As Switzerland’s leading ICT company, Swisscom aims to exploit the opportunities of the digital transformation for the country’s prosperity, but also to minimise potential risks and help shape the future. To this end, we promote digital skills in the wider population, protect the climate, advocate fair and climate-friendly supply chains and maintain a reliable, high-performance ICT infrastructure.
Embracing sustainability
Swisscom has been committed to sustainable business practices for over 20 years. Our journey began in 1998, when we became the first telecommunications company to receive ISO 14001 certification for our environmental management system.
Embracing our responsibilities towards the environment in this way kickstarted a chain reaction that led to many achievements such as in 2010 when we sourced 100 percent of our electricity from renewable energy sources. In 2014, we followed up by opening one of the most modern and energy-efficient data centres in Europe, at Berne-Wankdorf, a building whose eco-innovations include being integrated into the city of Berne’s heating network, so that its waste heat can be used directly to heat neighbouring homes and offices.
In 2016 we were among the first global companies – today there are well over 1,000 firms involved – to commit to an emissions reduction path based on the Science Based Targets initiative (SBTi) in line with limiting global heating to a rise of no more than 1.5 degrees Celsius above pre-industrial levels. We were proud to meet and exceed our initial targets, and continue to engage with the initiative to this day.
In 2018 we introduced energy-efficient cooling systems for our mobile base stations and in 2020, as our operations became climate neutral, we were named ‘Most Sustainable Company in the Telecommunication Industry’ in the World Finance Sustainability Awards. As of 2021, we have 80 electric vehicles in operation as part of our 2,400-strong fleet, an important first step on the road to switching to zero-emission mobility by 2030. Elsewhere in the business, our entire network went climate-neutral earlier this year – all calls, streaming and surfing on the Swisscom network by Swisscom customers are now automatically climate neutral, at no extra cost.
When it comes to other aspects of the drive for greater sustainability, achievements include the launch of our ‘schools on the internet’ initiative in 2002 – since then we have helped over 5,000 schools get online, free of charge. First and foremost we support children and teenagers but also their parents and teachers in dealing with risks and opportunities on the internet.
We have a wide range of courses and initiatives set in place in order to address topics such as hate speech, cyberbullying but also the world of eSports. Our commitment to young people went one step further in 2012 with the launch of the Swisscom Mobile Aid programme, through which revenue from the recycling of donated old mobile phones helps disadvantaged children in the developing world. We’ve funded three million meals for children in need since 2012.
Going forwards
Swisscom’s ‘Sustainability Strategy 2025’ contains three pillars – ‘Ready for People,’ ‘Ready for the Environment’ and ‘Ready for Switzerland’ – all with ambitious goals aligned with the UN’s Sustainable Development Goals. ‘Ready for People’ will see us opening up secure and barrier-free access to the digital world for everyone in Switzerland.
By 2025 at the latest, the company will support two million people a year in using digital media – primarily children and young people. Swisscom actively promotes diversity and combats all forms of discrimination.
As a pioneer in climate protection, meanwhile, Swisscom is making a contribution to capping the global temperature increase at 1.5 degrees Celsius. ‘Ready for the Environment’ is our plan to become climate-neutral across the entire value chain – including supply chains or equipment from external partners – by 2025. Operational CO2 emissions will be reduced by over 90 percent compared to 1990. To achieve this, we are relying on 100 percent renewable energy, an emission-free vehicle fleet, heat pumps and, thanks to digitalisation, a climate-friendly way of working.
We are systematically maximising energy efficiency in our operations and supply chains in order to limit our CO2 emissions from our operations and supply chains to a total of 235,000 tons, which corresponds to a reduction path of well below 1.5 degrees Celsius. Any remaining unavoidable emissions from our value chain will be offset.
In addition, customers should be able to reduce their carbon footprint thanks to our climate-friendly ICT solutions. We aim to save one million tons of CO2 per year by 2025, a figure that corresponds to around two percent of all greenhouse gas emissions in Switzerland. We will achieve this by empowering our customers to reduce their own carbon footprint through our products and services, whether that’s technology that allows them to participate in virtual meetings, thereby reducing the need for business trips, or IoT (Internet of Things) – supported services for the optimisation and remote monitoring of traffic, building technology and devices.
We are also driving forward digital product innovations: since 2022, business customers have been able to measure the ecological footprint of their employee mobility thanks to the ‘Swiss Climate Challenge’ and create incentives for a reduction by means of a challenge. We are also actively investing in digital climate-friendly technologies – such as Ecorobotix and Daphne recently.
Finally, our reliable, secure and climate-friendly ICT infrastructure forms the basis for competitiveness, added value and quality of life in Switzerland. As part of ‘Ready for Switzerland,’ we plan to have 50 to 60 percent of all homes and businesses connected with a bandwidth of up to 10 Gbps by 2025.
Only when everyone steps up and plays their part will the next generation inherit a liveable world. Here at Swisscom we’re delighted to be leading that change.
The banking sector in Africa is emerging rather strongly from the impact of the COVID-19 pandemic. However, the fact that the pandemic has significantly altered the face of banking on the continent is without a doubt. Today, the industry is witnessing an acceleration in digital transformation. By all accounts, the survival of the status quo, which is bricks and mortar, is not guaranteed during this reawakening.
While for most banks, COVID-19 activated the need to think differently, for Zenith Bank, this has been the norm. Even before the pandemic, Zenith Bank has always been a technology-driven bank that thrives on innovation. In fact, putting technology and innovation at the heart of its operations was fundamental in ensuring minimal disruptions at the peak of the pandemic when shutdowns and restrictions significantly affected large corporates, small and medium enterprises (SMEs) and retail clients.
The bank has continued to invest immensely in new technologies and digital solutions
Zenith Bank readjusted its strategy to ensure it continued to create value for customers, employees and investors. Part of the measures included activating a robust business continuity plan to ensure that critical systems remained operational, allowing customers to continue carrying out their banking transactions seamlessly. With the pangs of the pandemic becoming less severe, the bank is domesticating some of the key pandemic trends, including customers’ preference for digital channels.
With technology being at the core of Zenith’s business strategy, the bank has continued to invest immensely in new technologies and digital solutions. In the outgone financial year, the bank’s investments in technology grew by 40 percent year-on-year from $49m in 2020 to $68.9m in 2021. These investments have simplified processes like account opening, loan application and complaints resolution. More importantly, the transaction platforms and channels have been reliable, secure and convenient for customers, thus driving the continued patronage of the Zenith brand. This is evident in the bank’s value and volume of electronic transactions, which grew by 73 percent and 69 percent, respectively, year-on-year, in 2021.
The pursuit of growth
Since its inception, Zenith Bank has demonstrated an overwhelming presence in the corporate market. The bank is the preferred financial partner for most businesses operating across various sectors of the Nigerian economy, including oil and gas, power, construction, manufacturing and general commerce. Having maintained leadership in the corporate market segment, the bank has set its focus on the retail market as part of its strategy to expand its customer base and create more diversification.
The bank’s desire to bring about transformation meant exploiting vast opportunities presented by the internet
In the last couple of years, Zenith Bank has been leveraging its success in the corporate segment to achieve significant mileage in the retail segment through its ‘retail take-over’ strategy. The objective is to become the market leader in the retail market. So far, the strategy has led to remarkable growth in customer base and the roll-out of innovative retail banking services.
It’s important to note that digital infrastructure and platforms have been central in enabling the bank to penetrate the retail market. The bank leveraged cutting-edge technology to deliver best-in-class retail products and services that suited the digital demands of retail customers.
Zenith Bank’s pursuit for growth is both outwards and inwards. Outwards, the bank harbours big plans to expand beyond its Nigerian home market and become a force to reckon with on the pan-African front. Zenith Bank has already set its sights on other African markets, beginning with the West Africa sub-region, where its brand is making significant inroads. In the Ghanaian market, which it entered in 2005, the bank already boasts of 38 business offices. As well as Ghana, the bank also has operations in Sierra Leone and Gambia.
Betting big on SMEs
Inwards, Zenith understands the importance of the Nigerian market to its growth ambitions. Apart from implementing the ‘retail take-over’ strategy, the bank is also focusing on SMEs, women-led enterprises and financial inclusion. In Nigeria, the SME sector is massive, considering it contributes 48 percent of the country’s GDP and is a major contributor to employment generation. Despite the sector’s importance, SMEs face challenges, top of which is access to affordable credit. One of the biggest impediments to their access to credit is their inadequate track record.
While this is the reality for SMEs, Zenith Bank sees enormous opportunities in their contribution to employment generation, wealth creation and overall economic growth. SMEs also provide a huge base to deliver value innovation and offer compelling propositions and engagements for business growth.
Consequently, Zenith Bank launched the SME Grow My Business (SME-GMB) product. This innovative product creates a platform for SMEs to better manage their business, become more competitive and get more visibility in the market across the web and digital platforms. The bank is also expanding credit allocation to bridge the gap in access to credit between large corporates and SMEs. On this, the bank rolled out the Zenith SME facility, which has made it possible for many SMEs to obtain loans at single-digit interest rates.
More importantly, Zenith Bank is collaborating with service providers like digital and technology companies in partnerships that focus on addressing the major challenges of SMEs. These partnerships cut across providing SMEs with digital skills and sector-based training, offering solutions and tools that help them find customers, build loyalty, and enable them to access loans more swiftly and earn savings from discounted business expenses.
The problems facing SMEs are closely intertwined with those besetting women entrepreneurs who are highly represented in the SME segment. Their challenges are compounded by the fact that the majority of the financial products and services are gender-neutral and tend not to favour women’s access to finance. Zenith Bank is on a mission to change this narrative.
The bank launched the Z-Woman initiative to improve access to credit for women. The package comes with loans of up to $24,000 at a single-digit interest rate, free digital skills training, and free exhibition stands at Zenith Bank events. In 2020, the bank extended $9.6m in loans under the initiative.
Finance for all
Another area that has become of paramount importance for Zenith Bank is financial inclusion. According to Enhancing Financial Innovation & Access (EFInA), Nigeria’s financial inclusion rate stood at 64 percent in 2020. Notably, Zenith Bank understands that bricks and mortar has largely failed in making it easy for the majority to access financial services, more so those living in rural areas. Apart from the enormous costs involved in setting up and running physical branches, it is a no-brainer that technology has become a better enabler of banking services.
This explains why Zenith Bank has opted to go big on technology and innovations. For the bank, the digital stride has continued to evolve from traditional banking channels to developing innovative digital products and solutions. In essence, digitisation is enabling the bank to reach unbanked populations in every part of the country. Investment in technology is also helping drive financial inclusion, which is critical for the bank’s continuous growth.
The Nigerian economy is going through a season of optimism since exiting one of its deepest recessions
When the bank started operations in 1990, there were no ATMs, no debit or credit cards, and no digital networks. The bank’s desire to bring about transformation meant exploiting vast opportunities presented by the internet. Consequently, the bank invested in a VSAT (very small aperture terminal) satellite, giving customers the power to deposit money in one part of the country and withdraw it in another. This endeared the bank to customers and encouraged many people to access formal financial services.
Today, the introduction of digital financial solutions like unstructured supplementary service data (USSD), mobile apps and the internet has opened the possibilities of near-universal access to financial services. With a mobile telephone, anybody can access financial services even in the remotest parts of the country. With USSD, the unbanked can easily open bank accounts with minimal documentation and carry out banking services.
Champions of innovation
Zenith Bank will continue to make the requisite investments in personnel and infrastructure to maintain the ability to deliver innovative solutions to the market and serve customers more diligently. Over the years, the bank has strongly demonstrated its ability to churn out innovative products and services.
On technology and innovation, the bank has opted to partner with fintechs. In fact, Zenith Bank has been a leading champion of the fintech space in Nigeria. The country is home to many of Africa’s vibrant tech hubs and fintech start-ups. According to a 2020 McKinsey report, Nigeria has over 200 standalone fintech companies. Going by the amount of foreign financing that fintechs have been attracting, the industry is tellingly vibrant. The McKinsey report shows that between 2014 and 2019, Nigeria’s bustling fintech scene raised more than $600m in funding. In 2019, the country attracted $122m, a quarter of the $491.6m raised by African tech start-ups.
Jim Ovia, Chairman and Founder of Zenith Bank
Unlike in other countries where regulators remain extremely cautious, leading to the stifling of innovation, the Central Bank of Nigeria has been exemplary in embracing new ideas. Part of this has been putting in place frameworks that regulate and spur innovations which help to deepen digital finance. In 2020, the apex bank adopted a creative approach to regulating fintechs using a sandbox and governing framework where products, services and approaches are tested with customers and concerned stakeholders. The ability of the apex bank to be open-minded on financial innovations has seen Nigeria lead the pace in digital currency in Africa with the launch of the eNaira.
The regulator understands the future of money potentially rests in the broad-based adoption of digital currency to meet emerging consumer demands by establishing more direct, transparent and efficient payment systems. In essence, the eNaira opens a new sphere in digital payments by providing simplified, swift and safe transactional opportunities. Overall, it will not only be a game-changer for domestic payments processing but will also be used for foreign exchange transactions and cross-boundary payments.
The vibrancy of Nigeria’s fintech innovation space has seen Zenith Bank develop a sandbox infrastructure that enables it to engage with fintech firms. The sandbox facilitates compatibility and positions the bank in readiness to collaborate with different players in the ecosystem irrespective of their product offerings or needs. Through the sandbox, the bank is able to extend governance and risk management framework to fintechs. It also helps to address risks related to compliance failures and cybercrime.
In addition, the bank also provides funding and banking support that fintechs require to scale. Indeed, Zenith Bank’s continued push to expand its value creation across its business segments comes at an ideal time.
The great recovery
The Nigerian economy is going through a season of optimism. Since exiting one of its deepest recessions occasioned by the COVID-19 pandemic in the last quarter of 2020, the Nigerian economy has continued on a positive trajectory. Data from the National Bureau of Statistics show that GDP grew by an impressive 3.9 percent in the last quarter of 2021, compared to 0.11 percent from the same period in 2020 (see Fig 1).
