Nadeem Shaikh: Financial Wellness

I recently came across the concept of Financial Wellness in a Ted Ex talk by Nadeem Shaikh, who has also written about it here and brought together some further reading about it here.

You can see the Ted talk here.

Nadeem Shaikh’s argument is that a combination of technology and consumer needs has come together to generate what he calls a paradigm shift. Fascinating and potentially world changing in terms of development and the achieved of the sustainable development goals.

Consumers are increasingly looking for products and services that do not just cater to discrete need but to their overall financial wellness. This includes not only what we think of traditional financial services, but also insurance, health, education and, in some cases, energy. This convergence of needs applies to all consumers in the developed and developing world alike, whether they are affluent or under/unbanked.

A paradigm shift toward financial wellness is now possible thanks to the emergence of new business and technology models. While the traditional approach to financial inclusion has involved bringing low-cost financial products to the market, a new generation of startups is creating solutions that embed themselves in consumers’ lives instead of treating finance as a pure utility, embracing a 21st-century approach to digital financial services.

What these business models have in common is that they are essentially customer-centric rather than product-centric. They are using technology, behavior science and new business models to improve customers’ well-being instead of seeking a fresh market for tried-and-true products. And they are doing so with the goal of profitable growth, ensuring an incentive to serve the customer while finding new ways to remain relevant and compelling. For them, every customer is a profitable one. regardless of where they are on the financial spectrum.

Coffee Corruption: Rip Off Britain

The Mail on Sunday has exposed the 20% increase in the price of a high street cappuccino. Research by the MoS found the price of beans on the international markets has plunged 67 per cent since 2011, from £2.23 per pound to a low of 74p last month. Yet in that time, a ‘tall’ cappuccino in Starbucks that cost £2.15 in 2011 now costs £2.60 in most outlets – a 20 per cent increase, according to industry experts Allegra. Rival Caffe Nero’s regular cappuccino has risen 40p from £2.30 in 2011, at Pret a Manger it has gone up from £2.19 to £2.45 and at Costa, the £2.15 ‘primo’ now costs £2.35.
But international trade Leonardo González Dellán explains why the reality is even worse: “August sees the largest coffee exporting figures of any month in the year, Brazil’s exports will increase by 81% compared with July, and most other supplies will also be shipping larger volumes. This will depress the price of the beans even further. Much of the decrease rightly spotted by the MOS has come in the last 21 months – the price of beans has dropped 44% since November 2016 highs.” The price continues to drop: “If you look at the international coffee organisation index, you will see that Brazilian beans dropped a further 10% in August alone.”
So why is it going to get worse?
According to Leonardo González Dellán, consumers will be hit with more increase over the next year: “As the growers consider the crop for next year, they are going to have to cut supply to increase the price. That means that bean prices are likely to surge, as they did in the second half of 2016, which means the price of a cup of coffee is going to continue to go up”.

The Triple Knot: Emerging Markets in the Digital Economy

Patrick Mahony, Emerging Markets expert, highlights a new study that explores the Triple Knot – economic growth, digitalization and security and argues that “If you can untie, understand and analyze the triple knot effect for an emerging market then you can pick those markets that are capable of sustainable growth in these turbulent times and the places in which your investments and your businesses will be secure.”

Mahony argues that assessments of long term prospects for emerging markets in South East Asia are changing rapidly. Many commentators argue that mobile broadband take up is the key measure of the potential of a market to sustain growth. The future is digital and it is mobile. While there is much in this analysis and the future is indeed digital, assessing the prospects for long term growth and stability of emerging markets requires a careful understanding of the analogue backbone of the country as well.

In western states, mobile broadband was built on the back of land lines, established institutional structures and rules of law, in addition to a steady and predictable supply of electricity, skills in the workforce, knowledge, and education. While digitalisation is increasingly recognised as a precondition for sustainable development and economic growth, it is these analogue foundations, Niels Nagelhus Schia of the Centre for Cyber Security Studies, Norwegian institute of international, Oslo, Norway argues in this important new study of digital development, that determine the extent and the sustainability of the digital dividends that emerging economies will deliver. These foundations, he adds, will usually determine the direction of a country’s digitalization.

Reflecting on this study, Mahony argues that the nature of the digitalization is the first key strand of the knot. Leapfrogging directly to mobile broadband payments, for example, without the analogue foundations leads to the second strand being either strong or weak – security. In Myanmar for example, only 20% of the population have a bank account but 97% of the population will have mobile access by 2021. Across Africa and the Middle East mobile banking based on the M-PESA service is growing very rapidly. Assessing the penetration of mobile banking in isolation from assessing the cyber security infrastructure that runs alongside it will lead to major mistakes by investors. Cyber criminals are increasingly understanding that the richest pickings are not in the western infrastructure, which is beginning to build the needed protection, but in emerging and developing markets. As Schia highlights, “The robberies of the Bangladesh National Bank in 2016, Banco del Austro in Ecuador in 2016, and in the Philippines and Vietnam in 2015, are important reminders that cybercriminals may move towards less developed regions as digital connectivity and opportunities emerge and progress.” These are also the places in which the cyber criminals set up shop. As the World Bank Development Report 2016 summarized: “the areas with the highest potential of economic growth correspond roughly with those where the security risks are the highest [and] the skills developed locally through cybersecurity trainings correspond to those needed to enable local businesses to scale up, without having to rely on outside, more expensive talent.” This, Mahony argues, is the key to the third strand of the knot – sustained economic growth.
There is no question that the digitalisation of the economy is the key to success in the future but there are, to use the World Bank’s analogy, three miles. The first mile is the level where the Internet enters a country, the middle mile is where the Internet spreads through the country, and the last mile is where the Internet actually reaches the end users. “Most emerging markets have mastered the first and to an extent the second mile of the journey, what needs the most careful analysis is the last mile. Take a careful look at analogue foundations of a country, its legal structures and levels of Cyber Awareness education, then explore the extent to which broadband reaches the broad mass of consumers. Understand that knot and you will untie the secret of where to invest next in the emerging digital economy”. Patrick Mahony is an Emerging Markets expert.