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An Economic Recovery From COVID-19 in 2021 Is Possible – But Massive Uncertainty Remains

An Economic Recovery From COVID-19 in 2021 Is Possible – But Massive Uncertainty Remains

COVID-19 has had a devastating effect on human life. But it has also caused widespread economic upheaval for both advanced and emerging market economies as countries shut down to try to stop the spread of the virus. The U.S. for instance is set to see the most severe economic downturn since GDP was first tracked in the 1940s.

This means deep hardship for many businesses of all sizes and across all industries. Shutdowns caused many firms to entirely cease operations for a time. Now, they are grappling with plummeting demand as a result of rising unemployment and uncertainty, on top of supply chain difficulties and uncertainty as to financing resources.

Bad Timing for a Global Crisis

Although there is no “good” time for a pandemic to strike, business conditions in 2020 were already a little shaky prior to the outbreak. At the beginning of the year, the global economy had just finished its weakest year since the Great Recession, global trade was turning sour, trade finance had become more restricted and continued uncertainty from the U.S.-China trade war weighed on businesses everywhere.

If the outlook was stormy at the beginning of the year, it’s now outright bleak. Atradius economists are now forecasting that global trade will decrease approximately 15 percent in 2020, while global GDP will decline about 5 percent. The U.S. will perform below average, with a 6.1 percent decrease in GDP – largely due to its lag in controlling the virus and subsequent record high in number of COVID-19 cases, in addition to soaring unemployment as well as pressure on incomes, leading to a drop in consumption.

Will Government Intervention Be Enough?

Governments and central banks the world over have enacted measures to counteract the pandemic’s economic devastation. Early in the crisis, for instance, the European Central Bank put in place a Long Term Refinancing Operations III program, while the U.S. Federal Reserve increased quantitative easing.

Countries have also put together aid packages, such as the U.S. CARES Act and a number of packages from individual EU economies and the UK. Similarly, China is providing tax relief, state-backed credit guaranteed, and delayed loan and interest payments. Altogether, global government stimulus measures amount to approximately 9 percent of global GDP, or around $7.8 trillion.

But will this be enough? Atradius economists suggest not – not unless countries also enact vigorous policies to revitalize the economy at every level. The EU Pandemic Fund provides a good example: the $750 billion initiative will bestow loans and grants to the areas and sectors hardest hit by the pandemic, allowing for a more even recovery rate across the entire EU.

Although stimulus measures are necessary, soaring government debt levels are also cause for concern – even before the outbreak, many countries had worryingly high debt levels. The most recent baseline scenario from Atradius economists has the U.S. federal budget deficit, as a proportion of GDP, increasing by more than 10 percentage points this year. The UK will fare even worse, seeing a 13 percentage point increase in deficit growth rate. China and India are the only major economies likely to maintain moderate debt ratios through the pandemic.

All that said, low interest rates will likely stick around through the end of 2021 at least – this should help offset some of the concerns over high government debt levels. Moreover, central banks like the Fed and ECB will continue purchasing government bonds, suppressing any financial market stress.

What’s Next?

While the global economy is under undue strain at the moment, Atradius economists predict a recovery could begin as early as this year, continuing into 2021. Our baseline scenario has global GDP rebounding by 5.7 percent in 2021, with the U.S. coming in just under that, with GDP growth of 4.2 percent.

This scenario, however, is shrouded in uncertainty and hinges on a few key assumptions:

-That researchers are able to develop a successful vaccine in the near-term

-That lockdowns will be limited throughout the remainder of the outbreak

-That oil prices will remain low

-That the U.S.-China trade war will remain at a standstill

-That the rise in financing cost for firms, if any, remains limited

Should these assumptions not play out, the global economic recession could be much worse than anticipated – contraction rates could be twice as damaging as those currently predicted, with global GDP contracting 12.2 percent in 2020 and U.S. GDP seeing a 7.9 percent drop. Recovering from a contraction of this size would be a slow, painful process, although we would expect 2021 to see similar growth rates.

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John Lorié is chief economist with Atradius Economic Research. He is also affiliated with the University of Amsterdam as a researcher. Previously, he was Senior Vice President at ABN AMRO, where he worked for more than 20 years in a variety of roles in commercial and investment banking. He started his career at the Dutch Ministry of Foreign Affairs. John holds a PHD in international economics, master’s degrees in economics and tax economics as well as a bachelor’s degree in marketing. 

Theo Smid is an economist with Atradius Economic Research. His work focuses on business cycle analysis, insolvency predictions, thematic research and country risk analysis for the Commonwealth of Independent States. Before joining Atradius, he worked for five years in the macro-economic research team of Rabobank, focusing on business cycle analysis of the Dutch economy. He holds a master’s degree in economics from Tilburg University.  

new york

NEW YORK RANKS AS THE TRADING CAPITAL OF THE WORLD

DailyFX has analyzed the finance and trading skills index, showing which skills can increase your salary, where in the world has the highest number of jobs and what salaries you can expect in the finance and trading sector. 

However, some words of warning: The research and data used in the DailyFX study were taken and analyzed in January, BEFORE the COVID-19 pandemic had impacted global financial markets. This study can be used as a reference and comparison to pre-pandemic areas, such as the health of the financial job market.

“The Top 20 Cities in the Global Financial Centers Index (GFCI)” was culled from data on finance and graduate vacancies per location, individual roles with the most availability and the most financially lucrative cities for each of these roles. Focus on the wider financial industry includes specific reports for trading.