The economy is projected to continue on a positive trajectory in the immediate and medium-term, with the International Monetary Fund forecasting a 3.4 percent growth in 2022. The Nigerian government is more optimistic, with a 4.2 percent growth projection. Growth is expected to be driven by various initiatives to improve the country’s economic and investment climate. A key focus has been a push to boost investments in infrastructure and improve foreign exchange earnings from non-oil exports. No doubt, the banking industry will benefit from growth in various sectors of the economy, particularly from expanding credit to the private sector. Last year, banking sector credit to the private sector stood at $84bn. With the economic rebound, growth in credit to the private sector is expected to rise exponentially. One area of concern is Nigeria’s overdependence on the oil sector. The risks associated with this overdependence were evident during the peak of the pandemic.
Nigeria, Africa’s top oil producer and exporter, relies on crude sales for about 90 percent of foreign exchange earnings. A contraction of the oil sector due to low oil prices in 2020 was one of the key factors that plunged the country into a recession.
The need for diversification is even more crucial as the fortunes of crude oil are dwindling as the world begins to move away from fossil fuels. For Nigeria, it is also imperative to rediscover the country’s non-oil export potential. This will not be new, considering the country once relied solely on non-oil export earnings. The need to boost local production capacity, create more jobs and achieve overall economic growth calls for diversification of Nigeria’s economic base through the promotion of non-oil exports.
Zenith Bank has already identified the emerging opportunities in stimulating non-oil exports and has developed robust financial products and incentives for operators outside the oil and gas sector. Part of the interventions has been a steady application of the Central Bank of Nigeria’s discounted cash reserve requirement (DCRR) policy to disburse funds to non-oil exporters while significantly investing under the Non-oil Export Stimulation Facility. The bank has also launched an annual non-oil export seminar to deepen the discourse on promoting non-oil export business in the country.
A sustainable future
Having been in existence for three decades, Zenith Bank has grown enormously to become a powerhouse financial institution in Africa. Today, the bank is Nigeria’s largest bank, and it is also one of Africa’s largest financial institutions by tier-one capital. It is also unarguably the most profitable bank in the country. As a forward-thinking institution, the bank is keeping a keen eye on the future and taking action to remain sustainable.
A holistic approach to business has seen Zenith Bank commit to the adoption of responsible practices in its operations while driving progress towards the achievement of the Sustainable Development Goals (SDGs). Consequently, the bank has continued to leverage its commitments under various local and international sustainability frameworks, including the Nigerian Sustainable Banking Principles and the Principles for Responsible Banking of the United Nations Environment Programme Finance Initiative, to align its activities and those of its clients with the tenets of sustainable banking.
The bank has also successfully integrated environmental, social and governance (ESG) considerations into its financing and investing decisions by screening projects. This is in line with its robust E&S framework. Currently, Zenith Bank is able to assess more than 90 percent of all credit transactions for E&S risks.
Putting sustainability at the heart of operations has brought about accolades from both within and without. The bank has received several awards and recognitions as a result of its sustainability performance. These include the Best Corporate Governance ‘Financial Services’ Africa 2021 (Ethical Boardroom), Most Responsible Organisation in Africa, Best Company in Reporting and Transparency, Best Company in Infrastructure Development and Best Company in Promotion of Gender Equality and Women Empowerment.
By all accounts, the awards demonstrate that adopting sustainability as a business strategy combined with a commitment to excellent service delivery and best practices sets a business apart as a market leader. While being proud of its success, the bank cannot afford to rest on its oars. As far as sustainability is concerned, the bank’s winning mentality is to achieve continual improvement, knowing that the sustenance of the business is directly related to the sustained value that it creates for the people, investors, society and all stakeholders.
Sustainability is not a separate strategy at KBC Asset Management, but an integral part of the overall workings of the KBC Group. As such, sustainability is embedded in KBC’s corporate strategy, central to our relationship with our clients as we strive to offer them a unique bank-insurance experience.
We are convinced that our strategy – powered by our business culture and the contributions made by our people – is instrumental in earning, keeping and growing trust day by day. It’s helped us become the ‘reference’ for sustainability in financial management in our core markets of Belgium, the Czech Republic, Slovakia, Hungary and Bulgaria. For us playing our role in society means responding to the expectations of all stakeholders, not only today, but also going forwards.
Investors expect the countries and companies in which they invest to have a positive impact on our society and the environment
At the heart of our sustainability strategy are three key ideas: boosting our positive impact on society; limiting our negative impact on society; and encouraging responsible behaviour among all our employees. We make a positive impact partly through ensuring that our sustainability strategy focuses on local communities and economies.
We are conscious of the impact of our operations on society and respond to societal needs and expectations in a balanced, relevant and transparent manner. In doing so, we acknowledge the special approach required in each of the local economies of our core markets.
When it comes to mitigating our negative impact on society, strict sustainability policies and guidelines enable us to address challenges close to home and further afield. On the one hand, we’re working hard to reduce the environmental footprint of our business, with actions such as switching to 100 percent renewable energy in 2021, installing solar panels on more and more of our buildings, and incentivising low carbon travel for our employees.
Responsibility as a philosophy
Looking beyond our own front door, our attitude towards responsible investments continues to effect real change. This philosophy has been part of KBC’s make up for a long time now, having launched the first Responsible Investing fund in Belgium in 1992.
Since then, we have regularly brought new solutions to the market, with our methodology becoming increasingly stringent as the years have gone by. KBC Asset Management was the first financial institution in Belgium to have its own Responsible Investing research unit. We endorse the six UN Principles for Responsible Investment and have enshrined them in our general investment policy – incorporating ESG issues into investment analysis and decision-making processes, and promoting acceptance and implementation of the principles within the investment industry, to name just two.
We are proud of sustainability milestones such as the fact that all our Responsible Investing funds have been fossil fuel-free since November 2017. In addition, in May 2018 KBC launched Pricos SRI, the first Responsible Investing pension savings fund on the Belgian market. And in 2019, all our Responsible Investing funds in Belgium obtained the ‘Towards Sustainability’ label, an initiative of Febelfin (the Belgian Financial Sector Federation).
To service our clients in the best possible way, KBC offers a wide variety of Responsible Investing solutions, ranging from traditional Responsible Investment funds and Thematic funds, to the Impact Investing funds. Responsible Investing funds invest in companies or countries that – compared to peers – are the best performers in terms of sound corporate governance, the environment and social themes. Thematic investment funds, on the other hand, invest in companies active in areas such as climate change, the looming shortage of potable water or the quest for alternative energy sources. The third category, Impact Investing funds, invests in companies whose goods and/or services demonstrate a clear positive influence on our society. We look, in other words, for companies that make it their core business activity not only to generate a financial return, but also to contribute positively to society or the environment.
Credibility is another core value. Our sustainability policy and criteria are therefore monitored by the Responsible Investing Advisory Board, which is fully independent of KBC. The body consists of leading academics who are experts in fields like human rights, business ethics, biology and ecology. Operating in a personal capacity rather than representing the institutions at which they are employed, our board members decide which screening methodology we should use and set the criteria for rating the companies we are considering making investments in. They also ensure that screening is complete, thorough and accurate, with board meetings taking place quarterly to enable us to be as responsive as possible to changing circumstances.
Changing expectations
Over the past five years, KBC has systematically strengthened its sustainability policies, taking into account society’s constantly changing expectations and the growing body of research that demonstrates unequivocally how burning fossil fuels contributes to global warming. It was this process of learning and adapting that led us to divest completely from fossil fuels in all funds – not just RI funds – this year, with other examples being our new negative screening criteria around palm oil for RI funds and tobacco, thermal coal and human rights policies for all funds.
We will continue to make these changes when required going forwards, thereby maintaining our position as reference in the market regarding sustainability. Responsible Investing is not just another trend – it is here to stay. In addition to financial returns, investors also expect the countries and companies in which they invest to have a positive impact on our society and the environment. KBC Asset Management pursues an active policy of proxy voting and engagement. By exercising the rights attached to shares held by the investment funds and by making its voice heard at the annual general meetings of these companies, KBC aims to defend the interests of its clients and investors. KBC Asset Management applies this active voting policy to several different themes, recognising that business, corporate governance and sustainability issues all determine the value of a company in the medium and long term. All these factors can have a significant impact on value creation or the return enjoyed by clients and investors. In 2021, we participated in 351 general meetings and voted on a total of 4,165 resolutions.
Responsible Investing is becoming the new standard at KBC, the choice for 64 percent of new investments by Belgian clients in 2021. In the first quarter of 2022, it was as high as 74 percent. RI funds are now the first option offered to clients, with the result that assets under management have risen considerably over the last few years. We’re even promoting our Responsible Investing solutions via digital channels, with Kate, KBC’s virtual assistant, helping our clients navigate investment options remotely.
Since 2021, the KBC Pension Fund in Belgium (Pricos) has consisted entirely of Responsible Investments, while as a group our total investment in such funds has grown from €2.8bn in 2016 to €31.7bn. Since the launch of the first Responsible Investing fund in 1992, we have broadened our offer and refined our methodology, for example our recent decision to exclude fossil fuels from all our funds.
New challenges
We are proud of our progress but we are not stopping there. New challenges are around the corner and, as always, we will be facing them head-on. Responsible Investing is a fast-changing environment due to its vast growth, its variety of approaches and its changing regulatory landscape. The introduction of the EU taxonomy for sustainable activities, which will establish a list of environmentally sustainable economic activities, and the ESG changes to the Markets in Financial Instruments Directive (MiFID), are just two of the challenges we face.
Anticipating these changes, we have created a vision that is based on two pillars. The first is the introduction of KBC Asset Management’s 10 Principles of Responsible Investing. The ambition behind the principles is to ensure that KBC can explain, in a comprehensive way, where it stands when it comes to Responsible Investing, taking into consideration landmark regulations like Sustainable Finance Disclosures Regulation (SFDR), the Task Force on Climate-Related Financial Disclosures (TCFD) and ESG in MiFID.
We are also introducing a new Responsible Investing methodology, setting a high standard that is aligned with the new regulations and the ‘Towards Sustainability’ label in Belgium. The new methodology will enable us to better integrate climate change mitigation measures in Responsible Investing assessments, and to promote Responsible Investing while leaving sufficient room to integrate the risk and return preferences of our clients. All these actions will allow us to act even more in the best interest of our clients and their needs. We are ready for the future.
One of the greatest lessons to emerge from the COVID-19 pandemic has been the importance of connection. Whether that’s our relationships with our families and friends, or with the community and the wider world around us, repeated lockdowns have served as a pertinent reminder of the value of strong, long-lasting bonds.
In the business world, too, the pandemic has re-emphasised the need for companies to lead with empathy, and to place the customer experience at the very heart of their operations. In fact, never before has it been more important for companies to devote themselves to meeting their customers’ new and evolving needs. The pandemic has reshaped customer expectations and habits, with consumers now desiring simpler, faster service and digital solutions as standard. Those who fail to adapt to these new standards of customer care will soon find themselves left behind in what is an increasingly competitive market.
This is particularly true in the banking industry. Before the pandemic hit, banks had spent years working to rebuild consumer trust in the wake of the 2008 financial crisis. Then, after many years of effort and investment in restoring customer confidence, the banking world was hit with a fresh crisis in the form of COVID-19. This time, though, lessons had been learned, and banks around the world were quick to respond to the rapidly unfolding emergency with a host of innovative digital solutions and a re-orientated customer service experience.
As the largest conventional bank in Brunei, Baiduri Bank felt compelled to lead the way when it came to the industry response to the pandemic. Acting swiftly and with sensitivity, Baiduri Bank lent its support to customers with a range of financial relief methods, including loan deferment and restructuring, as well as introducing new digital channels to streamline the user experience and prioritise low-risk contactless interactions. As the world tentatively reopens and moves towards a post-pandemic new normal, Baiduri Bank remains as committed to its customers as ever before, and is fully focused on enhancing the user experience through innovation and digitalisation.
A bold new era
Long before the pandemic hit, new technologies were beginning to reshape the banking world as we once knew it. Digital-only challenger banks, Artificial Intelligence (AI) and remote payment methods were rapidly redefining the industry, with banks under ever increasing pressure to innovate and expand their digital offerings. Then, in March 2020, as the pandemic took hold and kept people confined to their homes, it became clear that the banking industry would need to fully embrace digitisation during that period – and fast.
Baiduri Bank has had a sustained focus on digital transformation for some years now, and the unprecedented events of the past two years have only served to highlight just how important it is to continue on this mission of continuous, customer-focused technological progress. In March 2020, we relaunched Baiduri b.Digital Personal, our award-winning personal online banking service. This successful relaunch proved very timely, as it offered our customers a range of enhanced features that enabled them to access a whole host of banking services from their smartphone.
Suddenly, as lockdowns came into effect and bank branches closed, customers needed to be able to access banking services remotely, and the Baiduri b.Digital Personal app allowed them to do exactly that. Offering a safe and secure way to carry out remote transactions, the new and improved version of the app includes a biometric login feature, along with a time-saving online registration process. Once customers are set up on the app, they can use it to view a dashboard of their assets and liabilities, set themselves a savings goal and view a number of in-app calculators, including a loan calculator, retirement calculator and a risk-profiling tool. Designed to be an ‘all-in-one’ platform to help customers to navigate their personal finances and make the most of their money, the app offers a number of features seen nowhere else in Bruneian banking – which has proved particularly appealing to new users.
Recognising the growing appetite for contactless payment options in the wake of COVID-19, Baiduri Bank is also partnering with financial firm UnionPay International (UPI) and telecommunications provider DST to launch a pioneering e-wallet. With DSTPay, Baiduri Bank and UPI customers will be able to scan QR codes at over 200 merchant outlets in Brunei, letting them pay for products and services with a simple tap on their smartphone. The cross-sector partnership is now gearing up to launch phase two of DSTPay, which will enable contactless payments at 25 million UnionPay merchants across the globe.
