The decade after the 2008 financial meltdown has been marked by recovery, optimism, and bullish markets, but recent trends indicate that there may soon be a change in the winds. With the ongoing U.S.-China trade war, political uncertainty in major countries like the United Kingdom and Germany, and sluggish growth in the U.S. economy, the global markets are understandably jittery.
According to The Washington Post, surveys in the U.S. indicate that three out of four economists anticipate that a recession is on the horizon. Starting a business in a booming market is already a risky proposition, but small companies and startups are particularly vulnerable to economic downturns, primarily due to lack of resources.
Why emerging markets present an attractive alternative
Those keen on starting a new business at this time should recognize that the immediate future looks uncertain in the U.S. and European Union. With the never-ending Brexit debacle and an upcoming 2020 Presidential election in the U.S., there is potential for some market instability in the West.
Emerging markets present a different picture, however. The Morgan Stanley Emerging Markets Index tracks dozens of these nations across the globe, and on average, its numbers indicate that nations like China, Korea, Brazil, and South Africa are currently experiencing faster GDP growth rates than developed countries. New business, an emerging middle class, and increased purchasing power are all symptoms of emerging markets experiencing accelerated growth.
In the past, where partnerships in emerging markets heavily focused on exports, now see emerging markets growing into bona fide consumer markets. Emerging markets now boast increased accessibility, high growth rates, and unsaturated verticals – and yet, they still possess glaring gaps in consumer access to basic goods and commodities.
In particular, markets like China and India have seen millions of households that have experienced increased purchasing power in recent years. Consequently, there is now a massive potential for growth and expansion in the retail, consumer, and B2B segments in these markets.
Take, for example, Walmart’s $16 billion acquisition of Indian e-retail firm Flipkart in 2018 – a deal that helped the American merchandising giant quickly enter one of the world’s most promising e-commerce markets. In a press statement, Walmart recognized Flipkart’s potential to leverage the American corporation’s experience in merchandising and supply chain management, while acknowledging Flipkart’s “talent, technology, customer insights and agile and innovative culture.”
A local partner is essential for ventures in emerging markets
Recognizing trade potential in an emerging market is only one small piece of the puzzle. Starting a business in a home market is challenging enough, despite familiarity with the local economy, politics, social customs, and consumer audience. Now, imagine trying to sustain a business in a foreign market without knowledge or expertise in these areas. Without help, the likelihood of success reduces drastically.
Instead, a domestic partner can help to provide knowledge of local markets and structures of influence to utilize resources that are beneficial to the new business venture. In doing so, the domestic partner helps to reduce the partnering businesses’ financial burden in the process.
What cannot be ignored, however, are the fundamentals of a business partnership – values like reliability, compatibility, and trust. A lack of these fundamental qualities in the partner firm can result in an early demise for any joint venture in business.
This is where experience and reputation are crucial – a business with a long and proven track record is preferable over a brash new startup with exciting potential. An established local business can be an invaluable asset by providing insight into the conditions of the local market. Sometimes, a firm can bring something unique to the table, something which is not available to other companies in that market. These could be unique technologies, access to licenses and permits, or strong ties to regulators which can be a ‘make it or break it’ skill in markets with tight controls.
If you plan to fly solo, prepare for a crash landing
Emerging markets that possess a growing middle class and an increase in disposable income can be tempting to foreign organizations looking to grow their business. However, the risk can sometimes outweigh the reward.
The experience of San Francisco-based rideshare giant Uber in Southeast Asia is just one example of how a solo venture in an emerging market can go awry. Enticed by India and Southeast Asia’s markets of more than 2 billion consumers each, Uber made an abrupt exit from 8 operating countries in March of 2018 – just five years after entering the market.
Homegrown startups, Grab in Southeast Asia and Didi Chuxing in China, beat the popular Western rideshare service by possessing a better grasp of the local conditions. And the lesson proved to be costly – Uber eventually sold its Southeast Asian operations to the rival Grab.
With the right business partner, however, organizations entering emerging markets can turn into success stories. Just look at the approach taken by Japanese auto manufacturers Honda to gain a foothold in India’s auto consumer market. Initially, Honda entered the market exclusively through a joint venture with the Indian auto manufacturer, Hero MotoCorp. After enjoying excellent growth and profits for more than two decades, Honda and Hero decided to split ways, signifying Honda’s confidence in navigating the Indian market without a local partner.
Avoiding early exits versus planning orderly exits
The experiences of Honda and Uber highlights the importance of having an exit strategy. Although a mutually beneficial partnership between two organizations is crucial in a joint venture, it’s not always necessary that they have the same long term goals. With time, goals change, targets move, and an arrangement that may have worked in the past may not be feasible in the future.
However, when first laying the groundwork for a new partnership, choosing a partner with complementary goals and expectations is essential for a successful business relationship. Both parties need to be fully conscious of the expectations regarding the partnership.
For example, does the partner expect full access to intellectual property owned by your firm? Does your business require any specific returns goals from this venture? Goal compatibility should be a factor to consider when looking for a new partner in an overseas emerging market. Otherwise, your investment might be headed for an early exit.
For example, McDonald’s joint venture with Indian firm CPRL has become a cautionary tale regarding the importance of selecting the right domestic business partner. After emerging in the Indian market in 1996, McDonald’s was able to alter the Indian perception of eating out dramatically, and at its peak, boasted 430 locations on the subcontinent.
However, financial disputes with CPRL’s Vikram Bakshi led the American fast-food giant to become entangled in a six-year-long legal battle in Indian Courts. By August 2017, McDonald’s had announced the early termination of its joint ventures in India and immediately closed 169 of its locations.
The bottom line: complementary, capable, and competent
Emerging markets in Southeast Asia, Africa, and the Americas are some of the most vibrant startup ecosystems in the world. Given the promise of fast and scalable expansion, business partnerships involving tech firms are currently en vogue.
In the past, the flow of technology and IP was largely unidirectional – from the developed markets in the West and Japan to emerging economies. Now, there is considerable disruption in the flow of global knowledge. For instance, China is the world’s leading market for Fintech startups, while nations in Sub-Saharan Africa are experiencing the fastest growth in usage and integration of mobile money. For once, the playing field is beginning to level.
Analyzing a potential business partner for knowledge reciprocity is important in the decision making process. Does the domestic firm shares complementary goals? And what various resources and capabilities can an organization bring to the equation?
Resources such as intellectual property, capital, market assets, existing brands and products, distribution and supply chains, and an established customer base, are all things to consider when selecting a competent domestic partner.
In the words of Michael Gerber, small business guru and New York Times best-selling author of The E-Myth Revisited, “The number of businesses that fold due to bad partnerships is staggering. In some cases, they are charlatans, in others inept business people, and others find themselves unable to scale with any growth.”
