | International Finance

considerations into their operations, despite these systemic and structural constraints.

First, investors are becoming more interested in ESG factors. They will be more drawn to companies with great ESG performances. Second, customers, particularly the younger generation, are placing a greater emphasis on ESG factors. Companies that emphasize ESG considerations may be better able to draw in and keep customers.

Adopting an ESG framework will be advantageous for an organization's financial situation. It may put it in a better position to manage ESG risks, including climate change, social unrest, and legislative changes.

Thai businesses must develop ESG strategies, action plans, and reporting

FEATURE ESG LANDSCAPE

systems that are transparent, consistent, and in line with the standards set by their stakeholders and the best practices in their respective fields. This will promote greater comparability and transparency in Thai business. Additionally, it will be simpler for consumers, investors, and other stakeholders to understand the benefits of ESG performance.

Thai businesses from various backgrounds and industries should invest in the skills and resources needed to manage, gather, and analyze reliable ESG data. Handling the collection and analysis of ESG data can entail creating agreements with ESG data providers or engaging specialized ESG personnel.

For some businesses, the procedure can be a long and difficult one. It will undoubtedly enhance our performance,

relationships with stakeholders, and reputation in the neighbourhood.

Thailand has become noteworthy in adopting ESG principles. Despite economic challenges, Thai business executives rank ESG efforts as a top organizational priority, indicating a genuine commitment to sustainable development.

The government's introduction of initiatives like ‘Thailand 4.0’ and the ‘Sustainable Development Plan 2030’ demonstrates a persistent commitment to sustainable growth and environmental preservation.

Thailand's ESG landscape is evolving through policy developments in various sectors. The Bank of Thailand and the Securities and Exchange Commission have introduced guidelines and regulations to

encourage financial institutions and corporations to integrate environmental considerations, climate change mitigation, and sustainable practices into their operations and investments.

The adoption of ‘Equator Principles’ and the focus on human rights due diligence further reflect Thailand's progress in embracing ESG principles.

While challenges remain, such as the need for more consensus and consistency in ESG reporting and the difficulty of collecting and evaluating ESG data, Thai businesses can harness the benefits of ESG. By balancing traditional business goals and ESG issues, organizations can mitigate risks, attract investors and customers, and foster long-term financial performance and sustainability.

The importance of ESG considerations is growing globally, with investors and customers increasingly valuing companies demonstrating strong ESG performance. Thai businesses must collaborate with stakeholders and develop transparent ESG strategies, action plans, and reporting systems to meet their expectations and align with international best practices.

By embracing ESG principles, Thai organizations can contribute to sustainable development and responsible business practices, enhance their financial performance, manage ESG risks, and improve their relationships with stakeholders. With continued efforts and investments in ESG data management, Thai businesses have the potential to foster a more sustainable and prosperous future for the country and its communities.

editor@ifinancemag.com

International Finance | September - October 2023 | 55

ECONOMY

ANALYSIS

WEIGHING WINDFALL REVENUE

The rationale behind implementing a windfall tax is to capture a portion of these windfall gains and redistribute them for the public good

Weighing Windfall Tax Impact IF CORRESPONDENT

In a shocking decision that has sent equities tumbling, Italy passed a one-time 40% levy on the profits banks gain from higher interest rates.

The government's action followed a rise in official interest rates that led to record earnings for Italian banks. The government now claims The situation that the money will go hasn’t been toward tax reduction and different for assistance for mortgage the private holders. The levy on their banks as well. profits, according to Italian The fallout banks, will be "significantly has impacted detrimental" to the industry. the banking And after the objections, the sectors of finance ministry said the Germany and tax would be capped at 0.1% France too of assets, while reiterating the commitment to support businesses and people suffering due to the higher borrowing costs.

The tax will apply to the net interest income that comes from the gap between the banks' lending and deposit rates.

According to reports, the levy will generate about €2 billion (£1.7 billion), which will go toward supporting families who are suffering from higher interest rates.

However, some European banks have termed the move bad news for the sector.

56 | September - October 2023 | International Finance

Shares in the country's two largest banks, Intesa Sanpaolo and UniCredit, saw valuation drops, as the government announced the move. Italy’s thirdlargest bank Banco BPM and the state-owned Monte dei Paschi di Siena also witnessed market bloodbaths. The situation hasn’t been different for the private banks as well. The fallout has impacted the banking sectors of Germany and France too.

What is a Windfall Tax? A windfall tax is imposed on unexpected/ extraordinary profits or gains earned by individuals, businesses, or industries due to specific economic circumstances. It is often considered when a company or sector experiences an unusually large increase in profits that may be perceived as excessive or unjustified.

The rationale behind implementing a windfall tax is to capture a portion of these windfall gains and redistribute them for the 'public good.'

Windfall taxes are typically levied on top of regular corporate or income taxes and are meant to mitigate the potential negative effects of excessive profits on economic equity and fairness.

The implementation of a windfall tax can be a matter of debate and policy decision, as it involves balancing the need for government revenue with considerations of economic incentives, investment, and potential unintended consequences.

Why are countries charging Windfall Taxes?

Crude oil, gas, and coal prices have dramatically increased since 2020. As a result, energy firms made large profits at the expense of customers, who now pay significantly more for their energy use.

In light of this, the UN Secretary-General urged countries to apply windfall taxes on businesses that have greatly benefited from the increase in the price of fossil fuels. As a result, numerous nations, besides India, are thinking about enacting windfall taxes, including the UK, Germany, and others.

International stance on Windfall Tax Italy is the most recent nation in Europe to surprise banks with a windfall tax on their earnings, which have increased as a result of interest rate hikes, in an effort to assist homeowners.

In order to earn $3.4 billion in 2023 from profits judged excessive to support assistance for families and businesses hurt by skyrocketing electricity and gas prices, the Czech lower house of Parliament authorized a 60% windfall tax on energy firms and banks.

President Emmanuel Macron of France stated in March 2023 that businesses with over 5,000 employees should instead reinvest more of their "exceptionally high" revenues into their workforce.

However, he and Finance Minister Bruno Le Maire

have disregarded the idea of a windfall tax. While French banks restrict the rate of quarterly increases in loan pricing, the country has a well-known, regulated savings program with an inflation-linked return that adjusts more swiftly than loan rates. This program accounts for slightly under 20% of bank deposits in France.

Compared to the COVID-era lows, net interest revenue for some of Germany's largest banks has increased by 50% to 70%. However, under probusiness Finance Minister Christian Lindner, a windfall tax has not been a topic of discussion.

The German finance ministry declined to comment on Italy's decision but pointed out that a coalition government agreement in Germany forbids tax rises.

In a decree issued in June 2023, Hungary modified the windfall taxes levied on significant economic sectors, stating that banks might pay up to 50% less in windfall taxes in 2024 if they increased their purchases of government bonds. Additionally, it placed a brandnew 13% "social tax" on specific investment kinds.

Italy authorized a one-time 40% tax on bank profits from increased interest rates on August 8. It intends to utilize the money raised to assist homeowners.

According to insiders, it anticipates receiving less than 3 billion euros ($3.3 billion) in tax revenue.

In May 2023, Lithuania authorized a windfall tax on the banking sector's net interest revenue.

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ECONOMY

ANALYSIS

WEIGHING WINDFALL REVENUE

Forecast share of net income impacted by windfall tax for select utilities in the European Union in 2023 (In Percentage) In order to improve public finances and provide room to absorb the costs that a financial crisis could generate, Sweden implemented a "risk tax" for institutions having liabilities related to Swedish operations of over 150 billion Swedish crowns ($14.1 billion) in January 2022.

In 2022, the tax amounted to 0.05% of liabilities and rose to 0.06% in 2023. The estimated annual revenue is 6 billion Swedish crowns.

Britain did not enact a bank windfall tax, but since 2011, it has imposed a bank levy that applies to both the global balance sheet assets of UK banks and the assets of foreign banks that have operations in the country.

Are Windfall Taxes fair?

There is a school of thought that believes that corporations don’t operate in a vacuum and that they have a moral obligation to the citizens of the countries they are from. The citizens are the end consumers who help these colossal organizations amass incredible profits.

However, this political intervention in the industry is risky because it occurs while economies are on the verge of recession. Governments must use extreme caution since doing so will undoubtedly frighten bank investors, increasing the capital cost. Additionally, weakening banks is not a wise move because those same banks may be required to provide free-flowing credit during a crisis.

There are many arguments against windfall tax, the most obvious of which is arguably the

58 | September - October 2023 | International Finance

Fortum

RWE

Engle

27%

8%

Endesa

Naturgy

10%

15%

5%

Iberdrola

Orsted

10%

3%

4%

19%

11%

Source: Statista

Uniper

EDP

fact that the majority of banks have no windfall to tax. Analysis reveals a somewhat different scenario from the headlines about European banks reporting "decadehigh" profits that have dominated the current reporting season. For many of these banks, the return on the equity deployed remains unimpressive, averaging 10% to 13%. That merely covers the return required by investors, which is also their cost of equity.

Additionally, a recession might be on the horizon, and when one hits, bank earnings plummet as loans default and losses skyrocket.

On whether banks would be better prepared to weather a crisis this time, there is debate—there always is. However, the scenario in which impairments increase and profitability declines is by far the most likely. Profitability may decline from its low beginning levels.

Because of this, despite appearing to have received "windfalls," the share values of European banks have decreased by approximately 10% since March 2023.

The fact that politicians and

Enel

6% SSE

regulators effectively opposed such a move in the recent past, albeit from a different angle, may be the strongest case against a windfall tax. At the beginning of the COVID crisis, politicians persuaded European regulators to compel banks to halt dividend payments.

Their justification was straightforward and seemed convincing. Banks would be better prepared to handle the impending recession if they kept more of their profits, allowing them to lend more to the real economy and have more cash to recognize loan losses.

Do Windfall Taxes work?

There are several historical examples of such a windfall tax levied on a specific industry after it registered record gains.

The Oil and Gas Industry in the United Kingdom was taxed for the windfalls it made in the early 2000s. The country introduced windfall taxes on energy companies during a period of high oil prices.

The taxes were meant to capture a portion of the unexpected profits generated by these companies due

to the surge in oil prices. While these taxes generated revenue for the government, the move also faced criticism from the affected companies and some economists, who argued that such taxes could discourage investment in the energy sector and lead to reduced exploration and production.

The Mining Industry in Australia had a windfall tax during the commodities boom in the mid2000s. The tax, known as the "Resource Super Profits Tax," was intended to capture a portion of the extraordinary profits made by mining companies due to the high demand for commodities like iron ore and coal. The tax proposal faced strong opposition from the mining industry, which argued that it would hinder investment and job creation.

The tax was eventually repealed.

Germany implemented a windfall tax on telecommunications companies during the late 1990s and early 2000s as part of its efforts

to reduce its budget deficit. The tax was imposed on the proceeds from the auction of 3G mobile spectrum licenses. While the windfall tax helped generate additional revenue for the government, it also sparked criticism from the affected companies and analysts who raised concerns about the potential impact on investment in the telecommunications sector.

The Banking Industry in Iceland was taxed in the aftermath of the 2008 financial crisis. The move was projected as a bid to stabilize the European country’s economy and address its fiscal challenges. The tax was applied to the large profits that Icelandic banks had made leading up to the crisis. This measure was part of a broader set of policies aimed at managing the crisis, and its effects were intertwined with other economic factors at play.

Some commodity-exporting countries, such as those heavily reliant on oil revenues, have

considered or implemented windfall taxes to capture a larger share of profits when global prices are high. These taxes can provide governments with additional revenue that can be used for public spending or diversifying the economy. However, elements like the degree of government transparency, the administration of tax revenue, and the state of the economy as a whole can affect how effective such taxes are.

It's important to note that the effects of windfall taxes can vary widely based on specific circumstances. They have the potential to affect investment choices, economic activity, and government revenue, and a variety of factors, such as the state of the economy, the structure of the industry, and public opinion, can affect their success or failure.

editor@ifinancemag.com

International Finance | September - October 2023 | 59

ECONOMY

FEATURE FINANCIAL MARKETS

INSTITUTIONAL ECONOMICS INVESTMENT

Growing bribery, corruption, and mistrust have also hampered the nation's economic development

Impact of institutional economy IF CORRESPONDENT

‘Institutional Economics’ refers to laws that affect how a country’s economy functions. So norms are essential to the development and success of any economy. They are manual directives from the government or the state.

Depending on their nature, these guidelines may be formal or informal. Institutionalism's primary goal is to reduce transaction risk and predictability. International organizations like the United Nations and the International Monetary Fund serve as examples. These firms adhere to the guidelines and principles that have helped them function effectively and gain worldwide dominance.

Institutionalism views a broad range of laws, customs, and regulations as enduring principles that change through time. Simply put, people do not adhere to a single institution or guideline. Instead, the laws alter for the good of the whole, depending on the circumstance.

Institutionalism, in this case, determines which values

60 | September - October 2023 | International Finance

will be relevant at what moment. Additionally, because the real world is dynamic, it is imperative to analyze all institutional environments. Additionally, they must decide on the institutional framework they want to use.

However, some elements may need help as the process continues. For instance, creating a structure without communicating it well can lead to failure. Similarly, money itself is a crucial component in exchanges. The transactions will only be transparent if the state has a uniform currency. Therefore, having comparable cash can improve productivity and uniformity at work.

The language, the financial system, and even some economic powers are additional influences.

Some of these powers might be against establishing institutions to safeguard their interests.

FEATURE INVESTMENT

International Finance | September - October 2023 | 61

ECONOMY

FEATURE FINANCIAL MARKETS

Growing bribery, corruption, and mistrust have also hampered the nation's economic development. When it is expensive to transact and utilize institutional economics, institutionalist Douglass C. North argued later in 1994.

It is essential because more institutions will result in more significant economic growth for the nation.

Contemporary institutional economics Most economists concur that the primary factors influencing economic prosperity across nations are institutional variations. Additionally, there is sufficient empirical data to demonstrate that some countries alter their institutions and go through political changes to embark on longterm economic development pathways.