Our customers have continued to respond positively to our enhanced digital offers. Between September 2020 and September 2021, Baiduri Bank saw a 53 percent increase in average monthly transactions, and a 52 percent increase in its active user base. As we continue on our journey of technological transformation, our customers remain, first and foremost, at the very heart of our digital mission.
Keeping things personal
At Baiduri Bank, our customers are well informed of each and every decision we make. We take a humanised approach to financial services, using our deep knowledge of customer needs and preferences to create a truly personalised service. Above all, our approach to customer care is guided by our core values of trustworthiness, empathy and inclusion – in both our online and offline interactions.
Banks around the world were quick to respond to the rapidly unfolding emergency with a host of innovative digital solutions
We firmly believe in an omnichannel, ‘phygital’ approach, that ensures a seamless customer service experience across all channels. In September 2020, Baiduri Bank released its first AI chatbot – Emmi – as part of the revamped website. One of the first of its kind among banks in Brunei, Emmi uses predictive analytics, meaning that it is able to actively learn from conversations, providing relevant answers before customers even complete their questions, and offering next-best answers based on context.
Through conversing with Emmi, customers can have their frequently-asked-questions answered in real time, helping them to better understand our products and services. What’s more, during the second wave of the pandemic, we actively trained Emmi to provide updated information and assistance on COVID-19. Our customers appreciated this enhanced level of digital support, and we saw a marked increase in our digital engagements during this turbulent time.
While Emmi marked our first venture into the world of AI, we are now committed to exploring other applications of this groundbreaking technology. From robo-advisors to enhanced cybersecurity and predictive analytics, there are a number of different ways to utilise AI that will help to create an ever more seamless and intuitive service for our customers.
When it comes to our in-person interactions, we maintain the same level of commitment to high-quality customer care. We understand that everyone has different needs and preferences, and some may prefer to use our traditional brick-and-mortar branches to carry out their banking transactions. That’s why we are continuously looking to enhance our in-person experience, ensuring improved facilities and a comprehensive suite of services at our high-traffic branches, while catering the services of other, more localised branches to best suit the needs of the communities they serve. Financial inclusion is at the very core of our mission, and we hope to empower each and every customer to gain greater control over their finances in whatever way best suits them.
Building a sustainable future
In the wake of the COVID-19 crisis, customers and companies alike have begun to reassess their values, reflecting on what kind of post-pandemic future they would like to see emerge as the world reopens. The past two years have shown that our communities are immensely capable of collective action when faced with an emergency – and now is the time to build on that momentum and tackle some of our world’s most pressing issues head on.
The climate crisis is perhaps the next looming global emergency, and at Baiduri Bank, sustainability is a matter of real priority. We are in the process of developing a detailed roadmap that will embed sustainability into our strategy and operations going forward, aligning with the UN’s Sustainable Development Goals and matching national commitments when it comes to environmental good practice. In this spirit, we have also reviewed our Corporate Social Responsibility (CSR) commitments, ensuring that they reflect the UN’s sustainable development pillars and prioritise doing good – for the environment, for our communities and for our people.
At the height of the pandemic, Baiduri bank donated much-needed supplies of PPE materials to frontline healthcare workers as they fought to save lives and protect citizens from the virus. As part of our CSR efforts, we also donated care packages to underprivileged special-needs families across Brunei, as well as sending a number of laptops to disadvantaged students for home learning purposes, in partnership with the Ministry of Education.
We also partnered with the Ministry of Culture, Youth and Sports to develop an innovative national volunteering app, named ‘Mengalinga’ – which translates as ‘We Care.’ Launched in August 2021, at the start of Brunei’s second wave, the app became instrumental in organising and mobilising volunteer support, with over 1,100 individuals and 115 organisations registered with the app as of February 2022.
During this unprecedented time, Baiduri Bank has been committed to supporting its valued employees, introducing a dedicated internal WhatsApp line specifically focused on mental health and wellbeing. At the start of the pandemic, all employees were given special care kits that included surgical face masks, and we introduced a series of virtual wellness activities and workshops in collaboration with health experts to offer sustained support to employees who were working from home. All of our employees were also offered two days of leave in-lieu for each vaccine dose to allow them to recover in their own time. Throughout the pandemic, Baiduri Bank has strived to make a real difference in the community that it serves.
In the months and years to come, our ESG principles will remain at the core of our strategy, and we will continue to look towards a more sustainable future, where the needs of our customers, employees and our wider communities will always come first.
Two years – that’s how long it’s been since COVID-19 struck and air travel was hit by the greatest existential crisis since the Wright brothers first took flight at Kittyhawk. There is no doubt the impact on our industry was and will continue to be profound. But in retrospect, the shutdown of global passenger air travel created absolute clarity in terms of situational analysis, the speed with which tactical decision-making had to be made and a base case of zero revenue to plan for in the short and medium term.
Strength of balance sheets fast became the single most important lens through which stakeholders could judge an airline – cash burn was key and reducing it the single most important decision to make.
Of course, that didn’t happen overnight and the partnership approach to creating those short-term solutions was paramount. In a matter of days, and in some cases, even hours, decisions were taken. Everyone in the airline value chain had to take giant leaps, in unison. This was our Global Financial Crisis and as an industry, we met the challenge.
Cash is king
From Wizz Air’s perspective, the strength of our balance sheet was vitally important to bridge the post COVID-19 period. But even more importantly, to create a real competitive advantage as we embraced this crisis, in order to significantly improve our relative position – getting access to destinations that previously would not be open to us, leveraging our ultra-low-cost business model, enabled by our Airbus fleet order and delivery programmes.
This fleet order, in conjunction with our business model, does not only deliver the lowest cost (and as such enables the lowest fares for customers), it also delivers the lowest emission intensity in the industry as we fly the most modern fleet, which use ultra-efficient GTF-powered engines designed to reduce fuel consumption and carbon emissions, with the most optimised seat density in an aircraft – efficient yet highly comfortable for passengers.
Early on in the pandemic, we made the decision to accelerate our growth as the industry was being reset and we put forward our WIZZ500 strategy, to become a 500 aircraft airline by the end of the decade. The reality is that COVID-19 forced the acceleration of major fleet decisions within the airline industry, leading to the retirement of older and less fuel-efficient aircraft.
Significant lessons have been learned and there is no doubt that all parties in the airline supply chain will be seeking to develop new ways of working that embed resilience into contractual agreements. However, the challenge for the industry is this: do we go back to the previous status quo or embrace the opportunity to create a better and more efficient ecosystem, rethinking and realigning to the needs of our customers, without over-reliance on government-backed legacy business models?
Rebooting technology’s role in aviation
Customers have enjoyed decades of airline travel at ever reducing costs, but there are emerging geographies where new customers can only access air travel for the first time via ultra-low-cost carriers. How can we balance the need to connect more people, connect more communities and allow them to improve their economic prospects, with the need to reduce our carbon footprint?
Technology in combination with the business model is part of the answer. Today, the industry would reduce emissions overnight by 34 percent if it adopted the technology and business model of Wizz Air. With full fleet conversion to the current available best technology, Wizz Air intends to further reduce its carbon emission intensity by 25 percent by the end of the decade. In the next decade, better hydrocarbon-based engines, electric and hydrogen are all possibilities. But investment in new technology needs to be encouraged, not throttled, by policies. It’s clear to Wizz Air that taxes/fuel taxes need to focus on emissions, rather than other metrics, as only that way can governments force the pace of technological change.
In the past two fiscal years, which were loss-making for the airline, Wizz Air paid around 20 percent of revenue on taxes unrelated to profits or the people it employs. Of these taxes, more than 70 percent was based on how many people we transported rather than how efficiently we transported them and to our knowledge less than a few percent of these tax proceeds was invested in enabling infrastructure for a carbon net zero future.
However, the current thinking that allows tax breaks for long haul operators and highly polluting connecting traffic, and which therefore favours the current status quo of inefficient carriers and airports, needs to be challenged.We would encourage non-corporate income or employment taxes to be designed to incentivise lower fuel technologies and business models.
Coming through the clouds
There are also inefficiencies that need addressing, such as slot policies that favour incumbents and encourage half empty flights, that simply can’t withstand any rational economic, business or sustainability analysis unless the core goal is to stifle competition. We would encourage regulators to examine these structures closely, both through an economic and a sustainability lens.
We also see a significant opportunity to fundamentally rethink how airspace is controlled in Europe. At present, ATC strikes in key overflight areas like Italy or Poland, not only cause major disturbances for our customers, but they increase ticket prices and emissions, as flights paths are adjusted and lengthened by industrial action. As we emerge from the COVID-19 crisis, when so much has been achieved in realigning fleets and emissions characteristics, there is an opportunity to rethink how all players in the airline value chain, including regulators and governments, can meet the needs of our customers, while addressing the fundamental sustainability issues that face the industry.
Portugal is not only a country known for its amazing and unique history and cultural heritage. Portugal is also famous for its hospitality, gastronomy and beauty. It is a country with 3,000 hours of sunshine per year, 850km of splendid beaches bathed by the Atlantic Ocean and a mild climate that every year guarantees Portugal as one of the best holiday destinations in Europe. The Portuguese are proud of their traditions as well as their ability to add modernity in perfect harmony with them. This unique blend of old and new is especially noticeable when it comes to the superb cuisine, restaurants and new chefs, the fine wines, and the unparalleled hospitality services.
However, it is not just these things which mark Portugal out as a choice destination. As one of the most developed nations in the world, Portugal boasts excellent higher education institutions and one of the best public health systems in the world. Portugal ranks as one of the safest countries, it is politically and economically stable and is also open for business. Events like websummit, and several others related to IT companies and start-ups, are placing Portugal as one of the best IT hubs in all of Europe.However, what is really making Portugal stand out as an investment destination for non-European families is the well-structured Portuguese Residency Programme by Investment, also known as Golden Visa. The Portuguese authorities launched this residency programme in 2012 to attract investment, and in the last 10 years it has seen more than €8bn of investment from foreign investors, with an average of 1,000 investors per year.
A better future
In a world where uncertainty has become the new normal, high-net-worth individuals are increasingly seeking security and freedom of movement. Amid the pandemic fallout and conflict in Ukraine, high-profile non-European investors are ensuring a better future for themselves and their families in the EU by taking advantage of Portugal’s highly-coveted residency programme by investment.
The Portuguese residency permit programme is a scheme that grants investors access to Portuguese residency through investment, starting at €280,000. Investors and dependents are required to stay in Portugal for just seven days a year, on average. In addition, investors when approved on the residency permit programme immediately gain the use of Portugal’s public hospitals at no charge, as well as access to European universities and job markets. The programme not only allows investors and their family members to travel freely, work, live and study in all Schengen countries, but it is also the only programme in Europe that allows them access to European citizenship in as little as five years without the need to relocate.
The Portuguese passport consistently ranks among the most powerful and travel-friendly, granting visa-free access to more than 170 countries. Applying for a Portuguese golden visa, therefore, brings a wealth of opportunities – from exciting business prospects to long-term plans for retirement plus education and a career for the next generation.
In Portugal, there are several options of investment in order to obtain the Golden Visa residency permits. However, investors have been most interested in Portuguese real estate, due to the huge returns the market is providing, both on rental income and capital appreciation. With real estate, investors are required to make investments starting from €280,000; or alternatively, Golden Visa applicants can access the scheme through investment in a Portuguese investment fund – with a minimum value of €500,000.
Since January 1, 2022, the rules of the programme changed and applied geographical restrictions on the qualifying areas for real estate investments. Residential properties are now only available for investors in the interior of Portugal and its islands. Therefore investing in popular cities such as Lisbon or Porto is only possible if the investment is in commercial/non-residential properties, like offices or shops.
The new rules actually broaden the geographical availability to the interior of Portugal and to popular islands such as Madeira and Azores, where PTGoldenvisa has been offering several profitable projects that guarantee a title deed for investors and rental returns. These locations are now attracting local and international developers, to build residential projects, in order to offer solutions for the international community. The amazing and historical villas of Portugal, filled with culture and traditions, are now finally being discovered by foreign investors.
Portugal is definitely a destination where one should invest. It is not an option anymore, it is a must have. Portugal is without doubt one of the most competitive destinations for investment migration in the European Union. Focused on ensuring safe and profitable business investments, PTGoldenvisa offers a full integrated service support to investors willing to apply for the Portuguese residency permits and citizenship. PTGoldenvisa is a credible, reliable and experienced company in the Portuguese market managed by local, experienced business managers with a track record of more than 150 successful applications per year.
As we gradually put the spectre of coronavirus behind us, the one thing that has undoubtedly defined the post-pandemic era is the huge proliferation of retail traders and investors in financial markets. Indeed, in terms of sheer quantities, the number of ordinary people moving into a wide variety of financial instruments is nothing short of unprecedented. To put things into perspective, Citadel Securities estimates that retail players now account for around 25 percent of the total stock market. In developing markets, however, these figures are even higher.
While this impressive growth in equities is definitely noteworthy, the undisputed leader in terms of attracting new capital has been cryptocurrencies. Following a whirlwind 2021 that saw them hit previously unimaginable all-time highs, cryptocurrencies have enjoyed newfound popularity among institutional and retail investors alike.
Looking at the current economic climate, it’s only natural that an ever-increasing number of Joe and Jane Bloggs would be more willing to entertain risk-on options. With inflation now in the double digits and savings accounts rates effectively in negative territory, the lure of massive gains in the stock and crypto markets is very strong. In fact, it would seem that even the most conservative of savers have been tempted by the huge returns these markets have generated in recent years. In this article, we’ll be looking at what is behind the hype encircling the financial markets right now, along with methods of maximising one’s potential returns as a trader or investor.
Forget the past
Proper financial planning and saving money have been inextricably linked for decades, but the new age of near-zero interest rates ushered in after the Great Financial Crisis of 2008 had already begun to challenge that paradigm. Fast forward to 2022, and virtually all the major currencies are now in the grip of very high inflation. As a result, holding cash savings for the long term has become nothing short of financially ruinous. If we look at things in the wider context, consumer prices for everyday items are rising at a rate of at least 10 percent. Meanwhile, even the most attractive savings accounts are paying a maximum of two percent per annum on deposits. Viewed through this prism, you don’t need to be a qualified public accountant to work out that your total wealth is actually shrinking by more than eight percent each year.