- The pandemic revealed the fragility of the world’s economy and the global supply chain and its over-reliance on China; risks of future disruptions loom stemming from the potential of new pandemic waves, but also natural disasters and geopolitical factors such as trade wars
- Managing supply chain risks is emerging as the major aspect of business sustainability in the future
- Push for economic sovereignty is gaining traction in an attempt to localize or regionalize supply chain and mitigate the risk of future disruption
- 3D printing offers solutions to emerging supply risks by digitizing warehouses and enabling manufacturing objects at or near the point of use. The distributed production on demand reduces the complexity of the production chain, allowing the companies to leverage on-demand and decentralized production.
What COVID-19 has revealed about the global supply chain
The COVID-19 pandemic demonstrated the vital role that well-functioning supply chains play in the economy and the whole society. Causing an unprecedented disruption around the world markets, the pandemic brought to spotlight the need to transform traditional supply chain models, exposing the vulnerabilities of many companies, industries and whole economies and, in particular, those highly dependent on China to fulfill their demand for raw materials or final products.
Figure 1: China’s Rising Role in Global Economy; Source BakerMckenzie (2020)
Global manufacturing production has been organized in global value chains (GVCs) where raw materials and intermediate goods are shipped around the world and then assembled in yet another location with the final product re-exported to consumers located around the globe. For an increasing number of products, China is the “world’s factory,” right at the center of such GVCs (UNIDO Industrial Analytics Platform, 2020). For example, China accounts for around 50% to 70% of global demand for iron, copper, ore, nickel, and metallurgical coal (McKinsey Executive Briefing, 2020). Figure 2 demonstrates how the pandemic affected China’s exports virtually overnight.
Figure 2 China’s exports to the rest of the world; Source: Unido Industrial Analytics Platform (2020)
Over the past several decades, the focus of such supply chain optimization was on cost minimization costs, inventories reduction, and the increase of asset utilization, leading to the elimination of buffers and flexibility to absorb disruptions. As a result, the vulnerability of supply chains to global shocks increased and COVID-19 revealed that many companies lacked awareness of this fact (Deloitte, 2020). The unprecedented economic shock brought upon the world economy by the pandemic warned that specialized global value chain GVC increases a “trade fragility” and that the paradigm of today’s GVC needs to be re-assessed (UNIDO Industrial Analytics Platform, 2020).
A number of developed countries have started re-thinking their local companies’ approach to overseas outsourcing of production, with an intent to prevent future supply bottlenecks and increase the resilience of supply chains, thus ensuring “sovereign” and “independent” supplies. These calls for “national” supply chains suggest that companies need to re-think production distribution across the world. However, it needs to be a balanced approach as a considerable nationalization or regionalization of supply chains will lead to the reduction of diversification of suppliers in the world economy, exposing companies to yet another form of supply chain risk (UNIDO, 2020).
Although companies around the world are worried about the possibility of a second COVID-19 wave amid the rising potential that pandemic risk will become enmeshed into modern business, it is not only the pandemic risks that can cause a significant disruption due to overreliance on China. Geopolitical events in the most vulnerable nodes of GSCs and trade wars are becoming the norm of today’s business environment, while natural disasters equally threaten the resilience of global trade flows.
Emerging supply chain technologies that transform the traditional linear supply chain model into digital supply networks (DSNs) can dramatically improve visibility across the whole supply chain, empowering companies to mitigate such shocks. Digital supply networks refer to supply chain models where functional silos are broken down and companies become connected to their complete supply network to ensure end-to-end visibility, agility, collaboration, and optimization (Deloitte, 2020). 3D printing as an emerging technology can facilitate the overhaul of GVCs.
What is 3D printing technology?
3D printing, also called additive manufacturing (AM), is an innovative technology that allows manufacturers to create a three-dimensional object by robotically layering material under computer control. This approach includes specially developed methods used to transform a 3D digital object into a physical one by adding material layer by layer, instead of subtracting the layers like in a conventional manufacturing process.
This emerging technology enables on-demand production of both components and end products, improving the responsiveness of the supply chain, and reducing the inventory costs as well as the obsolescence risks. 3D printing allows small scale or “one-off” production as economies of scale and standardization are no longer requirements. As the technology matures, the parts could be printed on-site from available materials.
The capability to produce high-quality objects dramatically broadened the practical application of this emerging technology and many industries have been quick to capitalize on its potential.
Recognizing the immense potential of the 3D printing industry to transform the traditional manufacturing process, investors, including those most established such as Sequoia Capital, are flocking to invest capital into 3D printing companies leading to the emergence of three companies valued more than $1 billion in this space, or so-called unicorns.
Benefits of 3D printing
With conventional manufacturing, materials are sourced and shipped from various locations to centralized factories where the final product is assembled. In contrast, 3D printing allows the production of a variety of products from a single 3D printer, reducing the complexity of the production chain, enabling companies to leverage on-demand and decentralized production.
The additive manufacturing technology ensures a critical competitive advantage for manufacturers as it allows the flexibility to develop and test products multiple times and quickly build prototypes, helping them to reduce uncertainties while improving product functionalities and accelerating design cycles as well as reducing time to market.
What 3D technology means for the supply chain in the future
“Distributed production on-demand”— or demand production in distributed locations—represents one-way 3D printers that can enable the redesign of the supply chain to better meet customers’ needs. In this configuration of the supply chain, a decentralized network of 3D printers replaces some or all of the centralized conventional production facilities. Manufacturing objects at or near the point of use reduces the inventories required to respond to customer availability expectations, considerably reducing lead time, and the need for forecast accuracy as the supply chain based on the distributed production on demand is flexible enough to respond to unpredictable customer demand virtually at no additional logistics costs, such as transportation, taxes, customs, and others.
The applications of 3D printing technology
3D printing has the biggest impact on industries that manufacture low-volume, high-value parts such as the aerospace and medical industries. The ability to produce complex objects autonomously in a remote environment is also immensely beneficial for resource extraction companies, space agencies, and the military. For example, resource extraction projects such as oil platforms are usually placed in remote areas with limited access to infrastructure, which hampers the delivery of spare parts. The transformative power of 3D printing technology also extends to the military sector and others that involve high costs of producing small scale but complex parts where the conventional production is proving expensive. The military has already allocated resources to investigate the potential of this emerging technology for producing replacement parts, which can save billions of dollars per annum for military equipment maintenance as 3D metal printing has spread across the Air Force.
UPS has piloted an on-demand AM program in its stores, while NASA and the US Navy have also been experimenting with using AM to improve supply chain performance. NASA is testing 3D printing for on-site, in-space manufacturing of hardware upgrades and tools on the International Space Station, rather than conducting a space launch to deliver them. The Navy is exploring the use of 3D printing to manufacture spare parts while at sea.