Among the findings:

-London and New York lead the way with the most vacancies per trading role

-Having the skill of UCITS can increase your salary by more than $26,000

-San Francisco leads the way in locations for earning the most in finance

OPPORTUNITY FOR A CAREER

New York provides the most opportunities for those in trading roles. Combined with London they make up 42 percent of all trading roles available at the time of research. The U.S. provides the bulk of the locations, 59 percent of the 24,174 trading roles, with only Zurich and Frankfurt providing Europe’s next best locations.

Rank City Total No. of trading roles
1. New York 5,546
2. London 4,709
3. Chicago 2,823
4. Los Angeles 2,268
5. San Francisco 2,014
6. Toronto 1,761
7. Boston 1,636
8. Sydney 1,322
9. Vancouver 632
10. Dubai 520

 

TRADING ROLES: HOW MUCH DO THEY PAY?

 Rank Trading role Top earning location Salary
1. FX Trader San Francisco $98,280
2. Broker New York $72,852
3. Sales broker New York $74,255
4. Commodities trader San Francisco $63,667
5. Equity Broker San Francisco $85,774

 

OPPORTUNITY FOR A CAREER

Leading the opportunity index is London, with New York joining it at the top of DailyFX’s findings. Both cities provide significantly more opportunities for current professionals than their nearest rivals and graduates with 5.54 percent and 4.54 percent of all vacancies at graduate level. While other locations performed well, in the majority of cases the percentage of vacancies aimed at graduates was well below 1 percent. DailyFX’s results show that the worst location for graduates to look for a new role is Dubai with only 0.01 percent of all roles destined for graduates.

Rank Location Total No. of finance Vacancies  Total No. of finance graduate vacancies    % of graduate positions

 

1. London 32,274 7,499 5.79%
2. New York 17,688 5,881 4.54%
3. Chicago 8,849 1,503 1.16%
4. Hong Kong 8,801 1,432 1.11%
5. Singapore 8,584 971 0.75%

 

FINANCE ROLES: HOW MUCH DO THEY PAY?

Actuaries continue to earn good equivalent salaries at all three of the comparison levels shown. Budget analysts have the highest minimum salary of $53,501, while investor relations can achieve the highest maximum salary at $86,587.

One role with a wide range in potential salary is accountant. The research found that this role, which was most in demand according to vacancy data, has the lowest minimum salary of all roles analyzed at $39,942. Its maximum offered salary peaks at $78,523 but the overall average of $59,763 places it as the third lowest earning average salary.

While much of this data can be used as a guideline, many of the skills underpinning these industry roles are what many vacancies will be looking for. DailyFX undertook further research using the 20 most commonly appearing skills and experience criteria to understand how each particular skill and experience is valued in the industry. This was then used to reveal how the inclusion of each impacts the potential salary offered.

You can view more on the study here: www.dailyfx.com/forex/fundamental/article/special_report/2020/05/13/The-Financial-Trading-Skills-Index.html

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

bitcoin

Bitcoin Has Gained Legitimacy in 2020

Throughout its brief but exciting existence, bitcoin has had its detractors. For every enthusiast predicting soaring values or a shift in the very concept of money, there has always been a critic suggesting that bitcoin is fundamentally worthless, or that we can’t trust blockchain technology. For the most part, the breadth of the spectrum between proponents and detractors has always been understandable, because bitcoin is still new and it has always been volatile. This year has painted a different picture though. All of a sudden, bitcoin is beginning to look more legitimate than ever.

This is largely thanks to how the asset has responded to the coronavirus pandemic and ensuing financial crises around the world. Early on, there were quick-trigger takes suggesting that bitcoin had actually failed this test — that its long-hoped-for potential as a safe haven had fallen flat, and it had simply crashed alongside other assets and markets around the world. It didn’t take long, though, for bitcoin to reverse this narrative. While it did indeed experience a sharp and troubling crash, it followed with a far more rapid recovery than most other valuable assets or commodities. Bitcoin was over $10,000 in the blink of an eye, relatively speaking — after falling down around $5,000 in March. At least in this instance, it was a safe haven for those patient enough to withstand the dip.

There is also a feeling of growing legitimacy connected to bitcoin’s sudden stabilization. As noted, bitcoin is historically volatile, and this is partly responsible for the polarized opinions and outlooks it inspires. Since the “halvening” event in late May though (during which the amount of bitcoin acquired in each mining block is reduced by half), bitcoin price movements have been almost minute. There were no sharp gains or losses throughout the month of June, and in that same span, the price was kept almost entirely above $9,000. In recent days, bitcoin has actually spiked upward again, making for its most dramatic movement since early May — but that’s not exactly a bad thing, and the key takeaway from the summer has been a reduction in volatility. This is reassuring for a lot of traders and analysts.

Beyond the positive and stable response to events this past spring, bitcoin may be enjoying a further boost in legitimacy as a result of governments’ and financial institutions’ increasing willingness to explore digital payments. To be clear, most of these governments and institutions are not explicitly working with bitcoin. However, when people hear about major banks adopting blockchain transactions, or the People’s Bank of China launching a digital currency, it supports the idea that bitcoin works, and that digital currency is the future. Even if these changes are ultimately producing competitors, they’re helping to validate its core concept.

