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Month: March 2020

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Visual (Videos)

COVID-19 effects on the US Economy

As the COVID-19 effects hit in the US, more than 3 million Americans lost their jobs last week. Reports also show a sluggish growth on personal consumption. The Fed Chairman says the US may already be in recession. We are joined by Tony Nash, CEO and Founder of Complete Intelligence, from Houston, Texas.

 

CNA: We’ve got this incredible amount of stimulus in the system, and the market seems loving it. The fundamentals of COVID-19 are getting worse, but the markets seem to be moving another direction. Is there a disconnect?

 

TN: I don’t think there is. I think there are two things. First, people want better information. With the testing and other things. Not all tests are created equally. We are not told the denominator of the tests. I’m not an expert, but there are some issues around that not all countries’ numbers are created equally. But the 2 trillion dollar stimulus, it’s not possible that that’s the extent of the stimulus that the US government is going to issue.

 

This is a government-induced recession, globally. A recession is typically an economic failure, a financial failure. What has happened is that governments have effectively turned down the economy like putting their economies in a coma. So there’s nothing that companies can do to avoid this. This is the responsibility of every government that puts strict measures in place and it’s their responsibility to make sure that their economies are back up.

 

CNA: Are you concerned about the cost to cushion the fall of COVID-19 effects? Remember the 2008 financial crises and how much money it took back then—hundreds and billions? We are now talking about trillions here. When will we able to see the kind of recovery that we saw in the past 10 years once we’re over COVID-19?

 

TN: I do believe we’ll see that recovery. I believe this is sufficiently different. It was not the market’s fault. This was the investor market, investor banks back in 2008, 2009. This is the government today. So it’s the government’s responsibility to fix what they did. I understand they’re responding to COVID-19 and its effects, but they’re the ones to put the measures in place. They’re the ones to handcuff managers, CEOs, and executive teams. So it’s the government’s responsibility to help companies start back up.

 

CNA: On that note, Donald Trump wants the American workforce to get back to their jobs as everybody wants to work. I don’t doubt that. Do you agree with that? Is that the solution, the elixir to the problem here?

 

TN: I do believe that. I’m actually more worried about the social issues associated with jobless dislocation than really the COVID-19 effects. Not that I don’t care. I want everyone to take measures. But the social dislocation of people in their prime working age. Being laid off. We have 3 million of them as reported today. These are people in their prime. They’re earning and they’re losing their jobs. We’re gonna see a lot of problems. And so, depression, suicide, all sorts of things.

 

My fear is that those things start to manifest in the next few weeks. So the US has to get back to work. Americans have to get back to work. Otherwise, people will be short on their bills and they’ll feel incredibly stressed.

 

CNA: How bad do you think the economic data is going to get? Now that we got the 3.3 million jobless claims out of the United States? Is this just going to continue to get worse and worse down the pipeline here?

 

TN: Oh yeah. I think it will get worse until probably the third week of April or maybe the 4th week of April. We’ll continue to see this over the next month until the hump. Once we get over the hump, we’ll see, once the fiscal stimulus starts to take place, which is the big difference this time.

 

We’re seeing a lot of fiscal stimulus. That’s the difference. It’s not just the Fed printing dollars, of course, that’s happening. But we’re seeing fiscal stimulus going straight to end consumers. That’s very important.

 

CNA: What can we learn from China’s response in this situation? It seems things are returning back to normal in China with Hubei province opening up, Wuhan in 2 weeks, traffic jams in Beijing. Can the US look forward to that extrapolation? What’s happening in China, coz I mean the capital markets in China have made a decent recovery as well.

 

TN: I think the US is going to come back pretty aggressively in say the last week of April or early May. I don’t see that the way the US is handling it is similar to China, given the civil liberties that Americans have, there’s absolutely no way that that would work in America.

 

We have a thing called the 4th Amendment in the US that allows people to assemble and leave their houses. So welding people in their apartments wouldn’t work here, and so the US had to take other measures. And I actually think it’s being fairly effective. The case count in the US looks like it’s high, but I’m not convinced that we’re seeing full reporting from any other countries.

 

CNA: Thanks so much, great to chat with you. Stay safe there in Houston, Texas.

 

 

Watch the interview on Channel News Asia’s Asia First. 

Categories
News Articles Visual (Videos)

[Global Insight] Why are stocks, oil prices continuing to crash?

 

Arirang News notes:

 

Oil prices have fallen sharply for four consecutive weeks now. Slumping by more than 60 percent since the turn of 2020. As the coronavirus pandemic continues to severely disrupt business, travel and daily life, demand for crude has been plunging, and major producers like Russia and Saudi Arabia haven’t helped the situation by launching an intense price war.

 

This is stirring even more volatility in global stock markets as the world economy reels from the coronavirus pandemic. It’s a time of uncertainty but to provide us with a better sense of what might lie ahead, we’re joined by Dr. Kang Wu, Head of Analytics, Asia at S&P Global Platts, and Tony Nash, CEO and Founder of Complete Intelligence.

 

Let’s first talk about the losses seen on Wall Street on Monday. Dr. Wu, starting with you: U.S. stocks ended in the red, after a two trillion dollar coronavirus support package failed to pass the Senate for the second time. And stocks have been extremely volatile in recent weeks despite the Federal Reserve having cut its interest rates twice this month and rolling out other never-seen-before measures. Why have these moves failed to reassure investors and are you expecting markets to fall even further?

 

This is a very volatile time and overall the demand globally on commodities and on the economy is very weak. So it’s a panicking situation for many economies. It really is up to the individual governments to stimulate the economy and global organizations. I do see that the current downward pressure on the economy and the commodity market will continue until we have a solution. However, the government of the US and other countries and the Fed could help the situation.

