As companies continue to migrate to all things digital, this wave of transformation will inevitably wash over every area of work, digitizing everything from finance functions and tax compliance to data analytics and beyond. Approximately 73% of executives predict significant disruption within their industries in the next three years, according to Mercer's Global Talent Trends 2019 report. This number, up from 26% in 2018, is greatly due to digital transformation. More than half of executives also expect AI and automation to replace one in five of their organization's current jobs. While this might worry some organizations, these two earthquake changes stand to create 58 million net-new jobs by 2022. Business leaders responding to Mercer's annual survey have mixed opinions on the economic growth these technological advances will have across the globe. Digitization may promise increased opportunity, but it also bodes increased competition from a host of new — and possibly more nimble — players. Assessing the Economic Outlook Across the Globe The turbulence within the global economic landscape is compounded by uncertainty over how trade tensions between the U.S. and China are resolved, according to the Mercer report Economic and Market Outlook 2019 and Beyond. The U.S. economy may slow somewhat due to higher interest rates, while the Chinese economy will remain dependent on how the trade tensions are resolved. Other emerging market economies should continue to grow at roughly the same pace, with the possibility of stronger growth when trade tensions ease. Mercer's Themes and Opportunities 2019 research report notes "mounting evidence of over extension of credit" is creating further white-water turbulence, with the uncertainty over how the central banks' retreat from market involvement after massive liquidity infusions will impact economies. The report also notes that there is a distinct possibility "the pace of globalization could slow, pause or even go into reverse" due to political influence, particularly on trade. In addition, there are increasing expectations from governments, regulators and beneficiaries to have asset owners and investment managers incorporate sustainability as a standard action. Digitally Transforming Tax Compliance Companies navigating all these shifting sands will increasingly look to digitization to help manage and respond to both opportunities and obligations — including tax compliance across geographies. This is also a moving target, particularly in Asia, as some countries are now implementing digital technologies to improve their tax collection efforts. In 2015, the average tax-to-GDP ratio for 28 economies in the region was only 17.5%, which is just over half the average tax ratio of 34% among OECD economies. There has been a great deal of progress with the use of electronic filing of tax returns for major taxes in India, Kazakhstan, Malaysia, Mongolia, Nepal, Singapore and China. Moreover, mandatory electronic payments are now required by revenue bodies in the People's Republic of China, Indonesia, Mongolia and Vietnam.1 Digitization and increased tax regulation are also intended to vastly improve collection efforts, though much more push is needed. Governments are making great strides within their tax administration efforts with the aid of digitization — including sending eAssessments to businesses for taxes owed, based on electronic auditing systems.2 If the systems find discrepancies within sellers' monthly tax reports, it automatically issues an eAssessment that includes interest and penalties. Andy Hovancik, President and CEO at Sovos, puts it plainly: "Bottom line — tax enforcement is now embedded in the most important business processes, changing the world of tax and disrupting decades old business processes. As a result, tax is driving digital transformation in finance and accounting departments. Now more than ever, businesses need a new approach to tax automation to ensure compliance."2 Finance executives agree, including Michael Bernard, chief tax officer for transaction tax at Vertex Inc. He states, "Governments worldwide are turning to new forms of compliance, like e-invoicing regulations, which require IT departments to embed workflows in core processes, and real-time VAT compliance checks. In 2019, finance organizations will begin to factor tax considerations into their digital transformation strategies. An effective road map will include actions for using data to link business processes and tax compliance obligations."3 Guiding Business Strategy With Compliance Digitization alone won't enable companies to better comply with new tax regulations — making compliance a central business strategy will. This includes implementing training sessions across the enterprise to help employees develop a state of mindfulness when it comes to compliance. But in this era of increased accountability, Leila Szwarc, global head of compliance and strategic regulatory services at TMFGroup, states that companies should re-imagine the notion of compliance as a "business enabler" that can distinguish it from competitors.4 According to Szwarc, "Compliance should be seen as a business enabler rather than as a drain on development, but this can only happen if businesses work in an integrated way to bring creative solutions to the related organizational challenges." She continues, "As APAC firms face up to a new regulatory era, compliance teams have a key role to play in both protecting their firms' interests and helping to drive long-term competitive advantage." With an uncertain market ahead and vast changes on the horizon, it's more important than ever to get ahead of the curve and think about how your business can not only survive the wave of digital transformation coming but also thrive with it. Start planning your business strategy, placing compliance and digitization at the heart, with these considerations in mind today, and you'll be better off tomorrow. Sources: 1.Suzuki, Yasushi; Highfield, Richard. "How digital technology can raise tax revenue in Asia-Pacific." Asian Development Blog, 13 Sept. 2018, https://blogs.adb.org/blog/how-digital-technology-can-raise-tax-revenue-asia-pacific./ 2.Hovancik, Andy. "How Modern Taxation is Driving Digital Transformation in Finance." Payments Journal, 16, Jul. 2018, https://www.paymentsjournal.com/how-modern-taxation-is-driving-digital-transformation-in-finance/. 3. Schliebs, Henner. "2019 CFO Priorities: Experts Predict Top Trends." Digitalist Magazine, 18 Dec. 2018, https://www.digitalistmag.com/finance/2018/12/18/2019-cfo-priorities-experts-predict-top-trends-06195293. 4.Szwarc, Leila. "Regulatory compliance – The new business enabler." Risk.net, 18 Mar. 2019, https://www.risk.net/regulation/6485861/regulatory-compliance-the-new-business-enabler.