We’ll note in closing that there are still plenty of negatives people will ascribe to cryptocurrency. Bitcoin’s pros and cons are fairly baked in at this point; some will always dismiss it because it’s expensive or complicated, or because an alternative is more appealing. But the idea that bitcoin is worthless or illegitimate may finally be fading as a result of what we’ve seen this year.

supplier

Why is the Supplier Experience Important in Payment Automation?

It’s a difficult time to be a supplier. As companies conserve cash amid difficult economic conditions, suppliers are often the ones who feel the financial strain. Payment terms get extended. Buyers seek to renegotiate contracts to optimize their processes and adapt to new solutions. But then their suppliers are left out of the discussion until they’re presented with their marching orders.

Even though a company’s first responsibility is to its bottom line, it cannot afford to forget that suppliers are ultimately responsible for their ability to deliver revenue. It’s especially important right now that companies take care of their suppliers for the supplier’s benefit as well as their own.

Nightmare Scenarios

If suppliers don’t get paid in a way that works well in their processes and systems, it causes many nightmares for their accounts receivable team. Those nightmares can spread throughout the organization, causing stress and frustration. That frustration sometimes manifests as a conflict between buyers and suppliers. In my prior finance roles, I saw my fair share of suppliers who went to great lengths to make their dissatisfaction known, from verbally assaulting my unsuspecting colleagues to threatening lawsuits.

When suppliers go to these lengths, it’s because they’re desperate for action on the buyer’s part. In today’s environment, their distress is twofold. Payment amounts that seem negligible to buyers make a significant difference to suppliers. The constant flow of payments from AP to AR teams has slowed as companies conserve their funds as long as possible. The ebb and flow of this process has always been present—it’s how many companies do business. But this year, suppliers are feeling the strain more than usual.

Increased Collection Pressure

In 2001 and during the Great Recession, we saw that when the economy struggles, finance departments add aggressive collections specialists to their accounts receivable teams to collect overdue money from their customers, relationships aside.

In my experience, AP people are helpful, conscientious, and tough. They have to be, as the liaison between their company and its suppliers. Right now, they’re on the front lines, battling to conserve cash. If past downturns are any indication, they’re currently bogged down with calls, and morale is dipping as the number of irate callers spikes. What’s worse, that stress and emotional exhaustion can cause high turnover rates, which in turn leaves companies in a constant state of training new-hires—a drain on already-limited resources.

From a strategic standpoint, if you’re not getting payments to suppliers in a way that’s conducive to their operations, they could go out of business. They might also choose to stop working with your company altogether. To them, not all customers are ideal, and as more of them abuse the “customer is always right” notion, suppliers have to withhold the benefit of the doubt and act in self-preservation.

I’ve experienced both positive and negative aspects of the financial battle. On the one hand, I’ve negotiated with large retailers who ground businesses down to the thinnest margins. Smaller companies who rely on their enterprise customers to stay afloat are often forced to accommodate them, knowing that they are expendable and replaceable. Conversely, I’ve worked with a global manufacturer that valued its supplier relationships and would only offer early payment discounts and supply chain financing if they knew it would benefit the supplier. This company holds stress-free, decades-long relationships.

When suppliers don’t get paid on time, they may decide to deprioritize the offending customers. By becoming a nuisance in their process, your supply chain could feel the impact. Ultimately, this translates to your inability to generate revenue.

Buyers Care

Fortunately, more companies seem to value their supplier relationships than not. I recently participated in a third-party study to understand what potential payment automation buyers value the most about adopting such a solution. Supplier experience took the third spot after efficiency and fraud protection.

Supplier experience appears in our buyer persona research too. When I meet with customers, they want to ensure that we treat their suppliers well. It’s not only part of the company culture they wish to instill in all of their relationships, but they also worry about the impact on their AP team and the supply chain if something goes wrong. They understand any economic impact on their suppliers ultimately translates to higher prices.

Supplier Experience Now

Supplier experience has always been a crucial part of our value proposition as a payment automation solution, and why we continue to focus on building upon the improvements we have already implemented.

We have a dedicated team that supports suppliers on behalf of each customer. Because many customers share the same suppliers, we act as the main point of contact for all of them, which reduces the number of touchpoints a supplier must make to resolve payment issues or update contact or financial information. At the same time, we’re flexible. Some of our customers have invested deeply in their supplier relationships, and they still prefer to be involved in communications. In those cases, we don’t have to be the single point of contact. Suppliers can contact us or their customer’s AP team—whichever suits them.

For suppliers with hundreds of customers in our network—which is common in verticals such as automotive, construction, and technology—we even offer consolidated payments. For example, we combine all their incoming payments into one deposit and supply a data-rich file for easy reconciliation, right down to the customer and invoice level. This data is delivered either through our payment portal or by email.

Creating a Satisfying Experience

At Nvoicepay, we’re always looking at new methods for supporting customers and suppliers alike. It’s our goal to offer better payment products, faster payments, and more real-time data. Our most valuable report cards take supplier opinions into account, and we are proud to consistently receive satisfaction ratings above 98% from the suppliers who interact with us.

Buyers have immense power over suppliers, and sometimes they press that advantage hard. As a payment automation provider, we advocate for and support our customers—the buyers. However, we have found that supplier advocacy results in measurable success for all parties involved.

