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Key to Efficiency and Productiveness

Balance Sheet, which tells us about the financial position of a company, is one of the most significant financial statements for analyzing the solvency and liquidity position of any company. Often it has been noticed that in order to curtail costs of an organization, the main focus is on Income statement or profit and loss account, but in reality, a tight management of balance sheet results in surplus Cash and provides a good investment return to the shareholders. Inefficient balance Sheet management or Asset – Liability management often shows inefficiency and ineffectiveness on part of management. It shows that there is either over or underutilization of capital and unproductive fixed assets in the company which is resulting in tying up of capital in low-value projects. It might further reflect a poor liquidity position of the company and show that it does to have enough funds the meet its short-term liabilities. By managing the following key areas a company can liberate cash and put it in productive ventures.

1. Capital Structure-Capital Structure of a company shows the way finance has been raised in a company. A company can raise money through internal or external sources. A highly levered firm would reflect that the funds have been raised through external sources like loans, debentures, and it also suggests that the company has the capacity to take risks, aims at having a high growth and has more money for growth and expansion. On the other hand, a low-levered firm would the money invested by the shareholders in form of common equity, preferred stock and retained earnings for making investments in various assets and projects. Depending upon the company’s stage of development and nature of business,a right mix of internal and external sources should be there so that a company has a good solvency position and is able to meet its long-term obligations. Capital ratios such as Debt-Equity, Total Debt to Total Capitalization provide an insight into company’s capital position and further help in strengthening the balance sheet,.

2. Capital Deployment and Management-Often it has been seen that although the directors of the company are aware of the money raised but they are unsure of the places where the funds have been deployed which often lead to a decrease in economic profitability of resources. Tracing of capital to each department, unit or division helps the management to make sure that each penny is being utilized to the optimum and also helps in releasing of capital from the units where they have been over-allocated. Further, effective control measures of capital allocation can be implemented in the company to achieve a higher return on investment for the shareholders.

3. Fixed Assets Management– Resources of the company must be invested in those fixed assets, which are profitable and give return to the company in the future years. With the help of capital budgeting, a company can decide whether to make an investment in a particular asset or not.Some of the widely used capital budgeting techniques are Net Present Value, Internal rate of Return, Pay back method which help in evaluation of various long-term assets, and the cash flows that they will generate during their useful life. If a company has assets which are inefficient or on longer in use, steps should be taken to dispose of, so that the surplus cash from those assets can be used for productive purposes and value creation for the company.

4. Working Capital Management– Working Capital Management forms an integral part of a company as it ensures that a firm has enough current assets to meet its current liabilities. If a company has a high working capital it shows that there is an ineffective use of short-term assets, which might be used for some other purpose. And again, too low working capital results in a liquidity crunch and reflects the firm’s inability to pay off its short-term debts.

With the help of financial analysis, a company can maintain the right level of working capital and have good liquidity position. Current ratio, liquidity ratio are some of the tools which help the managers in knowing that the company’s current and liquid assets are used economically and they would have no problem paying their short-term liabilities.

Asset -Liability management has become an integral part of every company as it ensures freeing up of cash and using it productively to have higher returns. Proper management of working capital, right kind of financing mix, liberating cash from unproductive assets help companies in streamlining their balance sheet and redeploy the resources to generate higher returns and maximize shareholders wealth.


Important Things You Must Know About Fixed Capital Investment

It can be quite daunting to decode the jargon of financing businesses. In most cases, because of the similarity in the objectives of the different financing solutions, many have a tendency to exchange one for the other.

To simplify these very technical terminologies, most especially when you just have ventured into business and you do not have enough knowledge about it, here are some useful information regarding a fixed capital investment, which is one of the relevant business solutions businesses, either big or small, can opt for.

Facts About Fixed Capital Investment

First, they are often used to launch or perform businesses. Over a long period of time or about 20 years, they depreciate on the accounting statements of the company.

Second, though these investments can depreciate over time, they won’t depreciate the same way. Be reminded that there are investments that lose their value faster than the others. The perfect examples of those that devalue fast are communications equipment or devices since there is a rapid turnover of technology for these. Another excellent example is the company vehicles. Within the year of purchase, the value of a brand new company vehicle can depreciate by as much as 40%.

