Like every financial pontificator and prognosticator, I am going to present predictions for 2023. I could go tearing through the entrail or birds or try reading tarot cards, but experience teaches the best we can do is guess, and then carefully dress it up and hedge these guesses to present them as informed advice. But that’s not what readers are looking for. Readers generally want insights and ideas so here is my best advice for dealing with 2023.

First, forget everything you ever thought you knew about economics and your perceptions of current markets! That might just be the best piece of advice I ever give. Chuck everything you think is sacrosanct in the bin and start again. Do so, and the current contradictory markets and theoretical economic morass might make a little more sense. Break it down and reconstruct the bits and pieces to make sense of your perceptions! Remembering, of course, to spice it with plenty of self-doubt.

Remember the most significant danger to markets is people. The market, after all, is just an enormous voting machine weighing up the votes of every participant. Things get complicated when everyone is pessimistically careful causing the prices to become overly depressed. Hence smart money says to be fearless when others are fearful. Things get dangerous when market participants are optimistically careless causing prices to soar to euphoric levels. Know the mood and trade accordingly.

We still seem trapped in a phase of over-optimism with investors jumping on any positive news to validate their hopes the market will go higher. After all, that’s what they have been doing since 2009, so surely, they can only ever go up. Nope. A lower-than-expected US Consumer Price Index pushes up prices for a while. Any hints of a Fed “pivot” to lower rate rises will push stock markets higher.

If you want an example of over-optimism in the face of reality, it’s the high likelihood that the market believes that Central Banks can navigate a genuine soft landing. Why? They have never previously succeeded. Every known instance of economies overheating, and rampant inflation has been followed by a crash of some description as Central Banks either let inflation run on too long or engineer an economic crisis by hiking rates too hard. There is no such thing as a soft landing, but a good landing is one you can walk away from.

First, forget everything you ever thought you knew about economics and your perceptions of current markets!

The expectation that we can still avoid a damaging recession in 2023 is strong across markets. I don’t want to sound grumpy, but I still think a recession will happen because of rising rates, property sentiment dipping, and inflation which leaves consumers unhappy, nervous and not buying. For consumer societies to thrive, we need more, not less consumption. People spend even less when faced with tax rises, austerity spending, declining services, rabid inflation, industrial strife, and ongoing political sleaze. It’s a recipe for economic misery, and next year's stagflation, in the UK, looks nailed on.

To see where we are going, look back to where we have come from. 2022 was a watershed year. The third exogenous shock of the decade, the Ukraine War and Energy Price Shock, followed by COVID-19 in 2020 and Supply Chain Disruptions in 2021. We also have a critical endogenous shock underway. Quantitative Tightening as global Central Banks try to unroll the effects of monetary experimentation in the 2010s.

You also must understand the key economic factors that drove markets and inflation through the 2010s. The first was monetary experimentation keeping interest rates low to drive economic recovery following the global financial crash of 2008. But we didn’t get an economic boom. What we got was galloping financial asset inflation as bond prices and stock prices went stratospheric. That distortion enflamed market exuberance and euphoria, triggering the stock market bubbles in Big Tech, disruptive tech and the stupidities of meme stocks, crypto and NFTs.

At the same time, we had the second factor, a de-facto cap on global inflation: China. The Middle Kingdom became the “cheapest to deliver” manufacturer exporting deflation around the globe, and all supply chains led back to it. COVID and the building of a geopolitical stag fight between China and the USA profoundly changed that reality. It unleashed supply chain price instability as geopolitics changed and shut off the deflation spigot.

The era of cheap money fuelling markets and downward pressure on prices is over. Make sure you understand that there is a new reality of real inflation and expensive money before figuring out what 2023 looks like. Although the indications are for inflation to moderate, I reckon it will prove stubbornly high and challenging to de-fumigate from Western economies.

Let’s scribble down some possible scenarios and predictions for 2023. My starting point would be to worry about further shocks. What about another exogenous shock?  Could COVID in China overwhelming the medical system create a judder moment triggering another China shutdown, making the Government look weak, causing the possibility of a deeper global recession, and the possibility of President Xi deciding to deflect by going outward bound on Taiwan?

Could the Bird Flu that’s ravaged Christmas Turkey’s jump species lead to a second major pandemic? What are the chances Central Banks decide to go soft again and turn market accommodating? Slashing rates to avoid a market meltdown and a deep recession?

These are all known unknowns, and none are binary. There are numerous others we could discuss, including political instability across the west, the dollar, and the great retirement causing a demographic crisis in the jobs market, and thus the economics of every firm that hires staff!

Equally, there are a host of entirely unpredictable events that could occur. Dreaming up storyboards for disaster movies is fun but scary: the big West Coast earthquake, a super-volcano triggering a mini-ice-age, a meteor strike, a solar flare, an unwater landslide caused by ocean warming causing a tsunami to hit Europe’s Atlantic and North Sea Coasts, a storm surge in the North Sea flooding London and the Netherlands. There is any number of unimaginable events.

Or it may be something financial. A big bank discovers its bust on the back of a housing crisis, a major hedge fund evaporating in a slew of downright stupid trades, or a pension fund exploding in a leverage/liquidity event. Don’t discount anything upsetting our cosy little apple cart of expectations. I think it is 100% likely the remaining cryptocurrency exchanges will collapse in a welter of liquidity events but if you were invested, there is no one to blame but yourself.

What about bond markets? The consensus is bonds are likely to rally on the back of the pace of interest rate rises declining. That doesn’t factor in residual inflation remaining higher than expected, the effects of the sheer over-indebtedness of nations like Italy, France, and even the USA, or the fact that Central Banks are trying to sell down their QE inventory creating a supply glut. The much-heralded bond rally may yet be premature.

Or earnings? Stock markets are still rolling on hopes rather than the fundamentals of good versus bad companies and their earnings. The quality of earnings and their sustainability to competitive threats and a changing economy matter. There is still a shakeout on valuations and stock market multiples to come.

In currencies, sterling has recovered all its losses since the Liz Truss mini-budget disaster but mainly on the back of adults being back in the Downing Street room, and dollar weakness. What does the coming year hold for US growth on the back of a weaker dollar and with all the effects that would have on the global economy?

I predict the big themes for 2023 will be renewables, carbon mitigation, agri-business, soil enhancement, commodity weakness, healthcare in terms of AI, obesity and Cancer drugs, consumers and retail. I plan to continue exploring these topics in 2023.

There are a few reasons that the cost will go up, which we just touched on. Let us dig a little deeper into the main reasons why the cost of premiums is on the rise and why they will continue to rise for now.

1. Cost Of Claims

The biggest aspect of driving that causes the premium rates to increase are accidents. The more claims that a carrier has filed against them, the more money that they must pay out of their bank funds designed for the task. As with other businesses, the more money that is paid out the less the profit margins will be. To maintain their pay-out accounts the insurance companies will raise the premiums costs for all of us. This makes good business sense for them, but it is unwelcome news for us. 

2. Inflation

Another main factor of increases is the rise of inflation throughout the economy. Prices around us are soaring through the roof right now. Housing is out of control. Car prices are very high, especially for used models, and the basic costs of living are on the rise. All this while the wages many people get for their jobs allow them to stay in the poverty levels of the nation, but it keeps them from being homeless. All these changes will spill over into the insurance industry. Their costs will increase, so our costs will increase even more.

