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Cryptocurrencies Could Eliminate Banking’s Easiest Moneymaker

Banks earn big profits by paying minuscule interest on deposits and charging large credit card fees. Digital currencies are about to disrupt that.

If non-bank payment companies are allowed to set up accounts at government-controlled central banks, the banking industry could be in for some pain.

If the measure of a currency’s importance is how much it’s used to actually buy and sell things, digital currencies like Bitcoin and Ethereum have barely gotten off the ground. And Facebook’s proposed entry, Libra, has run into a wall of skepticism.

But don’t be misled, says Darrell Duffie, professor of finance at Stanford GSB. Unless banks come up with much faster and cheaper ways to transfer money, he predicts, digital currencies in one form or another are likely to upend the industry’s business model within the next decade.

“The future is coming, and it will be very disruptive to legacy banks that don’t get with the program,” Duffie says.

The disruption won’t necessarily come from the likes of Bitcoin. It’s more likely to come from a “stablecoin” that’s pegged to the dollar or some other major currency. It could also come from a digital currency offered by a central bank — and most of them are looking at such possibilities. Or it might come from tech companies, like Facebook, that find ways to circumvent the banks.

One way or another, Duffie says, banks are likely to lose their easy access to low-interest deposits — and easy profits — within 10 years. Banks also earn large profits on credit card interchange fees collected from vendors, who pass many of those costs on to customers.

“At some point, new payment methods will trigger greater competition for deposits,” he says. “If consumers have faster ways of paying their bills, and merchants can get faster access to their sales revenue without needing a bank, they won’t want to keep as much money in accounts that pay extremely low interest.”

The Low-Interest Windfall

At the moment, consumers and businesses keep large sums — about $14 trillion in the United States alone — in deposit accounts that pay an extremely low average rate of interest. Why? A key reason is that bank customers still overwhelmingly rely on their deposit accounts to make and receive payments. Depositors are also notoriously slow to shop around for better deals from other banks.

As a result, banks reap huge profits. On average, banks currently pay less than 0.1% interest on checking and savings accounts, and only slightly more on one-year certificates of deposit. By contrast, the amount banks earn from routine overnight loans has climbed from 0.3% in 2015 to more than 2% today.

For the banks, that widening spread has meant billions in extra revenue at virtually no extra cost. Banks also earn large profits on credit card interchange fees collected from vendors, who pass many of those costs on to customers.The future is coming, and it will be very disruptive to legacy banks that don’t get with the program.Darrell Duffie

[Duffie notes that he has a potential personal stake in this issue: He is an unpaid board member of a proposed “narrow” bank, called TNB, that would take deposits but not offer any payment or credit card services. The firm’s goal is to offer higher interest rates than normal banks, but it has yet to win regulatory approval or open for business.]

Cryptocurrency Transfers: Faster and Cheaper

Meanwhile, bank payment systems are slow and expensive compared with digital currencies and other new technologies. Checks take several days to clear, and vendors need to wait a long time to get paid when customers send their payments electronically. Wiring money can be faster, but it costs $25 just to send $200 from Cleveland to Cincinnati. International wire transfers routinely cost more than $50. By contrast, transfers using the most efficient cryptocurrencies can be completed in a few seconds or less, at a tiny fraction of the cost.

Duffie says banks should not expect this state of affairs to last.

Central banks are acutely aware of the issue. According to a recent survey by the Bank for International Settlements, most of the world’s central banks are doing research on digital currencies that they themselves could create or support.

Sweden’s central bank, the Riksbank, recently floated the idea of an “e-krona.” Any resident would be able to open a personal account at the Riksbank and make payments by directly transferring the “e-krona” to someone else’s account. That would have cut commercial banks out of the process, which may be why the central bank has backed away from the idea.

But Duffie says that’s just one approach. Banks already pay each other with a digital currency, in the form of electronic deposits that they hold at their central bank — in the U.S., that’s the Federal Reserve. If non-bank payment companies were allowed to set up similar accounts at central banks, they would be able to bypass commercial banks for at least part of the payment process. Duffie notes that the central banks of both Canada and Singapore have tested this approach.

The Chicken, the Egg, and Libra

Meanwhile, Facebook has electrified both central banks and commercial bankers with its proposed cryptocurrency, Libra. To be sure, Facebook has run into a storm of skepticism tied to concerns about privacy and the potential for money-laundering and other illegal uses. Several big initial supporters, including Visa and Mastercard, have backed away.

But Duffie says Libra could have a huge impact, for better or worse, if regulators allow it to go forward, because it would immediately be available to the social network’s 2.4 billion users.

