COVID-19 is Showing Small Businesses the Benefits of Digital Financial Services

Digital finance

Written in collaboration with  Aaron Lewin , Associate Managing Consultant at Mastercard.

Before COVID-19, small merchants globally were gradually beginning to see the power of digital financial services. Transitioning to digital services helps small businesses transact faster, smarter and safer, and opens up credit options and other benefits. It also increases their financial inclusion, which gives them the tools to achieve financial security and grow their businesses. Yet despite these benefits, many micro and small enterprises have been slow to move past their traditional, cash-based operations.

But then the pandemic struck, bringing a new awareness of the drawbacks and dangers of relying on cash. Suddenly, digital access to financial services was more than a “maybe someday” — it was an urgent priority.

In the early months of COVID-19 shutdowns,  BancoSol  in Bolivia — the first regulated commercial bank in the world dedicated to micro and small entrepreneurs — saw its digital transaction volumes rising. It soon realized that speeding up its digitization efforts would be key to a lasting recovery for Bolivia’s small merchants, by enabling BancoSol to stay in touch with its customers and continue to support them throughout the pandemic. BancoSol serves 1.5 million microentrepreneurs in Bolivia, where the informal small business sector employs  more than half the country’s population , the majority of whom still operate in cash. By shifting its many microentrepreneur customers to digital services, the bank could help them weather the pandemic.

BancoSol also realized that these businesses’ long-term resilience would be enhanced if they maintained their usage of digital financial services even after the crisis, so it committed to making this new trend stick. The only question was: How?

An answer to that question came via a  first-of-its-kind partnership  between Accion and Mastercard, which aims to empower microbusinesses to join and benefit from the digital economy, while boosting their financial inclusion. Over the past year, the partners have been supporting BancoSol to integrate responsible data use by the organization in order to better serve their customer base of microentrepreneurs.

Like many microfinance organizations, BancoSol has years of customer data. But it often didn’t know what to do with all that information. To help the bank derive data-driven insights with the objective of expanding financial inclusion for microbusinesses in Bolivia, 40 Mastercard volunteers in Bogota, Colombia and Arlington, Virginia gathered virtually in a 36-hour “datathon.” The goals of the exercise were to understand how to enable digital adoption by more BancoSol customers, better serve them with more products and retain them over the long term. While planning for the datathon had begun prior to the pandemic, its findings proved to support BancoSol’s efforts to help its customers recover from the crisis and build financial resilience. The datathon developed the methodologies and a proof of concept for how BancoSol and other microfinance institutions can take a more data-driven, customer-centric approach. Below are the three steps it identified for tapping into customer insights to better serve the needs of micro and small business customers.

 

Using data to improve digital financial services for micro and small businesses

Start by understanding your typical digital customer:  Analyzing customer banking patterns can help identify customer segments that are most likely to go digital. In BancoSol’s case, data-driven insights indicated that its typical digital app customer was more likely to be female, and more likely to be younger compared to the average BancoSol client. By better understanding the typical digital customer, BancoSol can prioritize the customer segment that may be most-inclined towards digital adoption.

Equip loan officers with insights to match customers with products that meet their needs:  The datathon analysis indicated that app users made nearly twice as many deposits as other users — linking digital adoption with increased usage. As  research has shown , greater use of financial products, whether that’s insurance, savings or credit, makes small businesses more resilient to shocks like COVID-19 and also ensures the bank’s own sustainability. Equipped with these kinds of insights, BancoSol was able to streamline the app experience to better match customer expectations and develop clear messaging for loan officers to better communicate key benefits of going digital.

Retain customers by being proactive, not reactive:  The datathon also offered insights on customer retention enabling the bank to reduce attrition by proactively engaging customers before they begin to disengage. The data-driven insights also suggested that a digital connection can improve retention in the absence of an in-person connection — a critical benefit in this era of social distancing.

 

Helping more financial service providers reap the benefits of data

Insights like these can help more inclusive financial service providers use their data to become more customer-centric. “The data was always there,” said Carlos Otalora Martínez, national manager of information technology at BancoSol, referring to the bank’s customer data. “But now we see it in a different way, with more value. This fact led us to delve into organizational changes to better leverage the data, as well as ensure that the data is structured, clean and available for consumption — actions that we are already taking with the impetus provided by the datathon exercise.”