3. State Variances

The cost of a policy will depend a lot on the state that you live in. Michigan is reportedly the highest, and Hawaii is the cheapest. Some of the best car insurance companies will offer the lowest rates that they can, but they must follow the legal limits that are set by the state. If your area requires a certain amount of liability coverage, you will have to pay for that amount as a rock bottom policy. If you want to know the specific amounts that the policies will increase in your state, go to the first link in this article. It will allow you to zero in on your specific area of the nation.

4. Vehicles

One of the biggest, and most detrimental, changes that we are all seeing are the vehicles that we drive. It is common knowledge that right now car makers are having trouble getting the parts that they need to keep their manufacturing lines open. This is sad news for us because it means that many items, such as the computer systems, are not available to order. If they can be found, they may take a long time to receive them, which leaves you without a car. For this reason, most claims on the newer cars will be for replacement, rather than fixing. 

Final Thoughts

No matter what we all do, or how much people complain, the increase in auto insurance premiums will continue to rise. The changes throughout the nation affect everything within the country. Price increases are an aspect of life that we have all become accustomed to, but the last couple of years spoiled us. The discounts and money returned were nice, but we all knew that it would not last forever. As the future continues to creep up on us all, the insurance sectors will continue to increase prices until the world gets back to some semblance of normal. From there, time will deal with the tale.

As most global activity defaulted to remote, FinTechs were able to cater to this trend by offering digital tools that solved a whole host of new problems businesses were now faced with - in the case of Soldo, for example, by offering visibility for finance teams as they increasingly found themselves in the dark as a result of remote working.

As a consequence, it’s been pleasing to see a significant increase in FinTech investment over the last year, in spite of a rocky economic landscape. This has been particularly pronounced in the US, where private equity investments have grown from tens of billions of dollars several years ago to hundreds of billions, approaching trillions of dollars - if counting the market caps of firms that have gone public.

But what does 2022 have in store for the sector? Will the industry continue to thrive and what challenges will need to be surmounted in order to ensure this?

The post-pandemic boom                                             

2022 will hopefully see the end of the COVID-19 pandemic and, with this, a subsequent economic boom. Soldo’s recent report with Coleman Parkes entitled Open for Business looked at how finance teams are planning for this and the opportunities and challenges they see. We found that almost three quarters (70%) of UK businesses are prioritising growth in the next 12 months – with 44% saying their strategy will be to raise new capital, and a third (33%) to acquire businesses through mergers and acquisitions.

The report also highlights that (72%) believe greater visibility, control and oversight across expenditure has a positive impact on revenue growth. In preparing for this, finance teams are turning to investments in technology, and specifically automation tools. Two thirds (66%) cited investments in IT tech and automation as key drivers of profitability, while almost three quarters (74%) have invested in automation to manage employee expenses. FinTechs will hence have a critical role to play in facilitating post-pandemic growth and need to capitalise on the opportunities that the needs of businesses will present.

The great “switch on”

The economic instability brought about by the pandemic caused many businesses to shift into survival mode and cut back on spending, limiting expenses to the strictly essential. However, with the end of social distancing measures, events, meals, drinks and travel are increasingly once again becoming a part of working life.

For finance teams, this great “switch on” means having to manage an influx of POs as workers look to enjoy their renewed freedoms, and this is only set to increase into 2022. This will have to be balanced against managing the costs of the coronavirus crisis, with Bounce Back Loans and deferred tax payments having to be paid off.

With so many UK businesses geared towards growth, the pressure is on finance teams to deliver a holistic view of spending, control costs and implement systems that provide the business with a level of data insight that is essential to driving growth – in whichever format that takes. This pressure provides further opportunities for the FinTech sector to step in and offer solutions. Without the right tools and services in place, finance teams will undoubtedly be wasting precious time that could be better spent on initiatives that aid strategic growth.

Europe vs the World

The global FinTech landscape is in constant flux and it will be interesting to see how this plays out in 2022, particularly how European FinTech businesses hold up in the face of increasing competition from elsewhere in the world.

Providing that COVID-19 has no further nasty surprises to throw our way, we can expect the next 12 months to see a huge global economic rebound.

The EU is currently home to only 7.2% of worldwide unicorns. The sum value of all EU unicorns and EU tech and digital champions already public is dwarfed by the value of today’s non-EU big tech. This allows the latter to buy out potential disruptors, solidify industrial control, build scale, and manage the global digital and tech agenda – and we should expect this trend to continue upwards in 2022.

We have watched the development of China’s FinTech space with particular interest and expect to see a continued rise in 2022. As of April 2021, the sectors home to the highest number of unicorns in China were technology and telecommunications, and transportation and logistics. However, Chinese unicorns active in finance or insurance had significantly higher market valuations than unicorns in either of these sectors.

Maintaining high levels of innovation is a key challenge for European FinTech. In the EU, ensuring innovation is essential to both territorial cohesion and growth. Government, as well as business, has a role to play in facing this challenge. It can do so by reducing fragmentation of regulation across the EU’s main innovation areas and removing unnecessary obstacles. It is equally important to have close cooperation with the existing expert organisations who unite various European innovation industries.

Final thoughts

We all hope that 2022 will bring a return to true normality and much needed social and market stability across the globe. Providing that COVID-19 has no further nasty surprises to throw our way, we can expect the next 12 months to see a huge global economic rebound. This will mean that opportunities for the FinTech sector will be in no short supply. But FinTechs, investors and governments alike must not be too complacent about the inevitability of bouncing back. Careful planning and management will still be required to ensure opportunities are not squandered.

Below Douglas Blakey, editor at GlobalData Electronic Payments International, considers the key changes ahead.

Among the most notable product launches of 2019 was the Apple Card. It was notable not just for the hype it generated. The card also features the natty feature of no card number, signature or expiry date.

Any 2020 forecasts have to include the call that we can expect to see more of the same. There is huge potential for the popularity of virtual cards to soar due to the peace of mind given to consumers by way of increased security.

A second prediction is a little riskier and that is a tad less political uncertainty in the UK. It may be a little optimistic to make similar forecasts in other markets, such as Hong Kong, Chile and Venezuela. But in the UK, a decisive Conservative general election victory may clear some of the fog. The payments sector will take in its stride the likely rise in the value of a currently undervalued sterling.

Strong customer authentication

A third forecast relates to AI and machine learning. Expect more investment in real-time transactional data analysis to uncover potential criminal activity.

We will hear plenty more about how strong customer identification will play a crucial role in reducing occurrences of fraud in payments.  As the staggered rollout of 3DS 2.0 continues, ahead of full compliance with PSD2 in March 2021 there should be plenty of positive news stories about success in fraud prevention.

On a similar theme, Secure Remote Commerce will allow the sector to rethink the online checkout. It removes the need to type card details manually and replaces the card number with a token.

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Open Banking still to show its potential

Next up, faster payments. Safe 2020 forecasts must include the expectation of many a breathless press release about an explosion in faster payments.

And then there is Open Banking. 2019 was meant to be the year that Open Banking took off. The kindest summary would be that it has yet to show its full potential. But in an effort to be upbeat about Open Banking, expect to see a significant increase in the adoption of the payments side of Open Banking in 2020.

Finally, a word on regulation. It is safe to forecast further acceleration towards consolidation in payments. One of the best examples is the roadmap to the Eurosystem Single Market Infrastructure Gateway promoted by the European Central Bank.