 

 

Oil prices have also been getting battered day after day, due to lower demand and this oil price war between Saudi Arabia and Russia. Mr. Nash, Moscow started it by refusing to agree to cut its oil production. It’s a dangerous game of chicken so what are they aiming to gain from this brinkmanship?

 

I think they’re just aiming for more say in the trajectory for crude. This is really a capacity game. Russia doesn’t have the additional capacity available really to go to up against Saudi Arabia. Saudi Arabia has a lot of capacity available. So if Saudi Arabia wants, they can continue producing more volume. The problem is neither government can afford to produce at these rates. They need crude prices about $20 higher than they are right now. So we don’t see this as viable for either government for much longer.

 

 

Dr. Wu, you were in charge of research in global energy markets in Riyadh. What do you think MPS’s strategy is. Can either country afford this war and who do you think will blink first?

 

I agree that there is an issue with the physical budget for Saudi Arabia and similarly there is the issue of the budget for Russia. However, in terms of how long we can sustain the current low prices also depends on how they are fiscally and the reserves they have.

 

Saudi Arabia oil is very important. Crown Prince has been trying to very hard to diversify the economy of Saudi Arabia. So currently the overall oil market is in turmoil in a way that they have very few strategies to pursue. One is to preserve the prices and the other one is to preserve the market share or drive out competitors. So it seemed that after three and a half years of trying the price defense, now they are turning to another strategy to drive out the competition in the oil market.

 

 

Dr. Wu: With the impact of COVID-19 on markets and economies around the world, what dangers lurk around the corner if this oil price war rages on for a prolonged period of time? Is it a potential nail in the coffin for many oil companies who were already struggling to turn a profit when oil was 40 dollars a barrel, let alone 20 dollars?

 

Many companies, many players will get hurt. Other OPEC producers and exporters, smaller ones other than Russia, which is an OPEC and a Saudi Arabia, they will get hurt, and globally, US shale oil producers and Canadian heavy oil sands project operators, if the low oil price continues. Once you know that the global oil storage is running to the limit, then there’s no choice. Some have to give up. Some have to reduce production. And that will start from the high oil producers around the world.

 

 

Mr. Nash: Some say the motivation behind this price war is to hurt U.S. shale gas producers? Do you agree and will it work? Can the US Shale industry complex survive a prolonged stretch with oil basically being given away? How should the U.S. government react to this?

 

In 2015, we saw OPEC really take that aggressive stance against shale producers. I think it failed because US authorities tried to, and very effectively, extended credit to shale producers. I think this time that those same or even more aggressive instruments will be put in place to defend shale producers.

 

That’s not to say everyone is going to be healthy. That’s not to say there won’t be consolidation in shale. It’s also not to say there won’t be kind of closed downs in places that are really expensive like Colorado and other places to produce. But I think in general, the aim is to ensure that the volume of shale production in the US stays relatively consistent and that the US can continue to be a net producer of crude and I think that’s really what the US is focused on.

 

So I see this as a Saudi-Russia issue, and perhaps a Saudi-Iran issue as much as it is a kind of Saudi-Russia-Shale issue.

 

 

As an aftermath of this, what do you think the long-term impact would be on oil markets on all companies across the world?

 

Crude companies have to become much more efficient. There’s a lot of automation, there’s a lot of other things that can happen within oil companies. There’s a difference between national oil companies and independent oil companies. so the national oil companies are typically pretty inefficient, and they’ll probably stay that way. The independent oil companies, really the private sector ones, will have to get even more competitive, which there’s plenty of room for them to get competitive and I think they’ll be the healthier ones in the long run.

 

 

Dr. Wu: OPEC’s current production cut deal expires at the end of the month. Do you see prices dropping even further after that? (and if so, how would it affect broader financial markets?)

 

Yes, I do. At the end of the month, I do not see that Russia and Saudi Arabia will come back to the negotiation table very soon. Eventually, they might. But not in a very short time. So April is probably a pretty challenging month for the oil market as the demand continued to drop due to the pandemic of the Coronavirus and oil production. Not only the price formulas by Saudi Arabia, but physical supply of OPEC, particularly Saudi Arabia UAE will increase. That will put a lot of pressure on non-OPEC producers, which are more dominated by independent in North America. Of course also national oil companies as well. At the end of the day, the market needs to be balanced. So Asian players included can buy more oil but up to the limit of the storage, up to the limit of the current state of demand, which is very, very weak.

 

What do you think, Mr. Nash? Do you think there’ll be another oil cut, though?

 

It’s possible. What we’re seeing is we think the last half of April we’ll actually see prices return. We think toward the end of April, we’ll start to see prices back in the 40s. So things may get slightly worse in the short term, and anything is possible. But we know within the 40s, crude prices are depressed anyway. We’ve started to see Asia really come back online post-Corona and we’ll see that kind of move westward as well. So that consumption capacity as that comes back online, that will put pressure on prices.

 

The pressure between the Saudi government and the Russian government, their fiscal revenues, there will be serious pressure there. And you can bet there’s probably pressure from the US government on the Saudis and the Russians to resolve this. So I think that pressure will only intensify over the next two weeks. And we’ll see some resolution say mid-April or third week of April.

 

 

Thank you very much for joining the program today Dr. Kang Wu, Head of Analytics, Asia at S&P Global Platts, and Tony Nash, CEO and Founder of Complete Intelligence.

Categories
QuickHit Visual (Videos)

QuickHit: Status of Global Supply Chain in Time of Coronavirus

In this week’s QuickHit episode, Tony Nash speaks with George Booth, the President of Secure Global Logistics. SGL is a complete logistics company with global and domestic services. We dig deeper into the status of global supply chains within this era of Coronavirus or COVID-19 and learn how companies move things across the globe, and what that is looking like right now.

