Bank of England hints at interest rate hike in ‘coming months’

The Bank of England has signalled it may hike interest rates in the “coming months” to cool surging inflation as economic growth shows signs of picking up.

Members of the Bank’s nine-strong Monetary Policy Committee voted 7-2 to keep interest rates on hold at 0.25%, as widely expected.

But the Bank gave its strongest signal yet that a rate hike is on the horizon as it said all policymakers believed “some withdrawal of monetary stimulus was likely to be appropriate over the coming months”.

Read the full article here.

 

 

RBS To Allocate $1 Billion To Help SMEs Switch To FinTechs

RBS, one of the U.K.’s top banks, is required allocate to more than $1 billion to help small businesses switch to its competitors.

Reports Thursday (July 26) said the Royal Bank of Scotland will be required to establish an innovation investment fund worth nearly $670 million, and a scheme worth $457 million, to encourage SMEs to switch bank accounts. RBS is also required to pay grants to challenger banks and FinTechs in an effort to enhance competition.

http://www.pymnts.com/news/b2b-payments/2017/rbs-sme-bank-switching-agreement/

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The Race Is On To Disrupt Traditional Banking

Are banks here to stay? A recent report by Accenture has highlighted how digital disruption is shrinking the role and relevance of banks.

Global fintech adoption has risen on average from 16% in 2015 to 33% in 2017. Financial institutions, in general, are being pushed to innovate and outpace existing systems. Across the board, there is a push towards redefining business models to develop agility and increase growth. Eventually, it’s the changing customer perceptions and behaviour which impacts demand for financial services.

Read more https://www.forbes.com/sites/rogercrook/2017/08/16/the-race-is-on-to-disrupt-traditional-banking-2/#310ce8ecd952

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Bank of England warns Brexit will put strain on regulatory resources

The Bank of England has warned that the task of regulating the City after Brexit will put a strain on its ability to police the financial sector.

Deputy governor Sam Woods also said the Bank’s regulatory arm, the Prudential Regulation Authority, faced “a material risk to its objectives” – which include promoting financial stability – as it deals with the UK’s exit from the EU.

Read the full story here.

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Pound down, inflation up. What does this mean for SMEs?

Keep Calm

What goes up must come down, they say. Either way, there is no reason to panic!

When you put things into a longer context, say five years, you can see that – whatever happens – we’ve probably been there in the past, and will probably be there again in future.

Let’s explore the current situation where we’re seeing a lower pound and rising inflation.

Plummeting pound

Alas! Poor pound. It’s been falling for ages – although it does seem to be making a slight recovery in 2017, as shown on this five-year chart compiled by the FT. (The sudden drop just before July last year was a result of the Brexit referendum vote.)

Pound

A weak pound can benefit small businesses who export their goods and services or sell to tourists. The Guardian recently reported the following success stories:

Wrendale Designs of Lincolnshire source nearly all their materials from the UK, and export greetings cards, home furnishings and giftware to the US. Co-founder, Jack Dale predicts 30% growth in turnover this year.

“The US market is doing really well for us,” he says. “We’ve kept our prices constant but obviously the dollars we’re earning convert to around 15% more pounds.”

The Scotch Whisky Experience in Edinburgh has had its busiest year ever, with visitor levels up 9% on last year and the number who take a tour up by 12%.

Julie Trevisan Hunter, head of marketing, says: “The weakness of the pound has made Scotland an attractive holiday destination, particularly for short-haul travellers. At the same time, the value of the pound versus the euro has made staycations more attractive for people from the rest of the UK.”

For fashion brand, Gandys, online international sales are up 21% by volume and nearly 13% in value, while in-store sales in London have seen a 14% boost, largely due to shoppers from overseas.

“We’re doing really well with tourists who are spending a lot more money in our flagship Spitalfields store because they’ve effectively got a 15% discount,” says co-founder, Paul Forka.

International sales have also rocketed for male grooming brand, The Beard and the Wonderful, who sell products online through their own site and via eBay.

Founder, Steve Sanger, says: “Before, around 4/5 of our business was in the UK but now it’s more like a 50/50 split. On lower cost items a 15% discount may only bring your cost down by less than a pound, but it gets you at the top of search results when people prioritise by price.”

