Representatives of governments and other participants at the Sharm el-Sheikh Climate Change Conference (COP 27) have agreed on key principles for reforming the financial structures required to promote and sustain climate action. According to guest speakers such as the Prime Minister of Barbados, Mia Amor Mottley, and Ngozi Okonjo-Iweala, Director-General of the World Trade Organization (WTO), immigration policies, unfair trade, and inadequate finance flows are currently hindering efforts to meet the climate-related goals.
Mottley stressed that developing countries encounter difficulties accessing concessional funding and lack the necessary resources and goods to reach net zero. Okonjo-Iweala cited the power of trade policies to diversify supply chains and promote inclusivity, while the First Minister of Scotland, Nicola Sturgeon, stated that private companies should also financially support climate action.
Among the industry leaders that participated in the event, the International Cooper Association (ICA) has pledged to help Africa to minimize grid losses through a newly-launched Grid Efficiency and Resiliency Partnership Initiative. Google has also committed to investing US$1 billion in digitalization projects for Africa.
Introduced in 2018 within the United Nations Framework Convention on Climate Change (UNFCCC), climate finance includes all types of financing (local, national, and transnational) from public, private, or other alternative sources used to support actions to address climate change. Since large-scale investment is needed to reduce emissions, setting this mechanism in motion is paramount for preventing and mitigating the effects of climate change. Moreover, financial assistance and support provided by wealthier countries for the disadvantaged and more vulnerable ones is an important aspect of climate finance.
The publicly accessible Climate Finance Data Portal shows the financial resources mobilized to support developing countries in their climate actions. Besides public funds, impact investing is an essential source of resources for environmental protection. Such initiatives not only have a positive impact on the global climate, but also offer the opportunity for financial return.
Another financial mechanism promoted as a way of achieving sustainable development goals is blended finance, a public-private partnership that aims to boost the economic potential of countries and increase the speed and scale of the impact on sustainability. Together with other countries, Indonesia has already announced its commitment to using such alternative and innovative financial mechanisms.
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The COVID pandemic and the emerging recession are bringing significant staffing problems for sectors such as education, healthcare, retail, transportation, and construction, all of which face difficulties in finding skilled labor. While technological advancements cannot fully replace the roles and functions performed by humans, second-generation Robotic Process Automation (Gen2 RPA) currently represent the best viable option to address the labor shortage and overworked employees.
According to Aaron Bultman, product director at digital transformation platform Nintex, “RPA is a form of business process automation that allows anyone to define a set of instructions for a robot or ‘bot’ to perform. RPA bots are capable of mimicking most human-computer interactions to carry out a ton of error-free tasks at high volume and speed.” However, the first generation of RPA, though it has on the rise for the past years, has already proved its limitations. Proprietary toolsets, bots that crash with every software update or change in the environment, and scaling-up difficulties, are just some of the problems the first generation of RPA is currently facing.
A better, quicker, and more cost-effective form of robotic process automation, Gen2 RPA provides developers with more control and flexibility than proprietary versions. This technology is based on open-source architecture and scalable cloud technologies. It can automate practically any repeatable business activity, supporting administrators in finance, human resources, information technology, and compliance in dealing with operational concerns.
A study conducted by SmartSheet showed that workers could save at least six hours a week when automation is implemented, leading to more standardized and streamlined processes and improved employee life-work balance. At the same time, by automating repetitive tasks, companies leave more room for creativity, innovation, and problem-solving, allowing their employees to focus more on customer experience.
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In an interview with Supertrends, Karina Rothoff Brix, country manager for Denmark at Firi, the Nordic region’s largest cryptocurrency exchange, shares some insights on the role of crypto in the decentralization of the financial system.
As a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems, blockchain technology allows users to record information in a way that makes it difficult or impossible to tamper with. The technology has applications in multiple fields such as healthcare (e.g., to preserve and exchange patient data, track medical goods and confirm their authenticity, etc.), food and agriculture (e.g., increase supply chain transparency), automotive (e.g., increase efficiency by tracking the ownership, location, and movement of parts and goods), and government (audit trail for regulatory compliance, contract and identity management), to name just a few.
The rise of Decentralized Finance (DeFi)
However, the field where blockchain is expected to have the highest impact or go faster into mainstream is the financial industry. This technology is currently driving the shift from centralized finance (where banks or third parties store, manage, and transfer the money between transaction partners) to decentralized finance, a system that eliminates intermediaries and enables peer-to-peer financial networks.
“Because the information on a blockchain is duplicated to a lot of computers all around the world, the system is more secure than saving all data in a few spots. Changing the data is impossible, as many so-called ‘validators’ are involved without knowing each other. Therefore, decentralized financial systems do not require the involvement of centralized parties such as banks, but at the same time are capable of enabling payments, money lending, and interest-bearing accounts,” says Brix, who has over 15 years of experience in driving innovation and implementing digitalization projects.
The many faces of crypto
Crypto is usually defined as a class of digital assets that are generated using cryptographic techniques and can be traded, exchanged, or used as a store of value. As Brix explains, the term “cryptocurrency” can be misleading: “Crypto is much more than a currency.
“Crypto is much more than a currency. Simplified, crypto can represent coins, tokens, or NFTs. Different crypto can be coded to encompass different possibilities and values. This is why regulators are struggling with how to define crypto.”
Simplified, crypto can represent coins, tokens, or NFTs [non-fungible tokens]. They are all digital assets, but different in the sense that a coin is a crypto that functions on its native blockchain, whereas a token is crypto on a non-native blockchain. A unique token is called an NFT. Different cryptos can be coded to encompass different possibilities and values. This is why regulators are struggling with how to define crypto.”
These developments have led to the rise of tokenomics, an industry branch that covers a token’s creation principles, content, and distribution. This information usually stored in a so-called “white paper.” From this perspective, not all crypto assets are created equal, and they do not all have the same value propositions and tokenomics. Brix also notes that crypto can be a security token, a utility token, a commodity token, a governance token, or a combination of these. Moreover, the range of possibilities and projects is in full expansion, since innovations in this space are advancing very rapidly.
Currently, there are several types of blockchain networks that differ in terms of technical infrastructure, speed, verification, authorization procedures, energy consumption, access, risk, etc. Various projects can be built on top of these networks, with a broad range of applications. Brix points out that it is too early to say which ones will still be functional in the next five years or which blockchain is a better fit for a certain industry.
Regulating the unregulated crypto market
Even though crypto assets have been around for more than a decade, it is only now that regulatory efforts are beginning to pick up and become a priority on the political agenda. Most countries are already exploring ways of adapting existing regulations to crypto, and of enabling legal transactions with digital assets.
In the EU, the Council Presidency and the European Parliament reached a provisional agreement (the MiCA regulation) regarding the regulation of crypto assets in June 2022.
The provisions are expected to come into effect in 2024 and harmonize crypto services across all member states. In the US, President Joe Biden has signed a US$1.2 trillion infrastructure bill that, among other things, advances the regulation of the cryptocurrency industry with a series of amendments to be enforced starting 2024. In the Asia-Pacific region, efforts to regulate crypto range from a complete ban in China to more progressive approaches in Indonesia and the Philippines.
“The major change that is likely to occur when regulation is in place is that institutional investors will start to participate in the process. A lot of big companies and pension funds are reluctant as the regulation is not clear, but the interest from the big players is definitely there and will materialize in the coming years.“
Emerging markets lead the way in crypto adoption
Despite an adoption rate that varies significantly from country to country, current trends indicate a steady increase in the global adoption of cryptocurrencies compared to 2019 levels. Emerging markets lead the Global Crypto Adoption Index, with countries such as Vietnam, Philippines, Ukraine, India, Pakistan, Brazil, Thailand, Nigeria, Turkey, and Morocco in top positions.