Institutions, Institutional Change, and Economic Performance by Douglas North (1990) describe institutions as the "rules of the game in a community."

Adam Smith emphasized the significance of a justice system, private property rights, and the Rule of Law as early as the seventeenth century in his "Wealth of Nations."

When evaluating the relative relevance of institutions, Rodrik et al. (2002) note that institutional determinants "trump all others."

Aron (2000) found a positive correlation between seven development indices and institutions related to property rights and law enforcement, ten development indices and civil liberties, ten more development indices and political rights, four development indices and cooperation, and fifteen development indices that correlated economic development with democracy.

Studies by the UNFAO in 2006 and by Myrdal (1992) on a comparative

INSTITUTIONAL ECONOMICS INVESTMENT

analysis of development trajectories discovered that the unequal land ownership in Latin America, aggravated by population increase, was the main reason for its underdevelopment.

Improved agricultural technology only let landowner elites cement their power over the industry, resulting in institutions that continue route dependency. On the other side, while increased equality and effective economic institutions helped Vietnam's economy flourish, Nicaragua's development was hampered by the government's instability and concentration of power, which prevented it from spending on public welfare and infrastructure.

Birell et al. (2005) discovered that. In contrast, Botswana, Mauritius, and other countries benefited from institutional capacity to harness domestic primary resources; Sierra Leone, Angola, Equatorial Guinea, and Nigeria did not share this experience. In repeating the findings of economists Abhijit Banerjee and Lakshmi Iyer (2005), along with another study conducted by Banerjee and his economist wife Esther Duflo (2011) noted that in India, the two unique ways of collecting land tax during British rule generated conflicting effects.

Agriculture produced more in areas where farmers were responsible for tax payments than in areas where landlords used to collect taxes. In the first scenario, more public welfare initiatives like schools and hospitals were established, along with greater social collaboration. Similarly, Bardhan (2006) discovered that institutions focused on development ensured a greater flow of information and more resource savings so that the state could appropriately offset economic risks.

According to Ferrini, institutions impact the degree of appropriability

62 | September - October 2023 | International Finance

The 10 countries with the highest growth of the gross domestic product in 2022 (Compared to the previous year)

Guyana St. Lucia Fiji Armenia Maldives Ireland Belize Niger The Bahamas Cabo Verde Source: Statista

62.29% 14.87% 14.52% 12.60% 12.33% 11.97% 11.40% 11.11% 10.98% 10.50%

FEATURE INVESTMENT

on investment returns, the protection of property rights and expropriation of rights by elites, and the conduciveness of the ecosystem to cooperation and increased social capital. To reduce risks and assure sustainable levels of prosperity, inclusive and participatory institutions boost information flow and resource pooling.

Based on cross-country studies of Asian, Latin American, and African countries, the World Bank's Commission on Growth and Development's working paper no. 10, titled "Role of Institutions in Growth and Development," concludes that differences in economic institutions, which reflect the results of various collective choices, are the primary drivers of cross-country differences in per capita income.

According to the bank, resolving the development issue requires urging the relevant institutions to work toward a favourable political and economic equilibrium. The Bank claims that the

African experience shows that, in most cases, although not always, improved economic policies and institutions will result from promoting democracy and accountability.

On the other hand, Latin American history would contradict the Washington consensus that introducing democracy would unavoidably disrupt the political equilibrium. Contrarily, China's experience would demonstrate how the nation began a growth trajectory after 1978 due to a shift in the political balance that increased the influence of those seeking to enact changes.

According to a 2005 MIT study titled "Institutions as a Fundamental Cause of Long-Run Growth," the prosperity of England and the Netherlands can be attributed to sound economic institutions like safe property rights and well-developed financial markets, as well as to institutions like the "organization of overseas trade" that contributed to the expansion of Atlantic trade during the 16th century.

The paper refers to the development of democracy in 19th-century Europe, which influenced economic institutions and policies, including allocating financial resources. In short, institutions play a significant role in the economic growth of nations by setting the context of monetary transactions, to use Ferinni's phrase.

India fits the bill against the background above. The Directive Principles provide a solid framework for economic policy, and it is one of the biggest democracies in the world with the Constitution that is the longest written and guarantees the Fundamental Rights to life and liberty.

A sound legal framework protects property rights, and the separation of powers clause establishes the judiciary,

the executive branch, and the legislature as the three main pillars of government.

A healthy domestic market and wellregulated financial markets help to increase manufacturing. India is proud of its significant public sector investment, which accounts for 2.2% of GDP and is projected to increase to 2.9% in 2023.

Regular elections guarantee that people in authority are answerable to the electorate. Keeping an eye on the integrity of public spending is under the purview of the Comptroller and Accountant General's office.

Information is spread more quickly because of active media and the Right to Information Act, passed into law in 2005. India has a thriving social capitalism, as well.

However, India's heavy reliance on the reform process is the critical policy decision that sets off its growth trajectory. After 1991, India implemented industrial delicensing, which exempted the private manufacturing sector from licensing requirements. It devalued the Indian rupee in 1996 to give its software and other exports sector a more decisive competitive edge and keep up with the increased competition from foreign markets.

Additional steps to increase India's competitiveness in the global market include lowering the average nominal tariff rates, eliminating the consumer goods quota in 1991, liberalizing tariffs in the intermediate goods sector, and establishing preferential trade agreements with Singapore, Sri Lanka, and Thailand. This will drive India's growth of expansion.

editor@ifinancemag.com

International Finance | September - October 2023 | 63

Business Dossier - Easy Parking

Easy Parking always strives for excellence Always marked by a culture of innovation, Easy Parking today prides itself on parking access, revenue management, and innovation in the industry

Mr. Salman Al Haqbani, CEO, Easy Parking

W

ith over 50,000 parking spaces under its operational fold so far, Easy Parking has emerged as the leading car parking operator in the Kingdom of Saudi Arabia. The venture has been providing its smart car parking spaces in Kingdom’s crucial infrastructures such as airports, shopping malls, hospitals, universities, office buildings, hotels, and city streets, apart from taking care of the Saudi government’s ‘Vision 2030’ projects.

Easy Parking, established in 2017, has emerged as a leader in the Kingdom in offering innovative parking management, brilliant customer service, and generous hospitality. The company's team of experts provides flexibility, reliability, and sustainability, developed through years of excellence.

Easy Parking, which is the sister company of Kingdom’s 42-year-old family-owned business Bin Dayel Group, provides services like operation and management of parking spaces, developing and 64 | September - October 2023 | International Finance

financing these infrastructures further under BOT and PPP Models, providing basic taxi management and valet services. Also, the venture provides 'Smart Car Wash Services', 'Quick Maintenance Services', 'Shuttle/Golf cart services' and 'Traffic Management'.

The venture describes itself in the following words, “The foundation of our success is the way we blend technology solutions into our processes to make the functions more effective and efficient. Always marked by a culture of innovation, Easy Parking today prides itself on parking access, revenue management, and innovation in the industry. When it comes to professional traffic management, and local and international parking facilities, clients rely on Easy Parking's expertise.”

Easy Parking, whose' smart parking solutions have reshaped the infrastructure game in Kingdom's big-ticket projects like King Abdullah Financial District, Prince Sultan Military Medical City and Prince Abdul Mohsen Bin Abdulaziz Regional Airport, is led by its CEO Mr. Salman Al Haqbani. He also handles various other responsibilities of Bindayel’s other sister companies. Mr. Haqbani is currently serving as a Board member of smart technology company Etech, aviation services company MACO (Modern Airports Co.) and EMS (Easy electro-mechanical solutions), apart from serving as the General Manager (Business Development) of Bindayel Group.

Mr. Haqbani’s journey as the Easy Parking CEO began in 2017. Over the last six years, he performed his leadership duties with his sheer abilities, dedication, and hard work, with the main agenda being a smart and

sustainable future for the business.

With a bachelor’s degree in Applied Medical Sciences and over 17 years of leadership experience across industries and cultures, Mr. Haqbani found great satisfaction in witnessing the growth and success of talented individuals. He believes the people within an organization and their collaborative efforts are the greatest assets for the venture to achieve success.

At Easy Parking, Mr. Haqbani leads a motivated and committed team that comprises employees, who irrespective of their diverse nationalities are dedicated to providing high-quality services to the clients.

Mr. Haqbani recently caught up with International Finance, where he spoke about his company's operational objective under the 'Saudi Vision 2030', the key factors shaping Easy Parking's growth, the smart parking solutions provided by his company and more.

Easy Parking was also honoured with the “Best Car Parking Operator & Management Company in Saudi Arabia” in the International Finance Awards 2023.

Here are the excerpts from the interview.

IF: What is the Vision of Easy Parking and how much

is aligned with Saudi Vision 2030?

Salman Al Haqbani: Our Vision is to become a leading car parking operator and management company in Saudi Arabia and GCC by 2025 by expanding the operations from the Middle East to Africa and Asia.

Easy Parking is very much aligned with Saudi Arabia’s ‘Vision 2030 Program’ by participating in some of the National Giga Projects like Diriyah Gate, Qiddiyah, NEOM, KAFD (King Abdullah Financial District) etc.

Also, we are involved with government authorities like MOMRAH (Ministry of Municipality and Rural Affairs), MRM (Madinah Regional Municipality), Holy Makkah Municipality, RCMC-Royal Commission for Makkah City and Holy Sites, RCRC-Royal Commission for Riyadh City, TGA- Transport General Authority etc., when it comes to public parking and taxi management.

What are the strong points of Easy parking? Is Operation & management the key to the company’s growth?

Our strength is our employees with expertise, honesty, and generosity. Thinking out of the box is also the key to fostering creativity and innovation. Of course, the International Finance | September - October 2023 | 65

Business Dossier - Easy Parking

operations and management portfolio is the key to the performance and growth of the company other than the parking development and smart parking solutions & services. It’s because of these, we are standing tall among the global leaders with the IFA (International Finance Awards) 2023 in the category of “Best Car Parking Operator & Management Company in Saudi Arabia.”

What is your reaction to winning the International Finance Award for the “Best Car Parking Operations & Management Company”?

All the stakeholders of the Bindayel Group are very much delighted and we have plans to celebrate the occasion with our clients and vendors along with our full team. This is the result of everyone’s hard work and dedication for which we have waited for some time.

Tell us about Smart Parking & MAWQFI. Easy Parking always strives for excellence in the field of car parking. That is the reason we make a strategy to have an R&D division and own product which will serve our customers/commuters.

Our policy is to make our customers happy and give a very high level of quality and service priority with all the latest and seamless state-of-the-art technologies.

We always planned to bring parking services to the fingertips of the customer on his/her smartphone with all the operational knowledge and experience that we have had all the years.

Also, as we are aligned with the ‘Saudi Vision 2030’ national program, we want to bring a unique product with hardware and software, which is local and ‘Saudi Made’ to serve its citizens and residents by making a standard path for the ‘National Parking Program Initiative’.

To execute the challenge, we have collaborated with our sister company Etech and SAMI AEC (a PIF-based company, running under the patronage of the Crown Prince and Prime Minister of Saudi Arabia). Recently we completed the Pilot project at Al Ahsa Airport successfully and the new system is operational for the passengers and visitors.

MAWQFI is one App and one-stop solution for car parking services like car parking operations & management, enforcement, taxi management, valet services, smart car wash services, quick maintenance services, shuttle/golf cart services, trolley/porter service, parking maintenance services, cleaning services, loyalty program and digital payment solutions.

What are the key focus areas and projects currently being handled by Easy Parking?

Our Main focus is on Customer Satisfaction, QoS, human development, team building and its values which are the backbone of any company’s growth. Then we 66 | September - October 2023 | International Finance

We are aligned with the ‘Saudi Vision 2030’ national program, we want to bring a unique product with hardware and software, which is local and ‘Saudi Made’ to serve its citizens and residents by making a standard path for the ‘National Parking Program Initiative’

focus on sustainability and a smart future by aligning with the country’s net zero carbon emissions, ‘Saudi Green Initiative’ and Saudi Smart Cities programmes.

Easy Parking is currently participating in the Smart Parking Projects under the smart mobility dimension of Saudi smart cities like Madinah, Riyadh and Makkah.

What makes Easy Parking different from its rivals?

It’s our company’s culture and core ethical values of generosity, and compassion that makes us proud and stands unique in the car parking market of Saudi Arabia.

Tell our readers about some of the challenges faced

by Saudi’s car parking industry. Is on-street public parking on the track? How far the customer is ready to pay for the service?

All the stakeholders along with parking regulatory bodies like the municipalities, public/private facilities organizations are working together to bring a common road map with unified standards, policies, and regulations for different components of car parking soon in the areas of parking design & development, parking operations & management, value-added services like valet, car wash, disabled parking, taxi pick-up point, taxi drop-off point, loading/unloading area, food truck parking, off-street parking (surface, underground, multistorey) and automated Multi-storey car parking.

With regards to on-street parking, it is already in place in most of the cities here. Jeddah, Dammam and Madinah have been leading in generating revenue for a long time. The capital city of Riyadh is serving the parkers for free until now. Recently MOMRAH/REMAT released the tender for 166,000 on-street parking spaces in Riyadh City under BOT/PPP model.

The customer is still reluctant to pay for the on-street parking service as they used to park free for so many years and there is a challenge in changing the culture by marketing/awareness campaigns and advertising.

Enlighten us about the current regulations for the EV charging stations for the public parking spaces in the Kingdom?

As per the Kingdom’s ‘Net Zero Emission’ program, we need to increase the share of renewables to 50% by 2030. As part of the ‘Riyadh Sustainability Strategy’, the Royal Commission of Riyadh launched an initiative last year to ensure that 30% of all vehicles in the capital would be powered by electricity by 2030. The Kingdom also partnered with the United States-based Lucid Motors in establishing its first EV factory in the region with an annual capacity of 150,000 zero-emission units.

