Invest

Digital Transformation & Trust in the Investment Industry

7 March, 2019
  • Beverley Sharp

    Strategy Leader - Investment Research, Mercer United Kingdom

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“Investment firms should embrace the emergence of AI and smart technologies to explore new terrain and chart competitive landscapes.”

The impact of technology on today’s world has many confused and frustrated. They struggle to determine what information is real or fake, helpful or harmful. The investment industry is not immune to the digital transformation that is impacting how people view themselves, their money and their futures. CIOs need to recognize these changes and determine how to leverage the evolution of technology as it reverberates throughout the industry, and the world.

Hype vs. Reality: The Truth Is In The Middle

Much of the hype around Artificial Intelligence (AI) and digital transformation has centered on how technology and machines will replace employees in every industry, including the investment industry. AI is revolutionizing the process of interpreting valuations through the instant and comprehensive analysis of financial data and transactions, and stakeholder sentiments expressed across the Internet. AI offers new insights into unstructured data, financial behavior models and market volatility. However, the human element is still critical. As CIOs know, it is impossible to predict the future with 100% accuracy, but a mindful examination of data and research helps provide a sense of control of the unknown. The value of any security or asset is based partly on human perception. An investment team still needs to assess all of the information and data to make strategic, and very human, decisions on how to move forward.

Advances in FinTech are benefitting CIOs and their teams in meaningful ways. For example, advanced data and analytical capabilities give them more detailed and enhanced risk dashboards, placing actionable information at their fingertips. FinTech’s insightful diagnostics also help them better understand how strategies are run and how to clearly delineate between luck and skill. But it’s still very much a qualitative game.

FinTech is also significantly impacting the role of the consumer, as apps and other technology platforms offer them more control over their financial objectives and strategies. This is a positive development because when consumers pay more attention to their investment goals, everyone benefits. Currently, the speculation over advanced technologies dominating the industry has not come to fruition—and, like many emotionally-charged debates, the truth is usually somewhere in the middle.

Robo-advisors Streamline Relationships

Robo-systems and automation are helping firms streamline once bloated processes so client information is easier to access and contextualize. Many financial advisors have incorporated robo-advice into their services, providing clients with varying tiers of human interaction. From no-touch to high-touch, these different levels of interaction offer clients a menu of options to accommodate their desire to work with, or without, a live financial advisor. Robo-advisors and other technological advances will disrupt aspects of the industry, but also help financial advisors be more productive and valuable—for example, by leveraging technology that focuses on how advice is delivered to clients rather than how it is formulated. Yet, at the end of the day, many clients are still human beings who wish to speak with a human advisor before making a decision that will impact their and their family’s financial futures.

Blockchain and Rebuilding Trust

Mercer’s Healthy, Wealthy, and Work-wise report —conducted across 12 countries— examined who people trusted the most. At the high end were family, friends and employers. At the low end were financial intermediaries, banks and insurance companies. This is an issue for investment firms and the industry as a whole. After the global economic meltdown and the Great Recession, people simply stopped trusting the financial community. Many who have been burned by the industry (or know someone who has), tend to leave their money in minimal interest-bearing bank accounts, stuffed under their mattresses or buried in places far from the possible benefits of high-quality investing advice.

Cue blockchain. Blockchain technology is a game changer for the investment community and its low trust metrics. Blockchain provides investors and clients with an immutable and secure digital record of financial transactions. Investors are attracted to the prioritization of transparency after an era of intentionally confusing finance structures—such as tranches and the bundling of subprime mortgages—left the world in a tailspin. For an industry that has struggled to build trust with clients and the public, blockchain offers a new age of accountability and means of building profitable relationships.

As in other industries, clients and consumers are going online and taking control of the narrative. Businesses are being publicly held accountable for every decision and interaction. This increasing level of transparency will continue to be a compelling motivator for investment professionals and firms to provide the best services and results possible. This greater level of transparency, in truth, may be how the financial industry rebuilds lost trust with the public. 