Brix explains why low and middle-income countries dominate the index: “In the emerging markets, crypto is a way to have access to banking, make trades, earn an income, and travel with finances. A huge part of the population in emerging markets doesn’t have access to a bank account, and as a result, is excluded from the economy. Decentralized Finance changes this.” Moreover, in emerging economies, crypto trading is also a viable hedge against inflation, allowing people to preserve their savings in times of fiat currency volatility.
What does the future of crypto hold?
In line with the common expert opinion in the industry, Brix also expects that crypto will see mainstream adoption in the next decade, despite the current volatility and global financial turbulence.
Notable in this sense are initiatives such as the ones in El Salvador and Central Africa, where the governments have declared bitcoin to be legal tender and all corporate and private entities own a crypto wallet.
“A completely new and different economy is currently developing based on cryptos, blockchain, and Web3. The way people are trading is changing dramatically, and the young generation is the biggest driver.”
Crypto is also starting to gain an increasingly important role in financial transactions – with cities such as Colorado (US) and Zug (Switzerland) allowing citizens to pay their taxes with Bitcoin, while other municipalities such as those in Miami and New York City have already developed their own tokens.
Karina Rothoff Brix is Country Manager in Denmark for Firi, the largest crypto exchange in the Nordics. The former head of the Copenhagen School of Entrepreneurship at Copenhagen Business School (CBS) and head of the Center for Lifelong Learning at the Danish Technical University (DTU), Karina is also a recognized expert at the Danish Innovation Fund. For the last 15 years, Karina has worked with tech-scaleups and emerging businesses and has spoken on numerous occasions about the impact of emerging technologies on the future of businesses. In 2022, she published “Kryptovaluta og Blockchain” (Cryptocurrencies and Blockchain), an inspired and clear introduction to the future of cryptocurrencies, blockchain, and Web3.
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The idea of sustainability has attracted exponential attention in the last decade. But in many sectors, the concept is sometimes reduced to an amalgamation of catchphrases and token gestures rather than real efforts to promote collective best interests and environmental protection. How can the banking industry pivot toward true sustainability and deal with the challenges that it faces along the way?
Sustainability is one of the many ideas that have enjoyed exponential attention in the last decade. Corporate Social Responsibility (CSR), Sustainable Development Goals (SDGs), Environmental, Social, Governance Approach (ESG), Triple Bottom Line (People, Planet, Profit), plus thousands of reporting standards: An endless list of catchphrases and prospective corporate values has been devised to guide businesses and industries towards promoting collective best interests and environmental protection.
On everybody’s radar, from politicians and futurists to corporatists, environmentalists, NGOs, scientists, and human rights activists, sustainability is still a broad, loosely defined concept, a buzzword or an alphabet soup of acronym-heavy measurement and reporting standards that gained momentum once climate change became a globally recognized issue.
Despite the lack of a shared understanding and commonly agreed standards regarding this concept, publicly listed companies with over 500 employees or €40 million turnover must disclose annual sustainability reports showing their performance concerning environmental, social, and corporate governance goals.
Lately, an increasing concern from the investors’ side has led to even more criteria and evaluation models. Currently, the sustainability reporting system is very fragmented, with 307 reporting instruments that are mandatory and 230 that can be applied voluntarily under the so-called “comply or explain the approach.” The UK is leading in terms of the number of provisions, followed by Spain and Colombia.
Organizations that must comply with these regulations are state-owned companies, large corporations, and publicly listed companies. This situation raises numerous challenges for businesses in general and requires them to invest a huge amount of resources into gathering data, agreeing on materiality topics and targets, and working towards their implementation. These obligations are even more complex for multinational companies that must meet the reporting requirements of different countries.
How does the banking sector keep up?
An analysis published on Statista regarding sustainability reporting on a global level in 2020 shows that the financial and banking sector ranks fifth in terms of disclosures regarding ESG targets. However, a more detailed report conducted by KPMG shows that only 57% of the companies in this sector disclose carbon reduction targets, which is significantly less than in other industries such as Automotive (80%), Mining (72%), Oil and Gas (69%), and others.
A benchmark analysis conducted by KPMG and published in July 2022 points out that the nature and extent of climate-related disclosures in the banking sector is currently minimal. Most institutions in this sector approach sustainability-related issues from a risk perspective, trying to mitigate any issues that might prevent them from achieving their business targets. Acknowledging the impact climate-related risks have on their credit operations, reputation, image, and compliance makes banks more inclined to address them.
A global research project undertaken by East & Partners ranked the most important providers of banking services based on perceptions regarding their sustainability. According to the study, BNP Paribas was perceived as the best “Stand out” ESG/Sustainable Finance provider globally, followed by Standard Chartered, Citi, HSBC, JPMorgan, Barclays, and BAML/Bank of America.
What actions could banks undertake to achieve sustainability goals?
Various organizations state that the general hallmarks of sustainable banking should include transparent operations and policies, community support, as well as bank policies and products that favor and promote responsibility in the production and distribution of goods and services.
The Initiative for Responsible Investment, an applied research center at Harvard University’s Kennedy School, has gone a step further and defined a series of Key Performance Indicators for sustainability in the banking sector, taking into consideration factors such as the percentage of investments evaluated for climate change risk, the percentage of branches located in low- and moderate-income communities, gender distribution and minority inclusion at board level and senior management, and CO2e emissions in kg per square foot, to name just a few metrics. GRI (The Global Reporting Initiative) is another international independent standards organization that advocates for transparency in sustainability reporting and makes available specific standards for each industry.
“Profit at all costs ceases to be the primary objective of sustainable banking. While a healthy bottom line continues to be a goal, other objectives that will encompass environmental and social criteria start being significant considerations in selecting investments and formulating policies.” Banks.com, an aggregator of financial services
In practice, banks can “mix and match” various standards and apply those that match their own goals and interests. For example, UBS, a multinational investment bank and financial services company founded and based in Switzerland, plans to release 100 green, social, or sustainability-linked bond mandates in 2022, initiate a task force to research climate-related financial disclosures recommendations and direct US$175 million towards philanthropy projects. By 2025, it aims to invest US$400 billion in assets in sustainable investments and adapt its operations to achieve zero energy emissions.
However, a sustainability benchmark in this sector is difficult to achieve, given the myriad of evaluators and analysts. Depending on which instance performs the evaluation, the same company can rank differently, making benchmarking challenging to follow.
The bottom line
Even though significant progress has been made in terms of defining sustainability goals and raising awareness around this issue at the consumer, business, and governmental levels, there is still a long way to go until this goal is implemented according to its true meaning. Changes in mentality, banking values, and operations could propel sustainability from a simple PR exercise to a core value within the organization. However, most of the current efforts in this direction strive to recast actions that are already being performed to reduce risk, maximize profit, and improve company performance as efforts aimed at meeting sustainability and CSR goals.
Rishi Bhattacharya, CEO of the communications consultancy Impact & Influence, explains: “Many banks are in a ‘place race’ when it comes to showcasing their ESG credentials and expertise, through marketing and communications, but also through their actions.” Therefore, the greatest danger comes from the fact that, because it is so loosely defined, sustainability measures in the banking industry can be easily touted and marketed, even if they are not carried out properly.
