Friday, 23 January 2015

The P2P Jobs Market

The UK has an army of 4.6 million self-employed people, according to the Office of National Statistics - the largest it's been since we began recording such figures 40 years ago. That's 15% of the UK workforce. Even more significant is that 732,000 of the 1.1m people who have found work since early 2008 are self-employed. Fewer people have been leaving self-employment for employee roles over the past five years than used to be the case. Perhaps that's because of the recession. But over that period numerous services have emerged to support self-employment, and it seems possible that we'll see an even greater shift towards that way of working in the future.

So, who are the self-employed, and how do they find work?

The largest increase in self-employment since 2008 has been among 'managers, directors and senior officials'. But, hey, every self-employed person might claim to be a manager. So it's more noteworthy that the top 3 self-employed roles of 2014 have been building trades, cab drivers/chauffeurs and carpenters. The figures also show that professional and technical occupations are heavily represented.

How do these people find work?

No doubt word of mouth has a lot to do with it. But we've also seen a rise in the number of online marketplaces that match self-employed people with those who need work done. Indeed, TaskRabbit, a leading US marketplace, chose London as testing ground for a more automated model that it later rolled out in the US to replace its initial manual auction service. While TaskRabbit currently seems to cover the broadest range of services, there are many other such marketplaces in the UK, such as RatedPeople, Trustatrader, MyHammer, MyBuilder, TradeAdvisor, Checkatrade and so on. Note that Amazon has launched a 'local services' offering in the US, which suggests it may one day do so here.

The prevalence of cab drivers amongst the self-employed may help explain the growing number of taxi apps and car-share services.

Meanwhile, SchoolofEverything (a client of mine from 2007, on the back of my experience of P2P lending), enables anyone to make money from giving lessons in almost anything you could think of (, not that).

At any rate, the growth in both the number of self-employed people and the services that help them find work, suggests that self-employment could be an even more popular model in the future. The rise of the P2P economy?

Thursday, 15 January 2015

Another Hung Parliament, Please

With the UK general election looming in May, I thought I'd declare my apolitical hand: I'm hoping for another 'hung' Parliament and a coalition government.

I've been a fan of the idea since the opportunity presented itself in the last general election. I think the beast has worked pretty well for the pragmatic amongst us, and is well suited to dealing with the nasty challenges ahead. As I hoped in April 2010, politicians on both sides of the coalition have had to behave much more reasonably and responsibly in seeking solutions to the root causes of our problems than their party-political dogma would have otherwise dictated. This has spiked the guns of an extremely dogmatic opposition. And even the media's doom-mongering about instability and chaos has proved groundless. Sure there have been U-turns and major disagreements between the coalition parties, but the democratic progress should be dynamic, open and messy - not engineered, top-down, by a party leader with a Whip.

The same form of government is needed over the next five years because the long journey out of the tunnel has barely begun. That light up ahead is not looming economic recovery, it's an on-coming train laden with vast public sector debt, slowing Chinese growth, savagely low oil prices that might rebound higher than before, the Russian Problem, insanity in Greece, negative real interest rates and a stagnant Eurozone. Oh, and a new global financial crisis, as Hank Paulson infamously forecast in 2010:
"...We'll have another financial crisis sometime in the next 10 years because we always do.""
The public finances are still in a parlous state. So all the UK political parties face the need to cut public spending, whether they like it or not. Raising expenditure is out of the question, because it would mean borrowing more - and higher taxes won't bring in any more money. The total UK tax receipts have hovered at or below 40% of GDP for over 40 years. We're bumping along the ceiling, people! Raise taxes, the economy grinds to a halt and the best you'll get is 40% of a smaller pie. Cut taxes to around 35% of GDP,  the economy roars into life and you get a smaller slice, but of a much bigger pie.

But, hey, if you think the UK should drift into the next financial crisis with even higher debt and taxes, why not simply move to Greece?

What's left to cut? There's no end to it: we need our politicians and civil servants to remain focused on making the public sector more efficient, by removing waste and insisting that services be designed to operate more efficiently in future, particularly in the major spending areas. The defence budget, for example, is a rounding error on a more efficient tax and benefits system and a leaner, better co-ordinated public health and social care sector (20% of hospital beds are occupied by people who aren't even sick!). Money could also be saved by addressing root causes instead of their many symptoms. For instance, would more social housing have helped ease the pressure on first-time buyers, avoiding government subsidies to them and pre-empted the policy battle over immigration levels? Similarly, we must continue financial reforms to increase the sources of funding and the range of payment services for consumers and small businesses (who create half of all new jobs) because the economy is still too dependent on a few major banking groups who remain a millstone around the country's neck.

Some people will say this is dry, boring and unimaginative. But if you want entertainment, head to the movies. 

Others want something to believe in. For instance, they accuse David Cameron of lacking political ideology or a 'pattern of belief', an '-ism'. Yet they claim that his "legacy will be a collection of tactical manoeuvres, with as many prominent surrenders as victories." Apparently these people have never heard of pragmatism. But they've also unwittingly hit on the benefit of the hung Parliament in restraining coalition parties from implementing their more extreme policies. By contrast, the 'believers' expect us to cling to the idea that Ed Miliband is "in politics for the right reason" (just the one?) or "propelled by something more noble than the salvation of his own skin", which you could choose to mean anything that gets you through the day. But beware words like 'right' and 'noble'. They are the cloaks of dogma and moral panic - rallying cries for the likes of Tony Bliar's weird crusade or Gordo's crash, in which Miliband (and Balls) played key roles - not to mention the ballooning cost of the Security State. So, actually, if we believe anything in this vein, then it's surely that such 'noble' ambitions make Labour governments the kind of luxury that only a much wealthier country could afford

But, who knows, maybe being trapped in a coalition would even convert Ed to pragmatism.