Production will start in 2024, and a complete assembly will be ready by 2025.

The Ministry of Municipal and Rural Affairs and Housing (MOMRA) has classified electric vehicle (EV) charging stations in the Kingdom into three levels. As per the regulations, 10% of the vehicle parking spaces and 2% of Motorbike Parking shall be equipped with EV charging stations and it shall increase to 20% by 2030.

How do you see the future of Saudi’s parking spaces turning out? What type of service you are most excited to implement in the future?

The parking business is always a fascinating one and it’s

the base for any smart city initiatives with a very bright future here. As per the current trends and market in Saudi Arabia, the parking business will grow multi-folded in the coming years as it is catching up with the pace due to so many public/private initiatives and BOT/PPP model projects.

Well, we look for IOT based end-to-end parking solution with multiple payment options with a fully automated, contactless, ticketless, cashless, integrated, and centralized platform. The smart solution will enable smooth car parking operations with a better customer experience by significantly reducing not only the queue waiting times at the parking entry/exit gate but also a reduction in carbon emissions and pollution.

Tell us about your company’s expansion plans in the GCC and MENA markets?

Yes, we have expansion plans with competitive strategies and plans for the GCC markets, especially UAE, Bahrain, and Kuwait. Our plan is to start operations by 2025 in this region. Once we establish well in the GCC, we will explore all the doors and channels for the MENA (Middle East & North Africa) market and other parts of the globe.

International Finance | September - October 2023 | 67

TECHNOLOGY

ANALYSIS

QUANTUM COMPUTING COMPUTERS

As more and more people turn to the potential of quantum computing, applications are emerging that go beyond quantum simulation and encryption

Quantum Computing: The mainstream technology IF CORRESPONDENT

Quantum technology is approaching the mainstream. Goldman Sachs recently announced that it could introduce quantum algorithms for pricing financial instruments in as little as five years. Honeywell, an American publicly traded, multinational conglomerate corporation believes that Data is quantum technology will form recorded and a trillion-dollar industry in stored in a the coming decades. But why different way are companies like Goldman by non-binary daring to take this step, information especially since commercial qubits than quantum computing may still by binary bits, be years away? reflecting the In order to understand multitude what's going on, let's step of states in back and examine what the quantum exactly computers are doing. world We will start with today's digital technology. At its core, the digital computer is a calculating machine.

It made mathematical calculations inexpensive to perform and had a tremendous impact on society. Advances in both hardware and software have enabled all types of computing to be applied to products and services. Today’s days, cars, dishwashers, and boilers are all equipped with some kind of computer, and that's before we even get to smartphones and the internet. Without

68 | September - October 2023 | International Finance

computers, we would never have reached the moon or put satellites into orbit.

These computers use binary signals (the famous ones and zeros of the code) measured in bits or bytes.

The more complicated the code, the more computing power is required and the longer it takes to process.

This means that for all their advancements, from self-driving cars to defeating grandmasters at Chess and Go, there are still tasks that traditional computing devices struggle with, even when the task is spread across millions of machines.

A particular problem they struggle with is a category of computation called combinatorics.

These calculations are about finding an arrangement of elements that optimizes a specific goal. As the number of items increases, the number of possible arrangements grows exponentially.

In order to find the best arrangement, today's digital computers basically have to go through each permutation to find a result and then figure out which one achieves the goal best. In many cases, this can require an enormous amount of calculations (for example, think about cracking passwords).

The challenge of combinatorial computation, as you will see shortly, applies to many important fields, from finance to pharmaceuticals. It also represents a critical bottleneck in the development of artificial intelligence, and this is where quantum computing comes in. Just as traditional computers have reduced the cost of arithmetic, quantum

computers represent a similar cost reduction in computing massive combinatorial problems.

The value of quantum Quantum computers (and quantum software) are based on a completely different model of how the world works. In classical physics, an object exists in a well-defined state. In the world of quantum mechanics, objects do not appear in a well-defined state until the user observes them.

Before observation, the states of two objects and their relationship are a matter of probability.

Computationally, this means that data is recorded and stored in a different way by non-binary information qubits than by binary bits, reflecting the multitude of states in the quantum world. This variety can allow faster and cheaper computation of combinatorial arithmetic.

It has been noted that even particle physicists have difficulty becoming familiar with quantum mechanics and the many extraordinary properties of the subatomic world it describes. However, it is said that quantum mechanics can explain many aspects of the natural world better than classical physics and that it takes into account almost all the theories that classical physics has produced.

Quantum, in the world of commercial computing, means machines and software that can, in principle, do many of the things that traditional digital computers can do, plus one great thing that traditional or classic computers can't: perform combinatorial computations quickly.

In a paper called 'Commercial Applications of Quantum Computing', experts described, this is going to be a big deal in a few important areas. In some cases, it is already known that the importance of combinatorics is central to the subject. The paper has described various aspects that go with quantum which includes chemical and biological engineering sciences, cybersecurity, artificial intelligence, financial services, and complex manufacturing.

Chemical and biological engineering is about the discovery and manipulation of molecules. This requires the movement and interaction of subatomic particles. In other words, it's quantum mechanics.

The simulation of quantum mechanics was a central motivation in Richard Feynman's original proposal to build a quantum computer. The more complex the molecules become, the greater the number of possible configurations. The result is a combinatorial calculation that is suitable for a quantum computer.

For example, programmable quantum computers

International Finance | September - October 2023 | 69

TECHNOLOGY

ANALYSIS

QUANTUM COMPUTING COMPUTERS

The quantum computing market worldwide between 2013-2022 (In Billion US Dollars) have already demonstrated successful simulations of simple chemical reactions, paving the way for increasingly complex chemistry simulations in the near future. With the increasing feasibility of quantum simulations, which help predict the properties of new molecules, engineers will be able to account for molecular configurations that would otherwise be difficult to model. This capability means that quantum computing will play an important role in accelerating current efforts in materials research and drug development.

Another aspect is cybersecurity in quantum computing.

Combinatorics has been central to encryption for over a thousand years. Al-Khalil's 8th-century book of cryptographic messages dealt with permutations and combinations of words. Today's encryptions are still based on combinatorics, which underlines the assumption that combinatorial calculations are fundamentally unmanageable. However, with quantum computers, cracking encryption becomes much easier, which poses a threat to data security.

A new industry is emerging to help organizations prepare for upcoming cybersecurity vulnerabilities.

As more and more people turn to the potential of quantum computing, applications are emerging that go beyond quantum simulation and encryption.

Quantum computing potentially opens up new possibilities in artificial intelligence, which often involves the combinatorial processing of very large amounts of

70 | September - October 2023 | International Finance

data to make better predictions and decisions (think facial recognition or fraud detection). A growing field of research in quantum machine learning is identifying ways in which quantum algorithms can enable faster AI. Due to the current limitations of technology and software, the possibility of quantum artificial general intelligence is slim, but it certainly makes thinking machines more than just a science fiction topic.

Another area where quantum computing can potentially open up is Financial services. Finance was one of the first areas to use big data.

And much of the science behind the pricing of complex assets like stock options is based on combinatorial calculations. For example, when Goldman Sachs prices derivatives, it applies a very computationally intensive calculation called Monte Carlo simulation, which creates forecasts based on simulated market movements. Computational speed has long been a source of advantage in financial markets (where hedge funds compete for millisecond advantages in obtaining price information). Quantum algorithms can increase the speed of important financial calculations.

Also, with quantum computing, large manufacturing datasets on operational failures can be captured and turned into combinatorial challenges that are combined with a quantum-inspired algorithm and can determine which part of a complex manufacturing process contributed to product failures. For products like microchips, where this production process can involve thousands of steps, quantum

2013

39 2014 82 2015 102 2016 179 2017 205

2018

390 2019 480 2020 575 2021 690 2022 740

Source: Statista

technology can help reduce costly failures.

Quantum computing's ability to solve large-scale combinatorial problems faster and cheaper has led to billions of dollars in investment in recent years. Perhaps the biggest opportunity is finding more new applications that benefit from the solutions offered by Quanta. As professor and entrepreneur Alan Aspuru-Guzik said, "Imagination, intuition and adventure come into play. Maybe it's not about how many qubits we have; Maybe it's about how many hackers we have."

The quantum race is underway Governments around the world have allocated more than $25 billion to quantum research and development. Tech giants like IBM, Google, Alibaba, Microsoft, Amazon and others are competing to mainstream quantum computing as an everyday tool for businesses.

have been generally unthinkable.

An ocean of opportunities for enterprises

For example, IBM announced its plans to build a 1,000-qubit quantum computer by 2024, a first in the tech industry, and broke new ground in November 2022 with the unveiling of Eagle, a cuttingedge processor that appears to be the most remarkable of quantum computing.

The processor developed by IBM could thus embark on a remarkable new path in IT. The developers assembled a 54-qubit Sycamore processor and demonstrated its quantum quality by performing the task of generating an irregular number in 200 seconds, which would take the supercomputer 10,000 years to complete.

The company also unveiled its latest 72-qubit quantum computer, the Bristlecone. Alibaba's cloud management service provider Aliyun and the Chinese Academy of Sciences have jointly developed an 11-qubit quantum program available to the general public on its quantum computing cloud platform. Not only big technology

companies, but also well-funded startups have developed the quantum computing room to develop hardware, algorithms and security applications. Some of these are Rigetti, Xanadu, 1Qbit, IonQ, ISARA, Q-CTRL and QxBranch.

One of the main goals that companies are currently advancing towards is the supposed quantum incomparability, when a quantum computer applies the estimate that no conventional computer can function in a reasonable time frame. In October 2019, Google also claimed it had achieved unprecedented quantum quality, but this case has been disputed.

Some experts, including Intel's head of quantum hardware, Jim Clarke, believe the ultimate goal should be quantum practicality, he told IEEE, alluding to the moment when quantum computers can truly achieve something new and unique. Additionally, researchers accept that quantum computing will gradually enter the enterprise space and do things that would

The varied analysis and advances in quantum computing by major technology companies and other organizations are opening an ocean of open doors for CIOs and IT offices to transform the innovation into the current reality.

As Prashanth Kaddi, Partner at Deloitte India, notes, quantum computing is undeniably suited to handling complex optimizations and searching unstructured data quickly. They can bring about potentially problematic changes in all areas, including research, drug discovery, the distributed branch network and traffic flow, energy optimization, and more. In addition, quantum computing significantly reduces time to market and helps improve customer satisfaction.

For example, a drug organization may significantly limit the ability to introduce new drugs. In finance, it could enable faster and more complicated Monte Carlo stimuli such as trading, price optimization, market instability, value appreciation techniques, and more. Once again, JP Morgan Chase and co., together with IBM, are developing advanced philosophies for financial demonstration, including decision estimation and risk analysis. Another company, ExxonMobil, plans to work with IBM Quantum to solve the strategic challenge of shipping the world's cleanest fuel, LPG, around the world. editor@ifinancemag.com

International Finance | September - October 2023 | 71

TECHNOLOGY

FEATURE TWITTER

CYBERCRIME PHISHING

72 | September - October 2023 | International Finance

FEATURE PHONE BACK UP

According to the 2023 Axios Harris reputation rankings, Twitter under Elon Musk is the fourth-most-despised brand in the United States

Twitter's cybercrime mess IF CORRESPONDENT

T

he abrupt resignation of Twitter officials in charge of brand safety and content moderation, after Elon Musk’s takeover of the micro-blogging platform in October 2022, has made the portal more open to hate speech and cybercrime than before.

Ella Irwin, the vice president of trust and safety at Twitter, left the organization. A.J. Brown, the organization's head of brand safety and ad quality, and Maie Aiyed, a program manager who handled brandsafety relationships, reportedly resigned after Irwin left.

International Finance | September - October 2023 | 73

TECHNOLOGY

FEATURE TWITTER

CYBERCRIME PHISHING

It has been close to a year since Elon Musk completed the $44 billion acquisition of Twitter, an investment which has so far proven to be a colossal loss for the maverick tech billionaire. He has significantly downsized the company's employees and reversed content distributionrelated restrictions. As a result, several companies stopped or reduced their advertising expenditures.

According to the 2023 Axios Harris reputation rankings, Twitter under Elon Musk is the fourth-most-despised brand in the United States. And the scepticism around his ownership of Twitter keeps growing.

Since Elon Musk took control, phishing attempts against Twitter (now rebranded as X) have increased. The changes to the ‘Twitter Blue Premium Verification' service have given threat actors a pretext to steal users' login information.

Researchers at cybersecurity vendor Proofpoint have noticed an upsurge in Twitter-related phishing attacks. According to the Proofpoint team, numerous advertisements have employed enticements relating to Twitter verification or the new Twitter Blue offering, such as "Twitter Blue Badge Billing Statement Available."

After taking over the company, Elon Musk added an $8 monthly fee for the ‘Twitter Blue’ service. He has guaranteed that tweets from verified users will be prioritized on Twitter feeds. Users who paid were verified with the website's well-known blue tick. The plan has been suspended, nevertheless, due to several spoof account issues.

Twitter and phishing attempts Twitter phishing attempts use URLs that redirect to criminal infrastructure

in addition to Google Forms for data harvesting. Vice President of threat research and Detection Sherrod DeGrippo stated, “These initiatives typically target members of the media and the entertainment industry, including journalists and Twitter users who have the appearance of being verified. Frequently, the email address is the same as the Twitter handle used, or it may be found in the user's Twitter bio.”

"While we have occasionally seen Twitter credential phishing employing lures linked to verification from cybercrime threat actors in the past, the activity has picked up recently," the official added further.

In the past, TA482, a hacker gang, has frequently used Twitter-related phishing to target media users. But research published in July 2023 by Check Point Research claimed that delivery service DHL was the most impersonated company for phishing scams, followed by Microsoft and LinkedIn. When it comes to the mosttargeted brands for these kinds of attacks, Twitter (rebranded as X) does not even make the top ten.

