March 1, 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.
Unhackable Blockchain? It Got Hacked…
Security holes are starting to emerge in distributed ledger technology that was previously thought to be “unhackable”. Recent attacks on crypto blockchains – which not long ago were considered purely theoretical scenarios – have been on the rise, with nearly $2 billion worth of cryptocurrency stolen since the beginning of 2017. (From MIT Technology Review, 19 February)
Taking Robots to Court
A robot has been used for the first time as a mediator to settle a dispute in the court system. With the use of AI algorithms, the online tool settled the three-month dispute in less than an hour. According to mediator and online dispute resolution experts, the system could prove attractive to insurance companies in routine personal injury cases. (From Legal Futures, 19 February)
Buy-To-Let Competition Ramps Up
The number of buy-to-let (BTL) products currently available on the market is at a post-financial crisis high, as mortgage lenders compete for a dwindling number of landlords. Now the government’s tax changes have hit investors, interest in property investment is on the wane, but that hasn’t stopped specialist mortgage lenders pushing more than 2,000 BTL products. The next battle might be in rates as more landlords struggle to manage increasing tax bills. (From Financial Reporter, 25 February)
Publicly available factsheets indicate that 34 oil and gas related companies account for 3.4% of the ‘FTSE4Good’ developed index of supposed ethical investment options. While all the index firms provide methodologies for their indices, some indices use scoring systems that omit emissions from burning fossil fuels. (From The Guardian, 22 February)
Silicon Valley Votes for Super Voting Rights
Lyft, the ride-hailing company, is preparing to create “super-voting” shares for its co-founders, in preparation for listing on Nasdaq. The share structure would mean that its co-founders would get greater voting rights than their economic stake of less than 10% in the company. This comes as investors become increasingly worried about mechanisms that limit their rights as shareholders. Lyft is not unique in this aspect in Silicon Valley, with Facebook’s Mark Zuckerberg famously keeping an iron grip on his creation with a special class of shares – and more floating tech firms might follow suit. (From Financial Times, 25 February)
Cashless Too Soon?
Cash is no longer king. Debit card payments overtook cash as the most popular form of payment in the UK for the first time in 2017, with UK Finance predicting that cash will account for just 16% of payments by 2027. Cashpoints are swiftly disappearing, with Which? claiming that 488 close every month in the UK – but are we moving away from cash too soon?
The move towards a cashless society is part of a wider global phenomenon – Sweden is now the most cashless society on the planet, while Singapore is using nudge-based technology to encourage cashless payments.
Access To Cash, a consortium of payment experts, revealed in its 2018 review that an estimated 25 million people believe cash is an economic necessity, with eight million at risk of suffering if the UK went fully cashless.
Among those who would struggle to survive with digital payments alone are rural communities, who still suffer from poor broadband or mobile connectivity.
A cashless society would also potentially leave behind older consumers who might struggle with digital services. Forcing them to make digital payments could also leave the elderly prone to hacking or scams, as seen in China.
Low-income households are also at high risk, given the two lowest household income groups rely predominantly on cash. People in debt are frequently advised to adopt a cash-only strategy, given this can be easier to control and avoids the risk of high overdraft or other banking penalties.
Other vulnerable groups who stand to suffer from a cashless society are those with mental or physical disabilities, or those trapped in financially abusive relationships.
Even for those who do not fall into the above groups, IT is not infallible, as proved by recent tech failures at multiple high-street banks. If online systems go down and card payments cannot be processed, cash is an invaluable back-up.
Digital payments bring many benefits, with convenience, faster access to finance and innovative budgeting tools just some of the advantages. But as the digital revolution picks up speed, financial services providers – particularly those in the banking and payments industry – are duty bound to consider if we as a society are ready to ditch cash just yet.