PORTFOLIO FOR CRITICAL ISSUES IN BUSINESS AND MANAGEMENT

PORTFOLIO FOR CRITICAL ISSUES IN BUSINESS AND MANAGEMENT

Executive Summary

This report sheds light on opportunities and threats faced in digital transformations by Commonwealth governments. It also encapsulated the “state of play” of digital transformation supporting by evaluation of the way Covid-19 impacted fintech sector. The COVID-19 pandemic has had a huge impact on export controls, sanctions, foreign direct investment regulations as well as respective enforcement. The discussions highlighted the various kinds of impacts that the pandemic had on the trade and investment while focusing on the fintech sector.

Table of Contents

Introduction

This report highlights the impact of digital transformation in the sector of fintech. Fintech corresponds to the technological advancements in financial sectors. In this study, detailed aspects of digital transformation in commonwealth nations including opportunities and inadequacies would be elaborated. It also encapsulated the way Covid-19 ha influenced the trade and investments among different fintech organisations. Correspondingly, recommendations have also been included in this study focusing on the strategies that can be implemented for overcoming the identified impact of Covid-19.

State of play and opportunities and challenges in Digital Transformation in the Commonwealth

State of Play

Commonwealth refers to an association of approximately 53 independent nations consisting of small and large, island, landlocked developing and developed economies (Thecommonwealth.org, 2020). The governments of different commonwealth nations undertake meetings to identify the best opportunities for promoting consensus development. With this, the government of different nations can attain equitable development in their respective nations. According to Liverman (2018), commonwealth aids its member nations to offer them with sustainable practices for ensuring economic growth with the assistance of advanced technologies. Additionally, it is encountered that global trade has declined from 9% in 2017 to 8% in 2018 among the Commonwealth nations (Thecommonwealth.org, 2020).

Figure 1: Graphical representation of Commonwealth global trade

(Source: Thecommonwealth.org, 2020)

Corresponding to the graphical visualisation, it is also identified that contribution of Commonwealth to global trade was around 15% from 2014 through 2018 (Thecommonwealth.org, 2020). The exports of manufacturing were dominated by the resource-based exports corresponding to approximately 5.3%. On the other hand, technological exports were encountered to be 4% (Thecommonwealth.org, 2020). Concerning this, the overall exports of tech aspects by the Commonwealth were recognised to be 98.8% (Thecommonwealth.org, 2020). This represented that fact that all Commonwealth member nations have been implementing innovation and technological aspects in their respective business practices for escalating individual economy. In this respect, Petrov et al. (2020) cited that the application of digital transformation within the business prospect aids the nation to develop their respective business activities and generate adequate revenue. The earned revenue by business establishments of respective nations is added to its GDP growth rate. In compliance with this, it has been observed that in the year 2017, only 6 Commonwealth nations contributed around 98.8% for exports of high tech goods (Thecommonwealth.org, 2020). The six Commonwealth nations include Malaysia, UK, Australia, India, Canada and Singapore. Involvement of high-tech exports in business has enabled the business industry like the fintech sector to simplify different payment activities for its customers.

Figure 2: Growth of Internet Users across Commonwealth nations

(Source: Thecommonwealth.org, 2020)

Concerning digital transformation, unprecedented growth in the digital economy has been experienced as internet usage has been increasing among the wide population of the Commonwealth nations. In this regard, Pohle and Thiel (2020) stated that in the existing period majority of the population are well-equipped with technologies. Digital transformations have aided business establishments to facilitate adequate services to its target customers for offering exclusive shopping experiences. This is further attained with the assistance of fintech organisations that are continuously undertaking innovation practices for simplifying the payment methods. Therefore, it can be stated that digital transformation among Commonwealth nations has helped in enhancing business performance thereby enhancing economic developing of respective nations.

Opportunities in Digital Transformation

Digital transformation has enabled Commonwealth member nations to harness enhanced benefits from advanced technologies and innovative ideas. In the opinion of Lawrence and Laybourn-Langton (2018), digital transformation has also aided the Commonwealth nations to boost intra-Commonwealth trade activities. From different literary sources, it has been identified that digitisation has escalated datafication which are being deployed in distinct stages of the value chain of the business organisations. The research works of Latchem (2017) provided an overview that digitisation of value chain has aided business establishments with an opportunity to enhance their online presence and also increase recognition in the online market. Besides this, digital transformation enable escalated innovation practices in research and development and also offers with 3D visualisation of the product design (Thecommonwealth.org, 2020). Another opportunity acquired by business establishments of the Commonwealth nation includes the application of online platforms for ensuring B2B and B2C marketing practices.