1. Technology innovation will transform international payments.

In today’s connected world, consumers are no longer willing to put up with delays and hefty fees for processing cross-border payments. As customer demand for frictionless on-demand payments grows, payment providers and banks will be competing to offer ever faster cross-border payment services to their customers. This will drive the wider adoption of blockchain and distributed ledger technologies, enabling financial institutions to transfer low-value payments in real-time at a fraction of the cost incumbent processes are taking. This technology can enable financial institutions to move money around the world in the same way that we exchange information over the internet, so 2020 will be a tipping point for driving efficiency and innovation in cross-border payments.

2. The rise of banking-as-a-service will drive stronger competition in the market.

With banks having to juggle the relentless pressure of faster innovation while keeping down technology costs, we’ll see more financial institutions turning to cloud providers to help radically reduce IT costs.

Cloud-based solutions are ideally placed to easily and cost-effectively plug into emerging blockchain networks, AI engines and other developing FinTech innovations. As such, using cloud-based technologies will create a strong competitive advantage for agile, forward-looking financial services providers that embrace digital innovation - intensifying market competition around the globe. Cloud-platform companies like 10X and Thought Machine are great examples of this new paradigm that is being adopted by banks, and we’re likely to see more similar players entering the market in 2020 and beyond. As a result, on-premise “museum” banking technology will be increasingly displaced by more agile, affordable cloud-based fintech solutions.

With banks having to juggle the relentless pressure of faster innovation while keeping down technology costs, we’ll see more financial institutions turning to cloud providers to help radically reduce IT costs.

3. This will be the year of new cross-currency consumer payment solutions:

In 2020, we’ll see a rise in new consumer purchase solutions for tourists and travellers that enable cross-currency payments, without requiring cards or card rails. For example, such solutions could enable a Japanese tourist visiting Thailand to make purchases using a mobile app or QR code, triggering an immediate cross-border payment from their Japanese yen account to a Thai baht merchant’s account. Blockchain technology, combined with digital assets, will be a key driver in this innovation. Such payment services could have a huge impact on the payments market, bringing untapped opportunities for payment providers in the new year

4. In-app micro and wallet payments will become mainstream.

As technological innovation helps bring down the cost for processing cross-border payments, the business case for micropayments is becoming more viable. Traditionally, micropayments have been confined to messaging apps like Telegram and Line, but with big tech companies introducing payment services of their own, the case for micropayments will soon expand far beyond that. In 2020 we can expect to see a surge of developers flocking to blockchain and digital assets do develop solutions to satisfy demand for in-app, real-time micropayments. For example, micropayments can be applied across multiple use cases and industries: from incentivising players in the gaming industry to creating new payment models for the streaming of online content or paying for energy/electricity bills.

5. The shift toward low-value, high-volume payments will help SMEs break into new markets much faster.

The cross-border payments market today is not set up for small businesses. In fact, international payments are often slow, prone to errors and accrue extremely high costs. Moreover, international payments are not even readily available in some emerging markets. This is a huge setback for small businesses looking to expand operations and scale internationally. The good news is that new blockchain technologies can address all these challenges and enable SMEs to invoice and receive international payments immediately, in small amounts, and with 100% certainty.

The adoption of blockchain technologies has the potential to be a game-changer for SMEs globally - enabling them to improve cash flow and reduce the cost of running a business while freeing up precious capital for reinvestment. As a result, 2020 will see a rise in international payment services for SMEs across emerging markets, helping them to expand and process immediate payments around the world and improve access to new markets.

But it’s not a perfect world, of which you are undoubtedly aware. And the fact is, 2020 is not going to be open banking nirvana. The vision has been well articulated. But the vision is not reality — and it will take considerable work for the reality to emerge.

That is not to say that 2020 isn’t going to be incredibly significant for open banking and its future. With PSD2 and its related Strong Customer Authentication (SCA) firmly in place, many more European consumers are going to become more familiar with the new frontier of banking.

For them, a world in which consumers can conveniently, in one place, see their full financial profile and easily compare terms, fees and interest earned on multiple accounts, loans and investments will be tantalisingly within reach. The promise of easily budgeting and accurately examining every expenditure they make — the ability to better rein in unnecessary or ill-advised spending, the capability to manage subscriptions and suspend underused ones  — will be right there in front of them.

Regulations and rules allowing for data to be shared among banks, third-party service providers and businesses, including retailers and others selling services, make a whole, new kind of commerce possible.

But new paradigms are complicated. This one requires constructing the right technology, alliances and incentives. And the truth is, banks are not fully prepared to offer all that is necessary to seamlessly provide this new form of commerce and consumers appear not ready to take advantage of it.

For the unbanked, open banking is a non sequitur and a non-starter.

In short, things are going to break.

User experiences will vary by bank and by third-party provider — and even by consumer. Open banking tilts toward the haves and the have-nots — those who have enough money to make use of apps that keep an eye on it for them, and those who have smartphones, connectivity and a second-nature comfort with the technology and apps that deliver the value provided by third-party apps.

For the unbanked, open banking is a non sequitur and a non-starter.

The convenience that comes with sharing data will be accompanied by the risk of having a larger surface area for cybercriminals to attack.

If some financial accounts integrate seamlessly through banks with third-party providers, but others fall short, consumers could be faced with a half-baked view of their financial standing. Worse yet, they might operate under the assumption that they are getting the big picture, when in fact, vital information is missing from the resource they consult to make important financial decisions.

All that means is rather than 2020 being the year when open banking flourishes, 2020 is the year that banks, FinTech and regulators need to sell consumers on the new model of conducting commerce — a model that more than likely will get off to a shaky start.

Banks seeking to deliver on the open banking promise are going to have to over-index on communication — relentlessly explaining to customers why things are the way they are and how things actually work. And, yes, maybe sometimes, how they intend to do better in the future.

More importantly, they will need to listen. What are their customers’ experiences with open banking? What works? What doesn’t? What new services and possibilities would make open banking more valuable?

All that means is rather than 2020 being the year when open banking flourishes, 2020 is the year that banks, FinTech and regulators need to sell consumers on the new model of conducting commerce — a model that more than likely will get off to a shaky start.

Banks and FinTech businesses looking to provide services enabled by open banking need to practice humility, compassion and customer obsession because they have some catching up to do.

The stated goals of PSD2 and open banking were to provide increased security, more choice and better experiences for consumers. But regulators and open banking architects moved ahead without consulting the end-users of their model.

Consider that vision of building meaningful online portfolios for consumers by sharing data across banks, businesses and institutions. Sharing that data requires a consumer’s consent, which is a good and necessary thing. But public opinion polls show that consumers are reluctant to allow their banks to share their data.

At the dawn of the open banking era, Accenture Research found in late 2017 that 69% of consumers in the UK said that they would not share data with third-party service providers. And 53% said they’d never make use of open banking options, instead sticking with the way they’ve always banked.

Sure, people change, and as more services are rolled out it’s possible that some who thought they’d never embrace open banking will give it a try. But the idea is hardly catching on like wildfire. Earlier this year, the Financial Times reported that only 25% of those polled by banking technology company Splendid Unlimited had heard of open banking. Only 20% of those said they actually knew what open banking meant.

The inevitable hiccups in these early stages of open banking will undoubtedly increase consumers’ scepticism. It’s hard for people to trust you with their data and especially the personal financial information they hold dear when you don’t seem to be able to accommodate everyday digital transactions and requests.