Bibby Foreign Exchange allows “hedging” of dollar and euro purchases, where an SME fixes a price a month or two in advance so they know they will have enough in the bank for an upcoming purchase.

MD, Michael McGowan, has seen a sharp rise in SMEs being more comfortable to deal in dollars and euros. Similarly, business is brisk in turning dollars and euros earned abroad back into pounds.

“A few years ago, many British SMEs were resistant to selling in another currency but since the drop in the pound, they’re increasingly willing to deal in euros or dollars,” he says. “You’re effectively getting 15% more margin for the same transaction.”

Soaring inflation

Meanwhile, UK inflation has been rising since 2015. This chart shows the past five years:

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Source: tradingeconomics.com

The Bank of England set an inflation target of 2%. However, in April 2017, consumer prices increased 2.7% year-on-year, following a 2.3% rise in each of the previous two months, and inflation is now running at its highest rate since September 2013.

But why?

According to TradingEconomics.com, the upward trend is mainly connected with the reduced value of sterling since the Brexit vote last year, as well as the rising cost of air fares (due to a late Easter), and electricity prices. With a falling pound, imports are more expensive. At the same time, fuel and food prices are rising.

Ben Brettell, senior economist at Hargreaves Lansdown, said: “Transport costs account for more than a third of the inflation figure. Oil is priced in dollars, and sterling has fallen around 13% since last June’s referendum.”

With the average pay rise at 2.3%, and inflation increasing at the same or higher rates, employees are no better off, which puts pressure on household income and spending.

In BBC reports, the Bank of England said it expects inflation will peak at 2.8%, although some economists think it could rise above 3%.

And what does this mean for interest rates?

Suren Thiru, head of economics at the British Chambers of Commerce, said: “Businesses continue to report that the substantial increases in the cost of raw materials and other overheads over the past year are still filtering through the supply chain, and are therefore likely to lift consumer prices higher in the coming months. However, it remains probable that the current period of above target inflation is transitory in nature, with little evidence that higher price growth is becoming entrenched in higher pay growth. This should give the Bank of England sufficient scope to keep interest rates on hold for some time yet, despite their recent warning.”

Interest rate increases by the Bank of England are uncertain, particularly in relation to controlling prices.

Which means that – if your business has money in the bank – you have to do your best to make the most of it. And that means using your Akoni Hub to find the account paying the best interest on your cash deposits. We also provide a personalised report with best practice relating to cash management, collecting funds owed to you and paying your suppliers.

After that, you can put your feet up, relax, and have a cup of coffee.

 Akoni helps businesses make the most of their cash. Register for free at AkoniHub.com

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Meet the new challenger banks

The UK financial services sector is going through unprecedented upheaval, with new banks being launched all the time.

Banks make their money by attracting savings and lending out the money at a higher rate of interest. New banks need to increase their lending, which means they need to grow deposits – they do this by offering higher rates of interest on savings accounts. Some of these new banks are therefore offering the best interest rates on savings.

It therefore makes sense to move your savings around more often – and that’s exactly where Akoni’s cash management service fits in.

Why challenger banks

The ‘Big Five’ UK banks hold 85% of the personal current account market – Lloyds has about 27% market share,  Barclays and RBS have 18% each, HSBC has 12% and Santander has 10%. The top four banks also hold about 80% of the small business liquidity market.

People used to be loyal to traditional high street banks because they thought bigger institutions were safer. However, this mindset is changing. Here are the main reasons why:

  1. Traditional banking was discredited by a series of scandals
  2. The business model for high street banks was reformed after the financial crisis of 2008, when the UK Government had to prop up the banking system with a massive £1 trillion
  3. Legislative reform led to improved competition within the banking sector (according to Savings Champion, over 1 million retail customers have already taken advantage of easier switching)
  4. Customers witnessed or experienced poor value, bad customer service and mis-selling
  5. Low interest rates are driving savers to shop around
  6. Most High Street banks focus on acquisition of new customers rather than retention of existing customers
  7. The EU and UK Governments provide deposit guarantees relating to the risk of bank failures.  In the UK this is provided by the Financial Services Compensation Scheme (FSCS), with further information provided below.

