A list of transformative technologies, from blockchain to quantum computing, are shaping the future of banking and payments, bringing new risks and opportunities to businesses engaged in cross-border business.
The rapid pace of change and the urgent need for businesses and regulators to keep pace was explored in a webinar on the future of fintech hosted in April by the Georgia State University Center for International Business Education and Research.
Evaristo Doria, a professor in the GSU Robinson College of Commercesaid in an introduction that companies that want to be globally competitive must “master the present, and that’s fundamental to their survival, but they must also anticipate the future, and that’s fundamental to succeed “.
This future seems to be coming to fruition faster as the Internet itself grows from a mere interconnected clearinghouse of information to a web of ecosystems larger than any single government or private sector player can muster.
Building Trust with Blockchain
One example is blockchain, the distributed ledger technology that burst onto the scene as a way to verify transactions in bitcoin, the first major cryptocurrency.
This underlying technology, which presents every transaction on a transparent log distributed across multiple servers around the world, has given rise to a flurry of activity in “decentralized finance” – the exchange of value outside the jurisdiction of a central bank or a national government. Non-fungible tokens, certificates verifying digital assets like GIFs or other works of art, provide an example of how this is evolving.
But that’s just a taste of how blockchains could change business, said Jai Singh Arun, Senior Director of Programs at IBM Research.
“Think of blockchain 1.0 as the digital currency, blockchain 2.0 as the digital economy, and then 3.0, which we will see in the next five years or so, is the digital society,” Arun said during of the discussion.
The technology, he argues, could be used to globally replicate trusted networks that allow known parties to transact with each other, opening the way for digital commerce in areas where it has traditionally not been. possible.
Other use cases include cross-border payments, syndicated bank loans and even traditional logistics, where proponents say the technology could reduce delays and improve visibility in the supply chain. Identity authentication is another challenge blockchain is being used to solve as it becomes more mainstream.
“We know that to date more than 40 central banks from different countries are experimenting with blockchain technology,” he said. He noted that the US President Joe BidenThe March 2022 executive order calling on regulators to look into digital assets was an acknowledgment that governments view their rise as inexorable.
Blockchain’s promise, especially when paired with technologies such as the Internet of Things, is the reason some $25 billion has been invested in blockchain-focused startups over the past few years, he said. said Mr. Arun.
Quantum Computing Enables New Modeling and Risk Reduction
Equally powerful is the coming revolution in quantum computing, which could transform myriad industries with its ability to perform computations exponentially faster than classical computers, said Enrique Lisaso Olmos, Spain– Founder and CEO of Multiverse Computing and member of the board of directors of the European Quantum Industry Consortium.
In addition to ambitious corporate research, governments are investing billions in the development of quantum computing, which deals with algorithms using subatomic particles that are not limited to binary states like the electronic bits of standard computers.
This has huge implications for cryptography and a variety of other fields such as machine learning and artificial intelligence, which rely on analyzing huge datasets, or where simulations need to hold has many variables.
“The risk is huge just to be left behind,” Mr. Olmos said.
Investment banking is one of the areas ripe for disruption, as quantum computers could produce better predictive models that could help banks manage their portfolio and detect fraud, while protecting them from risk in the financial system.
During the global financial crisis of 2008, trading of bundled financial instruments was done electronically at such speed that no one could follow the ensuing spiral; quantum computing could have helped see that coming, Olmos said.
Fintech in everything: embedded finance
Blockchains and faster computing show the highly contingent relationship between regulators and incumbents often preserving the status quo and disruptors seeking to change it, says Nir Netzerhead of the israeli fintech association Fintech-Aviv.
On the one hand, the emergence of decentralized instruments like cryptocurrency makes the traditional banking sector less powerful. This became clear after Russia’s invasion of Ukraine and the subsequent withdrawal of its banks from FAST global interbank payments system, Netzer said.
“(SWIFT) is powerful, but it’s not essential,” he said, noting that many Russians were still able to move their assets out of the country using cryptocurrency and other alternative payment networks, which are on the rise.
At the same time, regulators’ embrace of “open banking” – where traditional banks are required to give consumers greater control over their own data and open their platforms to integrations via APIs – has encouraged the emergence of many business-to-business fintechs. who sell to the banks instead of trying to upset them.
Israeli disruptors love social investment app eToro and cross-border payments provider Payerwhich have both been made public via SPACs that have raised billions in US markets, may hint at a different story, but most fintech successes are “on the side of empowerment and not on the side of disruption, and we see that regulation actually allows that and encourages that.
Fintech includes payments, he said, but it’s best to see the infrastructure that underpins new business models and markets — think of the substantive financial transactions that happen via Uber and AirBnBMr. Netzer said.
“You can try to imagine where the world is going with the term ’embedded finance,'” Netzer said. “There is a financial aspect to everything we do.”
Watch the full webinar above or here, and check out past events from the GSU-CIBER International Business Webinar Series here.
Next in the series: Revisiting Export Strategy: Research and Practice Oct. 20 at 11 a.m.