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As an alternative to conventional forms of payment, digital money promises to speed up financial transactions and improve transparency. However, this emerging trend also brings a series of challenges, such as volatility and the risk of security breaches. So what should we think of this type of digital asset? What are the benefits, opportunities, and implications, and how far has its adoption advanced? In the following, we list five of the most important things to know regarding the rise of digital money.
Digital currencies are alternative methods of payment that exist only in electronic form and have no physical representation. Managed and transferred via online platforms, these currencies can also be exchanged via trading services and, in some cases, converted into their traditional physical cash equivalent via ATMs.
After being first conceptualized in 1983 by David Chaum, a US cryptographer, the concept of digital value transfer and digital cash only started to gain traction after Bitcoin was developed and became popular. Over a span of more than 20 years, the trend evolved slowly, with several failed attempts to introduce digital money into the market (e.g., DigiCash, the company that developed the first digital currency, eCash, went bankrupt in 1998).
Fast-forward another 20 years, and the trend is in full swing, with adopters and supporters from all levels of society, from governments to businesses and individual users. However, there are still many issues that need to be understood and addressed before the trend enters into the mainstream. Here are some of the main points to be aware of in relation to digital money.
Digital money comes in different shapes and forms
Even though terms such as “digital money”, “digital currencies”, and “cryptocurrencies” are sometimes used interchangeably, there are three main types of digital money, each with different characteristics in terms of centralization, encryption, and transparency:
Cryptocurrencies are a form of digital money that is created using cryptography. Being supported by blockchain and unable to operate outside this platform, its purchasing power depends on its user community. On the one hand, this allows for complete decentralization, with no authorities or governments being involved from a regulatory perspective. On the other hand, this leads to high volatility and a limited legal framework. The strongest cryptocurrencies in terms of market capitalization and trading volume are Bitcoin and Ethereum.
Central Bank Digital Currency (CBDC) is a digital version of a country’s currency, backed by the central bank. It can be developed on different platforms (i.e., digital ledgers) and is therefore not limited to the blockchain (distributed ledger technology). The central bank retains control over the currency, issuing it and governing transactions. According to the Atlantic Council, 105 countries, representing over 95 percent of global GDP, are exploring a CBDC.
Stablecoins are digital money whose market value is tied to an external reference (i.e., another currency, the price of a commodity, etc.) and are developed in an attempt to counterbalance the high volatility of cryptocurrencies. There is a general trend towards tighter regulation of this type of currency. Tether (USDT) and U.S. Dollar Coin (USDC) are the strongest stablecoins in terms of market capitalization.
The market is moving fast
Currently, there are over 20’000 cryptocurrencies in circulation, the equivalent of US$1.07 trillion in market value. Based on a research study conducted by the Atlantic Council, ten countries have already fully launched a digital currency, 14 countries are currently conducting pilot projects to assess the feasibility and implications of digital money, 26 are in the process of developing the necessary systems and procedures, and 47 are still in the research phase.
On a global level, the Digital Currency Global Initiative, a joint project between ITU and Stanford University, aims to further explore the technical implications and challenges of digital money, develop metrics and means of standardization, and promote best practices and learnings from pilot implementations.
The number of technology and service providers for digital currencies is increasing
A significant number of fintech companies that develop platforms or solutions for digital currencies have been founded in the last decade. Either leveraging the distributed ledger technology or blockchain-agnostic, these companies aim to provide central banks, financial institutions, governments, and participants in financial transactions with the necessary tools to implement and use digital currencies.
Companies such as FTX US (former LedgerX) and BiKi.com provide platforms for digital currency trading services. Bitt, TradeBlock, and Fluency develop solutions that help wholesale or retail customers to develop, customize, and integrate digital financial instruments, while companies such as Coinfirm focus on facilitating regulatory and compliance processes. The market of solution providers is constantly expanding, covering all aspects from technological enablers to exchange platforms and regulatory systems.
A society governed by digital money comes with additional challenges
Despite the promise of digital money to increase access to payments, efficiency, and resilience, the road to mainstream digital currencies is not a smooth one. First, a consistent and unitary legal framework still needs to be developed, and all parties involved need to reach a mutual agreement. The amount of human and financial resources for scaling up the pilot projects is also considerable (e.g., a lack of resources was the reason why Uruguay has not launched its second digital currency project).
As with most emergent technologies, digital money is not yet entirely accepted by consumers due to concerns related to privacy and safety. To a certain degree, these fears are justified, with digital assets being more vulnerable to cyberattacks than traditional money. On top of that, due to uncertainty over the technology and questions as to whether the technology is fully scalable and can meet the demands of a large population, the path to full adoption could still be a long one.
Moreover, some critics see CBDCs as a “slippery slope” leading to economic influence and social control by the state. They believe the centralized version of digital money would give governments the opportunity to control spending, allow only certain purchases, and provide money with expiry dates which would allow them to force private citizens to spend their money instead of saving it.
Digital money will significantly disrupt the financial sector
There are multiple scenarios for the future of financial services in relation to the digitalization and decentralization trends. Many experts are inclined to predict a future coexistence of physical and digital money, while others point towards complementarity – with each type of currency having its unique role in financial transactions. However, there are also supporters of the takeover scenario, where physical money is entirely replaced by its digital counterparts.
Either way, the financial sector has to develop contingency plans and adjust to changes related to business models (e.g., changes in the product and services demand and offering), regulation and compliance, infrastructure adjustments, identity management, cybersecurity, audits, and financial reporting, as well as employee capacity building.
Although the popularity of digital currencies is constantly growing, they are not yet widely perceived and accepted as a reliable and secure alternative to physical money. However, the trend is currently gaining ground and is expected to gain increased traction in the near to medium future.
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Revolut, a British fintech company offering digital banking services, has announced the rollout of a new “buy now, pay later” (BNPL) service across Europe. The offering will first be made available in Ireland and then gradually extended to other European countries, with deployment in Poland and Romania planned by the end of 2022.
BNPL is a short-term financing model that allows clients to purchase products and pay for them at a later time, usually in installments and with no interest fees. Unlike traditional credits, BNPL services are easy to qualify for, manageable via an app, and adjusted to the customer’s budget. However, they usually come with a fixed fee, and the conditions may vary according to the provider.
Along with the digitalization of financial services, neo-banking, and decentralization, the BNPL trend is rapidly gaining traction, with analysts expecting the market for this type of service in Europe to grow to £680 billion (about €790 billion) over the next five years. Afterpay (Australia) and Klarna (Sweden) are two of the established BNPL providers, with startups such as Zip, Sezzle, and Affirm now making their way into this field.
Joe Heneghan, chief executive for Revolut Europe, declared that these types of products “give customers more control and flexibility over their personal finances, in a responsible way, by enabling them to spread the cost of purchases.” However, regulators are concerned about the prospect of giving customers easy access to cheap credit. Moreover, such services are currently not fully regulated, and various governmental agencies are currently trying to set up regulatory frameworks and supervisory bodies for BNPL services.
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One of the biggest challenges facing the banking systems today is the security of transactions. By identifying and confirming the identity of users based on their physiognomy, biometrics such as facial recognition can support the banking and financial sector in identifying fraudulent transactions, increase the security of payments, and enhance customer experience. Face recognition algorithms can be used for user authentication procedures, the automated opening of checking accounts, authorization of financial transactions, and performing payments.
As our society becomes increasingly digitalized, biometrics solutions (i.e., technologies using anatomical features to verify someone’s identity) are slowly starting to replace traditional methods. Based on checking unique biological traits such as facial characteristics, retinas, irises, voices, fingerprints, or two-dimensional images of finger veins, these technologies promise faster, more secure, and more accurate authentication processes. Tailored applications have been developed for sectors such as banking and finance, defense, transportation, and manufacturing, to name a few. With the number of startups drastically increasing in the last decade, the biometrics market is expected to grow from US$42.9 billion in 2022 to US$82.9 billion by 2027.