So, banks and those in the FinTech sector have a big job ahead of them — not just in keeping up with the changes required to successfully deliver on open banking, but in evangelising the value that the new model offers. The rewards for those who can get out ahead in 2020 will be substantial. They will be the ones that early adopters turn to and those early adopters will potentially become advocates.

Some players are at least showing the way. There’s HSBC with an app that allows consumers to access all their accounts, including those at competitors, Chip, which algorithmically determines how much a person can afford to save each month and then automatically deposits that into a savings account; Credit Kudos, which analyses a user’s finances and determines their creditworthiness and what financial services they are eligible for; and dozens of others that monitor the mortgage market, create spending reports, automate loyalty programs and more.

The open banking operators in the market today provide a reason for optimism. They are a strong sign that the open banking vision can become a reality. Plenty about how much of a reality - and how soon - will come down to how the key participants perform in the year to come.

That possibility has pushed many government bond yields to new lows in recent weeks, while global equity prices have been volatile. Below Rhys Herbert, Senior Economist, Lloyds Bank Commercial Banking looks at the evidence.

And while some economic data might be confusing, I think there is a clear message.

First, that global economic growth has slowed and may slow further, and second, that there is a pronounced difference between weak or even falling activity in the manufacturing sector and still relatively buoyant service sector.

So, what might be causing this?

Manufacturing v services

It seems probable that the manufacturing sector is being hurt by the ongoing trade dispute between the US and China.  Indeed, the US manufacturing sector is now in decline for the first time in a decade.

And the Bank of England (BOE) flagged last week that, because the trade war between the US and China had intensified over the summer, the outlook for global growth has weakened.

The Bank’s Monetary Policy Committee added that the trade war was having a material negative impact on global business investment too.

The main impact is on confidence - or more accurately lack of confidence – which is holding manufacturers back from investing. As a result, we’ve seen a slowdown in world trade and in demand for manufactured goods.

In contrast, demand for services is being supported by relatively buoyant consumer spending. Yes, consumers are probably reluctant to splash out on big ticket items like cars right now, but overall, they are still willing to spend.

Consumers are probably reluctant to splash out on big ticket items like cars right now, but overall, they are still willing to spend.

The central conundrum

The key question going forward is whether it is more likely that manufacturing rebounds or that service weaken from here?

That is the conundrum that central banks need to weigh up in setting policy.

So far, the majority have decided that they are sufficiently concerned about the downside risks to take out some insurance and adopt policies designed to support economic growth.

Back in July, the US Federal Reserve did something it had not done for over a decade. It reduced interest rates – by a quarter point to 2.25% (upper bound).

It was widely seen as an insurance move against increasing global economic headwinds, emanating mainly from the US-China trade dispute.

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It repeated the move last month, lowering the target range for its key interest rate by 25 points to between 1.75% and 2%. The accompanying statement repeated July’s message that, while economic conditions are probably sound, a bit of insurance against downside risk was advisable.

Meanwhile, in his penultimate meeting in September, this month, European Central Bank President Mario Draghi announced a package of stimulus measures including a reduction in its deposit rate to a record low of -0.5% and the introduction of a two-tier system to exempt part of banks’ excess liquidity from negative rates.

He also announced a resumption of the bond-buying programme at €20bn a month from November and, importantly, signalled no end date to purchases.

Draghi can argue that the weak Eurozone PMI suggests the economy is stagnating, supporting this action.

But the UK has not followed this strategy.

On the sidelines

The BOE is still wary enough about potential inflationary pressures from a tight labour market and rising wage growth to talk about the possibility of interest rates needing to go up.

But last month, the BOE concluded that the longer that uncertainty goes on, the more likely it is that growth will slow, especially given the weak global economy.

We will see if the message changes, but the likelihood is that BOE rate setters will want to continue to remain on the sidelines and keep rates unchanged at 0.75%, not least because the Brexit outcome remains unsettled.

The government’s official preferred Brexit position is for a deal and that assumption in the Bank’s forecast points to interest rates rising “at a gradual pace and to a limited extent”.

But the BOE also noted growing concerns about risks to growth, joining the US Federal Reserve and the European Central Bank, which both seem to have decided that risks are skewed to the downside.

But, while escalating tariff wars, slowing growth in the US and China and Brexit uncertainty mean there are credible reasons to worry that 10 years of steady expansion could be coming to an end, it is still far from certain that the current slowdown means a recession is looming.

Market Outlook

Mihir Kapadia, CEO and Founder of Sun Global Investments

When it comes to investment trends, every year appears to have a certain theme which dominates the markets and beyond throughout the course of those twelve months. 2017 was largely a stock market year, with global markets closing at record highs thanks to a booming global growth rate, loose tax and monetary policy, low volatility and ideal currency scenarios (for example, a weaker pound supporting inward investments). It was also a crazy year in the consumer segment with market momentum captivated with crypto assets, leading to established financial services firms to create special cryptocurrency desks to monitor and advise.  Today, things are looking very differently.

Markets have since moved from optimism (led by stock markets) to a cautious tone (with an eye out for safe haven assets). This is largely due to the concerns over slowing global growth rates (especially from powerhouse economies like Germany and China), volatile oil markets and Kratom Powder For Sale induces significant market threats with the likes of Brexit and the trade wars. The rising dollar has also not helped much, with Emerging Market and oil importing economies suffering with current account deficits.

At the World Economic Forum’s annual meeting in Davos last month, the International Monetary Fund (IMF) has warned of the slowdown, blaming the developed world for much of the downgrade and Germany and Italy in particular. While the IMF does not foresee a recession, the risk of a sharper decline in global growth is certainly on the rise.  However, this risk sentiment doesn’t factor in any of the global triggers – a no-deal Brexit leading to UK crashing out of the EU or a greater slowdown in China’s economic output.

While the IMF does not foresee a recession, the risk of a sharper decline in global growth is certainly on the rise.

Volatility expected

 We have lowered earnings expectations globally due to more subdued revenue and margin assumptions. We believe investors will be confronted by increased volatility amid slower global economic growth, trade tensions and changing Federal Reserve policy. Our base case relies on the view that the US may enter a recession in 2020. As the market dropped 9% in December, the worst market return in any 4th Quarter post World War II, many risks are starting to be discounted by the market. We have reduced industrials, basic materials and financials due to heightened risks.

There are a number of factors that are driving this view, but it is important to note that upsides to the risks do exist:

• The Fed: The Fed’s slow pace of hiking interest rates is meant to be just enough to keep wage inflation from accelerating, but not so much that it crushes business and consumer spending. It’s a difficult balancing act.
• Fiscal stimulus: The tightening of fiscal conditions has already created a slowdown that only time and lower rates will heal. The impact from the US Government’s lower tax rates and higher spend will end when 2019 does.
• Trade and China: The lack of clarity on trade has created an ‘uncertainty tax’, forcing companies to seek alternative means of procurement, adding to inefficiencies and holding back some investment decisions. China is trying to stimulate its consumer sector, but the country is already weighed down by high debt and defaults, and it has limited ability to create demand at present.
• European politics: Brexit negotiations and Italy’s budget situation have added to the political fog affecting investor confidence.

In uncertain markets like these, we should look to do three things: reduce risk, focus on high quality and stay alert for opportunities due to dislocations.

So what do you do?

