Rishi Sunak reveals New Business Support Plan

Chancellor Rishi Sunak cancelled the winter budget to pave way for emergency measures as the UK battles another wave of COVID infections. With government support schemes CBILS, BBLS and Future Fund coming to end in September and furlough scheme in October, he laid out plans to extend the support.

CBILS and BBLS extension

Coronavirus Business Interruption Scheme has been extended till 30th November 2020 and lenders have till end of December to approve the applications.

Decimal Factor has witnessed a multifold increase in applications and approvals

“Pay As You Grow Scheme”

Loans can be repaid over ten years if the businesses are in difficulty without any impact on the credit score.

New Job Support Scheme

Government will pay for one third of lost hours for employees who work at least one third of their usual hours. Grant is capped at £697.92 per month and is valid for 6 months starting Nov 2020. Employers will cover the worked hours and one third of lost hours. Scheme is targeted mainly at SMEs. Larger businesses can apply if their turnover has witnessed fall during COVID.

New Business Support Scheme

Cut in VAT from 20% to 5% for hospitality and tourism businesses has been extended until March 2021

Middle East is ready for Alternative Finance Are You Ready For Me

Payments is increasingly becoming the backbone of Financial Services especially for alternative finance where the loan/ Factoring product which is not collateralised but the mechanism of repayment acts as a collateral.As the world get more cashless and new digital payments will evolve. Alternative finance companies will use the digital transaction flow to understand cash flows , patterns and even profitability. They will then use these to make informed & instant artificial intelligence based funding decisions resulting in more financial products for Merchants.

The Alternative Finance has had steady growths in UK andUSA which will continue in 2017. However I see an unique opportunity in UAE. In middle east mostly banks are providing the card acquiring solutions to business, except for likes of AFS in Bahrain who have a high share of the market. The opportunity for Alternative Finance providers could be to partner with a Bank in UAE and in countries like Bahrain tie up with the likes of AFS. Through alternative finance providers this product can be offered by bank directly to the moderate risk customers using their own funds but for high risk customers they could pass it to alternative finance providers or do a syndication model.This is a much needed loan for Small Business who have low scale but High margins. They can afford the cost but don’t have the liquidity.The merchants shares a part of his profit as a fee and it’s not a interest product. We are consulting with Sharia Scholars to review this and see if a Sharia compliment certification can be awarded to card receivable factoring.

Sure it benefits the UAE customer but how do the UAE Bank benefit from partnering with an alternative finance player ?

Benefit for the UAE bank is following

  • They will be reaching out to potential loan customers for the bank and helping bank sell more of its loan products and earn higher revenue.
  • If the partner UAE bank is able to offer a loan for the customer who is with a competing bank then the customer will tend to switch all their banking needs to the bank that provide the loan to them .i.e. their bank. They will also acquire this customer for its main banking lifecycle and also merchant acquiring.
  • In 2018 VAT and taxation will come into play in UAE. This will create a new need for alternative finance as businesses are not use to calculate and provide for tax provision. Small business suddenly realise that they are due for tax at the last minute and there is a big uptake of alternative finance for such requirements due to cash flow situations. We have seen here in UK that taxation can provides algorithms for funding , in future with an API into tax authority ( in UK HMRC provides one) one will be able to take machine decisions( artificial intelligence (AI) based decisions) on lending. With AI & Algorithms becoming more efficient one can develop a platform which will have a value for banks. One who move now we will have an early movers advantage in ME for alternative lending data that can then feed AI models.
  • The Dubai government wants to be on blockchains by 2020. This too is an opportunity. I have detailed the impact of blockchain on alternative financein my article separately just after my visit to Las Vegas, Money2020*.

Here above is a short dump of my thoughts and views. Can you please put them through your wisdom and acid test them for imperfections ? Or if you have been in the UAE market and don’t agree or see hurdles. Please comment. I would love to receive you critical comments if any and if you like it please share it.

Invisible payments in a smart Terminal world
Cards Receivable Factoring – Decimal Factor Advert
Impact of blockchain on alternative finance

What I learnt in Las Vegas !