Currently, the US is the world leader in terms of investment volume and the number of companies developing biometric solutions, followed by Latin America and Asia. Africa has a relatively high number of startups; however, the total funding amount is very low compared to other regions. Nevertheless, the trend is picking up all over the world, powered by the quest for digitalization across all industries and the need for more secure and personalized solutions.
Facial recognition in the banking sector
While biometric technologies like facial recognition have been around for a while, the banking sector is only now starting to incorporate them into authentication processes. Adoption is also accelerated by significant advancements in technology, the increasing need for remote onboarding and interaction with customers, and by regulatory provisions such as “know your customer” (KYC) guidelines and the US Bank Secrecy Act.
In the banking sector, ATMs equipped with cameras can verify and validate a customer’s identity by checking the image of their face against a database of stored photographs. After the validation takes place, the customer can withdraw money or access other banking services. This type of authentication is already offered to customers by banking institutions such as CaixaBank in Spain and Singapore-based OCBC Bank.
Facial biometrics have additional applications in finance: The technology could be used to enable customers to log in to digital financial applications in order to open new accounts, secure mobile wallets, or approve financial transactions. In these situations, too, the face scan is matched against official identity documents or images that have previously been stored in the database.
Challenges in implementing facial recognition biometrics in banking
Despite its numerous advantages for multiple industries, face recognition technology also comes with a series of challenges and limitations. Firstly, the technology requires an extensive dataset to train the algorithms. However, these datasets are difficult to obtain and store, given privacy regulations and the growing number of data breaches and cybersecurity attacks. Moreover, poor-quality datasets could introduce biases and lead to false matches, which would defeat the main purpose of this technology.
Secondly, apprehensiveness and cultural anxiety among the general public regarding potential abuses of this technology might slow down adoption, despite the fact that providers are selling it as a means to increase customer satisfaction.
Startups on the rise
Although facial recognition is one of the most controversial and complex issues to regulate and implement in the market, investors’ interest in the technology surged in 2021. A CrunchBase analysis conducted by Supertrends shows that more than US$1 billion has been invested in various funding rounds. Here are some examples of face recognition solution providers that tailor their services to the needs and regulations of the financial industry.
US-based Incode Technologies is a digital identity company that develops biometric identity products for industries such as banking, retail, healthcare, and hospitality. Headquartered in San Francisco, it has offices in Europe and Latin America. One of their platforms, Incode Omni, offers self-service, omnichannel, and secure multi-biometric capabilities, supporting customers in performing identity authentication.
Based in the UK, Shufti Pro is a SaaS company providing fully automated solutions for end-customer authentication and business verification. Their solution can be integrated with other proprietary systems via an API. Besides face verification, the solution also supports document verification, video interviews, address verification, two-factor authentication, consent verification, and biometric sign-in through facial recognition. The verification process can be completed in under 30 seconds and is available in more than 230 countries.
Brazilian company unico develops facial recognition and identification solutions for banks and retail companies. Their product, Unico Check, allows for biometric authentication and validation of individuals during the onboarding processes and while performing various transactions, helping companies and the government to reduce fraud, streamline processes, reduce operation costs, and increase the security of exchanges.
An artificial intelligence and computer vision-enabled SaaS platform developed in India, Biocube offers biometric technology for border control, the finance industry, insurance businesses, and governmental organizations. Their robust yet easy “know your customer” and transactions system helps identify frauds in account opening and fraudulent transactions.
In the corporate banking sector, companies such as Barclays and Citi are experimenting with the finger vein reader technology. At the same time, fingerprint-based identification codes have been successfully incorporated into several contactless card pilots worldwide. Other organizations are pushing the envelope even further by developing 3D imaging for finger veins using photoacoustic tomography. However, experts consider that, among all biometric authentication methods, facial recognition is currently the closest to maturity, capable of confirming a person’s identity with high confidence. Nevertheless, governments and regulators must ensure that the legal and regulatory framework keeps pace with technological advancements so that basic ethical principles are respected and no civil rights are infringed.
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Banking as a service (BaaS), often used interchangeably with the concept of embedded finance, represents the provision of financial tools and services by non-financial providers. After hitting US$22.5 billion in revenue in 2020, this model is expected to reach approximately US$230 billion by 2025, causing significant disruption in the traditional banking value chain and processes.
According to traditional models, purchasing high-end goods and services requires an additional step, usually related to obtaining financing either through loans, insurance, or investments. The BaaS model streamlines the operations and customer experience by eliminating the extra step and allowing companies in various sectors (e.g., real estate, retail, leisure, etc.) to integrate these financial services into their processes, offering customers the possibility to purchase goods and services without the need to acquire additional funds from other parties.
The process is based on an API (Application Programming Interface) integration between customers, companies, and banks, which facilitates the exchange of messages, funds, and data. Even though API is a technology that has existed for decades, Banking as a service offers an innovative way of employing it in the financial sector.
Benefits for customers and service providers
BaaS has multiple implications across all parties involved in a transaction. For customers, it provides a frictionless and convenient experience, which in turn increases their loyalty to the brand. Their need for customized and tailored services is met, along with their sense of process ownership.
For providers of products and services, the benefits are even greater. The system provides additional data about consumers (i.e., spending habits and needs) and increases the likelihood of purchase. Moreover, financial integration through APIs allows providers to expand their offerings, combining features from multiple partners that they would otherwise not be capable of offering.
This model has also led to the rise of various fintech companies who are willing to facilitate and act as an intermediate in the relationships between banks and non-financial service providers, by developing the necessary technologies for communication, data exchange, and risk and compliance management.
Disruptions in the banking industry
However, BaaS is also set to disrupt the operational model of the banking industry. Initially, banks built their own products and systems and disseminated them through proprietary distribution channels. At this point, their control over operations and relationships with customers was at its highest level.
However, technological advancements and market changes have led to a new reality: On one side, customer dissatisfaction with existing banking offerings and lower levels of trust in the banking industry became a more serious issue, pushing clients to consider switching banks or embrace alternative options. On the other hand, the rise of FinTech and open banking, together with global trends such as decentralization and hyper-personalization, dramatically changed the role of these institutions in the financial field and limited customers’ direct access to bank services.
In order to stay relevant, banks have to re-invent their strategy and integrate new business models such as B2B2C and B2B2B. The conservative approach, where they continue to provide specific banking products such as licenses, deposits, loans, and payments to their existing customer base, might not be enough to assure the survival of financial institutions in the long run. To keep up with the market and social changes, banks will need to expand their offerings and capabilities through partnerships with FinTech and target end customers as well as banking products distributors and service providers.
Accelerated by the availability of technologies such as cloud computing and data storage, smartphones, and digital applications, the banking as a service trend is currently in a highly accelerated emergent phase. The number of startups developing the necessary technology is growing, while significant players in retail, real estate, leisure, travel, and other consumer services, etc. have already implemented it. Banks have also started to join the BaaS movement, either by stepping up their digital banking offerings or by facilitating the integration of banking products with non-financial companies.
For example, Walmart, one of the leaders in the US retail sector, has partnered with Ribbit Capital, a fintech investment firm based in Silicon Valley, to develop next-generation digital financial services for its customer base. Ingka Group, the parent company of Swedish furniture brand IKEA, is also looking into BaaS-based services through its partnership with Ikano Bank.