Introducing the challenger banks

New banks are now challenging the market share held by the five major high street banks. These challenger banks are more specialised, with simpler business models and greater transparency.

To help familiarise you, here’s a brief introduction to just a few of the new entrants in the UK banking sector:


AldemoreAldermore Bank

Independent bank launched in 2009 and based in Peterborough. Among other investors, it was originally backed by private-equity company, AnaCap Financial Partners LLP (who are now planning to launch Abacus – a digital bank), and has since been floated on the stock exchange. CEO is Phillip Monks, who gained 30 years’ experience at Barclays and Arab Bank. Focus is on UK SMEs, with funds lent to small businesses and as mortgages.


Amicus

Amicus

Amicus is a fast-growing specialist financial services group, providing finance for property and other assets, as well as invoice factoring for SMEs. It’s headed by John Wilde, formerly of SME Invoice Finance, JP Morgan and UCB Bank plc. The group was set up in London in 2009, and applied for its banking licence in 2016.


british business bank

British Business Bank

This government-owned and independently managed bank is dedicated to developing smaller businesses. It provides finance to start a business, grow to the next level, or stay ahead of the competition.


Cambridge and CountiesCambridge and Counties Bank

Launched in 2012, this bank was formed by a partnership between Trinity Hall, Cambridge and the Cambridgeshire Local Government Pension Fund. It provides business savings accounts, property finance and asset finance. CEO is Mike Kirsopp, who previously spent 30 years in commercial lending including at Lloyds.


csbaCommunity Savings Bank Association

CSBA aims to create a UK-wide network of customer-owned, regional banks that use local savings to grant loans to local people, community groups, and SMEs. The Chairman is James M Moore, and the initiative is supported by The Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA).

Copernicus Bank

Since 2012, Aidan Brady and Michael Rossman of Danela Ventures Partners Limited have been building a new UK corporate banking platform to target corporate clients. It will run an open ledger/balance sheet and not engage in deposit-based maturity/risk transformation. The launch date has not yet been announced.


HampshireHampshire Community Bank

A new not-for-profit bank launched recently to serve the Hampshire community, headed by Richard Werner, Professor of Banking at Southampton University, and Sir Vince Cable as Chairman. It’s modelled on small local banks such as Sparkasse and Volksbank in Germany, and aims to ‘create credit for productive purposes’ by lending mainly to SMEs.


Metro BankMetro Bank

When Metro Bank launched in 2010, it was the first new independent UK bank on the High Street for more than 100 years. It has 27 branches in London and southeast England, all open seven days a week, and about 360,000 customers. CEO is Craig Donaldson, who used to hold senior roles with RBS, Barclays and HBOS. Funds are lent as mortgages, personal loans and credit cards in the UK.


oaknorthOakNorth Bank

OakNorth is run by entrepreneurs not bankers, and provides funding for business and property. The CEO is Rishi Khosla, and the Chairman is Cyrus Ardalan.


Paragon BankParagon Bank

Based in Solihull, Paragon Bank launched in 2014 after being a buy-to-let mortgage lender for years. It’s quoted on the stock market. MD, Richard Doe, was previously CEO of ING Direct UK. Funds are lent to UK borrowers and as car loans.


RedwoodRedwood Bank

Redwood was co-founded by Jonathan Rowland and Gary Wilkinson to provide SMEs with commercial mortgages and deposit accounts. The bank is based on the border between Bedfordshire and Hertfordshire.


ShawbrookShawbrook Bank

Launched in 2011 and based in Essex, this UK bank is owned by the Special Opportunities Fund (SOF). CEO is is Richard Pyman, a banker for 20 years. The management team are formerly from RBS Group. Funds are lent to individuals and UK SMEs.


FSCSFinancial Services Compensation Scheme (FSCS)

This free and independent scheme was set up to boost confidence in small banks. It means that customers will be compensated if UK-authorised financial services firms stop trading.

The FSCS protects deposits and savings up to £85k, as well as investment business, home finance, insurance policies and insurance broking. If your savings balance is temporarily high due to a specified ‘life event’, the FSCS protects up to £1m for up to six months.

