Working with top experts to identify how the latest innovations and disruptive technologies will impact businesses, industries, and society. I have an academic background in social science (Ph.D. in Sociology), an MBA degree, and experience in private companies and NGOs.
Representatives of governments and other participants at the Sharm el-Sheikh Climate Change Conference (COP 27) have agreed on key principles for reforming the financial structures required to promote and sustain climate action. According to guest speakers such as the Prime Minister of Barbados, Mia Amor Mottley, and Ngozi Okonjo-Iweala, Director-General of the World Trade Organization (WTO), immigration policies, unfair trade, and inadequate finance flows are currently hindering efforts to meet the climate-related goals.
Mottley stressed that developing countries encounter difficulties accessing concessional funding and lack the necessary resources and goods to reach net zero. Okonjo-Iweala cited the power of trade policies to diversify supply chains and promote inclusivity, while the First Minister of Scotland, Nicola Sturgeon, stated that private companies should also financially support climate action.
Among the industry leaders that participated in the event, the International Cooper Association (ICA) has pledged to help Africa to minimize grid losses through a newly-launched Grid Efficiency and Resiliency Partnership Initiative. Google has also committed to investing US$1 billion in digitalization projects for Africa.
Introduced in 2018 within the United Nations Framework Convention on Climate Change (UNFCCC), climate finance includes all types of financing (local, national, and transnational) from public, private, or other alternative sources used to support actions to address climate change. Since large-scale investment is needed to reduce emissions, setting this mechanism in motion is paramount for preventing and mitigating the effects of climate change. Moreover, financial assistance and support provided by wealthier countries for the disadvantaged and more vulnerable ones is an important aspect of climate finance.
The publicly accessible Climate Finance Data Portal shows the financial resources mobilized to support developing countries in their climate actions. Besides public funds, impact investing is an essential source of resources for environmental protection. Such initiatives not only have a positive impact on the global climate, but also offer the opportunity for financial return.
Another financial mechanism promoted as a way of achieving sustainable development goals is blended finance, a public-private partnership that aims to boost the economic potential of countries and increase the speed and scale of the impact on sustainability. Together with other countries, Indonesia has already announced its commitment to using such alternative and innovative financial mechanisms.
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The COVID pandemic and the emerging recession are bringing significant staffing problems for sectors such as education, healthcare, retail, transportation, and construction, all of which face difficulties in finding skilled labor. While technological advancements cannot fully replace the roles and functions performed by humans, second-generation Robotic Process Automation (Gen2 RPA) currently represent the best viable option to address the labor shortage and overworked employees.
According to Aaron Bultman, product director at digital transformation platform Nintex, “RPA is a form of business process automation that allows anyone to define a set of instructions for a robot or ‘bot’ to perform. RPA bots are capable of mimicking most human-computer interactions to carry out a ton of error-free tasks at high volume and speed.” However, the first generation of RPA, though it has on the rise for the past years, has already proved its limitations. Proprietary toolsets, bots that crash with every software update or change in the environment, and scaling-up difficulties, are just some of the problems the first generation of RPA is currently facing.
A better, quicker, and more cost-effective form of robotic process automation, Gen2 RPA provides developers with more control and flexibility than proprietary versions. This technology is based on open-source architecture and scalable cloud technologies. It can automate practically any repeatable business activity, supporting administrators in finance, human resources, information technology, and compliance in dealing with operational concerns.
A study conducted by SmartSheet showed that workers could save at least six hours a week when automation is implemented, leading to more standardized and streamlined processes and improved employee life-work balance. At the same time, by automating repetitive tasks, companies leave more room for creativity, innovation, and problem-solving, allowing their employees to focus more on customer experience.
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The world population is projected to increase from 8 billion in 2022 to 9.7 billion in 2050. At the same time, inefficient use of land and urban sprawl are among the leading causes of housing affordability problems, transportation and infrastructure challenges, and unsustainable use of resources.
Projects conducted in Uppsala (Sweden), Incheon (South Korea), Amsterdam Airport Schiphol (The Netherlands), and Gwinnett County (Georgia, US) showed that using geographic information systems (GIS) and other data sources in combination with digital twins allows city planners to identify and foresee necessary upgrades to services, as well as test various scenarios and plans to meet the city’s efficiency and sustainability goals.