It’s no secret that some of the biggest returns one can make come from long-term investing
In contrast to the amazing returns seen in the stock market last year, the increasing draw of financial instruments is self-evident, even after allowing for the gains wiped off by the significant correction we have seen since the Fed started to tighten its monetary policy. No doubt, many of the new entrants to the stock market were somewhat hesitant at first, but now they are purchasing ETFs, indices and even individual equities with impressive confidence. While the US regulator is definitely trying to bring inflation under control, it could take many months and several rate hikes to achieve. Until then, securities will remain an indispensable part of any working-age person’s portfolio.
The digital switchover 2.0
If you have been casting even a passing eye at the financial markets over the past two years, you will have surely seen the extent of the hype around crypto. This fledgling-no-more asset class made headlines in 2021 for rocket-fuelled growth, increased utility and widespread adoption.
Naturally, this market has been far more volatile in its swings than stocks have. As a result, gains have been far more spectacular. However, the flip side of this is much greater uncertainty. For example, despite being up over 90 percent at one point this year, BTC is currently down over 40 percent from this recent all-time high. Nonetheless, now that many institutional investors are more or less sold on the need for crypto allocations, we can safely expect multiple growth cycles to come for this still relatively young instrument class. In fact, despite this current downtrend, many large pension plans, including the Houston Firefighters’ Relief and Retirement Fund, are actively buying up digital currencies.
The other key attraction of crypto is its utility, including as a store of value. In spite of cryptocurrencies’ inherent volatility, many people still tout them as potential hedges against inflation. This perception is thus seeing increasing numbers of people adding bitcoin and other non-inflationary cryptocurrencies to their portfolios in line with typical gold allocations. The utility of digital currencies and the blockchain in general is even gaining traction in the upper echelons of government, as a raft of nations prepare to release their own central bank digital currencies (CBDCs), which are basically digital versions of their existing fiat currencies. Until government-backed stablecoins go live, there are, of course, various private algorithmic stablecoin projects like Terra and Tron that offer a quick and easy way to buy and hold US dollars.
Beware, though: there are still a lot of scammers operating in this largely unregulated space, and you would do well to seek out a reputable broker like Libertex, which has a user-friendly app that enables you to trade your crypto CFDs from any device.
Sorting the wheat from the chaff
As trading and investing have gained in popularity over recent years, the retail market has become inundated with a plethora of firms offering financial and brokerage services. Sadly, not all of them are as reputable as you might expect, and your choice of broker can therefore make a huge difference to your potential returns. Libertex offers commission-free crypto CFD trading, which means its users only pay the spread (the difference between bid and ask price) when buying or selling digital currencies on the Libertex platform. By way of contrast, many of its competitors will charge transaction, exchange and commission fees on every single purchase or sale of cryptocurrencies.
Naturally, the impact of these practices is exponential and can ultimately reduce the funds that are used for investing by a significant margin. What’s more, since many new crypto investors are predominantly holders of stocks or other more traditional instruments, Libertex provides the added comfort and convenience of enabling users to store their entire portfolio in one easily accessible location. Libertex has been connecting ordinary people with a whole host of different financial markets for almost 25 years now and is able to consolidate all your holdings in its user-friendly, multi-award-winning mobile or desktop app.
Diversification in all things
We all know how exhilarating and exciting short-term trading can be. The hands-on action involved in frantically changing pending orders, the rush of seeing price changes in real time. But all of that comes at the cost of exponentially higher risk. It’s no secret that some of the biggest returns one can make come from long-term investing.
Libertex recognises this reality and wants to build sustainable and mutually beneficial relationships with its clients. It was with this goal in mind that the company created its Libertex Invest account type. Libertex Invest enables users to make long-term purchases of stocks, completely reducing any additional charges except purchasing the actual shares. That means there are no transaction fees, commission or other hidden costs. Clients can even receive dividends on their stock holdings. This means you can buy and hold blue-chip stocks like Microsoft, Apple and Tesla or even indices like the S&P 500 or Nasdaq under some of the best possible conditions in the industry.
Even the most dedicated traders have to admit that it’s always smart to have at least some of your eggs in a lower-risk basket, just in case. This being the case, the brand-new Libertex Invest product now means you can keep your active trading and passive investment portfolios both totally separate and yet conveniently interlinked while still enjoying the best possible terms for each account type.
70.8 % of retail investor accounts lose money when trading with this provider. You should consider whether you understand how derivatives work and whether you can afford to take the high risk of losing your money.
After successfully riding out the first few waves of COVID-19, Sri Lanka approached 2021 with cautious optimism about the future as global economies began opening up and worldwide trade links were restored. Further aided by the Sri Lankan government’s aggressive vaccination roll out, the country geared up for a quick return to normalcy. These efforts, coupled with strong decisive action by the Central Bank of Sri Lanka to support the private sector and also assist the banks to manage the negative effects of COVID-19 related disruptions, saw the Sri Lankan economy grow by 3.7 percent in 2021, a sharp contrast to the contraction of 3.6 percent reported in 2020.
Despite these positive signs however, the fragility of Sri Lanka’s economic recovery was brought into question on the back of lingering concerns regarding rising inflation, erratic currency fluctuations and rapidly depleting foreign exchange reserves amid the backdrop of the country’s mounting debt burden. Even with all this in the background, the country’s banking sector continued to play an anchoring role in fuelling growth and supporting greater economic stability. Notwithstanding pandemic-related negative headwinds, the banking sector as a whole recorded noteworthy credit expansion, indicating that the country’s economic revival was solid.
Relief measures
With Sri Lanka on post-COVID reset mode, Sampath Bank demonstrated a strong focus on customers and employees, and showcased its resilience and ability to grow safely and sustainably. Renewing its commitment to customers, the bank took immediate steps to implement the government mandated relief measures to assist COVID-19 affected individuals and businesses. A total of LKR 10.5bn ($30m) worth of disbursements were made under the Saubhagya Renaissance scheme up to the end of 2021, while all eligible customers were granted the debt moratorium extensions announced by the government. Over and above these government mandated measures, the bank continued with its own efforts to support businesses and individuals affected by the pandemic induced economic downturn.
From a business perspective, the bank moved determinedly ahead with phase II of the Triple Transformation 2020 (TT2020) agenda. In this second phase, the focus was pivoted on three pillars: growth, risk and cost. The growth pillar was centred on seizing opportunities presented by the low interest rate environment, with special emphasis on driving credit growth across the SME sector and in the green financing domain.
Responding to the heightened demand for working capital from SMEs keen to restart their operations after the COVID-induced lull in economic activity, the bank pushed ahead with its ‘Diriya’ loan scheme – Sampath Bank’s flagship product targeting the SME sector. In parallel, lending activities were also accelerated on the back of strong encouragement by the government to increase the proportion of renewable energy in the country’s overall energy mix.
Groundbreaking development
Having been in the business for the past 34 years, Sampath Bank has a well-established track record for digital excellence. In 2021, the bank leveraged these capabilities to launch ‘Touchless Cash Withdrawals’ (TCW) at ATMs. The TCW technology, with its contactless feature, allows users to withdraw cash from an ATM without ever having to physically touch the surface of the machine, is perhaps the most groundbreaking development to have been unveiled in the local banking industry in decades.
It was also seen as a conscious response to the urgent need for contactless transactional capability in the COVID-19 environment. Based on this same rationale, the network of digital interfaces was further expanded to empower customers to perform more and more of their banking activities remotely. Some notable milestones included the roll out of digital on-boarding across multiple platforms, including Sampath Vishwa and through the e-enrollment tab on the corporate website as well as Sampath Bank’s Virtual Teller Network. A dedicated video conferencing facility was also implemented to enable corporate clients to open business accounts.
From a risk perspective, the focus was on strengthening risk fundamentals to take cognisance of the tenuous and often unpredictable operating environment. As part of the overall risk management approach, strong emphasis was placed on increasing the integration between the bank’s physical and digital systems in order to build backend system resilience, while additional investments were made to fortify the bank’s information security systems.
Users can withdraw cash from an ATM without ever having to physically touch the surface of the machine
Meanwhile, the cost pillar was driven primarily through digitalisation and process automation initiatives guaranteed to deliver dual benefits in terms of improved operational efficiencies as well as lower paper usage, collectively contributing towards lowering costs. In testimony to the success of these efforts, the bank’s cost-to-income ratio (excluding taxes on financial services) declined significantly to 35.3 percent in 2021, from 43.5 percent in 2020. Continuing to prove its resilience and ability to remain sustainable even in times of uncertainty, Sampath Bank produced strong financial results in 2021. Having crossed the trillion rupee mark in the previous year, the bank’s asset base edged up to Rs. LKR 1.2trn ($3.4bn) as of December 31, 2021, a solid 8.1 percent increase year-on-year.
Meanwhile profit after tax (PAT) of LKR 12.5bn ($35.7m) and profit before tax (PBT) of LKR 16.8bn ($48m) for 2021, also indicate significant growth of 55.2 percent and 50.7 percent respectively compared to 2020. In light of this performance, the board declared a cash dividend of LKR 4.25 per share for the year ended 2021, ensuring the continuity returns to shareholders.
Looking beyond the numbers has always been central to Sampath Bank’s service philosophy. The pandemic only served to strengthen the bank’s resolve to reorient its approach to address the needs of employees and the wider community.
While continuing with all planned employee development initiatives, the focus on employee safety was significantly deepened in this past year. For the safety and wellbeing of its employees and their immediate families, the bank undertook to cover the cost of PCR testing, the cost of intermediary care including ambulatory charges and if required, critical care for those testing positive for COVID-19.
Community initiatives
Unwavering in its commitment to the community, Sampath Bank proceeded with its flagship community initiative – the ‘Wewata Jeewayak’ tank restoration programme where three new projects were undertaken in 2021 for the benefit of over 4,000 rural paddy farmers in the dry zones of Sri Lanka.
Since it was impossible to run the traditional ‘Sampath Saviya’ workshops in 2021 due to pandemic restrictions in place, the bank hosted webinars for SMEs. At the same time, through the ‘Hope for a Life’ programme, the bank made significant donations of essential medical equipment to state hospitals around the country to help in the fight against COVID-19.
By solidifying its track record of solid financial results and responsible operations, Sampath Bank has yet again proven that it has not just the capability and the courage to navigate unforeseen circumstances, but also the sheer determination to succeed against all odds.
The forex market is one of the biggest and most liquid of all financial markets. Its daily trading volume reaches $6.6trn. Recently, it has become more easily accessible to prospective traders, as it offers a wide variety of possibilities in trading. Broker companies play an essential part in this type of market by providing traders with platforms through which to trade on, special trading courses, educational materials, tips on trading, and much more. However, in a world that deals in the exchange of capital; security, trust, and reliability are paramount – yet not always enforced. As such, two types of brokers emerge – regulated and nonregulated.
Nonregulated brokers have always been an opposition that regulated brokerages, like LegacyFX, face, as many times they lack the same levels of professionalism, respect, and concern for client resources, time and needs. Therefore, it is important for every trader to fully understand each one before deciding which type of broker to trade with.
The preference of one broker over another mainly depends on whether invested capital is safe and protected against fraud and risk. However, there are other points to consider which include the main differences between a regulated and a nonregulated broker; why nonregulated brokers exist; how this influences lead generation, verification, and conduct; what this means in terms of transactions; how this affects supplied offerings; and how our brand ensures a better trading experience by adhering to a core value of transparency, which is significant when it comes to using a broker.
Regulated versus nonregulated
Contrary to a nonregulated one, a regulated broker is duly registered, authorised, and governed by a local financial conduct authority – depending on the region of registration, wherever applicable, based on where the broker wishes to conduct business from and draw clientele.
For instance, as a regulated broker, the LegacyFX brand is registered under multiple regulatory bodies such as, VFSC, CySEC, BaFin, and FCA. Due to the lack of rules, laws, supervision, and monitoring, a nonregulated broker is free to conduct themselves and execute transactions and trades as they see fit. As regulators have no control over the actions of an unlicensed broker, trading with them comes with many disadvantages and higher risks with capital, accounts, and trading actions not being secured with traditional methods.
Why do nonregulated brokers exist?
The answer is simple. A major hindrance for many brokers is obtaining licenses, the process of which is costly and arduous. In addition, circumventing licenses allow nonregulated brokers to avoid paying taxes, service charges and audits. Some brokers even go as far as to obtain fraudulent licenses for generic activities unrelated to the financial services and products they actually supply. Knowing this, why then do traders choose to use the services of a nonregulated broker? There are a few reasons, one of which is that many nonregulated brokers rely on promises of immediate results and guaranteed profits.
This resonates with traders who are influenced solely by emotion and greed, those with a ‘get rich quick’ mindset. Also, some nonregulated brokers provide a broader range of products and services, as they can afford to make higher-risk transactions.
Finally, such brokers typically do not limit who they solicit nor have geographical restrictions on client accounts.
Client classification and conduct
Following this, there is no place for comparison when discussing client classification and conduct via a regulated firm versus a nonregulated one. Since the former is monitored by regulatory organisations, they need to follow and consider specific rules regarding customer solicitation and conduct if they aim to provide financial services to them. For instance, concerning potential traders our company targets, we avoid soliciting and accepting clients from high-risk countries such as Iran, Iraq, Sudan, and Afghanistan, to name a few. Another restriction for us comes from the US’s strict regulations on financial services. As such we steer clear of clients with proven connections to the US. Such restrictions are supplied to us not only by the regulators that govern our actions, but also the various financial institutions, banks, and credit card processors that we work with.
Now more than ever, interacting in financial markets requires full disclosure
In accordance with our regulatory requirements to maintain KYC (know your client) compliance, when a client opens a demo or real account through us, LegacyFX collects personal data. KYC is a term that refers to the process of verifying the identity of a person or a business in the financial industry. To maintain the highest levels of scrutiny, we employ the use of SumSub – an automated KYC reviewer utilising machine learning and artificial intelligence to automate checks and verification of ID documents, proof of residence, and proof of payment compliance.