 

Last week’s Quick Hit episode was about how SMEs are affected by the global pandemic and pieces of advice from an expert on the best course of action. Watch it here.

 

The views and opinions expressed in this QuickHit episode are those of the guests and do not necessarily reflect the official policy or position of Complete Intelligence. Any content provided by our guests are of their opinion and are not intended to malign any political party, religion, ethnic group, club, organization, company, individual or anyone or anything.

 

Show Notes:

 

TN: Hi, this is Tony Nash with Complete Intelligence. This is our weekly Quick Hit that we publish each week. We’ve got George Booth, President of Secure Global Logistics in Houston, Texas.

 

We’re really interested to understand George’s view on the impact of Coronavirus on global logistics, supply chains, and trade. And what the impact is on the volume, timing and magnitude of trade. George, first could you tell us just a real quick overview of SGL? Then let’s get into some of the topics.

 

GB: Yes, good morning, Tony. Good to be here. The SGL is a complete logistics company. We do a full suite of global and domestic logistics, including import, customs brokerage, exports by air and sea and domestic by air and road. We also do 3PL logistics, so full warehousing, packing and getting ready for export.

 

TN: Perfect. That’s great George. Thanks very much. And I really appreciate you taking the time to talk. I know there’s a lot going on as shippers and the other folks try to figure out how to get goods to destination with the disruption of the supply chain. Can you help us understand, what are you seeing in terms of volumes for your clients?

 

GB: Yeah. Well, interestingly, the volumes haven’t dropped off yet. We would expect that to happen almost immediately. Shut down hasn’t started to happen here. It hasn’t happened yet. I think we’ve been slightly helped with a buffer by China coming back online.

 

In January and February, we took a real hit from our customers that import from China. That’s when they just shut down and factories were closed. We saw nothing coming in, but that’s now picking back up.

 

For example, we have a customer who does a monthly freight out of China. That hadn’t happened in like two months, and this week we’re moving 21 ton of freight out of China. And he said, “Get it here fast.” They want to get the product on the market and sell it.

 

We haven’t seen a drop off yet. We’re also seeing a big spike in freight this past week, and even yesterday, as a lot of clients are preparing for a shutdown. So they’re trying to get that product moving and maybe converting from sea freight, ocean freight to air freight to get it moving and to get to the destination before the shutdown happens.

 

TN: OK. So volume has been pretty consistent. What about, you know, as we’ve seen, say, the crude price, because I understand some of your clients are big gas firms.  With the crude price declining as it happens, what impact has that had on shipping rates? And what is the typical relationship of crude price and shipping rates?

 

GB: Well, this is really interesting. I’ve been in the shipping industry for all of my career of about 25 years. And this is the first time we’re not seeing a direct correlation between lower oil price and low freight rates.

 

That’s been really challenging, our clients are suffering from a lower price, but we have had to present them with much higher rates from the carriers and particularly air freight.

 

The air freight in the past, when the oil price was down, the freight rates go down with it. And then when they go up, you see a big spike included fuel surcharges. But because of capacity issues, air freight has now become almost the highest bidder scenario.

 

Some airlines are selling to the highest bidder. We are seeing freight rates in some cases 10 times what they normally ask. Something would have paid a dollar fifty per kilo in the past, we’re now seeing going for up fifteen dollars.

 

I’ve seen a lot of lack of flexibility from the air freight carriers, as well. While in the past you might have booked it, and the factory wasn’t quite ready or it wasn’t ready to export. You’d still book it into the next day with no charge for lost slots.

 

If you don’t show up with your freight, they’ve been really clear, which, again, from a supply chain, you can understand, they’re not getting the same return. So they’re making it inflate.

 

I once had an airline say that the best deal for them is that the cabin, first-class cabin is full, economy empty, and the belly full of freight. Now, they don’t do first class. So they’re making all their money on the various freights.

 

TN: Are you seeing sea freight come down or stay the same or what’s happening with sea freights?

 

GB: Well, sea freights have been very interesting as well, because the distribution of liner and equipment, shipping containers, there’s a backlog in China because China hasn’t been moving.

 

A lot of equipment is stuck in China. The past few weeks, we’ve started to see competitive, very competitive sea freight rates coming out of China as China tries to boost the economy, get freight moving. And also as liners are trying to get the equipment back in the right places.

 

Conversely, trying to export from Europe or from the US. We’re seeing much higher rates because there’s a lack of capacity and a real demand for liner and equipment. So that’s proven a challenge. So it depends where your ship has been from and to, based on the allocation and relocation of liner and equipment.

 

TN: Okay. It is interesting from your perspective to see China’s actually back online.  We’re actually seeing the physical goods coming and you’re seeing the volumes come in. I think that’s very interesting.

 

So what is the biggest kind of concern that your clients have right now in terms of logistics and some supply chains? What do you hear from them as their biggest concern?

 

GB: Yeah. I mean, a lot of our clients are tied to oil and gas. They operate as a squeeze-in. And as it squeezes, it comes all the way down. And I always say the fate of logistics is at the end of the food chain.

 

We get the squeeze all the way down. Some of our clients are being asked to take 40 percent reductions in the rates. And now squeezing that back down to all that supply.

 

At times in, well, of course, we want to work with you. But we’re also presented with air freight that is 10 times what used to be. It’s proven very challenging commercially for our customers, and for us to keep those relationships. They want to continue to be a partner at a time when they want us to share the bin with the promise of sharing the prize when it comes back.

