Tag Archive | "financial services"

All hail the EU startups taking on the banks!

Twenty twelve was an eventful year on the world stage for more reasons that any of us can remember, but in startup land it may well be remembered as the year the financial sector was finally taken to task.

All across Europe tech startups set about loosening the banks’ grip on the financial services market, and largely came through in fine form. Just about any financial service you care to name is now being done better, cheaper and faster by a young technology company somewhere in the Eurozone than in the City.

These startups are all responding to a public demand for better access to financial services, and have been lucky enough to have the public zeitgeist on their side. Trust in existing banks has fallen to previous unplumbed depths in the last year – a recent study found that only 2% of business owners would approach their Bank Manager for advice.

Peer-to-peer lending was the breakthrough service of the last year, with a clutch of VC-funded companies all vying for an increasingly vibrant market.

Despite signs of recovery in some European economies in 2012, banks remained cagey about offering credit. Small business lending in the UK fell to it’s lowest level since 2006 and in response SMEs went looking for funds elsewhere. Lending marketplaces like Funding CircleSeedrs and Rate Setter were all too happy to oblige – and with returns on investment greater than those offered by banks, individuals who decided to lend through them did well too. The sector was further bolstered by the overdue arrival of crowdfunding giant Kickstarter.

Elsewhere foreign currency exchange – traditionally a money-spinner for the banks – saw the beginnings of meaningful disruption through services like TransferWise and Currency Cloud, both of whom offer currency transfers at a fraction of the banks’ prices through clever collective consumption methods.

Payment processing got a shot in the arm from GoCardless, who are re-engineering Direct Debits to be useful for things other than paying bills, and iZettle, who offer a Eurocentric take on Square’s plug-and-play smartphone card reader.

The one problem common amongst all these firms is that the big name banks are still their platform. Money lent, transferred or processed still moves from one High Street bank account to another. Finnish startup Holvi looks to be taking tentative steps towards building a viable alternative, and in the US Simple is rethinking personal banking – although both still rely on institutional banks to underpin their services to one degree or another.

While many of these inventive companies are tinkering with auxiliary financial services, none have yet entered the fray headlong in a bid to oust the HSBCs and Deutsche Banks of the world as the main repositories for our money.

Will this happen in 2013? In the current financial climate it seems unlikely. However, with their profits being squeezed by all these young pretenders, it won’t be long before the big banks have to adapt or suffer the consequences.

Jon Norris is a freelance writer, and Web Editor at online accountancy firm Crunch.

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Are contractor accountants providing online services?

Accountants for contractors might want to brush up their online skills after Sage reported that online services will be the biggest growth area over the coming 12 months.

41% of the accountants who took part in Sage’s research said they will be focusing on online services for the rest of this year and nearly 75% said their working practices would change over the next three years.

It would appear that only 29% of accountants carry out the majority of their work in the office and now that around 60% of accountants are using devices such as tablets and smart phones, clients are becoming increasingly interested in online collaborative reporting.

However there is a difference in opinion over what services should be available using mobile apps. SMEs think business planning advice, final accounts and financial services should be offered whereas accountants say mobile technology is best suited to bookkeeping, compliance services and tax planning apps.

Jim Scott, the MD of Sage Accountants Division, said that sharing financial information online is a natural progression for entrepreneurs who have been brought up with Apple, Facebook and Google and accountants should take advantage of the opportunities available.

Online accountants need to demonstrate that they understand collaborative working practices and are able to provide them if requested. Not every business is suited to online accounting so accountants and clients must be able to choose the way in which they access data.

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Image: Kenilworth Street, Leamington Spa – QR Code by ell brown

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How many contractor accountants went into liquidation in final quarter of 2011?

The latest company liquidation figures published by the Insolvency Service have been released.

The fourth quarter of 2011 saw a 14% increase in the number of compulsory company liquidations. 4,260 companies went into liquidation in the final quarter; 1,389 of those were compulsory. 191 companies took advantage of voluntary arrangements, 234 called in the receivers and 658 went into administration. Creditors voluntary liquidations stood at 2,871 – a quarter on quarter decrease of 5.1%, but an increase of 3.4% on the comparable quarter of 2010.

Frances Coulson, the president of R3, said time to pay arrangements from the Revenue and low interest rates have created zombie companies that are just managing to keep their heads above water. Some of these companies will eventually sink, she predicted.