DeGrippo stated further, "To maximize the possibility that a user would interact with social engineering content, cybercriminal threat actors frequently exploit themes connected to important news stories and relevant to people's interests.”

Even if Twitter and the social media platform are currently quite active, acquiring access to accounts is still profitable. Twitter accounts that are legitimately verified typically have larger audiences than the average user, and compromised accounts can be used to spread false information, persuade users to interact with additional

74 | September - October 2023 | International Finance

malicious content like fraudulent cryptocurrency scams and expand phishing campaigns to other users.

De Grippo warned that "pig butchering" fraud, or attacks that start on social media networks before moving on to other services with the ultimate goal of obtaining cryptocurrency, might be launched via Twitter phishing. This kind of activity has increased lately, according to Proofpoint.

Cybercrime on Twitter post takeover Impersonation of well-known firms has plagued the new authentication system Elon Musk created. Following fake tweets sent by spoof accounts using the names of their respective companies, Eli Lilly and Lockheed Martin suffered a decline in their share prices.

With the ransomware gang Yanluowang joining X in July 2023 to sell their wares, concerns have been raised that the network will be used by hackers to sell stolen data due to

FEATURE PHONE BACK UP

Ponzi schemes

the billionaire Tesla's devotion to free speech.

He cut down the number of employees responsible for X’s safety and content moderation before the most recent high-profile departures from the concerned department took place. He fired the whole artificial intelligence ethics team, which was in charge of making sure that consumers weren't pushed harmful information by algorithms.

The billionaire recently downplayed worries about the prevalence of hate speech on Twitter. During a Wall Street Journal event, he asserted that hate speech on the site has decreased since he took over the firm in October 2022 and that Twitter has reduced "spam, frauds, and bots" by "at least 90%."

There is no data to back up those assertions, experts, and ad industry insiders told CNBC. Some even claim that Twitter is purposefully obstructing independent researchers from tracking these numbers.

X is among the most well-known social networks in the world. Naturally, it is also a sanctuary for scammers of all stripes and cybercriminals.

It's important to familiarize yourself with common Twitter scams and how they operate, the risk quotient and how to successfully defend yourself against them.

There are many Ponzi schemes out there such as phishing, account hacking scams, conversation frauds, bitcoin scams, and bot scams.

Phishing, a sort of cyberattack in which a threat actor impersonates someone or something they are not, can affect any social media network. With Twitter (rebranded as X), a con artist has virtually endless opportunities to phish users. To provoke the target into entering their credentials, they can use email phishing, by sending false messages.

In November 2022, not long after seizing control of Twitter, Elon Musk unveiled ‘Twitter Blue’, a monthly subscription service that costs money and adds a blue checkmark to a user's account.

According to a study by Bleeping Computer, con artists promptly took note of this attempt and launched a sophisticated phishing assault to steal the usernames and passwords of users who wanted to confirm their accounts.

Since Twitter's creation, similar phishing campaigns have plagued the social media platform, with fraudsters coming up with ever-creative ways to steal user credentials. The best thing a user can do is to set up two-factor verification and carefully examine each email that purports to be from Twitter because this won't change regardless of who is in charge of the social network.

X's security and user experience have deteriorated under Elon Musk's ownership, becoming increasingly perilous for users. In a recent story published by Wired.com, Tim Utzig, a visually impaired individual was deceived by scammers on the microblogging platform. Tim, relying on a screen reader, couldn't detect the scam indicators when responding to a tweet from a compromised account. He lost $1,000 in the process.

The author, concerned by the social media portal's lack of responsiveness, teamed up with a social engineering expert named Steve to track down the scammers. The efforts revealed a network of fraudsters using elaborate methods, exploiting vulnerabilities, and leveraging blockchain transactions to deceive victims. Multiple individuals were identified through their payment accounts, linked to real-world addresses, underscoring the scope of the scam.

This story illuminates several critical issues with X. The rise in fraudulent activities on the platform, exemplified by Tim's case, indicates a worrisome lack of effective security measures. The decline in accessibility support for visually impaired users further compounds the problem, leaving vulnerable individuals like Tim susceptible to exploitation.

The narrative also raises concerns about Twitter's changing priorities, as evidenced by its rebranding to "X" and ambitious plans to become an "everything app." This pivot, while aiming to expand the platform's capabilities, poses significant security risks given the existing vulnerabilities that scammers exploit. The story serves as a cautionary tale, emphasizing the need for users to be vigilant and the

International Finance | September - October 2023 | 75

TECHNOLOGY

FEATURE TWITTER

CYBERCRIME PHISHING

urgent necessity for Twitter to prioritize both accessibility and security to prevent further harm to its user base.

Then there are account hacking scams.

The blue checkmark on Twitter has always been reserved for the most eminent people, including celebrities, politicians, and influencers. On the other hand, cybercriminals have always coveted the social evidence that comes with obtaining a blue check. They routinely hack verified accounts to get one.

For instance, a 17-year-old teenager hacked the Twitter accounts of Joe Biden, the then-presidential contender, and Bill Gates, the co-founder of Microsoft, in 2020 using a straightforward social engineering technique. The adolescent received a three-year prison sentence after his actions, but they demonstrate how simple it is for cybercriminals to hack verified Twitter accounts, according to The Guardian.

It's easy to suppose that many people fell for the young boy's con after he hacked into Biden and Gates' accounts to demand a Bitcoin payment. However, this was not an isolated incident; breaches occur much too regularly, and most often, regular users are the ones who suffer. This is why it's crucial to keep in mind that you shouldn't ever blindly believe what you see on Twitter.

Even if it seems like your favourite celebrity is truly tweeting, make sure to confirm that their message is authentic before taking any action.

Conversion frauds are also tricky.

Cybercriminals are developing more inventive ways to con consumers because everyone wants a blue checkmark. Whether you use Facebook, Twitter, or Instagram, you've received a message from someone promising to quickly verify your account.

There are only two ways to have a

verified Twitter account in practice. One is a holdover from the first approach, namely making a formal verification request through the platform. There were several requirements you had to meet to receive the blue badge. Most importantly, you had to demonstrate that you are a "notable" person involved in politics, the media, or other fields.

This is no longer functional, although those who previously had verified accounts may still appreciate the blue tick icon.

There is currently just one method to get the tiny blue checkmark, which is to join up for ‘Twitter Blue’ if you still want one.

Additionally, be sure to report any con artists who offer to verify your account to Twitter. Visit X's support page and complete the necessary form there to accomplish this.

In the cryptocurrency industry, scams are all too rampant, and many of them take place on Twitter. You have probably encountered one if you follow cryptocurrency-related accounts or occasionally post about cryptocurrencies.

Twitter cryptocurrency scams come in a variety of forms, some of which are glaringly evident while others are more subtle. One way con artists do this is by pretending to be a well-known digital currency influencer or analyst, posting false tweets, or even sending direct messages to their intended victims.

Their tweets may promote worthless cryptocurrencies that will eventually lose value or advertise phoney airdrops and dubious services.

Another scammer favourite is fake cryptocurrency giveaways. This kind of hoax relies on persuading the victim that they would receive a huge reward in exchange for a tiny cryptocurrency

76 | September - October 2023 | International Finance

deposit to pay a "fee" or something comparable. Of course, the fraudster will just take your money and move on to the next victim if you make the mistake of depositing it.

Make sure you thoroughly research any information regarding a specific asset and only trade on reputable cryptocurrency exchanges if you want to avoid falling victim to crypto-related scams on Twitter.

Then there are bot scams. As you may already be aware, social media sites are crawling with bots— computer programs that mimic human activity. Twitter is no different. A 2022 study from the online analytics firm Similarweb discovered that 5% of Twitter users are bots and that they produce between 21% and 29% of the network's content.

Although bots are not inherently evil, con artists frequently use them to disseminate false and misleading information, encourage victims to click on harmful links, install malware, and carry out other harmful activities. On

FEATURE PHONE BACK UP

Twitter Statistics • Twitter currently has 396.5 million users • Twitter brought in $3.72 billion in revenue in 2020 • 206 million users access Twitter daily • Twitter is most popular among users aged 25-34 • 8.85% of worldwide social media users access Twitter • Worldwide, men use Twitter more than women • Quarterly Twitter revenue is over $1.1 billion as of Q2, 2021 • In the US, 92% of tweets come from the top 10% of users

Source: backlinko.com

Twitter, networks of bots may work together to retweet and like posts to reach a larger audience.

You should always carefully examine any account that sounds suspicious, especially if it frequently spams links in responses to other tweets or sends direct messages, as some Twitter bots can be challenging to recognize and initially resemble real accounts. Block or mute the account in question, and then report it to the microblogging platform if you believe it to be a harmful bot.

The recent developments surrounding Twitter, including the departure of key officials responsible for brand safety and content moderation, have raised concerns about the platform's susceptibility to hate speech and cybercrime. The abrupt resignation of prominent figures like Ella Irwin, A.J. Brown, and Maie Aiyed has had an impact on the platform's ability to maintain a safe and controlled online environment.

Since Elon Musk acquired Twitter

and his subsequent changes, there have been notable shifts in the platform's policies and practices. These changes have led to decreased content restrictions and alterations to the premium verification service, which has been exploited by cybercriminals for phishing attempts. These phishing attacks use various tactics, including false email messages and Google Forms, to trick users into revealing their login credentials.

Additionally, Elon Musk's takeover seems to have made Twitter a more attractive target for hackers, increasing phishing attempts. The compromised accounts, particularly those with the coveted blue checkmark, can be used to spread false information, promote scams, and expand phishing campaigns to other users.

Furthermore, concerns have been raised about the rise of cybercrime on Twitter, such as the selling of stolen data and the potential for pig butchering fraud, which involves using the platform as a stepping stone to other services and

ultimately targeting cryptocurrency.

It's worth noting that while Elon Musk has claimed improvements in reducing hate speech and spam on the platform, these assertions lack concrete data to support them. The prevalence of scams and cybercrime, including Ponzi schemes, phishing, account hacking, and bot scams, remains a significant challenge for Twitter users.

In navigating this landscape, users are advised to exercise caution, practice good online hygiene, and be sceptical of unsolicited messages or offers. Implementing two-factor authentication, carefully scrutinizing emails and messages, and reporting suspicious accounts are crucial steps to protect oneself from falling victim to cybercrime on the platform. As Twitter continues to evolve under Elon Musk's ownership, vigilance and awareness remains the key to staying safe in this ever-changing digital environment.

editor@ifinancemag.com

International Finance | September - October 2023 | 77

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International Finance | September - October 2023 | 79

TECHNOLOGY

ANALYSIS

FEDIVERSE THREADS

As per the latest report, Threads is all set to receive Twitter-like direct message feature

Fediverse & the Threads debate IF CORRESPONDENT

After ChatGPT, 2023 saw one more disruption in the tech sector, as Meta launched its new app, Threads.

While the Threads app has features similar to its rival Twitter, thus making the latter's boss Elon Musk call the product a 'copycat' one, Meta's Threads is innovation has been an envisioning overwhelming success. itself to be After topping over 100 compatible million users within a few with a days of its launch, Threads decentralized, has already achieved oneopen social fifth of the weekly active user networking base of Twitter and 86 times protocol. the weekly active user base Posts made on of the largest Twitter rival Threads will in the United States named be accessible 'Truth Social', which, till the from other mid-week of July 2023, had apps too a weekly active user base of one million, stated the latest analysis of the app intelligence firm data.ai.

Threads has achieved over 150 million downloads (going by the July 17 data of data.ai) and rising further. The download rate is 5.5 times faster than Niantic’s Pokemon GO, which had held the record for the largest app launch title since its July 2016 debut.

As per the latest report, Threads is all set to

80 | September - October 2023 | International Finance

receive Twitter-like direct message features. The app has also got major iOS revamps like the 'follows' tab on the activity feed and translations. However, Threads is envisioning itself to be compatible with a decentralized, open social networking protocol.

Posts made on Threads will be accessible from other apps too.

Meta has announced working with ActivityPub, a protocol that is used by decentralised networks like Mastodon. The Zuckerberg-led platform has also been referencing 'fediverse,' a term that pops up in Threads’ supplement terms on signing up for the platform.

What is Fediverse?

The term Fediverse, derived from Federation and Universe, is built on open-source technological standards and supports interoperability across social media platforms. Decentralization is the core operating principle of Fediverse.

Platforms and individuals can host their own servers and independently manage them in Fediverse. Server owners can choose what they want to post or share with the Fediverse community.

For example, a Gmail user can send an email and interact with an Outlook user, as the email services rely on interoperable protocols like IMAP, POP, and SMTP. Similarly, in the Fediverse network, the popular protocol is ActivityPub.

Let’s discuss ActivityPub What is common between Tumblr, Flipboard, Medium, Mozilla, and Meta? All these tech giants are working with ActivityPub, to accelerate the creation of the 'fediverse.' ActivityPub has an official WordPress plug-in, which will enable the protocol for something like half the internet all at once. Developers are using ActivityPub to build new and different takes on YouTube, Instagram, and much more, as per a report from 'The Verge.'

"And, of course, there’s Mastodon, the ActivityPub–powered platform that has become a haven to Twitter Quitters all over the internet.

But ask around the tech industry, and there’s a growing set of people who will tell you the future isn’t Mastodon but what it represents: a scaled ActivityPub-based social platform," the article commented further.

As Twitter has been floundering since Elon Musk's takeover in 2022, Mastodon recently overhauled its Android app, thus bringing in features like 'Material You Redesign’. Google’s design language for Android, along with tab bars, settings, a compose screen, and more.

Mastodon now has a monthly active user base

Threads Forecast Revenue (In Billion USD)

2023

0.8 2024 4.5

2025

8.0 2026 11.3

of 1.4 million. However, the same ratio was at 2.5 million last year, when people were quitting Twitter after Musk took over the micro-blogging platform's ownership. As of July 2023, posting activities on Mastodon have tripled.