As real-time virtual representations of a real-world physical system or process, digital twins used for construction purposes allow architects and specialists in this area to develop digital versions of buildings, cities, networks, and even lands. This technology gives them the possibility to simulate and test various construction options, enrich the data with historical information, weather patterns, topography, demographics, etc., and finally identify the best and most sustainable output in terms of architectural layout, materials, and operations.
Besides these advantages, digital twins based on GIS allow for sustainable city planning and iterating while monitoring real-time the impact of infrastructure work. In an interview with WhereNext Magazine, Marc Goldman, director of industry solutions for the architecture, engineering, and construction (AEC) professions at Esri, the global market leader in GIS software, location intelligence, and mapping, lists the benefits of GIS-enabled systems for the AEC industry:
“Understanding the context at that great scale is really important for figuring out where your roadways are going to go and where your bridges are going to be impacting potential neighborhoods. And then there’s the more detailed levels, zooming all the way into an individual building, wayfinding on campuses and within buildings themselves. You enter a building at the front, and you want to know how to get to where you’re going. That building has been designed by an architect who hopefully kept in mind the location intelligence, the complexity or the ease of getting from point A to point B, and GIS is great for that.”
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In an interview with Supertrends, Karina Rothoff Brix, country manager for Denmark at Firi, the Nordic region’s largest cryptocurrency exchange, shares some insights on the role of crypto in the decentralization of the financial system.
As a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems, blockchain technology allows users to record information in a way that makes it difficult or impossible to tamper with. The technology has applications in multiple fields such as healthcare (e.g., to preserve and exchange patient data, track medical goods and confirm their authenticity, etc.), food and agriculture (e.g., increase supply chain transparency), automotive (e.g., increase efficiency by tracking the ownership, location, and movement of parts and goods), and government (audit trail for regulatory compliance, contract and identity management), to name just a few.
The rise of Decentralized Finance (DeFi)
However, the field where blockchain is expected to have the highest impact or go faster into mainstream is the financial industry. This technology is currently driving the shift from centralized finance (where banks or third parties store, manage, and transfer the money between transaction partners) to decentralized finance, a system that eliminates intermediaries and enables peer-to-peer financial networks.
“Because the information on a blockchain is duplicated to a lot of computers all around the world, the system is more secure than saving all data in a few spots. Changing the data is impossible, as many so-called ‘validators’ are involved without knowing each other. Therefore, decentralized financial systems do not require the involvement of centralized parties such as banks, but at the same time are capable of enabling payments, money lending, and interest-bearing accounts,” says Brix, who has over 15 years of experience in driving innovation and implementing digitalization projects.
The many faces of crypto
Crypto is usually defined as a class of digital assets that are generated using cryptographic techniques and can be traded, exchanged, or used as a store of value. As Brix explains, the term “cryptocurrency” can be misleading: “Crypto is much more than a currency.
“Crypto is much more than a currency. Simplified, crypto can represent coins, tokens, or NFTs. Different crypto can be coded to encompass different possibilities and values. This is why regulators are struggling with how to define crypto.”
Simplified, crypto can represent coins, tokens, or NFTs [non-fungible tokens]. They are all digital assets, but different in the sense that a coin is a crypto that functions on its native blockchain, whereas a token is crypto on a non-native blockchain. A unique token is called an NFT. Different cryptos can be coded to encompass different possibilities and values. This is why regulators are struggling with how to define crypto.”
These developments have led to the rise of tokenomics, an industry branch that covers a token’s creation principles, content, and distribution. This information usually stored in a so-called “white paper.” From this perspective, not all crypto assets are created equal, and they do not all have the same value propositions and tokenomics. Brix also notes that crypto can be a security token, a utility token, a commodity token, a governance token, or a combination of these. Moreover, the range of possibilities and projects is in full expansion, since innovations in this space are advancing very rapidly.
Currently, there are several types of blockchain networks that differ in terms of technical infrastructure, speed, verification, authorization procedures, energy consumption, access, risk, etc. Various projects can be built on top of these networks, with a broad range of applications. Brix points out that it is too early to say which ones will still be functional in the next five years or which blockchain is a better fit for a certain industry.
Regulating the unregulated crypto market
Even though crypto assets have been around for more than a decade, it is only now that regulatory efforts are beginning to pick up and become a priority on the political agenda. Most countries are already exploring ways of adapting existing regulations to crypto, and of enabling legal transactions with digital assets.