Individuals Taking Control

Mercer—alongside other money managers and investment advisors—believes that governments, plan sponsors, financial intermediaries, and the industry in general, have a responsibility to help individuals recognize “What good looks like” regarding financial advice and investment products. So, as a service to the investment industry and to promote trust, in multiple markets including Singapore and Hong Kong, Mercer launched Mercer FundWatch.com to accomplish two goals:

(1)   Provide a rating system for funds that are available to individual investors. This enables investors and their financial advisors to compare funds according to their ratings. These ratings are based on deep-dive, qualitative investment due diligence.

(2)   Give financial intermediaries that use the site—as an input to their recommendation process for clients—the opportunity to be featured on Mercer FundWatch.com. If an individual investor or financial advisor is looking for a high-quality entity to transact with, they can easily find and access a list of intermediaries using this credible due diligence in their process.   

Digital transformation is here and accelerating at an exponential rate throughout the world. The possibilities are limitless. Investment firms should embrace the emergence of AI and smart technologies to explore new terrain and chart competitive landscapes. The evolution of technology is forever changing the industry, client expectations and how human beings relate to their money, themselves and their investments.

 

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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.

Editorial Staff | 19 Aug 2019

Learn about the latest employee financial wellness trends emerging in 2019. Employees and employers alike can agree on at least one value: financial security. Finances can affect every function of a company and, for the individual, their personal life. When employees face a difficult financial situation, it can impede on job satisfaction, attitude and performance. Financially stressed workers miss more work and incur higher healthcare costs than their peers. These factors inevitably take a toll on a company’s employee engagement levelsand eventually the bottom line—especially if financial hardship impacts multiple employees. At the same time, HR professionals know that people don’t just work for the paycheck and that increasing salary alone won’t necessarily boost job satisfaction. Workers also strive for positive company culture, flexible scheduling, recognition, L&D opportunities, retirement plans, and other benefits. Naturally, apart from the salary figure, employees want to work for a company that values them and offers a bright future. As global unemployment reaches its lowest point in 40 years and we enter an employment economy, employers are facing an increasingly competitive hiring landscape where the benefits package is an increasingly important tool for attracting and retaining top talent. One benefit that continues to gain traction is a structured financial wellness program. With financial wellness solutions, employees receive financial education through courses on goal planning, basic financial literacy, budgeting, debt management and alleviating financial stress. The aim of a financial wellness program is to guide employees towards actions that help them reach goals for every stage of their financial lives, such as saving for a house, a car, college, or retirement. Mercer’s Healthy Wealthy and Work-wise report found employees (as well as employers) report higher satisfaction with their benefit plans when financial wellness is offered. Furthermore, companies report up to a 3-to-1 return on their financial wellness investment. Employees are worried about their finances   For many employees, money is the number one source of stress. Mercer’s Inside Employees Minds report asked 3,000 workers questions about the extent to which financial stress affected their work, finding that 62% of those who are financially challenged identify being able to pay monthly expenses as their biggest financial concern—even among people with an annual household income of $100,000 or more. Financial stress varies among demographics. Young adults are burdened with high levels of debt, especially with educated-related expenses for university. Families can struggle to meet financial goals due to cash flow issues or unexpected expenses. Even older adults often carry financial stress from caring for aging parents or children who have moved back home. Single parents have their own set of financial stressors. Therefore, when designing a financial wellness program, it is important to consider the entire scope of your workforce and the various financial lives they may lead. Financial wellness trends to have on your radar   For all the struggles brought on by financial hardship, there is hope that financial wellness programs can remedy the situation to the benefit of both employees and employers. A Gallup poll found financial wellness is closely linked with positive behavioral changes and stronger relationships, regardless of income levels. By implementing financial wellness programs, employers also enjoy the benefit of having a happier, healthier and more productive workforce. A joint study from Morgan Stanley and the Financial Health Network found that 75% of employees said a financial wellness program is an important benefit and 60% said they