On the banking side, the BaaS model is taking root across multiple continents. At least five major banks in Australia are developing banking as a service systems, with Westpac leading the way. The Australian bank and financial service provider has already launched such a platform and established partnerships with various industry sectors.
Wells Fargo, one of the largest banks in the world, has built a BaaS platform together with MuleSoft aiming to deliver a more unified customer experience as well as services such as account servicing, foreign exchange, and payments. Under the motto “a world where financial services seamlessly sync with life,” the Berlin-based fully licensed Solarisbank has built a proprietary BaaS platform from scratch that enables non-financial providers to launch banking products.
The banking system is currently undergoing a significant transformation that will become even more acute in the near future. In order to “ride the wave” and stay relevant in the financial field, banks need to incorporate the BaaS model into their short and medium-term strategy, at the same time taking into consideration the talent and cost requirements that are necessary for this transformation.
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In the societies and business worlds of today, “green” or ethical investment has become a key benchmark. However, the lack of standardization and knowledge as well as a plethora of regulations in this area make it difficult for investors to assess the sustainability of an organization. In an interview with Supertrends, Kristina Touzenis shares some insights regarding the current situation and the challenges that sustainable investment poses.
Sustainable investing, also referred to as socially responsible or ESG investing, has become a hot topic due to the growing awareness and global prioritization of climate change as well as social and ethical issues. This specific type of investment allows stockholders to direct their money and resources towards companies that show an interest in and a solid commitment to tackling environmental, social, and corporate governance issues.
However, assessing the sustainability of companies in different industries has proven to be a challenging task. On the one hand, there is no general agreement concerning the criteria according to which companies should be evaluated. According to research conducted in 2020, there are over 20 sets of reporting provisions in the UK alone. In the EU, Canada, the US, China, and Australia, the number varies between 15 and 20. Most of these provisions were developed by governmental agencies, followed by financial market regulators, stock exchanges, industry bodies, and civil society.
How can investors ensure that their investments are actually used for sustainable supposes? Supertrends spoke with Kristina Touzenis, who, after many years of working with UN agencies and governments on legislative development and advocacy, is currently helping the private sector navigate the world of sustainable development and prioritize investments based on sustainability goals.
Supertrends: What is the current situation in the private sector in terms of sustainability?
Kristina Touzenis: In the beginning, there were many big meetings, but apart from some exceptions, not much was being done. Then we saw an increasing interest in the investment sector and an external push towards fulfilling the Sustainable Development Goals. As a result, a lot of progress has been made on environmental matters; however, the social and good governance issues are lagging.
There is this idea that social aspects can’t be measured, and therefore, we can’t do anything about them. And people’s understanding of good governance seems very often to be limited to the board’s composition instead of assessing the internal processes that actually create good governance.
Supertrends: What would be helpful in this situation?
K.T.: First of all, all parties involved, from wealth managers, advisors, investors, and asset owners to the companies themselves, would benefit from more insight and guidance regarding the sustainability field and the implications of the reporting provisions. Moreover, the focus should be on identifying specific and measurable goals that might or might not always be expressed numerically. Last but not least, developing partnerships between the private and public sectors would certainly expand the knowledge base, bring in more insights, and potentially lead to higher convergence.
Supertrends: What are the main challenges when it comes to increasing the sustainability of various industries?
K.T.: All industries are in a transition phase, and all industries need to do better. Moreover, there is a lot of potential in industries that many investors don’t want to associate themselves with, such as extraction and fossil fuel. But we can’t close our eyes to the fact that they are actually there. On the other hand, there are a lot of industries where people are much more willing to invest, but where you actually have a lot of hidden issues, such as agriculture and the garment industry. Many believe that investing in these sectors is safe both from a social and from an environmental perspective. However, this is not always the case.
Broadly speaking, there are two types of companies. The first are those who acknowledge that they have to do this, but don’t know where to start. So they ask for external help, and sometimes try to get away with just a shiny report and no real effort. However, they realize quickly that regulations will soon be in place and that the external pressure is strengthening – and they finally agree to look into it.
The second group is burying their heads in the sand. They see the massive trend developing, the regulations being set into place. However, they still hope that they will not be affected. I think that the moment when you start putting a price on it, that is when people will react much more.
Another challenge is getting people to understand that reaching sustainable goals requires in-depth knowledge. The management of investment or wealth management firms must accept that this new plethora of regulations and requirements require new know-how and competencies to be incorporated into their companies.
Supertrends: Given this situation, what can an investor do? What should an investor pay attention to if they are looking for opportunities to invest in?
K.T.: A company’s engagement and willingness to actually change is much more important than the current ESG scoring. We might even consider getting entirely away from all types of scorings, which are basically a snapshot of a company based on sometimes completely random factors. Likewise, we should try to move away from thinking that weights and scores are the best things since sliced bread. Of course, they can provide guidance and sometimes reduce the complexity of the data, but they don’t necessarily capture the complexity of the situation.
Performing due diligence is the most critical factor when assessing the sustainability of an organization. Ratings and scores are only a small component in this vast picture.
Proper due diligence will also allow for a deeper understanding of the company’s external context and internal operations and avoid investing in companies involved in greenwashing.
About Kristina Touzenis
Lawyer by training, Kristina Touzenis worked for many years in the public sector, focusing on migration issues, international cooperation, and policy and legislation development in the Mediterranean region. For ten years, she led the international law department of the International Organization for Migration, headquartered in Geneva. She was directly involved in working with governments on legislative development and advocacy, and with UN agencies on coordination and negotiations regarding human rights, policy protection, and access to fair justice. She now focuses on helping the private sector understand sustainability-related issues and prioritize their investments according to the UN Sustainable Development Goals.
When we think about fashion, we tend to think of material objects such as colorful textiles, cutting tables, scissors, sewing needles, or pins. However, the future of this industry will be shaped just as much by high-resolution screens, blockchain, 3D modeling, virtual and augmented reality, holograms, and artificial intelligence. While it is a natural concept for those now in their 20s, digital fashion might require a certain mindset shift for those who grew up in an analog world. However, in a future where our main priority will be to preserve our natural resources, virtual fashion is certain to become a sustainable alternative.
Put on your headset, position yourself comfortably in front of your screen and immerse yourself in the metaverse. Depending on your current mood and inspiration, choose your avatar and outfit and decide whether you want to hang out with other people, attend an event, visit a particular place, or shop around. All of this can be done from the comfort of your chair and using nothing but digital artifacts…
This is the metaverse, a universe of virtual spaces that will form the immersive version of the internet. Currently, under construction by multiple players in the gaming, blockchain and crypto worlds, web 3.0, as it’s also known, will become the main distribution channel for virtual fashion, according to Michaela Larosse, Head of Content & Strategy at The Fabricant.
“From a consumer point of view, we are all living digital lives, expressing ourselves in multi-media and virtual realities. When self-expression and the exploration of identity through the medium of fashion exists beyond the physical realm, it allows us to transcend the boundaries and limitations of reality; in the digital environment, we can express our multiple selves and explore new possibilities of who we might be,” says Larosse.
Founded in 2018 as the world’s first digital-only fashion house, Amsterdam-based The Fabricant operates at the intersection of fashion and technology. Currently, the company focuses on two core businesses. One is their own digital couture house and label, which creates garments that will never exist in the physical world. The other relies on developing digital versions of physical garments for established brands that want to expand their presence in the 3D digital space.
“From The Fabricant’s perspective, we are building our business for a future where physical fashion becomes utilitarian in response to our planetary circumstances and the need to preserve natural resources, but the digital environment is where we will let our fashion imaginations run wild.”