 

But the oil and gas industry, as you know, has been depleted since 2015. So we’ve all been sharing the bin for a long time. So there’s not much left in the market for starters being distribution goes.

 

TN: OK. And George, I don’t know if you can answer this question, but how long do you expect this to last? What do you expect, what do your clients expect? Are they expecting this next month or two months or six months or a couple of weeks? How long do you think this will last in the US?

 

GB: Yeah, I think China’s a good indicator of the length of time they needed to end it and start to come out of it. So we have been planning for the same length, 120 days.

 

I mean, based on the president’s comments yesterday, it seems like there’s a real bullish approach to not going into this too long. I don’t know if that’s keeping with health advisory or not. But it seems that America wants to get back to business sooner rather than later.

 

I think we’ll see that big spike as we have this past week and this week as people try and get product moving before very they put it in shutdown. And then we’ll see the wall. And then there’ll be a backlog and people will start and try and get goods moving again.

 

So we were making our plans 90 to 120 days. And we’re hopeful, obviously, that it comes back.

 

But, our industry has also led the charge in health and safety, so we’ve been talking about our safety language for many years, even decades. And this is a time to prove that we care for our people, care for our supply chains and for our communities.

 

And we’re thinking very much the safety of our employees at our every week touch points, literally and figuratively speaking. Even four weeks ago, we had a memo out to our staff saying to be ready to work from home. And that this is coming. And we saw it coming because we were in daily contact with our partners in China and Italy and in Europe. So we could see what was happening there.

 

So, and we’ve been preparing for this. We operate from the cloud. So a lot of our people are operating from home. I’ve got so much scale and staff, and we rehearsed it.

 

TN: Fantastic. George, thanks very much. Thanks for your time. I really appreciate it.

 

If any of the viewers have questions, leave me comments or send us an email at Complete Intelligence. Thanks very much.

Categories
Podcasts

Could COVID-19 Finally Kill the EU?

The fallout from COVID-19 might result in the disintegration of the European Union while the flight to safe havens like the USD is yet another headache for the financial markets to stomach, according to Tony Nash, CEO of Complete Intelligence.

Produced by: Michael Gong

Presented by: Roshan Kanesan, Noelle Lim, Khoo Hsu Chuang

 

Listen to the podcast in BFM: The Business Station

 

Show Notes:

 

BFM: So for more on global markets right now, we speak to Tony Nash, CEO of Complete Intelligence. Welcome to the show, Tony. Now U.S. markets closed down sharply again last night, erasing all gains from the time President Trump was elected. So what’s your outlook for markets? Is it still too early to buy?

 

TN: Gosh I don’t know. Actually, we don’t really know if it’s a really good time to buy. At this point, it’s really hard to catch that kind of falling knife. But what we don’t see is a V-shaped recovery. We think we’re in the zone where the fall may start slowing down. But we believe the equity markets will trade in a pretty low range for the next couple of months. And that’s because we’re not really sure of the economic impact of the slowdown in the West.

 

This COVID-19 is a government-driven recession that countries have lawfully gone into. So a lot of the recovery has been how quickly the fiscal stimulus is put into the hands of consumers and companies, and how quickly those individuals will get back to work.

 

 

BFM: Well, oil continues to fall last night to record lows with the Brent at $26 per barrel. What’s your view on oil? I know you are seeing the stock market. We do not know where the bottom is. But for oil, are we hitting the bottom yet?

 

TN: We may not be, but we’re pretty close. Our view is that crude will bounce once the Saudi-Russia price standoff is resolved. So we actually see crude moving back into the 40s in April.

 

But after that, we expect a gradual fall back into the low 40s to the high 30s in May. So, you know, we’ll see the next several months’ prices will be depressed. And we think it’s going to be quite a while before we see oil at 50 bucks again.

 

 

BFM: Yeah, Tony, you would have seen the stock futures point in green, obviously quite buoyed by the ECB’s whatever-it-takes policy. In Asia this week, four central banks are meeting. I’d like to go off a piece of possible talk about Australia, Thailand, Philippines, Indonesia. Our central banks are expected to meet this week. What do you expect them to do in terms of responding to the market turmoil?

 

TN: So it can’t just be central banks. I think central banks will do whatever it takes. But you really have to get finance ministries involved because, again, this is a government-induced recession.

 

Governments have demanded that people stay at home due to COVID-19. They’ve demanded that places of business close. And so until finance ministries and treasury departments get involved to get money in the hands of consumers and companies, we’re in a pretty rough place and there’s a lot of uncertainty.

 

So I think the central bank activity is fine. But I think getting a fiscal stimulus out there right now and not waiting is what they need to do. The US is talking about doing something in mid-April, that is just not good enough.

 

We have to get fiscal stimulus out right now because the governments have brought this on. The markets did not bring this on. The governments brought this recession on.

 

 

BFM: Yeah, Tony, obviously the helicopter money is going beyond the conceptual stage right now. But from a fiscal standpoint, how many central banks in Asia can afford, you know, the financial headroom to pay these helicopter money solutions?

 

TN: Well, whether they can afford it and whether they need to afford it are two different questions. And so I think we have real issues with a very expensive U.S. dollar right now.

 

Dollar strength continues to pound emerging market currencies. And emerging markets and middle-income markets may have to print money in order to get funds in the hands of consumers and companies.

 

So I think you have a dollar where appreciation continues to force the dollar strength. And you also have middle income and emerging market countries who may have to turn on printing presses to get money into the hands of consumers. So I think for middle income and emerging markets, it’s a really tough situation right now. The dollar, I think, is both a blessing and a curse for the U.S. But the U.S. Treasury and the Fed have to work very hard to produce the strength of the dollar.