Third, fixed capital investments won’t devalue rapidly. There are actually cases where it can even increase in value. Real estate properties like the company’s office buildings and land are among the examples.

Fourth, these will include the acquisition of tools and equipment required for daily operations, along with the real estate properties where the goods are to be produced and stored. Remember though that the materials used in the production of goods are not included due to the fact that these aren’t retained by the company.

Sixth, the amount of fixed capital will be different from one industry to another. There are enterprises that would require higher fixed capital investment than the others. These will include oil companies, telecommunications providers, and the engineering and manufacturing firms. On the other hand, businesses that will just require limited fixed capital are those that within the service industry. And these will include the law and accounting firms since they require more compact devices, tools and regular office appliances.

Lastly, getting fixed capital often takes a considerable amount of time. Thus, it is crucial to work with a reliable, competent financing institution that can efficiently minimize the risk of financial losses through a wide variety of proven methods.


The Case for Making Invoice Factoring the First Choice in Business Financing

In the United States, Invoice Factoring is often perceived as the “financing option of last resort.” In this article I make the case that Invoice Factoring should be the first option for a growing business. Debt and Equity Financing are options for different circumstances.

Two Key Inflection Points in the Business Life Cycle

Inflection Point One: A New Business. When a business is less than three years old, options for capital access are limited. Debt financing sources look for historical revenue numbers that show the capacity to service the debt. A new business doesn’t have that history. That makes the risk on debt financing very high and greatly limits the number of debt financing sources available.

As for equity financing, Equity Investment dollars almost always come for a piece of the pie. The younger, less proven the company, the higher the percentage of equity that may need to be sold away. The business owner must decide how much of his or her company (and therefore control) they are willing to give up.

Invoice Factoring, on the other hand, is an asset based transaction. It is literally the sale of a financial instrument. That instrument is a business asset called an invoice. When you sell an asset you are not borrowing money. Therefore you are not going into debt. The invoice is simply sold at a discount off the face value. That discount is generally between 2% and 3% of the revenue represented by the invoice. In other words, if you sell $1,000,000 in invoices the cost of money is 2% to 3%. If you sell $10,000,000 in invoices the cost of money is still 2% to 3%.

If the business owner were to choose Invoice Factoring first, he/she would be able to grow the company to a stable point. That would make accessing bank financing much easier. And it would provide greater negotiating power when discussing equity financing.

Inflection Point Two: Rapid Growth. When a mature business reaches a point of rapid growth its expenses can outpace its revenue. That’s because customer remittance for the product and/or service comes later than things like payroll and supplier payments must take place. This is a time when a company’s financial statements can show negative numbers.

Debt financing sources are extremely hesitant to lend money when a business is showing red ink. The risk is deemed too high.

Equity financing sources see a company under a lot of stress. They recognize the owner may be willing to give up additional equity in order to get the needed funds.

Neither of these situations benefits the business owner. Invoice Factoring would provide much easier access to capital.

There are three primary underwriting criteria for Invoice Factoring.

  1. The business must have a product and/or service that can be delivered and for which an invoice can be generated. (Pre-revenue companies have no Accounts Receivable and therefore nothing that can be factored.)
  2. The company’s product and/or service must be sold to another business entity or to a government agency.
  3. The entity to which the product and/or service is sold must have decent commercial credit. I.e., they a) must have a history of paying invoices in a timely manner and b) cannot be in default and/or on the brink of bankruptcy.


7 Ways To Make Shipper-Carrier Relationships Better

Freight services are very important and load boards work great at connecting shippers with carriers. But the relationship between carrier and shippers ought to be good for the process to work out smoothly and be a win-win kind of a process. Fortunately, there are so many ways that can help improve the relationship between these two important people in the business. With stronger relationships, a reliable carrier network is maintained. By giving attention to carrier concerns, it is possible to build collaborative partnerships that are long lasting.

As a shipper, there are a few things that you can do to maintain a good relationship with your carrier.

1. Work for the good of everyone involved. This can be done by working with the carrier in determining which freights and lanes work the best. By working in conjunction with the carrier, then it is possible for profitability to be added to the network. It solidifies the relationship.

2. Honor commitment to the carriers. It is only when you honor your commitments to the carrier they will be able to honor theirs to you. Considering that carrier will usually base service price on data provided, then it is of importance that only accurate data should be provided. You should also ensure that you ship in tonnages and lanes that you say you will.