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Josh Cyphers is the President of Nvoicepay, a FLEETCOR Company. For the past 20 years, Josh has managed successful growth for a variety of companies, from start-ups to Fortune 100 companies. Prior to Nvoicepay, Josh held leadership roles at Microsoft, Nike, Fiserv, and several growth-stage technology companies. Josh is a lapsed CPA, and has a BS in Economics from Eastern Oregon University.

payment

Survey Finds Dramatic Increase in Overdue Payments in North America

Will North American businesses remain resilient in the face of COVID-19 challenges? That answer is increasingly difficult to answer in the affirmative, as virus containment measures continue to negatively impact trade, consumer spending, industrial production, unemployment, corporate debt and supply chains.

According to the annual Payment Practices Barometer survey of businesses in the U.S., Mexico and Canada by trade credit insurer Atradius, companies are facing widespread cash and liquidity pressures. Survey data was collected this spring, and conditions have likely deteriorated further. News recently broke, for instance, that the coronavirus caused the U.S. economy to contract 32.9% in Q2, the worst contraction in modern history.

Needless to say, the bleak economic outlook puts businesses in an extremely tight spot, and it is likely insolvencies will rise dramatically, further exacerbating liquidity challenges among organizations in the supply chain. Some troubling signs of deteriorating payment practices and B2B customer credit risk captured in the survey include:

-Overdue payments have increased dramatically. Across the region, 43% of the total value of issued invoices remain unpaid by the due date, a sharp increase from the 25% reported last year.

-The value of invoices overdue by 90 days or more has doubled to 13%.

-Businesses write off 4% of the total value of outstanding invoices, up from 3% in 2019.

The increase in payment defaults is particularly alarming in the U.S., which saw a 72% year-over-year uptick compared to 2019, and in Canada, which saw an 86% increase. In Mexico, the amount of trade receivables firms have written off has doubled since last year.

These trends put a troubling burden on businesses, which end up having to spend more time, resources and funds chasing down overdue invoices. It also means working capital is tied up for longer than before, limiting businesses’ abilities to pay their own suppliers and make strategic investments. In short, rampant late payments cause a bad domino effect, spreading liquidity issues all throughout the supply chain.

UMSCA Firms Are Tightening Credit Controls

Faced with heightened B2B customer credit risk, many businesses across North America are tightening their credit control procedures, the Payment Practices Barometer found.

Firms typically rely on a mix of outsourced risk management, such as credit insurance, and internal tactics such as reducing risk concentrations and increasing debt collection resources. Notably, more than half of the region’s survey respondents plan on upping the efficiency of their debt collection processes through tactics such as payment reminders or outsourcing collections to an agency.

The Payment Practices Barometer also found that while credit-based B2B sales are on the rise across the region, the trend is slowing. Self-insurance against the risk of payment defaults also saw an increase – 66% of businesses rely on this tool compared to 22% last year.

The most prevalent methods of credit control vary by country:

-Many Canadian firms are planning on adjusting payment terms to better align with the credit capacity of customers – average payment terms are now 26 days, compared to 27 days in 2019. They also widely employ payment reminders and work to avoid concentrations of credit risk.

-In Mexico, a significant proportion of businesses employ credit insurance. Additional popular credit management tactics include suspending deliveries until outstanding invoices are paid, requesting payment on cash from B2B customers and requesting payment guarantees.

-U.S. firms focus more on credit management than their peers in the region. A large majority of U.S. businesses manage customer credit risk in-house through self-insurance. Requiring payment guarantees prior to sales and offering discounts for early payment are also widely used tactics.

UMSCA Businesses Remain Hopeful?

Despite the bleak economic outlook and all signs pointing to widespread liquidity issues, the majority of businesses surveyed in North America predicted growth in the coming months, their optimism rooted in the belief that banks will continue to provide credit to cushion the effects of poor cash flow.

But again, that was a few months ago, and business conditions are rapidly changing for the worse. Consumer sentiment, for instance, has fallen back almost as low as in the early days of the outbreak – optimism that COVID-19 will go away any time soon is now a distant memory.

The only thing that can be said for sure is that the business environment in North America is rife with uncertainty with no indication of sunnier skies in the near future. More than ever, businesses need to take a strategic approach to credit management that ensures adequate cash flows and a solid liquidity position.

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Gordon Cessford is the president and regional director of North America for Atradius Trade Credit Insurance, Inc

Cryptocurrency

2020 Global Challenges for Cryptocurrency

Blockchain, Bitcoin, and Cryptocurrency are some of the terms that you must have heard at some point in your life. Especially in the past decade or so, cryptocurrency became the talk of the global economic forums. As many authorities began to question the future of monetary assets, money, and similar resources, cryptocurrency was among the more controversial topics.

In 2019, right before Blockchain could have seen a public acceptance phase, the revolution came to an abrupt halt. According to the Gartner Group, it was called ‘Blockchain fatigue.’ Other experts also jumped on the bandwagon that the fire of Blockchain technology and virtual currency, in general, has fizzled out. People thought maybe it was a phase after all that overstayed its welcome.

Pragmatically, the perspective is incorrect. According to recent statistics, the crypto market has an estimated total market capitalization of over $155 billion as of 15th March 2020. Considering these numbers and based on many financial institutions, powers might tend to disapprove of cryptocurrency, but they are in favor of Blockchain technology. The disruptive nature of decentralized currencies such as Bitcoin and others has led to a corresponding halt to its progress.

Let’s find out what more challenges do cryptocurrency has to face as the year 2020 goes by.

Challenges Hindering Cryptocurrency Growth and Acceptance Worldwide

The following are the challenges hindering cryptocurrency growth and acceptance on a global scale.