 

There is a global shortage of dollars, partly because it’s a safety currency, partly because of the debt that’s been accumulated in U.S. dollars outside of the U.S.. And if those two things could be alleviated, it would weaken the dollar a bit. But the Treasury and the Fed are going to have to take some drastic measures to weaken the dollar.

 

 

BFM: Well, how much higher do you think the green buck can go?

 

TN: It can be pretty high. I mean, look, it depends on how panicked people get. And it depends on how drastic, I’d say, money supply creation is in other markets.

 

I think there are real questions in my mind about an environment like this and around the viability of the euro. The EU is in a very difficult place. I’m not convinced that they can control the outbreak. I think they have a very difficult demographic position. And I don’t think Europe within the EU, have the fiscal ability to stimulate like it is needed. The ECB cannot with monetary policy, wave a magic wand and stimulate Europe.

 

There has to be fiscal policy, and the individual finance ministries in every single EU country cannot coordinate to the point needed to get money into the hands of companies and individuals. So I think Europe and Japan, actually, have the most difficult times, but Europe has, the toughest hole to get out of economically.

 

 

BFM: It really sounds like Europe has its work cut out for it at this point. What do you think? What could we see coming out of Europe in terms of any fiscal policy? Or will this pressure the EU, put more pressure on the EU?

 

TN: ECB doesn’t really have the mandate for fiscal policy, so they would have to be granted special powers to develop fiscal policy solutions. It has to be national finance ministries in Europe that develops that.

 

So the ECB can backup as many dump trucks as it wants, but it just doesn’t have the power for fiscal policy. So, again, our view is that there is a possibility that the Euro and the EU actually break up in the wake of COVID-19.

 

This is not getting enough attention. But the institutional weakness in Europe and the weakness of the banking sector in Europe is a massive problem and nobody is really paying attention to it.

 

 

BFM: Do you think this has been a long time coming?

 

TN: Oh, yeah. I mean, look, we’re paying for the sins of the last 20 years right now. And for Asia, you know, Asian countries and Asian consumers and companies have taken on a huge amount of debt over the past 20 years to fund the quote unquote, “Asian Century.” And I think a lot of Asian governments and countries will be paying the price over the next six months. The same is true in Europe. But the institutions there are very, very weak.

 

The U.S., of course, has similar problems, not because the U.S. dollar is so dominant, the U.S. can paper over some of those sins, although those problems are coming from the U.S. as well.

 

So, again, what we need to think about is this: The people who are the most affected by COVID-19 are older people. Those people are no longer in the workforce generally, and they’re no longer large consumers, generally.

 

OK. So all of the workforce is being sidelined or has been sidelined in Asia, is being sidelined in the West now, and consumption is being delayed for a portion of the population that is no longer consuming and is no longer working.

 

And so getting the fiscal stimulus out is important because those people who are contributing to the economy can’t do anything, right?

 

So and this isn’t to say we’re not caring about the older populations. Of course, we all are. But it’s a little bit awkward that the beneficiaries of this economic displacement are largely people who are not contributing to economies anymore.

 

 

BFM: All right. Tony, thank you so much for joining us on the line this morning. That was Tony Nash, CEO of Complete Intelligence.

 

Listen to the podcast on COVID-19 in BFM: The Business Station

 

Categories
News Articles

Top 12 AI Use Cases: Artificial Intelligence in FinTech

We’ve scoped out these real-world AI use cases so we could detail how artificial intelligence has been a game-changer for FinTech. Few verticals are such a perfect match for the improved capabilities brought by the AI revolution like the financial sector.

 

Traditional financial services have always struggled with massive volumes of records that need to be handled with maximum accuracy.

 

However, before the advent of AI and the rise of Fintech companies, very few giants of this industry had the bandwidth to deal with the inherently quantitative nature of this world. (Read Fintech’s Future: AI and Digital Assets in Financial Institutions.)

 

Banks alone are expected to spend $5.6 billion USD on AI and Machine Learning (ML) solutions in 2019 — just a fraction of what they’re expecting to earn since the profits generated may reach up to $250 billion USD in value.

 

From automating the most menial and repetitive tasks to free up the time to focus on higher-level objectives, to assisting with customer service management and reducing the risk of frauds, AI is employed from back-office tasks to the frontend with nimbleness and agility.

 

 

1. Fraud Detection and Compliance

 

According to the Alan Turing Institute, with $70 billion USD spent by banks on compliance each year just in the U.S., the amount of money spent on fraud is staggering. And when the number of reported cases of payments-related fraud has increased by 66% between 2015 and 2016 in the United Kingdom, it’s clear how this problem is much more than a momentary phenomenon.

 

AI is a groundbreaking technology in the battle against financial fraud. ML algorithms are able to analyze millions of data points in a matter of seconds to identify anomalous transactional patterns. Once these suspicious activities are isolated, it’s easy to determine whether they were just mistakes that somehow made it through the approval workflow or traces of a fraudulent activity.

 

Mastercard launched its newest Decision Intelligence (DI) technology to analyze historical payments data from each customer to detect and prevent credit card fraud in real time. Companies such as Data Advisor are employing AI to detect a new form of cybercrime based on exploiting the sign-up bonuses associated with new credit card accounts.

 

Even the Chinese giant Alibaba employed its own AI-based fraud detection system in the form of a customer chatbot — Alipay.

 

 

2. Improving Customer Support

 

Other than health, no other area is more sensitive than people’s financial well-being. A critical, but often overlooked, application of AI in the finance industry is customer service. Chatbots are already a dominating force in nearly all other verticals, and are already starting to gain some ground in the world of banking services, as well. (Read We Asked IT Pros How Enterprises Will Use Chatbots in the Future. Here’s What They Said.)