In the EU, the Council Presidency and the European Parliament reached a provisional agreement (the MiCA regulation) regarding the regulation of crypto assets in June 2022.
The provisions are expected to come into effect in 2024 and harmonize crypto services across all member states. In the US, President Joe Biden has signed a US$1.2 trillion infrastructure bill that, among other things, advances the regulation of the cryptocurrency industry with a series of amendments to be enforced starting 2024. In the Asia-Pacific region, efforts to regulate crypto range from a complete ban in China to more progressive approaches in Indonesia and the Philippines.
“The major change that is likely to occur when regulation is in place is that institutional investors will start to participate in the process. A lot of big companies and pension funds are reluctant as the regulation is not clear, but the interest from the big players is definitely there and will materialize in the coming years.“
Emerging markets lead the way in crypto adoption
Despite an adoption rate that varies significantly from country to country, current trends indicate a steady increase in the global adoption of cryptocurrencies compared to 2019 levels. Emerging markets lead the Global Crypto Adoption Index, with countries such as Vietnam, Philippines, Ukraine, India, Pakistan, Brazil, Thailand, Nigeria, Turkey, and Morocco in top positions.
Brix explains why low and middle-income countries dominate the index: “In the emerging markets, crypto is a way to have access to banking, make trades, earn an income, and travel with finances. A huge part of the population in emerging markets doesn’t have access to a bank account, and as a result, is excluded from the economy. Decentralized Finance changes this.” Moreover, in emerging economies, crypto trading is also a viable hedge against inflation, allowing people to preserve their savings in times of fiat currency volatility.
What does the future of crypto hold?
In line with the common expert opinion in the industry, Brix also expects that crypto will see mainstream adoption in the next decade, despite the current volatility and global financial turbulence.
Notable in this sense are initiatives such as the ones in El Salvador and Central Africa, where the governments have declared bitcoin to be legal tender and all corporate and private entities own a crypto wallet.
“A completely new and different economy is currently developing based on cryptos, blockchain, and Web3. The way people are trading is changing dramatically, and the young generation is the biggest driver.”
Crypto is also starting to gain an increasingly important role in financial transactions – with cities such as Colorado (US) and Zug (Switzerland) allowing citizens to pay their taxes with Bitcoin, while other municipalities such as those in Miami and New York City have already developed their own tokens.
Karina Rothoff Brix is Country Manager in Denmark for Firi, the largest crypto exchange in the Nordics. The former head of the Copenhagen School of Entrepreneurship at Copenhagen Business School (CBS) and head of the Center for Lifelong Learning at the Danish Technical University (DTU), Karina is also a recognized expert at the Danish Innovation Fund. For the last 15 years, Karina has worked with tech-scaleups and emerging businesses and has spoken on numerous occasions about the impact of emerging technologies on the future of businesses. In 2022, she published “Kryptovaluta og Blockchain” (Cryptocurrencies and Blockchain), an inspired and clear introduction to the future of cryptocurrencies, blockchain, and Web3.
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Quantum computers and superconducting microprocessors usually operate optimally at temperatures around absolute zero (-459.67° Fahrenheit). However, they still have to exchange information and interact with traditional devices running at room temperature. Researchers from the University of California, Santa Barbara, have developed a device that mediates the communication between these two types of devices, hoping to enable seamless integration between cutting-edge and traditional technologies in the future.
Quantum computers, devices that operate based on quantum physics laws, are expected to revolutionize all industries due to their capacity to solve problems that are out of reach for traditional computational devices. Even though some prototypes have been proven to work at room temperature, most quantum computers need to be cooled at temperatures close to absolute zero to minimize errors and facilitate the quantum states. At the same time, quantum devices haven’t yet reached their full potential; thus, present operational solutions propose a hybrid approach, in which computations are performed partly on a quantum device and partly on a traditional one.
Currently, the connection between cryogenic systems and room-temperature electronics is established via standard metal wires. However, these wires transfer heat into the circuits and allow only small amounts of data to be transmitted. The solution proposed by Paolo Pintus, the lead researcher within UC Santa Barbara’s Optoelectronics Research Group, is to convert data from electric current to light pulses using magnetic fields. Then, the light can be transferred via fiber-optic cables, which have a larger data capacity and minimize the heat that leaks into the cryogenic system.