She went on to say that current insolvency figures are down on previous recessions and the latest data could represent the “calm before the storm”. In order for an economic recovery to take place, some businesses must fail so that viable ones can thrive.

R3 research shows that 29% of SMEs are experiencing decreased sales volumes and will need additional support this year.

Andrew Dixon from Bibby Financial Services blamed the increase in insolvencies on the lack of available funding. Less than 33% of small business applied for funding from external sources last year, and only 4% took advantage of government run initiatives such as the Enterprise Finance Guarantee of the Business Growth Fund.

He said the latest insolvency figures show that small businesses need more effective support. Businesses are now turning to asset based funding such as invoice finance in a bid to improve their cashflow, because they do not know where else to turn.

He added that government agencies and the financial services industry should work together to develop greater awareness of the funding options available to UK businesses.

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Would contractor accountants give up £11,000 a year to work a four day week?

Latest research from Marks Sattin shows that professionals in the accountancy and financial services sector would be prepared to give up £11,000 a year if they could work a four day week and have a better work/life balance.

The firm surveyed almost 3,000 finance professionals and discovered that two thirds of them would accept a salary cut of 20% in order to enjoy a three day weekend.

Marks Sattin’s MD, Dave Way, pointed out that now the economy is recovering, employers are under less pressure to make redundancies and employees are prioritising a better work-life balance. Employers should now be considering whether their employment terms have the flexibility to satisfy this demand.

Modern technology has fuelled this desire for a shorter working week as more and more employees find it difficult to escape from work. People with phones such as BlackBerries say they spend two and a half times longer checking emails than those without smart phones.

Smart phones enable online accountants to work remotely and this has increased users appetite for a longer weekend because of the amount of work they do outside normal office working hours.

However, the government probably wouldn’t be so keen on the idea of a four-day week. Marks Sattin also claims £24 million a day would be lost in income tax, costing the treasury £1.2 billion a year!

Meanwhile, workers in the UK take an average ten days unauthorised leave every year, twice as much as their counterparts in the US, according to a recent study from PwC. The firm has calculated that these unscheduled absences cost British businesses about £32bn every year.

Technology companies have the lowest rate of unauthorised absences at 7.6 days followed closely by banking and finance at 7.8 days.

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Regulatory burdens are still weighing companies down

Ed Davey, the employment relations minister, recently reinforced the government’s commitment to removing the barriers to job creation.

The minister made his comments at a breakfast event at Epsom Downs Racecourse, saying the coalition wants to remove both perceived and real barriers. He acknowledged that employers’ felt it was difficult and tricky to employ staff but stressed that the new Employer’s Charter was not biased in favour of employees.

Employers have rights too, and if they behave reasonably they have nothing to worry about, he continued.

The government will press ahead with reforms that will give employers confidence to recruit. All business organisations have complained about Employment Tribunals and so the coalition intends to reduce the unfair dismissal qualifying period.

He finished off by telling the audience that Whitehall is currently reviewing all employment related legislation and in the future, the government intends to deregulate or re-regulate rather than introducing new legislation.

It isn’t only employment legislation that is weighing employers down. The latest Annual Global Accelus Survey from Thomson Reuters GRC found that 71% of senior compliance and risk managers feel the global economy is being held back by the burden of regulations. And a massive 88% of the respondents said regulators must find better ways to ensure the regulations they are trying to enforce are effective.

In the financial sector last year, there were 12,500 regulatory updates globally and there will be even more this year, said the president of Thomson Reuters GRC, David Craig.

It’s not only the financial services sector that is weighed down by the burden of regulation either. Energy, healthcare, legal, life sciences and shipping are all heavily regulated industries and companies are getting increasingly concerned over how to cope with the daily avalanche of rules and regulations, he added.

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5 year jail sentence for tax credit fraud in HMRC clamp down

Public sector tax fraud costs the Treasury an estimated £15 billion every year according to the National Fraud Authority.

This estimated public sector fraud figure is made up on £7 billion lost due to tax evasion, £5 billion by criminal activity and a further £3 billion that is stashed away in the hidden economy.

The Fraud authority’s figures also show that the total amount of fraud in the UK tops £38 billion and £21 billion of that is down to the public sector. In the private sector, the financial services sector has the highest amount of fraud at £3.6 billion whilst the fraud losses attributed to SMEs were £780 million.