 

Companies like Kasisto, for example, built a new conversational AI that is specialized in answering customer questions about their current balance, past expenses, and personal savings. In 2017, Alibaba’s Ant Financial’s chatbot system reported to exceed human performance in customer satisfaction.

 

Alipay’s AI-based customer service handles 2 million to 3 million user queries per day. As of 2018, the system completed five rounds of queries in one second.

 

Other companies, such as Tryg, used conversational AI techs such as boost.ai to provide the right resolutive answer to 97% of all internal chat queries. Tryg’s own conversational AI, Rosa, works as an incredibly efficient virtual agent that substitutes inexperienced employees with her expert advice.

 

Virtual agents are able to streamline internal operations by amplifying the capacity and quality of traditional outbound customer support. For example LogMeIn’s Bold360 was instrumental in reducing the burden of the Royal Bank of Scotland’s over 30,000 customer service agents customer service who had to ask between 650,000 and 700,000 questions every month.

 

The same company also developed the AI-powered tool AskPoli to answer all the challenging and complex questions asked by Fannie Mae’s customers.

 

 

3. Preventing Account Takeovers

 

As a huge portion of our private identity has now become somewhat public, in the last two decades cybercriminals have learned many new ways to use counterfeit or steal private data to access other people’s accounts.

 

Account Takeovers (ATOs) account for at least $4 billion USD in losses every year, with nearly 40% of all frauds occurred in 2018 in the e-commerce sector being due to identity thefts and false digital identities.

 

Smartphones appear to be the weakest link in the chain in terms of security, so the number of mobile phone ATO incidents rose by 180% from 2017 to 2018.

 

New AI-powered platforms have been created such as the DataVisor Global Intelligence Network (GIN) to prevent these cyber threats, ranging from social engineering, password spraying, and credential stuffing, to plain phone hijacking.

 

This platform is able to collect and aggregate enormous amounts of data including IP addresses, geographic locations, email domains, mobile device types, operating systems, browser agents, phone prefixes, and more collected from a global database of over 4 billion users.

 

Once digested, this massive dataset is analyzed to detect any suspicious activity, and then prevent or remediate account takeovers.

 

4. Next-gen Due Diligence Process

 

Mergers and acquisitions (M&A) due diligence is a cumbersome and intensive process, requiring a huge workload, enormous volumes of paper documents, and large physical rooms to store the data. Today the scope of due diligence is now even broader, encompassing IT, HR, intellectual property, tax information, regulatory issues, and much more.

 

AI and ML are revolutionizing it to overcome all these difficulties.

 

Merrill has recently implemented these smart technologies in its due diligence platform DatasiteOne to redact documents and halve the time required for this task. Data rooms have been virtualized, paper documents have been substituted with digital content libraries, and advanced analytics is saving dealmakers’ precious time by streamlining the whole process.

 

 

5. Fighting Against Money Laundering

 

Detecting previously unknown money laundering and terrorist financing schemes is one of the biggest challenges faced by banks across the world. The most sophisticated financial crime patterns are stealthy enough to get over the rigid conventional rules-based systems employed by many financial institutions.

 

The lack of public datasets that are large enough to make reliable predictions makes fighting against money laundering even more complicated, and the number of false positive results is unacceptably high.

 

Artificial neural networks (ANN) and ML algorithms consistently outperform any traditional statistic method in detecting suspicious events. The company ThetaRay used advanced unsupervised ML algorithms in tandem with big data analytics to analyze multiple data sources, such as current customer behavior vs. historical behavior.

 

Eventually, their technology was able to detect the most sophisticated money laundering and terrorist financing pattern, which included transfers from tax-havens countries, abnormal cash deposits in high risk countries, and multiple accounts controlled by common beneficiaries used to hide cash transfers.

 

 

6. Data-Driven Client Acquisition

 

Just like in any other sector where several players fight to sell their services to the same customer base, competition exists even among banks. Efficient marketing campaigns are vital to acquire new clients, and AI-powered tools may assist through behavioral intelligence to acquire new clients.

 

Continuously learning AI can digest new scientific research, news, and global information to ascertain public sentiment and understand drivers of churn and customer acquisition.

 

Companies such as SparkBeyond can classify customer wallets into micro-segments to establish finely-tuned marketing campaigns and provide AI-driven insights on the next best offers.

 

Others such as LelexPrime make full use of behavioral science technology to decode the fundamental laws that govern human behaviors. Then, the AI provide the advice required to make sure that a bank’s products, marketing and communications align best with their consumer base’s needs.

 

 

7. Computer Vision and Bank Surveillance

 

According to the FBI, in the United States Federal Reserve system banks alone are targeted by nearly 3,000 robberies every year. Computer vision-based applications can be used to enhance the security and surveillance systems implemented in all those places and vehicles where a lot of money is stashed (banks, credit unions, armored carriers, etc.).

 

One example is Chooch AI, which used to monitor sites, entries, exists, actions of people, and vehicles. Visual AI is better than human eye to capture small details such as license plates and is able to recognize human faces, intruders and animal entering the site.

 

It can even raise a red flag whenever unidentified people or vehicles are present for a suspicious time within a certain space.

 

 

8. Easing the Account Reconciliation Process

 

Account reconciliation is a major pain point in the financial close process. Virtually every business must face some level of account reconciliation challenge since it’s an overly tedious and complex process that must be handled via manual or Excel based processes.

 

Because of this, errors are way too common even when this problem is dealt with rule-based approaches. In fact, other than being extremely expensive to set up due to complicated system integration and coding, they tend to break when the data changes or new use cases are introduced and need on-going maintenance.