3D printing is also well suited for the aerospace industry, where the weight of the parts is critical for optimized performance. Exceeding what is possible with traditional manufacturing both in terms of complexity and production efficiency 3D printing permits significantly reduced development times of prototypes and the downtime in the spare parts business, reducing supply chain constraints, minimizing warehouse space, and decreasing waste materials compared to conventional manufacturing processes.
The list of industries embracing technology is expanding. As the industry matures, 3D printing companies are increasingly specializing in individual verticals, such as dental, machine tools, aerospace, construction, automotive and oil and gas, but also medical and bioprinting.
Two giants, Siemens and HP, teamed up into an alliance to make Siemens manufacturing software and HP’s latest industrial 3D printers work smoothly together and encourage big companies to adopt 3D printing (HP Inc, 2020).
The future of 3D printing in supply chain management
As noted by a recent Euromoney article, the pandemic should not be interpreted as the end of global supply chains as local and regional supply chains may not necessarily be sustainable on a standalone basis. However, as 3D printing becomes more scalable, this might change, although it is a long-term goal.
The 3D industry is charging ahead firmly toward high growth and scalability. This nascent technology, set out to disrupt the $12 trillion global manufacturing industry, is expected to grow at a 21.8% CAGR, reaching $44.39 billion by 2025, according to a report published by (Allied Market Research, 2020). Similarly, a report published by Verified Market Research revealed that the global 3D printing market is valued at USD 15.78 billion in 2020 and is projected to reach USD 86.11 billion by 2027, growing at a CAGR of 25.5% from 2020 to 2027 (Verified Market Research, 2020).
A recent survey by Essentium, an innovator in industrial 3D printing platforms and engineering filament materials, conducted to explore the practical experiences of companies that have invested in 3D printing beyond simple prototyping, revealed that although the technology has exceptional potential, the industry has been rather slow in adopting it for mass production. Still, 99% of respondents confirm that the use of this technology will grow over the next three to five years, enabling mass customization in the automotive, aerospace, consumer goods, and biomedical industries, while allowing manufacturers to better respond to the demands of modern consumers.
The emerging 3D printing industry has been expanding at the annual rate of 35% for the past three decades, gaining momentum among manufacturers and investors alike. According to the 3D Printing Media Network article, it will continue to grow for the next decades until it eventually becomes the primary manufacturing method. This striking growth pace is equivalent to the industry’s doubling in size every two years, leading to an exponential growth well beyond a once tight-knit, enthusiastic group of professionals and maturing into an industry that will transform manufacturing as we know it today.
The industry still needs to solve several considerable challenges hindering its growth at scale. For example, 3D printing has a higher cost per unit than conventional manufacturing. On the other hand, no set-up costs are incurred between batches of different product lines and smaller parts are more cost-efficient as print time and material consumption are the dominant costs for 3D printing (OECD, 2017). Another challenge is to ensure repeatability, reliability, and consistency across different 3D printers and geographies (Deloitte, 2015). Security will become increasingly important as decentralized inventories and on-demand production continue to gain traction. This will require the development of tailored solutions to ensure security and IP protection across the entire 3D printing ecosystem (AMFG, 2019).
The pandemic has exposed the risky over-reliance on vulnerable points in global supply chains and, in particular, those that are placed in China. It may accelerate companies’ quest for ways to mitigate supply chain risk and the probability of future disruption. The impact heightens the need for companies to diversify their supply chain and implement innovation targeting logistical bottlenecks. 3D printing or additive manufacturing acts as a disruptive technology that will reconfigure how factories operate in the future and the way we build and transport things, from consumer products to industrial equipment and the defense industry.
It has the potential to revolutionize future supply chains as production will move from make-to-stock in offshore or low-cost locations to make-on-demand closer to the consumers’ market. This will lead to a drastic reduction of inventory and transportation costs, particularly pronounced in low volume, high-value production. It will also reduce lost sales due to the non-availability of products. It may also affect the configuration of the logistics industry, transforming its dynamics by decreasing freight business since 3D Printing companies can provide services in warehouses.
- 3D Printing Media Networks (2019). What Formnext 2019 means and where the AM Industry is heading. Retrieved from https://www.3dprintingmedia.network/what-formnext-2019-means-and-where-the-am-industry-is-heading/
- 3dnatives (2019). Essentium’s latest survey: what is the future of industrial 3D printing? Retrieved from https://www.3dnatives.com/en/essentium-190320195/
- Allied Market Research (2020). 3D Printing Market is Expected Excessive Growth to $44.39 Billion by 2025, at 21.8% CAGR. Retrieved from https://www.globenewswire.com/news-release/2019/09/03/1910174/0/en/3D-Printing-Market-is-Expected-Excessive-Growth-to-44-39-Billion-by-2025-at-21-8-CAGR.html
- AMFG Newsletter (2019). 8 Challenges Additive Manufacturing Needs to Solve to Become Viable for Production. Retrieved from https://amfg.ai/2019/01/23/8-challenges-additive-manufacturing-needs-to-solve-to-become-viable-for-production/?cn-reloaded=1
- BakerMekenzie (2020). Beyond COVID-19: Supply Chain Resilience Holds Key to Recovery. Retrieved from https://www.bakermckenzie.com/-/media/files/insight/publications/2020/04/covid19-global-economy.pdf
- Deloitte (2020). COVID-19: Managing supply chain risk and disruption. Retrieved from https://www2.deloitte.com/global/en/pages/risk/articles/covid-19-managing-supply-chain-risk-and-disruption.html
- Euromomey (2020). The future of supply chains after Covid-19. Retrieved from https://www.euromoney.com/article/b1lpmkc1l8s0fr/the-future-of-supply-chains-after-covid-19
- Harvard Business School Working Knowledge (2020). Has COVID-19 Broken the Global Value Chain? Retrieved from https://hbswk.hbs.edu/item/has-covid-19-broken-the-global-value-chain
- HP Inc. (2019). HP and Siemens Deepen Additive Manufacturing Alliance to Advance Digital Manufacturing. Retrieved from https://www.globenewswire.com/news-release/2019/05/09/1820460/0/en/HP-and-Siemens-Deepen-Additive-Manufacturing-Alliance-to-Advance-Digital-Manufacturing.html
- McKinsey Executive Briefing (2020). COVID-19: Implications for business. Retrieved from https://www.mckinsey.com/business-functions/risk/our-insights/covid-19-implications-for-business
- OECD. (2017). The next production revolution: Implications for governments and businesses. Organization for Economic Co-operation and Development OECD. Retrieved from https://espas.secure.europarl.europa.eu/orbis/sites/default/files/generated/document/en/9217031e.pdf
- S&P Global (2020). COVID-19 Impact: Key Takeaways From Our Articles. Retrieved from https://www.mckinsey.com/business-functions/risk/our-insights/covid-19-implications-for-business
- UNIDO Industrial Analytics Platform (2020). Managing COVID-19: How the pandemic disrupts global value chains. Retrieved from https://iap.unido.org/articles/managing-covid-19-how-pandemic-disrupts-global-value-chains
- Wing, I., Groham, R., & Sniderman, B. (2015). 3D opportunity for quality assurance and parts qualification: Additive Manufacturing clears the bar. A Deloitte series on additive manufacturing, 28. Retrieved from https://www2.deloitte.com/us/en/insights/focus/3d-opportunity/3d-printing-quality-assurance-in-manufacturing.html#endnote-4
Make room for 5G, because the next revolution in internet technology is quickly approaching.