Coming back to ActivityPub, the technology is currently making social media networks interoperable, connecting everything from a single social graph to a content-sharing system. The principle behind it has been derived from old-school solutions like web chat and email, but the old-school is now making waves, as open protocols are now giving social media’s control back to users.

Artifact and Substack Notes are building their own closed platforms, while Bluesky, Farcaster, Nostr, and

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TECHNOLOGY

ANALYSIS

FEDIVERSE THREADS

others are building their own open protocols in order to decentralize social networking entirely.

"To decentralize social networking is to completely separate the user interface from the underlying data. Any time you sign up for a new social app, you won’t have to rebuild your audience or re-find all your friends, your whole following and followers list come with you. Those things should be part of the internet, not part of an app," The Verge noted.

"If our current social system was decentralized, you’d be able to post a picture on Instagram and I could see it and comment on it in the Twitter app. Your friends could read your tweets in their TikTok app. I could exclusively use Tumblr, and you could read all my posts on Telegram. Different apps would have different strengths and weaknesses, different moderation policies and creator tools, but you’d have the same set of followers and follow the same accounts no matter which platform you use.

There would be no such thing as 'Facebook friends' and 'Twitter followers.' The social graph and the product market would split completely," it stated further.

Mastodon has been using ActivityPub as its primary protocol since 2017. Flipboard has set up a Mastodon server at flipboard. social and is inviting its users and curators to post there, in addition to on the main platform. Medium did the same. Flipboard is also supporting Mastodon inside of its app, thanks to ActivityPub. If someone likes a post on Flipboard that comes from ActivityPub, it

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will also show up on the content creator's Mastodon app. The same goes for comments. It’s the best case study for an interoperable social media network as of now.

But, please hold your horses Mastodon CEO Eugen Rochko has welcomed Threads' intention to become part of the decentralised social web by using the same standard 'ActivityPub' protocol.

One might agree with Rochko's point of view and believe that Meta coming on board is the best thing that has happened to the Fediverse, but the reality may be a bit different.

We have reported about a small group of Mastodon instances threatening to “defederate” from Threads if it joins the fediverse,

which in plain words suggests that the Threads users may not be included in the fediverse.

"Mastodon, the largest app in the Fediverse, is open source and run by a non-profit, and smaller Fediverse apps like PeerTube and Lemmy are often held up as a repudiation of the closed nature of services such as YouTube or Reddit. Corporations like Meta are typically held up as the enemy. No surprise that, despite appeals from ActivityPub leaders for civility when Meta arrived on the listserv, some couldn’t hold their tongue," news portal Wired observed.

"Weeks-old Threads already dwarfs the Fediverse, which has been around for more than a decade and recently peaked at about four

million active monthly users. Some Fediverse fans see that imbalance as a win: Suddenly, the network could become many times more relevant.

Others consider that view naive and expect Meta’s size to push the small world of apps built on ActivityPub in undesirable directions. Some have circulated a pact to preemptively block content from Threads’ servers from appearing on their own," it added further.

“The Fediverse community has been jolted into motion—due to fear and loathing of Meta, and also excitement,” told Dmitri Zagidulin, a developer who leads the World Wide Web Consortium (W3C) group responsible for discussing the future of ActivityPub. “There are furious meetings.

Grants being applied for. Pull requests. Pushes for better security, and better user experience. Better everything,” he added further.

Zagidulin is an integral part of the Mastodon server that operates as a social cooperative, where users decide major decisions on a collective voting basis. These members held a vote on whether to pre-emptively start 'defederation'.

The result was 51:49 in favour of the move.

On one hand, Meta wants to use its resources and brand value to inject new life into the Fediverse movement; on the other hand, Fediverse users like Vanta Black are not happy with it.

"In 2017, as she (Vanta Black) navigated her gender identity, she found a home in small Mastodon communities where moderators and users intermingled and held shared values for how to filter out hateful posts. She fears the arrival of millions of Threads users will unleash volumes of content into the Fediverse that are impossible to manage," the Wired report remarked.

Black has now launched the “Anti-Meta FediPact,” a pledge for Fediverse communities to defederate from the social media company’s future offerings. Black cited Meta’s content moderation policies and its role in human rights abuses and global conflicts, while justifying her tirade against Meta.

For her, Fediverse leadership's hunger for business growth is conflicting with Fediverse's 'intimate' community value.

Sections of the Fediverse family are unhappy with Meta coming

onboard, when it comes to the latter's content moderation policies and its role in human rights abuses and global conflicts. Meta will have to be careful, in terms of allowing Threads users to integrate with other Fediverse servers, as the tech giant needs to respect the Fediverse's 'intimate' community value.

Meta’s leadership will also have to decide the categories of Threads content that will be broadcast out into the Fediverse, including the ads.

"Given that Threads could at a stroke represent the majority of Fediverse users and content, those choices will be deeply felt by existing users of decentralized apps. And anyone building a Fediverse app could find themselves essentially forced to optimize sharing content with Threads users. Mastodon plays a similar role on the network right now because of its large relative size, but so far it has a good relationship and open dialogue with other Fediverse developers.

A giant for-profit corporation might not manage to do the same," observed Wired.

Also, Meta has a history of briefly embracing an interoperable messaging protocol titled 'XMPP', only to abandon it later. So Meta's goal to inject new life into the Fediverse movement requires full commitment from the Zuckerbergled tech giant. Also, Threads is not available in Europe due to the European Union's new Digital Markets Act. The act also doesn't have provisions on Fediverse-like data interoperability.

editor@ifinancemag.com

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TECHNOLOGY

FEATURE ROBOTICS

ARTIFICIAL INTELLIGENCE HUMAN INTELLIGENCE

Will technology outrace humans?

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FEATURE HUMAN INTELLIGENCE

Rather than technology outpacing human intelligence, a more possible way ahead will be the development of collaborative intelligence

IF CORRESPONDENT

T

he question of whether technology will surpass human intelligence has emerged as a topic of debate and speculation, with the emergence of generative AI tools like ChatGPT, which can compose essays, create AI art prompts, and even do software coding for users.

The reality is that the concept of Artificial General Intelligence (AGI), which refers to highly autonomous systems that outperform humans at most economically valuable work, has evolved so much in 2023, that it can even perform leadership tasks as well. The tech world is highly divided on AI’s future potential. While Google boss Sundar Pichai has predicted that the tool will enhance professions, Stability AI CEO Emad Mostaque and OpenAI chief Sam Altman have pitched for the tech to be regulated.

Are we going to see 'technological singularity'?

Yes, it is difficult to predict the future with certainty; with experts holding differing views on the timeline and likelihood of technology surpassing human intelligence.

Proponents of the idea, such as futurist Ray Kurzweil, believe in the concept of a technological singularity, a hypothetical point in the future when AI and technology become so advanced that they surpass human intelligence.

In a 2005 non-fiction book, Kurzweil described his law of accelerating returns, where there will be a massive

increase in technologies like computers, genetics, nanotechnology, robotics and artificial intelligence. Once the singularity has been reached, machine intelligence will be infinitely more powerful than human intelligence. Is ChatGPT the first step towards the fulfilment of the 'technological singularity'?

No one can answer that, at least in 2023.

However, experts are also cautioning against making definitive predictions about when or if this will occur. Developing AGI involves complex challenges, including understanding and replicating humanlevel intelligence, achieving common-sense reasoning, and most importantly, navigating through the tricky alleys of ethical aspects of the tech. In short, developing AI tools involve a significant amount of technical, philosophical, and societal obstacles to overcome.

Also, let’s not forget another reality.

While technology has made remarkable advancements in specific domains such as chess and language translation, human intelligence encompasses a wide range of capabilities, including creativity, emotional intelligence, and intuition, which are yet to

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TECHNOLOGY

FEATURE ROBOTICS

ARTIFICIAL INTELLIGENCE HUMAN INTELLIGENCE

be fully replicated in machines and will take a few decades more (to be realistic), if we are talking about the timeline of a 'technological singularity' kind of scenario arriving.

What about a symbiotic relationship?

In all likelihood, we will witness a symbiotic relationship between humans and technology, where AI and advanced technologies augment human intelligence rather than replace it entirely. This perspective aligns with the concept of Artificial Narrow Intelligence (ANI), a specific type of artificial intelligence in which a learning algorithm is designed to perform a single task, and any knowledge gained from performing that task will not automatically be applied to other tasks.

We already have instances in the banking sector where AI and robotics have been deployed to do tasks like processing huge data sets in a very short span, thus spotting fraudulent information in a matter of seconds, using intelligent algorithms to find anomalies from a vast amount of data, an activity which would have been unfathomable for a human agent.

This is helping the banks to reduce operational costs, increase productivity and take quick decisions. A Business Insider report suggests that by 2023, banks will save $447 billion by using AI apps. These numbers indicate that the banking and finance sector is swiftly moving towards AI to improve efficiency, service, productivity, and reduce costs. So the sector is on the way to establishing a workable model of the symbiotic relationship between humans and technology The trajectory of technological development and its impact on human intelligence will depend on various factors, including societal choices,

regulatory frameworks, ethical considerations, and ongoing research and development efforts.

Also, before jumping the gun, one needs to consider some additional points regarding the potential relationship between technology and human intelligence.

One of them is ‘Enhanced Cognitive Abilities.’ Technology can enhance human cognitive abilities. Wearable devices, brain-computer interfaces, and neurofeedback systems can improve our memory, attention, and learning capabilities. Such technologies can act as cognitive tools that amplify human intelligence and help individuals perform tasks more efficiently.

Recently, the University of Waterloo came up with 'Companion Robots', which will help people with dementia. These devices will have episodic memories of their own, powered by object-detection algorithms, thus helping the robots to detect, track and keep a memory log of specific objects in its camera view through stored video. Here, you have a perfect example where technology is symbiotic towards humans with medical conditions.

Collaborative intelligence: The road ahead?

Rather than technology outpacing human intelligence, a more possible way ahead will be the development of collaborative intelligence. It will be a multi-agent, distributed system where each agent, human/machine, will be autonomously contributing to a problem-solving network, with each contributing with their unique strengths. Machines will process vast amounts of data, analyze patterns, and perform repetitive tasks, and humans will provide creativity, critical thinking, and ethical decision-making.

Also, we need to address the ethical

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questions, when it comes to technology’s potential impact on human society, especially risks like job displacement, inequality, privacy, and algorithmic bias.

Striking a balance between technological progress and ethical values is essential to ensure that human intelligence is respected and protected. With systems becoming more autonomous and complex, there is a need for robust oversight, accountability, and safeguards against unintended consequences. Close attention must be paid to AI safety, control, and the potential for misuse.

One solution can be in the form of ensuring that the technology becomes human-centric, and considers the needs, values, and well-being of individuals, apart from empowering and enhancing human intelligence. Remember that human intelligence, apart from having cognitive abilities, is also guided by elements like consciousness, subjective experience, emotions, and social interactions. These aspects are currently not fully understood or replicated by machines. Neither will they be able to encompass the entirety of human intelligence.

The impact of technology influences various aspects of society, including education, healthcare, governance, and communication. Integrating technology in a way that fosters equitable access, empowers individuals, and addresses societal challenges can lead to a more inclusive and intelligent society. So in the long run, we will see a collaborative relationship between humans and machines. Technology will augment human intelligence, address societal issues, and amplify human potential.

Striking a balance crucial here Finding a balance between technological progress, ethical considerations, and human-centric design will be the key,

FEATURE HUMAN INTELLIGENCE

Artificial Intelligence market size worldwide with a forecast until 2030

207,902.42 298,246.87 420,465.53 582,948.69 795,384.63 1,068,718.47 1,415,054.84 1,847,495.60

2023 2024 2025 2026 2027 2028 2029 2030 Source: Statista

to realise the dream of a future where technology and human intelligence will coexist harmoniously. Remember, human intelligence is deeply rooted in contextual understanding and the ability to make sense of complex and ambiguous situations. While machines can process vast amounts of data, they often struggle with understanding nuances, cultural context, and abstract concepts that humans effortlessly grasp, and it’s a proven fact.

Human intelligence encompasses creative and innovative thinking, which involves generating novel ideas, making connections between ‘unrelated concepts’, and thinking outside the box.

While machines can assist in generating possibilities and performing certain creative tasks, their thought process lacks the elements called ‘originality’ and ‘ingenuity’. Neither do they have the adaptability and the capacity of learning new skills and knowledge (from a wide range of experiences),

|

like their human counterparts. For meeting these scenarios, AI, robotics or any other technology requires explicit programming/training.

Programmed rules or algorithms lack human empathy Humans possess empathy, intuition, and the ability to navigate complex social dynamics. Machines do face limitations, when it comes to understanding and responding to human emotions, building relationships, and demonstrating ethical behaviour. Things like moral reasoning and decision-making based on values and ethics, determining ethical priorities, resolving ethical dilemmas, and making value-based judgments are complex aspects of human intelligence that are challenging to replicate in machines.

All the above elements come under the domain called self-awareness, which is very much alien to technology.

Also, despite technology making significant strides, there are inherent

In Million US Dollars

limitations to its development.

Power consumption, computational constraints, data availability, and algorithmic limitations pose hurdles to achieving Artificial General Intelligence.

Overcoming these limitations will require ground-breaking scientific discoveries, and most importantly, an unlimited capital flow.

Humans have a remarkable ability to adapt to technological advancements and incorporate them into their lives. Humans have displayed the trait of adapting and leveraging technology to enhance their own intelligence, along with fulfilling professional and personal requirements.

Collaboration and co-evolution between humans and technology are more probable than technology surpassing human intelligence entirely. And expect the trend to continue in future as well.

editor@ifinancemag.com

International Finance | September - October 2023 | 87

BANKING AND FINANCE

FEATURE BANKS

AMERICAN BANKS

Banks are exposed to a range of risks, including credit risk, market risk and liquidity risk

Data storage: Empowering digital banking 88 | September - October 2023 | International Finance

FEATURE AMERICAN BANKS

IF CORRESPONDENT

I

n the era of digital banking, the efficient management and utilization of data have become crucial for financial institutions.

