Jack Manning

Wander down any of Dublin’s inner streets and the success of Starbucks is striking. Their cafés bespeckle the city’s thoroughfares more than fifty times and their expansion is by no means slowing. As determined by The Irish Times, “Ireland is now home to more Starbucks, per head of population, than anywhere else in Europe.” Vying for dominance of the caffeine-craving market with Insomnia and Costa, the firm maintains a solid foothold by every metric. So where did the company go wrong in Australia? Sydney has more than eight times the population of Dublin, yet operates thirty-three less cafés.

Australians drink on average three or four cups of coffee every day. The country is home to 6,500 independent coffee houses which bring in $4 billion annually. Starbucks has seen success practically everywhere else in the developed world, operating almost 30,000 stores in 75 countries. Was this not a match made in heaven?

The story of the mega-chain’s relationship with Australia’s multi-billion dollar coffee market begins in Sydney, where their first store opened in 2000. It opted to spread at a somewhat frantic pace throughout Australian cities and suburbs – as well as in more rural regions.  By 2008 Starbucks operated 87 cafés across the continent. This hasty strategy of capturing a portion of Australian market share through swift expansion rather than gradual and incremental integration proved to the firm’s detriment.

The firm did little to adjust its business model to adapt to the Australian market and as a result presented a café experience at odds with the indigenous coffee culture. It opted to copy-paste its formula of breakneck expansion and fast service, having seen tremendous results in North America, Europe and Asia. This conflicted with Australians’ long-established appetite for a slower, more relaxed and thoughtful café experience.

Rapid growth of a distinctly American mega-chain was perceived as a commodification of their more community-oriented coffee scene, and this left a for-once unwelcome bitter taste in Australian coffee-lovers’ mouths. Starbucks also charged more than native counterparts, and consumers were less than keen on the beverages’ higher sugar content.
All of this led to a spectacular crashing out of the market, seeing over $100 million in losses in its first seven years. After borrowing over $50 million from its American division to stay afloat, Starbucks shuttered a whopping 61 stores in 2008.

But the firm hasn’t thrown in the towel. In 2014 Starbucks entered into a partnership with the Withers Group, the multinational which operates 7-11, in an effort to reinvigorate the brand. It now operates in 39 locations – up from 22 in 2014 – in Sydney, Brisbane, Melbourne and the Gold Coast. The renewed attempt to instil love for Starbucks’ coffee in Australia focusses no longer on Australians themselves, but visitors enticed and comforted by a familiar brand. It chooses to open stores in locations abuzz with tourists – and no wonder. More than nine million international visitors make landfall down under every year, and, according to Tourism Australia, 2018 was the third consecutive year that tourism has outpaced the growth of the Australian economy.
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Starbucks sees such swelling numbers of tourists – many of whom are doubtlessly already in love with the brand from back home – as their ticket to success on the southern continent. Is the company’s newfound tourist-centric vision a brew for success, or is it high time they wake up and smell the coffee?

Michael O’Callaghan

The Trinity Student Managed Fund recently held its first Fintech Conference on the evening of Monday February 11th. The objective of this new event was to allow Trinity students to understand the impact of fintech on financial services and the opportunities that are available in the industry today. The evening consisted of a dialogue between a panel of revered leaders in the industry discussing topics such as the impact of blockchain and artificial intelligence on the industry as well as what the future holds.

Fintech (financial technology) is changing the financial services industry and creating new opportunities and challenges for everyone, from consumers to producers, advisors to clients.
Global investment in Fintech reached $57.8 billion in the first six months of 2018, highlighting the scale of the investment in this area. According to the Fintech & Payments Association of Ireland (FPAI), fintech in its broadest sense consists of every area of technology and innovation in the financial services sector, including payments, trading and foreign exchange, big data, risk, compliance, business intelligence, consumer-focused currency exchanges and peer-to-peer lenders. Ireland’s unique ecosystem has led to the development of a world class fintech industry with one hundred and fifty indigenous fintech companies.

Disruptive innovations such as artificial intelligence, blockchain, machine learning, cloud computing and the use of big data are transforming the way financial information is processed and collected. This affects the way we save and borrow, the channels we use to pay for goods and services, and how we engage in money transfers between wallets and accounts, domestically and across borders.