More than just a simple improvement of its 4G predecessor, 5G reconstructs the telecommunication paradigm by allowing for higher transfer speeds, denser data transfer, and lower latency. The potential for this technology is untapped, and the innovations that will occur with the integration of 5G technology have yet to be imagined.
What is certain, however, is that 5G technology will reshape industries and business models in ways that have never been seen before.
5G technology as a catalyst for the global economy
The integration of 5G’s low latency and high bandwidth technology will encourage the development of new activities that have the potential to disrupt entire B2C and B2B verticals across the whole economic spectrum. From autonomous vehicles to smart cities, the Industrial Internet of Things to Virtual Reality, 5G technology may soon become a catalyst for the global economy.
Telecom and consulting players have already begun to analyze use cases for 5G technology to identify the most promising areas for growth. Figure 1 represents how those activities are distributed based on three factors: the importance of 5G technology, the stage of deployment, and the attractiveness of the use case (assumed to be linked to the market size).
As one can see, industry analysts anticipate that 5G will be a disruptor for industries ranging from agriculture to automotive, media to manufacturing.
The Gulf Cooperation Council (GCC) is one region, in particular, that is already recognizing the economic opportunity of this new technology. By providing cheaper and faster internet access, 5G technology is capable of advancing connectivity through the Internet of Things. Despite some inevitable operational and regulatory bottlenecks, GCC operators are already making strides in the deployment of 5G technology.
The economic potential of 5G is a strong motivator for 5G deployment; some analysts estimate that 5G technology has the potential to boost the GCC economy by $269 billion over the next ten years. According to GSMA (2018), 5G adoption will reach 16 percent in the GCC region by 2025 with 20 million 5G connections – slightly ahead of the global connection rate that is assumed to reach 15 percent globally.
After a few years of moderate growth, 5G mobile connections are expected to gain momentum in 2023. First deployments are ongoing in Bahrain, Kuwait, Qatar, Saudi Arabia, and the UAE this year, while Oman is expected to see its first commercial offerings deployed by 2020.
Compared to the mobile current environment, these deployments represent impressive growth in the GCC Arab States. At the end of 2018, 77 percent of the population were mobile subscribers, while just 67 percent were mobile internet users.
Current status of 5G deployment in the GCC region
The MENA region (and particularly the GCC region) are especially mature markets for the integration of 5G. Because the current fixed broadband structure in the GCC is usually seen as a bottleneck in the communication infrastructure, it is anticipated that 4G networks and early 5G deployments will become the backbone of the regional digitalization trend.
In 2019, several pivotal movements have already been made that will accelerate the deployment of 5G technology in the GCC. The ready availability of 5G Fixed-Broadband Wireless (FBW) services and the anticipated release of smart phones with 5G capabilities are two major developments prompting key operators to prepare for 5G deployment in mature national markets.
In anticipation of these developments, some GCC mobile operators have already led several 5G trials and installed 5G infrastructure in key cities and business districts in Qatar and the UAE. In the gulf region, here’s how GCC nations are leading the race to 5G deployment.
The UAE are at the forefront of 5G deployment
The UAE are currently leading in the race to 5G deployment in the GCC, despite future policies which are expected to clarify infrastructure and spectrum allocation. In 2017, Emirates Telecommunication Group Company PJSC (Etisalat) was already demonstrating its 5G capabilities by using an advanced 5G based drone equipped with a 360-degree VR camera and 4K streaming. Just two years later, Etisalat announced that it expects up to 1,000 5G enabled stations to be operational by the end of 2019.
However, Etisalat aren’t the only telecommunications players adapting to 5G in the UAE. In late 2018, du and Nokia successfully demonstrated 5G capabilities through a soccer-related VR game at GITEX Technology Week 2018 in Dubai. Since that time, du has also been appointed by Smart Dubai to build the necessary infrastructure to deliver the UAE smart cities initiative. In June 2019, du announced that it had started selling the 5G-enabled ZTE Axon Pro 10 handset and anticipates further expand its 5G phone portfolio in the coming months.
Saudi Arabia represents the largest market potential in the GCC region
As the largest nation in the GCC, Saudia Arabia has the greatest market potential for 5G deployment. Although many unknowns currently exist in regard to full spectrum 5G deployment policies, Sudia Arabia has already implemented some policies regarding spectrum allocation and licensing. In particular, the Saudi Vision 2030 roadmap clearly supports the development of information and communications technology (ICT) infrastructure and the digitalization of the Kingdom economy.
With the help of Saudi telecommunication companies STC, Mobily, and Zain, Saudia Arabia already boasts significant mobile coverage throughout the country. Its anticipated that mobile operators from these firms will implement development strategies that target specific verticals as part of the Vision 2030 objectives.
STC is also playing a leading role in the Kingdom regarding the deployment of 5G. In 2018, the company signed a Memorandum of Understanding (MoU) with Cisco to collaborate on the development of 5G communication systems and networks for different use cases – including smart cities. The company also entered into an agreement with Ericson to develop at mid-band 5G network in Saudia Arabia as well as an agreement with Chinese multinational technology firm Huawei for the deployment of wireless network modernization and 5G construction. Huawei will also partner with Viva, a subsidiary of STC, to begin deployment in Bahrain in 2019.
At the 2019 Mobile World Conference, Nokia and STC inked a deal to deploy a 5G network with Nokia’s end-to-end 5G solutions. The deal outlines a network which will first be deployed in the western and southern parts of Saudi Arabia, including the holy cities of Makkah and Madinah. Rollout is anticipated to be completed by the end of 2020.
In Qatar, 5G deployment is not far behind
Qatar may not be as advanced as the UAE or Saudi Arabia in the race for 5G deployment, but it is proving that it is not far behind. In 2018, Qatari telecom company Ooredoo announced that it had already deployed some 5G capabilities, particularly those that allowed the company to perform a real-time video stream demonstration with AR and immersive VR features at the Emir Cup final.. Ooredoo also signed a MoU with Cisco to initiate smart city development that would support its enterprise customers.
While the small nation sprints toward its FIFA World Cup debut in 2022, Qatar may utilize the global event as a catalyst for accelerated 5G deployment.