3. Be generous. This is in terms of the sharing opportunities that arise. When you bring new opportunities first to your carrier partner, then everybody will end up benefiting from an equitable agreement.

4. Start off with a plan. One of the best ways of avoiding a rocky start that could ruin an otherwise good relationship is to make sure that you start every new partnership with a plan. Allow a considerable amount of time for the carrier to get their system up and even train to take on new lanes and freights.

5. Avail all relevant data. The data that you provide during bidding process will largely determine how prepares the carrier is with regards to freight characteristics and location or even seasonal changes in terms of volume. It is therefore very important that you provide freight characteristic percentages and also monthly volume in addition to tonnage data and lane data that you give.

6. Keep communication lines open. Reviewing performance metrics, options and new services are always a good way of strengthening relationships. As a shipper consider holding regular meetings with carriers to discuss what matters most to the business. Using such meetings, you can come up with strategies to reduce costs and improve the business. Working together and communicating on a regular basis only solidifies the shipper-carrier relationship.

7. Embrace technology. In the same manner you expect real-time data on your shipments from your carriers you should make it equally easy for the carriers to transfer the data that you need. Choose programming options that offer them an accurate and smooth system of transferring the data that you need. There are so many technological tools that you can choose to make improvements to the business and relationship.


2 Extra Hours Per Week Can Make You a Millionaire

When you take 2 extra hours of work per week to bring more value to your clients, it may just change your life. What kind of change? How about $1,000,000 worth of change. But first, let see some data, and then I will give you a practical roadmap that you can put into place TODAY!

It’s really scary. 26% of all Americans have $0 in their savings account. 7% don’t even have a savings account! The average American has $4,436 in their savings and 76% of families are living paycheck to paycheck. The average person in their 60’s has less than $200,000 in savings for retirement. It’s not surprising that most people just don’t believe in the idea that they really can become millionaires. But what if I could show you how? What if I could show you how to make an extra $2,000 per month, and if you invested over just 20 years, you would easily turn into $1,000,000+? Would you do it? If your answer is YES, then keep reading.

Let’s take a real life example that I just set up for my personal trainer Josh. It’s a perfect example of how he, you or anyone can do it. Josh was charging $50 per session and had 15 weekly clients that worked out with him an average of 3 sessions. That translates to $2,250 per week or $9,000 per month. When I posed the $2,000 = $1,000,000 concept, he loved the idea, but didn’t think he could come up with the extra $2,000 per month to invest. It just seemed like a pipe dream to him. He already had a mutual fund set up, that was earning 6% a year, but it had less than $1,000 in it and he was contributing $100 per month to it. And that’s the problem folks. Many of us have retirement accounts set up, but the deposits we make just not enough to move the needle of our net worth. That is why we need to get to a min. of $2,000 per month of extra cash to start moving the needle. Here is the roadmap I created for Josh to generate an additional $2,000+ per month. The big question was, “How many total extra hours per week will I need to work?” The answer? Two. That’s right, two hours extra per week will make him a millionaire. I’m sure the same could easily work for your business. Regardless of the business you are in.

Here is the roadmap:

Step #1:

Increase the value you bring. In Josh’s case, all he did was work people out. No meal plans, no videos, no body fat index testing, no nutritional or meal prep advise. In short, he offered his clients limited (really zero) EXTRA value. You can’t increase prices without increasing value. So he and I created the following value added programs and he put all of them into action within 1 week. Josh signed up for the email program (there are tons like Constant Contact or MailChimp), loaded in his client’s email addresses, and boom, he had a platform to get value added messages to them at anytime. He then created content via a simple, one-page weekly newsletter, that was emailed out on Monday morning at 6 am. In the newsletter he offered great recipes for easy to cook meals. He talked about nutritional suggestions along with vitamin and supplement recommendations. He told his readers about local farmer’s markets in the area and what was in season at them to buy and eat. He even offered a DATE NIGHT SUGGESTION section in which he suggested that his clients go on a data night and why it was important to your marriage and mental health along with great locations and destinations to make it extra special. Lastly, he started to record himself doing workouts and impeded them into the newsletter so that his clients to do them on their off days. Get the picture? He started adding a foundation of value added services that informed, educated and entertained his client base. Total time per week? 2 additional hours.