Africa's unique position as a continent largely comprised of young people who are embracing digital transformation provides banks around the world with a glimpse into the future. This new generation favours agility over bureaucracy and online automation over conventional interactions plagued by human inefficiencies, geographical constraints and a lack of adaptability. In fact, 40% of African bank customers report they prefer to use digital channels for their banking needs.1 This dramatic shift in consumer preference is propelling Africa to the forefront of change and making the African banking sector a hotbed for innovation. In particular, South Africa, Kenya, Nigeria and Cote D'Ivoire are leading the way as they navigate the unprecedented impact and consequences that the digitization of banking and rise of fintech are having on customers, revenue and the future of bank employees. The Rise of Mobile Usage and Digital Banking Mobile usage and digital banking go hand in hand. African banking users prefer digital banking, because they've already integrated digital channels into their lifestyles. In 2017, more than 90% of Sub-Saharan Africa was covered by 2G networks, and more advanced mobile broadband networks are being implemented rapidly throughout these regions, where a third of mobile users — 250 million people — have a smartphone.2 This familiarity with mobile technology and trust for digital platforms make adopting digital banking channels easier. Creating Unprecedented Access to Wealth Faster, cheaper devices and greater access to robust networks are empowering poor countries across Africa to leapfrog into a new era of connectivity, information and online resources. This profound development not only overshadows the impact of landline telephony but also creates a new reality where, in Sub-Saharan Africa, mobile phones are more common than access to electricity. Mobile-money systems that allow people to send cash directly from their phones has elevated the economic fates of populations — lifting, for example, 2% of Kenyan households out of poverty between 2008 and 2014.3 Nigeria (where 60% of the population is under 25 years old) combined with China, India, Pakistan and Indonesia will make up 50% of the 1.6 billion mobile internet users projected to be online by 2025.4 The continued rise of connected and tech-savvy generations of bank users is set to disrupt the entire industry and its workforces. The Challenges of Modernizing Banking Workforces To understand the impact digital transformation and mobile banking are having on banks and their employees, look no further than the recent developments at Standard Bank: Even as one of Africa's most powerful and influential banks, it announced a plan to close up to 91 branches throughout the country, putting more than 1,000 jobs in jeopardy.5 The digitization of transactions and processes that were once performed by human beings is creating profound challenges for banks and bank employees who make a living from increasingly antiquated skills sets. For the global banking industry, Africa represents an inevitable and very near future, and employees are understandably concerned about the viability of their banking careers. As major banks are searching for innovative ways to combat increasing competition and drive growth within their portfolios amid complicated trading conditions, a new generation of tech-oriented banks and fintech organizations are emerging, including TymeBank and Bank Zero. Finding Opportunity in Times of Change With change, there is always opportunity. Mercer's Global Talent Trends 2019 report details that innovation can often present legacy workforces with significant obstacles, but it can also provide unprecedented opportunities for career development and professional growth. Mercer can provide CEOs, CFOs and banking executives with the knowledge and resources they need to implement digitization throughout the finance industry, using lessons from Africa's digital banking boom. Africa's intersection of technology and tech-savvy customers has accelerated the rate at which the digital banking industry is growing, and the potential of this growth can elevate the global marketplace. As tech-savvy consumers across the world demand that banks migrate investments, resources and strategies into fintech and mobile-friendly platforms, Mercer's trusted expertise offers transparency and clear strategies that empower banks — and their workforces — to adapt to a new age of digital transformation. Sources: 1Agabi, Chris. "40% of African bank customers prefer digital channels transactions — Report." Mobile Money Africa, 23 Apr. 2019, https://mobilemoneyafrica.com/blog/40-of-african-bank-customers-prefer-digital-channels-transactions-report. 2Radcliffe, Damien. "Mobile in Sub-Saharan Africa: Can world's fastest-growing mobile region keep it up?" ZDNet, 16 Oct. 2018, https://www.zdnet.com/article/mobile-in-sub-saharan-africa-can-worlds-fastest-growing-mobile-region-keep-it-up/. 3"In much of sub-Saharan Africa, mobile phones are more common than access to electricity." The Economist, 8 Nov. 2017, https://www.economist.com/graphic-detail/2017/11/08/in-much-of-sub-saharan-africa-mobile-phones-are-more-common-than-access-to-electricity. 4Kazeem, Yomi. "Nigeria's young population will help drive global mobile internet user growth over the next decade." Quartz Africa, 18 Sept. 2018, https://qz.com/africa/1393908/gsma-nigeria-to-add-50-million-mobile-internet-users-by-2025/. 5Khumalo, Kabelo. "Customer behaviour triggered Standard Bank move to close 91 branches." Business Report, 15 Mar. 2019, https://www.iol.co.za/business-report/companies/customer-behaviour-triggered-standard-bank-move-to-close-91-branches-19896105.