Oman and Kuwait represent smaller markets
Although other GCC nations have shown significant advancement towards 5G deployment, in the smaller markets of Oman and Kuwait, progress is less certain. Although telecom companies Omantel and Ooredoo have both been involved in testing trials in Oman, there is no clear deployment timeline. However, Omantel has formed an alliance with Huawei to develop innovative smart solutions for security, lamp-posts, energy, and utility management.
In Kuwait, trials have been underway since 2016 and commercial offerings are expected in 2019 for all of its three major telecom operators.
Lessons learned from the GCC’s current 5G deployments
Like any new technology deployment, 5G projects encounter their fair share of issues and challenges. Now that full commercial deployment is quickly approaching in most GCC countries, some best practices have been identified and should be leveraged for future projects.
To ensure success, it is critical for the mobile industry to work in strong partnership with the government and regulators as well as other private players to be able to address the complex issues surrounding 5G deployment.
Areas of focus for commercial operators:
- Operators should focus on specific verticals to validate proof of concepts and develop ecosystems. In the GCC countries, the “smart city” vertical seems to attract a lot of interest which may result in a particularly strong return on experience for operators focusing in this sector.
- Operators should aim to significantly develop 5G infrastructure before the launch of commercial offers in order to ensure the best customer experience. This is particularly true for the B2C segments.
- Operators should prepare clear communications on their deployment roadmaps as soon as possible in order to facilitate exchanges within the 5G ecosystems, attract the attention of individual and industrial customers, as well as clarifying forecast for startup using 5G as an enabling technology.
In turn, regulators also play a key role in the deployment of the 5G technology. Any decision that a regulating body makes in the early deployment of 5G technology can deeply affect the whole 5G ecosystem in a given country.
Policy suggestions for local regulators:
- Regulators should more clearly communicate their 5G roadmap to empower the entire 5G ecosystem.
- Strong and stable policy frameworks are required by operators in order to make the necessary investment in a timely manner. Modifications to policies with regards to spectrum attribution, tax or infrastructure deployment can literally stop the deployment of 5G and endanger players in this ecosystem.
- The lack of clear policies is particularly dangerous because it does not allow any player to launch their projects, which could ultimately cause GCC nations to fall behind the global rate deployment. This is particularly detrimental to mobile network operators who face very significant investments for a 5G-Rollout, including spectrum licensing, physical hardware, specific 5G hires, tests, regulator fees, etc.
- Spectrum acquisition should be made more transparent and international collaboration may be necessary in order to develop national policies for frequencies attributions.
- A more transparent approach to license renewal may also allow for better operator’s empowerment, facilitating their long-term investment arbitrages.
- The possibility to reassign spectrum bands currently used for 4G to support 5G services could be investigated
- Regulators should also specifically focus on some of the regions most promising verticals in order to develop clear policies and support the deployment of new commercial offerings within those verticals.
The future of 5G in the GCC
5G has the potential to revolutionize many sectors and is anticipated to support the development of countless new B2C and B2B services and ecosystems. It represents a very important opportunity for many verticals in the GCC region that includes several players actively preparing for a technological prepare revolution.
In Saudi Arabia, in the UAE or in Qatar, in particular, many new commercial offerings are currently deployed and the arrival of 5G-ready smartphones will further boost B2C applications in 2019. A continuous coordination between all the leading parties – national regulators, mobile operators and hardware providers – will remain key for the success of 5G deployment in the region which is today at the forefront of 5G deployment.
In the coming years, the Expo 2020 event in Dubai as well as the 2022 FIFA World Cup in Qatar will represent great opportunities for the GCC region to demonstrate its continuous leadership in the deployment of 5G at global events. All eyes will be turned towards the region and there is little doubt that the companies involved in those events will test and showcase new, compelling and revolutionary 5G applications.
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These days, it’s difficult to ignore the potential of autonomous vehicles as companies begin testing autonomous trucks to deliver goods. But are these viable options for the future of transportation and logistics, or are they just another new cost for companies?
Why autonomous vehicles?
Many trends play a role in the growth of autonomous vehicles in the transportation and logistics industries. Advances in autonomous technology not only give a glimpse of the future of the industry, but they also align with the general goals of improving safety, lowering environmental impact, improving customer satisfaction, and increasing efficiency. However, in the context of transportation and logistics, three main ideas are fueling the shift towards autonomy: worker shortage, the need to optimize internal operations, and reducing last-mile delivery costs.
Most segments of the transportation industry are suffering from a worker shortage. The American Trucking Association estimates that there is currently a deficit of more than 60,000 drivers in the U.S., a shortage that is expected to double in the next ten years. Meanwhile, the aviation industry anticipates the need for 800,000 new pilots over the next 20 years, while in the seas, a mariner shortage of 150,000 expected by 2025. Autonomy is a solution to many of these human resource shortages, enabling a single person to monitor multiple vehicles or operate a single vehicle for more extended periods.
Autonomous vehicles can also help with indoor logistical operations in warehouses and distribution centers, adding efficiency necessary to scale operations related to the e-commerce industry. Amazon, for example, uses robotic vehicles in warehouses, where orders can be gathered more efficiently and delivered to a handler for shipping. The autonomous nature of these vehicles enables them to solve complex cost functions for each order and plan routes to gather items in an order that minimizes time and cost to the company. Additionally, the well-defined constraints in their motion can improve the safety and efficiency of operations.
Last-mile delivery has also been a significant challenge for many companies over the years, with several companies eliminating this segment of its operations to reduce costs. The main issue with last-mile delivery is the time lost in traffic to reach customers, which increases the cost of service in terms of human resources, fuel consumption, and depreciation. Companies like Google Wing are attempting to tackle this issue by piloting a program that delivers products directly to the consumer using drone technology. Amazon is also using autonomous technology to experiment with a fleet of delivery robots that cover this segment of its operations, to reduce the delivery times.
How does this affect cost?
While a lot of R&D work has gone into developing autonomous vehicles, the longterm savings make up for the upfront costs. Today, an autonomous truck can cost anywhere between $30,000-$100,000, compared to $15,000 $175,000 for a non-autonomous truck. However, before an autonomous system can be solvent, an infrastructure to remotely monitor and track vehicles needs to be developed, which also requires costs upfront.
Overall, vehicle autonomy would mean that trucks would likely have a lower operating cost by utilizing routes that optimize delivery time and fuel loss. The net savings from autonomous trucks are expected to be between $100 and $125 billion or approximately $1.67 per mile. The most significant savings are gained from reducing human resources and fuel consumption, each making up more than 30 percent of cost reduction. In terms of distribution, experts expect a 35 percent cost reduction by shifting towards autonomous vehicles.
For drones and smaller vehicles, the price will be almost market cost, as long as autonomous versions are utilized. Autonomy will reduce the risks arising from labor disruptions to companies, which is an additional benefit for business predictability.