Step #2:

Raise Prices. We raised his rate from $50 per session to $60 per session. $10 bucks, a small amount. But not all clients went for it.

Step #3:

What did his client say? He lost some clients who were not willing to pay the extra $10 bucks. They didn’t see the value add of the newsletter, because they never had it in the first place. They just wanted to cheaper price. No problem… that is the point of step #3- to test your client base and the value you bring to them. In Josh’s case, he had some cheap clients AND he was not bringing enough value to them. So they left him. If you raise prices without providing enough value to your clients, some will leave you too. And they should! Value is the key in today’s crowded and cloudy marketplace. You must deliver value that exceeds the price you charge.

Step #4:

Put on Your Selling Hat. Josh lost some clients, so he had to get to selling to find replacements and a few more. But now, he was starting with a new price ($60) and a new product offering. This time it was – “Josh aka The Super Trainer”, who cares about his clients more than anyone else and he proves it each and every week through the content he puts in his newsletter. He was now focusing your muscles, your mind, your food intake and even your relationship. He started asking for referrals from his existing clients and asked them to reach out to their family, friends and co-workers. I also had him talk to some of the busiest trainers at his gym and asked for their overflow, the clients they were just too busy to take on. Within 2 weeks he replaced the clients who dropped out when he raised his prices. It was ridiculously easy to replace them and he actually added 3 more for a new client base total of 18.

The end result:

Josh now has 18 very satisfied clients who get his VERY informative weekly newsletter and can watch his specific workouts on their off days. His new client base are all paying $60 per session X 3 sessions per week, and it now equals $12,960 per month. An increase of $3,960 over his prior income level.

I almost forgot… how will Josh’s extra 2 hours per week make him over $1,000,000 and why should you tweak your business to find $2,000 per month to invest? Here is how it will work out for Josh. He is 30 years old. He will now increase his monthly investment from a hundred dollars to $2,000 per month because he has $3,960 more money coming in per month. Even after putting $2,000 away, he still has $1,960 more money than month! His $2,000 will go into the same mutual fund that has an average annual rate of return 6%. At the end of 21 years, it will be worth $1,017,000. He will be 51 years old and have $1,017,000+ in his retirement account! If Josh wants to continue this until he is 60 years old, he will have $2,011,000. It can happen if you just start. It’s easier if you start in your 20’s or 30’s, but it can be done if you start in your 40’s, 50’s and even in your 60’s.


Investment Banking – 2 Main Types to Know About

Investment banks help private as well as public companies and organizations to gathers funds in both debt and equity capital markets. These banks were originally founded in order to raise capital and provide guidance on corporate financial strategies, such as acquisitions and mergers. Investment banks assume many different roles such as handing safety issues, providing institutional and public investors with brokerage services, providing corporate clients with financial advice, offering guidance on acquisition deals and mergers and more. These days, you can also find banks to have ventured into bridge financing, foreign currency exchange and private banking. Know about the two main types of investment banking companies India.

Basic bank for invest

This kind of bank tends to issue bonds and stocks to customers for a predetermined sum. Then the bank invests this sum which has been used by the client for buying bonds and stocks. Such types of investments vary across different banks. In the nations where this type of investment is permitted, investment banks come with networks of lending and financial organizations that they can derive profit from. Other banks also make investments in construction and property development. Customers with bonds and stocks would tend get payments from the amount of profit that is made on the sum that they have invested for a particular time period.

Both the investment bank and the client derive profits from the sum initially invested by the client. As these types of banks are completely familiar with the trade methods, they are often consulted about corporate investment activities like acquisitions and mergers by both big and small corporations and business houses.

Merchant bank for investing

This is the other kind of investment bank. Such kinds of banks participate in trade financing and provide business ventures with capita in the form of shares and not loans. These banks have their businesses based on how secure shares are. Such types of institutions only fund those business ventures which have only started in the world of business. Generally, startup merchant companies do not get any financing. Merchant banks can be regarded only as investment banks which are ready to invest some amount of the capital of the organization. The money is put in the form of an equity investment. The company acts like research and advisory firms in India into the transaction and offers advice. In case you want trade financing, you will like to get in touch with a merchant bank rather than an investment bank.