would be more inclined to stay at a company that offered financial wellness solutions. While employers are recognizing the importance of combating financial stress among employees, it appears they may need to improve these efforts to help employees. Cigna’s global well-being survey of employees in Asia Pacific, Europe, Africa, the Middle East, and North America found that 87% of employees are stressed at work—with personal finances being the top stressor—and 38% claim no stress management support is provided at all. While 46% of employees report they receive support from their employer, only 28% feel this support is adequate. It’s time to raise the bar on financial wellness benefits. Here are some emerging trends and strategies companies are considering so they can maximize employee financial wellness solutions and stand out in the marketplace. 1.  Users are demanding technology-driven solutions for personalization. For financial planning solutions, users want a modern, simple interface that offers a comprehensive view of their financial situation and outlines a guided, personalized path to reaching their financial goals and staying accountable. According to a recent Forrester study, customers of wealth management firms are demanding more functionality and digitalization with financial planning solutions. This demand is making features like account aggregation, personalized content delivery and accountability triggers standard elements for a successful financial wellness program. “Help me help myself” tools are being personalized for the user with finance snapshots, budget planners and loan repayment calculators. Notably, a study from Morgan Stanley and the Financial Health Network found that 42% of employees said they feel inadequately informed about the benefits and programs their employer offers. Of the employees who do not use all of the benefits, many said they would be more apt to use them if they were explained more clearly and made easier to access. According to Thompsons Online Benefits Watch, 70% of employees want mobile access to their benefits packages but only 51% of employers are offering it. These gaps mean there is an opportunity for companies to elevate their financial wellness programs and make them more usable and appealing to employees. Employers should consider informing employees about benefits through live webinars, social media or SMS alerts. The program should also be fully accessible by mobile and offer online tools that personalize the user experience. 2.  Data analytics & digital technology are personalizing financial wellness programs. Data analytics is shaping financial wellness programs to provide the level of personalization employees have come to expect in the digital age. These data analytics can help differentiate between types and categories of employees, allowing programs to be personalized for live events and stages. Just as online stores use aggregated consumer preference and demographic data to make recommendations and suggestions, financial wellness platforms are beginning to employ data analytics and algorithms to determine whether an employee is making progress or might need some extra assistance to stay on track. Some programs employ data analytics to frame an employees’ savings and spending habits and compare them to their peers. These programs can also analyze behaviors and provide scores to help employees see if they are improving on their savings or debt managements. Some programs can also offer employers the ability to create targeted marketing campaigns that focus on personal milestones for employees, such as buying a new car or getting married. These milestones can be used to inspire specific savings behaviors and spending habits, which might mean recommending homeowners insurance or opening an education savings account. Data analytics can also be used to build each employee a profile, which can then be supported by customized self-service tools to help employees get answers to specific questions and better plan for possible life changes. For example, with their profile input and all their financial information accounted for, employees can determine just how much additional life insurance they might need to purchase if they have a child. Without data analytics, the manual process of calculating this figure would be tedious, time consuming and require a potentially costly meeting with a financial advisor. On the employer side, data can be collected to determine how well the financial wellness program is performing. This data can help drive the program to offer new components and functions in ways that better meet the needs of employees. 3.  