Of course, in the transition period from low autonomy to full autonomy, the cost reductions might be insignificant while implementing operational policies. However, the long-term efficiencies will outweigh the transitory costs. When a fully autonomous infrastructure becomes available, these vehicles will only need to be monitored rather than operated by skilled workers. Assuming that a single person can monitor four of these vehicles at a time, the cost or human labor for the same number e number of vehicles could reduce by more than 60 percent.
Long term cost reductions, along with the increased safety, predictability, and reliability of an autonomous system, are pushing the transportation and logistics industry toward an era of vehicle autonomy. In response, the industry will soon see a reallocation of human resources to create value in other parts of the supply chain.
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- Roberts, J. (2018, December 13). Autonomous Trucks Could Radically Transform U.S. Logistics Within a Decade. Retrieved October 17, 2019, from Truckinginfo website: https://www.truckinginfo.com/321187/report-autonomous-trucks-could-radically-transform-u-s-logistics-within-a-decade
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- Statt, N. (2019, May 1). Amazon says fully automated shipping warehouses are at least a decade away. Retrieved October 17, 2019, from The Verge website: https://www.theverge.com/2019/5/1/18526092/amazon-warehouse-robotics-automation-ai-10-years-away
- U.S. Energy Information Administration (EIA). (2017). Study of the Potential Energy Consumption Impacts of Connected and Automated Vehicles. Retrieved from https://www.eia.gov/analysis/studies/transportation/automated/pdf/automated_vehicles.pdf
How the upstream Oil & Gas industry can tackle challenges faced by its strategic projects in West Africa
Capital-intensive Exploration and Production (E&P) projects represent a significant economic stake for the upstream Oil and Gas (O&G) industry. The years 2014 through 2016 marked a volatile era for the O&G sector, including a precipitous drop in oil prices that profoundly impacted the entire O&G ecosystem. Now that oil prices have begun to recover, the most promising Large Capital Projects (LCP) can proceed. Some of these projects, in particular, unconventional O&G projects, are becoming a priority and are supported by a stronger global economy and the surging energy needs from developing countries in Asia. In response to increased demand, O&G companies are investigating their next steps, while being mindful of the high volatility of crude oil prices. Currently, the search and development of new reserves in challenging locations are characterized by difficult conditions such as ultra-deep waters or new geographies. Because of this, O&G companies are required to navigate both the extraordinarily complex industrial challenges and the financing of these massive investment projects.
Across the whole continent of Africa, an estimated $190B will be spent on O&G projects between 2018 and 2025, representing 7.5 percent and 7.1 percent of global oil and gas production and reserves, respectively. Interest in offshore projects on the West African coast has grown significantly in recent years because the region boasts nearly a third of the African reserves. Investors and industrial players alike want to benefit from promising reserves by developing large E&P megaprojects. Apart from known geographies in Nigeria and the Gulf of Guinea, Senegal and Mauritania, followed by Guinea-Bissau and Sierra Leone, are becoming the focus of attention due to the discovery of smaller reserves. The oil-rich area (commonly referred to as the MSGBC Basin) extends from Mauritania to Guinea-Conakry.
In this article, we will investigate key challenges afflicting upstream projects in the West African region and discuss relevant solutions and mitigation strategies.
Financing the most promising projects remains a priority
Regarding upstream investment decisions, it is essential to undergo a highly professional due diligence and project valuation phase to support an efficient decision-making process. Price volatility and future market uncertainties challenge LCP’s financial evaluations, which are already complicated by limited political stability in some West African nations. Financing all potential E&P projects remains an impossible task, especially at a time when banks are tempted to reduce their exposure to O&G projects. Of course, a few focused efforts can help address these financing challenges.
Reinforcing market insights integration is a necessity
The inclusion of analytical inputs within LCP’s financial evaluation can significantly improve the decision-making process. Data scientists and analysts must play an increasingly integrated role with E&P project teams to facilitate well-informed strategic, tactical, and operational decisions. For example, after the fall of oil prices in 2014, new deepwater projects were among the first delayed or canceled projects as the industry moved towards shorter cycle investments, like shale. Now that prices have recovered, new O&G projects in West Africa, particularly on the Senegalese coast, will benefit from Financial Investment Decisions (FIDs).
Investigate alternative funding sources
Investigating alternative funding sources can help counteract the reduction in lending from traditional banking players. Some private equity-backed E&P players are already investigating offshore stock exchanges, creating potential opportunities for private investment. Another possible financing solution may occur when companies sell old assets and repurchase them under new leasing arrangements.
E&P companies must continue to restructure or sell the least efficient assets in their portfolio
Selling arbitrages can free significant amounts of capital better utilized for more promising projects and geographies. By continuously decreasing capital investments, E&P companies can restore financial flexibility to pursue new opportunities, like the acquisition of extension of identified promising assets.
Acquiring local players with unique assets in selected geographies
Partnering with a local firm can become a winning strategy in geographies where specific E&P companies are not present. A local partner can take advantage of optimized costs by leveraging existing local expertise in project assessments and asset management.
Solutions to tackle operational challenges in West Africa
Operations in the O&G sector can be particularly challenging in West Africa. First, the talent shortage in the upstream sector remains a very critical issue in developing countries. The lack of skilled personnel strongly impacts E&P sector operations, which rely on high-tech and high stakes processes. Generations of experienced employees retiring from the industry only exacerbates the talent shortage by not having a labor force that is readily available to replace skilled workers. Furthermore, E&P firms’ input costs have soared over the last decade, driven by increasing expenses related to the construction of offshore facilities. The combination of challenging drilling conditions in frontier areas with the volatile cost of materials (such as steel) are operational challenges that will require innovative solutions.
Supporting capacity building and the development of local expertise
Developing specific local O&G training curriculums can help to create a pool of highly qualified local engineers. In light of the limited local employment opportunities in many developing countries, there is no doubt that the O&G industry can recruit the best local talent. Refraining from financially supporting the creation of training and development initiatives is short-sighted; the expertise availability and flexibility of a highly-skilled local workforce would prove to be an invaluable return on investment for any O&G project.
Forging long-term partnerships that nurture a local ecosystem
Long-term partnerships with local suppliers is a necessity for E&P companies. As E&P projects develop, framework agreements that cover long-term periods and standardized deliverables and services are poised to become the norm in countries like Senegal. If mutual interest exists – such as reducing costs and localizing production – safety and quality control issues will represent another challenge and be a key indicator for localization projects.
The regeneration of technology projects in Africa is an opportunity to field-test simplified, standardized, (and in some cases, downsized) E&P equipment. Deepwater technologies utilizing new digital solutions, such as the atomization of drilling mechanism and innovative robotic technology, could also be tested on upcoming Nigerian and Senegalese installations.