Another rule that our company complies with is anti-money laundering and counter-terrorism financing. According to this requirement, LegacyFX has the right to block money transfers or accounts if it has sufficient grounds to believe that the internal transactions are in breach of the act.
Finally, concerning traders, we, as a regulated broker, are not authorised to take any actions that may influence a trader’s decisions. All signals for trading that we present are not, nor are ever intended to be, a proposition to enter any trade or forex transaction. They should not be construed as direct trading advice. All recommendations offered by our agents do not constitute an official opinion or call to action, as our representatives are presented in a consultative capacity only.
In short, regardless of the information we relay to our clients to assist them in their activities, the final actions carried out are ultimately a client’s choice alone and require client approval – conditions that all our clients must inherently understand and are notified of throughout their interactions with us.
Transparent transactions
The same ideology applies to transaction operations handled by a regulated and a nonregulated one. Nonregulated brokers many times do not follow and consider specific rules regarding customer transactions. A regulated broker is responsive to processing requirements, transaction quality control and verification checks. One example related to a regulated broker’s quality control is verifying that its customers’ transactions originate from the customer themselves and can be completed with sufficient cash. With LegacyFX, traders can use a variety of payment methods such as credit cards, wire transfers, e-wallets and cryptocurrency exchanges, all of which are thoroughly screened and reviewed by our dedicated compliance department.
Another prerequisite that regulated brokers maintain is they should be liquid enough to be able to repay their clients in case of withdrawal requests. Maintaining proper accounting and bookkeeping practices, along with opening segregated accounts between business money and client funds, allows licensed brokers to maintain withdrawal options and transaction security. Such accounts are primarily held in top-tier financial institutions, protecting funds by being securely held. We exercise various security checks during withdrawals processing. We only process withdrawals that are related to the source of the original deposits, as a protection for all involved parties against fraud, money-laundering, and terrorist financing. Through all these ways, traders know where they stand with their transactions.
Supplied offerings
Another advantage of investing with a regulated broker, rather than a nonregulated one, is that the first is more motivated to offer traders a better and smoother experience. A licensed broker is more inclined to deliver greater amenities and customer service, to satisfy and meet client needs and requirements. We support our clients with information about spreads, available trading information and tools, and even help with technical trading issues. For instance, we have a dedicated customer support department available 24 hours a day to assist clients with login issues, installation problems, trading conduct, tools information, or deposit and withdrawal issues. Traders can get in touch with our support department either by phone, email, or online chat.
Furthermore, our site provides educational materials, videos, e-books, and live webinar training sessions, that assist even the most novice of traders. In addition, we offer one of the most advanced trading platforms – MetaTrader 5 (MT5) – where different instruments, risk management features, and price discovering tools are at a trader’s disposal. We also engage our clients through our social media presence by running campaigns with informative content, along with email and pop-up blasts. Finally, LegacyFX offers traders various promotions such as PAMM services, a loyalty membership programme, and affiliate and IB deals, to name a few.
Making an informed decision
Overall, regulated brokers are more transparent than nonregulated ones. But what does this mean? As LegacyFX’s core value, we have truly mastered the concept of transparency. We do this by ensuring that our clientele receives all the necessary information to make a reasonable and well-informed decision about trading or interacting with us.
We offer detailed and up-to-date web pages about our products and services and remain open and easily available for all queries or concerns. Our legal documentation covers all policies and regulations intended to protect our own and client assets. By supplying such essential information, we adequately warn traders before entering into business with us that trading involves risk.
Now more than ever, interacting in financial markets requires full disclosure. Poor or nontransparent information can be detrimental not only to traders but also to brokers. Studies have shown that when quality assurances are not properly employed, customer loyalty, transaction, and execution rates drop from 80 to 40 percent. Overall, it is clear how LegacyFX (int.legacyfx.com) adheres to industry standards and attempts to be as transparent as possible for our clientele, by keeping track of global trends and adjusting to change whenever needed.
Taiwan is experiencing a period of change. While the birth rate has been declining for decades, 2020 was a significant milestone, with deaths outnumbering births for the first time. It seems inevitable that Taiwan will soon join nations such as Japan, Germany and Italy in becoming a ‘super-aged’ society, one in which more than one in five of the population is aged 65 or older.
Here at Fubon Life, we are ready to meet this challenge. In an era of change, the only way to succeed is to innovate and this year the company will focus on four strategies to achieve our goals for both people and planet. Led by our brand concept, ‘Be Positive and Enrich Lives,’ we will be strengthening our organisational development through sales training; promoting insurance and retirement planning products to suit a super-aged society; putting sustainability at the heart of our supply chain; and enhancing remote services and digital competitiveness.
While the pandemic has continued to affect the domestic and international markets in recent years, the economy is now steadily recovering. With our diversified channel operations, product strategies and sustainability initiatives, Fubon Life created outstanding operating results in 2021, with our net income after taxes (NIAT) exceeding NT$100bn ($3.4bn). Furthermore, our cumulative annual consolidated first-year premium income reached NT$165.6bn ($5.6bn) and our consolidated total premium income reached NT$507.2bn ($17.2bn), firmly establishing Fubon Life as the market leader in the Taiwanese life insurance sector. On top of that, Fubon Life has abundant resources from Fubon Financial Holdings to provide the public with multi-faceted financial and insurance services. We will continue to deepen the value chain of the insurance industry with our people-oriented approach.
Putting people first in a digital world
With mobile digital technology penetrating ever further into daily life, it should come as no surprise that the online insurance market continues to grow. In this new digital world, however, technological advances are only as helpful as the human teams working alongside them. Technology can improve efficiency, but it’s our staff’s professionalism and warmth that make our services what they are.
Responding both to the COVID-19 pandemic and the wider trend towards digitisation that preceded it, Fubon Life launched several key services to help our staff develop stable and deep customer relationships, serve customers remotely and promote business without interruption. These include the FBFLi smart business management system, the FBSIR online policy health check system and FBVIP video insurance application services, which provides insurance services to all Taiwanese people more quickly and without geographic restriction.
As part of our goal of achieving a zero contact and completely paperless service, in September we are hoping to roll out voice-to-text technology (STT) to enable telephone insurance services, and we have begun developing AI technology to speed up the underwriting review process so as to provide customers with the most rapid, convenient and intuitive insurance services possible. Fubon Life will also continue to cooperate with the relevant authorities to promote projects such as insurance passbooks, consortium blockchain and the insurer-hospital link 2.0 for claim application.
Customers are seeking more diverse cover that protects them from all eventualities – we responded by creating a five-in-one product that includes liability, medical, long-term care, retirement and inheritance insurance. To better meet the needs of our ageing society – in particular the retirement preparedness gap – we are developing competitive investment-oriented insurance products with payment systems that allow customers to accumulate assets in installments. The age range will be expanded to help people plan for their retirement and inheritance effectively and we will continue to offer retirement capital repayment products that encompass a diversity of needs.
Customers are seeking more diverse cover that protects them from all eventualities
The insurance value chain is centred on people, and Fubon Life has fully implemented the principle of fair treatment of customers no matter their circumstances. In 2022, with reference to the ‘Guidance for Firms on the Fair Treatment of Vulnerable Customers’ released by the UK’s Financial Conduct Authority, Fubon Life will focus on the elderly and vulnerable – continuing to provide products and services that meet their needs as well as developing new products for our senior customers. These will include a dedicated customer hotline, online text chat, microinsurance and a whole range of other friendly financial and insurance services. Such an approach will be key as Taiwan joins the ranks of the super-aged societies.
This commitment to personal wellbeing extends to our staff too, many of whom are young people with exactly the same concerns for the future as our valued customers. A couple of statistics to give a sense of our workforce: the overall recruitment target for this year is expected to exceed 6,000 employees, while in 2021 nearly 50 percent of employees promoted to the position of sales managers were under 30 years of age.
The company has also been recognised as the most desirable life insurance employer for young people 11 years in a row by RMi Magazine. This is thanks, in part, to our generous employee pension scheme (the leader among financial holding companies for 13 consecutive years), as well as the fact that employees benefit from insurance coverage for their families and can participate in our employee stock ownership trust to build a happy life after retirement.
New parents, meanwhile, are entitled to a maternity bonus of NT$100,000 (£3,400), an annual childcare subsidy of NT$15,000 ($510) per year for children up to the age of six, and maternity leave that is superior to that offered by the state. Fubon Life also provides a complete training and counseling system, smart digital tools and excellent employee benefits, inviting young talent to work together to build their careers with us.
Leading the way on ESG
Fubon Life continues to develop its responsible investment strategy and alternative energy investment plan, with our green investments totaling NT$1.8951bn ($64.37m) in 2021. This year we will strengthen our carbon reporting, launch an internal carbon pricing operation, and introduce a science-based target for carbon reduction of eight percent by 2025. In terms of corporate sustainability reporting, we will adopt more stringent standards for corporate self-assessment, and incorporate SASB sustainability accounting standards and TCFD climate risk financial disclosure indicators.
Fubon Life’s green finance strategies have been adopted by more than 460 sales agencies and 20,000 tied agents across Taiwan. Last year saw Fubon Life focus on river conservation and water resource issues, cooperating with the Society of Wilderness to lead Taiwan’s enterprises in launching a three-year continuous quick screening survey of river waste.
In 2022, Fubon Life will continue to make an impact in line with Fubon Financial Holdings’ ‘Run for Green’ initiative, creating ‘Work for Green,’ a brand new sustainability innovation mechanism that links sustainability goals with performance.
This year, we will also work with our tied agents and policyholders to plant more than 10,000 trees in cooperation with the Tse-Xin Organic Agriculture Foundation, choosing tree planting sites with the goal of restoring the natural ecology. Sites include Fushoushan Farm in Taichung, which is located in the upper reaches of the Dajia River within the catchment area of the Deji Reservoir, one of the main water sources in Central Taiwan. By planting trees here, we aim to stabilise the reservoir’s water storage capacity, which in turn helps to maintain the water temperature at 17°C, thereby safeguarding the habitat of Taiwan’s landlocked salmon. Another tree planting site is Tainan Taijiang National Park, home to the largest lagoon in Taiwan. Our project will help reverse the effects of climate crisis-induced sea level rises in the lagoon by preventing further loss of sand from the sand bar at its mouth.
We take our social responsibilities seriously too. To respond to the needs of our rapidly ageing population, Fubon Life is working with the Taiwan Association for Dementia, the Federation for the Welfare of the Elderly, the Formosa Cancer Foundation, the Taiwan Foundation for Rare Disorders and other public welfare partners, advocating for issues including better access to medical care for elderly people in remote areas. The company has also been actively engaging with county and municipal governments, local communities and universities to expand the scope of care and promote social inclusion to achieve the UN’s Sustainable Development Goals. In view of the health risks posed to the nation by the pandemic, Fubon Life continues to play an educational role, building universal awareness of the importance of risk protection.
Beyond Taiwan
We are optimistic about the future of Taiwanese society but we are looking beyond our borders too. Fubon Life’s operations in overseas life insurance markets were fruitful in 2021, with our subsidiaries in Korea, Hong Kong and Vietnam all performing well. We will continue to leverage our strengths and develop insurance products targeted to local markets, while prudently evaluating appropriate investment opportunities to expand into the Asian market. By adopting such an approach, alongside our ambitious strategies in Taiwan, we move steadily towards our goal of becoming one of Asia’s foremost financial institutions.
Over the past two decades, tourism has become one of Morocco’s main assets. It represents a major component of the country’s economy and generates an average of seven percent of the national GDP. Before COVID-19, Morocco was the leading destination in Africa and was in the top 30 of world destinations. The pandemic hit the Moroccan tourism economy hard. Various measures and mechanisms have been put in place by the Moroccan government to support a quick relaunch of both tourism and investment to help it return stronger than it was before the pandemic.
What kind of mechanisms will help relaunch the tourism investment sector in Morocco and how will the Moroccan Agency for Tourism Development (SMIT) support them?
The government has put in place an emergency plan of €200m to aid the revival of tourism, with €100m set aside to help hotels upgrade their product and quality. This emergency programme is a decisive lever for boosting investment. As the sector has been hit by a considerable drop in hotel occupancy rates, this financial mechanism will allow investors to participate in its revival. To improve the quality of service, it will be necessary to quickly bring hotels up to standard by re-considering the structural loads, training qualified staff, and carrying out digital transformation.
SMIT is a government body with expertise in tourism investment and hospitality. It encourages and coordinates the development of the Moroccan tourism industry so that it benefits all stakeholders. To reboot tourism, SMIT will assist hotels who have expressed their interest in being supported by financing improvements including renovations, maintenance of equipment and spaces, training, upgrading of standards (international, environmental, safety, hygiene, etc), and digital transformation.
SMIT is playing an essential role in the tourism sector’s recovery, continually mobilising to adapt its solutions. Its challenge for the year is to accelerate the implementation of structural projects with high added value for the tourism ecosystem, to amplify actions to promote national and international investments, and to boost the development of emerging regions and territories. Also, a wide range of incentive measures are planned through financial support initiatives, state subsidies and investment agreements.
How will SMIT actively participate in improving the business environment in Morocco and what kind of tourist investment incentives are there?
Located at the crossroad of cultures, an African hub with more than 40 connections to the continent and less than three hours’ flight from the main European capitals, Morocco is a safe, stable and secure destination with a GDP averaging 3.6 percent growth since 2010.
Morocco has numerous qualities that make it appealing to investors and visitors alike: solid infrastructures, an ideal climate all year long, a rich and diverse culture, and stunning landscapes. As such, the tourism sector has long been a crucial economic driver in the country.
Tourism generates significant employment opportunities, particularly for young people. The sector is also a valuable foreign exchange provider for Morocco’s trade balance. The Moroccan government has long recognised and prioritised tourism as a key sector. As a result, the industry benefits from various government incentives, both in terms of financial contributions and administrative support. The chief aim of these policies is to help ensure that tourism growth delivers broad and equitable social, economic and environmental benefits for the population. Morocco is an investment-friendly kingdom. In fact, it is easy to set up a business in Morocco even as a foreigner: there is no restriction on capital investment; no restrictions on repatriation of capital and profits; no restrictions on land ownership; and ease in terms of staff recruitment.