Employees want actual help not hype. As financial wellness programs continue to shape the benefits ecosystem, more employees are expecting that their employers will care about their financial security beyond just signing their paycheck. According to Thompsons Online Benefits Watch, 79% of employees trust their employers to deliver sound advice on planning, saving and investing. Employers are expected to deliver real, actionable ways to help employees improve upon their financial situation. A study from Merrill Lynch found a sharp disconnect in what employees want to have and what employers are offering in financial wellness programs. For example, employees generally want to work on meeting end goals, and they’d prefer to focus on one goal at a time. But employers are taking a heavy approach, emphasizing a comprehensive approach to controlling overall finances. While the comprehensive strategy of employers is certainly well-intentioned, it has a tendency to overwhelm users. Financial planning can be intimidating, especially for those in stressful situations. To counter this, companies in the wellness space are designing programs from the employee perspective to offer a holistic approach. Holistic programs, which integrate financial health with mental and physical health, can help employees open their financial “junk drawer” and make connections between the various elements of financial health and life—from saving for a wedding, buying a home, managing loan debt, etc. Well-designed programs will demystify the topic of financial wellness rather than scare employees away with an onslaught of complex information and suggestions for services and financial products they don’t understand. 4.  Building the business case for financial wellness programs: engagement, productivity & success. Whether management wants to admit it or not, employees are bringing financial stress to work and it’s impacting the company’s bottom line. In a survey from the Society for Human Resource Management, 83% of respondents reported that personal financial challenges had at least some effect on their overall performance at work in the past year. This disengagement means big losses for businesses. Workforce stress is potentially costing companies more than $5 million a year.  Because of the business losses incurred, supporting employees’ financial wellness is becoming a major priority for organizations and the trend is catching on. Research from GuideSpark found that financial wellness is the third most important type of wellness program to employees, at 82%, behind stress management (86%) and physical fitness (85%). The results of employee wellness programs are promising. According to Employee Benefit News, participants in financial wellness programs demonstrate progress in their finances. The percentage of participants feeling “highly stressed” about personal finances fell from 52.4% to 19.2% after the completion of a financial wellness program. Similarly, 56% of participants said they believe they’re in a better position to manage their monthly cash flow after the completion of a financial wellness program. 5.  An increased focus on student loan repayment & affordable education. In the HR industry, employee development has become an impetus for employee engagement. But the truth is that for many employees, their past continues to weigh them down. Higher education costs are contributing to unprecedented student loan debt challenges in both developed and developing countries. As university tuition costs continue to rise, student loan debts have reached concerning record levels for graduates. The World Bank reports that developing countries face greater higher-education challenges than developed countries. Enormous debt and high tuition costs are setting back many employees before they have the chance to get ahead, which is widening the talent gap and thinning talent pools for companies. Amid rising tuition and mounting debt, HR professionals owe it to companies and employees to offer solutions to the challenges they both face. This can be done through loan repayment education that helps employees strategize to pay off loans as quickly as possible. Taking it a step further, some HR departments may be able to convince companies to offer loan repayment and tuition reimbursement programs. When employees are worried about finances, they may have to switch jobs and find an employer willing to give them the tools and monetary compensation they need. Offering loan repayment advice or support offers employees a solution to a personal problem they face. They will likely become more invested in the company, which can translate to boosted morale and productivity across the company’s workforce. Tuition reimbursement and the encouragement of further education can also go a long way in helping companies thrive in the digital transformation and foster a culture of lifelong learning. Amid digitalization, the workforce is shifting from fixed job titles and detailed job descriptions to ever-revolving roles. At the current pace of technology growth, chances are that many of today’s prized technical skills will be obsolete within a few short years. As the skill gap grows, companies won’t have the luxury of easily recruiting new hires. They will instead need to focus on upskilling and recruiting lifelong learners who have a passion for integrating new technology into business operations. Offering tuition reimbursement or education planning advice will help attract and develop a talented workforce for the digital age. People around the world are experiencing record amounts of stress, according to Gallup’s Annual Global Emotions Report, and finances are certainly among the greatest stressors. As the stress escalates, more companies will find their employees’ personal bottom lines eroding the company’s bottom line. Without intervention, employees’ financial stress will rise, and companies will suffer drops in productivity, increased absenteeism, and low engagement levels. When implemented properly, financial wellness solutions can be a rising tide that lifts all boats—benefiting both employees and the company. The HR department is in a unique position to make this connection, sending the message that employees and companies are in this together.