Note that some EU banks are not UK-authorised as they are covered by their own scheme instead. You should be aware that cash saved in those banks is not protected under the FSCS and will usually be covered by the home country government guarantee.

Visit Akoni Hub’s latest rates to view leading business deposit products.

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CMA Pave the Way for an “Open Banking Revolution”

This is a real banking revolution: the CMA (Competitions and Markets Authority) announced some stringent rules for banks in the UK to comply with by 2018. This throws the gates wide open to competitors, and will have banks scrambling to attract customers.

As the banking industry has been slow to respond with innovations, the CMA has made it clear that it expects to utilise its own enforcement powers, in addition to expecting reform from the government to push through change. While some commentators believe the change is not far enough, I am of the view that steps in the direction of major change start slowly and momentum builds quickly.

These changes include:

–       Open Banking by 2018 – by which the CMA means to accelerate mobile banking in the UK retail banking sector.  SME’s and individuals will be free to share their banking data securely with other banks and third parties, enabling them to manage their accounts with a range of providers through a single App – thus having more control over their money and also being able to shop around for better deals. Banking on the move, having your bank in your phone is the way of the future.

–       Accurate, unbiased information about their services and truthful information about products and quality of service – from their branches to their websites. there is much agreement that with a significant range of fintech investment both within the industry itself, as well as new players, banking as it currently stands will undergo drastic change.

–       Making event- based communication compulsory – for example if a branch closes or there is an increase of charges, they have to send their customers notice of these happenings.  THIS was raised to provide trigger points for review of banking products – like the insurance sector which has an annual policy renewal as a trigger to prompt considerations of cost, cover, benefits and performance of an insurerer.

The CMA has also made it clear that it is to be made easier for customers to search for banks offering more competitive rates and to enable easier account switching.

Apparently only 3% of individuals and 4% of businesses ever change their banks in a year, despite the huge savings this could provide.

A range of other measures has also been announced – for example, those of you who may have been surprised to find that you are in an unarranged overdraft, without ever having arranged one, the CMA has introduced specific measures including that the bank needs to alert you before this happens, and offer you a grace period. It was found that banks in the UK make an unbelievable £ 1.2billion a year from unarranged overdrafts.

Businessman-in-Istanbul-000052231446_Large

By 2018, SME’s should be in a much better banking position after the Competition Marketing Authority’s findings

Businesses and individuals win all round with the banks having to provide accurate information on banking services and charges for small business.  One of the key assessments is that small business had lacked the tools needed to assess fair credit and availability and service quality.

In order to progress further, the CMA will be supporting Nesta.  This requires banks to provide financial backing and technical support for this innovation-supporting charity that aims to partner and work with organisations who need information and expertise on the practice and theory of innovation.

This initial level of game-changing recommendations will make the United Kingdom the most attractive banking hub for customers as well as provide another example of leading the way in innovation, particularly relating to small and medium businesses.

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Banking’s Future as an Information Business

Why Barclays Sees Banking’s Future as an Information Business

Through Gov.UK Verify, Barclays’ customers can use their bank credentials to authenticate themselves to access tax returns and other government services. Simon said the bank is working on an “attributes exchange” that would enable a person to show, using a mobile banking app, that Barclays has verified certain information about them. For example, the app could vouch that a customer is old enough to drink in a pub, so they doesn’t have to show a driver’s license with an exact birthdate, or confirm their last three addresses to a landlord, saving both parties time spent looking up old lease documents or checking references. Offering such a service will make customers more likely to stay with the bank and to use more of its products, Barclays is betting.

Digital services like identity management will be a key for banks to offer as the nature of financial services changes, said Dan Latimore, senior vice president of the banking practice at the research firm Celent. In a world where nonbank firms can offer banking services, traditional financial institutions need to focus on data to offer services or insights that a fintech startup can’t, he said.

“We have been advocating that banks take a look at the treasure trove of data they possess,” he said. “As they come under further attack from fintechs, they have to think about what differentiates them. I think what Barclays is doing is a great example of mobilizing the resources banks have and offering differentiating products and services.”

Though consumers are generally wary of sharing personal information or having their personal data accessed, Latimore noted that in general “they have shown they are willing to give to get. You just have to demonstrate what you are giving them is worthwhile.”