The primary function of these banks consists of offering financial services and advice to individuals as well as corporate houses. Such kinds of banks function like a type of intermediary between the consumers of the securities and the issuers of the capital. Various companies issue these kinds of securities in order to gather funds in the stock markets. Merchant banks offer better monetary solutions and options to the customers, and can assist customers to gather money via low-cost resources. These banks are able to revive the economic health of sick firms.


Tips On How To Spend Your Windfall Income

As individuals, especially workers we sometimes get windfall incomes in forms of bonuses, profit shares, etc. However, a lot of the time the temptation is to spend the money on acquiring a new car, new clothes, shoes, new phones, among other things. While acquiring these things in themselves is not a bad idea, it is wiser to use windfall incomes for things that will have long term positive impart on our lives especially because we do not have a full grabs of what tomorrow will bring.

For workers just starting off or in mid level careers, it is really important not to squander windfall incomes on non-essentials.

Many years ago during the mid 2000s, when the banking and telecommunication really became big industries, many banks and telecommunication companies paid bonuses and profit shares to their staff on a yearly basis. Most new staff and mid level staff squandered their money on buying cars, renting new apartments in high brow areas and changing their wardrobes almost every 3 months. Nite clubs were packed every Friday night with each person almost trying to out do the other in terms money spent.

Today, the story is different. The global economy is almost comatose. Banks are no longer giving huge bonuses, neither are telecommunication companies doing any better. The oil industry is in shambles. Every industry is operating lean.

Windfall incomes will not come all the time as the economic realities have now shown us. So if you are fortunate to get a bonus or profit share that amounts to something reasonable, here are a few tips on how to spend wisely:

1) Invest in real estate: As much as this sounds like really over flogged, it is a wise counsel. A businessman once said, “the only Estate that is Real is Real Estate”. Real estate is big business. There is a huge demand for rental apartments especially mini flats and 2 bedroom flats. There are several real estate companies offering instalments payment options for those interested in buying land. You can invest your windfall income in buying a half plot or full plot of land. I will advice you buy from a real estate company rather than directly from the community especially if you do not have funds for immediate development.

The simple reason is that the real estate company usually would have sorted out community settlement issues with the land owners and so you can be rest assured that you land is at least secure from land grabbers. Also, by buying from a real estate company, you will benefit from quick capital appreciation of your investment and rapid development of the locations since there will be several people also buying and developing their property in that location. Another advantage of investing in real estate is that after developing the property, you can put it up for rent if you do not wish to reside in that location and use the rental income to pay for your rent in your desired location.

2) Invest in a part-time business: If you already have a business that you can run part- time alongside your full-time job, you should invest your windfall income in that business. You can buy the needed equipments or register for a training programme that will increase your expertise in that business area. If you do not already have business idea, you may want to consider doing some research to see what part-time business to invest in.

3) Invest in education: You can invest your windfall income in further education that will boost your profile and give you a better chance at a higher paying role in your industry or another industry entirely. You an also invest in the education of your loved ones like your spouse, children or siblings (if you have this responsibility thrust on you)

4) Invest in Marriage: Yes! you read me right.

This is for those who believe in marriage. If you have a partner and your really desire to spend the rest of your life with the person, then invest your windfall income towards settling down. You can start making down payments for some critical items on your list. Marriage is an investment in your lifetime happiness.

5) Invest in Charitable Activities: Don’t spend all your windfall income on yourself. Life is about sharing and putting smiles on the faces of others. You can give a portion of your windfall income to a charitable organisation. Depending on your religious leaning, Christians are advised to give a tithe of this to their local churches. However, if you are not a religious person, do well to give to a cause that will help humanity.


A Quick Introduction To Behavioural Economics

The study of human behaviour, which has traditionally come under the umbrella of psychology, would seem to have little relationship with economics.

But, as we learn more about how the brain works through the dual disciplines of neuroscience and psychology, there is an increasing marriage with the field of economics, in order to better understand how people make financial decisions.

This has evolved considerably in recent years and is an emergent field that deserves a little introduction and explanation.

The traditional view of economics and financial decision-making

It is sometimes forgotten in economics that the field is meant to be about the behaviour of people when making financial decisions.

The traditional economist’s view is that the world is populated by unemotional, logical, decision makers, who always think rationally in drawing their conclusions. This view is underpinned by the understanding that human behaviour displays three key traits: unbounded rationality, unbounded willpower, and unbounded selfishness.