As a next step, Accion plans to develop a playbook outlining the processes and methodologies used during the datathon, so other inclusive financial service providers can use their own internal data to drive their digital transformation. The playbook will include customer segmentation concepts, as well as guidance on using statistical modeling to prioritize customers and personalize their experiences.

For BancoSol, the datathon revealed the potential of data to better support the millions of small merchants who are working hard to stay in business — and who power the Bolivian economy. If other financial inclusion-focused institutions in other markets leverage their data to similar effect, they can help to speed a digital transition that can help reduce the economic damage of the pandemic, and set micro and small enterprises on the path toward greater success after the crisis has ended.

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Digital Payment Adoption and Contactless Payments Surge Three Years Ahead of Expectations

Digital payment

As consumer spending returns, a new report from global payments provider, Blackhawk Network, has found that the 2020 eCommerce surge created shopper affinity around the world for retailers that offer digital payments. The findings of the Global Digital Payments study1 were based on a survey of more than 13,000 respondents in nine countries which represent nearly half of the world’s card payment volume. The report found that surveyed shoppers across all regions reported they spend more money and have a deeper connection with retailers that offer more digital payment methods. Across all regions, 69% of digital wallet users surveyed reported shopping more often since using a digital wallet, and 54% report spending more money at retailers where they can use digital payments.

“Shoppers continue to look for easier ways to tap into mobile wallets, digital gift cards, rewards and loyalty points, and as a result, are increasingly seeking retailers that have embraced digital and contactless payments,” said Theresa McEndree, global head of marketing, Blackhawk Network. “Our research shows that consumers around the world are drawn to retailers that offer fast, seamless and secure digital payments. As we start to hit more of a stride in our economic recovery, the winners will be the merchants that cater to the everyday digital payment preferences of today’s shopper.”

The report provides a global look at how consumers are using digital wallets, gift cards and rewards, and what motivates them to continue these behaviors over the next year. The research also explores what encourages consumers to shop with a specific retailer, and how shoppers may deepen their affinity for retailers that offer and accept digital payment options. Countries included in the research are the United StatesAustraliaBrazilCanadaGermanyIndiaMexicoNetherlands and the United Kingdom.

Key trends from the report include:

 

eCommerce surge created shopper connection with retailers that offer digital payments

Adoption of digital wallets, digital gift cards, QR codes and barcodes accelerated in the past 12 months. Survey data indicates these digital payment methods have an impact on how shoppers feel about a particular brand—and how likely they are to frequent that retailer. The rise in digital payments is a bright spot for retailers that are embracing digital payments. Surveyed shoppers across all nine countries report they will spend more money and have a deeper affinity for retailers that offer more digital payment methods.

  • Along with shopping more frequently (69%) and spending more (54%) at retailers where they can use digital payments, a majority of shoppers surveyed (85%) also reported that digital wallets have made shopping easier.
  • The top retail segments where digital wallet users are using digital payment methods the most are: online-only retailers (41%)grocery stores (37%) and mass merchandisers (26%).

 

QR codes were one of the most used new digital payment tools during the pandemic

QR codes, or barcodes on a mobile device, were a digital payment tool that emerged with new digital wallet users during the pandemic—and were used more frequently at grocery stores and online-only retailers.

  • Eighteen percent of respondents used a QR code or barcode for the first time during the pandemic, and 40% report using them more frequently.
  • QR codes offer opportunities for retailers looking to gain a share of the growing digital wallet user audience, with 30% of non-users being interested in using barcodes or QR codes.

 

Gift cards helped people connect to eCommerce in 2020

With an ability to be easily bought and used through online-only retailers and essential businesses—like grocery stores—shoppers turned to gift cards. Digital gift cards also saw huge increases in popularity since they are an easy contactless payment option to send and use.

  • Digital gift cards got a boost from self-use: 34% of respondents reported purchasing a physical or digital gift card for themselves in the last year. Additionally, 46% of respondents report being interested in digital gift cards to make purchases online.
  • Digital gift cards were used most at online-only retailers: Nearly half of surveyed digital gift card users have used them at online-only retailers in the last year—though Brazil and Australia residents are least likely to use them at online-only retailers. For residents of Australia, more than half of digital gift card users used them at grocery stores.