One key aspect that empowers digital banking is data storage.

Effective storage solutions enable banks to securely store and process vast amounts of data, leading to improved operational efficiency, enhanced customer experiences, and advanced analytics.

Let's explore how storage powers digital banking.

COVID-19 caused a digitalization boom in the United Kingdom’s banking sector, with mobile apps seeing the biggest gains, according to research from UK Finance.org. The 81% of respondents polled by the study also pitched a bank's online experience as a deciding element in their financial behaviour.

Challenger banks have also arisen as fierce competitors by putting a premium on providing an amazing digital-first service. Traditional banks must pay attention to this trend to stay competitive.

Banks have realized that achieving digital transformation requires more than technological breakthroughs. The industry must continually invest in its infrastructure to secure reliability and trust from its customers. A smooth user experience is essential to standing out in a booming market as more customers rely on online banking

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BANKING AND FINANCE

FEATURE BANKS

services. Effective storage solutions are the foundation of the digital banking ecosystem, supporting and maintaining efficient consumer access. The financial services industry can effectively meet the rising demand for digital banking services and provide a superior user experience for all consumers, regardless of age or demographic, by prioritizing customer experience and data security.

Age of storage: The big short With the transition from paperbased records to storing consumer information online and in the cloud, customers' interactions with their banks and financial institutions have changed significantly. In 2023, there will be about 5,000 banks on UK high streets, down 75% from the number of branches in the late 1980s, according to a recent Parliamentary discussion.

The conversion of traditional banks to digital platforms and the emergence of neo banks, banks that only conduct business online and have no physical locations, have greatly increased the amount of data and metadata produced.

Consequently, these growing data volumes necessitate ongoing, scalable, and more creative storage solutions. The acquired data and storage requirements will vary depending on each bank's digital operations. However, because of their increased online presence, all banks, whether neo banks or hybrids of brick-and-mortar and online, now need more reliable storage solutions to help them conduct their operations.

Before the development of modern banking, banks only kept basic records of their clients' identities, including names, dates of birth, addresses, and bank account numbers. However, financial institutions have begun to gather more meaningful data about

AMERICAN BANKS

customer transactions due to the growth of digitalized banking. This involves using client spending data to identify potential credit concerns, putting risk management procedures in place, and using data gathered from customer surveys. Banks gather insights due to the rising use of artificial intelligence (AI), which must be efficiently managed, stored, and secured for the protection and security of personal data. Financial institutions must assess their storage needs and develop more scalable, efficient solutions to address their expanding data needs.

Since the late 1980s, corporations and financial institutions have relied heavily on flash storage, including solidstate drives (SSDs), for quick speed and short retrieval times. In comparison to conventional hard disk drives (HDDs), which are known in the industry to store and handle "cold" or "warm" data, SSDs can provide faster access to data (so-called "hot storage").

Flash storage helps speed up dataintensive processes like processing customer transactions and real-time data analysis for UK banks. However, "cold" storage (HDDs) and "hot" storage (SSDs) both have significant roles to play in data management. For information banks that need instant access to, such as transactional data, "hot" storage is essential. On the other hand, "cold" storage is utilized to retain historical and inactive data. However, HDDs offer bigger capacity and are more cost-effective due to a cheaper price per terabyte and other total cost of ownership (TCO) factors.

HDDs give a different access speed for data retrieval. The amount of accessibility necessary is the main factor to take into account while dealing with archive data. Although it is possible to

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retrieve data from both data backups and archives, doing so via archives can take a few minutes to many hours.

Depending on the data’s nature and volume, this may need manual searches.

Institutions are integrating data analytics and AI capabilities into their storage systems. In fact, according to one estimate, the market for AIpowered storage will be worth about $25 billion by the 2025 end. AI may be used to determine and optimize a bank's data storage needs, separate the data into live and archival copies, and even automate the procedures and schedules for managing storage.

Major applications Digitalized banking generates a significant volume of data encompassing customer information, transaction records, financial statements, and market data. Robust storage systems, such as cloud-based platforms or data centres, are crucial in efficiently managing and storing this data.

These centralized storage solutions provide secure data storage, backup, and disaster recovery capabilities.

Moreover, they enable easy and fast accessibility to data. This seamless access facilitates smooth operations and enhances customer service by allowing quick retrieval of relevant information.

Personalized customer experiences are at the core of digital banking. Banks can gain valuable insights into customer behaviour, preferences, and financial needs by leveraging stored data. This data is a foundation for creating tailored products and services, personalized marketing campaigns, and targeted recommendations.

For instance, customer relationship management (CRM) systems store customer data, allowing bankers to offer customized

FEATURE AMERICAN BANKS

enhances customer experiences, supports advanced analytics and business intelligence, facilitates regulatory compliance and security, and provides scalability and flexibility.

Banks can optimize operations, deliver personalized services, and make data-driven decisions by effectively leveraging stored data, enabling them to thrive in the digital banking landscape.

Following the challenger banks

solutions and deliver exceptional user experiences. These personalized interactions foster stronger customer relationships and satisfaction.

Efficient data storage is fundamental for advanced analytics and business intelligence in digitalized banking.

Banks can leverage big platforms to store and analyze vast volumes of data. Banks derive valuable insights, identify patterns, detect fraud, and make data-driven decisions by applying analytics techniques. These analytics capabilities enable banks to understand market trends, manage risks, optimize operations, and improve profitability.

Access to comprehensive and wellorganized data fuels the success of these analytics initiatives.

The storage of sensitive financial data necessitates stringent regulatory compliance and robust security measures. Banks must comply with data protection regulations, ensuring data privacy, confidentiality, and integrity. Storage solutions with strong encryption, access controls, and audit trails safeguard customer

data from unauthorized access or breaches. Implementing proper data storage practices allows banks to meet compliance requirements by securely storing transaction records, regulatory reports, and customer consent data.

This focus on regulatory compliance and security instils trust and confidence among customers.

Digitalized banking demands storage solutions that can scale and adapt to accommodate the growing volume of data. Cloud-based storage solutions offer scalability, enabling banks to expand storage capacity as needed without investing heavily in physical infrastructure. The flexibility of cloud storage also facilitates seamless integration with other banking systems and applications, promoting efficient data sharing, collaboration, and innovation.

This agility in storage solutions supports the dynamic nature of digital banking operations and ensures scalability as the business evolves.

In summary, efficient data storage empowers banks to manage vast amounts of data, ensures accessibility,

Online and offline banks are pressured to meet shifting standards for the best client experience. This calls for highperforming storage solutions to ensure a seamless experience and consumers' quick access to their data and services.

Customers will benefit from the improved convenience of Internet banking in the future, but banks must ensure that the necessary infrastructure is in place. Banks must improve their storage options to stay competitive in a crowded industry. Massive volumes of live and archived data have resulted from the quick development of digital banking.

Banks may offer tailored consumer experiences by investing in scalable, secure storage solutions. Consumers will have faith in real-time transactions and data-driven insights, building strong trust with prospective and current clients. The foundation for advancing the industry will be effective storage solutions.

Digital transformation has significantly impacted the banking industry, and traditional banks must adapt to stay competitive in a market that values digital-first service.

editor@ifinancemag.com

International Finance | September - October 2023 | 91

BANKING AND FINANCE

ANALYSIS

TRADING BLOCKCHAIN

Financial stress and low financial literacy levels emphasize the importance of incorporating educational components into fintech services

Financial inclusion in the digital era IF CORRESPONDENT

The poor suffer the most globally due to rising inflation, limited economic growth, and food shortages. In addition to the COVID-19 pandemic's unequal consequences, today's numerous crises have already resulted in catastrophic development reversals and an enormous rise in worldwide poverty.

Positively, the COVID-19 71% of adults crisis sparked unheardin developing of change, particularly in economies sectors with a significant now have digital component. This digital a formal revolution has changed how financial people send and receive payments, account, up borrow money, and save money through increasing access to from 42% in and use of financial services in the database's developing economies. first edition The most recent 'Global Findex ten years Database,' created using data from ago a poll of over 125,000 adults in 123 economies and covering financial services in 2021, glaringly shows these shifts.

According to the survey, 71% of adults in developing economies now have a formal financial account, up from 42% in the database's first edition ten years ago. These accounts can be with a bank, another regulated institution like a credit union or microlender, or a mobile money service provider.

Additionally, the gap between the percentage of

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men and women who own accounts in developing nations has shrunk for the first time, from nine percentage points to six.

With the help of this digital change, it is now simpler, less expensive, and safer for people to receive paychecks from their companies, remit money to loved ones, and make purchases. Highvolume, small-value transactions are easier to manage with mobile money accounts, enabling consumers to access financial services and store money for the eventuality. Additionally, individual accounts give women more privacy, security, and financial management.

Adults in emerging nations now account for 57% of all digital payments made or received, up from 35% in 2014. 39% of mobile money users in Sub-Saharan Africa currently utilize their accounts to save money. And after the COVID-19 pandemic began, more than one-third of consumers in lowand middle-income nations who paid an energy bill from an account did so for the first time.

Fintech revolution By giving customers cutting-edge trading tools, the fintech revolution is advancing financial inclusion and democratizing access to international markets.

The World Bank claimed that by 2020, digital payments would have tremendous growth, particularly in emerging markets and developing economies, where the number of transactions is

increasing quickly. A pioneer in mobile money transactions has risen thanks to non-bank organizations like fintech, brokers, and others.

App-based financial organizations are replacing outdated interfaces as customers switch from feature phones to smartphones, giving them improved functionality, speed, and convenience.

Rapid advancements in digital banking are democratizing wealth creation prospects, increasing financial inclusion, and opening access to the world's financial markets to people from all walks of life.

For the financial system as a whole and particular individual, this financial inclusion does, however, come with some dangers and difficulties.

Users benefit from quicker and easier access and lower expenses, but handling possible problems like security, privacy, and financial literacy is crucial. In this article, we'll discuss ways to take advantage of digital finance's promise while minimizing the risks involved and the benefits and difficulties of the expansion of financial inclusion.

For a prosperous globe Institutional investors and high-net-worth individuals have historically had privileged access to the world's financial markets. The typical

individual may now access these markets, enhancing financial inclusion and levelling the playing field. This is because of technological improvements.

The democratization of financial services and education is essential in this new context for promoting financial literacy and ethical investing practices. There are notable differences in economic competence between economies and groupings, according to an OECD poll from 2020. Financial stress and low financial literacy levels emphasize the importance of incorporating educational components into fintech services.

Fintech companies may assist consumers in acquiring a solid financial knowledge foundation, empowering them to make educated decisions and take control of their financial future by creating thorough educational tools like webinars, articles, and video lessons. Fintech companies contribute to developing a more financially inclusive and fair global economy by making these resources available to a larger audience, enabling people from all walks of life to take advantage of the opportunities afforded by international markets.

Several companies like Olymp Trade, IQ Options, EToro, Plus 500, Interactive Brokers, and TD Ameritrade have developed platforms that serve both seasoned and novice traders. According to our

International Finance | September - October 2023 | 93

BANKING AND FINANCE

ANALYSIS

TRADING BLOCKCHAIN

research, most of the consumers in South-East Asia and Latin America desired to increase their income through trading. Even though most of these individuals believe their income to be ordinary, trade costs comprise a sizable amount of their spending plan.

Such households must be aware of the dangers involved with participating in the financial markets because a trading failure could have disastrous effects on them. Having a strong educational resource centre and encouraging risk management and thoughtful trading is crucial because of this.

Even if there is a ton of online knowledge concerning frequent trading errors and position sizing, traders sometimes need more time to make decisions and exhibit excessive confidence. Trading platforms should encourage consumers to pursue financial education for this reason. Fintech companies are always developing new ideas to make it easier for customers to acquire the knowledge necessary for trading securely, such as trade analyzers and in-app advice. As a result, individuals receive counsel that enables them to explore and take advantage of this new world as barriers to entry into the financial sector crumble.

Collaborating with AI Trading analysis has advanced significantly since people depended on printed or hand-drawn charts to interpret market trends.

Computer-based indicators have revolutionized how traders analyze data by speeding the process and offering more precise insights

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as technology has evolved. Now that we live in the age of artificial intelligence (AI), and the trading environment is undergoing yet another change. Making better decisions, optimizing trading tactics, and increasing overall market efficiency are all possible with the help of artificial intelligence.

Making informed trading decisions is essential in today's fast-paced financial environment and access to real-time data and analysis is necessary. Innovative platforms already utilize machine learning and AI to give users access to sophisticated analytical tools and insights to help businesses remain ahead of industry trends.

For instance, AI-driven sentiment analysis analyzes news articles, social media posts, and other data sources to assess market sentiment and forecast price changes.

AI is revolutionizing portfolio management in addition to providing real-time market data.

Fintech firms offer customers access to robo-advisory services and automated trading solutions using AI-driven algorithms.

These tools can analyze enormous datasets, find trends, and create customized investment strategies depending on a person's financial objectives and risk tolerance. In addition to saving consumers time and effort, this level of personalization and automation also works to lessen the influence of emotional biases on trading decisions. Investors can benefit from a more effective and unbiased approach to managing the intricate and constantly evolving financial markets.

Companies like E Toro and Innovative Brokers ensure that consumers obtain timely and pertinent market evaluations that improve the performance of their trading methods by integrating AI-powered features. Additionally, these platforms provide adaptable risk management capabilities that let traders maximize gains while minimizing losses.

The limits of autonomy may open up as AI technology develops, enabling more complex trading tactics. However, these achievements also raise the possibility of problems.

AI trading computers, for instance, are trained using historical data and could lack perspective.

Furthermore, the algorithms can advance to the point where human programmers cannot fully comprehend them. Finally, when politicians venture into unfamiliar waters, regulatory obstacles will materialize. It is crucial to appreciate and respect AI's limits to maintain the importance of human oversight and comprehension in the trading process.

these issues if blockchain is to live up to its potential as a revolutionary technology. Fintech businesses can create a more sustainable and effective financial environment for all consumers by being aware of these concerns and trying to address them.

