The Future of Payments: Series 2 - Part III. Bitcoins: Can the Tinkerbell Effect Become a Self-Fulfilling Prophecy?

We dig into how the world of payments is moving away from cash towards digital payments. This structural shift from cash to digital payments is expected to continue in 2023 with further evolution of digital IDs and digital wallets. Amid a macro slowdown, we expect financial solutions offered by non-financial firms, such as embedded financing, to play a major role in the further adoption of digital payments. [more]

In the first part of series 4 of our Future of Payments series, Marion Laboure and Cassidy Ainsworth-Grace take a look at how the end of a rare macroeconomic environment, featuring near-zero interest rates, stimulus packages, and excess liquidity, could clean the market of bad actors, much like the dot-com bubble did two decades ago. [more]

Semiconductors rank first as the most traded goods in global trade statistics in 2020, representing 15% of total global trade in goods. Before 2015, they were surpassed by computers and crude oil, based on the HS4 categorization by the World Customs Organization (WCO). Prices for semiconductors have fallen dramatically and steadily since 1995, both in real and nominal terms. Our new Trade Chain Complexity Index (TCC Index) allows for a comparison of the ratio of global trade with sales of various goods. For semiconductors, the TCC Index shows a peak of 7.2 for 2008. Since then, the complexity value has steadily decreased with a value of 5.9 for 2020. This trend might be the first sign of more cautious supply chain strategies in a challenging macro environment - and a downward trend for semiconductor globalization in a new era of digital sovereignty. [more]

Global sales of semiconductors reached an all-time high in 2021. At the same time, global tensions and growing awareness of the fragility of supply chains have led to a reassessment of the strategic importance of global supply chains and semiconductors. We use our Structural Semiconductor Sales Model (3SM) to explore the extent to which government initiatives on digital sovereignty in the US, Europe, and Asia will impact chip manufacturing capacities. In doing so, we calculate structural (i.e., non-cyclical) supply and demand for the period up to 2030. Assuming a continuation of historical supply and demand trends and a further tightening of the ratio of sales to investments (sales-to-capex ratio), it is our forecast that a huge structural demand gap will emerge in 2030 that cannot be closed by the government subsidy programs announced to date. From this perspective, today’s temporary supply chain issues may overlap with or be succeeded by structural shortages. [more]

Digital policy has become increasingly important in recent years. With its digital strategy, the German government has presented an agenda for which a digital budget is to be adopted in the Bundestag in November 2022. This is an important contribution by Germany to the EU's Digital Decade, particularly in the four areas of connectivity (5G and fiber coverage), digital skills, the use of digital technologies and AI in companies, and the provision of digital public services. Further legislative initiatives at EU level have as their goal the creation of a digital space in order to be able to compete internationally with Asia and the USA. To this end, the German government's digital strategy sets priorities in 25 fields of action. The next three years will be decisive for an effective implementation of the digital reform program for Germany. [more]

Stablecoins and the DeFi ecosystem have taken a hard hit recently. However, the current stress for cryptos caused by tighter monetary policy may reveal which services offer real value for customers. In fact, leading collateral-backed stablecoins have weathered the storm quite well. The ecosystem will probably face further losses but emerge consolidated and well positioned for continued growth. [more]

In 2021, global sales in the semiconductor industry reached an all-time high of USD 556 bn. Despite this record figure, the industry currently faces severe challenges as the present semiconductor cycle is characterized by a triple whammy: Huge demand due to a boost for digitalization, COVID-related and non-COVID related supply shortages and geopolitical tensions. Due to the sharp rise in chip demand, new chip factories are currently being built in the US, Asia and Europe to meet rising demand over the next decade. We think, the present sales cycle will be extraordinary long. [more]

Quantum 2.0 super technologies will massively change the way we live and work. Quantum has the potential to shape a new economic era. The vision of Quantum 2.0 is that processing power of quantum computing could skyrocket which allows the development of previously technologically unfeasible products and technologies such as an ultra-high performance secure quantum internet. Real-time quantum applications and quantum AI might organize our daily lives. It could also open the door to a new kind of science with novel materials and products in probably every field from medicine to chemistry and physics. As a consequence of these developments, the number of new goods and services may explode. This potential revolution leads to new economic and social questions which we tackle in this publication. It also provides an overview about developments in quantum computing and quantum software. [more]

The introduction of a digital euro is drawing closer: as a digital version of cash it is primarily intended to be a means of payment rather than an instrument for investment. The ECB wants to strengthen Europe’s sovereignty in the world of payments as well as the euro’s competitive position vis-à-vis other currencies. However, this will only be achieved if the digital euro is used widely, which is not very likely. A limit is expected on how much users can hold, to prevent a massive outflow of bank deposits into digital central bank money. In this case, lending decisions and money creation would eventually shift to the ECB. Europe would face the question which type of monetary and financial system it wants. [more]

A year ago, we stated that:
− Cryptocurrencies would become more mainstream. Both Facebook and PayPal will be adding cryptocurrency capability to their wallets early 2021.
− Central bank digital currencies (CBDCs) will be widely discussed. The Bahamas launched the first nationwide CBDC last October, and both Sweden and China launched pilots in early 2020.

What do we see this year? Click here and find out [more]

Covid-19 disruption to business has reshuffled priorities for CFOs and treasurers. They must address how to: maintain access to liquidity /credit; implement back-up procedures; create visibility to total cash in global locations; determine cash requirements in the short and medium term; and assess current exposures. [more]

Like the Internet in the 1990s, distributed ledger technology (DLT) and blockchain are set to transform the economy. Yet, two-thirds of senior executives still don’t know what DLT is, and those who do tend to ignore its uses outside of some simple financial applications. [more]