Besides, banks are required to know increasingly more about their customers under stiffening anti-money-laundering regulations. Acting as identity providers, they might spare their customers from having to expose all that personal information to various other parties with weaker data security practices.

In general, the U.K. has put a focus on using financial innovation for consumers’ benefit. In 2014, the government put out a call for evidence on how best to deliver an open standard for application programming interfaces and to ask whether more open data in banking could benefit consumers. The government has since asked the banking and fintech industries to work together on the creation of a framework to introduce an open API and open banking standard in the U.K.

Another service from the new Barclays unit mines individual customers’ spending data to give them insights into their financial habits. Down the line, Simon said, Barclays is looking to offer services pegged to these insights to help customers manage their financial lives. For example, if a customer is spending more on heating and electricity than the average resident in their area, a message in their mobile or online banking may appear asking if they want help switching utility providers. (Customers would have to opt in for these services, Simon said.)

The information group offers services even to non-customers. For example, the Barclays website offers a Local Insights feature where anyone can type in their U.K. postcode to access an array of local economic data. This can be helpful to small businesses, Simon said, who can examine data such as how much spending on entertainment or eating out residents of their area do.

Giving away this information helps grease the wheels of commerce, which ultimately is good for the banking industry, Simon said. “The more we can use the power of big data to help the economy grow, the better it is for us.” But he acknowledged that the giveaway also serves as soft marketing for the bank to businesses that may need financial services in the future.

“What is the bank of the future?” Simon said. “It’s becoming a data-driven organization that is there to help customers manage their lives.”

#SMEs #BigData #SmallBusiness

http://www.americanbanker.com/news/bank-technology/why-barclays-sees-bankings-future-as-an-information-business-1080128-1.html

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How SMEs are using FinTech and cloud tools for growth and profitability

There is much talk about the disruption of FinTech innovation, and not much in terms of understanding the business impact. In particular, small and medium-size enterprises, who can benefit in terms of financial leverage, use various online tools to increase productivity, streamline processes, improve reporting and the business balance sheet. In the age of digital innovation, FinTech is providing solutions that can benefit small enterprises as much as it does the retail market. We aim to present a few pragmatic options for you to explore.

Business Loans

First and foremost, following the banking crisis there was a major contraction in credit, hitting small and mid-size enterprises.  There is a new paradigm shift in Small Business Finance, including a few examples below:

  • FundingCircle provide a 30 second eligibility check, with no impact on your credit rating, and has a £60million facility via the government-back British Business Bank.
  • Ratesetter is a peer-to-peer lender offering business loans, which are supported by the government’s British Business Bank. Business loans vary from £25,000 to £1m and it says it can make cash available within 48 hours. The duration is six months to five years and can be cancelled within 14 days without penalties being incurred.
  • Kabbage provides small same-day loans of £1,000 to £40,000 and provides greater real-time business analysis by linking your PayPal and eBay store account as part of their credit analysis.

Some business owners are also concerned with providing a personal guarantee, one of the requirements of most lenders. A new type of insurance can offer protection for this, called PGI Cover.  Should your Personal Guarantee be called upon by the lender, the Insurance will be in place to pay out the indemnified amount which may clear your liability in full.

The British Business Bank (BBB) has also issued a “Business Finance Guide” – from Startup to Growth, providing insight into the process of raising funds. The Bank is aiming to increase SME growth through leveraging traditional and alternative lending options. SMEs are critical to the economy, with 65% of net job creation, and research has found that if the government with institutions such as BBB fail to increase awareness of alternative sources of credit to fuel growth, this could impact the economy to the tune of £20 billion as traditional lenders continue to withdraw from the market.