 

Hurdles to widespread digital payment adoption remain

Despite the increase in digital wallet usage and acceptance, 50% of surveyed digital wallet users reported friction in using them because they are not accepted everywhere—including 30% of respondents who reported they can’t always use the same digital wallet at the same retailer in-store and online. Across all the regions surveyed, 27% of respondents reported there were too many digital wallet options, while 20% don’t feel as comfortable using digital wallets as they do using traditional payment methods.

  • Top opportunities for digital wallet adoption:
  • Broader acceptance: 63% of respondents report they are more likely to shop at a retailer if they accept the digital payments they use.
  • Seamless omnichannel experience: 73% of respondents say they want to be able to pay the same way they pay online and in-store.
  • Ubiquitous payment option: 27% of respondents cited that they don’t like digital wallets because there are too many options.
  • Faster, secure and seamless checkouts: a secure (47%), fast (36%) and easy (39%) checkout process are the payment preferences that matter most to surveyed consumers when paying for goods and services in the next 6–12 months.

 

In-store shopping will rebound

Since the pandemic, two-in-five respondents have been making in-store purchases less frequently, but once shopping returns to pre-pandemic levels, slightly more shoppers will return to in-store than online.

  • Fifty-five percent of in-store shoppers plan to continue in-store shopping when shopping centers return to pre-pandemic levels, compared to 53% of surveyed consumers who will buy online and opt for at-home delivery.
  • Consumers have missed the in-store shopping experience. Fifty-one percent of surveyed shoppers rank the ability to see and touch items in-store before making a purchase as one of the most important factors when they are able to return to their pre-pandemic shopping habits.

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International Market Survey Reveals Poor Digital Employee Experience Could Cost Companies More than $4 Trillion in Lost Revenue

Digital Workplace

Lakeside Software, the leader in digital experience management (DEM), today released results from a new global market survey of 600 C-level executives, end-users, and IT staff investigating the progress companies are making to provide a good digital experience to their workforce. The survey also revealed the impact stemming from a lack of DEM solution adoption and its effect on mitigating core challenges related to new hybrid work practices as we exit the pandemic.

Key findings in the report, “The Future of Digital Workplaces,” establish a direct connection between organizational budget reductions, a decrease in organizational financial performance, and the lack of prioritization and investment in digital experience (DEX) technology solutions. Specifically, industries where staff rated their digital employee experience the highest had significantly fewer technology disruptions and 12% less unproductive time from tech disruptions compared to those industries where employees ranked their DEX lowest. CEOs projected a 12.1% revenue increase and 18.1% cost reduction with a significantly improved digital experience, which would unlock an astonishing, unrealized upside revenue potential of $4 trillion for the Global Fortune 500.

“The business leaders of today’s hybrid and remote workforces are finally recognizing the enormous financial impact digital employee experience has on an organization’s performance across the board, and not just on productivity and morale, but also the company’s bottom-line,” said Mike Schumacher, CEO, Lakeside Software. “These figures clearly indicate the true urgency in addressing the current divide between how DEX is perceived in the C-suite and how it is experienced at the employee level.”

Additionally, in industries where the highest percentage of employees rated the quality of their digital experiences as average to low, a strong connection exists between IT problems and overall productivity. For example, approximately 78% of healthcare workers rate their DEX quality as average to very low and as a result of this experience also reported the highest number of IT issues (4.0) per week out of all the surveyed industries.

In light of such a significant impact on business outcomes, the study also found other critical gaps between DEX perception versus its implementation across the business. Although 67% of IT staff agree that DEX is a critical priority for the IT organization, nearly half of CEOs and CHROs say their companies don’t measure the quality of digital employee experience. With only 17% of employees believing that senior executives give digital experiences high or very high priority, employees are taking note.

The study also assessed the impact of remote working on the digital workplace, both from the perspective of how it is impacting the business, as well as the challenges workers are facing themselves.

Top remote work challenges employees face:

–        Distractions (approximately 50%)
–        Less effective collaboration and teamwork (approximately 45%)
–        Data and privacy issues (approximately 44%)
–        Poor internet connection quality (approximately 32%)

Additionally, nearly 92% of employees admitted that technology issues that interrupt their work could be avoided or prevented through digital experience management solutions.