Whichever way you look at it, we need a government that's forced to focus on resolving the root causes of society's actual problems - not one driven to distort the facts to suit its own dogmatic solutions. And my sense is that only another hung Parliament will ensure we get it.

Tuesday, 13 January 2015

Feeling Down? Try #FoxNewsFacts

Source: Bipartisan Report
By now you probably know that Fox News broadcast claims by a so-called 'terror expert' that - among other bizarre claims - the UK city of Birmingham is 'totally Muslim' and non-Muslims 'don't go there', when Muslims only represent a quarter of the population, according to the BBC. Clearly an idiot. Fox actually had several goes at this - note the 'expert' is wearing a different shirt/tie combination in the two clips below. The 'expert' has since apologised and admitted to being completely wrong, though I'm not sure the anchors have apologised for their part in it. Sky News tried to clean up the mess for the Murdoch Empire by interviewing the 'expert' afresh, but it just got worse as he likened listening to his own erroneous comments to "being waterboarded"

Of course, this isn't the only instance of bizarrely ignorant claims, opinion or commentary on Fox News, and I can't work out who's worse - the Fox News anchors or the so-called experts they interview.  You can judge for yourself by following the #FoxNewsFacts hashtag on Twitter. It's hilarious, if you can fight the urge to panic over how many stupid people might actually believe this crap. I do wonder whether US foreign policy - amongst other things - might be rather different if Fox News viewers were given the actual facts, rather than this trash.

One day, we might even find out.

Wednesday, 7 January 2015

Do The EBA Security Guidelines Ensure Card Scheme Control Over Retail Transactions?

The European Banking Authority recently issued payment security guidelines, as part of its security remit under PSD2. The guidelines take effect in August 2015 and will  require subtantial work on the part of payment service providers and merchants. They will be followed by 'stronger’ guidelines under PSD2 that will take effect in 2017/18. As anticipated, the guidelines could well present a significant obstacle to the evolution of payments services and competition from new entrants. At the same time, even if they reflect best practice today, the guidelines do not really overcome inherently unsecure features of legacy payment methods - like cards.

To be fair, the authorities have a difficult balancing act here. They have a responsibility for ensuring that PSPs implement appropriate security measures - and should at least point to best practice in the area - yet the authorities cannot afford to be so prescriptive as to delay implementation of those measures and/or prevent PSPs keeping pace with wider technological developments, the development of new payment services and the efforts of hackers. Unfortunately, the EBA appears to have struck a balance in favour of banks and card schemes, rather consumers, merchants and alternative payment service providers, as discussed below.

The guidelines cite card fraud as the main driver of this initiative, rather than fraud in relation to other types of payment service that do not involve card payments. Yet payment cards and the related IT systems have not really evolved fundamentally since they were introduced in the 1960s, which means that 'legacy' systems are effectively dictating the approach to payment security. True, there are many payment methods that are exempt from the guidelines. But the prevalence of card payments means that PSPs and merchants are being forced to divert resources to shoring up security on that front, rather than investing in more advanced payment methods.

At the heart of the guidelines is the concept of 'strong customer authentication', which is quite prescriptively defined. Yet this form of authentication would seem likely to evolve, and it is conceivable that customer authentication in the payment step of a transaction process might not remain relevant over time, particularly where the payment is being made in the course of a wider customer activity within a secure environment.

Many of the guidelines also go beyond the realms of payment security. While these may reflect obligations under other regulations, such as Money Laundering Regulations, Payment Services Regulations and the Data Protection Act, they are quite prescriptive and therefore will require additional legal and compliance time to review, implement and monitor changes to those other compliance procedures, as well as extra IT and operational resources.

The need for "customer education and awareness programmes" are also likely to require the involvement of marketing teams and their support staff. The concern here must be that customers who deal with multiple PSPs (as competition authorities should hope!) will begin to ignore the educational materials as just so much clutter or junk mail. The adverse customer experience may also drive consumers to prefer less secure payment options (e.g. cash).

Requirements for merchant co-operation, through enforcement of their contracts with PSPs, are also very concerning. For example, PSPs are asked to require merchants to "clearly separate payment-related processes from the online shop" and to enable customers to sign a dedicated payment contract with the PSP rather than having those terms included in a wider service contract. Yet merchants are not directly bound by Payment Services Regulations (except in very limited respects), so the EBA is arguably exceeding its authority in requiring merchant compliance with broader security requirements. In addition, we have already seen significant data security costs imposed by card schemes on merchants who must comply with the PCIDSS requirements. These resulted in most merchants choosing not to hold payments data at all. Indeed, many chose to deal through payment aggregators who accept and process payments on their behalf. However, PSD2 will require technology service providers to contract directly with PSPs under PSD2, rather than merchants if they wish to remain exempt from regulation, which must be likely to reduce the number of independent service providers. Such requirements seem to be aimed at large retailers and e-commerce marketplace operators who may otherwise legitimately offer a seamless consumer experience under current regulations. So it may be that the EBA guidelines will help drive control of e-commerce transactions to financial institutions – particularly banks and card schemes - rather than opening up competition for transaction processing from large merchants and others who have developed competing payment functionality.

As a result, the EBA's security guidelines deserve careful consideration by the competition authorities.

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