1.  Boom Phase for Blockchain

There is no doubt about the fact that where cryptocurrency is facing the challenge of surviving and being accepted by the masses, Blockchain technology has already surpassed it. The masses have widely accepted it, and big names of global trade specialists are now moving towards Blockchain.

The likes of Trade Lens by IBM and Maersk’s joint Blockchain investment in the shipping industry have welcomed the first-ever initiative taken. Many such mind-blowing initiatives are underway that involve Blockchain apart from the cryptocurrency domain. The challenge for crypto-enthusiasts here is that once the Blockchain technology takes off without crypto, it will be the end to it.

2.  Bad Imagery

Cryptocurrency, even after having gone through a boom phase, still has a PR problem. The terms associated are enough to conjure up images of cringe advertisements, low-quality campaigns, bad actors, get rich quick schemes, and criminals alike. For many people, cryptocurrency spells out new technology for age-old scams and frauds, which they don’t want any.

It may seem like a petty issue, given the magnitude that is a cryptocurrency and the Blockchain industry. However, this issue has hindered crypto for years since its inception and will continue to do so if no knowledgeable individuals came forward in favor of it.

3.  Blockchain vs. Authorities and Officials

US constitution is known worldwide for its protection right given to the democratic entity that the country is. Freedom of speech, access to information, and the right to form an opinion is protected by the officials to be open. However, on the flip side, when it comes to assets and financial resources, our system laws, governments, and authorities are designed to keep it limited amongst the powerful.

It is evident why crypto and Blockchain has taken over a decade to adjust in an economy where it had to tackle issue arising from the core of how our economy and society operates.

a. Lack Of Legislation

Digital currencies are decentralized virtual entities. They are purely digital products, and our authorities are not geared to handle this advanced technology. That is why the lack of legislation regulating these digital currencies and providing any sort of user protection has become a huge challenge.

The essential step that needs to be taken to reduce the risk involves educating and informing people about keeping their personal data safe. There is still a gaping void where insurance and dedicated legislation needs to be placed. But until that happens, awareness to safely exercise crypto is crucial.

b. Legal Obstacles

In addition to lack of legislation, the other big obstacle that stands in the way of cryptocurrency holders like Bitcoin traders and users is the challenge to spend their holdings. The untraceable nature of Bitcoin and its bad imagery as a mode of finance for mega criminal activities like terrorist attacks and the drug trade has made it quite scandalous in some countries.

Cryptocurrency is going through a period of abrupt halt where nothing much seems to be happening around the technology. Therefore, one can’t say for sure that what the future holds unless wide acceptability affects these legal obstacles standing in the way of crypto-trading.

4.  The Technology Is Still Immature

Cryptocurrency faces implementation obstacles beyond the lack of regulation and inactive obligations. The technology is an emerging one and is still immature in a system where other options are widely scalable and accepted over it.

One might think how a technology that has been out there for over a decade now can be new and emerging. The reason is that not much has been done to expand it.

a. Interoperability

Interoperability or the ability of computer system software to exchange and utilize information is a challenge faced by Blockchain. The technology has been divided to make multiple uses of it in different industrial domains, separate form cryptocurrency.

The technology needs to be made interoperable for the internet dedicated to Blockchain and crypto exchange. Until then, as long as people continue to go by illegal and wrong means of mining it, the technology is a threat to the economic system that opens its gates to accept virtual currencies.

b. Usability

This point cannot be emphasized enough how difficult it is to buy and sell crypto. We are way in the year 2020, and it is still as difficult as it was back in the day when Bitcoin was first launched. The mere participation in the crypto world requires a nerve-wracking validation that general people find unappealing.

The security procedures are so complex that they have become hurdles in crypto adoption as a mode of exchange. Most students look for personal statement help UK who have a high interest in cryptocurrency markets but unable to compose a compelling profile.

It is still a significant challenge for the industry to create user-friendly processes for buying, selling, storing, and using cryptocurrency securely without being called out for it.

c. Scalability

The generally acceptable country-wise currency exchange and even the banking transactions in different currencies have been made scalable and adaptable to the different rates. Cryptocurrency has years of effort to go until it finally reaches a scalability level that Dollar, Yen, Pounds, or Rupee have gotten to.

While interoperability may be a huge step forward to achieve that, that itself is a challenge to mitigate first, the system is so slow, and many dominant platforms for smart contractual applications are still under development. The processes face numerous delays and would require many scalable solutions to counter this issue of exchange.

d. Data Rights

Data has reached a level of becoming a digital asset at this point. Digital mafia considers data the real deal and a key to all things penetrable for the immense value it can hold for individuals and organizations. That is why one of the biggest lose loop in cryptocurrency is and will always be data rights and privacy.

The solution here is not just government protection of privacy and data for cryptocurrency traders. A dedicated system is required where such identities can capture and control their own data. And where there is a long way to go for an efficient framework, many initiatives have been taken and underway.

e. Security

Blockchain might be immature, but it is so far advanced that it is more secure than a traditional computer system.

However, many financial breaches, data leaks, and huge losses due to the system vulnerabilities have made it challenging for people to be satisfied with their transactions. At one point in time, $250 million were lost in a single transaction through QuadrigaCX exchange due to its deadly centralized business model.

In addition to it being not secure enough, these pieces of news make rounds globally. People have lost faith in cryptocurrency over time.