“With C-level respondents reporting that on average, 43% of their workforce will continue to work remotely or hybrid post-pandemic, this new normal – as well as its associated core challenges of collaboration, employee engagement, customer service, and product innovation – are here to stay,” said Bill Hobbib, chief marketing officer, Lakeside Software. “Thankfully, from monitoring and diagnosing device issues to predicting potential system failures or performance issues before they occur, the kind of benefits a proper DEM management solution can provide should help enterprises address a number of these known challenges.”

“Furthermore, DEX can be instrumental to manage digital risk,” said Angela Salmeron, associate research director, Future of Work, IDC. “Remote workers are struggling to adopt new technologies, impacting the success of transformation projects. A DEM solution can provide relevant insight on usage and sentiment, and proactively identify IT dexterity problems in the workforce.”

Lakeside Software commissioned ESI ThoughtLab to survey C-level executives, employees and IT staff. Each survey assessed each group’s views on digital employee experience, best practices and impact on production metrics. Detailed results of the market survey will be presented at Lakeside’s DEXterity 2021 Virtual Conference on May 26.

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Global Green-bond Issuance Could Rise by Over 50% to About $500-550 Billion in 2021 says Bloomberg Intelligence

Green bond

Global green-bond issuance could rise by over 50% to about $500-$550 billion in 2021 following a robust first quarter with strong demand, sustained low yields and supportive Government policies, including the Biden administration’s clean-energy focus and China’s updated green-bond principles driving growth. Net-zero emissions targets may accelerate issuance from the two countries, a new report published by Bloomberg Intelligence (BI) says.

Green-bond supply totalled about $152 billion in Q1, states BI, with Governments contributing about $49 billion and financials close to $46 billion. If the growth trend extends, the tally may reach $500-$550 billion this year, rising over 50% vs. 2020.

The Q1 total was the highest for 10 years, with every corporate sector except communications and consumer staples seeing quarter-over-quarter growth. Total corporate, Governmental, asset-backed securities, and municipal green bond sales rose 186% compared to the previous yearas record low interest rates and pent-up demand for ESG debt increased green capital spending.

March alone saw over $74 billion in green-bond deals, notes BI, with Governmental entities dominating issuance including Italy, France, China Development Bank, German state bank KfW and the European Investment Bank.

Simone Andrews, BI ESG Analyst, said: “US dollar green-bond issuance could accelerate under the Biden administration in 2021, as we anticipate his $2.25 trillion infrastructure plan may speed up US green capital spending.

“Biden is set to rejoin the Paris Climate Agreement targeting net-zero emissions by 2050, which would mean heavy investments in infrastructure, transit, the power sector and green buildings, requiring green bond financing. Euro-denominated green debt represented about half of green-bond sales in 1Q, followed by U.S.-dollar sales of 21%. The U.S. green-bond supply totalled about $21 billion at Q1’s end, about a 100% increase from a year earlier.“

BI warns, however, that the lack of a standardised criteria by those who verify green-labelled bonds may lead to heightened concerns of “greenwashing,” weakening investor confidence.

While 89% of green corporate and sovereign debt issued in Q1 was verified by an external provider, there are growing concerns that, despite the “green” marketing, proceeds won’t go toward environmental projects or that the issuer itself isn’t actually reducing its environmental footprint over time. In March 2020, the European Commission Technical Expert Group published a usability guide to establish a unified green-bond standard and require accreditation of external providers. A legislative proposal may come in 2021.

China’s Green Sales Could Accelerate After Five-Year Low

About $32 billion, or 45%, of China’s green debt matures this year, leaving it with ample room for net new issuance of Yuan-denominated bonds, says BI in line with the nation’s pledge to be carbon neutral by 2060.

“Unless new issuance picks up, it could create an undersupply of emerging market green debt. The supply of Chinese green bonds plunged to $13.8 billion in 2020, or a 49% decline compared to the prior year, as borrowers focused on working capital needs given the pandemic,” adds Simone Andrews, BI ESG Analyst.

“Chinese green corporate bonds’ weighted average maturity of 1.66 years with a weighted fixed coupon of 3.83% suggests the deals tend to be shorter  than the broader corporate green market, which has a weighted average year of 7.08.”

