Join Us | Print Page | Sign In
Emerging Fellows
Group HomeGroup Home Blog Home Group Blogs

Has Finance Driven Digitisation?

Posted By Administration, Friday, March 8, 2019

Charlotte Aguilar-Millan reflects her thoughts about the impact of finance on digitisation in her third blog post for our Emerging Fellows program. The views expressed are those of the author and not necessarily those of the APF or its other members.

Innovation within the finance industry has seen unprecedented development. Not only in the accessibility of data but also how households access and manage their finances. Attributes such as easy access, speed of logging in and flexibility of data are now at the core of our expectations. Finance companies have stored a mass of data on their users to enable this. But how much data are consumers unwittingly gifting to finance within this digitised world?

 

Digitisation within everyday life is significantly affected by the finance industry. Through innovation in software capabilities, we are now able to access our finances through one simple easy portal within various forms of media. The future of digitisation within finance is reliant upon further integration of the customer’s experience. With the EU’s 2007 Payments Services Directive 2, it is now legislated that banks allow customers to share their financial data if requested. This has been adopted through digitisation. Banking apps now embrace a new feature where all bank accounts with various providers can be shown within a single app.

 

Banks are in the strongest position to develop digitisation. For years they have collected and processed personal data with customer’s transactions. With social media supplying instant feedback from customers on new digital products - through the use of tweets or Facebook commenting - banks are able tailor and adapt to customers wishes. Banks are able to analyse the data they have available and partner with companies to create an experience evolved from traditional banking. Today, most bank cards offer cashback opportunities on purchases at retailers which are tailored to customer’s previous bank usage. This not only provides a customer the financial incentive to use their banking facilities but also induces loyalty to a specific bank. 

 

Banks have been at the forefront of digitisation with developments in online platforms. However, this has also resulted in banks being at increased risk for lost confidence where the technology fails. Data migration between platforms saw TSB customers in May 2018 unable to access their accounts or make payments for weeks on end in what was due to be a weekend migration of 5.2 million of its customers between technology platforms. The effects of this error was a compensation bill of £116m and savings balances of customers falling by roughly £1bn as a result of 26,000 customers switching to an alternative bank.

 

This cautionary tale of reliance on data must be heeded by consumers. Whilst the TSB migration was the most publicised, banks such as RBS, NatWest and Barclays also saw glitches in customer’s usage of their online accounts in 2018. All of which has regulatory impacts on the safety of customer’s money. Finance must now take more ethical responsibility above and beyond the regulatory requirements. Customer security must not be breached in the name of innovation. Where the integration of technology and finance meet, so must accountability and security meet.

 

Finance initially lead digitisation through established banks enhancing their services with digital products. However, this has now transformed into digitisation leading finance. Fintech companies are being set up which supersede previously dominant finance providers. Companies such as Monzo, Tandem and Loot are fully digitised current account providers and adaptations such as ApplePay or Samsung Pay are making tangible finance providers redundant. The future could be that digitisation will drive finance, and that future banks are, actually, technology companies. Households now need to adapt to personal security resilience in order to protect their future finances.

 

 

© Charlotte Aguilar-Millan 2019

Tags:  Digitisation  Economics  Finance 

Share |
PermalinkComments (0)
 

What has been the Impact of Digitisation on Corporate Structures?

Posted By Website Admin, Friday, February 1, 2019
Updated: Wednesday, February 27, 2019

Charlotte Aguilar-Millan publishes her second blog post in our Emerging Fellows program. She inspects the impact of digitisation on corporate structures. The views expressed are those of the author and not necessarily those of the APF or its other members. 


What if the option to earn the same amount of money as you do now was offered to you, but rather than working over a 12-month period, this money was generated in only 9 months? This flexibility is becoming ever more present in workers lives as a result of the rise of a new concept known as the ‘gig economy’. The term gig economy was once uttered with fear due to the instability of short term contracts. However, with the rise in skilled labour adapting to the gig economy, it is now a growing platform with which businesses are expected to adapt.

The gig economy can range from those working on zero hour contracts such as the likes of Uber and Deliveroo, to areas in which seasonality can be seen within skilled professions. With the introduction of websites such as Hourly Nerd, Upwork, Freelancer and Fiverr, professional careers are now appearing as part of the gig economy. This includes tasks such as copy writing, accountancy, translation or even coding.

Take Upwork, for example, where roughly a decade ago two friends in Silicon Valley created this platform. Today it has grown to now being listed on the Nasdaq. Upwork remains free to post advertisements requesting specialist work. This gives the gig worker the flexibility to submit a bid for work within a timeframe that suits them. The platform then offers a paid tier for a more specialist pool of workers. From the gig worker, Upwork then deducts a set percentage of the fee, linked to the amount billed. Upwork provides an interview process and handles payment securely for clients. Both parties can feel secure that the advert posted is authentic, and that the specialised skill offered is also authenticated through Upwork’s vetting process.