The data proves that tax evasion is definitely the largest problem area, far overshadowing the £1.5 billion lost each year in benefit and tax credits fraud.

Last week, Ricards Virokaitis, a Lithuanian living in south-east London, was jailed for five years for his part in a £3 million tax credit theft. An HMRC investigation found that he was a central member of a gang who paid more than 100 women from Eastern Europe to enter the UK solely with the intention of registering for tax credits and benefits. The women were escorted by Virokaitis and his criminal gang while they claimed the benefits. The women then returned home and Virokaitis withdrew up to £90,000 each month through bogus bank accounts. Women with children were deliberately recruited in order to obtain the maximum benefits, an HMRC spokesman said.

The assistant director of criminal investigations at the Revenue, Simon Grunwell, said the HMRC is cracking down on benefit fraud and has received an additional £900 million from the government to tackle tax avoidance, evasion and criminal attacks. Criminal gangs such as Virokaitis’s are a menace and their activities are hurting honest taxpayers.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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Will most of the class of 2011 become accountants?

The class of 2011 might be interested to learn that accountancy firms currently top the list of graduate recruiters, according to High Fliers Research, a market research company.

The largest graduate recruiters are PwC, Deloitte and KPMG each of which recruiters between 900 and 1,200 graduates per year.

PwC’s head of student recruitment, Richard Irwin, said he’d seen a massive increase in the number of early applications to the firm this year as students want to be first in line for new opportunities. In addition to this year’s leavers, there is also a pool of returning graduates from 2009 who are still seeking employment and this has led to increased competition. PwC still has 600 graduate vacancies but hopes to have them filled by April.

There is a 12.6% increase in graduate opportunities this year compared to 2010 but larger recruiters are still offering 6% fewer vacancies than they did in 2007. This will disappoint university leavers as this year there are 50,000 more graduates leaving university than there were 4 years ago.

Elizabeth Ewen, the head of talent at recruitment giant Michael Page International, says that qualifications alone will not be enough to secure a graduate role and university leavers should make sure they possess employability skills as well.

This is backed up by the findings of the High Fliers Research that showed that many organisations will not consider even the brightest graduates unless they possess relevant work experience.

Meanwhile, Robert Half’s Salary Guides have revealed the top finance and accounting jobs for this year. In commerce and industry, financial accountants and analysts are up at the top, along with credit controllers, financial controllers and assistant accountants. Purchase ledger clerks could also find prospects look promising.

For people who yearn for the City life of financial services and banking, regulatory accountants and internal auditors come out tops along with financial planning analysts. Assistant management accountants and client services also feature in Robert Half’s Top 11 jobs.

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FAT or FTT, which option will the chancellor go for?

Persuading the banks to lend more to businesses is still high on the agenda for George Osborne and he is now considering imposing additional taxes on them.

The chancellor said that the EU was talking about a ‘financial activities tax’ which would tax profits and bonuses rather than transactions. The Committee of European Banking Supervisors is currently considering a multiple salary cap on bonuses which would restrict cash bonuses to a maximum of 30% of salary and defer 40% of that bonus.

Osborne has already announced a bank levy and by imposing additional taxes the new government is showing that our financial institutions and business bank accounts are no longer going to receive preferential treatment.

During the Conservative party conference, the chancellor informed the banks that he would not tolerate them paying exorbitant bonuses when small businesses were struggling to obtain finance.

The first two months of next year are bank bonus season and the prospect of City traders raking in massive bonuses will not be welcomed by the ordinary man on the street who will be paying more VAT and possibly losing housing and child benefit.

However, the CBI is worried that the EU proposals will hurt households and businesses and cause the banks to relocate. The Confederation’s director of competitive markets, Matthew Fell, said that taxing financial services companies would not make the sector more resilient or encourage lending to companies. In fact, he believes it would have the opposite effect.

The financial services sector is such an important part of our economy and Fell explained that the International Monetary Fund has already rejected a global financial transactions tax because the burden would ultimately fall on households and businesses. But, imposing a European ‘FAT’ could encourage financial services companies to relocate outside the Union; a move that would hit undoubtedly reduce London’s importance as a world-wide financial centre, Fell concluded.

Dominique Strauss-Kahn, chief of the IMF, is concerned that without closer supervision, the banks will return to ‘business as usual’ which could lead to a further economic crisis.

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