2.  Difficulties Of Bitcoin Transactions

In 2013, a crypto-enthusiast made a luxury car dealership in Costa Mesa, CA, for a Tesla Model S and paid for it in Bitcoin. Just under 92 bitcoins that were worth over $100,000 at that time, the deal was sealed and legally conceived. Considering this transaction and comparing it with the real-time value of crypto right now, the setback and skepticism surrounding Bitcoin have not done much harm to the growing estimation of it.

However, one cannot move past the real-time losses that have occurred given the Bitcoin transactions over the years. Spending Bitcoin is still a huge deal than hoarding it.

a. Countries Banning Bitcoin

Countries like Vietnam, Bangladesh, Bolivia, and Ecuador have prohibited crypto transactions. The state bank has outlawed it and declared cryptocurrency an illegal form of payment with a heavy fine due to violators. And even where it is legal, there are countless logistical issues.

Even in the United States, the Securities and Exchange Commission is having an ongoing debate if it prefers new regulations for the cryptocurrency market. If major countries with relevant economic forums stand against Bitcoin, it will become increasingly difficult for the crypto-type to gain acceptance from the masses as people continue to engage in it illegally.

b. Conversion Issues

Conversion remains a huge hurdle for Bitcoin vendors. As Bitcoin is not a fiat currency and is only limited to monetary value when converted to a cash equivalent, not many vendors go for its conversions for other cryptocurrency types. They are more willing to look for a payment method that delivers in Dollars or any other local currency. So that any exchange made for goods and products is made on consumer rates.

Such an implementation system is difficult even if bigger brands are willing to make it possible. No matter if a business sells cars or academic writing services, there is a lack of appropriate regulations to facilitate this type of exchange.

c. People Losing Money

Though Bitcoin regulatory protocol was not affected and not a single Bitcoin disappeared or got lost, people lost loads of money. The downfall and cases of transactional breakdowns are the major reason why cryptocurrency came to an unannounced halt in the first place.

There is a serious need to regulate and change the trading and mining protocols in Bitcoin and other cryptocurrencies. Only then can I expect the general public to safely indulge in Bitcoin mining and trading without feeling it to be illegal or a complete daredevil gambling moves on their part.

d. Volatility Of Prices

The volatility of prices also hangs in the balance of the potential of Bitcoin and cryptocurrency in general. Even though Bitcoin has gained significant community following over the years, there have been disputes among the community member for deciding the path it should take.

The compact user base has made the currency increasingly volatile. The stability expected concerning a centralized authority system to regulate it will increase once people start to accept it. The doubts about Bitcoin’s usage and the resistance by major countries to integrate the system and legalize it will continue to deteriorate the prices further.

Conclusion – The Stakes Are High

All in all, the results of no action being taken by major industrial giants, businesses, and government authorities have never been so altering ever since all these years of crypto trading and mining as it is now. The year 2020 is going to shape the cryptocurrency industry either for better or for worse.

Crypto networks like Bitcoin, corporations like Facebook, and nations like China implementing digital currency by the end of this year will be taking a step towards stumping Dollar as the record currency. It will, in turn, lead to the US Federal Reserve pushing ahead of the digital counterpart.

There is no denying that the stakes are high, and just like everything else, the future is unpredictable for cryptocurrency too.

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Claudia Jeffrey is currently working as a Junior Finance advisor at Crowd Writer, an excellent platform to get assignment help UK. She is a self-proclaimed crypto-influencer. She has gained significant expertise and knowledge in this regard over the years and likes to share it with an interested audience.

payment

The New Business Case for a Powerful Payment Solution

Back in 2009, when my co-founders and I started Nvoicepay, there was very little technology in the market to help companies make supplier payments efficiently. Banks were the only game in town. Companies were still making a very high percentage of their supplier payment with paper checks, using painful manual processes. The fintech revolution was getting underway, and we were starting to see tech companies begin to deliver innovations in consumer payments—think Venmo, Apple Pay, etc.—and these quickly gained mass adoption.

Business payments are far more complex, and we’re still not at mass adoption, but the market is picking up steam. There are now several strong suppliers in the market, and investment continues to flow into B2B payments tech. As a result, the move off of check payments is accelerating. According to the 2019 AFP JP Morgan Electronic Payments Survey Report, organizations on average make 42 percent of their supplier payments by check, down from 50 percent in the prior year. This is the biggest drop we’ve seen in several years.

As all this happens, the business case for B2B payment solutions is becoming stronger and multi-dimensional.

Efficiency at the core

Process efficiency remains a core feature of payment automation. It enables an accounts payable organization, which could be making tens of thousands of supplier payments a year, to automate the workflow of making payments of any type—card, ACH, wire or even print check—using cloud-based software and services.

Software automation provides the customer control over the payment, visibility as the payment clears, and complete traceability if they need to access the payment history. But payment services are critical to creating efficiency in accounts payable.

A large portion of accounts payable’s time is devoted to unwinding payment errors and resolving payment exceptions. A single payment error can take 20-30 minutes or longer to resolve; even with a low error rate, most accounts payable teams are dealing with hundreds of errors every month. Payment service providers take that piece off their plates completely and that’s a huge efficiency boost.

These services also address the historic barrier to electronic payment adoption: the labor of reaching out to each supplier to determine how they want to be paid, where the remittance information should be sent, and—if the supplier wants to receive ACH—to collect their banking data and securely store it. Accounts Payable teams working with thousands, or even tens of thousands of suppliers, just don’t have the headcount to do that level of outreach.