The prototype has already been tested in projects developed together with the Tokyo Institute of Technology and the Quantum Computing and Engineering group of BBN Raytheon. According to Pintus, “[t]he promising results demonstrated in this work could pave the way for a new class of energy-efficient cryogenic devices, leading the research toward high-performing (unexplored) magneto-optic materials that can operate at low temperatures.”
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The idea of sustainability has attracted exponential attention in the last decade. But in many sectors, the concept is sometimes reduced to an amalgamation of catchphrases and token gestures rather than real efforts to promote collective best interests and environmental protection. How can the banking industry pivot toward true sustainability and deal with the challenges that it faces along the way?
Sustainability is one of the many ideas that have enjoyed exponential attention in the last decade. Corporate Social Responsibility (CSR), Sustainable Development Goals (SDGs), Environmental, Social, Governance Approach (ESG), Triple Bottom Line (People, Planet, Profit), plus thousands of reporting standards: An endless list of catchphrases and prospective corporate values has been devised to guide businesses and industries towards promoting collective best interests and environmental protection.
On everybody’s radar, from politicians and futurists to corporatists, environmentalists, NGOs, scientists, and human rights activists, sustainability is still a broad, loosely defined concept, a buzzword or an alphabet soup of acronym-heavy measurement and reporting standards that gained momentum once climate change became a globally recognized issue.
Despite the lack of a shared understanding and commonly agreed standards regarding this concept, publicly listed companies with over 500 employees or €40 million turnover must disclose annual sustainability reports showing their performance concerning environmental, social, and corporate governance goals.
Lately, an increasing concern from the investors’ side has led to even more criteria and evaluation models. Currently, the sustainability reporting system is very fragmented, with 307 reporting instruments that are mandatory and 230 that can be applied voluntarily under the so-called “comply or explain the approach.” The UK is leading in terms of the number of provisions, followed by Spain and Colombia.
Organizations that must comply with these regulations are state-owned companies, large corporations, and publicly listed companies. This situation raises numerous challenges for businesses in general and requires them to invest a huge amount of resources into gathering data, agreeing on materiality topics and targets, and working towards their implementation. These obligations are even more complex for multinational companies that must meet the reporting requirements of different countries.
How does the banking sector keep up?
An analysis published on Statista regarding sustainability reporting on a global level in 2020 shows that the financial and banking sector ranks fifth in terms of disclosures regarding ESG targets. However, a more detailed report conducted by KPMG shows that only 57% of the companies in this sector disclose carbon reduction targets, which is significantly less than in other industries such as Automotive (80%), Mining (72%), Oil and Gas (69%), and others.
A benchmark analysis conducted by KPMG and published in July 2022 points out that the nature and extent of climate-related disclosures in the banking sector is currently minimal. Most institutions in this sector approach sustainability-related issues from a risk perspective, trying to mitigate any issues that might prevent them from achieving their business targets. Acknowledging the impact climate-related risks have on their credit operations, reputation, image, and compliance makes banks more inclined to address them.
A global research project undertaken by East & Partners ranked the most important providers of banking services based on perceptions regarding their sustainability. According to the study, BNP Paribas was perceived as the best “Stand out” ESG/Sustainable Finance provider globally, followed by Standard Chartered, Citi, HSBC, JPMorgan, Barclays, and BAML/Bank of America.
What actions could banks undertake to achieve sustainability goals?
Various organizations state that the general hallmarks of sustainable banking should include transparent operations and policies, community support, as well as bank policies and products that favor and promote responsibility in the production and distribution of goods and services.
The Initiative for Responsible Investment, an applied research center at Harvard University’s Kennedy School, has gone a step further and defined a series of Key Performance Indicators for sustainability in the banking sector, taking into consideration factors such as the percentage of investments evaluated for climate change risk, the percentage of branches located in low- and moderate-income communities, gender distribution and minority inclusion at board level and senior management, and CO2e emissions in kg per square foot, to name just a few metrics. GRI (The Global Reporting Initiative) is another international independent standards organization that advocates for transparency in sustainability reporting and makes available specific standards for each industry.