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.

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Editorial Staff | 23 Aug 2019

Blockchain has potential to make a huge impact. Learn about fascinating blockchain trends that are emerging in 2019 and beyond. Blockchain technology was invented to safeguard the cryptocurrency infrastructure (e.g. Bitcoin), enabling secure financial transactions without the need for a bank or a middleman. But blockchain’s ledger technology is now expanding beyond digital currency and financial services, offering great potential to improve upon many areas of our lives.  As blockchain matures and becomes more accessible, companies across various industries are finding compelling use cases for blockchain to make businesses processes more efficient. For example, banks can now reduce infrastructure cost by 30% throughblockchain solutions. This is achieved by encrypting millions of storage points, none of which contain a full name or an account number.  While blockchain is currently only being used by 0.5% of the global population, emerging trends are making it more scalable. It is anticipated that 80% of the population will be using blockchain technology in some capacity within 10 years.  Because the HR department is charged with managing so much sensitive data, blockchain technology will be integrated directly into the HR function through a multitude of possible use cases—adding transparency and trust to an organization’s operations. The evolution of blockchain will also mean companies need a workforce with new skills, so HR will be kept busy with recruitment and talent management.  The following blockchain trends are lifting ledger technology from the obscurity of cryptocurrency and making blockchain part of the mainstream conversation.   1.  More potential real-world uses on the horizon will raise the visibility of blockchain.  While cryptocurrency and financial institutions are the pioneers of blockchain, it is important to note that tokenization and securing payments are just precursors to many potential real-world uses for ledger technology.  Every transaction on the blockchain is on public record and its enhanced security makes it a virtually incorruptible platform. Because no central party will ever be in control of all of the record keeping, blockchain can be used to mitigate financial, political and institutional corruption in corporations and governments, alike.  Blockchain may also be able to improve the political sphere in terms of voting systems. Because records cannot be altered in any way, blockchain is ideal for voter registration, identification and vote tallying. Election corruption and voter fraud would be eliminated, ensuring a more accurate, fair electoral process.   The general public will also be drawn to blockchain’s ability to eliminate transactions fees. Owing to decentralization, sending and receiving money can be expedited and enhanced. This has implications for automated legal procedures, customs payments, ownership transfers and business transactions—allowing widespread disintermediation across industries and economies.  Another mainstream use could be in public records of ownership, citizenship and identity. Even in the thriving digital era, these records are stored in centralized databases for security. However, this exposes them to tampering because of the intermediaries it engages. Blockchain opens up the possibility of a decentralized, public, fixed and consensus-driven ledger of records that could nullify the need for intermediaries. A groundbreaking example of this is Estonia’s E-Citizenship Program, which stores citizens’ information on a blockchain.  The application of blockchain can also be extended to include organizational information for the HR department, where one day a company can maintain one identity stored in a master Blockchain. This could be safely accessed by all stakeholders including vendors, employees, customers and tax authorities. 2.  Blockchain as a Service (BaaS) will facilitate business adoption. A Blockchain-as-a-Service (BAAS) platform is a full-service cloud-based solution that connects developers, entrepreneurs and enterprises on one platform. On the BaaS, stakeholders can develop, test and deploy blockchain applications and smart contracts. Moreover, the BaaS platform provides all the necessary infrastructure and operational support, ensuring that the applications run efficiently.  BaaS providers include major companies like Microsoft, IBM, SAP, Amazon, Oracle, and Hewlett Packard. These providers are nurturing blockchain adoption among business because the platforms enable companies to engage blockchain projects without having to spend anywhere near as much money as they would developing customized blockchain solutions independently.  As more businesses look for convenient and cost-effective ways to implement blockchain technology, BaaS collections will most likely continue to expand. Keeping an eye on the emerging BaaS space can help an HR department choose the right provider for (future) company needs.  3.  Blockchain will be less associated with cryptocurrency & possibly rebranded.  Blockchain was born and bred to protect Bitcoin’s infrastructure— but now ledger technology is leaving the cryptocurrency nest to explore more business endeavors.  