We have dialled down risk in 2018 and will likely continue to do so in 2019 as we expect global growth to slow. However, the expected volatility could cause dislocations that are not fundamentally driven, resulting in tactical opportunities to consider.

The best piece of advice to be relayed is: “Don’t run for the hills”. In uncertain markets like these, we should look to do three things: reduce risk, focus on high quality and stay alert for opportunities due to dislocations.

It would be ideal to shift allocations from cyclical to secular exposures, especially away from industrials, basic materials, semiconductors and financials due to heightened risks. It would also be ideal to focus on high-quality companies with secular growth opportunities that can generate dividends as well as capital appreciation.

Two sectors stand out as both strategically and tactically attractive - aging demographics and rapidly improving technology are paving the way for robust growth potential in healthcare. Accelerating growth in data, and the need to transmit, protect, and analyse it ever more quickly, make certain areas in technology an attractive secular opportunity as well. Where possible, our advice to investors is to maintain a tactical portion of their risk assets, because volatility may give them the opportunity to find mispriced sectors, themes and individual securities.

Still, in this climate, the bottom line is that you should be increasingly mindful of risk in your portfolio so that you can reach your long-term investment goals. 

Eastern Economies vs. Western Economies: Countries, Sectors and Projects to Watch

Dr. Johnny Hon, Founder & Chairman, The Global Group

The global economic narrative in 2018 was characterised by growing tensions between the US and China, the world’s two largest economies. The US imposed 10% to 25% tariffs on Chinese goods, equivalent to more than $250bn, and China responded in kind.

This had a seismic effect on global economic growth which, according to the IMF, is expected to fall to 3.5% this year. It represents a decline from both the 3.7% rate in 2018 and the initial 3.7% rate forecast for 2019 back in October.

Although relationships between Eastern and Western economies are currently strained, suggestions that a global recession is on the horizon are exaggerated. China’s economy still experienced high growth in 2018.

However, it is clear that trade wars have no winners. The rise of protectionism in the West is creating more insular economies and we are at a time when increased efforts are needed for mutual understanding. There are still enormous opportunities across the globe: India is among several global economies showing sustained high growth, and innovations in emerging markets such as clean energy or payments systems continue to gather pace. Investors who are savvy and businesses with true entrepreneurial flare can triumph at a time when others may be stagnating.

The rise of protectionism in the West is creating more insular economies and we are at a time when increased efforts are needed for mutual understanding.

Here are the exciting countries, sectors and projects to look out for in 2019:

Countries

Recent trends in foreign direct investment (FDI) reveal a growing trend to support developing economies. In the first half of 2018, the share of global FDI to developing countries increased to a record 66%. In fact, half of the top 10 economies to receive FDI were developing countries.

This trend will accelerate in 2019 - the slow economic global growth, and subsequent currency depreciation means the potential yield on emerging market bonds is set to rise dramatically this year. More and more investors are realising the great potential of these developing economies, where the risk versus reward now looks much more attractive than it did in recent years. Asia in particular has benefited from a 2% rise in global FDI, making it the largest recipient region of FDI in the world.

India and China are both huge markets with a combined population of over 2.7 billion, and both feature in the world’s top 20 fastest growing economies. However, the sheer quantity of people doesn’t necessarily mean the countries are an easy target for investment. There are plenty of opportunities in both India and China, but it takes a shrewd investor with a good local business partner to beat the competition and find the right venture.

Other Asian economies to invest in can be found in Southeast Asia, including Vietnam, Singapore, Indonesia and Cambodia. In a recent survey by PwC, CEOs surveyed across the Asia-Pacific region and Greater China named Vietnam as the country most likely to produce the best investment returns – above China.

Investors who are savvy and businesses with true entrepreneurial flare can triumph at a time when others may be stagnating.

Sectors

One sector in particular which remained resilient to the trade wars throughout 2018 was technology. By mid-July, flows into tech funds had already exceeded $20bn, dwarfing the previous record amount of $18.3bn raised in 2017. This was a result of the increased accessibility and popularity of technologies in business.

In the area of Artificial Intelligence (AI) for example, a Deloitte survey of US executives found that 58% had implemented six or more strains of the technology—up from 32% in 2017. This trend is likely to continue in 2019, as more businesses realise AI’s potential to reduce costs, increase business agility and support innovation.

Another sector which saw significant investment last year was pharmaceuticals and BioTech. By October, these had already reached a record high of $14 billion of VC investment in the US alone. One particular area to watch carefully, is the rising demand for products containing Cannabidiol (CBD), a natural chemical component of cannabis and hemp. Considering CBD didn't exist as a product category five years ago, its growth is remarkable. The market is expected to reach $1.91 billion by 2022 as its uses extend across a wide variety of products including oils, lotions, soaps, and beauty goods.

Projects

At a time of rising trade tensions and increased uncertainty, cross-border initiatives are helping to restore and maintain partnerships and reassure global economies. China's Belt and Road Initiative is a great example of how international communities can be brought closer together. From Southeast Asia to Eastern Europe and Africa, the multi-billion dollar network of overland corridors and maritime shipping lanes will include 71 countries once completed, accounting for half the world’s population and a quarter of the world's GDP. It is widely considered to be one of the greatest investment opportunities in decades.

The Polar Silk Road is another international trade initiative currently being explored. The Arctic offers the possibility of a strategic commercial route between Northeast Asia and Northern Europe. This would allow a vast amount of goods to flow between East and West more speedily and more efficiently than ever before. This new route would increase trading options and would make considerable improvements on journey times – cutting 12 days off traditional routes via the Indian Ocean and Suez Canal. It could also save 300 tonnes of fuel, reducing retail costs for both continents.

Since founding The Global Group - a venture capital, angel investment and strategic consultancy firm - over two decades ago, I have seen the global economic landscape change immeasurably. The company is built around the motto ‘bridging the frontiers’, and now more than ever, I believe in the importance of strong cross-border relationships. Rather than continuing to promote notions of protectionism, we must instead explore new ways of achieving mutual benefit and foster a spirit of collaboration.

Brexit, Trade Wars and the Global Economy

Robert Vaudry, Chief Investment Officer at Wesleyan

If there’s one thing that financial markets do not like, it is uncertainty - which is something that we’ve faced in abundance over the last couple of years.

The UK’s decision to leave the European Union and President Trump’s 2016 election in the US, sent shockwaves through markets, and the two years that followed saw increased volatility across asset classes. This year looks set to be fairly unpredictable too, but in my view there are likely to be three main stabilising factors. Firstly, I expect that the UK will secure some form of a Brexit deal with the EU – whatever that may look like – which will give a confidence boost to investors looking to the UK. Secondly, the trade war between America and China should also come to an end with a mutually acceptable agreement that further removes widespread market uncertainty. Thirdly, the ambiguity surrounding the US interest rate policy will abate.

The Brexit bounce

A big question mark remains over whether or not the UK is able to agree a deal with the EU ahead of the 29th March exit deadline. However, with most MPs advocating some sort of deal, it’s highly unlikely that the UK will leave without a formal agreement in place. So, what does this mean? Well, at the moment, it looks more likely than ever that the 29^th March deadline will need to be extended, unless some quick cross-party progress is made in Parliament on amendments to Theresa May’s proposed deal. While an extension would require the agreement of all EU member states, this isn’t impossible, especially given that a deal is in the EU’s best interests as the country’s closest trading partner.

The ambiguity surrounding the US interest rate policy will abate.