The digital transformation of fashion
Even though one might expect this industry to be the last one to go digital, there are numerous technologies that have tremendous potential in connection with fashion. Augmented reality, an immersive 3D technology that combines digital information with a person’s physical environment, already allows for digital clothing try-ons. In addition, digital supermodels are taking over the fashion industry, with data suggesting that in some cases, virtual personas outperform human influencers.
Artificial intelligence and machine learning make sense of large amounts of data, from customer size and measurements to consumer behavior and sustainability-related metrics. Besides allowing for traceability and transparency regarding the provenance of materials and the supply chain, blockchain also facilitates a new trend in fashion: NFTs (non-fungible tokens).
These are digital assets that provide proof of ownership in the virtual space. As the first company to ever release a fashion NFT, The Fabricant sold their digital Iridescence dress for US$9,500 at an auction in May 2019. RTFKT, a market leader in digital artifacts, sold US$3.1 mn worth of sneaker NFTs in seven minutes in February 2021.
For those anchored in the physical world, who experienced floppy disks and portable cassette players firsthand – the metaverse and digital images of themselves might seem pointless, if not absurd. However, Larosse points out that for young millennials and Gen Z, as digital natives whose virtual lives have equal validity to their physical lives, digital fashion is an obvious concept that makes complete sense and doesn’t require any explanation.
Being able to dress avatars (virtual representations of oneself) any way they want gives this generation a new avenue of self-expression that allows them to explore and experiment with their identity.
“Of course, we’re all used to wearing fabric against the skin, but fashion is an emotional experience. And you don’t lose that emotional experience when you create something digitally.”
On the other hand, more and more brands are entering the digital world to keep up brand awareness, reach customers via a multichannel approach, and offer them immersive experiences. Companies such as Levi’s and Ralph Lauren have already released lines of virtual clothing, Gucci recently sold one of its digital bags at a higher price than its physical counterpart, while Balenciaga dropped an entire digital fashion collection in the global multiplayer game Fortnite.
How does digital fashion contribute to a more sustainable fashion future?
The credo of The Fabricant underscores the company’s commitment to sustainability: “We waste nothing but data and exploit nothing but our imagination.” Larosse points out that, unlike the traditional fashion paradigm, which can be wasteful and exploitative in so many ways, digital fashion does not cause overflowing landfills, excessive water usage and pollution, child labor, or animal cruelty.
“The historical process of sampling is so wasteful. It hasn’t changed in 200 years. So many of the principles according to which the current fashion industry operates are created for societies that don’t exist anymore. But now, we have the tech to disrupt that narrative and allow for more sustainable initiatives. We have begun to be much more cognizant of our planetary circumstances, and that requires quite radical interventions in the way that we do things.”
Another important aspect is the way virtual fashion and 3D modeling can help make the sampling process more sustainable. By creating 3D samples, companies can bypass the extremely resource-intensive process of moving bolts of fabric across companies’ branches or ateliers, sometimes flying them across the world, transforming them into samples of different sizes and colors, and then shipping them back to the original point. If additional alterations are requested, the entire process is repeated, together with further carbon emissions and environmental burdens.
Big brands such as Peak Performance, Nike, and UnderArmour have already started to use 3D sampling by creating virtual versions of their garments. These digital assets can then be rebuilt as needed.
Today, a vast array of technological applications are poised to shape the future of the fashion industry. Keeping track of how these advances affect the environment and society in general, from creating a digital narrative to more informed and data-based decision-making, will be one of the main challenges going forward. Sustainability is becoming a key criterion in assessing the viability of a technological trend or business model.
All pictures in this article featuring digital fashion items were kindly provided by The Fabricant.
Want to learn more about the future of fashion?
In the latest issue of our innovating sustainability report series in partnership with Valuer.ai, we shone a spotlight on the innovative companies working to make the fashion industry more sustainable. In order to support the industry’s transition to a cleaner future, we decided to release this report for free. Download our Sustainability Trends in Fashion report for free.
What do companies such as J.P. Morgan, Wells Fargo, Barclays, Mitsubishi Financial Group, Citigroup, Goldman Sachs, or Caixa Bank have in common (besides being banking and financial giants)? They have all started to invest in and experiment with quantum computing applications.
Even though it is an emerging technology that still needs to mature in many ways to fulfill its wide range of promises, quantum computing has already started to make its way into various industries. The business world now faces steady pressure to familiarize itself with the technology, assess its potential, find specific use cases, and decide upon a potential long-term strategy.
Quantum computers are an entirely new type of hardware operating on quantum physics principles. While traditional computers use bits and a binary system of representing the information (either zero or one), quantum devices store the information in qubits, which can find themselves in a particular state, superposition (both zero and one at the same time). This allows them to process a vast amount of information significantly faster than classical devices. However, quantum hardware technology still needs to develop; therefore, most of the advantages that quantum computers offer compared to conventional computers are almost entirely theoretical.
Companies in the banking and financial sector are already experimenting with this technology to either harness its potential or take precautions with regard to its implications.
Quantum computing as a threat
Banks, hedge funds, asset managers, and all types of financial institutions deal with very sensitive customer data as well as information regarding transactions and contracts. Moreover, regulators require this data to be stored for periods ranging from several years to several decades. Therefore, it is paramount that it should remain secure and private. Some of the encryption algorithms used today rely on complex mathematical problems that classical computers cannot solve.
In a keynote presentation at the Inside Quantum Technology 2021 conference, Dan Garrison, who guided the creation of Accenture’s Quantum Computing Program, mentioned that if all classic computers would work together to break an encryption key (e.g., the one protecting a bank account), this would take approximatively 14 billion years. However, it has been theoretically proven that a quantum computer would be able to break some types of encryption in a matter of minutes or seconds, and several algorithms that can do that have already been developed.
Quantum hardware hasn’t yet reached the necessary level of development to run such algorithms. Nevertheless, as soon as large-scale, fault-tolerant universal quantum computers become available, there is a risk that all the data and private information concerning people, businesses, and transactions may be exposed. Some scientists expect this to happen in the next decade. Based on the principle “harvest now, decrypt later,” it is believed that nefarious actors are now hoarding encrypted data, with a view to accessing it as soon as more powerful quantum devices become available.
Therefore, by starting to use quantum-resistant algorithms already at this stage, the data owners could protect their information in the future, too.
“In the Finance sector, which deals with sensitive and private information, our greatest concern is what we call post-quantum cryptography (PQC). This refers to the landscape of privacy, cryptography, and encryption after the day when quantum computers become capable of breaking many of today’s encryptions. Post Quantum Cryptography should be something that is on everybody’s mind.” Peter Bordow, Principal Systems Architect for Advanced Technologies at Wells Fargo.
Quantum computing as an opportunity
Optimal arbitrage, credit scoring, derivative pricing – all these financial procedures involve many mathematical calculations and become even more complicated and resource-intensive as the number of variables increases. At some point, people have to settle for less-than-optimal solutions, because the complexity of the problem surpasses the capabilities of current technology and methods.
These so-called intractable problems (that can’t be solved by a traditional computer in a reasonable amount of time) represent the best use-cases for quantum technology.
One of the most acclaimed applications of quantum computing in the financial sector are the accurate simulation of markets and the ability to predict how a change in a commodity price will influence the cost of other assets.
According to experts in the field, quantum computers would be to perform so-called Monte Carlo simulations to forecast future markets, predict the price of options, or assess risk and uncertainty in financial models.
By optimizing machine learning and employing algorithms capable of recognizing patterns in large amounts of data, quantum computers could perform these highly complex forecasts and predictions.