 

SigmaIQ developed its own reconciliation engine built on machine learning. The system is able to understand data at a much higher level, allowing for a greater degree of confidence in matching, and is able to learn from feedback.

 

As humans “teach” the system what is a match and what is not, the AI will learn and improve its performance over time, eliminating the need to pre-process data, add classifications, or update the system when data changes.

 

 

9. Automated Bookkeeping Systems

 

Small business owners are often distracted by the drudgery of the back-office — an endless series of chores which take away a lot of valuable business time. AI-powered automated bookkeeping solutions such as the ones created by ScaleFactor or Botkeeper are able to assist SMB owners in back-office tasks, from accounting to managing payrolls.

 

Using a combination of ML and custom rules, processes, and calculations, the system can combine various data sources to identify transaction patterns and categorize expenses automatically. JP Morgan Chase is also employing its own Robotic Process Automation (RPA) to automate all kind of repetitive tasks such as extracting data, capturing documents, comply with regulations, and speed up the cash management process.

 

 

10. Algorithmic Trading

 

Although the first “Automated Trading Systems” (ATSs) trace their history back to the 1970’s, algorithmic trading has now reached new heights thanks to the evolution of the newer AI systems.

 

In fact, other than just implementing a set of fixed rules to trade on the global markets, modern ATSs can learn data structure via machine learning and deep learning, and calibrate their future decisions accordingly.

 

Their predicting power is becoming more accurate each day, with most hedge funds and financial institutions such as Numerai and JP Morgan keeping their proprietary systems undisclosed for obvious reasons.

 

ATSs are used in high-frequency trading (HFT), a subset of algorithmic trading that generates millions of trades in a day. Sentient Technologies’ ATS, for example, is able to reduce 1,800 days of trading to just a few minutes. Other than for their speed, they are appreciated for their ability to perform trades at the best prices possible, and near-zero risk of committing the errors made by humans under psychological pressure.

 

Their presence on the global markets is pervasive to say the least. It has been estimated that nowadays, computers generate 50-70% of equity market trades, 60% of futures trades and 50% of Treasuries. Automated trading is also starting to move beyond HFT arbitrage and into more complex strategic investment methodologies.

 

For example, adaptive trading is used for rapid financial market analysis and reaction since machines can quickly elaborate financial data, establish a trading strategy and act upon the analysis in real-time.

 

 

11. Predictive Intelligence Analytics and the Future of Forecasting

 

Accurate cash forecasting are particularly important for treasury professionals to properly fund their distribution accounts, make timely decisions for borrowing or investing, maintain target balances, and satisfy all regulatory requirements. However, a 100% accurate forecasting is a mirage when data from internal ERPs is so complicate to standardize, centralize, and digitize — let alone extract some meaningful insight from it. It’s clearly a financial forecasting challenge.

 

Even the most skilled human professional can’t forecast outside factors and can hardly take into consideration the myriad of variables required for a perfect correlation and regression analysis.

 

Predictive intelligence analytics applies ML, data mining and modeling to historical and real-time quantitative techniques to predict future events and enhance cash forecast. AI is able to pick hidden patterns that humans can’t recognize, such as repetitions in the attributes of the payments that consist of just random sequences of numbers and letters.

 

The most advanced programs such as the ones employed by Actualize Consulting will use business trends to pull valuable insights, optimize business models, and forecast a company’s activity.

 

Others such as the one deployed by Complete Intelligence reduce error rate to less than 5-10% from 20–30%.

 

 

12. Detecting Signs of Discrimination and Harassment

 

Strongman and sexist power dynamics still exist in financial services, especially since it’s an industry dominated prevalently by males. While awareness has increased, 40% of people who filed discrimination complaints with the EEOC reported that they were retaliated against, meaning that the vast majority of those who are victimized are simply too scared to blow the whistle.

 

AI can provide a solution by understanding subtle patterns of condescending language, or other signals that suggest harassment, victimization, and intimidation within the communication flows of an organization.

 

Receptiviti is a new platform that can be integrated with a company’s email and messaging systems to analyze language that may contain traces of toxic behaviors. Algorithms have been instructed with decades of research into language and psychology that analyze how humans subconsciously leak information about their cognitive states, levels of stress, fatigue, and burnout.

 

A fully automated system, no human will ever read the data to preserve full anonymity and privacy.

 

 

Final Thoughts

 

In the financial sector, AI can serve a multitude of different purposes, including all those use cases we already mentioned in our paper about the insurance industry. AI and ML are incredibly helpful to ease many cumbersome operations, improve customer experience, and even help employees understand what a customer will most-likely be calling about prior to ever picking up the phone.

 

These technologies can either substitute many human professionals by automating the most menial and repetitive tasks, or assist them with forecasts and market predictions.

 

In any case, they are already spearheading innovation in this vertical with the trailblazing changes they keep bringing every day.

 

 

Written by Claudio Buttice

Dr. Claudio Butticè, Pharm.D., is a former clinical and hospital pharmacist who worked for several public hospitals in Italy, as well as for the humanitarian NGO Emergency. He is now an accomplished book author who has written on topics such as medicine, technology, world poverty, and science. His latest book is “Universal Health Care” (Greenwood Publishing, 2019).

A data analyst and freelance journalist as well, many of his articles have been published in magazines such as Cracked, The Elephant, Digital Journal, The Ring of Fire, and Business Insider. Dr. Butticè also published pharmacology and psychology papers on several clinical journals, and works as a medical consultant and advisor for many companies across the globe.

Full Bio

 

This article first appeared on Techopedia at https://www.techopedia.com/top-12-ai-use-cases-artificial-intelligence-in-fintech/2/34048

Categories
Podcasts

US warns against cruise ship travel as industry reels

Our CEO and founder is one of the live guests at BBC: Business Matters that talked about the cruise ship travel warnings, Italy’s Coronavirus, Wells Fargo, US politics, and sports.