The tourism sector is a government priority with benefits such as prime location government land at an attractive price; private land purchase support; support for project expenses; total exemption on custom duties; and co-investment with Morocco senior partners. There is also a fund guaranteeing medium and long-term bank loans intended for the financing of accommodation and/or tourist projects that can cover up to 60 percent of the nominal value of the loan.
In addition, attractive investment incentives are in place, such as total VAT exemption on capital expenditure (for all goods, equipment and tooling acquired both in Morocco or those imported); total corporate tax exemption for the portion of the turnover denominated in foreign currency, for a period of five years from the start of the company’s operations; a reduced corporate tax for the portion of the turnover denominated in foreign currency for an unlimited period after the five years from the launch of operations (versus a standard corporate tax); and a reduced VAT rate of 10 percent (on all hotel accommodation sales for an unlimited period).
The government has also simplified all the prerequisites to enter the Moroccan market by creating dedicated institutions to assist investors in all aspect of their projects. These include SMIT, whose role is to promote the destination in terms of tourism investment and support the investors during the investment process. In fact, SMIT orients investments towards high added value projects for both the investors and region, creating sustainable and inclusive tourism components.
Tell us about the origins of the tourism support programme. How will it strengthen the capacities of existing companies and support new project leaders?
As well as its strong impact on the national economy, the pandemic led to persistent social consequences, especially in terms of tourism employment. To limit the effects, it is essential to support the private sector to maintain an investment dynamic, particularly for VSMEs. To this end, there have been moves to make VSMEs a lever for economic development. A support programme for SMEs has been set up as part of a partnership between the Departments of Tourism and Finance and SMIT.
The programme is being developed as a pilot in the Agadir region, to support the profitability of existing SMEs by creating rich, sustainable and diverse experiences. Its objective is to strengthen the tourism entertainment offer, to improve tourism consumption and to improve the attractiveness of the Agadir region (Souss Massa). It is intended for existing SMEs as well as new projects in various tourism fields. However, the focus in this pilot region will be entertainment and innovative projects with the aim of diversifying and increasing them. The programme’s impact on boosting tourism investment will help the socio-economic development of the region through the attraction of 250 new SME investors and the creation of almost 800 direct jobs for the local young population.
What kind of promotional activities has SMIT created to promote the kingdom and its tourism investment opportunities? Have they been successful so far? What do you have planned for the future?
The objective is to showcase Morocco investment potential as well as existing opportunities. Our main goal is to make the destination more attractive to investors and keep the attention of world-class brands. To achieve this, our promotional activities include attending the most prestigious global gatherings of tourism investment and hospitality forums, a specific and tailored communication campaign, the organisation of international events and webinars with high-profile participants, as well as international business meetings, roadshows and inviting guests.
Our main goal is to make the destination more attractive to investors and keep the attention of world-class brands
SMIT’s role is to develop projects that fit within the kingdom’s overall tourism development strategy: to make it internationally attractive by adapting products to each destination to meet tourism trends and needs, as well as those of the investors. These changes must benefit all stakeholders, attracting customers while encouraging investors to optimise their investments. Our promotional activities make the kingdom visible at the international scale. In the years to come we want to maintain the interest of international investors and hotel brands towards the destination.
Our short-term objective is a quick exit of the sector from the fallout of the pandemic. SMIT’s challenge for the future is to accelerate the implementation of structural projects with high added value for the tourism ecosystem, to amplify actions to promote national and international investments, and to boost the development of emerging regions and territories.
Also, Morocco is actively working to become a more attractive destination, through investments in infrastructure and the creation of assets such as an airport, train station, malls, and so on. We want to become one of the leading African and Mediterranean tourism investment destinations, with the goal of recovering market share from investors by offering tourists differentiated products.
Which parts of SMIT are you looking to digitise? How will you make this happen?
We were looking at accelerating digitisation even before the pandemic, with the aim of improving the support level of all stakeholders in the tourism investment process. We want to streamline exchanges, share insights, increase responsiveness, ensure the transparency of operations, disseminate and initiate good practices, and develop operational efficiency. Becoming digital has tremendous advantages such as increasing commitment, obtaining better collective intelligence and gaining in efficiency and decision-making.
This transformation positively affects SMIT’s operating systems and mechanisms, including interactions with stakeholders in internal and external investment, the strengthening of tools with the latest management technology, and the monitoring of investment files. We also plan to create an innovation LAB to monitor, develop and continue the digitalisation of tourism investment. These improvements will help our coworkers be more efficient, work in total transparency and place the investment process and investors at the heart of our concerns.
Home to 130 million people and covering just shy of two million square kilometres, Mexico is a vast nation with tremendous economic potential. For decades, the country has been hotly tipped as an economy ready to boom, with experts predicting that Mexico could emerge as a global powerhouse as far back as the 1980s. Boasting abundant natural resources, a young labour force and enjoying a strategic location that is integrated with North America, Mexico is certainly ripe with economic opportunity. Its 3,000-kilometre border with the US means that it enjoys a lucrative trade relationship with its northern neighbour – worth over $650bn each year – while its impressive manufacturing capabilities make it the sixth biggest car producer in the world. In terms of sheer size, Mexico is among the 15 largest economies in the world, and ranks as the second largest economy in Latin America. So, if Mexico is such a force to be reckoned with, why does its economy continue to underachieve?
Over the past four decades, Mexico has struggled to achieve the levels of growth that economists had once excitedly predicted. Between 1990 and 2019, growth averaged just 2.4 percent per year – less than half of the expected rate for fast-growing developing economies.
“There are a number of deep-rooted and knotty issues that had prevented Mexico from achieving its full growth potential,” explained David Razú Aznar, CEO of Afore XXI Banorte. “From low productivity to a pervasive inequality and the prevalence of a large informal sector, the current administration has been forced to try innovative solutions to a long-standing history of socioeconomic challenges.”
And that’s without mentioning the impact of Covid-19. After decades of lacklustre growth and a pandemic-induced crash, it is safe to say that Mexico is at something of an economic crossroads. But if it chooses to be bold in its Covid-19 economic recovery plan – prioritising financial inclusion, sustainable investments and a strengthened social security net – Mexico will be well positioned for a remarkable post-pandemic transformation.
The Mexican miracle
Over the course of the past century, Mexico’s economy has been largely defined by periods of boom and bust. In the decades after World War II, Mexico pursued an ambitious programme of import-substitution and rapid industrialisation. Seeking to reduce its foreign dependency by boosting domestic production, the government adopted an inward-looking development strategy, introducing high protective import tariffs while launching tax incentives for products aimed at the home market.
This shift towards an industrialised, manufacturing-based economy ushered in a period of robust economic growth, known as the ‘Mexican miracle.’ Between 1950 and 1973, the nation’s economy grew by an average of 6.5 percent, prompting international economists to exalt Mexico as a model for emerging market development. On closer inspection, however, Mexico’s boom may have been more myth than miracle. While investors and business owners profited nicely from the country’s focus on domestic production, Mexico’s average workers didn’t feel the same benefits. Income growth was concentrated among the top 10 percent of households, widening the gap between the country’s rich and poor. By the early 1970s, inflation was rising rapidly, as was the public debt pile. Mexico’s mounting problems came to a head in 1982, when the economy crashed. With its foreign debt then standing at over $80bn and inflation approaching nearly 100 percent, Mexico was forced to turn to the IMF and the US Federal reserve for assistance.
This historic crash prompted Mexico to re-evaluate its stance on trade, shifting away from its previous inward-looking approach and instead taking steps to reduce tariffs and open itself up to international markets. In the late 1980s, Mexico entered into a series of free-trade agreements with other Latin American countries, and joined the North Atlantic Free Trade Agreement (NAFTA) in 1994, signalling that it was open for business. The agreement marked the beginning of what was to be a strong, long-lasting trade relationship between Mexico and the US.
In these times of severe economic hardship, the issue of financial security has never been more important for Mexico and its citizens
By 2003, 80 percent of Mexican exports were destined for the US, showing the significant economic ties that had quickly emerged between the two nations. While this trade relationship proved beneficial to Mexico through the late 1990s and the turn of the millennium, when the financial crisis gripped the US economy in 2008, Mexico’s reliance on its northern neighbour as an export market left it vulnerable to the knock-on effects of the US economic crash. Its dependence on the US market saw Mexico’s GDP contract by 6.6 percent in 2009 – the worst decline of any Latin American economy during the financial crisis. While its GDP has rebounded since the darkest days of the global financial crisis, growth has remained below its potential over the past decade, and despite some efforts to address its vulnerability, the nation’s economic activity has remained largely tied to external forces. But, as almost every nation around the world came to note in 2020, even the most careful and forward-thinking economic planning couldn’t have accounted for a global crisis on an unprecedented scale.
Time for action
We are now over two years on from the first Covid-19 lockdowns, and while many countries are now thankfully entering an endemic phase, the psychological and socioeconomic scars of the pandemic are still being felt worldwide – and will be for some time to come.
“The Covid-19 pandemic produced a global economic and health crisis and Mexico was no exception,” said Razú Aznar. “The health crisis unfortunately generated the loss of human lives, unemployment and a significant economic shock, which made the country face great challenges in the last two years.”
Under President Andrés Manuel López Obrador, Mexico had expanded social protection programmes even before the Covid-19 crisis: the non-contributory pensions for the elderly had reached a roster of eight million people that was expanded to 10 million in 2021 when the age to receive it was reduced from 68 to 65 years old; additionally a comprehensive programme of scholarships for the young was created, reaching a coverage of almost 10 million students in 2021. And several other new programmes benefitted other disadvantaged groups, like rural families who receive support for sowing several species of trees in rural areas. As a result, public social expenditure grew at a real annual rate of 7.4 percent during 2019–21, above its 2013–18 average of 5.7 percent. More importantly, all these supports were kept during the Covid-19 pandemic and, in fact, the payments of several of them were frontloaded, to avoid vulnerable people going out during the most contagious stages of the outbreaks.
We can expect to see a ‘greening’ of pension investments in the years to come
Given that social support programmes were already introduced in the federal budget, Mexico was able to maintain a good fiscal balance during the Covid-19 crisis, which distinguishes it among emerging markets now and constitutes a strength ahead in an era of global financial volatility and high interest rates. Total federal government and public enterprise debt amounts to 53.8 percent of GDP, when several Latin American emerging markets average over 70 percent.
In these times of severe economic hardship, the issue of financial security has never been more important for Mexico and its citizens. In a working paper entitled Mexico Needs a Fiscal Twist: Response to Covid-19 and Beyond, the IMF recommended that Mexico look to strengthen its social safety net as it rebuilds from the pandemic. In order to create a financially secure future for its citizens, the nation urgently needs to tackle its pervasive inequalities and long-standing economic challenges. The pandemic has exposed some of the remaining gaps in Mexico’s existing social safety net, and the dangers for those who end up slipping through the cracks. Now is the time for bold, decisive action – and there are some early signs that Mexico could be learning its lessons from the pandemic and stepping into a more equal and inclusive future.
A fresh approach
In December 2020, President López Obrador signed off on changes to the nation’s pension system, ushering in the most comprehensive reforms to the state pension law in 25 years. Aiming to increase retirement benefits to eligible workers and to boost contribution amounts to levels in line with the OECD average, the reforms should allow pensions plans to become flexible, while also ensuring greater returns for recipients.
“Under the new system, the average Mexican citizen will be required to work fewer weeks over the course of their working life in order to receive their guaranteed pension from the government, which was also increased for low wage workers” explained Razú Aznar. “This is in recognition of the current labour market structure, which sees many workers transition between formal and informal employment during their lifetime.”
“The employer contribution rate to the pension was raised for high wage workers and the government contribution was re-focused towards low wage workers, for whom it was indeed raised,” added Razú Aznar. “It is estimated that under these adjustments of the pension reform the assets managed by the Afores will reach around 56 percent of Mexico’s GDP in 2040. This ratio, already a strong source of internal savings, is currently 18.6 percent and in a scenario without the reform, the assets would only represent 35 percent of GDP by 2040.”
A gender-balanced team of Afore XXI Banorte executive officers
Far-reaching and ambitious, the sweeping changes will seek to address many of the most pressing issues with the outgoing pensions system – with old age poverty one of the most urgent concerns. One of the main recommendations to emerge from the 2016 OECD Pension Review of Mexico was to significantly expand safety nets for the elderly, in recognition of the nation’s high levels of income poverty among older people. Mexico has one of the highest rates of old age poverty in the OECD, and many citizens are forced to work into later life as they lack any formal retirement plan. While barriers to boosting pension coverage certainly still remain – the ever-prevalent informal economy being the most significant – the reforms represent a significant step in expanding Mexico’s social safety net and boosting financial security for the most vulnerable.
Indeed, just as these extensive reforms set out a long-term approach to strengthening financial protections for the elderly, the pensions sector also played a crucial role in the short-term response to the Covid-19 crisis. As mentioned, the Mexican government did take the decision to frontload non-contributory social pension payments for eight months, while workers were also given the option to make partial withdrawals from existing retirement accounts to alleviate loss of income during the pandemic. These withdrawals from private social security pension accounts were carefully monitored by the country’s pension fund managers, known as Afores, to ensure that workers’ assets were not put at risk.
“As Mexico’s largest pension fund, Afore XXI Banorte is proud to have led the delivery of this crucial aid withdrawal scheme,” said Razú Aznar. “It ultimately supported over 448,000 citizens between January 2020 and January 2022, giving them access to vital funds during the most difficult days of the pandemic.”
In the short, medium and long-term, the pensions industry will have a significant part to play in tackling some of the country’s most pressing socioeconomic issues. From pandemic-related loss of income to old age poverty and the challenges of a largely informal labour market, the nation’s pension funds have the potential to be a real force for good when it comes to addressing these urgent issues.