Payments

Receiving payments for goods or services rendered should be a simple process, however in many cases the set-up and implementation are confusing and time-consuming. There are various solutions which aim to deal directly with this issue relating to SME challenges. Businesses can produce invoices by digital accounting and these can be directly linked to automated payments platforms, like the popular PayPal, and tracked and updated accordingly. Other examples specific to business:

  • Ixaris offers payment solutions for a variety of sectors, including financial services and travel. The firm offers “white labelling” options for financial services firms, with their own branding using Ixaris technology. Ixaris facilitates payments to suppliers around the world, and has a “plug and play” API option. It allows firms to receive card payments from Visa and MasterCard.  There are also multiple opportunities for rebates for firms that meet a quota due to the high level of transactions they complete.
  • Another full-service provider is Wirecard – a check-out package for an online shop, credit card acceptance and processing for merchants, as well as SEPA direct debit processing. For those without a debit or credit card, Wirecard offers the facility to make payments directly through a bank account, increasing the amount of people who can purchase your products using Wirecard facilities.

Other companies include Square, a U.S based company who recently IPO’ed, has a range of payments offerings and IZettle, both of which have downloadable software and also offer hardware devices for card payments. Both companies are currently offering free card readers with certain conditions attached.  The software is free to download and provides  the point of sale that takes care of digital receipts, inventory, and sales reports and provides valuable analytics and feedback.

International Payments

Banks currently regard the SME market as niche and don’t properly understand their business needs. International payments are especially difficult and complex for SMEs with hidden fees, poor rates and cumbersome processes. SMEs should definitely consider alternative global money transfer companies instead of using their bank as it is an area of significant cost savings. While the sites are secure and protected, some business owners prefer not to disclose any financial information online – in this case, it is recommended to approach a private FX broker. Always compare rates and fees to your bank, in most, if not all cases, the average business will benefit from significant savings.

  • MoneyMover provides a free international payment review as part of their business assessment, and manages a platform with reporting and analytics and transparent pricing, tailored to your business.
  • The most newsworthy platform, Transferwise, also offers business services. The company manages to offer its services so cheaply by matching up payments with those going the opposite direction using sophisticated software. Transferwise has a simple to use platform and have a devoted fan base in the retail market.

Accounting

Most SMEs do not have full-time accounting functions, and keeping accounts up-to-date can be time-consuming and often take valuable resources from taking care of the business. There are a few alternatives which provide easy to use, intuitive and reasonably priced digital solutions, which integrate and auto-update from bank statements.

Xero Xero’s popularity is based on having a simpler, easier approach to small business accounting.  Instead of forcing you to use complex accounting functions if you don’t need them, Xero streamlines things

  • Xero’s popularity is based on a simpler, easier approach to small business accounting and streamlining processes. SME businesses have a significant advantage using cloud based platforms due to the ability to easily migrate and scale up.  Xero provides functionality for different stages of business growth and integrates with various other systems including payroll; and streamlines processes if you work with an accountant.
  • Freshbooks provide bookkeeping services, including invoicing, expensing, tracking and reporting and is available on a trial basis. Additional functionality includes automated payment reminders to follow up with late payers, another key component to keep cash flow fluid.

The traditional players in the market are also constantly improving their offerings and these include:

  • QuickBooks aims to simplify business life for consumers, small businesses and accountants with products that are easy-to-use and intuitive. These products focus on helping small businesses manage their money, pay their employees and get paid faster.
  • The market leader, Sage, has increased their offering to deal with the various pain points of businesses, including integration with payroll and pensions auto-enrolment. The new challenges faced by SMEs are particular to regulation and compliance, and the company has been working to incorporate multiple requirements across the various spheres of business regulation.

With the U.K government’s introduction of the Enterprise Bill, the government aims to reduce SME costs by $10 million per year, hastening payments with cash as the key commercial component.  This support is in the event of payment disputes and early intervention to enable faster insurance claims payments. The Prompt Payment Code (PPC) sets standards for payment practices and best practice and has been updated and strengthened to provide an improvement in the payment culture.

What are your experiences using new FinTech products? We would love to hear from you, please post your comments or or get in touch.

Next in the series:

  • The new Challenger Banks and improving working with SMEs
  • Big Data – what does it mean for the Small Business
  • Can Small and Medium business benefit by purchasing insurance coverage online?

I am passionate about technology and innovations in financial services adding value to Small and Mid-size business in a practical way.  I work as a co-founder at StrongJones, aiming to bring innovation to the key asset within all enterprises – cash. Follow me on @Feliciatedx

Akoni helps businesses make the most of their cash. Register for free at AkoniHub.com

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