Blockchain’s association with the volatile cryptocurrency market has potentially diluted its reputation. There are still negative connotations with cryptocurrencies, including wild price swings and the perceived link to people buying illegal items from the dark web.  But mainstream industries, such as manufacturing and retail, are proving the power of blockchain to improve supply chain management and ownership tracking. To break out of the cryptocurrency pigeonhole, it is expected that the blockchain industry will make a concerted effort to establish an identity that’s separate from cryptocurrency—and better educate the business sphere on the advantages it offers, beyond financial transactions.  To take the rebrand a step further, research from Forrester suggests that it might be beneficial for the blockchain industry to drop the name blockchain and replace it with distributed ledger technology (DLT).  4.  Blockchain enabled Internet of Things (IoT) systems. Gartner predicts that the number of installed Internet of Thing (IoT) will exceed 20 billion by 2020. As HR departments integrate more IoT into companies, there is growing concern because these connected devices often open the door for hackers. The same vigilance applied to computers is sometimes overlooked when ensuring the security of the IoT infrastructure. As a company’s digital ecosystem expands to include more IoT devices, they can be left vulnerable to hacks. Blockchain offers strong protections against data tampering by locking access to IoT devices and shutting down compromised devices within the IoT infrastructure if a security event is suspected.  Blockchain serves to effectively decentralize data, which provides a safety net from hacks and fraud. In the digital age, data is fast becoming the most prized asset a company has. If you store all your jewelry, cash and other valuables in one location of your home, what happens if a burglar enters your home and is able to find this location? Because it spreads data across a large network of computer storage spaces, storing records on a blockchain network is like placing your most valuable digital assets across a multitude of places to mitigate your risk of being severely impacted or wiped out by a hacking event.  One of the first blockchain IoT-specific platforms is IOTA, which provides transaction settlements and data transfer layering for IoT devices. IOTA has launched its  Tangle platform, which developers describe as “going beyond blockchain.” This serves as a blockless, cryptographic, decentralized network, where, rather than outsourcing network verification to data miners, users verify transactions of other users. Such IoT platforms promote greater scalability while also eliminating the need to pay transaction fees to data miners. These are both essential factors in a practical IoT network, which could potentially require the processing of billions of micro-transactions between devices daily.  5.  Hybrid blockchains are promising the best of public & private networks.  As blockchain rapidly comes of age, there are generally two communities that have been established. On one side of the tracks, there is a large community supporting public blockchains and arguing for decentralization. On the other side, there is a more niche community—comprised mostly of businesses and their clients—pushing for private blockchains operated by a single entity that also grants permissions to users.   Traditional blockchains (e.g. Bitcoin and Ethereum) are public and completely open, meaning anyone can join the consensus protocol and participate in maintaining the shared ledger. Users often join public blockchains because, apart from operating in a decentralized system, they can offer incentives for mining or staking.   But public blockchain have limitations, including visibility. Data is completely transparent so anyone can access it, presenting a privacy concern for many uses. In some blockchain use cases, data would need to be restricted and a public blockchain cannot do this. Public blockchains also demand high computational power and consume large amounts of electricity. There are also scalability concerns for public blockchains because the consensus protocol places limits on speed and the number of transactions it can process.  Private blockchains operate similarly to public blockchains with an important exception: they are not open to everyone and require an invitation to join. These blockchains are also permissioned networks and can be customized to interact with certain users differently than the general users. Unlike in the public blockchain, provisions can be outlined to determine who is allowed to participate in the network and what specific transactions they are authorized to conduct. While private blockchains address some data security concerns, the main drawback is that they are not as decentralized as the public blockchains.   To build a bridge, hybrid blockchains are being developed to offer decentralized platforms that can restrict visibility of some information on the network. In particular, this model is appealing to regulated markets because it offers the benefits of public and private blockchains in one network.   