Trading and portfolio optimization are other areas where quantum computing could significantly help. Having to consider the market volatility, customer preferences, regulations, and other constraints, traders are currently limited by computational limitations and transaction costs in simulating a large number of scenarios and improving portfolio diversification. Scientists have already proved that quantum technology can deal with the complexity of these problems.
In a panel discussion during the Inside Quantum Technology 2021 conference, Steve Flinter, Vice President within Mastercard’s Artificial Intelligence & Machine Learning Department, declared that Mastercard had already started two years previously to explore use cases for quantum computers. Even though retail banking and payments are not typical use cases for these devices, Flinter believes that besides optimization problems, quantum computers could be successfully employed to make sense of petabytes of data.
Marcin Detyniecky, Group Chief Data Scientist and Head of AI Research and Thought Leadership at Axa Insurance, also points out that in the financial industry, quantum computers could have a positive impact in areas such as foreign exchange optimization, asset allocation, large-scale portfolio optimization, disaster simulations, and risk modeling.
Commercial quantum applications for the financial industry
Of the dozens of quantum software start-ups around the globe, Multiverse Computing and Chicago Quantum have already developed specific quantum solutions for the financial sector and announced encouraging results in the area of portfolio optimization.
Multiverse Computing’s most mature product, an investment optimization tool, is capable of improving asset allocation and management, generating twice the ROI on average while the risk and volatility remain constant. Besides that, the company develops quantum-inspired solutions to predict financial crashes, determine anomalies in big unlabeled datasets, and identify tax fraud.
Chicago Quantum’s proprietary algorithm identifies efficient stock portfolios and, according to the company, “is currently beating the S&P 500 and the NASDAQ Composite 100 indices”.
In terms of quantum security for financial institutions, there are already several companies on the market offering quantum encryption devices and solutions. QuintessenceLabs offers data-protection solutions and encryption keys based on quantum technology, designed to withstand any malicious attacks both from classical and quantum computers. ID Quantique is also commercializing a quantum random number generator, along with quantum-safe network encryption and quantum key distribution solutions. Similar services are provided by Cambridge QC, evolutionQ, IBM, Infineon, ISARA, and Microsoft, to name but a few.
“Wait and watch” or “go ahead”
The future development of quantum solutions within the financial and banking industry is not without challenges. Finding out which problems are suitable to be tackled by quantum computers and which not, increasing the interface accessibility and the availability of software, extending the interest in this technology beyond an elite group of mathematicians and physicians – these are only a few of the challenges that this field will have to deal with in the future.
However, experts have warned that adopting quantum-based solutions is a long and complex process that depends not only on the company’s capacity to define problems, migrate data, and adjust the infrastructure but also on its ability to include suppliers and clients in this process as well.
“This is a long game. It is not a light switch that you flip, and suddenly you’re all done in a few months, and you’ve mitigated all your risk exposure.” Peter Bordow, Principal Systems Architect for Advanced Technologies at Wells Fargo
Nonetheless, quantum computing technology is not fully developed yet, and most of its applications and promised benefits are still conceptual. Therefore, companies in the financial and banking industry are faced with two alternatives: To wait and watch, or to go ahead. The first option implies ignoring emerging trends and reacting only when the threats or the opportunities have been identified. The second one relies on a more proactive approach, where companies already start to familiarize themselves with the quantum technology, identify use cases, and start testing the integration of quantum security solutions. This option might prove more valuable in the long run and help them mitigate future risks.
Find out more about the expected breakthroughs in quantum computing. Read our report, Supertrends in Quantum Computing, for a complete overview of quantum technology, as well as key players and investors in this field.
As a Senior Management Consultant at IBM, Anja Juhl Jensen has been working with digital innovation and disruptive technologies for more than 16 years. Currently, she supports IBM customers in the use of technologies such as artificial intelligence and blockchain to set a sustainable course for their organization. In an interview with Supertrends, she calls attention to an essential step in achieving a sustainable organization: proper data collection and analysis.
Anja Juhl Jensen has extensive experience working with disruptive technologies that drive sustainability. Other areas of expertise include innovation, cognitive solutions, SAP software, compliance, and security. Currently, Ms. Jensen is involved in projects focused on gathering data and develop real-time sustainability reports as well as product modernization using artificial intelligence, image recognition, and machine learning.
With increased support from governments and socio-environmental activists, sustainability is now part of the mindsets of many businesses and consumers. Defined as an integrated effort to balance economic profit, the environment, and society’s wellbeing, sustainability has become a gold standard in the last decade.
Driven by increasingly stronger regulations, by the desire to boost their public image, or simply because of genuine concern for the future of humankind, companies have started to look into strategies to improve their environmental and social impact.
The current state of affairs
Despite growing interest in sustainable business goals, companies’ attitudes and interests towards this issue vary significantly. Jensen highlights three main categories:
The “business-as-usual” firms are on one side of the spectrum. They do the bare minimum and meet only the most stringent regulations. In their case, sustainability is a PR exercise: Sustainability-related terms show up on their website or in glossy reports, without any real effort to make them a reality. This type of company has no genuine interest in changing its business model to become more sustainable.
“Optimizers” represent a different approach on the spectrum. Setting sustainable-related goals is seen as a means to optimize and improve processes and operations within the organization. These companies have already developed a sustainability strategy and started gathering data. Often, however, this is done manually and unsystematically. These companies have the right intentions but lack the necessary knowledge base to address sustainability issues. Finally, the “re-inventors” are determined to substantially change their business model and develop new, sustainable products or services. Various surveys show that these companies have already started getting value back from the investment in sustainability and re-invention of the company.
Companies’ attitudes towards the sustainability challenge
However, optimizing a business or re-designing corporate strategy requires sound data and cannot be done without a thorough analysis of the company’s current environmental, social, and economic impact.
Moreover, an increasing number of European regulations (e.g., Product Environmental Footprint (PEF) or EU Taxonomy) stipulate clear conditions that companies must meet to be qualified as environmentally sustainable. To prove that they meet these criteria, companies need access to proprietary data that spans a large spectrum.
The common issue – lack of consistent, comprehensive data
According to the Greenhouse Gas Protocol (GHG) Protocol, which sets global standardized frameworks for greenhouse gas emissions, corporations are required to monitor and report three major factors: direct emissions – fuel burned for the company’s direct activities (Scope 1); indirect emissions – resulting from the consumption of purchased energy, steam, heat, and cooling (Scope 2); and emissions that occur in the value chain of the reporting company (Scope 3).
As Jensen notes, today most of this information is gathered manually, usually once a year, when companies release a sustainability report. Besides being time-consuming, the process also lacks transparency in terms of data provenance or calculation. Moreover, transferring and converting information between various systems is slow and difficult, making data mapping across specific sites, brands, and geographies a cumbersome effort.
The problem becomes even more complex when it comes to gathering data from suppliers. For example, a dairy producer who obtains milk from over 12,000 farmers needs to know the footprint of each liter of milk acquired. Getting this information from the suppliers can become very difficult if they don’t monitor sustainability parameters or use a different reporting system. Currently, companies work with industry averages, but in the future, the need for exact data will significantly increase.
Despite being perceived as an onerous process, gathering this type of data can also be beneficial for the company, as Jensen points out:
“When companies start collecting data dynamically and automized, they can start analyzing it across the whole company. This way, they can immediately see where resources are wasted, where there are gaps in the process, what could be optimized, and where their emissions are coming from.”
However, based on the old principle “You get what you measure”, companies need relevant inputs, actionable metrics, and robust analytics to get an overview of all sustainability areas and make informed decisions.