What I learnt

Don’t get ideas I am just talking about payments and financial service .. Money 2020 was indeed a great show as always .. kudos to Anil Aggarwal & team Money 2020 for another successful show. My key learning from the show is that Blockchain is now real. Smart contracts it’s not about if it will happen it’s about when it will happen. I think the successful use cases of smart contract in Trade Finance will now pave the road for them to be used in Alternative Finance. 2018 to 2020 the Alternative Finance will drop the adjective “Alternative” and become mainstream.
JUST “FINANCE”.

This is custom heading element

It will make contracts truly paperless contracts

To will be reality. Origination to fulfilment will become 0 days.

Pricing will become more affordable for SME’s.

Payments and collections will become invisible. Like Uber

Our industry will become from a “maybe option” to “a Super cool option”

Cost of capital will reduce as investment in this sector will move from private investor to more involved structures that will make cost of capital cheaper.

Commerce will evolve with smart contracts allowing one to instantly understand value created in an SME using Blockchain powered smart contract and distributed ledger.

Why is Vocalink so important to UK Consumer?

Last year Vocalink processed 11 billion transactions,amounting to £6 trillion.

In United Kingdom;

  • Vocalink processed 90% of salaries.
  • Processed 70% of household bills.
  • Processedalmost 100% of all state benefits.
  • Almost every person in the UK benefits from Vocalink platforms.
  • Vocalink manages faster payments, BACS and Direct Debit systems.
  • Vocalink connects almost 70% of all ATMS in the United Kingdom.
  • Vocalink is synonymous with real time payments.

Shouldn’t Britain’s most important payment platform be owned by the Bank of England or be under supervision of the treasury?

There are two different perspectives:

  1. The government should not interfere with the payments business and should allow open competition to prevail.
  2. The government should step in and protect the most important payment network of this country, control it and run it …
Faster Paymenthas forever changed the way we work. Payments before/after Faster Payments are two different eras, just like a calendar is remembered in BC & AD. Such important work is carried out by a consortium of banks that created Vocalink and indeed made it one of the best payment systems in the world. Of course the banks don’t want to own it, they want to monetise their efforts as they have shareholders. However,it is beyond my comprehension as to why the government or the treasury will not step in to own the most important payment system that touches the lives of every British citizen and almost all of the UK’s residents.
As a global payments citizen, a citizen who believes in open competition and the prosperity of the world markets, Istart liking the idea of Vocalink being under the MasterCard umbrella. Undoubtedly, MasterCard is one of the better companies that have the abilityto take this platform around the world.It also has the prowess to put the impetus and finances forward to ensure Vocalink’s growth worldwide. Make it as important to the world as much as it is important to us here in the UK. As the MasterCard advert says, “Some things are priceless and for everything else, there is MasterCard “ The question for me, you and our government is simple;is this payments network priceless for us or are we going to use MasterCard?
CMA acting chief executive Andrea Coscelli said: “The Link ATM network provides an essential service for millions of customers. It’s important that Link has a good choice of providers when it comes to supplying the necessary infrastructure so it can take advantage of the opening up of payment systems to competition.” However, it’s not just about thechoice of providers for Link ATM. It is also about the unified payments in UK. PayByBank app is a technology platform owned by Vocalink, i.e. Vocalink is very close to enabling UK bank account holders make a direct payment to merchants without the need of any scheme like MasterCard, Visa, or any Credit and Debit cards but, by simply using their bank app on the phone. I think CMA should also question handing this capability to MasterCard. In future say the Bank Of England wants to go cashless or introduce a Crypto or get on Block chain, it is this backbone of unified payments that will be very important. Payments don’t makea lot of money but can drive economy and be the backbone of major government decisions.

Should we put our British interest first or be firm on our principle of being fair and open to business and competition? Should we give away the strongest payment network to a private company?

I am interested to hear any view points on this issue but more importantly on the below;

  1. The government should not interfere with the payments business and should allow open competition to prevail.

  2. The government should step in and protect the most important payment network of this country, control it and run it …

If you had a vote would it be 1 or 2?

Type 1 in comment if you believe in the first viewpoint and type 2 if you believe in the second viewpoint.

    Manoj Karkhanis