Digitisation has revolutionised banking as we know it today. Mobile payment revenue worldwide in 2015 was $450 billion and is expected to cross $1 trillion in 2019. Smartphones with intuitive apps have given customers the advantage of real-time transactions. Fintech allows consumers to make quicker transactions at a lower cost. According to Finextra, approximately 40% of the world’s population will have a smartphone by 2021, up from a third of the global population in 2017. Another benefit of fintech, with regards to blockchain, is the introduction of transparency. Fintech projects create auditable money trails which can help identify potentially fraudulent activity quicker and more easily than a human.

Payment apps integrated with bank accounts allow seamless mobile to mobile payments and transfers. Moreover, the benefits of fintech for students are endless. New banks offer customers the opportunity to budget, break down spending into categories and then group them into useful sections such as restaurants, groceries and transport.

In addition, financial inclusion has improved globally and fintech has brought a new paradigm to the design and implementation strategies for financial inclusion. According to the World Bank, there are 1.7 billion adults globally that live outside the financial system, yet two-thirds of them own a mobile phone that could help them access financial services.
Mobile banking will continue to drive financial inclusion as it enables consumers to skip the step of banking with a traditional institution and allows them to bank directly on their mobile devices.
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The future looks to be bright for the fintech industry. Advances in artificial intelligence and data handling and analytics will drive even more innovation in the sector. The ultimate winner will be the consumer as financial and technology organisations embrace a broader view of banking.

Sean Kelly

Let’s face it, if you don’t have it now then what are you waiting for?
Revolut has taken Ireland and the UK by storm the last couple of years, for those of you who are unfamiliar with the mobile-based current account let me fill you in.

Revolut is just like your normal banking app on your phone, except that it actually works. It was launched in July of 2015 by its two co-founders, Vlad Yatsenko (CTO) and Nikolay Storonsky (CEO). The pair had previously spent 10 years in the investment banking industry where they experienced first-hand the astronomical fees applied to foreign exchange
transactions. Their exposure to these fees led to the light bulb moment that in 2018 was
valued at $1.7 billion.

The mobile app offers a range of features and all for free if you stay with the standard
subscription. The customer is straight away met with the simplicity and convenience that
sets it apart from its competitors as opening an account takes only a few minutes and can
be set up directly from your phone.

Once you’re set up you can manage your money through instant payment notifications and vaults that allow for the putting away and saving of money. If your friends are on Revolut you can send and request money from them instantly or even split a bill. Spending money abroad becomes a whole lot easier as you canuse your card abroad at the interbank exchange rate and take out money from ATM’s in the local currency with no withdrawal fee (up to a certain limit).
Not to mention you can buy cryptocurrencies and do some casual checking of the exchange rates (This article is not sponsored by Revolut).

Revolut has described itself as a “World Beyond Banking”. The benefits of using Revolut are endless and its slick app design and efficient processes make it
every millennials dream.
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At the start of 2018 the fintech company reached a million users, 2 and a half years after it
was first established. In April of 2018 the company raised $250 million from a funding round
that was led by DST Global, a company that was early investors in Facebook and Spotify. The
funding round also included high profile venture capital firms such as Index Ventures and
Ribbit Capital. This funding round led to Revoluts’ $1.7 billion valuation which subsequently made it at the time “Europe’s Fastest Growing Unicorn”, which is by all means a highly
impressive feat.
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The company now has over 3,000,000 users (200,000 of which are in Ireland) and is supported in all countries within the European Economic Area (EEA), along with Switzerland and also Australia. It recently announced its Metal subscription plan, which is essentially its Premium plan on steroids. For a cost of €8 a month users can enjoy a premium subscription where they can avail of upgrades such as a higher limit on feeless ATM withdrawals abroad, global medical insurance and discounted device insurance. The Metal subscription allows the user to earn 1% cashback on card payments, free concierge and access to airport lounges, coming in at €14 a month. The introduction of the Metal plan is testament to the constant updates that Revolut provides its customers. It is one of many examples of the company continuously progressing. Another such example is the previously mentioned airport lounges feature. This allows Metal users to get access to over 1000 airport lounges worldwide. Users simply book a pass, present it and you’re waiting for your flight in style.