“There’s a chicken-and-egg problem with new currencies, because nobody wants to use one until a lot of other people are using it as well,” Duffie notes. “But as soon as Facebook releases Libra, it would start out with 2.4 billion potential users. There’s nothing else coming along that can easily get those scale effects.”

Even if Libra never launches, Duffie predicts that the combination of technology, economics, and public pressure will undermine the grip that conventional banks now have on the worldwide payment system.

The European Union recently ordered commercial banks to provide data to non-bank payment companies that would allow them to compete more directly. In the United States, the Federal Reserve is exploring the possibility of launching a fast-payment system of its own.

“The smartest banks will be on the front edge of this, but others will be reluctant to cannibalize their very profitable franchises,” Duffie says. To the latter, he sends this warning: “The future is coming, and it’s not good.”

Article by Article by Edmund L. Andrews from gsb.stanford.edu

E-Commerce’s 5 Secrets To Build A Successful Online Business

E-Commerce's 5 Secrets To Help You Build A Successful Online Business

Retail sales will face a steady growth in 2017, according to the National Retail Foundation. Retailers are projected to see an increase in number from 2016 by 307% to 4.2%.

As impressive as the growth of retail might be, it has however been dwarfed by the projections for online retail. The NRF expects the e-commerce sector to from from 8% to 12% on 2017, which is up to three times higher than the growth rate of the wider industry. This only means that the e-commerce sales will be between $427 billion and $443 billion. Compare that with brick and mortar retail which will only see a growth of 2.8% this year, which us slower than the average growth rate of the overall industry.

Estimate show that there are now roughly about 110,ooo e-commerce websites that are generating revenue on a meaningful scale here on the internet. In addition, more than 12% of the 100,000 high traffic websites are e-commerce. Businesses often wonder how their business is going to stand out in the competition. How is your business different from your e-commerce competitors? Here are five of the most important secrets to help your e-commerce business become a successful one.

Business Sense

Behind every successful e-commerce company starts with a clear and solid business sense. If you’re thinking for starting a high volume business, first you have to educate yourself on the critical operations of business. Everything from building optimal inventory, to managing your taxes, to marketing strategies and achieving a steady ROI. The building blocks of business strategy will help set you apart from all your competitors. Without a strong business base you have nothing.

Quick Shipping

Unlike brick-and-mortar stores, e-commerce businesses still lack when it comes to customers receiving their purchase right away. When a customer purchases something from a physical store, they get to walk out of the store with the item they bought in hand. However, if a customer were to buy something off an e-commerce website, they will have to wait for the purchase to be sent to them. In this impatient world, waiting for something you’re super excited about can be tough. If you want to catch the attention of customers, you’re going to have to rival the e-commerce giants who are offering their customers a speedy shipping process. E-commerce giants such as Amazon are offering their customers next day delivery or even the same day delivery if you were to order from Amazon before a certain time. Offering your customers this option will definitely give your business an advantage.

Competitive Pricing

Before deciding on pricing for your items, do some research first. Check out e-commerce retailers who are in the same filed as you are and see how much they are charging their customers. Customers today have a lot of websites to choose from, as said before the e-commerce world is very competitive. So, why would a customers pay more for a product when he/she can get it some where else for less? If you want to stand out from the crowded community, you have to out do your competitors when it comes to pricing. This is especially important when it comes to first time customers because this will either make them stay and make a purchase or leave the site. Obviously, at the end of the day we are all looking to save some cash, so the lowest price will get the sale.

Engaging Social Media

Another leverage that brick-and-mortar retailers have on e-commerce stores is the engagement that goes on between customer and employee when making a purchase. But, when shopping online, all a customer relies on is the website and the businesses social media pages. Hence, this is why it is important to be extra creative in the ways you as a e-commerce business owner engage with your customers. What you can potentially do on your social media channels to engage with your customers are host giveaways, special campaigns, sharing photos and Q&A’s. It doesn’t have to stop there, there are so many ways you can communicate with your customers, so get creative and bond them to your brand.

Great Customer Service

Lastly but of course not the lest, your e-commerce business has to be supported by a team of people who are customer service pros. How you and your staff treat your customers play a huge role in your company’s branding. If a customer is happy with your service, the more likely they are to come back and purchase from you again. But, if they weren’t happy with the service you provided not only will they not buy the second time but possibly spread the news onto their friends and family. An example of good customer service is when their questions are answers effectively, quickly in a friendly and helpful manner.

There is no doubt that e-commerce is a ever growing industry in the U.S and around the world too. It is booming faster than any of us expected. If your business does not have a strong presence in the filet yet, this five tips will definitely help you to be a competitor in the market.

Arabic-first Platform Noon.com Launches

Arabic-first Platform Noon.com Launches

Mohamed Alabbar, the chairman of Emaar Properties announced in November 2016 about his idea to launch an e commerce retail platform. The site launched on Saturday the 30th of October 2017.