The result of any form of deal will be a widespread relief that should be immediately visible in the global markets. It will bring greater certainty to investors, even if the specific details of a future trading relationship between the UK and EU still need to be resolved. Recently, it was estimated that Brexit uncertainty has so far resulted in up to $1trn of assets being shifted out of the UK, and I personally don’t see this as an exaggeration. Financial markets have been cautiously factoring Brexit in since the referendum vote in 2016 and, if we can begin to see a light at the end of the Brexit tunnel, it is likely that some of these vast outflows will be reinvested back into the UK. We can also expect to see a rise in confidence among UK-based businesses and consumers, at a time when the unemployment rate in the UK is the lowest it has been since the mid-1970s.

All of these outcomes would help lead to a more buoyant UK economy and the likelihood that UK equities could outperform other equities – and asset classes – in 2019.

Trade wars – a deal on the table?

Looking further afield, the trade tensions that were increasingly evident between the US and China last year could also be defused. The last time that China agreed to a trade deal, it was in a very different economic position – very much an emerging economy, with the developed world readily importing vast quantities of textiles, electronic and manufacturing goods. However, given China’s current position as one of the world’s largest economies, it has drawn criticism from many quarters regarding unfair restrictions placed on foreign companies and alleged transfers of intellectual property.

Either way, global financial markets are eager for Washington and Beijing to reach a mutually agreeable trade deal to help stimulate the growth rates of the world’s two largest economies.

It was estimated that Brexit uncertainty has so far resulted in up to $1trn of assets being shifted out of the UK.

Be kind to the FED

2018 saw an unprecedented spat between the US President and his Head of the Federal Reserve. What began as verbal rhetoric quickly escalated into a full-frontal assault on Jerome Powell, and the markets were unimpressed. With the added uncertainty about the impact of a Democrat-led US House of Representatives, we headed into a perfect storm, and equity markets in particular rolled over in December. Ironically, this reaction, coupled with a data showing that both the US and the global economy are generally slowing down – albeit from a relatively high level – has resulted in a downward revision of any US interest rate rises in 2019. The possibility of up to four US interest rate rises of 25bps each during 2019 is now unlikely – I expect that there will only be one or two rises of the same level.

 Transitioning away from uncertainty

So, in summary, 2019 is set to be another big year for investors.

The recent protracted period of uncertainty has hit the markets hard, but we’ll have a clearer idea of what lies ahead in the coming months, particularly regarding Brexit and hopefully on the US and China’s trade relations too. If so, this greater certainty should pay dividends for investors in the years to come. UK equities are expected to strongly bounce back in 2019, which is a view that goes against the current consensus call.

Here Stan Swearingen, CEO of IDEX Biometrics, discusses the potential trends for 2019’s biometrics sector.

Following a number of successful trials using fingerprint sensor technology within smart cards across multiple markets, (including Bulgaria, the US, Mexico, Cyprus, Japan, the Middle East and South Africa) the biometric smart card is reaching its inflection point. Key players within the banking industry, including Visa and Mastercard, are already heavily invested in this new payment technology and anticipate that biometrics will play a key role in the revolution of the payments industry.

With mass market rollout on the horizon, here are five key predictions for the biometric payment industry in 2019.

2019: The year of dual interface

The first half of 2017 reported 937,518 cases of financial fraud, resulting in losses of an astonishing £366.4 million^[1], a clear demonstration that the PIN is no longer fit for purpose. Recent research from IDEX Biometrics supports this claim and found that 29% of consumers surveyed felt concerned about the use of PINs to keep their money secure, and as many as 70% believed that contactless payment cards left them exposed to theft and fraud. As consumer concerns continue to grow around the security of payments, so too does the need for a personalised, secure and convenient payment solution.

Enter the biometric dual interface payment card. 2019 will see biometric fingerprint sensors integrated into cards with both a micro-processor and contactless interface, removing the need for PINs. This will provide consumers with the reassurance that their money is safe as any transactions will require their finger print to authenticate it. 2019 will be the year of the dual interface where biometric authentication will be available for both contact and contactless payments!

These advances in technology and those within the payments market have meant that the concept of biometric authenticated payments is no longer a novelty. In fact, according to forecasts by Goode Intelligence, nearly 579 million biometric payment cards will be used globally by 2023^[2]. The integration of the biometric sensors in the payment card will be one of the next-generation transformative innovations to breathe new life into the payment industry next year and assist in the fight against payment fraud.

The integration of the biometric sensors in the payment card will be one of the next-generation transformative innovations to breathe new life into the payment industry next year and assist in the fight against payment fraud.

Remote enrolment will be the key to mass market adoption

For mass market deployment of biometric smart payment cards to be possible in 2019, banking infrastructures must look at the implementation of biometric technology and ensure that this method of enrolment is accessible and convenient to all. The elderly or those with physical health limitations may struggle leaving the house to enrol within bank branches and even those who work a 9-5 day can often find making it to the bank within opening hours a challenge.

The latest advancements in remote enrolment of biometric payment cards will mean that enrolment for biometric payment cards can take place in the comfort of your own home. Card users will be able to enrol straight onto the card by simply placing their finger on the sensor (with the aid of a small device that comes with the card) to upload their print to the card’s highly secure EMV chip. There is no need for an external computer, smartphone or internet connection. Once loaded, the fingerprint never leaves the card, thus eliminating multiple attack points.

Biometric payments will bridge the gap to financial inclusion

In 2019 advances in biometric fingerprint authentication will be a vital ingredient when bridging the gap to financial inclusion. Currently, 1.7 billion adults remain unbanked across the globe today^[3]. This is for many reasons, from immigration issues, to illiteracy as well as mental health. Those living with dementia are also at risk of losing their financial independence as their short-term memories decline. A fingerprint sensor on the card can take the place of a PIN or even signature, meaning sufferers are able to stay financially independent for longer.

Currently those who lack access to financial services are missing out on the many benefits financial inclusion has to offer. Fingerprint authentication will remove the barriers that face those with literacy challenges, or face difficulty with memory, as card payments will no longer be about what you know, or what you can remember, but who you are.

Currently those who lack access to financial services are missing out on the many benefits financial inclusion has to offer.

Biometric authentication will be a simple, secure and convenient solution eradicating the need for passwords and PINs as a form of authentication. For this to work as a solution to financial inclusion, banking infrastructures and card manufacturers must work together to reach a price point that enables this technology to be available to all.

The possibilities for biometrics are endless…

While biometric authentication technology is already being used with smartphones and passport identification in the UK, 2019 and beyond will see endless possibilities for the use of biometric smart cards into payments and beyond. We can even expect to see biometrics branch into the Government issued identification and IoT enabled devices arenas.

In fact, a whole host of public services is set to benefit from this secure means of authentication. The use of biometric smart cards within the NHS, for example, could see access to sensitive patient records limited only to the patient themselves. Biometric social benefits cards could control how the money is spent and that it is spent by the right person. According to IDEX research, 38% of consumers surveyed would like to see biometric methods of authentication introduced to wider government identification including driving licenses, National Insurance numbers and even passports.

The future of the biometrics – 2019 and beyond!

In 2019, authentication will get even smarter, and further technological advances such as multi-modal or multi-factor authentication will further enhance security within the payments landscape. This refers to technology that combines a variety of different types of biometrics in order to add an additional layer of security, including persistent authentication. For example, instead of having one single authentication, smartphones could continuously scan features to ensure the correct person is using the device.