Fraud protection and continuity

As enterprises have shifted toward electronic payments, we’ve seen an uptick in ACH fraud. Organizations have become accustomed to dealing with check fraud, and banks usually offer Positive Pay and Positive Payee services to combat it.

ACH fraud is a whole different animal. It’s cybercrime, and prevention requires sophisticated technology and controls, and ongoing employee training. It’s a lot more than most companies can do on their own, but a payments solution provider has the scale to offer extensive security services to all of its customers, and to assume that risk on their behalf. Fraud protection adds another very significant dimension to the business case.

With the global pandemic, many accounts payable teams are still working from home, where it is almost impossible to produce paper checks in a safe, secure, repeatable way. Paying by check was expensive and time consuming before the pandemic, but now the problem is acute. It’s incredibly difficult to approve invoices and make payments by paper check when your accounting staff is spread across their home offices. You literally have to drive paper from place to place to get approvals and signatures. Payment automation gives accounts payable the visibility and control they need to do remote payment approvals from home, making business continuity another dimension of the business case.

Now we’re heading into a severe global economic downturn. Businesses are pivoting to reducing costs, and checks cost a lot—around ten times more than electronic payments. So, in the near term, reducing costs is going to become a driver that accelerates payment automation adoption.

I think this driver will remain over the long term as well, and could very well change our payment behaviors forever. Short term imperatives will drive greater adoption, but as more organizations get a taste of automated payments, it will change the way they think about payments. They will realize there is a far better way to pay than writing checks, and I can’t see anyone who’s adopted payment automation going back to the old way.

Fintechs really are redefining business payments. Banks provide ways to move money from point A to point B. The business case for that is pretty simple—get the best deal on per transaction costs, but beware of the need to add headcount to use these products.

As awareness of these solutions grows, buyers should dig into the details and ask questions to really understand what they are getting and the differences between solution providers, and bank offerings. Some questions to ask are:

-How are payment issues handled and what are the SLAs (service level agreements) around payment support and resolution?

-What does the provider take responsibility for?

-How is data managed?

-How does the provider treat your suppliers, and what services do they offer them?

-How does the provider protect against fraud?

-How are they protected in the event of a disaster?

-How many payments are really sent electronically with their solution?

Some fintechs offer a surprisingly low number of electronic payments. Anything lower than 20 percent is not a payment solution; it’s a payment hobby, and buyers today can make the case for something a lot better. The best fintechs address the entire payment process with automation and services, which enables organizations to move 100 percent of payments electronically with a fraction of the effort previously required, and, by doing so, dramatically lower overall costs.

checks

This is How Rooted Checks are in our History

If your company makes payments, I’m willing to bet you’ve at least Googled cost-effective ways to simplify the process. Perhaps you’re an enterprise making hundreds of payments a day. Or maybe you’re a small- to mid-sized business looking to ease the manual burden on your small-but-plucky AP team.

One of the biggest arguments against checks is that they’re just plain old, invented to support even older banking processes. Of course, the term “old” is relative, so what does it mean when we’re talking about check history? You might be surprised.

Checks used to make a lot of sense

Checks developed alongside banks, with the concept for payment withdrawals based on recorded instruction appearing in history as early as 300 B.C. in India or Rome, depending on who you ask. Paper-based checks made their debut in the Netherlands in the 1500s, and took root in North America about a century before the Declaration of Independence was signed. The oldest surviving checkbook in the U.S. dates back to the late 1700s—and the register even has a notation for a check made out to Alexander Hamilton for legal services.

So, yes, checks are old.

What started as a safe and strategic way to transfer money—one that protected merchants’ safety and livelihoods—ingrained itself in business dealings for hundreds of years. It’s challenging to phase out something like that entirely, even if checks are difficult to adapt to today’s electronic processes.

Hanging onto the past

Each business that holds onto its check process has a reason. Perhaps their AP team’s veteran employees are more comfortable with the familiarity of checks. They may wish to preserve business relationships with suppliers that prefer checks. Some businesses are very likely interested in switching to electronic processes because check payments are expensive—but they hold back due to the perceived process upheaval.

These concerns aren’t unfounded. They’re built upon years—and generations—of business experience. So while plenty of news outlets claim that checks will phase out “soon,” we should more realistically expect that they’ll be incorporated into—not eradicated from—modern business practices. At least for now.

Time for a change

While banks have made efforts to simplify the payee’s ability to cash checks electronically, only a few have attempted to tackle the time-consuming issues that their customers face. They also lack ways to incorporate outdated check processes with the newer ACH and credit card processes their customers are also expected to support.

If checks are here to stay, do companies need to resign themselves to endless signature hunts, letter-stuffing parties, and post office visits? No. Checks have the spectacular ability to evolve as modern needs arise. After all, the first printed checks in the U.S. didn’t have the standardized MICR format that we use today.

Change happens slowly and in easily digestible segments. So although checks aren’t going away any time soon, they’re overdue for another evolution.

A middle ground exists, where business owners can upgrade their processes without causing major supplier or employee upset. Payment automation solutions have been growing in recognition for over a decade. The most successful providers have acknowledged the gray area with checks and incorporated them into their simplified electronic payment workflows. These alternatives reduce AP workloads without forcing suppliers to accept payment types that don’t work for them.

Checks have come a long way since their conceptual days, and their flexibility means we probably won’t see the last of them anytime soon. We are, however, in the midst of their shift into the electronic world, and AP teams are all the happier for it.