Perhaps the biggest piece of news surrounding Revolut recently is the securing of a European banking licence. With this the fintech firm plans to start accepting deposits, offering overdrafts and also personal and business loans that are comparable if not better than traditional high street lenders. This really sets the way for the company to establish itself as a fully functioning bank.

​What I find most interesting and admirable about the company is its plans for the future.
With its banking licence secured, the company has focused its efforts on progressing its
commission-free stock trading along with its plan of launching its five new international
markets. CEO Nikolay Storonsky stated that they truly are on their way to becoming the
“Amazon of banking” as he intends to have 100 million people using his platform within the
next 5 years.
For those interested I’d highly recommend following Revolut’s blog where they consistently
post news and updates surrounding their business. You can keep up to date first hand with
the developments in this ever evolving fintech and also its questionable use of emojis on
social media!

Sean Kelly

We all know about Irelands’ low corporation tax. It is one of the biggest, if not the biggest factor that attracts foreign direct investment into Ireland. Being an English speaking, highly-educated island on the American side of Europe is already enough to be considered the ideal place to locate a European HQ for many multinational companies. It would seem that our low tax rate of 12.5% on the profits of a company is the icing on the cake for all the sweet toothed global firms. Let’s look at just how many of the worlds’ top companies actually are located in Ireland.

Source: www.educationinireland.com

This list of companies includes old favourites such as Apple and Microsoft but also some of the more recent companies like Google and Facebook. For a country with a population of roughly 5 million people this is highly impressive and just goes to show how attractive our rate of corporation tax really is. To put our low corporation tax rate into perspective we can compare it to the rates of other countries within the EU. Ireland has the joint 3rd lowest rate in the EU with Cyprus, following only Hungary and Bulgaria (countries which are all on the far side of Europe and are less likely to attract American companies).
As I’m sure many of you are aware, we can’t simply put multinationals and Irelands’ corporation tax in the same sentence anymore without thoughts coming to mind of the Apple tax case that was ruled upon in 2016. This is the most prominent case that demonstrates that multinationals in Ireland do not necessarily pay the rate that is advertised for all companies (the statutory rate).
In 2016 it was ruled by the EU Commission that Ireland had given the multinational tech giant illegal state aid amounting to a staggering amount of €13 billion in the previous decade. In 2003 Apple paid an effective tax rate of 1% on its’ European profits recorded by its Irish subsidiaries and this had fallen to a rate of 0.005% in 2014. In the second half of last year €14.3 billion (including EU interest) was collected by Ireland from Apple and is now being held in escrow (a financial agreement where a third party holds funds for two parties involved in a transaction) until the Department of Finances’ appeal of the decision is complete.
This effective tax rate paid by Apple is not unusual for multinationals in Ireland however. It was found through a report by PwC that in 2015 in Ireland, 13 of the top 100 companies with the highest taxable income had an effective rate of less than 1% in 2015. Among this cohort, eight had an effective tax rate of 0% on qualifying income. It is important to note that this official report also recorded an estimated effective rate of 12.4%, which is obviously just below our statutory rate of 12.5%, showing little variation between what is advertised and what is paid overall in the country from all firms.
So how and why is it possible for the largest multinationals to pay such low amounts you may ask? As to the how, well this reflects the use of significant tax credits and reliefs, such as double taxation (when tax is levied by two or more jurisdictions on the same income/asset or financial transaction) relief and also research and development tax credits. Companies have been and are still using in particular tax avoidance arrangements provided by the Irish government such as “Double Irish” and “Single Malt” (10/10 for creativity on the names) which basically involve exploiting double taxation agreements Ireland has with other countries. Ireland has received much criticism on how it taxes (or lack thereof) multinationals in this way.
In the case of Apple, they were attributing billions of dollars of profits each year to three Irish subsidiaries that declared “tax residency” nowhere in the world, something which other firms hadn’t been doing. This was one step too far for the EU commission and so they made the subsequent ruling of the €13 billion payment to Ireland.
And why does Ireland allow this to happen? Simple. Having these multinationals located here is nothing but beneficial for Ireland. Our economy benefits, jobs are created and revenue is generated from the tax that is collected. Not to mention that it makes the country look great as well. If the government heavily enforced the 12.5% corporation tax rate on multinationals then they wouldn’t locate here and that to the Irish government would be more costly than taxing them the statutory rate.
So I suppose you could say the government are between a rock and a hard place, just involving billions of euros.