The original time to launch Noon.com was early this year, in January. Noon.com offers an array of products from smart phones to biscuits. The brands that they carry include Apple, Samsung, Burberry, Sketchers, Nike and famous biscuit brand McVitie’s.

UAE customers can now download the app on their smartphones or tables and start shopping. The app is available for download on the Google Play Store. A version will soon be available for all Apple users within the coming weeks. Besides working on an App for Apple users, Noon.com is expecting to launch their e commerce platform in Saudi Arabia too, in a statement by the company.

“Today, we are excited to deliver orders to our first customers,” Mr Alabbar said. “We are proud to take this important first step in our journey, and we are committed to making Noon the region’s Arabic-first e-commerce platform.”

“As digital technologies cause disruptions across industries and geographies, it is important for us to shape a digital marketplace that is relevant to our local markets and serves as a growth platform for brick-and-mortar retailers.”

Noon, the 1 Billion Dollar e commerce platform is a joint venture between Saudi Arabia’s Public Investment Fund and MH Alshaya (the Kuwait franchise operator)

The e commerce platform was launched with an “Arabic-first’ platform. Noon.com’s offices are located in Dubai and Riyadh, the company said.

Remarketing Tools You Need To Be Using

Remarketing Tools You Need To Be Using

What exactly is remarketing? Remarketing gives you a chance to reach your customers who have visited your website but left without buying. Customers who have visited your website will be tagged with a special cookie allowing you to advertise to them online using banner ads. This just means you get another chance to convince them into buying from you!

Using YouTube

One of the most popular form of remarketing today is through YouTube. Studies show that a viewer watches at least 5 hours of video content on average every month. Before majority of the videos on YouTube start there will be an ad which viewers have an option of watching or skipping and go straight to the video they clicked on. Also, you only pay if people watch at least 30 seconds or more of your ad. If a viewer skips the ad then you do not have to pay for it. YouTube also separates their viewers into demographics based on what they watch on a daily basis. This will allow YouTube to know who you show your ads to.

Email Remarketing

The main purpose of email remarketing is to target the customers who have visited your site and browsed but left without buying anything the first time. It would be much easier if customers were to sign up for newsletters however most customers do not like signing up as they are afraid of being bombarded by unwanted emails as they probably do already. In this situation, companies should give its potential customers incentives to encourage them to sign up. Everybody loves free stuff! There are so many incentives you can offer to your customers, a couple examples would be to give first time customers a discount on their first purchase using a special code after they provide their email or even something as simple as free shipping.

Another way of encouraging customers to sign up is to make the process of it easier. Keep the signing up process as short and sweet as possible, keeping the information needed at a minimal.

“Stalking” your Potential Customer

How this works is that as soon as you enter a web page a cookie is automatically placed onto your browser and companies can show you their ads wherever you go. I know this sounds a little bit creepy but it is a good tool to have as it is a constant reminder of your presence toward your customers. Use this tool to promote upcoming promotions, offer special discount codes or even reminding your customers of items they were once browsing in your store.

This blog post by InstanteStore tells you how you can use a remarketing tool to boost sales!

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Facebook Sneaks Into China With New App Colorful Balloons

China has long been a super guarded place, more so when it comes to the internet and freedom of speech. Their citizens have to rely on using VPNs (Virtual Private Networks) to get around the Great Firewall. Needless to say, Facebook is not available freely in China. But that hasn’t stopped the company from trying.

In a surprise move, Facebook has made and released an app just for China – where Mark Zuckerberg’s social network has been blocked since 2009.

Facebook’s China app, launched stealthily into the local app store under a company pseudonym, is a photo-sharing service called Colorful Balloons. The New York Times first spotted and reported on the app after verifying that it was indeed made by Facebook.

The Colorful Balloons app is actually a walled-off, China-only version of Facebook Moments, the spin-off app dedicated to photos that was first introduced mid-2015.

“We have long said that we are interested in China, and are spending time understanding and learning more about the country in different ways,” Facebook said in a statement to the New York Times.

The furtive Facebook app actually hit China in May, but its origins were only discovered yesterday.

The launch of Colorful Balloons comes after years of careful diplomacy by Zuckerberg, who often visited mainland China, and even met with top officials in 2015 such as Lu Wei, the internet czar responsible for blocking Facebook and virtually every other overseas social media app.

In March 2016, Zuckerberg was widely mocked for taking a jog through heavily polluted downtown Beijing – on a day the air quality was ranked “very unhealthy.” “It’s great to be back in Beijing!” wrote the CEO in a Facebook post, making no mention of the pollution.

Facebook’s new China app is up against WeChat, the popular messaging app, as well as the Twitter-esque Weibo.