Are you interested in the history of wire payments? Check out this article.

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Alyssa Callahan is the Content Strategist at Nvoicepay, a FLEETCOR company. She has five years of experience in the B2B payment industry, specializing in cross-border B2B payment processes.

banks

OUT WITH THE OLD: WHY BANKS MUST ADOPT FINANCE TECHNOLOGY TO REMAIN RELEVANT

The term “FinTech” continues to saturate the news and financial institution reporting in recent years. It’s not surprising that streamlining financial services in the age of automation is something traditional banks struggle with adopting as global markets capitalize on technology. The trade sector on a high level is already purging antiquated, traditional processes involving paper, phone calls, Excel spreadsheets and tedious, unreliable methods of tracking and invoicing.

Now that FinTech is part of the bigger financial picture, it only makes sense that more companies in the global trade market are adopting FinTech as the norm rather than an option. This presents its own set of challenges for banks to overcome as much as it presents opportunities in optimization and risk mitigation. FinTech has its own challenges to overcome as well before it can successfully replace the traditional financial processes currently in place.

To understand exactly how FinTech fits into the bigger picture, we must break it down and evaluate all angles. To start, trends in emerging finance technology include variables from governments and dominating players to emerging acquisitions positioning big tech as a disruptor and solution to trade finance. So, what are some of the top emerging trends currently found in the financial technology space? According to experts at Azlo, a no-fee digital banking platform, government regulation will weed out fly-by-night FinTech while ownership of a self-sovereign identity will become more prevalent for risk modeling. Additionally, FAANG companies are currently positioned to become major players in the FinTech space as they continue to raise the bar for consumers and businesses alike.

Azlo also maintains that banks must adopt FinTech and emerging tech to remain a relevant part of the financial industry, warning that if they don’t, European, African and Asian markets, which possess less regulation and oversight, will own the space very soon. Additionally, optics, trust and inevitable obsolescence will ultimately serve as supporting reasons behind the adoption of emerging tech in the banking space in the near future.

From a safety and risk mitigation point of view, cybersecurity requires a sophisticated and advanced system to combat various strategies hackers utilize to disrupt the financial industry. Cybersecurity goes hand-in-hand with the recent surge in FinTech and will present itself as a challenge for financial companies to mitigate. How will this risk impact banks from a cost perspective? Think of it in terms of compliance and regulation. Circling back to Azlo’s expert point that once the government starts implementing harsher regulations, the days of FinTech will take a different stance in the financial industry. An example of this is found in Mexico’s FinTech law that took full effect this year and in the Latin America markets. As noted in a November Nasdaq article: “The goal of the FinTech law was to help bring more people into the formal economy. Additionally, it would help to reduce the amount of cash in circulation, which would cut down on money laundering and corruption as well.”

Nasdaq experts also point out the significant progress FinTech has made within the Mexico and Latin America markets. “In January 2019, Albo raised $7.4 million, sparking a surge in investor interest in Mexican neobanks,” states the article. “In March 2019, Mexican neobank, Fondeadora, announced a $1.5 million round of investment, and in May 2019, Nubank, Brazil’s largest neobank with over 15 million users, announced its plans to expand into Mexico.”

Considering the reputation for cash dependency in Mexico paired with the more than 273 FinTech ventures operating in the country, it’s no surprise that FinTech is disrupting and recreating opportunities for global markets while changing the way cash flow is approached.

FinTech will not necessarily hurt the traditional banking model, as it does offer an automated and sustainable approach for customers while keeping up with what is expected of companies on a cultural scale. To remain relevant, banks should consider what customer generations are emerging while maintaining the changing ecosystem supporting efficiency, sustainability and cost-savings.

Furthermore, FinTech is changing the way investments and lending are assessed. FinTech allows for much larger sets of data, providing a new level of visibility. Possessing the ability to manage multiple information streams that reflect the health of a company is found as an unmatched solution provided by FinTech, according to Azlo. With this information, companies can further evaluate next-step approaches and what actions in place need to be revisited, revamped or completely eliminated. The name of the game is data visibility, folks, and that is exactly what FinTech is doing to redefine how finances are approached.

“FinTechs are relying on different information when underwriting consumers, looking at things traditional banks have never considered and providing more people with access to personal and business capital,” explains Donna Fuscaldo in her blog, “The Rise of Fintech: What You Need to Know & Financial Services Now Offered.”

“Traditional financial institutions may be late to the FinTech party, but they haven’t missed it altogether,” Fuscaldo writes. “Many of them are creating their own services or partnering with established FinTechs to bring services to their clients. It’s happening in every aspect of FinTech from robo advisors with Charles Schwab’s Schwab Intelligent Portfolios to digital payments with Visa’s Visa Pay digital payment service. Even heavy hitters like JPMorgan are turning to FinTech’s data to evaluate applications for loans, and Quicken Loans, the online mortgage lender, launched its Rocket Mortgage app that can churn out mortgage approvals and rejections in minutes. All of this action on the part of the traditional financial services industry make for more choices beyond just the startups.”

With cybersecurity and automation consistently creating new ways for companies to optimize their payments while maximizing data and integration, only time will tell how much regulation global governments will impose and whether that reshapes the FinTech marketplace. One thing is certain: Traditional banking will continue to be challenged to redefine how customers are served, transactions are protected and how the investment and lending sectors approach opportunities throughout the international and domestic markets.