“Profit at all costs ceases to be the primary objective of sustainable banking. While a healthy bottom line continues to be a goal, other objectives that will encompass environmental and social criteria start being significant considerations in selecting investments and formulating policies.” Banks.com, an aggregator of financial services
In practice, banks can “mix and match” various standards and apply those that match their own goals and interests. For example, UBS, a multinational investment bank and financial services company founded and based in Switzerland, plans to release 100 green, social, or sustainability-linked bond mandates in 2022, initiate a task force to research climate-related financial disclosures recommendations and direct US$175 million towards philanthropy projects. By 2025, it aims to invest US$400 billion in assets in sustainable investments and adapt its operations to achieve zero energy emissions.
However, a sustainability benchmark in this sector is difficult to achieve, given the myriad of evaluators and analysts. Depending on which instance performs the evaluation, the same company can rank differently, making benchmarking challenging to follow.
The bottom line
Even though significant progress has been made in terms of defining sustainability goals and raising awareness around this issue at the consumer, business, and governmental levels, there is still a long way to go until this goal is implemented according to its true meaning. Changes in mentality, banking values, and operations could propel sustainability from a simple PR exercise to a core value within the organization. However, most of the current efforts in this direction strive to recast actions that are already being performed to reduce risk, maximize profit, and improve company performance as efforts aimed at meeting sustainability and CSR goals.
Rishi Bhattacharya, CEO of the communications consultancy Impact & Influence, explains: “Many banks are in a ‘place race’ when it comes to showcasing their ESG credentials and expertise, through marketing and communications, but also through their actions.” Therefore, the greatest danger comes from the fact that, because it is so loosely defined, sustainability measures in the banking industry can be easily touted and marketed, even if they are not carried out properly.
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The Sustainable Apparel Coalition (SAC), a fashion brands alliance, has declared that it will stop making sustainability claims based on the Higg MSI assessments due to greenwashing suspicions raised by fashion sustainability activists and the Norwegian Consumer Authority (NCA).
Launched in 2021 by the SAC, the Higg Materials Sustainability Index (MSI) is a tool used to measure the environmental impact of materials in the apparel, footwear, and textile industry. The scores are calculated based on industry data and various product life-cycle assessments, thus facilitating benchmarking and comparability across multiple brands and companies.
250 companies including H&M, Norrøna, Nike, Primark, Walmart, Boohoo, Amazon, and Tommy Hilfiger have already implemented these rating systems on their product advertisements. They form the basis for the companies’ claims about sustainability, such as that certain products use over 80 percent less water compared to conventional materials or have a 10 percent lower environmental impact.
Fashion sustainability activists have heavily criticized this model, labeling it as a greenwashing tool that misleads consumers and spreads wildly inaccurate data about clothes and footwear. The reaction is in line with other concerns claiming that the SAC uses research funded by the synthetics industry to convince people that petroleum-based products are more environmentally sound than natural fibers.
After investigating Norrøna’s sustainability claims, the Norwegian Consumer Authority concluded that the data was misleading and the sustainability claims unsubstantiated. Moreover, it threatened the H&M group with economic sanctions unless it stops using MSI-related marketing messages by 1 September 2022.
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An innovative procedure for gas separation and storage developed at Deakin University’s Institute for Frontier Materials is poised to reduce energy consumption in the chemical industry and make hydrogen easier and safer to transport in powder form.
Mechanochemistry, a relatively new concept, represents chemical reactions triggered by mechanical forces rather than heat, light, or electric potential differences. The mechanical power is generated by ball milling, a grinding method that requires very low energy. During this process, a cylinder containing steel balls is turned, making the balls roll up and down, compressing and pushing the material inside. This triggers a reaction that absorbs the gas into the powder and stores it there, thus allowing for safe hydrogen storage at room temperature.
According to the research team, the process could extract hydrocarbon gases from crude oil with a 90 percent reduction in the energy traditionally required for this process. Moreover, storing gas safely in powder form could facilitate hydrogen storage and transportation and serve as a direct fuel for cars and trucks.
With significant benefits and savings in three major areas – energy, costs, and emissions – this mechanochemical process is expected to reach widespread adoption soon. Professor Ian Chen, the co-author of the study published in the journal Materials Today, says: “We’re continuing to work on different gases, using different materials. We hope to have another paper published soon, and we also expect to work with industry on some real practical applications.”