 

BBC Notes:

 

The US State Department has told US citizens not to travel on cruise ships. We will look at how the industry has been left reeling from these latest government instructions.

 

Italy meanwhile remains on lockdown as the country attempts to stop the spread of coronavirus gripping it currently.

 

Wells Fargo, the bank that went bad, promises to Congress that it has turned the corner.

 

We look at whether we – or Congress – can take its new chief executive at his word. We ask who will help out companies when coronavirus hits supply chains harder, from Kerstin Braun, President of Stenn Group, an international provider of trade finance.

 

We talk about all this live with guests Yumiko Murakami from the OECD (Organisation for Economic Co-operation and Development) in Tokyo, and Tony Nash, CEO and Founder of Complete Intelligence, a contextual artificial intelligence platform in Houston, Texas.

 

 

Show Notes:

 

Do you think this is the way that all countries (same as Italy) will have to go? Could it happen in the States?

It could, but I don’t think it will.  Part of the problem in Italy is almost 25% of Italians are over the age of 65. If you look at the mortality rate, for those over 80 years old, it’s about 15% and for those over 70 is 8%. The biggest risk is in older populations. With Italy being the oldest country in Europe.

 

The people who are affected by it are largely older people and they are not working-age population and not consumption cohorts of the economy. Anybody under 60 years old, there’s a less than a 0.5% chance of fatality. It’s just not bearing out in the direct economy. But we are seeing concerns for older people, justifiably, we should be. But does it necessarily require the shut down of the economy? I’m not so sure.

 

Do you think he’s got what it takes to take on Trump?

I think it’s gonna be hard to beat Joe Biden at this point. But it’s gonna be an uphill battle for him with Trump because Trump is already taken him on in social media and speeches, and I’m not sure Joe Biden has the ability to respond to Trump in a debate, etc. in a way that Americans expect.

 

The populism way of 2016 is not really over in the US yet and Biden cannot grasp that. There was an issue with him in a factory him cursing a factory worker that upset a lot of people.

 

Do you think if the Coronavirus continues at this rate, and tips the economy into recession, does that make the President more vulnerable?

I think it can. That’s 6 months away, anything is possible in 6 months in politics. If the US is the only one affected or affected worse, then sure, it will make Trump vulnerable. But if the US is kinda similarly affected to other places, I think it’s hard to blame him. I’m not exactly sure how Biden will take that in November. They may just blame China.

 

It’s very hard for Biden to play the common man message. If you’re talking about the economic dislocation (1% vs the 99%), Joe Biden has been carried in the womb of government health care plans for the last 60 years or something. Most Americans are very resentful at public sector workers because they have a very good insurance plan. It will be very hard for Joe Biden to play the populist in that role. I just don’t see a scenario that Biden looks better than Trump in that scenario.

 

If you really want to drive a clear wedge between the Republicans and Democrats, Sanders would have been a very clear alternative to Trump. But you can’t really say that Biden, at least from the kinda rich guy getting his kids job, it’s really hard to say that Biden’s really much that different.

 

Listen to the podcast on BBC: Business Matters.

Categories
Podcasts

Policy Action Kicks In As Bull Market Officially Ends

Various central banks are implementing emergency rate cuts to respond to the coronavirus and as the bull market ends. Meanwhile, it remains to be seen whether peak infections in China and South Korea are a light at the end of the tunnel.

 

Presented by: Wong Shou Ning, Lyn Mak, Julian Ng

 

 

The UK has launched a stimulus plan. Do you think the ECB will be pressured to do the same?

 

I’m sure they will. I don’t think they have that much power into interest rate cutting area – the rates are already right around zero. What they’ll most likely do: buy more government bonds, ease up on the reserve ratio, loan incentives, etc.

 

Europe is in a pretty bad position partly because COVID really attacks older people more aggressively than younger people, and the demographic profile of Europe is pretty terrible. So the ECB has to do something to help the economy. What they’re trying to do is to make sure the consumers don’t totally close their wallets and the banks don’t totally close lending. They’re really trying to stimulate banks to keep money moving.

 

 

In China and South Korea, there are indications that the infections have peaked. Pres. Xi visited Wuhan. Is this the light at the end of the tunnel?

 

I think it’s a natural progression and it’s quite possible that things are dissipating in China and things are improving. We see road traffic congestion gradually building back. That’s good for everybody. 2/3 recovered. We’re getting there. There may still be quite a lot of bounce back in March. Hopefully, in Q2, we’re back to an almost normal level.

 

 

Japan’s economy seems to be bordering on the recession. Do you think even the Bank of Japan has assisted on the current downward cycle? Have they got any more policy options left?

 

Central banks can do for the ending bull market. The BOJ really has been focused since 2012 on Abenomics to try to raise the inflation rate to 2%. They never achieved that. But they have helped some other things to stimulate the economy.

 

Japan’s in a very tough place because it’s tied to the Northeast Asian supply chain and it has the same demographic problem that Europe has. They really need to start circulating money. They can use these tools on reserve rates and loans, but how much further can they push it?

 

 

The fall in crude prices has also negatively affected shale oil producers. What’s your near and long-term outlook for the industry?

 

Shale for the US is energy security. Americans are tired of the political issues that they face in the Middle East to secure their energy supply chain. The current administration help the shale producers to survive including backing up their loans, working with banks to extend the payback period, etc. Shale is seen as a national asset by the current administration as they work very hard to make sure that those companies continue to be competitive and have the resources.

 

 

Listen to this podcast on the bull market at BFM: The Business Station.