The road to inclusivity

Accepting cryptocurrencies By granting access to crucial financial services and possibilities, digital currencies and blockchain technology are helping people from all socioeconomic backgrounds, even those with minimal financial resources. For low-income people who depend on remittances from overseas, faster, more inexpensive, and accessible remittance services made possible by digital currencies are crucial.

Blockchain technology enables the development of decentralized finance systems that do away with intermediaries like banks and reduce costs and entry barriers.

People with few resources can now participate in saving, lending, and borrowing programs previously only open to individuals with traditional banking access because of the democratization of access.

Additionally, digital currencies provide financial privacy and independence, enabling users to manage their money independently of third parties and offering an alternative store of value and medium of exchange for those living

in nations with unreliable banking systems or high inflation rates.

Thanks to the rise of digital currencies and blockchain technology, people from all walks of life can engage in the global economy. As more fintech businesses adopt these advances, traders and investors can access a wider variety of digital assets and decentralized financial services with fewer entry barriers.

They stay ahead of the curve by consistently extending their offerings to incorporate wellknown digital currencies and integrating blockchain technology into their infrastructure. Users can diversify their portfolios as a result and take advantage of the expanding potential of this rising market. Fintech platforms allow users to trade some of the most well-liked crypto assets and make cryptocurrency deposits and withdrawals.

It's critical to recognize blockchain technology's difficulties, including scalability, energy usage, security, complexity, and interoperability. It's crucial to solve

More people will be able to access and participate in the global financial markets as fintech continues to transform the financial sector. Businesses are laying the groundwork for a more inclusive and democratic economic environment, paving the way for a better future where people worldwide are more financially empowered.

Fintech businesses are reshaping the financial industry, dismantling obstacles, and empowering more people with the resources they need to build wealth and achieve financial freedom by adopting the newest technology and emphasizing user-centric services. It is crucial to remember that there is still a long way to go because, as of January 2023, 35.6% of the world's population lacked access to the Internet.

It is imperative to address this digital divide to ensure that the advantages of fintech technologies can reach everyone, regardless of location or socioeconomic level.

Fintech firms may play a significant role in promoting financial inclusion and democratizing wealth creation prospects by helping to close this gap.

editor@ifinancemag.com

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BANKING AND FINANCE

FEATURE BANKS

CREDIT SUISSE

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FEATURE CREDIT SUISSE

Smaller emerging economies with significant debt and declining repayment capacity have the most unstable banks

Is global financial system failure-proof?

IF CORRESPONDENT

T

he series of bank collapses in 2023 shook our belief system on the global financial system and its safety. In the overall scheme of things, post-COVID inflation and geopolitical factors (Ukraine War) have been bogging down the world's financial system. Add the banking collapses in it, and things get messier further.

In its April 2023 ‘Global Financial Stability Report’, the International Monetary Fund issued a warning that "financial stability risks have escalated quickly as greater concerns about inflation and fragmentation have put the resilience of the global financial system to the test."

Smaller emerging economies with significant debt and declining repayment capacity have the most unstable banks. The IMF expects a dire financial climate due to increased geopolitical concerns, unmanageable debt, rising inflation and interest rates, and tighter monetary conditions. It was closer than anyone admitted during those stressful March days.

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FEATURE BANKS

"The lightning-fast, forced takeover of Credit Suisse by rival UBS had helped to avoid a national calamity," Swiss Finance Minister Karin Keller-Sutter said in Washington in April.

Switzerland's central bank director, Thomas Jordan, said the takeover prevented Credit Suisse from "being the first domino in a systemic collapse."

A systemic crisis The crises around United States’ banking majors like Silicon Valley Bank, Signature Bank, First Republic Bank and their Swiss counterpart Credit Suisse have revealed systemic problems that require immediate attention.

There is a contagion worry around the financial circles in Europe and the United States, and this worry is now bothering regulators.

The Swiss government deserves recognition for moving fast and decisively to rescue Credit Suisse, as its quick deployment of resources prevented a 2008-style banking catastrophe.

On the other hand, American depositors were so nervous about the future of their deposits, that they started withdrawing those capital en masse from the domestic banking sector. The Federal Reserve too expressed worry, which didn’t help the matter either.

"It appeared like contagion from SVB's bankruptcy may be far-reaching and inflict damage to the broader financial system," said Fed vice chairman of Supervision Michael Barr.

Michael Barr also said that if the customers can't access their money, depositors may start distrusting US commercial banks' safety and soundness.

Potential risky behaviour As we shall see, both banks somehow

CREDIT SUISSE

slipped the leash of risk-averse management that authorities imposed on them after 2008. The obvious question is: have the global giants returned to the reckless behaviour that caused the financial crisis?

After the Credit Suisse panic, French and German authorities raided five giant banks for possible money laundering and tax evasion on behalf of wealthy clients, highly illegal activities that had enraged regulators after the 2008 revelations of egregious behaviour.

Since 15 years of reforms were designed to eliminate banking shocks, the question is significant. National regulators ordered a wide range of measures that separated investment from deposit banking, boosted capital ratios and liquidity, sheeted home responsibility onto specific senior executives, eliminated sky-high undeserved bonuses, and, most importantly, ensured a tottering institution could collapse without triggering a house of cards, as happened in 2008. No bank could be "too big to fail."

Meanwhile, authorities scrutinized systemically significant institutions (G-Sibs), which bankers sometimes hated.

Despite all this regulation, 49-yearold Silicon Valley Bank failed in 24 hours after what the US Federal Reserve called “a devastating and unexpected run by its uninsured depositors,” while once-mighty Credit Suisse was bundled into USB, its supposed rival, with indecent haste before it failed. Credit Suisse's viability has long troubled Swiss regulators.

Credit Suisse might earn over $17 billion in 2022 from financing Swiss railroads. The second-largest Swiss bank seemed impregnable until a year ago. Swiss banks are known for their strength, dependability, and prestige.

The major Swiss regulator, FINMA,

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is also held in high regard. The Swiss government had to quickly raise $122 billion to save Credit Suisse. The new guidelines say even a G-Sib's failure shouldn't cost taxpayers.

In the US, SVB was not for sale, even at gunpoint. The Federal Deposit Insurance Corporation, which ensures financial stability and confidence, followed the book, or "hierarchy," as central bankers believe. The FDIC swiftly guaranteed SVB and Signature Bank's insured deposits after a run on deposits caused them to fail.

Troubleshooting regulators took over after the US Fed fired senior managers overnight.

Most significantly, the Fed guaranteed up to a year's worth of liquidity to other banks, preventing future runs. As per the post-2008 hierarchy, SVB equity and liability

FEATURE CREDIT SUISSE

holders lost their investments.

Speculation & effects These failures have various effects.

Credit Suisse, with operations in the US, Europe, the Middle East, and internationally, has substantially higher numbers. The effects may last for years. UBS, with $1.1 trillion in assets and $34.6 billion in sales, may be able to swallow its rival, mainly due to its doubtful assets. The takeover creates a $5 trillion entity, but nobody knows how much of Credit Suisse's assets will be written down.

Credit Suisse stockholders lost money, and FINMA will value its tierone bonds at zero. UBS will buy Credit Suisse for $3.3 billion, a fraction of its pre-failure value.

Reading between the lines, the US Fed was astounded by Silicon Valley

Bank's collapse. Supervisor Michael Barr told the House Committee on Financial Services that management's failure to manage liquidity risk, its largest responsibility, and the run killed the bank. According to media reports, management prioritized development over stability and ignored internal stress testing that highlighted issues.

Why run, and why now? The Fed seemed bewildered and embarrassed.

Michael Barr stated, “SVB’s failure warrants a full assessment of what happened, including the Federal Reserve’s monitoring of the bank.”

It is already known that SVB had a focused business model and that its customers were mostly in the high-risk but potentially lucrative technology and venture capital industries. The bank had been established for over four decades, but in the three years leading up to

2022, it tripled its assets as the IT sector boomed. Concerns should have arisen.

Before 2008, fast-growing institutions like the Royal Bank of Scotland failed on both sides of the Atlantic.

The Fed says SVB invested fastgrowing deposits in longer-term securities with higher yields without the necessary expertise: “The bank did not effectively manage the interest rate risk of those securities or develop effective interest rate risk measurement tools, models, and metrics.”

The bank also neglected its liability risks. Senior executives fell into the liability-asset mismatch trap. Media reports suggest some personnel had severe concerns about their boss's decisions. SVB's troubles stemmed from the technology sector's need to hold cash deposits in the bank to cover salaries and operating costs. However, cash deposits can be removed at will and often are.

On March 8, SVB realized it wasn't liquid enough and announced a $1.8 billion loss in a securities transaction but expected to raise funds the following week. That alerted its clients, and some of America's brightest examined their bank's balance sheet.

Michael Barr stated, "They did not like what they saw," in typical US fashion.

On March 9, SVB clients withdrew over $40 billion, demonstrating how insecure a supposedly well-funded bank may be. SVB collapsed the following day as other depositors followed suit. The nightmare of regulators and bankers, an unstoppable run by depositors, took SVB down in three days.

Slow decline Credit Suisse's demise appears to be a case of bad management and, as the US

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BANKING AND FINANCE

FEATURE BANKS

CREDIT SUISSE

Net income attributable to shareholders of Credit Suisse from 2013 to 2022 Fed admits, supervisory errors, while SVB's was a case of terrible management and political interference. Unlike in the US and UK, FINMA did not release more than 100 red flags to the bank regarding its many faults during its slow decline.

Credit Suisse was in trouble by 2021 due to $10 billion in losses on client funds invested in Greensill Capital, a massively indebted British supply chain finance firm, and $5.5 billion in US hedge fund Archegos Capital Management.

The integrated global finance sector failed both in 2021. Credit Suisse lost the most in these disasters. Former bank CEO Thomas Gottstein said these blunders were "awful." Credit Suisse was unlikely to recoup any capital in Greensill and possibly none in Archegos at the time of writing.

These disasters followed years of risky investment banking by Credit Suisse, which had brought down US banks like Lehman Brothers in 2008. Wealthy clients fled, the share price fell, and the bank's credibility, any institution's most valuable asset, collapsed. Swiss Info, a Swiss Broadcasting Corporation magazine, says that the bank's leadership is to blame.

Events quickly deteriorated. In October 2022, Swiss authorities installed a new management team to fix the investment bank firm. “The bank will build on its outstanding wealth management and Swiss Bank franchises,” it said, returning to its roots.

At the time, FINMA Chairwoman Marlene Amstead called this spring clean "a start in the correct direction towards risk reduction."

The bank had a record-breaking client fund run in the same month. In

the fourth quarter, withdrawals reached over $155 billion, and although Credit Suisse survived again, the writing was on the wall.

The two occurrences highlighted "too big to fail" for systemically important organizations. The financial crisis reforms created a two-part worldwide norm. The bank is either a "going concern" that can be saved or a "gone concern" that will be properly buried. The global standard defines a "going" bank as one that has enough capital to cover current business losses and a "gone" bank as one that can be restructured or liquidated.

The Credit Suisse takeover is the first real-world test of the "gone" part of "too large to fail." No banking authority is ignoring this case study, which has garnered global attention. FINMA's Marlene Amstead believes Switzerland did the right thing in a communal solution combining taxpayer money, the government, regulators, the central bank, and UBS's consent.

However, Credit Suisse may have caused a financial disaster if it failed.

Does that mean the entire "too big to fail" architecture must be overhauled after the debacle?

Regulatory failures In a bank disaster, regulators must take responsibility, and they typically do.

The Bank of England's "regulation-lite" faith in management was abandoned during the Great Financial Crisis.

After SVB was classified as a higher-risk "big and foreign financial organization" with $100 billion–$250 billion in assets, its supervision was transferred to a new team. It's not a G-Sib, but any organization with up to $250 billion in assets is important.

The new team instantly rated

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2013

2018

2014

2019

2015

2020

2016

2021

2017

2022

2326 1875 -2944 -2710 -983

2024 3419 2669 -1650 -7293

Source: Statista

its enterprise-wide governance and controls "deficient-1" due to management concerns. Supervisors met with management in November 2022 to discuss rising risks, particularly in interest rates and liquidity, which pose some of the greatest threats to a bank's integrity. They also worried about rising interest rates affecting SVB and other banks.

The supervisors did not anticipate that it would collapse so quickly. Banks and regulators often clash. While most banks follow the rules and want to follow supervisors' advice, some must be judged. Because of judicial enforcement, regulators usually win with resistant banks.

Most of FINMA's 40 annual enforcement proceedings in Switzerland never go public. FINMA conducts 600– 700 investigations a year, which require inspectors to knock on doors "to clarify suspected infractions." In nine out of 10 situations, banks take corrective action

FEATURE CREDIT SUISSE

when presented with evidence, but Credit Suisse's refusal was a significant issue.

FINMA states that institutions rarely ignore investigations and multiple judgments. Thus, Swiss authorities are privately discussing Credit Suisse's case. No country can accept an institution that bullies the regulator, and Switzerland was exceptionally weak.

Central bankers like the Bank of England, the US Fed, and others can name names.

“As the events around Credit Suisse illustrate, our instruments reach their limits in severe cases. An extension is worth considering,” says Marlene Amstead, who wants additional power.

Historically, politicians have been hesitant to grant FINMA the necessary authority. Unlike France, the UK, and the US, FINMA lacks the ability to impose fines. Following a prolonged discussion, Swiss politicians ultimately voted against the merger of Credit Suisse and UBS.

Functioning properly In a broad internal evaluation, the Fed asks if the regulatory regime is effective.

"Once discovered, can supervisors

discern concerns that constitute a serious danger to a bank’s safety and soundness? Supervisor Michael Barr asked the House of Representatives, do supervisors have the instruments to reduce threats to safety and soundness?”

"The failure of SVB highlights the need to go on with our work to increase the resilience of the banking system," he added.