Challenges ahead
The factors behind Mexico’s underperforming growth – while often debated – are complex. Underpinning many of its socioeconomic woes, though, is the pervasive and far-reaching informal economy. According to another OECD economic report on Mexico, approximately 60 percent of the nation’s citizens work or have worked in the informal sector, with many moving between formal and informal jobs over the course of their lifetime. Others, however, will spend their entire working lives in informal jobs – meaning that they will lack access to several branches of social security, will not be entitled to maternity or paternity leave, and will not make pension contributions. This absence of vital workplace benefits, coupled with routinely low wages in the informal sector, leaves informal workers financially vulnerable – particularly as they approach later life.
López Obrador’s government also enacted a reform to the labour codes in order to fight outsourcing practices to elude the payment of full social security contributions. As a result, in 2021 2.7 million outsourced workers were migrated to jobs legally within the firms where they actually performed their tasks, with an average increase of 12 percent of their contributory wage.
“Informality is the main obstacle to achieving a truly inclusive pension system in Mexico,” said Razú Aznar. “While the recent reforms have proven effective in tackling the problem, as pension fund providers we must do our part by recognising the realities of the Mexican labour market, so we need to be able to offer alternative savings for different types of workers. Moreover, we must take advantage of the momentum created by the new universal non-contributory pension policy to think of solutions for enabling the pension industry to partake in it and maximise the economic and social benefits it can bring about to the Mexican workers and labour market as a whole.”
Afore XXI Banorte team at work
While access to the pensions system isn’t exclusive to salaried workers – and the recent reforms will extend coverage further – it can be more difficult for independent workers to begin making voluntary contributions on a regular basis.
“Financial literacy and awareness are absolutely integral to creating a more inclusive pensions system and enabling informal workers to unlock the benefits of making voluntary contributions to their retirement pot,” explained Razú Aznar. “That’s why, at Afore XXI Banorte, we have implemented a comprehensive strategy that aims at boosting financial literacy and at promoting sensible saving habits from an early age.”
Alongside its specialised blog on financial literacy and its eye-catching and informative posts on social media, Afore XXI Banorte also offers a savings option for children and teenagers called ‘PrimerAFORE,’ and manages close to 60,000 voluntary child pension accounts, demonstrating a commitment to promoting healthy financial choices from an early age.
The prevalence of the informal sector is not just a social security issue, but also a challenge to achieving true gender equality. Women tend to be overrepresented in the informal sector, particularly in fields such as domestic work, where an estimated 99.2 percent of workers do not have a written contract setting out their working hours, benefits, or holidays. What’s more, only 45 percent of working-age women are part of the labour force – far below the OECD average – and just 31 percent currently own a pension fund. Taking on a greater responsibility for childcare and domestic labour – up to 38 hours per week more than men, according to the World Bank, women are likely to have spent fewer years of their working life engaged in the formal workforce, often leaving them without any form of guaranteed income as they approach retirement age.
While the recent pension and outsourcing reforms are certainly a step in the right direction for improving pensions access, it is vital that the nation’s pension providers task themselves with helping to resolve the gender pensions gap, through a long-term commitment to furthering financial education and tackling bias wherever it exists.
A force for good
“It is clear that the pensions industry has a vital role to play in Mexico’s long-term vision. Not only a force for financial inclusion, social security and potential poverty reduction, the pensions sector is also able to effectively drive growth and propel the economy forward,” says Razú Aznar. Pension funds provide significant capital for investment – and not just in stocks, bonds and real estate, as one might typically expect. Alternative investments are becoming ever more popular, and funds are increasingly being invested along environmental, social and governance (ESG) principles. In 2020, Morningstar data showed that ESG-related funds saw $350bn in global investment, compared with just $165bn in 2019. With the pandemic and COP26 both shining a light on the pressing issue of climate change, we can expect to see a ‘greening’ of pension investments in the years to come.
“As Mexico’s leading pension fund, and with more than $52bn in assets under management, which places us also as the largest pension fund in Latin America, Afore XXI Banorte is well positioned to drive the industry towards a more stable and sustainable future,” said Razú Aznar. “In alignment with the objectives of our stakeholders, IMSS and Banorte, we are one of the main promoters of ESG investments in Mexico, committed to contributing to the country’s economic development by providing financing for companies in socially and environmentally-responsible industries. Whether that involves investment in companies that promote the creation of formal jobs for Mexican workers, or providing backing to firms that demonstrate exemplary corporate practices and ESG commitments, Afore XXI Banorte seeks to use its position to make a positive impact on Mexican society.”
When it comes to green investments, Afore XXI Banorte is something of a pioneer. By investing in projects focused on renewable energy and the optimisation of natural resources, Afore XXI Banorte enabled savings of over 410 billion litres of water, benefitting over 935,000 families across Mexico. In the same spirit, its investments in sustainable electricity production have generated more than 137,000MW per year – the equivalent of 3.3 percent of Mexico’s total installed energy capacity. Located in the centre of the world’s ‘sunbelt,’ Mexico has tremendous potential for solar power generation, and Afore XXI Banorte is keen to explore investment options in this exciting, high-growth sector.
Along with prioritising sustainable investments, Afore XXI Banorte is also deeply committed to helping to grow the Mexican economy and improving the lives of its citizens.
“As the front-runner pension fund management company in Latin America, we want to set an example to our peers,” explains Razú Aznar. “Over 7.7 million Mexicans have entrusted us with their retirement savings, and we want to do right by our customers. This means lending our support to vital and valuable causes that will make a real difference to the lives of Mexican citizens.”
In recent years, the fund manager has made substantial investments in local infrastructure projects, including the construction of new toll roads, seaports and airports, and the building of state-of-the-art telecommunications systems. It has supported the creation of new homes and hospitals, while its investments in agricultural and food production companies have resulted in the harvesting of 17,065 tonnes of food – enough to feed an average of 4,250 families each year. By investing in companies committed to the creation of formal jobs, Afore XXI Banorte has also enabled the creation of 3.5 million jobs throughout Mexico, in addition to generating employment opportunities for nearly 426,000 women.
“Through these strategic investments in sustainable and socially-conscious projects, companies and industries, Afore XXI Banorte is using its position to help address social and economic challenges where it can,” said Razú Aznar. “These prudent investments not only align with our ESG principles, but they also consider long-term results for our customers, ultimately helping them to feel more secure in their investments as they approach later life.”
The positive steps made by Mexico’s Afores – coupled with the far-reaching reforms to the nation’s pensions system – have helped to grow the social security net for many. If this momentum continues, and Mexico commits to prioritising financial inclusion in its post-Covid recovery plan, the country could be on its way to a fairer, more equal future – with the pensions industry helping to propel this change forward.
The Dominican Republic is witnessing the emergence of a banking industry that is increasingly dynamic. Instead of the traditional blanket market focus, the industry now has specialised players whose strategies are geared towards capturing specific segments of the market and pursuing dominance. Going by the configuration of the country’s economy, the emergence of specialisation in the banking industry has meant one thing – intense competition on the doorstep of leading banks.
Despite the emerging dynamics, Banco Popular Dominicano is unfazed. The bank has remained steadfast on its institutional values that have guided its growth over the years. Thus, by implementing strategies anchored on anticipation, innovation and supporting the country’s sustainable development, the bank continues to grow its market share and command leadership. This is evident after the bank increased its market share to 24.9 percent last year. Total assets surged to $10.9bn with earnings increasing by 40 percent. The impressive performance saw rating agency Fitch reaffirm the bank’s rating at AA+ in March this year.
A market leader
In the span of about six decades, the bank has risen to become the main private financial institution in the Dominican Republic. Today, the bank is a market leader in nearly all businesses and customer segments. The bank has managed to achieve this feat by adhering to its mission of democratising financial services in the country. It has also stayed true to its vision of promoting initiatives and involving the Dominican society in socio-economic development, with a keen emphasis on sustainability. Digital transformation has been at the core of its growth. In fact, leadership in the digital sphere has been instrumental in facilitating the financial inclusion of thousands of Dominicans.
Having managed to sustain strong market leadership amid the emerging dynamics and COVID-19 disruptions, Banco Popular Dominicano is poised for the next phase of growth. In the immediate and mid-term future, the bank intends to continue with its innovation-driven strategic approach.
This entails implementing new technologies for the modernisation of financial services, offering solutions that expand its portfolio of products and increasing the efficiency of the processes that generate more value for its over two million customers.
Luckily for the bank, the economic fundamentals are ideal. The Dominican Republic was badly ravaged by the COVID-19 pandemic with gross domestic product (GDP) contracting by 6.7 percent in 2020, according to the World Bank.
Recovery, however, has been swift and strong. In 2021, GDP rebounded by 12.3 percent. This was supported by a solid policy response to the pandemic including fiscal, macroprudential and supervisory policies and monetary easing.
Key sectors like tourism, remittances, foreign direct investment, mining revenues, free-trade zones and telecommunications have made the Dominican Republic the second fastest growing economy in Latin America and the Caribbean region over the last decade, with the economy expanding by an average of 5.3 percent from 2000 to 2019. Prior to the pandemic disruptions the country was on track to realise its ambition of achieving high-income status by 2030.
Driving tourism
Banco Popular Dominicano has been a major facilitator of economic development in the Dominican Republic. The bank’s huge exposure in tourism, for instance, has been instrumental in the sector’s splendid growth and performance. Government data show that tourism represents 8.4 percent of the country’s GDP. If ancillary services are factored in, the sector’s true impact is estimated in the region of 30 percent.
The bank’s innovation-centric culture has set the pace for digital transformation in the Dominican Republic
Banco Popular Dominicano’s support for the tourism sector dates back 25 years when it became the first banking entity to understand the paramount importance of developing the industry for the stability and growth of the country. The bank created a business unit specialised in promoting and invigorating the sector. Riding on its historical leadership in financing the sector, the bank has been one of the leading promoters of its recovery from the COVID-19 devastation.
Today, the bank contributes almost half of the volume of loans that banks in the country grant to the tourism sector. In 2021, its credit portfolio to the sector stood at $1bn, a 10 percent increase compared to 2020. The bank’s financing to the sector represents around 15 percent of its loan portfolio annually. Over the last seven years, the bank has granted financing of more than $1.4bn, of which $716m, approximately 50 percent, has been given for the construction and renovation of some 13,600 hotel rooms. The bank’s financial support for tourist activity is distributed among nearly 800 clients, including leading foreign hotel groups.
For Banco Popular Dominicano, becoming a leader not only in the tourism sector but also in financing other sectors of the economy has not come by default. Rather, it is by offering customers expertise in personal, commercial and corporate banking services through innovative products and high value-added solutions. This has been made possible by the bank’s belief in constant innovation, strong corporate governance and ethical principles and values.
In particular, the bank’s innovation-centric culture has set the pace for digital transformation in the Dominican Republic. In fact, putting digital transformation at the core of operations has brought about high levels of efficiency and robustness not only for client services but also as a driver for growth. Last year, Banco Popular Dominicano was named as the banking entity with the highest level of digitisation in the national financial system consisting of 17 banks. The bank obtained a score of 9.83 out of 10 in the Ranking of Digitisation of Dominican Banks carried out by the Superintendence of Banks.
The ranking was an affirmation of the bank’s deeply entrenched digital strategy. This is because in general, 85.5 percent of the bank’s operations were already being carried out electronically through the bank’s different digital channels with 13 percent done manually and 1.5 percent through the Subagente Popular network. In the last five years, the bank’s manual transactions have been reduced by half, giving way to electronic transactions.
Digital dominance
In October last year, Banco Popular Dominicano demonstrated its leadership in the digital space after App Popular, its financial application for mobile phones, exceeded one million affiliated clients. This represented a growth of 52 percent compared to the same period in 2020. In essence, it means 26 percent of the bank’s transactions will now be carried out on the platform. This is quantified in a total of 565,000 operations every day and 23,545 per hour. Apart from the app, which can allow anyone to ‘become a customer,’ the bank boasts of a retinue of other digital offerings that enable customers to carry out various transactions with the convenience and comfort of their digital devices.
As part of its technology and innovation strategy, the bank signed a strategic agreement with Microsoft designed to expand its consulting services and technological products for small and medium enterprises (SMEs), including offering them cloud storage solutions and capacity building. The bank understands the importance of SMEs not only in driving economic growth but mainly in job creation. In 2020, micro enterprises accounted for nearly 80 percent of all enterprises in the Dominican Republic. Although medium enterprises accounted for only 2.6 percent of the total, they employed 10.2 percent of the workforce. Over the past seven years, Banco Popular Dominicano has been using the Impulsa Forums to empower SMEs, managing to reach over 14,200 entrepreneurs.
Democratising finance
For customers without smartphones and access to the internet, the bank has an alliance to offer tPago, a service based on USSD technology. Although 80 percent of Dominicans own a mobile phone, half of the population do not have smartphones. The tPago service is able to link bank accounts and credit cards to customers’ cell phones to enable them to make payments, transfers, purchases, top-ups, queries and disbursements without consuming minutes or data. The service is among the bank’s proactive strategies to drive financial inclusion in the country. Another strategy is through the Academia Finanzas con Propósito, an innovative web platform with educational content on personal, family and business finances. The bank created the platform to extend financial education with the aim of educating more than 150,000 Dominicans by 2030.
Notably, the strategy is part of Banco Popular Dominicano’s commitment to the United Nations Principles for Responsible Banking. As a financial entity that believes in the tenets of sustainability, the bank is a founding signatory to the UN Principles. Being a signatory enables the bank to respond to the demands of society and the challenges of climate change. With the Dominican Republic among the countries that are most vulnerable to climate change, the ultimate goal is to align financing to sectors that help in adaptation and mitigation. The key focus is renewable energy across photovoltaic, wind and biomass parks. The bank is currently a financier and collateral agent at seven extensive facilities and sustainable energy companies with a portfolio amounting to $2.8m.