Whilst the biometric dual interface smart payment card is set to hit the mass market next year – this is just the beginning. The payment card of tomorrow will go beyond just transactions. Biometric smart cards will serve multiple purposes – a payment card, a form of ID for restricted goods and even a loyalty card!

The early days of biometrics where it was felt to be invasive and a privacy concern are long gone. In fact, according to recent research from IDEX, 56% of consumers surveyed state they would trust the use of their fingerprint to authenticate payments more than the traditional PIN. Further to this, 52% would feel more confident if their fingerprint biometric data was stored on their payment card, rather than a bank’s central database.

Consumers are ready for the use of biometric fingerprint methods of authentication for card payments and 66% expect their roll out to authenticate in-store transactions in 2019. We predict that by 2019 biometric smart payment card adoption will go into many millions!

[1] https://www.financialfraudaction.org.uk/news/2017/09/28/latest-industry-data-shows-fall-in-financial-fraud/

[3] https://globalfindex.worldbank.org/

Jumping straight into the top predictions for the security industry in 2019, below Reuven Harrison, CTO at Tufin, provides his thoughts on hacking, cybersecurity, and new technologies this year.

1. The changing face of the firewall

In 2019, we will see new cloud solutions providing security for public cloud coming from the traditional firewall vendors, following up on recent acquisitions of public cloud security companies. This trend is twofold. First, it is a response to the increasing shift of enterprises towards the cloud and their need for security in these environments. Second, the firewall vendors are also realizing the potential of the cloud as a superior platform for software development and big-data analytics.

In 2019, we’ll see the ongoing evolution of next-gen firewalls as they continue to absorb the functionalities of traditional network security solutions to include capabilities such as URL filtering
and other advanced security capabilities.

2. Data Breaches - Don’t speak too soon…or at all

We will see an increase in breaches that use virtual assistants for privilege escalation or distribution of sensitive information. These attacks will manipulate people into inadvertently giving voice commands or playing audio on their computer, prompting a sequence of events that leads to information on company performance or to further gather network information to ease an attack.

3. Kubernetes will become the new data centre operating system

The main factor behind the success of Kubernetes is how it simplifies and speeds up software development and deployment. For example, it enables "immutable infrastructure" which means that instead of deploying incremental changes to update your applications, you create a new version for every change – whether it’s in the application code or in the infrastructure. This concept brings tremendous benefits to the way we develop, deploy and operate applications (and how we secure them).

Another advantage of the microservices architecture is its ability to parallelise development. By decoupling application functions using microservices, large complex development projects can be broken up into smaller, independent teams, speeding up overall development.

In all respects, Kubernetes is driving an IT revolution.

4. The new year brings nothing new

2019 will be the Year of Lessons Not Learned: we’ll see the same security issues and the maturity of technologies that already exist.

In 2018, many organisations undertook their first steps to container security – which translated to vulnerability scanning – getting more data and false positives than they know what to do with and rendering security as a checkbox process. Vulnerable containers will still exist and remain accessible, and organisations can’t take action because they’re inundated with so much data.

Regarding security in the cloud, history is likely to repeat itself, and as the move to the cloud continues, we’ll inevitably see organisations spin up openly accessible servers and data in the cloud. This risk cannot be remediated with traditional security processes that are incompatible with DevOps CI/CD processes.

5. “Automation first” must happen

In 2019, we’ll see more emphasis on security in cloud-native organisations. Many are talking about it; this will be the year that they take action.

To do this, there will be an emphasis on automation. There’s no way that DevOps teams can get security into their environments without automation. To secure cloud-native environments, you must approach it from an automation-first perspective.

6. Hacking the hacker

In 2019, we’ll see cyber turf wars in which hacking groups attack each other to reap the bounty of their adversaries’ resources. Previously established botnets mining cryptocurrency will be targeted over companies with financial data as the ease of exchange and redemption of this decentralised currency is much more readily accomplished.

7. A look back at 2018

Last year, we predicted that automation will reach the tipping point. This came true in the sense that organisations now understand they must adopt automation. What has slowed the process of full adoption is the cultural challenges. In 2019, we’ll see an acceleration of automation across the industry.

Brian G. Sewell, Founder of Rockwell Capital; a family office committed to educating investors about cryptocurrency, and Rockwell Trades, below explains the intricacies of cryptocurrencies, shares the latest SEC regulatory updates, and provides expert insight into the future of cryptocurrencies across the globe.

The August 6th SEC decision to postpone a ruling on whether to approve the SolidX Bitcoin Shares ETF for trading on The Chicago Board Options Exchange is a good sign. Given previous SEC statements, the postponement appears to suggest that the U.S. regulatory agency wants to issue a well-thought-out approval ruling that protects cryptocurrency investors and nurtures innovators. I agree with the CBOE that "investors are better served by products traded on a regulated securities market and protected by robust securities laws.” And I would rather see the SEC make a methodical decision to approve a cryptocurrency ETF, with thoughtful guidelines than a rash decision to reject one.

Bitcoin’s Challenges and Promise
Since 2010, when it emerged as the first legitimate cryptocurrency, Bitcoin has been declared “dead” by pundits over 300 times. Critics have cited the cryptocurrency’s hair-raising price volatility; it’s scalability challenges, to handle a large volume of transactions as a payment method, or the improbability of a central bank ceding monetary control to a piece of pre-set software code. T he adoption of Bitcoin as an alternative to transacting by credit card or other payment methods is rising. After its release as open-source software in 2009, Bitcoin alone has facilitated over 300 million digital transactions, while hundreds of other cryptocurrencies have emerged, promising to disrupt a host of industries.

Granted, no more than 3.5% of households worldwide have adopted cryptocurrency as a payment method. But as developers and regulators resolve the following key issues, global cryptocurrency adoption will likely grow -- both as a consumer payment method, and through business-to-business integration, streamlining a variety of operations in the private and public sectors. The prospect of more widespread adoption explains why I think cryptocurrencies may continue to outperform other investment assets in the long term and improve how the world does business.

Four Key Reasons Why Cryptocurrency is Here to Stay:

1. An SEC-Approved Bitcoin ETF Can Boost Liquidity, Protect Consumers, and Nurture Innovators
Though the SEC may not reach a final decision until next year on the proposed listing of SolidX Bitcoin Shares ETF, I think the agency will eventually approve what many experts say represents the best proposal for a cryptocurrency ETF. The proposal -- which requires a minimum investment of 25 Bitcoins, or USD 165,000 assuming a Bitcoin price of $6,500 -- seems to meet the SEC's criteria on valuation, liquidity, fraud protection/custody, and potential manipulation.

By boosting institutional investment, SEC approval would represent another milestone in the validation of cryptocurrencies. To reiterate, rising adoption could benefit the U.S. financial system and other financial systems worldwide, because cryptocurrency promises to create significant financial savings and societal benefits -- by streamlining how the world transacts for goods and services, updates mutual ledgers, executes contracts, and accesses records.

2. Comprehensive U.S. Regulation Can Improve Protection, Innovation, and Investment
Beyond a potential Bitcoin ETF, demand is mounting for a comprehensive regulatory framework that protects consumers while nurturing innovation. Because the dollar remains the leading global fiat currency, institutional investors across the globe are especially watching for what framework of rules and policing U.S. regulators develop. Although many institutional investors are assessing the risk/reward proposition of cryptocurrency investments, that doesn’t mean they’re ready to invest. Many such endowments, pension funds, and corporate investors are awaiting U.S. regulatory guidance and protections to honor their fiduciary duties. How, if at all, for example, will exchanges be required to implement systems and procedures to prevent hacks and otherwise protect or compensate investors from cyber attacks?