This has always flown in the face of the findings of cognitive and social psychologists, who questioned these assumptions as far back as the 1950s.

With the rise of behavioural neuroscience since the 1980s (especially Kahneman’s work) providing more insight into the workings of the brain, we are now more sure than ever about the role that emotion and bias plays in all decision-making: from simple day-to-day decisions like which dress to wear, through to larger decisions that may affect many people.

Overconfidence and optimism are two examples of behavioural traits that may lead to sub-optimal financial decision-making, and divert from the traditional model used. People have also been shown to make poor decisions, even when they know it’s not for the best, due to a lack of self-control.

So this is where behavioural economics has been able to step in and modify many of the beliefs of the traditional economic views.

What is behavioural economics – and how can it help?

Behavioral economics and behavioral finance study the effects of psychological, social, cognitive, and emotional factors on economic decisions.

This may apply to individuals or institutions, and involves looking at the consequences for market prices, dividends, and resource allocation.

Of the three traits of human behaviour included in the traditional model outlined above, unbounded rationality has received special focus, with new understandings in the field resulting from neuroscience.

Understanding better how people arrive at financial decisions can help in many areas: from personal finance to organisations shaping products and trying to get more customer sign-ups; and from the vagaries of stock market trading through to governments and how they formulate financial legislation.

Perhaps behavioural economics can, in future, help people to make better decisions to safeguard their financial futures; it may even have helped if more attention had been paid to it in the lead up to the Global Financial Crisis in 2008.


Is Your Money Really Yours? Hackers at Work!

Information is both beautiful and deadly! Today, the online marketplace runs on analytics and data but in the wrong hands, it could turn into the worst of disasters. According to a new study, cybercriminals are costing more than $575 billion every year and this could include your financial data! As the world is speeding into a world of internet and our future infrastructure depending on virtual intelligence, we are more in the risk of exposing our personal information. Cyber terrorists and hacktivists have become regular topics of discussion and the breaches they have been able to make are worth getting concerned of. It’s not just that our bank accounts are at risk but hackers could create a global crisis. We have already seen the power when hackers reveal how all of Manhattan’s traffic signals can be turned green or a US military drone be rerouted for an unidentified target!

Online crimes are estimated to be about 0.8% of the world’s total GDP and this isn’t a small number. In January 2016, hackers stole approximately $54.5 million from FACC’s (US Aerospace manufacturer) accounts. Given that such a large corporation was compromised, you can never be sure enough if your bank account is safe enough. The crisis becomes more serious when James Lewis from the CSIS says that “We don’t catch most cybercriminals and we don’t catch the most successful ones. So far, there has been impunity for these hackers”.

So, in what ways can the hacker rob you?

The case of frequent flyer miles

In December, 2015, more than 10,000 American users were hacked and cybercriminals were able to book free flights and other upgrades using the stolen perks! The hackers accessed the login information of users (frequent flyers) and flew several miles for free. While these customers got back their free miles in due time, the event reasons why we should be changing our login information (passwords) more frequently.

Even your health insurance!

Today, when medical costs are on the rise and we are depending on fast food for our daily living, it’s medical insurance that’s kept as a backup plan! However, you can be surprised that even this insurance can be hacked and you are actually paying the premiums for someone else. These identity thieves will obtain all medical benefits you have paid for and you will not know unless you are actually in need for emergency attention.

In the worst case scenario, you could be getting a surprise visit from the police and be arrested for a crime you didn’t commit! While, these cases have been rare, identity thieves always have the option of making you the face of a crime. All of it is by using your personal details from different online sources. The lawyers will cost you a wholesome!

Chat override

Cases have happened in the past when hackers override a company’s chat dashboard and talk and make business with your clients and customers. In February 2015, HipChat announced that hackers stole encrypted passwords and other user details for 2% of their customers. After the event, several chat platforms switched to a two-factor authentication apart from asking their users to change their passwords frequently. Though, it doesn’t make your credentials completely immune to hacks, it does minimize the risks.

Your tax refunds

Generally, you would have filed your returns by 15th of April but the IRS won’t be checking it until late in June-July. This gives hackers a lot of window to steal your social security number and name and file a fake tax return and get the refund on their accounts. When you notice that your return application has been rejected, the money would be long gone.