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As an alternative to conventional forms of payment, digital money promises to speed up financial transactions and improve transparency. However, this emerging trend also brings a series of challenges, such as volatility and the risk of security breaches. So what should we think of this type of digital asset? What are the benefits, opportunities, and implications, and how far has its adoption advanced? In the following, we list five of the most important things to know regarding the rise of digital money.
Digital currencies are alternative methods of payment that exist only in electronic form and have no physical representation. Managed and transferred via online platforms, these currencies can also be exchanged via trading services and, in some cases, converted into their traditional physical cash equivalent via ATMs.
After being first conceptualized in 1983 by David Chaum, a US cryptographer, the concept of digital value transfer and digital cash only started to gain traction after Bitcoin was developed and became popular. Over a span of more than 20 years, the trend evolved slowly, with several failed attempts to introduce digital money into the market (e.g., DigiCash, the company that developed the first digital currency, eCash, went bankrupt in 1998).
Fast-forward another 20 years, and the trend is in full swing, with adopters and supporters from all levels of society, from governments to businesses and individual users. However, there are still many issues that need to be understood and addressed before the trend enters into the mainstream. Here are some of the main points to be aware of in relation to digital money.
Digital money comes in different shapes and forms
Even though terms such as “digital money”, “digital currencies”, and “cryptocurrencies” are sometimes used interchangeably, there are three main types of digital money, each with different characteristics in terms of centralization, encryption, and transparency:
Cryptocurrencies are a form of digital money that is created using cryptography. Being supported by blockchain and unable to operate outside this platform, its purchasing power depends on its user community. On the one hand, this allows for complete decentralization, with no authorities or governments being involved from a regulatory perspective. On the other hand, this leads to high volatility and a limited legal framework. The strongest cryptocurrencies in terms of market capitalization and trading volume are Bitcoin and Ethereum.
Central Bank Digital Currency (CBDC) is a digital version of a country’s currency, backed by the central bank. It can be developed on different platforms (i.e., digital ledgers) and is therefore not limited to the blockchain (distributed ledger technology). The central bank retains control over the currency, issuing it and governing transactions. According to the Atlantic Council, 105 countries, representing over 95 percent of global GDP, are exploring a CBDC.
Stablecoins are digital money whose market value is tied to an external reference (i.e., another currency, the price of a commodity, etc.) and are developed in an attempt to counterbalance the high volatility of cryptocurrencies. There is a general trend towards tighter regulation of this type of currency. Tether (USDT) and U.S. Dollar Coin (USDC) are the strongest stablecoins in terms of market capitalization.
The market is moving fast
Currently, there are over 20’000 cryptocurrencies in circulation, the equivalent of US$1.07 trillion in market value. Based on a research study conducted by the Atlantic Council, ten countries have already fully launched a digital currency, 14 countries are currently conducting pilot projects to assess the feasibility and implications of digital money, 26 are in the process of developing the necessary systems and procedures, and 47 are still in the research phase.
On a global level, the Digital Currency Global Initiative, a joint project between ITU and Stanford University, aims to further explore the technical implications and challenges of digital money, develop metrics and means of standardization, and promote best practices and learnings from pilot implementations.
The number of technology and service providers for digital currencies is increasing
A significant number of fintech companies that develop platforms or solutions for digital currencies have been founded in the last decade. Either leveraging the distributed ledger technology or blockchain-agnostic, these companies aim to provide central banks, financial institutions, governments, and participants in financial transactions with the necessary tools to implement and use digital currencies.
Companies such as FTX US (former LedgerX) and BiKi.com provide platforms for digital currency trading services. Bitt, TradeBlock, and Fluency develop solutions that help wholesale or retail customers to develop, customize, and integrate digital financial instruments, while companies such as Coinfirm focus on facilitating regulatory and compliance processes. The market of solution providers is constantly expanding, covering all aspects from technological enablers to exchange platforms and regulatory systems.
A society governed by digital money comes with additional challenges
Despite the promise of digital money to increase access to payments, efficiency, and resilience, the road to mainstream digital currencies is not a smooth one. First, a consistent and unitary legal framework still needs to be developed, and all parties involved need to reach a mutual agreement. The amount of human and financial resources for scaling up the pilot projects is also considerable (e.g., a lack of resources was the reason why Uruguay has not launched its second digital currency project).