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Tech Investing is the Key to Biden’s ‘Race to Zero’ to Avoid Climate Crisis

‘Race to Zero’ to avoid climate crisis

Save the Planet

President Biden’s ‘Race to Zero’ to reduce carbon emissions is underway, and go-ahead companies are jockeying to deliver emerging tech solutions to win it.

Leading nations including the USA (2nd biggest carbon emitter globally*), UK (17th), France (19th), Denmark, New Zealand, Japan(5th), and South Korea (8th) have committed to reaching net-zero by 2050. The world’s No1 emitter, China, has committed to net-zero by 2060. However, the International Energy Agency forecasts 2021 carbon emissions will be the second-highest ever recorded annually.

“It’s easy to see the financial and environmental benefits of using advanced technology to accelerate the launch of ‘Race to Zero’, pushing back against urban pollution, health risk and Climate Change and a future multi-trillion-dollar cost in economic and environmental damage,” said Vector Innovation Fund Co-Founder & The World Nano Foundation’s Paul Stannard.

Cities cover just 3% of the Earth but contribute 70% of global carbon emissions. Advanced technologies can provide the essential interconnectivity to drive this down.

Yet many tech companies say the tools for reaching net-zero already exist. One sector, in particular, is forging ahead in the battle to reduce carbon emissions in our cities using AI Digital Twin technology.

One Digital Twin market pioneer involved is Cityzenith’s whose SmartWorldOS™ software platform can create virtual replicas of buildings and urban areas to track, manage and optimize carbon emissions to minimize environmental damage.

The US company’s tech is currently deployed in multiple international megaprojects, including a substantial ground-breaking de-carbonization energy scheme for US cities.

Cityzenith’s CEO Michael Jansen said, “Cities are the key battleground, and that’s why we made our ‘Clean Cities – Clean Future’ pledge to donate our SmartWorldOS™ software platform to key cities one by one to drive down their carbon emission”.

Swiss-based company Climeworks has focused on carbon capture rather than emission management. Its Orca facility is designed to suck some 4,000 tons of carbon dioxide from the air each year.

Climeworks Christoph Beuttler believes carbon capture facilities like Orca must go mainstream if we are to reach net-zero:

“In order to stay within the 1.5-degree goal (to avoid Climate Change), we have 8-10 years left of current emissions, and we will not make that so, globally, we will have to remove CO2 from the atmosphere permanently.”

Fortunately, technology now attracts significant investment. Cityzenith has added over 5000 investors as part of its $15m Regulation A+ crowdfunding raise since the end of 2020.  Climate-focused investment funds such as US-based Congruent Ventures and the European fund, 2150, have recently supported start-ups and companies developing essential climate solutions. This form of investment is forecasted to run into trillions of dollars in the next 5 to 10 years.

But Cityzenith’s Jansen added: ” We must invest immediately, to act now and more effectively to protect our planet. “

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Sygnature Discovery Expands US Presence with Office in Bay Area Biotech Hub

Biotech

Sygnature Discovery, a world-leading integrated discovery and pre-clinical solutions provider, has established a new office presence in South San Francisco’s biotech hub at Oyster Point, where it can better serve current and future clients on the US west coast.

The new office presence comes in the wake of another year of impressive growth for the company, which has recently expanded operations at its headquarters in Nottingham, UK, as well as opening a second co-located integrated drug discovery site at the world-class research campus at Alderley Park, UK.

Sygnature established its first US office in 2019 in the heart of the Cambridge–Boston biotech hub in Massachusetts, and this expansion of its US presence with a second office will help meet growing demand from its US customers, which range from major pharma through to small seed-funded biotechs.

“Our very first client was actually from the US,” said Simon Hirst, Sygnature’s CEO and founder “and it remains a very significant market for us, both now and in our future strategy. It’s fantastic to have a base on the west coast, and in such a vibrant hub for the life sciences community.

“Our approach to drug discovery is based on true collaboration and partnership with our clients and having a physical presence near to many of them helps us to work the way we believe in, strengthening those ties and relationships that lead to success.”

The new office is located on Gateway Boulevard, Oyster Point, in South San Francisco – often nicknamed the Birthplace of Biotechnology and home to one of the largest biotech clusters in the world, with over 200 biotech companies, and 11.5 million square feet of biotech space across 500 acres.