Thus, supervisors should be tough before it's too late. The US Fed wants to apply Basel III regulations to smaller banks like SVB because they can withstand losses better than the G-Sibs.

The financial sector will be closely monitoring the Fed's proposed new set of stress tests, which cover a wider range of risks and reveal contagion channels.

That implies that present stress-testing technology fails.

Contagion is often irrational. In the current banking system, insured depositors get their money out, but dread spreads without explanation.

Fintech's emergence represents a hidden weakness in the post-2008 global banking system. They're faster, cheaper, and more customer-friendly, weakening the giants' financial dominance. For example, US banks are smaller.

US Fed Governor Michelle Bowman said, "De novo [new] bank development has largely frozen for the past decade during a period when financial services have quickly evolved."

New banks are smaller, more conservative, and, surprisingly, safer.

"As we have seen over time, they often outperform larger banks during periods of stress like the pandemic and during the 2008 financial crisis," Governor Michelle Bowman said.

They also treat small businesses better during rough times. That may drive depositors away from giants. Bank capital may be insufficient in the future.

Regulators admit they weren't before the Great Financial Crisis, and the latest concern is pushing for a reassessment.

Undercapitalized banks have serious repercussions. The 2008 banking crisis caused the longest and deepest recession since the Great Depression. America, the world's wealthiest nation, saw six million foreclosures, 10 million people fall into poverty, and six years of job losses.

Research suggests the impacts persist.

Central banks are worried about the resumption of the run on deposits, but nobody is predicting a worldwide banking collapse. In a post-Credit Suisse debate, Bank of England Governor Andrew Bailey said, “We’re in a very different place, and I genuinely don’t see this as the start of a systemic financial crisis.”

No central banker would disagree, but the tremors created by SVB and Credit Suisse's collapse have revealed systemic flaws that must be fixed.

editor@ifinancemag.com

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BANKING AND FINANCE

ANALYSIS

CRYPTO RISHI SUNAK

The FCA was given the task of regulating crypto firms’ compliance with anti-money laundering and anti-terrorist financing regulations

UK targets American crypto refugees IF CORRESPONDENT

When UK Prime Minister Rishi Sunak served as finance minister, the value of cryptocurrencies reached historic highs. The currency was on a hot streak back in 2021. Following the popularity, Sunak revealed a strategy for turning the nation into 'a global crypto asset technology hub' by formulating It is not hard precise rules that 'give crypto to imagine companies the confidence they need politicians and the crypto to think and invest long-term.' In Sunak's words, cryptocurrency is industry 'the business of tomorrow.' putting Since then, the UK economy and pressure on cryptocurrency have both fallen off the regulator their heights fairly substantially. to relax rules Sunak's departure as chancellor in to encourage July 2022 contributed to the downfall growth and of the outgoing prime minister Boris competitiv- Johnson. The UK has seen its third eness leader and fourth chancellor in less than a year, after a terrible 'fiscal event' that blasted a £60 billion ($76 billion) hole in the national budget in September 2022. Many people in the nation are fighting to stay afloat as costs rise and earnings remain stagnant while economic growth has peaked. Moreover, cryptocurrency has also seen a decline. The collapse of the TerraLuna stablecoin in May 2022 drove the market into a tailspin and resulted in the downfall of cryptocurrency exchange FTX, hedge fund Three

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Arrows Capital, and cryptocurrency lender Celsius.

Currently, bankruptcy cases involving billions of dollars are pending, and regulators in the US and other countries are closely monitoring the industry.

However, Sunak's enthusiasm for cryptocurrency remains the same. On June 11, he celebrated the opening of a London office for venture capital firm Andreesen Horowitz (a16z), whose fund has invested $7.6 billion in crypto, by reiterating that he is determined to make the UK the world’s Web3 centre. For firms like a16z, the UK offers an alternative to the US, where regulators have been accused of being obstinate and failing to clarify the rules for the industry. But apart from vague promises of opening avenues for crypto businesses in the UK, there are few details as to what becoming a crypto hub could mean.

Meanwhile, regulatory experts are warning that the UK government could put consumers at risk by tying future crypto regulation to a desire to boost economic growth and boost a financial sector that has been battered since Brexit.

"It is not hard to imagine politicians and the crypto industry putting pressure on the regulator to relax rules to encourage growth and competitiveness. It is a way for short-term political expediency to override long-term regulatory objectivity, which could lead to a regulatory race to the bottom in which ordinary people’s money is at stake," Mick McAteer, a former board member at

the Financial Conduct Authority (FCA), the UK’s top finance regulator said, the Wired reported.

Recently, the crypto industry has been asking regulators around the world to set clear rules for their regulation. Major firms including Coinbase, Binance and Ripple have said they are ready to comply once questions are clarified about how crypto assets should be classified (and therefore which authorities should regulate them) and clear rules are set for doing so provision of cryptorelated services.

The US, one of the largest and most active markets for crypto, has been slow to decide who should oversee the industry and how. Several bills related to cryptocurrencies were introduced in the 177th Congress, but these were no longer passed by the end of the December 2022 session and therefore have to be formally reintroduced and debated again. Meanwhile, the Securities and Exchange Commission (SEC), the largest US financial regulator, has expressed the view that most cryptocurrencies fall under existing securities laws and has sued major crypto companies for alleged violations. Critics, including one of the SEC's commissioners, have accused the agency of regulating through enforcement, leaving crypto

companies in the dark about their obligations until a lawsuit lands in their inbox.

Brian Quintenz, head of policy at a16z, said, "There is an obvious lack of clarity in the US, which is not conducive to entrepreneurs building new things.

Right now, the administration is taking a hostile approach to the technology, and through the actions of the SEC is looking to ban it."

This has led crypto companies to look for places where they can find regulatory clarity but also the freedom to push the boundaries of the underlying technology to create new services and financial products. Some countries, including Japan and the United Arab Emirates, have adopted crypto, but the size of these markets is relatively small and the scope of the rules is limited. In April, the European Union finalized its Markets in Crypto Assets (MiCA) scheme, the world's first scheme to bring almost all cryptorelated activities under its scope, and seemed to deliver exactly what the industry was asking for.

Although MiCA was universally applauded, the regulations require crypto firms to establish themselves as legal entities with a clearly defined governance structure and business basis, making it clear who bears legal liability in the event of a breach of the rules. This, some in the industry say, limits the ability of crypto

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ANALYSIS

CRYPTO RISHI SUNAK

technologies to form the basis of models where no single person or organization is accountable. When you anchor centralization in a regulatory model, you eliminate decentralization — the core benefit of this technology, Quintenz stated.

"If the US approach isn't prescriptive enough and the EUs are too prescriptive, the UK has a chance, says Mark Foster, head of EU policy at the Crypto Council for Innovation, a body that represents the interests of crypto firms, to use its 'second-mover advantage' to create a Goldilocks economy for crypto, which attracted a16z. This ecosystem needs a strong and clear regulatory framework that respects innovation but takes a strong stance on consumer protection. That is what we expect in the UK," he added.

Currently, the FCA has limited jurisdiction over cryptocurrencies in the UK. In 2020, the agency was given the task of regulating crypto firms’ compliance with anti-money laundering and anti-terrorist financing regulations. In January 2022, it took charge of how crypto can be marketed, with new rules set to be implemented in October.

The passing of the Financial Services and Markets Act in the coming months will mean that stablecoin tokens that are tied to the value of a benchmark such as fiat currency or a commodity will also come under the FCA's purview.

The phased approach of adding accountability for crypto layer by layer means a full, detailed ruleset like MiCA in the UK is still a long way off.

The Sunak government's desire to attract cryptocurrencies could

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spur attempts to build a more comprehensive system for the industry. But it could also create competing incentives. Critics of the government's approach fear that speeding up regulation and giving the crypto industry too much room to manoeuvre could lead to decisions that put consumers at risk, or end up undermining long-standing attempts to prevent financial crimes such as money laundering and terrorism Funding.

Martin Walker, director for banking and finance at the Centre for Evidence Based Management, a nonprofit that counsels businesses on management strategy, claims that lobbyists are "pouring into the ears" of politicians the idea that bespoke regulations are necessary for cryptocurrency if the UK is to keep up with financial innovation.

According to Walker, who testified as part of a 2018 government crypto probe, an "anxiety-driven flexibility" towards crypto runs the danger of a recurrence of prior boom-and-bust cycles in finance.

It seems as though no one has remembered the lessons from the dotcom bubble, which contained significant fraud, and the 2007 financial catastrophe, which was brought on by subpar financial innovation, he claims.

According to Stephen Diehl, a crypto-sceptic analyst, the UK city already has an unsavoury reputation as a location for money laundering and other financial criminality. It is mockingly referred to as 'Londongrad' or 'Moscow-onThames' for its historical propensity to welcome money from Russia and other pariah governments.

The inclusion of cryptocurrency will further strengthen the arguments made against it.

"I don't think the predominant view is that we want to become a dark money laundromat," he asserts.

Some members of Sunak's own party also disagree with his outlook on cryptocurrency. The Treasury Select Committee, a bipartisan group of MPs, released a report in May claiming that cryptocurrencies have "no useful social purpose" and expose users to fraud and con artists.

It further argued that cryptocurrency trading needs to be governed as a type of gambling rather than a financial activity to avoid a 'halo effect' that gives the idea of security.

The FCA has historically adopted a cautious approach in order to avoid glamorizing crypto.

"Given the volume of harm, our position has always been that it is a high-risk investment. We have been clear that people should be prepared to lose their money," Matthew Long, director of payments and digital assets at the FCA said.

There is anxiety the FCA may succumb to political pressure to soften its approach as it crafts a rulebook because the UK's capacity to entice crypto firms to its shores depends on the tone of its eventual regulatory framework.

According to McAteer, Sunak's strategy adds an additional goal that could be very dangerous to economic growth. He concluded by saying that fear will continue to be vague as long as there are few clear rules in the UK and ambiguous political promises. editor@ifinancemag.com

BANKING AND FINANCE

THOUGHT LEADERSHIP

BANKING GEN Z

Banks have to evolve as partners in the life of their millennial customers to add value to their lives much beyond banking

AZMAT HABIBULLA CHIEF MARKETING OFFICER, SOUTH INDIAN BANK

Banking in the Gen Z world Somewhere in the globe, a working professional in his thirties steps into a Walmart store, searching for breakfast cereals. He whips out his smartphone and logs into a Walmart app. From there, he logs in to the store that he is standing in and locates the stock of the item that he is searching for. He smiles to himself, picks up his purchase and during checkout, leaves a five-star review for the store.

Closer home, we have a traditional watch company – Titan, launching a smartwatch collection to appeal to a younger demographic.

Again, many established fashion and lifestyle labels, such as Nike and Puma have launched sub-brands and mini-collections to enhance their trendiness quotient. These are a few examples of how brands are revamping their offerings and operations to attract millennials and Gen Z. Such is the economic power of the cohort that all consumer-facing brands, including the ones operating in the financial space, are now motivated to create strategies to attract them.

Why are the Millennials & Gen Z important?

Millennials, typically identified as people born between 1981 and 1996, along with Gen Z, the generation born after them, are perhaps the most marquee group of customers for any business today. In 2019, a Bloomberg survey revealed that Gen Z constituted 32% of the world’s 7.7 billion

population. If you add millennials, the group’s proportion would swell close to 50%.

The sheer numbers give power to this dynamic cohort across sectors, including the financial space. A study reveals that millennials were largely driving the demand for new loans globally. It also predicted the situation to remain so for the next many years.

Gen Z will soon enter that space and may set the tone for the evolution of the next phase.

A unique consumer group As a consumer segment, the millennials and Gen Z are different as compared to their earlier generations. Millennials are digital and smartphone-savvy. They desire things fast and conveniently. Also, they are a conscious group that cares a lot about environmental and social issues.

Naturally, they gravitate towards brands with a high ESG (environment, social and governance) quotient. On the whole, millennials desire experiences rather than products. Since they are inspired to live in the moment, they see purchase and expenditure as a means of enjoying experiences as opposed to conquest for ownership and acquisitions.

What does it mean for banking & financial brands?

Banks, globally, are often iconic institutions

International Finance | September - October 2023 | 105

with a robust reputation built on a rich history of service to the public and community. They have left an indelible imprint on communities by helping in their development and progress.

However, to endear themselves to the millennials, the financial entities have to bank on more than an equation of trust that they have created with their customers. They now have to reinvent themselves by offering convenience, a positive customer experience, simplicity and speedy service delivery. Consequently, a great UI/UX (user interface/user experience) on all digital platforms is important to align both the expectations of this cohort. The heritage of trust and integrity can be complemented with a refreshing look, and bold brand aesthetics to deliver an attractive proposition. Moreover, banks have to evolve as partners in the life of their millennial customers to add value to their lives much beyond banking.

Since millennials have a limited attention span owing to continuous exposure to content and information, it’s imperative that brands should communicate through the right digital mediums.

Further, by employing suitable influencers, they can create engaging communication to inspire an emotional connect and receive greater engagement.

Digital conversations need to be in sync with the latest

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trends and be attuned to the current reality. Wherever possible, the campaigns have to stroke conversations around the environment, community development, financial literacy, etc.

The next few years may witness newer innovations to balance the expectations of digital convenience with the need to foster authentic and lasting relationships.

Rather than a transactional approach, the banking and financial industry will have to adopt a consultative outlook with a heavy accent on technology to engage millennials and Gen Z.

Azmat Habibulla is the Chief Marketing Officer at South Indian Bank. She is a marketing leader and digital enthusiast who has led business transformation at some of the leading brands in the country in the FMCG & BFSI sectors. Azmat Habibulla has a vast experience of more than 25 years, she has led impactful customer strategies, based on strong consumer insights. Her expertise spans a wide spectrum of domains such as Digital marketing & business generation, Marketing Communication & Branding, Experiential and Knowledge events, Strategic Partnerships, Community Building and Thought Leadership initiatives. editor@ifinancemag.com

International Finance | September - October 2023 | 107

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