So why are we all not signing up to the gig economy? This short term contract culture has created more instability over a worker’s long term future. Gig economy workers can find it harder to navigate life events – such as buying a house – when there is no guarantee of a fixed income. The gig economy itself has expanded labour market competition to bidding for advertised work. Not only from those within the same country, but also accessing a global pool of gig workers. This means that those in developing countries are able to provide the same services for much lower prices. Gig economy workers in more developed countries are finding that their services can be easily undercut on price, and they must either develop a specialist niche or accept lower pay to stay competitive.

The long term effects of the gig economy could also create negative futures. Governments have shown little innovation in how the gig economy could affect future tax revenues. Which country will receive the corporation tax if a company in the UK hires a gig worker from Singapore, but pays using a platform based in the US? Policymakers have a much slower reaction time to these changes in the employment market.

Corporations have taken this evolving landscape of work and altered their business models. It is no longer a requirement for successful companies to pack all staff within office buildings. There has been a decline in requirements for office space in the typical corporate structure as a result of digitisation. With staff able to work from home or contractors only made use of when required, a disembodied company is now emerging.

The disembodied company sees that large areas of work are seasonal and as a result having an office full of workers is not cost effective. Digitisation has allowed companies to disperse their staff away from the old structure of all being based in one building. They have adapted to new policies such as home allowances to assist staff to pay for home bills whilst working from home.

The gig economy helps companies make it easier to search for talent and reduces employment costs. It also means that work for the gig economy worker can fit in with their lives. Further, gone are the days of the toxic boss and navigation of office politics given that contracts typically are short term allowing for non-renewal if one party wishes. If a gig worker wants to work longer hours in one month to take the other off, the flexibility
is there.

Overall digitisation is allowing a reduction in face to face communication where the same workers are no longer needed to collaborate effectively by being in the same vicinity. Instead, by companies effectively utilising technology, a typical office structure is no longer needed. The gig economy is seeing unprecedented growth particularly for those who desire flexibility over security. This is fundamentally changing the way in which companies operate. It is now up to legislation to adapt to these new work dynamics as companies evolve with the use of the gig economy.

© Charlotte
Aguilar-Millan 2019

Tags:  corporate structure  digitisation  economics 

Share |
PermalinkComments (0)
 

To what degree is the economy digitized

Posted By Administration, Tuesday, January 22, 2019
Updated: Wednesday, February 27, 2019

Paul Tero a member of our Emerging Fellows program investigates the concept of digitized economy in his first blog post in 2019. The views expressed are those of the author and not necessarily those of the APF or its other members.

Let’s explore the digital economy that we currently experience.

Consider how ubiquitous digital technology is in our daily retail transactions. Recently I was on assignment to a far-flung Pacific Island. During my time there I enjoyed a latte at a cafe. The ease with which I paid for my beverage with a common payment card through an electronic terminal at this very remote establishment is a wonder of modern technology. Years ago this story would have been much different. Different, for example, in the planning for this most prosaic of first world transactions. This planning in years past would have included making sure I had enough of the local currency by actually visiting a banking outlet, during office hours, and conversing with real people behind a physical counter! No doubt you have similar stories to this.

Consider too, the actual things that we purchase. No longer common, for example, is the youthful experience of excitedly carrying home the latest 12-inch vinyl disk. Now, we enter into some form of electronic agreement to gain access to artists that please our ears.

I could continue. But now, wherever we are on Earth and whatever sector we can think of, we intuitively grasp that so much of today’s economy, so much of what is produced, traded, and consumed, has digital written all over it.

What is the digital economy? Building on the foundational understanding that an economy is comprised of the production of, the trade in, and the use of goods and services, we can add digitisation to each of these three factors. For example, the digitisation of labour, of transactions, of decisions, and of value. The list goes on. We have indeed shifted from the economics of atoms to the economics of bits.

The digital economy is this. It is the economic and social activities that information and communication technologies deliver. Yes, it is about how the internet has changed business, but the digital economy is about so much more. Various estimates put the value of the digital economy at about $5 trillion. Considering that the global economy as a whole is worth more than $80 trillion. This growth in the digital economy is from a standing start twenty years ago. What we are witnessing is no doubt historically significant.

The componentsof this phenomena include, for example, ICT hardware, software, and services at over $3 trillion (the enablers of this revolution) and electronic games at over $100 Billion (its fruits). For some countries, up to 10% of their GDP relies upon the ICT sector (its importance). The impact of this phenomena is witnessed in the speed at which companies of scale are built. Harley Davidson took 86 years to get to a billion-dollar valuation, Twitter just 3 years. The ease at which we can find answers to almost any question (40,000 questions are asked of Google every second), and in the explosion of data (90% of the world’s new data is only 2 years old).

The journey over this series of articles is one of exploration and prospection. Both discovering the pervasiveness of digitisation of our economy and contemplating that which could appear.

A journey that is supported by two purposes. The first: reflections upon the opportunities and costs of a fully digital economy at personal, business and government levels. The second: considerations of contemporary economic themes using the lenses of established strategic foresight models.

A journey with a vista of the world that today’s teenagers will experience during their later life. A time when their own grandchildren are in their teenage years.

A journey that will be worthwhile.

© Paul Tero 2019

Tags:  digitisation  economics  value 

Share |
PermalinkComments (0)