Credit cards in your name

The most feared act of identity theft is when someone else is issued a credit card in your name. Using your bank login details, social security and email, criminals will be happily running debts in your name until your credit reaches it limit. It is therefore necessary that you review your credit reports more frequently and report transactions that you don’t recognize.

Social hacks

Most of us will not think twice when a friend in needs asks for some emergency money. However, there have been cases when you have actually transferred the money to a stranger’s account after he has hacked your friend’s social account and asked help via the chat box. Referred to as “social engineering”, these scammers will ride on your reputation and trick you into sending money.

Your data at ransom

This is among the scariest of scams that has been running on the internet. Hackers will be using a “Ransomware virus” and encrypt all your files on your personal PC. You won’t be able to retrieve these files until you transfer a substantial amount to the hacker’s account! Well, in this age of information, you don’t have a choice.

The key to maximum security lies in the basics. Change your passwords, keep your antivirus software updated, don’t visit suspicious links, don’t store confidential details on your email or phone and double-check whenever you are dealing with your financial details on the internet.

In 2015, half of all American citizens had their personal information (including banking details) exposed to cybercriminals. The internet was built for openness, speed but not for complete security. As we keep on adding more and more services to make our life more convenient, we are easily becoming the target for hackers. That being said, we don hint about switching back to the traditional means of doing transactions. Breaches have become regular and there is no way to completely avoid them. However, you can make things harder for the criminals and hope that they choose an easier alternative to earn money – someone else’s account! It is necessary that we begin to fully understand the scope of the problem and treat hacking as a nuisance. The thieves at the other end are smart. You need to be smarter.


The Future of Financial Services

The ease of making financial transactions and financial services in general, had first been revolutionised when telegraph companies introduced wire transfers. But with the coming of new age financial services like Bitcoin and Ripple, it is the time we address the question of what the future holds for the financial services of the world.

Traditional Wire Transfers

Let us begin by first taking a look at how things have been going on for these past 150 years since wire transfers were first introduced. Transferring funds using a wire transfer method via a bank is not a single step process but a multi-step process. It is like this:

  • The sender approaches his or her bank and orders the transfer of funds to an account. Unique codes like BIC and IBAN codes are provided to the bank by the sender so that the bank knows exactly where the funds need to be transferred.
  • The sender’s bank contacts the receiver’s bank by sending a message through a security system, such as Fedwire or SWIFT, signalling it that a transfer needs to be made. The receiver’s bank receives this message, which includes settlement instructions as well, and then asks the sender’s bank to transfer the amount specified in the message.
  • The sender’s bank now transfers the amount. This is not done in one go but bit by bit, so it can take anywhere from a few hours to a couple of days for the entire sum to be transferred.
  • To make the transfer, the two banks must have a reciprocal account with one another. If that is not the case, the transfer is made through a correspondent bank that holds such an account.

As one can see, this form of transfer relies overly on a mediator, takes more time than it should, and can prove to be costly as the banks charge some fee for their service. Distributed currencies like Bitcoin provide a viable alternative to this process.

Decentralized Currencies

What sets services like Bitcoin apart from traditional services is that they do not rely on a central mediator but rather operate using cryptographic protocols. The process is therefore faster, simpler, and much more efficient. The system is quite transparent to both end users as well while traditional systems are susceptible to fraud due to the complex process involved.

However, there is a downside to this too. With services like Bitcoin, it is simple to trace a transaction back to each unit value’s creation.

Solution? A Common Ground

More and more people are opting for services like Bitcoin and peer-to-peer mobile transfers, where a network operator could help users transfer funds by simply sending an SMS. Although these are indeed more efficient, they are a long way from global acceptance because there are many who still do not have bank accounts, plus there is the issue of limited user identification in such services.

What would be ideal for everyone is if banks could tap into the potential of decentralized currencies and overlap the source code of services like Ripple on their existing system to form a hybrid of the two. It would kill two birds with one stone as:

  1. Decentralized currency systems provide more efficient transfers
  2. Bank systems ensure only registered users access the service, taking away the possibility of foul play.

Conclusion

The world has come a long way since the last time an indigenous financial service system was introduced. There is definitely a crying need to improve this traditional service and decentralized currencies like Bitcoin have shown them the way.


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