A sustainable future
The bank has also created a portfolio of products and services with preferential conditions dubbed Hazte Eco in order to promote greater use of sustainable mobility and clean energy in homes and businesses. Hazte Eco, the largest and most convenient green finance portfolio, had a value of $21.5m as of March 2022, distributed in loans, green leasing and personal and business lines of credit that are offered at lower interest rates compared to those in the market. The financing enables customers to acquire hybrid and electric vehicles, charging stations, vehicles without motors, solar panels and efficient appliances, among others. Through the facility, the bank has granted more than $14.6m in financing for electric and hybrid vehicles alone. Banco Popular Dominicano’s strong credentials on sustainability also saw it act as the underwriter for the $100m Larimar Trust, an investment vehicle that is completely new to the Dominican securities market and that promotes sustainable development in the country.
Financial innovators have long sung the praises of fintech’s ability to democratise modern finance by making it more affordable and accessible for the average consumer. The key caveat made by leading practitioners, however, is that fintech development must incorporate first-hand human experience in order to best fulfil its potential in terms of real world applications.
The best forms of financial innovation involve the merging of the latest technological developments with the time-honed knowledge and insight of human beings. One area of fintech which embodies this notion is copy trading, which has seen the creation of automated platforms and algorithms that enable investors to emulate the performance of successful human traders.
The birth of copy trading
Copy trading first emerged around 2005 as an offshoot of mirror trading. As the name implies, mirror trading entails the ‘mirroring’ of strategies implemented by human traders, and the development of algorithms based upon their history of market decision-making.
Where copy trading differs from mirror trading however, is that it precisely follows the actions of the traders that are being emulated on a proportional basis, as opposed to just implementing their specific strategies. Online brokers now offer a range of copy trading software that permits investors to perfectly replicate the positions of other traders that have successful track records. This software covers a variety of asset classes including stocks, commodities and even crypto, but is most frequently utilised with forex markets due to their vast size and liquidity.
I have been there in the trenches so I know the mistakes that traders make, whether quantitative or emotional
Some may view copy trading as a form of time-saving automation that outsources the investment decision-making process to algorithms, for the purpose of reducing or even removing the need for direct human action. The development of effective copy trading technology nonetheless remains heavily dependent upon judgement and decision-making by humans, that is based upon the accumulation of real world experience. This is not just because copy trading itself involves the emulation of skilled human traders with proven track records. It is also because the screening and selection of these traders is a process in which human judgement and experience can play an essential role.
Developing copy trading innovations
Michael Berman, the former CEO of Ditto Trade and now Head of Products at FXTRADING.com following its acquisition of Ditto, spoke to World Finance. He attests to the importance of combining practical trading experience with technical expertise in the development of successful copy trading platforms.
Berman, who has more than two decades of experience in the financial sector, points out that while it’s easy to enlist academic experts to develop the algorithms for a copy trading platform, without real-world knowledge of markets they will struggle to create breakthrough innovations. “Any broker who thinks they can just get a PhD fresh out of graduate school to create a scoring system is unlikely to develop something meaningful and industry-changing,” he said.
“This is not something that can be developed in a day, or even several years – it takes decades.” In Berman’s case, his background as a trader and fund manager would turn out to be essential in the development of cutting-edge copy trading innovations. Berman first commenced his career in investment banking and commercial property asset management, before accumulating years of experience in both prop trading and hedge fund management. This lengthy spell in the trenches gave Berman a deep, first-hand understanding of trading and financial markets, which would prove invaluable in his subsequent move towards the development of copy trading technology.
Traders know traders best
In 2012, Berman made his first major foray into copy trading with the creation of RAPA (Risk and Profit Analyser) Cap Intro – an online portal that matches trading talent with emerging manager capital. RAPA employed a highly quantitative approach, which saw the year-long development of an advanced scoring algorithm for measuring the trading skill of candidates. In addition to software innovations however, RAPA also required advanced human capabilities for the recruitment of the first-rate trading talent that would lay the foundations for its success. To this end, Berman booked a round-the-globe trip in order to recruit the best traders that the world then had on offer. According to Berman a key factor in any successful effort to recruit this top-flight talent lay in his background as a trader himself. “I wasn’t just an academic who came out of a laboratory or university and didn’t really understand them,” he said.
“I have on-the-ground experience – I speak their language, I understand what they are doing and their pain points.” Before long Berman managed to persuade 10 of the world’s leading traders to join the undertaking, enabling RAPA to take off with a flying start.
Scoring trader performance
In 2015 Berman co-founded PsyQuation with Vladimir Krouglov, as a cloud-based software platform that provides automated performance, risk and behavioural advice to traders. This next stage in Berman’s journey as a copy trading innovator took the opposite tack to RAPA, adopting a bottom-up instead of a top-down approach to identifying trading talent.
Instead of focusing on the recruitment of traders already renowned for their talent, PsyQuation involved the use of technology to coach and train better traders, while also identifying undiscovered talent.
“PsyQuation was intended to be the world’s first behavioural-based robo-trading coach,” Berman continued. “People make mistakes, which are costly as traders, so if you can help people to avoid those mistakes you will help them to make more money.” As with RAPA, Berman’s background as a trader played a critical role in the successful development and application of the technology.
“I have been there in the trenches so I know the mistakes that traders make, whether quantitative or emotional,” said Berman. Over the years Berman built up one of the world’s biggest retail trading databases, which provided the basis for validating theories about trading errors using a combination of behavioural science as well as finance, mathematics and computer science. In addition to aiding the development and maturation of emerging traders by warning them of their errors, PsyQuation also resulted in the creation of an ecosystem for identifying trading talent.
Berman then further honed his skills for the identification and management of trading talent by successfully running the AxiSelect programme for more than three years.
Rigorous screening
Berman’s efforts to create the ultimate copy trading platform have since culminated in the founding in July 2021 of Ditto, which has since been acquired by FXTrading.com and rebranded as FXTHub.com. Ditto was developed as a smart investment and multi-asset trading platform, capitalising upon Berman’s considerable experience in the incubation of emerging traders and his loyal team of longstanding collaborators, to provide investors with smarter ways to copy trades. As compared with other copy trading platforms, the big point of difference with Ditto is the robustness of the screening process, as well as the ongoing monitoring and management of the traders that clients will copy. “Ditto differentiates itself from everyone else in that you need to pass far more stringent tests than what is typically required in the copy trading industry,” said Berman.
“You first need to satisfy a bunch of criteria including a two year track-record, a Sharpe ratio of one, and managing a minimum of $2m. Traders that pass through this initial screening are then further analysed quantitatively and qualitatively by an investment committee of seasoned experts, before they finally receive the thumbs up,” Berman explained to World Finance.
Berman typically interviews applying traders to acquire a sense of who and what they are about, bringing a critical qualitative perspective to bear upon the selection process. While Berman’s years of copy trading innovation have long involved quantitative approaches that make extensive use of maths, behavioural science and computer science, it’s this qualitative approach based on personal experience that gives Ditto’s selection process the edge.
Democratising finance
For Berman, copy trading platforms can play a critical role in the democratisation of finance, by granting the average investor access to powerful knowledge and tools that are typically the exclusive preserve of the big institutions.
By thoroughly screening and selecting only the best talent available, FXTHub grants investors access to some of the world’s greatest traders at an affordable cost. Prior to the emergence of affordable copy trading, investors would need to pony up millions of dollars to tap comparable trading talent. “We are democratising finance by giving people not just tools, but access to the best talent available as well,” said Berman.
“We are offering our client base access to the highest-quality traders, giving people who use the platform a far better chance of making money than other platforms that don’t have the guard rails of strict talent screening in place,” Berman concluded.
In this post-Covid transition period, there is a great opportunity for Macao to achieve success in economic diversification and sustainable development, as well as to strengthen its status and function in the nation’s economic development and opening to the world. This policy has also served as a fundamental approach to solving the problem of Macao’s limited space, and exploring new development directions.
The Chinese Central Government attaches great importance to the diversified economic development in Macao. Additionally the Macao Special Administrative Region (SAR) Government has emphasised the construction of a modern financial services industry as its key policy objective.
The Policy Address for the Fiscal Year 2022, published by the Macao SAR Government, highlighted the importance of persevering with Macao’s integration into the overall national development plan. This is to make progress with deepening regional cooperation, and focusing on the establishment of the Guangdong-Macao In-depth Cooperation Zone in Hengqin, along with expediting adequate economic diversification and fostering and facilitating the development of nascent industries and modern finance.
The Chief Executive of Macao SAR, Ho Iat-Seng, reiterated that the moderately diversified economy is key to Macao’s success. Through regional cooperation, and especially with the development of Hengqin Island, Macao will be able to create better conditions and fresh opportunities to foster a moderate diversification of its economy. Macao will fully utilise its roles as a separate customs territory and a commercial and trade co-operation service platform between China and Portuguese-speaking countries, and also its connection with other places, to combine the city’s advantages with Hengqin’s land resources in order to reinforce the region’s opening-up. Such efforts would aid in cooperation between mainland China and the countries and regions covered by the ‘Belt and Road’ initiative, especially Portuguese-speaking countries and Latin American countries.
With these efforts, Macao is determined to support the country’s full opening-up. While providing services to and building connections with all sectors of society, Macao’s banking industry will continue to play a crucial part in both the regional and national development process.
Promoting economic diversification
Continued outbreaks of the COVID-19 pandemic have dealt a major blow to Macao’s economic and social development. Modern finance, with its high added value, has now become the most important support for Macao’s diversified economy. With joint efforts of the industry and support from local government, Macao’s financial industry is expanding in a digital and green direction with more offshore and cross-border business. In the foreseeable future, and with a profound development of modern finance in Macao, the prosperity of low-carbon emerging industry is all but guaranteed, along with the enhancement in financial market integration and commodities trading services, active transactions in the securities market and the e-commerce industry, as well as more convenient e-payment methods.
Modern finance, with its high added value, has now become the most important support for Macao’s diversified economy
As a result, the bond between local and international financial markets will be strengthened. Macao’s banking industry has become an important growth point of the local economy, with its total asset value soaring by 20.7 percent and the proportion of total GDP increasing by three percent in 2021. Meanwhile, the second five-year plan of Macao, released in 2021, has introduced comprehensive arrangements for the construction of modern finance, providing instructions on financial infrastructure, related laws and regulations, and the protection of talent. With joint effort and concrete action within the industry, Macao is expected to advance its building of modern finance.
Innovative financial services
With a unique geographical location, the Hengqin In-depth Cooperation Zone is involved in both domestic and international circulation, and enjoys the combined advantage of policies from four special areas, including the Guangdong-Hong Kong-Macao Greater Bay Area, the Hong Kong and Macao Special Administrative Regions, Free Trade Zones nearby, and the In-depth Cooperation Zone itself. It is designed to innovatively combine two institutions, with aims to promote the bidirectional opening-up of China, and the development of diversified economy and modern finance in Macao.
The Hengqin In-depth Cooperation Zone has divided its future development into three periods by the year 2024, 2029 and 2035. To fully perform its responsibility within each timescale, Macao will need to utilise policies of the Hengqin In-depth Cooperation Zone, to develop a globally recognised financial system, focused on the interconnectivity of people, logistics, capital and information flows through institutional innovations and offshore market development. The realisation of this requires the whole industry to join hands together, break with convention and create comparative advantages within Macao. On the one hand, we need to adapt the current legal system and provide a legal basis for developing the offshore economy. On the other hand, we need to seek policy support from the central government to improve the opening-up of cross-border investment and financing, capital facilitation, and financial regulation.
Broadening financial cooperation
The cross-border wealth management connect service has marked the central government’s substantial support for the Guangdong-Hong Kong-Macao Greater Bay Area, and also the successful cooperation of mainland China, Hong Kong and Macao. ICBC (Macau) was among the first group in Macao to provide all five services of cross-border wealth management connect in October 2021. With over 500 accounts opened on the first day, it is a well-launched and fully-implemented cross-border banking service in Macao. It also marks an important attempt to extend the opening-up and cooperation level of Macao’s finance, to promote the internationalisation of the renminbi, and to enhance the communication of funds.
Moreover, it indicates further room for wider investment amounts, more investible products, and a larger market. However, with a shared cross-border banking quota by Hong Kong and Macao, the cross-border wealth management connect service requires improvements to Macao’s financial market, especially its capability to provide competitive products and services, and at the same time, a progressive realisation of cross-border capital interconnectivity.
Improving financial infrastructure
There is still room for improvement within Macao’s capital market, especially when compared to neighbouring areas. Recent years have seen the building of Macao’s securities market from scratch, with a full range of breakthroughs including the launch of the Central Securities Depository (CSD), which was a landmark moment and helped supplement Macao’s deficiency of financial infrastructure.
In 2021, the volume of securities issued and listed in Macao has respectively increased year-on-year by 795 percent and 80 percent. And the total number of securities issued and listed in the year accounted was 63, surging by 142 percent compared with the previous year. Considering its advantages in capital amounts, the tax system, financial regulations and other aspects, Macao can upgrade its competitiveness by developing a bond market with green senior bonds, and improving the freedom of its offshore financial market.
In terms of related legislation, Macao will look to provide convenience for global investors in tax preference, entity establishment, and the application of laws, and at the same time, work to construct a bond exchange centre adapted to local circumstances. Moreover, on condition that the Hengqin In-depth Cooperation Zone releases an industrial classification, the development of Macao’s securities market will be accelerated, and an increasing number of investors from the securities market will be attracted to the Hengqin In-depth Cooperation Zone.
Local economic development
As the largest locally registered financial institution with the widest range of services in Macao, ICBC (Macau), with full bank license, plays an important role in local development of modern finance. It ranks first among the industry in the scale of underwriting and issuing bonds, and is the first member of the International Capital Market Association (ICMA) in Macao, which promotes its connection to the international market.
In 2021, it took the lead to initiate and establish the Securities and Funds Industry Association of Macao, with the vision to promote the building of modern finance through joint ventures and further self-regulation of the entire industry. Looking to the future, ICBC (Macau) will work with the Securities and Funds Industry Association of Macao to provide advice for the industry, and improve the financial market ecology by attracting institutions of securities, funds and assets management to the local market. With all these endeavours, ICBC (Macau) will continue to make its contribution to Macao stepping forward into a diversified economy and a modern finance future.