Through a hybrid blockchain solution, a company can conduct transactions from certain short-term partners and vendors on the public blockchain side. Since the transaction timeline of these partners is shorter, public blockchain is an ideal solution. It would not require the level of trust needed with a private blockchain. The private side of a hybrid blockchain solution can be used to conduct transactions with long term partners. It would operate with a classic permissioned setup, where authorized parties can view, transact and make changes based on permissions they are given. This private network is fast, scalable and secure. However, adding more parties and establishing their trust takes longer than on a public blockchain so it would only be reserved for transactions with designated users.   6.  Sidechains are improving scalability. For all their power and complexity, blockchains face challenges in scalability and speed. These limit some applications of the relatively new technology. One solution that seeks to improve blockchain efficiency and scalability is the sidechain. As its name indicates, a sidechain is a type of blockchain that accompanies a master chain. In the relationship, the master chain is the parent chain and the sidechain is the child chain.   In order to trade assets from the master chain for assets from the sidechain, the user would first need to send their assets on the master chain to a certain location. This would effectively place a lock on the assets for the time being. After the transaction completes, the sidechain would receive a confirmation and release a designated amount of the sidechain to the user—equivalent to the amount of assets locked up by the main chain times the exchange rate. This also works in reverse to trade assets from the sidechain to the master chain.   As sidechains store data and process transactions, they help to uphold the integrity of the master blockchain while making it smaller and more agile. When implemented correctly, sidechains relieve the master chain of some of the work, helping to solve the inherent scaling problem associated with blockchain solutions. Sidechains have practical applications for stock exchanges.   7.  Artificial intelligence (AI) & blockchain are teaming up.   While both AI and blockchain involve high levels of distinct technical complexity, there is potential for these two technologies to team up and score major technological victories in the next five to ten years.   The first change win might be in optimizing data management. Blockchain currently relies on hashing algorithms for data mining and these operate in a brute force style, meaning the algorithm inputs all possible sequences of characters until it finds the one that matches with the verification process. This demands extra steps, lags and effort. AI can step in to offer an intelligent data mining system that streamlines the entire process and cuts down total costs exponentially. This streamlining also has implications for improved energy consumption for blockchains.   AI can infuse natural language processing, image recognition and multi-dimensional real-time data transformation capabilities into a blockchain’s peer-to-peer linking. This allows data miners to turn a large-scale system into a series of micro-economic environments. In turn, this can optimize data transactions in a secure and effective manner. Most importantly, machine learning intelligence adds flexibility to the process.   On the flipside, blockchain’s data decentralization technology can help AI step up its game in creating better machine learning models. Introducing secure data sharing across systems, which have traditionally stored and operated data in an isolated manner, introduces higher quality data. Richer data means better models, better predictions and better insights.   Data decentralization will offer companies of all sizes access to analytics and insights they could not possibly generate from an individual data source. When AI’s deep learning algorithms gain access to multiple data points from multiple data pools that have been standardized by blockchain, the competitive advantage of an AI technology will no longer be about finding the data itself. Nor will it be about having the resources and funds to gather the most data. Instead the focus will be on writing the most innovative algorithms. This evolution ushers in a new era of scalability for deep learning where AI finds itself in new marketplaces, opens doors for smaller players and gains trust with the public at large.   The future looks bright for blockchain and it will likely innovate business processes in many industries, including human resources. However, its widespread adoption and full potential have yet to be seen. The next phase of development for blockchain will be in addressing scalability and accessibility challenges, which will pave the way for more applications and varied use cases across more industries.   Amid the rapidly evolving digital landscape, one thing is clear: blockchain is in a state of metamorphosis with many disruptive trends on the horizon. For HR professionals, it is important to keep an eye out on how this nascent technology is impacting various industries and making its way to the world of work.  

