Trends and technologies that could impact ESOPs

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Key Takeaways

It's been two years since the global pandemic began, and it has changed the socio and economic landscape considerably. There’s a shift in preference towards digital banking and online transactions to keep themselves safe. A report said  over 2.14 billion people will buy goods and services online in 2021, up from 1.66 billion in 2016. While we're still dealing with uncertainties in COVID 19 variants, more people are getting stressed increasingly, impacting their physical and mental health. 

But it's not all doom and gloom. Countries are gradually opening their borders to allow tourists and migrants to come in. While economies have slowed, some sectors continue to shine, namely ESOPs or Employee Stock Option Plans, which have stayed resilient during the pandemic.


What will the future hold forESOP in 2022 and beyond? While we don't have a crystal ball, we see these three trends and technologies that will impact ESOPs.


Blockchain will revolutionise ESOP record-keeping


In 2021, you probably heard about blockchain. A blockchain is an ever-growing list of records that form blocks. They are all linked in a peer-to-peer network using cryptography. It's an incredibly secure ledger where you can keep all kinds of transactions and assets. We're excited about blockchain because it could help resolve archaic record-keeping methods. Corporate governance has been a hot-button issue in recent years as there is an increasing awareness of ESG (environmental, social responsibility, and governance) issues.


ResearchGate reported that Blockchain could be instrumental in bringing about greater transparency, improved liquidity, and lowering costs in all aspects of corporate governance. Blockchain can make ESOP issuance more secure as it allows companies to issue smart contracts with set requirements for transfer and release. It can free up companies from manual transfers, document signing, and more. Employees would also get immediate control over their options, provide greater flexibility on what to do with their ESOPs, and likely foster mutual trust between them and their employers.


Software As A Service will simplify ESOP administration

Using a SaaS (Software as aService) platform can make issuing ESOPs more effective. SaaS allows users to get software licenses and use them on a subscription basis. Instead of worrying about using outdated software, applications on SaaS get updated automatically, and developers continually improve it, putting in more features and capabilities.  


Companies can tap on ESOP SaaS platforms to manage and track ESOP easily. Instead of manually issuing and tracking ESOPs, SaaS platforms can automate them, providing greater convenience and transparency. Both employees and employers can check and transfer theirESOPs through the web or mobile. 


We'll likely see more companies adopting SaaS platforms to help implement ESOP in the new year. 


Fintech will aid ESOP financial transactions

Fintech solutions are on the rise. Digital banking, online payment gateways, cross-border eCommerce to artificial intelligence, and other fintech solutions make it possible to do financial transactions more conveniently and securely. Deloitte estimated that the global fintech market would reach USD 212 billion by 2024 (pre-COVID-19forecast).


That's why we think that Fintech will play a more significant role in ESOP, facilitating payment and liquidity for employees, especially when they exercise their ESOP. An example would be employees accessing liquidity to cover the exercise cost. 


In the future, ESOPs will likely be integrated into payroll solutions, allowing for a one-stop solution in managing their ESOP portfolio together with their payroll.


The future of ESOPs is bright despite the economic gloom of the past couple of years. Contact us today if you'd like to discuss implementing ESOP for your startup.