January 18, 2019
Our Weekly NewsletterContact
Across Instinctif Partners’ Financial Services team, we are always keeping an eye on the key developments taking place across the sector to evaluate their impact on the many businesses we work with. Here we share our picks of the week’s most interesting news, and our expert views.
Are you a cash cow for your bank?
Official research by the Financial Conduct Authority (FCA) has revealed older savers are among those that earn banks the most profits. Second in the list of most lucrative customers for banks are 39-year-olds, who pay large amounts in overdraft charges and returned item fees. Banks are now being accused of taking advantage of the fact that customers find it too time-consuming to move their money around, and are profiting from their most loyal savers and spenders as a result. (From The Times, Sunday, January 13)
Mastercard’s new logo reflects cashless society
Mastercard is removing its name from its logo, in a move to downplay the “card” in “Mastercard” as new payment methods and technologies spread. The decision places Mastercard among the likes of Apple, Nike and Target, who have paved the way in being represented by visual symbols alone. As well as pointing to a broader business feature beyond physical cards, the new logo is also designed to stand out better on portable digital devices. (From Wall Street Journal, Monday, January 07)
Savers or overpayers?
Research by Which? shows young homeowners are opting to overpay on their mortgages in response to savings rates hitting rock bottom. Over half of young homeowners are overpaying on their home loans in order to cut months off the length of their repayment schedule and reduce the amount of interest paid. The move is said to be an attempt from young people to make their money work harder as returns from savings are so paltry. (From The Guardian, Sunday, January 13)
Hedge fund horror
2018 was a tough year for many investors, but hedge fund managers had a particularly challenging time. With even the biggest names making significant losses, only 4% of hedge funds delivered a profit to investors after fees. As global stock markets decline and US interest rates continue to rise, hedge funds that continue to fail to protect their clients from heavy losses will find their performance claims under intense scrutiny in 2019. (From Financial Times, 13 January 2019)
Pocket money performance
Many examinations of Britons’ attitudes to saving paint a grim picture – but there is hope for the future! Two new pieces of research from RoosterMoney and the Money Charity suggest children are already a lot better at saving their money than their parents are, even if they may only “earn” £5 a week. While youngsters manage to save 40% of their income, the average household overall puts away just 4%. We can only hope this trend is sustained into adulthood. (From The Times, 13 January 2019)
Bitcoin, the world’s first cryptocurrency, has just celebrated its 10th birthday.
Many in the industry will be surprised it ever made it this far. Born from the depths of the 2008 financial crisis, the electronic currency represents a vision of a peer-to-peer, blockchain-based network of cash that removes the need for established financial institutions.
The concept is both revolutionary – marking a major departure in the way money exchanges hands across the world – and fiendishly complex. As such, Bitcoin and other cryptocurrencies are frequently criticised and accused of being nothing more than just a flash in the pan.
Never before has this prophecy been more at risk of being fulfilled than in 2018. After one of the biggest bull rallies in history, the cryptocurrency ended last year with a market value 80% below its peak. The scale of these losses have left some experts questioning whether Bitcoin will ever again see a market turnaround.
Though the fortunes of individual cryptocurrencies may falter, the blockchain system on which they are based is continuously growing – with this technology’s potential far from limited to financial services alone. Such is its potential that one commentator describes it as the second significant step in the evolution of the Internet (the web’s invention being the first).
Even though Bitcoin has lost its lustre, blockchain is set to continue to make a huge impact in finance in 2019. The world’s biggest financial institutions continue to experiment with the technology as financial service practitioners find real-world applications for distributed ledgers.
So while we not be using Bitcoin to pay for our grocery shopping any time soon, the real revolution is taking place behind the scenes – and it is here where we should be turning our focus this year.