Technology – a powerful sustainability enabler
New technologies have the potential to enable, facilitate, and speed up the data gathering, analysis, and reporting processes, at the same time making them more reliable and transparent. Digital platforms can integrate data related to a wide range of sustainability initiatives (e.g., water and energy consumption, sources of raw materials, etc.) and provide the necessary insight for business decisions and operational plans.
“Some might see all the new regulations coming as a constraint for companies. This is the case to a certain extent. However, limitations also spark innovation. I strongly believe that we will see an acceleration of innovations based on the new insight companies get from their data when they are forced to start reporting on it.”
Through its smart, connected sensors, the Internet of Things enables access to an increasing amount of data. This way, companies can monitor their emissions in real time. Due to its use of distributed ledgers and its shared record of transactions, blockchain technology becomes an essential tool in monitoring the sustainability results all through the supply chain. Ultimately, artificial intelligence and machine learning can analyze the data and identify potential improvement areas.
Meeting sustainability requirements brings value for organizations
By using an integrated, automated system of gathering and analyzing sustainability-related data, companies have the possibility to increase their sustainability ratings, lower the cost of operations, and increase their efficiency. Jensen is convinced that such platforms can also lead to potential new sources of revenue, easier talent acquisition and staff retention, and improved brand perception and customer loyalty.
Common standards and automated reporting methods would also increase transparency in the supply chain, leading to improved process efficiency and reduced costs.
Businesses that are neglecting or don’t want to invest resources in meeting sustainability expectations might significantly lower their chances of benefiting from the myriad of opportunities in the current global economy.
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The financial services industry is evolving rapidly, propelled by the rise of new technologies and software. Accounting is also stepping up its pace, striving to implement and extend the usage of electronic invoice systems. Once rolled out on a larger scale, electronic billing has the potential to save costs, speed up transactions, and ease the environmental burden.
Serial entrepreneur, author of ten books, and fintech enthusiast Werner Valeur strongly believes that the future of accounting is digital. From automated data capture, direct data transfer between transaction participants, and real-time payments to the replacement of Excel spreadsheets and innovative ways to automate financial processes – Valeur is optimistic about the potential of this industry and the vast opportunities that digitalization will facilitate.
“Digitalized and automated processes allow for more data points. This way, the company has access to more information and can better optimize its strategy.”
Electronic invoicing is one of the major goals and an essential step in the future development of accounting systems. Electronic bill payment is a system that allows the transaction parties to generate, send, pay, and trace their bills electronically via the internet, instead of the obsolete exchange of paper invoices via post or email (scans). This process is sped up and facilitated by the latest technological developments, access to cloud services, widespread internet access, and the increase in digital literacy among the general population.
In 2017, 90 percent of the documents were managed as paper records, but experts and business analyses indicate a significant change in the future. Valeur expects that electronic invoices will become a generally accepted transaction model in northern Europe by 2025, and in the other regions of Europe a few years later.
Currently, Latin America and Scandinavia are the world leaders in implementing e-invoices on all three primary levels: business-to-consumer, business-to-business, and government-to-business.
Multiple national initiatives have been launched across different countries, but the most important challenges are posed by cross-border harmonization, collaborative approaches, and the spread of adoption.
Already in 2014, the European Parliament and Council set in place Directive 2014/55/EU, aiming to develop a common European standard on electronic invoicing. This will lead to increased interoperability and better synchronization across countries.
Researchers have already identified a high adoption rate of e-invoices among young consumers, which will speed up implementation even more, given the rise of a new generation of “digital natives”.
“In accounting, there are a lot of highly educated people, and the potential for advancement is huge. However, most of them have been educated according to outdated principles which don’t fit anymore in the current digital society. Therefore, the digitalization of accounting should already begin within the education system.”
Regarding the impact at company level, e-invoicing is expected to generate up to 80 percent in cost savings compared to paper-based processes, reduce the payment-associated risks and lead to centralized management of financial documents.
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For centuries, science has been based on Newtonian laws and the principles of classical physics. In the last decades, this ontology started to be questioned, leading to the rise of quantum mechanics. From theoretical simulations and mathematical experiments, these quantum principles soon extended to computer science. They are working their way into different industries, from manufacturing and chemistry to law, politics, and defense.
Classical mechanics picture the world as a collection of particles that find themselves under the influence of various electromagnetic forces. Repetitive measurements of a particle return similar results, and macroscopic phenomena are explained based on the properties of the microscopic level. Because of its simplicity and apparent consistency, this paradigm has been reinforced and has prevailed through time. However, technological advancements have allowed scientists to observe and verify various phenomena that behave differently, giving rise to a vast array of experiments and applications.
“We currently live in a world in which the old Newtonian principles (cause-effect relationships) are no longer valid. The science stopped advancing, and the only way the society can move forward and progress is by implementing metaphysical postulates.”
A dedicated supporter of this paradigm shift, Amir Vahid founded Eonum, a company based in California that employs quantum principles and harnesses the power of quantum computers to develop solutions for risk management, arbitration, and outcome prediction.
Working on the quantum devices made available by IBM, Amazon Braket, or Stanford, Vahid’s model relies on the analysis of human emotion and considers live data instead of other companies in the field that rely on static information mathematical models to make predictions. According to Vahid, this has the potential to save up to 60% of the client’s litigation cost and predict court outcomes with a 90% accuracy.
“Eonum has a distinctive ability to quantify complex human emotion using quantum field theory to enable high impact decision making.”
Any type of conflict, either between companies, political opponents, or world-powers, involves a high level of uncertainty, emotional volatility, power imbalances, and mysterious information. Eonum’s quantum model aims to make sense of this data, providing their clients with a more realistic assessment of their chances and supporting them in the processes of risk assessment, litigation, or arbitration.
Eonum’s approach does not limit itself to the usage of quantum computers and AI to make sense of data and perform complex computations. The company also employs quantum-based strategies (e.g., social laser) to support their clients to reach their goals.
“An average lawsuit in the healthcare industry costs around 3 million USD. This is a costly and time-consuming process. Our strategy is to help our clients move towards conflict resolution before reaching court trials by laying out strategies based on quantum principles and computations.”
One of the significant advantages of this model resides in its flexibility. On one hand, the model develops continuously, which allows the prediction to change in real-time, based on the events that take place at that moment. On the other hand, it is scalable and transferable to problems in other areas such as politics and diplomacy.
Quantum computing applications are still in their infancy. Besides the advancements expected on the technical side, a significant change in mentality and the way of thinking is also paramount. Only this way, both academia and industries will bring this field to the next level and prove the universal validity of the dissipative quantum field theory.
 Rodolfo Gambini and Jorge Pullin, “Event Ontology in Quantum Mechanics and the Problem of Emergence,” n.d., 10.
 E. A. Rauscher, J. J. Hurtak, and D. E. Hurtak, “The Ontological Basis of Quantum Theory, Nonlocality and Local Realism,” Journal of Physics: Conference Series 1251 (June 2019): 012042, https://doi.org/10.1088/1742-6596/1251/1/012042.
 Hans Christian Öttinger, A Philosophical Approach to Quantum Field Theory (Cambridge, United Kingdom: CAMBRIDGE UNIVERSITY PRESS, 2018).
 Andrei Khrennikov, “‘Social Laser’: Action Amplification by Stimulated Emission of Social Energy,” Philosophical Transactions of the Royal Society A: Mathematical, Physical and Engineering Sciences 374, no. 2058 (January 13, 2016): 20150094, https://doi.org/10.1098/rsta.2015.0094.