Figure 3: Some of the opportunities from the digital transformation of the value chain

(Source: Thecommonwealth.org, 2020)

Corresponding to the identified benefits, it can also be cited that digital transformation has offered the Commonwealth nations with widened opportunities like increasing productivity, output and employment growth. Organisations of Commonwealth nations are also able to enhance their participation in global trade activities with the assistance of unbundled production procedure in the global value chain (Dean and Spoehr, 2018). In addition to this, it is also recognised that digital transformation has helped the organisations to diversify their commodities with the assistance of enhanced technologies. The productivity of different industrial sectors has been boosted with the emergence of digital transformation. This is because enhanced digitisation enables the producers and designers to gather enormous knowledge about the features and functionalities of products corresponding to the requirements of the potential customers (Jovanovi? et al., 2018).

Figure 4: Increased productivity of different industrial sectors with digitisation

(Source: Thecommonwealth.org, 2020)

Apart from the identified opportunities of digital transformation, it has been encountered that business establishments have been able to increase their trade activities among Commonwealth member nations. Besides this, mobile money has also been evolved with the emergence of digitisation and enhancement of electronic commerce practices. This has also assisted the business establishments to attract a large customer base thereby increasing their economic transactions.

Challenges in Digital Transformation

Digitisation among different Commonwealth nations has come up with enormous challenges. Concerning this, there was a pressure on the Commonwealth governments to meet sustainable development goals which are also considered as another challenge (Marshall, 2017). Besides this, provisioning access to financial services and undertaking effective employment activities was also considered to be a major challenge for the Commonwealth governments. It is observed that most of the industrial sectors have experienced a declination in their manufacturing shares due to unemployment and inefficiency in providing value-added services (Barcevi?ius et al., 2019). As an instance, it is acknowledged that African industries experienced a declination in value-added shares from 12.65% in the year 2000 to 9.88% in the year 2017 (Thecommonwealth.org, 2020).

Figure 5: Declination in shares of value-added aspects in the manufacturing sector

(Source: Thecommonwealth.org, 2020)

Considering the growth of employment of advanced technologies in manufacturing domains in different Commonwealth nations, the rate of unemployment has increased. This is because the emergence of digitisation has resulted in automated business practices which have minimized the requirement of human resources. In this respect, it is considered to be a challenge for the Commonwealth governments to offer employment opportunities to their people. Concerning this, job opportunities for people with IT background have increased in recent years. It is identified that 50,000 new workforces are required in different industrial sectors for tackling advanced digitisation (Bergson-Shilcock, 2020). Compared to the developed nations in the Commonwealth, the developing nations have been experiencing lack of value-added shares of manufacturing due to lack of workforce. In this regard, it can be mentioned that nations with escalated digital skills can undertake digital transformation within their business premises. Henceforth, it can be stated that the Commonwealth government needs to take measures such that none of their citizens remains unemployed in this era of digitisation.

Evaluation of the impact that Covid-19 has had or will have on trade and investment and in particular on the fintech sector

The COVID-19 pandemic has had a catastrophic effect on international markets with huge adverse impact on international trade which will be felt for several years in the future. The governmental authorities in charge of regulating global trade have faced huge challenges by the massively spreading pandemic and the diverse mobility restrictions (Baldwin and Tomiura, 2020). As per reports, UNCTAD predicted the GDP fall by around 4.3% in the year 2020 and there are chances of global recovery in the current year by 4.1%. Developed economies were more affected during this period as compared with the developing countries (Manikandan, 2020). However, the top fintech leaders were often found to be cautiously optimistic about the growth prospects of the industry despite the massive devastating effect caused by COVID-19 pandemic on the global economy. Lending was most severely impacted due to the pandemic situation while wealth management and insurance businesses are expected to bounce back after massive losses. It has been reported that these fintech companies witnessed some amount of growth which was driven by the digitization of offline channels as well as the growth of different online segments like edtech, gaming and OTT.