Operational excellence for new E&P projects in Africa
The cost of large capital projects continues to increase, and it’s becoming important now, more than ever, to spend every dollar wisely. Now that rising oil prices have made investment opportunities more available, companies need to continue their efforts to streamline operations and leverage new possibilities offered by digitalization. Before the price decrease in 2014, E&P projects in the upstream industry were already demonstrating the impact of excellence in traditional project management and experienced significant cost overruns.
Addressing policy issues remains a recurring challenge
Obtaining timely regulatory approval for megaprojects, particularly for unconventional O&G projects, can be challenging. Especially on the northwestern coast of African where the O&G sector remains in its infancy, weak institutions focused on downstream distribution may have non-existent, or frequently changing regulatory requirements. Absent, changing, or increasingly stringent regulations can lead to delays, especially when permits involve multiple government bodies or business associations. Because of the “zero tolerance for accidents” environment now dominating the E&P sector, and the ever-evolving national regulations, large projects are increasing their expenditure on HSE compliance. Additionally, acreage can sometimes become more challenging to acquire, as well.
Leveraging positive support from policymakers: the Senegalese example
Between 2014 and 2016, significant O&G reserves discovered in Senegal that could begin production as early as 2021 or 2022. According to forecasts by the Senegalese authorities, production could reach 100,000 barrels per day, leading to a yearly growth of more than nine percent and a GDP increase of more than $5 billion per year. Newly elected Senegalese President Macky Sall’s background as a geological engineer and former head of the country’s national oil and gas company, Petrosen, is likely to facilitate discussions between O&G players and the Senegalese government. Sall is currently investigating opportunities to develop a local tax waiver, among other initiatives, to help support the development of local industry capable of supporting large scale O&G projects.
Anticipating and documenting fiscal and non-fiscal challenges
In Senegal, the 1998 oil code is currently being modified to adapt to recent O&G discoveries and developments. Because of this, a continuous exchange between the government and upstream operators and investors is crucial to ensure a smooth transition and to anticipate issues that may arise. Collaboration is particularly necessary due to increasingly more demanding legal restrictions often required for E&P companies. A fact-based perspective on global fiscal and non-fiscal regulations, as well as modeling industry data, is necessary to create a clear view of the potential impact that regulatory changes can have during a time of changing regulations.
Reinforcing ties with key officials and local communities important now more than ever
Due to factors contributing to growing resource nationalism, foreign companies must reinforce existing relations with local officials and communication with local stakeholders. Doing so will help to ensure they are compliant with local content regulation and conquer logistical challenges related to sourcing goods and services locally. In countries like Senegal, one should investigate whether external advisors are welcome to share their O&G sector expertise with regulators like Senegal’s oil policy body, COS-PETROGAZ. Of course, high-profile megaprojects attract attention from many different stakeholders and are subject to misinformed options and oppositions. Clear and transparent information regarding stakeholders will be necessary for the long-term success of O&G projects.
Control and support is necessary to reinforce legal expertise
Adapting to challenging policies requires the development of significant local knowledge across several sectors. From acreage acquisition to fiscal, non-fiscal, and environmental policies, a clear assessment of current internal and potential external support should be investigated. By doing this, E&Ps can ensure that they have a full understanding of compliance rules to avoid any misunderstandings or uncontrolled cost escalation.
Companies investing in large E&P projects pose very significant financial, operational, and political challenges to industrial players and investors. Because E&P projects often focus on environmentally sensitive and remote areas, leveraging new technologies that increase oil recovery, develop shale and oil gas, and create new subsea oilfield projects will become more prominent all over the world. The low oil prices during the 2014-2018 period have forced E&P companies to reexamine their core business capabilities, forcing them to adapt to more challenging geographies and production environments, volatile markets, and frequently changing regulations.
In West Africa, extensive development projects in Senegal and Nigeria represent promising opportunities. However, they also pose specific challenges. Solutions and mitigation plans to improve financing, promote more efficient operations, and better anticipate policies certainly exist and will need to be pursued sensibly to avoid neutering a growing industry.
Geopolitical uncertainties also exist and contribute to Oil & Gas challenges. Local security concerns, which cover not only potential civil unrest and workforce disruption but also specific terrorist actions, are well addressed by the O&G industry, which has experience working in challenging environments. In West Africa, diplomatic and security issues are not anticipated to represent key hurdles to the development of upstream projects but are worth being thoroughly reviewed.
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For employers, one of the most challenging issues in the workplace is losing talented employees to competitors. Most employers are acutely aware of the importance of attracting and retaining talent, which is why talent management has become a priority issue in most organizations. Attracting and retaining the right talent has a positive impact on the business strategy of a company because it involves investment into one of its most valuable assets: its people. However, many organizations adopt talent management practices without any differentiation for different generations of employees.
The millennial workforce has an extremely different perspective on what they expect from their employment experience than previous generations of workers. The modern workforce is well-educated, confident, skilled in the latest technology, and able to multitask. Millennial workers thrive in collaborative environments with lateral hierarchies and are usually very confident in their knowledge and skills. As a workforce, millennials are eager to seek out new challenges that possess more than one set of skills. However, in the current era of 24-7 availability, a work-life balance is a crucial component of job satisfaction for millennials.
Attracting millennials with workplace perks can work in the short term. However, employers will need to consider the following workplace structures to retain employees long-term.
1. Leadership that leads by example
Leadership that exhibits integrity and upholds the values of the company is necessary to keep millennials satisfied. New job candidates want to know who they are going to be working with, whether its the founder and CEO, senior executives, managers, or anyone in authority. Millennial employees will be doing their research to make sure that the organization they work for has strong leadership that is open to collaboration.
2. Career growth and job succession planning
For a generation of workers that are burden by academic debt, workers are concerned with the opportunity of advancement. Employers can achieve this by sponsoring workshops, financing degrees, and paying for skill acquisition programs that will prepare them for the next level in their careers. Companies should also focus on job succession planning by grooming talent to take on higher positions within the organization. Showing employees the roadmap to the peak of their career is a necessary talent management strategy in the workplace. The result is a workforce made up of people willing to go the extra mile to achieve the organization’s goals.
3. Laudable company mission and purpose
The new generation of talent needs to understand the “why” behind a company’s existence. Workers today aren’t motivated strictly by a paycheck or benefits; they want to produce results for a company whose work and mission align with their personal beliefs. Because of this, it’s essential to have not only a great mission and purpose statement but the follow-through to see it to fruition. Workers will feel greater fulfillment if they can measure the results of their labor and see how it applies to the organization’s mission and purpose.
4. Promoting creativity, innovation, and problem-solving
Regardless of the job and its related duties, holding creative thinking in high esteem is attractive to new talent. According to a 2019 Gallup poll, 53 percent of today’s workforce does not feel engaged at work, which means that most employees are merely “showing up.” Employees want to be more involved in creative and innovative activities, and it’s up to leaders to provide opportunities to solve problems creatively. Employers should encourage workers to pursue activities that require an innovative approach to problem-solving, such as finding new methods for streamlining or completing tasks.