As with most emergent technologies, digital money is not yet entirely accepted by consumers due to concerns related to privacy and safety. To a certain degree, these fears are justified, with digital assets being more vulnerable to cyberattacks than traditional money. On top of that, due to uncertainty over the technology and questions as to whether the technology is fully scalable and can meet the demands of a large population, the path to full adoption could still be a long one.
Moreover, some critics see CBDCs as a “slippery slope” leading to economic influence and social control by the state. They believe the centralized version of digital money would give governments the opportunity to control spending, allow only certain purchases, and provide money with expiry dates which would allow them to force private citizens to spend their money instead of saving it.
Digital money will significantly disrupt the financial sector
There are multiple scenarios for the future of financial services in relation to the digitalization and decentralization trends. Many experts are inclined to predict a future coexistence of physical and digital money, while others point towards complementarity – with each type of currency having its unique role in financial transactions. However, there are also supporters of the takeover scenario, where physical money is entirely replaced by its digital counterparts.
Either way, the financial sector has to develop contingency plans and adjust to changes related to business models (e.g., changes in the product and services demand and offering), regulation and compliance, infrastructure adjustments, identity management, cybersecurity, audits, and financial reporting, as well as employee capacity building.
Although the popularity of digital currencies is constantly growing, they are not yet widely perceived and accepted as a reliable and secure alternative to physical money. However, the trend is currently gaining ground and is expected to gain increased traction in the near to medium future.
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Solar cells – semiconductor devices that use sunlight to produce electricity – are considered one of the main technological innovations that will help humanity generate electricity in a sustainable way. Due to recent developments in solar energy related to perovskite and semiconductor technologies, solar cells have managed to reach average visible transparency of up to 70 percent.
A research team at Tohoku University in Japan has succeeded in developing a near-invisible solar cell, with transparency of over 79 percent, that could be used to transform windows, agricultural sheds, glass-based smart equipment, and even human skin into energy-harvesting devices. The newly-developed device is based on a combination of indium tin oxide (ITO) and tungsten disulfide (WS2), two materials that scientists consider to be the most suitable in terms of light absorption co-efficiency per thickness and band gaps in the visible light range. According to a study published in the journal Scientific Reports, the production of these devices can be scaled up rapidly.
With five to seven billion square meters of glass surfaces in the US alone, tremendous amounts of energy could be generated by harnessing the potential of transparent solar cells. Traditional solar panels currently need to cover extended areas and are cost-intensive. Transparent panels could be more easily integrated into urban areas and allow people to generate electricity by using their home or office windows, car sunroofs, smart devices, etc.
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Revolut, a British fintech company offering digital banking services, has announced the rollout of a new “buy now, pay later” (BNPL) service across Europe. The offering will first be made available in Ireland and then gradually extended to other European countries, with deployment in Poland and Romania planned by the end of 2022.
BNPL is a short-term financing model that allows clients to purchase products and pay for them at a later time, usually in installments and with no interest fees. Unlike traditional credits, BNPL services are easy to qualify for, manageable via an app, and adjusted to the customer’s budget. However, they usually come with a fixed fee, and the conditions may vary according to the provider.
Along with the digitalization of financial services, neo-banking, and decentralization, the BNPL trend is rapidly gaining traction, with analysts expecting the market for this type of service in Europe to grow to £680 billion (about €790 billion) over the next five years. Afterpay (Australia) and Klarna (Sweden) are two of the established BNPL providers, with startups such as Zip, Sezzle, and Affirm now making their way into this field.
Joe Heneghan, chief executive for Revolut Europe, declared that these types of products “give customers more control and flexibility over their personal finances, in a responsible way, by enabling them to spread the cost of purchases.” However, regulators are concerned about the prospect of giving customers easy access to cheap credit. Moreover, such services are currently not fully regulated, and various governmental agencies are currently trying to set up regulatory frameworks and supervisory bodies for BNPL services.
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One of the biggest challenges facing the banking systems today is the security of transactions. By identifying and confirming the identity of users based on their physiognomy, biometrics such as facial recognition can support the banking and financial sector in identifying fraudulent transactions, increase the security of payments, and enhance customer experience. Face recognition algorithms can be used for user authentication procedures, the automated opening of checking accounts, authorization of financial transactions, and performing payments.