Though there’s mounting pressure on regulators to act, cryptocurrency regulation that both protects consumers and nurtures innovation requires a nuanced set of rules, a sophisticated arsenal of policing tools, sound protocols, and well-trained professionals. Developing such a unique strategy takes time, and may involve some stumbles. But I think U.S. regulators will eventually succeed in developing a comprehensive and balanced regulatory framework for cryptocurrency. If institutions become more confident that regulations can help them meet their fiduciary duties, even small allocations from reputable endowments, pensions, and corporations could unleash a new wave of investment in cryptocurrencies.

3. Bringing the Technology to Scale
Bitcoin and other cryptocurrencies are still developing the capacity to function at a mass scale, which will require processing tens of thousands of transactions per second. But technology such as Plasma, built on Ethereum, and the Lightning Network, a second layer payment protocol compatible with Bitcoin, are being tested, which could enable cryptocurrencies to execute faster, cheaper payments and settlements than any other payment method. Though developing applications that bring cryptocurrencies such as Bitcoin and Ethereum to scale may not happen overnight, I think sooner or later; developers will get it right.

Making cryptocurrency scalable would probably unleash an explosion of new applications. That would boost adoption by allowing consumers and businesses to more easily take advantage of cryptocurrency by seamlessly integrating it with debit and credit payment systems – again, to execute transactions, update mutual ledgers, execute contracts, and access records. Such financial activities would likely happen more quickly, cheaply, and efficiently than ever because there would be no banking intermediary needed to validate the transaction and take a cut of the fees. This could improve the cost and efficiency of commerce – between businesses, between businesses and consumers, between governments and consumers, between nonprofits and consumers, and in every combination thereof. The seeds for this transformation of commerce have been planted, and like the internet before it, can innovate in ways we can’t fully anticipate.

4. Meeting Developing World Needs
At its current technological stage, use of cryptocurrency adoption as a payment method could grow fastest in emerging markets, especially those without a secure, reliable banking infrastructure. Many consumers in such regions have a strong incentive to transact in cryptocurrency -- either because their country’s current banking payment system is inefficient and unreliable, and they lack a bank account altogether. Globally, 1.7 billion adults remain unbanked. Two-Thirds of them own a mobile phone that could help them use cryptocurrency to transact and access other blockchain-based financial services.[2]

Data underscores the receptiveness of Developing World consumers to cryptocurrency as a transaction medium. The Asia Pacific region has the highest proportion of global users of cryptocurrency as a transaction medium (38%), followed by Europe (27%), North America (17%), Latin America (14%), and Africa/The Middle East (4%), according to a University of Cambridge estimate.[3] Although the study’s authors caution that their figures may underestimate North American’s proportion of global cryptocurrency usage, they cite additional data from LocalBitcoin, a P2P exchange platform, suggesting that cryptocurrency transaction volume is particularly growing in developing regions, especially in:

• Asia (China, India, Malaysia, Thailand)
• Latin America (Brazil, Chile, Colombia, Mexico, Venezuela),
• Africa/The Middle East (Kenya, Saudi Arabia, Tanzania, Turkey)
• Eastern Europe (Russia, Ukraine).[4]

As more applications launch in the developing world to facilitate the use of cryptocurrencies to buy and sell goods and services at lower cost and in expanded markets -- and more young people receptive to such new technologies come of age -- cryptocurrency adoption could well rise exponentially.

Remember The Internet - Investment Bubbles and Bursts Will Identify The Winners
High volatility is inherent in the investment value of this nascent technology, due to factors including technological setbacks and breakthroughs, the impact of pundits, the uneven pace of adoption, and regulatory uncertainty. Bitcoin, for example, generated a four-year annualized return as of January 31st, 2018 up 393.8%, a one-year 2017 performance up 1,318% -- and year-to-date, down 52.1%. Bitcoin has experienced even larger percentage drops in the past, before resuming an upward trajectory.

I believe roughly thirty percent of Bitcoin investors over the past half year are speculators since the cryptocurrency has dropped on the negative news by as much as a third. In my view, Bitcoin and other cryptocurrencies will experience many more bubbles and bursts, in part, fueled by speculators, who buy on greed and sell on fear.

But as the dot-com era underscores, the bursting of an investment bubble may signal both a crash and the dawn of a new era. While irrational investments in internet technology in the 1990’s fueled the dotcom bust, some well-run companies survived and led the next phase of the internet revolution. Similarly, despite periodic price crashes, I believe a small group of cryptocurrencies and other blockchain applications, including Bitcoin, will become integrated into our daily lives, both behind the scenes and in daily commerce.

Although “irrational exuberance” will continue to impact the price of cryptocurrencies, this disruptive technology represents the future not only of money but of how the world will do business.

finder.com has released its monthly Cryptocurrency Predictions Survey, on how the top 10 cryptocurrencies by market cap and two trending coins will perform in 2018.

Out of the 12 coins, finder.com’s nine panellists predict that Cardano (ADA) will experience the greatest percentage growth by 1 June, 2018, at 40%. ADA’s price was $0.272 (£0.20) per unit on 26 April 2018, and is forecast to reach $0.383 (£0.282) by June 1. It’s also expected to see the greatest percentage growth by the year’s end, of 597% to $1.90 (£1.39).

Bitcoin Cash (BCH) is the coin that’s expected to see the second-greatest increase in growth by 31 December 2018, at 174%, followed by Bitcoin (BTC) at 163%.

Ripple (XRP) is the only coin predicted to decrease in value by the end of the year, going down 15% to a price per unit of $0.688 (£0.506). By 1 June 2018, EOS (EOS) is the only coin forecast to decrease from its current price, dropping 11%, although is expected to bounce back up by 106% by end of year.

Comparing the forecast market capitalisations* for bitcoin (BTC), Bitcoin Cash (BCH) and Ethereum (ETH) – the only three of the 12 coins with reported number of coins available –  Bitcoin Cash (BCH) is predicted to see the highest growth by the end of the year (181%). This is only slightly above bitcoin (BTC) with a 170% forecast increase.

Jon Ostler, UK CEO at finder.com said, “While billionaire Warren Buffett's comments may have temporarily caused a sharp drop in the value of Bitcoin, overall the cryptocurrency market continues to trend upwards following last months’ bear market. Bitcoin has already started to recover while Ripple (XRP) has secured numerous partnerships with financial institutions. However, our panellists make the distinction between the Ripple technology and the coin – they’re not as optimistic about the coin itself, with an average forecast of a 15% drop in price by end of year.

“The prediction for EOS (EOS) is also interesting, as it shows the panellists’ confidence that the expected main net launch in June will boost the coin by the end of the year, despite seeing an 11% decrease in price by 1 June 2018.

“Despite Buffett’s remarks, cryptocurrency is growing in popularity as its acceptance and investment by major global banks such as Goldman Sachs becomes more mainstream. Before investing in any new currency it’s important to remember that the market is still volatile and many of the laws surrounding cryptocurrency are still in flux. When looking to invest make sure you consult a professional advisor and have a cryptocurrency plan in place before starting to trade or exchange.”

(Source: finder)