David Anderson | 22 Aug 2019

The smart city. The connected city. The intelligent city. The agile city. The data-driven city. The integrated city. The blockchain-powered city. The sustainable city. The future-proof city. There is no shortage of vision, aspiration and genius when it comes to today's cities. Still, they must attract foreign direct investment, along with blue-chip firms, start-ups and top talent, and have access to the best technology to drive growth. But growth in the world's GDP won't come from the same old sources. It will follow the fortunes of tomorrow's most competitively smart cities, many of which are overlooked urban areas with opportunities to leapfrog established megacities that were once the de facto homes to the world's most successful employees and businesses. Through investment in information and communication technologies that enhance the quality and performance of urban services, such as energy and mobility, these smart cities are competing for the highly skilled workers who will sustain their organizations and ensure growth. The Questions Facing Employers and Talent   Deciding where to work, live and raise their families, these employees prioritize the human and societal factors cited in Mercer's recent study, People First: Driving Growth in Emerging Megacities. Workers were asked to rank 20 decision-making factors by importance against four vital pillars: human, health, money and work. When deciding which city to live and work in, respondents ranked human factors — such as overall life satisfaction, safety and security, environmental considerations and proximity to friends and family — as the most important. The study also looks at how some of the fastest-growing global cities, from Kolkata, India, to Lagos, Nigeria, grow economically, attract people, enable new residents to thrive and lay a path toward a better life for its citizens. From these insights, city leaders and policy makers around the world can glean valuable lessons on what is not only needed to sustain but also power growth. Indeed, in an increasingly urbanized world, where highly skilled talent is scarce, employers and cities are asking important existential questions: ·  What makes professionals move to and stay in a particular city? ·  How can employers and cities retain talented workers with the high-level skills demanded by rising start-ups, upcoming unicorns and global brands in emerging hot spots? ·  What, exactly, do productive employees want from an employer and home city? The answers may lie in how well the world's emerging megacities prioritize their transformation from urban afterthoughts to global power players. Thus, it's helpful to take a comparative look at a sampling of cities that show serious potential to succeed and sustain their success over the long term. What they have in common is a commitment to regional superiority of opportunity and resources, to establishing themselves, in their way, as versions of Silicon Valley — where tomorrow's most highly skilled talent can thrive, building purposeful lives amid the evolution of artificial intelligence and advanced technology. From 'Cyberabad' to Other Contenders   A prime example of an emerging megacity is Hyderabad, the capital of India's southern state, Telangana. With a population of eight million, Hyderabad is the sixth most populous urban agglomeration of India and is popularly known as Cyberabad — the "Silicon Valley of India" — for its growing reputation as a global hub for information technology. (Megacities are defined as having populations of 10 million or more; the cities discussed in this article have either reached that milestone or are projected to.) Along with IT, though, Hyderabad is experiencing growth in the automotive industry and pharmaceuticals, as well as its traditional agricultural base. With extensive investment in digital and property infrastructure, the city is upgrading itself to host IT companies, especially via the development of its HITEC City, a township with state-of-the-art tech facilities for American IT giants. Retail has thrived, as well, as international and national brands open stores in the city. By contrast, the somewhat larger city of Chennai (a 2017 population of 9 million and a $59 billion GDP as of 2014) is known as the "Detroit of India" and leads the nation's automotive industry, but growth in software services, medical tourism, financial services and hardware manufacturing (along with petrochemicals and textiles) also add to its economic depth. It's also a major exporter of IT and business process outsourcing services. For sheer economic scale, the emerging megacities of China are impressive. With a 2014 GDP of $234 billion and a 2017 population of 14 million, Chengdu is Western China's No. 1 metropolitan area, and it thrives with emerging industries — notably an energy conservation and environmental protection industry that makes it an attractive destination for skilled workers. Indeed, the emphasis on "new energy" industries (in materials, hybrid and electric automobiles and IT) is propelling Chengdu. Meanwhile, China's second largest eastern city, Nanjing (with a 2014 GDP of $203 billion and a 2017 population of seven million) is dominated by service industries, led by financial services, culture and tourism. IT, environmental protection, new energy and smart power grids are becoming additional pillars of Nanjing, and a wealth of multinational firms have been establishing research centers there. Nanjing's unemployment rate has been below China's national average for several years. From Kenya to Jalisco   While China and India may dominate the scale of emerging economies, other geographies are very much on the emerging megacity map. Nairobi is not only the capital and largest city in Kenya; it is also on track for population growth from four million in 2017 to 10 million by 2030. Home to more than 100 international organizations, such as the United Nations Environmental Programme and The World Bank, as well as regional headquarters for major manufacturing and IT corporations, Nairobi shares its agricultural preeminence with a foothold in today's and tomorrow's economy. Likewise, Guadalajara (a 2014 GDP of $81 billion; 2017 population of five million) is more than the capital and largest city of Mexico's Jalisco state. It's known as the "Mexican Silicon Valley," according to the Financial Times, and is considered the city with the highest investment attraction potential in Mexico. It's the sort of social/cultural center — with an International Film Festival and International Book Fair — that strongly complements the growth of high-tech industry, chemical and electronic manufacturing, making it a hemispheric magnet for talent. These cities each make their case for talent in their own ways, creating an environment for highly skilled employees to thrive across multiple dimensions. This requires putting people first and focusing on what matters most to them. Mercer's Emerging Megacities study shows that employers often misunderstand what motivates people to move to a city and remain there: Human and societal factors are more important than money and work factors. For emerging megacities, the model of Silicon Valley may be a potent aspirational strategy, but in each case, they must prove themselves as places to live—today and tomorrow. Originally published in BRINK News.

Katie Kuehner-Hebert | 22 Aug 2019

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.

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