5. Flexible job schedules and work environment
The days of clocking out at 5 p.m. are over. Today, workers are always connected to their email and project management apps and are expected to be available to respond to questions and tasks outside of regular work hours. Because of this, millennial workers require balanced work and social life. Many workers would rather avoid the 9-to-5 work schedule in preference of jobs that offer telecommuting options and flexible working hours.
Additionally, office designs should be welcoming and dynamic, offering workers comfort, amenities, and fewer formalities. Ultimately, millennial workers want to feel rewarded for their productivity, not the hours spent in the office. Employers that focus on workers completing tasks with measurable outcomes will have greater success in retaining talent that will invest in the organization for years to come.
In this article, we discuss the midstream and downstream sectors of the oil and gas industry, and how logistics has been identified as a key challenge to be addressed.
FinTech has recently become a popular buzzword among spectators in the financial industry for its potential and universal application. According to the EY Global FinTech Adoption Index, FinTech adoption rates have risen by 48 percent since 2015 to encompass a global adoption rate of 68 percent as of 2019. But how did a digital technology designed to enhance the delivery of financial products and services become so highly sought after in emerging markets?
The answer is relatively simple. In the aftermath of the global financial crisis, consumers lost trust in banks and other traditional financial institutions. In their place, innovative newcomers set out to disrupt the financial paradigm that was ignored by Silicon Valley for too long. The wave of innovation that soon hit finance benefited from early momentum that coincided with millennials’ coming of age. Like everything else, the digital generation demanded a seamless Amazon-like customer experience – which included financial services.
At first, it looked as though the nimble FinTech disruptors were set out to replace brick and mortar banking. The banking sector, albeit burdened with cumbersome bureaucracy, rigid infrastructure, and sluggish legacy systems, had the upper hand. But due to its scale, broad client base, experience, and domain knowledge that cuts across the financial spectrum, it turned out that partnership, rather than hostility, was the model for the future.
Since then, FinTech has swelled in literally every corner of the world. Some of the newest regions primed for the rise in FinTech are Gulf Cooperation Council (GCC) countries and Africa. According to a recent report, GCC countries are among the best prepared for FinTech adoption in the Middle East and Africa. Among the driving forces for the implementation of FinTech are preferences from clients for digital banking, the availability of capital, and regulatory support (S&P Capital, 2019). By 2022, FinTech investment in the Middle East is expected to grow to 2 billion dollars with the leading centers in the UAE. There, the Dubai International Finance Centre (DIFC) rolled out a $100 million FinTech fund in 2017, followed by Bahrain, where two funds of $100 million were launched to support FinTech startups.
Today, FinTech is spreading across the whole financial value chain: from mobile payments and peer-to-peer lending to insurance and Robo-advising. As the sector matures, so do new domains providing additional business services. WealthTech, which utilizes technology to augment professional wealth management, is one further application of financial technology. Additionally, PropTech uses digital technology to enhance and streamline the process of buying, selling, and renting properties. Picture 1 illustrates the main FinTech categories ranked by their adoption rate since 2014. The figures show the percentage of respondents who reported using one or more FinTech services in that category.
Perhaps the most prominent force shaping the future of the industry is so-called open banking, driven by recent regulatory changes such as the second EU Payment Services Directive (PSD2). Open banking enables customers to have full control over their financial data, once accessible only by their bank. Customers are now able to share the data from their bank accounts with third parties through the seamless flow of data conducted by the so-called application programming interface (API).
The implications of FinTech have the opportunity to streamline business operations. Here are four ways that organizations can use FinTech to help improve business performance
1. Business to business (B2B) payments
Although retail customers have primarily been the focus when it comes to payments, the attention is moving to B2B segments where vast opportunities exist. Invoice automation, accounts payable management, cross-border transactions, and business expense management bring immense efficiency gains to companies.
2. Financial analytics
FinTech solutions can also use business financial data to provide insights and suggest strategic actions. By employing innovative digital solutions, companies can leverage predictive sales analytics, product and customer profitability analytics, and cash flow analytics to improve performance.
3. Accounting and reporting automation
Routine, rule-based tasks such as accounting and reporting are the perfect fit for automation. Utilizing FinTech for these functions can free up resources to be more productively employed elsewhere. FinTech is enabling companies to use financial technology to streamline their process and accelerate growth.
4. Corporate treasury management
Smart APIs will be a driver of back-office automation and corporate treasury management while enabling real-time decision-making and sophisticated analysis and forecasting. For example, corporate treasurers will be able to monitor their account balances held at different banks in real-time, check payment status, validate account numbers of new customers, and make one-time ACH payments to vendors. By replacing labor-intensive and costly SFTP file transfers, APIs will facilitate more efficient payments that enable better management of working capital and support more accurate decision-making and forecasting. APIs with built-in AI will also deliver real-time financial insights and projections.
FinTech has disrupted the financial sector and reshaped the economic landscape, bringing benefits to clients and consumers, to businesses small and large. However, the finance industry might be ripe for another disruption, this time from BigTech. Companies like Facebook, Google, and Amazon are eyeing opportunities to grab a piece of this lucrative market despite surmountable challenges. In June, Facebook shared its FinTech aspirations with the announcement of the ill-fated cryptocurrency Libra. However, in the months to follow, Libra has received its share of skepticism from regulators and investors alike. In contrast to nimble FinTech companies, the possibility of BigTech giants entering the industry poses a substantial threat to the dominance of the banking sector.
The future in FinTech is not guaranteed. Still, one thing is certain – companies will reap additional benefits from the increased competition that will bring new solutions for improvements in their business performance.
- Bloomberg (2019). Fintech Waves Reshape Gulf Region. Retrieved from https://www.bloomberg.com/professional/blog/fintech-waves-reshape-gulf-region/
- FinTech Futures (2019). Commercial Banks are Joining the API Revolution. Retrieved from https://www.fintechfutures.com/2019/06/commercial-banks-are-joining-the-api-revolution/
- EY (2019). Global FinTech Adoption Index 2019. Retrieved from https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/banking-and-capital-markets/ey-global-fintech-adoption-index.pdf
- KPMG (2019). Pulse of Fintech H1’19 – Global trends. Retrieved from https://home.kpmg/xx/en/home/campaigns/2019/07/pulse-of-fintech-h1-19-global-trends.html
- S&P Global (2019). Fintech’s Prospects in the Middle East and Africa. Retrieved from https://www.spglobal.com/en/research-insights/articles/fintech-s-prospects-in-the-middle-east-and-africa
- The Economist (2019). Is Libra Doomed? Retrieved from https://www.economist.com/finance-and-economics/2019/10/24/is-libra-doomed