Figure 6: Trends in global economic growth

(Source: Unctad.org, 2021)

The quarantine restrictions due to the pandemic have increased the use of different remote services such as online shopping delivery, streaming services, mobile payments and entertainment subscriptions. People used these advantages of the digital world are expected to keep using it in the post-pandemic period. For example, there has been a surge in cashless payments and as per reports, countries like the UK, Ireland, Germany, Egypt and Poland have increased the limits on contactless payment size. Another impact of the COVID-19 situation on the fintech sector is the diverse regulatory changes. It has pushed the practice of adopting regulatory and fintech technology in several countries while in some others; there has been an introduction of the cryptocurrency law.

Figure 7: Global merchandise trade

(Source: Unctad.org, 2021)

As is evident from the figure above, the growth in trade of different goods and services declined in the first quarter of 2020 and the value of merchandise declined by around 18%. The value of overall trade in services reduced by 7.6% in 2020’s first quarter, the travel services were most abruptly hit whereby it fell by around 24% (Unctad.org, 2021). However, medical products associated with COVID-19 including ventilators, sanitisers, personal protective equipment and thermometers experienced high growth in the latter part of 2020. Similarly, non-medical products like home office equipment, laptops, Wi-Fi routers, portable storage had strong growth and succeeded in the second quarter of 2020. Therefore, it is evident that the weakening economy, tight funding situations and declining business activity had a severe impact on challenger banks. The net interest margins for the challenger banks were compressed hugely as they relied on transaction revenues which suffered a huge decline during the COVID-19 situation. However, the demand for digital interactions had been a positive trend that is expected to make business situations easier for the sector in the coming months.

Conclusion and Recommendations

This report concludes that digital transformation has come up with enormous benefits for the Commonwealth nations and their business establishments. It is analysed from this report that business establishments have been able to acquire knowledge about the latest technologies being evolved. They are also employing them within their business practices. Besides this, it is also identified that the emergence of digital transformation has helped organisations of Commonwealth nations to increase their productivity and value-added aspects in their manufacturing shares. However, several challenges have also been identified in this report regarding the application of digitisation. Based on this, it can be recommended that the Commonwealth governments might ensure to provide effective education facilities to all of its citizens irrespective of their social and economic backgrounds. This can help in the enhancement of outcomes of digitisation.

Reference List

Baldwin, R. and Tomiura, E., 2020. Thinking ahead about the trade impact of COVID-19. Economics in the Time of COVID-19, 59.

Barcevi?ius, E., Cibait?, G., Codagnone, C., Gineikyt?, V., Klimavi?i?t?, L., Liva, G., Matulevi?, L., Misuraca, G. and Vanini, I., 2019. Exploring Digital Government transformation in the EU.

Bergson-Shilcock, A., 2020. The New Landscape of Digital Literacy: How Workers' Uneven Digital Skills Affect Economic Mobility and Business Competitiveness, and What Policymakers Can Do about It. National Skills Coalition.

Dean, M. and Spoehr, J., 2018. The fourth industrial revolution and the future of manufacturing work in Australia: Challenges and opportunities. Labour & Industry: a journal of the social and economic relations of work, 28(3), pp.166-181.

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Latchem, C., 2017. ICTs, Blended Learning and TVET Transformation. Using ICTs and Blended Learning in Transforming TVET, p.27.

Lawrence, M. and Laybourn-Langton, L., 2018. The Digital Commonwealth.

Liverman, D.M., 2018. Geographic perspectives on development goals: Constructive engagements and critical perspectives on the MDGs and the SDGs. Dialogues in Human Geography, 8(2), pp.168-185.

Manikandan, A. 2020. Covid-19 impact: Fintech leaders cautiously optimistic about growth prospects, The Economic Times. Available at: https://economictimes.indiatimes.com/corporate/covid-19-impact-fintech-leaders-cautiously-optimistic-about-growth-prospects/articleshow/78417709.cms?from=mdr (Accessed: 2 January 2021).

Marshall, L., 2017. Commonwealth Scientific and Industrial Research Organisation. Impact, 2017(10), pp.62-63.

Pohle, J. and Thiel, T., 2020. Digital sovereignty. Internet Policy Review, 9(4).

Thecommonwealth.org, 2020. Digital Transformation In The Commonwealth: State Of Play, Available at: https://thecommonwealth.org/sites/default/files/inline/Digital%20Connectivity%20Report_low%20res_.pdf#page=30&zoom=100,0,0 [Accessed 23 December]

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