This article first appeared in TechInAsia on 12th August 2017 written by Steven Millward

Instagram Turbocharges The Watch Market

Once considered a social media used by teenagers and constantly flooded with tonnes of fashion and beauty images, Instagram is now one of the hot spots for watch lovers who are looking to splurge on specific vintage time pieces. Watch lovers no longer have to go to watch shops to hunt for their vintage timepieces. They can now reach sellers directly to close the deal if they see something specific they want on Instagram.

On Thursday, it was a stylishly retro 1962 Bulova Super Compressor on @analogshift that won my heart. On Wednesday, it had been an elegantly understated 1970 Rolex Submariner, courtesy of @jasonheaton, that quickened the pulse. Tuesday had brought its own obsession, a vintage Heuer 3647 Carrera chronograph, regrammed on @hodinkee.

Damn you, Instagram.

Daily, if not hourly, my social-media addiction causes flare-ups of a second, closely related, malady: vintage watch deficit disorder, a chronic form of watch envy that inspires thoughts of raiding the 401(k) account.

I am hardly alone. Among watch obsessives, the impact of Instagram can hardly be overstated. Facebook’s explosively popular photo-sharing app not only serves to unite members of this fusty, long-obscure subculture the world over, but it has also helped spread watch obsession among the digital generation, turbocharging the vintage market in the process, several prominent dealers said.

“Instagram is absolutely driving the enthusiasm for watches,” said Paul Altieri, who runs Bob’s Watches, an online retailer of vintage Rolexes, in Huntington Beach, Calif., a company I have purchased from before. “It’s a major thrust in our business.”

In the last three years, his company’s Instagram following has surged to over 71,000, from fewer than 5,000. And business has boomed right along with it, with revenue up some 30 percent this year.

To Mr. Altieri, the twin spikes seem like more than a coincidence. “We’ll post a new green Rolex anniversary model Submariner from 2004, complete with box and papers, and, usually within minutes,” he said, people will message him, “‘Hey, let me know the price.’”

It’s a big change for a hobby long associated with paneled studies, elbow patches and discretion. Indeed, until recently, watch enthusiasts had few opportunities to show off prize pieces aside from dinner parties with friends or geeks-only online forums like TimeZone or WatchUSeek.

Instagram, by contrast, is everything that traditional watch collecting was not: young, colorful, brazenly digital and populist. (The app has some 700 million users worldwide.)

And showing off? It is the lingua franca of the medium, a wellspring of covetousness that inspires FOMO and a gotta-have-it hunger among users regarding seemingly any and all Instagram subjects: travel, food, fashion and, lately, watches.

“Watch collecting is a very tactile hobby, and if it can’t be tactile, it is visual,” said James Lamdin, the 33-year-old founder of Analog/Shift, a high-end Manhattan vintage watch boutique with more than 72,000 Instagram followers.

Those visuals were once limited on old-school online forums, where “uploading images of watches basically required a degree in coding,” he said. Not so with Instagram, where lovingly styled “wrist shots” of vintage Omega Speedmasters or Heuer Autavias can be enhanced, sharpened and uploaded within seconds for all the world to see.

Images of rare collector pieces on Instagram can create a feeding frenzy among collectors. Last year, for example, after Hodinkee, the watch site with over 378,000 Instagram followers, posted a photograph of the coveted 1969 Rolex “Paul Newman” Daytona reference 6241 available for sale on its online shop around 9 a.m. one day, messages were pouring in within seconds. Five minutes later, a buyer in his 30s snapped up the treasured Rolex for $175,000, a record price for the site, said Ashley Kinder, who manages Hodinkee’s retail operation.

“Before that,” Ms. Kinder said, the buyer “had only ordered with us once to purchase a $150 watch strap.”

Certainly, marketing fine timepieces on Instagram has its limits. Because most use the app as a forum for sharing photos among friends, many users chafe at overt salesmanship by retailers, said Yoni Ben-Yehuda of Material Good, a New York seller of luxury goods known for its salon-like retail space in SoHo. That is why his company tends to emphasize arty photos celebrating the lifestyle associated with fine timepieces (say, street shots of fashionably dressed New Yorkers), rather than catalog-style shots of specific timepieces for sale, he added.

But the landscape could change quickly.

Thousands of apparel, jewelry and beauty retailers, including the likes of Kate Spade, have begun to experiment with Instagram’s recently introduced shoppable photo tag, which allows users to buy directly through the app without interrupting their scrolling.

When watch retailers start using this technology, “get out of the way,” Mr. Altieri said. “It’s going to be like a tidal wave that hits the shore.”

This article first appeared in The New York Times on 31st July 2017 On Time by Alex Williams.