Sygnature offers high-quality, fully-integrated drug discovery and pre-clinical services to customers around the world, as well as flexible, stand-alone solutions in medicinal chemistry, in vitro biology, computational chemistry, DMPK and pre-clinical experimental services.

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Trump Pushed UPU Reform. Ten Months On, His Controversial Policy Looks Set to Stay

Postal Stamps

In 2019, former President Donald Trump staged a showdown with the Universal Postal Union over China’s unfair postal rates. His resulting victory saw US packet rates increase by an average of 50% in July 2020. Ten months on, ParcelHero asks, ‘Could UPU reform be a positive legacy of Trump’s time in office?’

In 2019, the USA went head-to-head with the Universal Postal Union (UPU) – the governing body of all international mail services – in a bid to raise China’s rock-bottom postal rates to America. Then President Donald Trump threatened to quit the nearly 150-year-old organisation unless it voted to raise China’s payments for access to the US and other countries’ postal systems.  

The international delivery expert ParcelHero says a dramatic meeting in September 2019 resulted in a ‘High Noon’-style showdown between the USA and the UPU that threatened to destroy postal rates agreements across the world. In the event, Trump’s team won the day. Consequently, a significant rise in the cost of small packages arriving from China was introduced on 1 July 2020.

ParcelHero’s Head of Consumer Research, David Jinks M.I.L.T., says that even though the move was the kind of ‘America first’ policy typical of Trump, the result is likely to have a positive impact on international e-commerce lasting many years.

Says David: ‘Significantly, other Western countries, including the UK, will now also be able to renegotiate the rates other countries – including China – pay to access their postal system. This will have a lasting international impact and help level the playing field for UK and European online traders.

‘In his first 100 days, President Joe Biden signed 24 executive actions that directly reverse Trump’s policies. These include halting funding for Trump’s border wall, reversing travel bans on largely Muslim countries and cancelling the Keystone XL pipeline. However, it’s highly likely that UPU reform will stand as a permanent legacy of Trump’s time in office.

‘There’s no doubting that, under the previous UPU agreement, Chinese sellers had an unfair advantage over e-commerce sellers in the West. It had been receiving what amounted to Third World rate subsidies for 50 years, despite having become the second wealthiest nation in the world.

‘US e-commerce traders were being significantly disadvantaged by the rates. Amazingly, it was cheaper for a Chinese seller in Shanghai to mail a packet of earrings to New York, than for a US seller in neighbouring Pennsylvania to send the same packet to the same address.

‘Trump’s high-risk strategy was to force the other member countries of the UPU to allow the US to set its own postal access rates for small packages arriving in the US, or it would quit the organisation altogether. This would have led to the complete collapse of international mailing systems, as every country scrabbled to set its own rates.

‘Trump’s gambit won the day and the first phase of the resulting reforms was introduced ten months ago. Between 2020 and 2025, logistical costs for exporting small parcels from China to the US are expected to increase 164%.

‘For the US, the win is already paying dividends. Katherine Muth, of the US-based International Mailers Advisory Group, told the Financial Times in December that the USPS had already raised its inbound rates by an average of about 50%. This had caused a “huge drop-off in volume on inbound parcels” – especially from China, which had sent about half of all packages.

‘Chinese sellers agree it has had a significant impact. The Shanghai-based businessman Bai Haitao sells to the US and Europe, under the trading name Vastsee. In March, he told Marketplace.org that, prior to the increase, during peak times he used to send more than 10,000 small parcels a day to the US. After the new rates were introduced, he revealed the cost of sending a necklace from his Shanghai warehouse to the US went from mere pennies to more than $1. For items such as headphones, the logistics cost has doubled or even tripled. Since the extra cost had to be passed on to his US consumers, his company saw sales drop by half from its 2018 volumes.

‘However, closer to home, there is a price to be paid for Trump’s reform. America’s new mailing rates are being increased in phases over the next few years and all countries, not just China, will be impacted. UK sellers using traditional UK Post Office services to send economy mailings of up to 2kg may see rates rise if their service uses the United States Postal Service (USPS) once in the USA. However, express courier shipments such as those available through ParcelHero should not be impacted by the new charges.

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