As our society becomes increasingly digitalized, biometrics solutions (i.e., technologies using anatomical features to verify someone’s identity) are slowly starting to replace traditional methods. Based on checking unique biological traits such as facial characteristics, retinas, irises, voices, fingerprints, or two-dimensional images of finger veins, these technologies promise faster, more secure, and more accurate authentication processes. Tailored applications have been developed for sectors such as banking and finance, defense, transportation, and manufacturing, to name a few. With the number of startups drastically increasing in the last decade, the biometrics market is expected to grow from US$42.9 billion in 2022 to US$82.9 billion by 2027.
Currently, the US is the world leader in terms of investment volume and the number of companies developing biometric solutions, followed by Latin America and Asia. Africa has a relatively high number of startups; however, the total funding amount is very low compared to other regions. Nevertheless, the trend is picking up all over the world, powered by the quest for digitalization across all industries and the need for more secure and personalized solutions.
Facial recognition in the banking sector
While biometric technologies like facial recognition have been around for a while, the banking sector is only now starting to incorporate them into authentication processes. Adoption is also accelerated by significant advancements in technology, the increasing need for remote onboarding and interaction with customers, and by regulatory provisions such as “know your customer” (KYC) guidelines and the US Bank Secrecy Act.
In the banking sector, ATMs equipped with cameras can verify and validate a customer’s identity by checking the image of their face against a database of stored photographs. After the validation takes place, the customer can withdraw money or access other banking services. This type of authentication is already offered to customers by banking institutions such as CaixaBank in Spain and Singapore-based OCBC Bank.
Facial biometrics have additional applications in finance: The technology could be used to enable customers to log in to digital financial applications in order to open new accounts, secure mobile wallets, or approve financial transactions. In these situations, too, the face scan is matched against official identity documents or images that have previously been stored in the database.
Challenges in implementing facial recognition biometrics in banking
Despite its numerous advantages for multiple industries, face recognition technology also comes with a series of challenges and limitations. Firstly, the technology requires an extensive dataset to train the algorithms. However, these datasets are difficult to obtain and store, given privacy regulations and the growing number of data breaches and cybersecurity attacks. Moreover, poor-quality datasets could introduce biases and lead to false matches, which would defeat the main purpose of this technology.
Secondly, apprehensiveness and cultural anxiety among the general public regarding potential abuses of this technology might slow down adoption, despite the fact that providers are selling it as a means to increase customer satisfaction.
Startups on the rise
Although facial recognition is one of the most controversial and complex issues to regulate and implement in the market, investors’ interest in the technology surged in 2021. A CrunchBase analysis conducted by Supertrends shows that more than US$1 billion has been invested in various funding rounds. Here are some examples of face recognition solution providers that tailor their services to the needs and regulations of the financial industry.
US-based Incode Technologies is a digital identity company that develops biometric identity products for industries such as banking, retail, healthcare, and hospitality. Headquartered in San Francisco, it has offices in Europe and Latin America. One of their platforms, Incode Omni, offers self-service, omnichannel, and secure multi-biometric capabilities, supporting customers in performing identity authentication.
Based in the UK, Shufti Pro is a SaaS company providing fully automated solutions for end-customer authentication and business verification. Their solution can be integrated with other proprietary systems via an API. Besides face verification, the solution also supports document verification, video interviews, address verification, two-factor authentication, consent verification, and biometric sign-in through facial recognition. The verification process can be completed in under 30 seconds and is available in more than 230 countries.
Brazilian company unico develops facial recognition and identification solutions for banks and retail companies. Their product, Unico Check, allows for biometric authentication and validation of individuals during the onboarding processes and while performing various transactions, helping companies and the government to reduce fraud, streamline processes, reduce operation costs, and increase the security of exchanges.
An artificial intelligence and computer vision-enabled SaaS platform developed in India, Biocube offers biometric technology for border control, the finance industry, insurance businesses, and governmental organizations. Their robust yet easy “know your customer” and transactions system helps identify frauds in account opening and fraudulent transactions.
In the corporate banking sector, companies such as Barclays and Citi are experimenting with the finger vein reader technology. At the same time, fingerprint-based identification codes have been successfully incorporated into several contactless card pilots worldwide. Other organizations are pushing the envelope even further by developing 3D imaging for finger veins using photoacoustic tomography. However, experts consider that, among all biometric authentication methods, facial recognition is currently the closest to maturity, capable of confirming a person’s identity with high confidence. Nevertheless, governments and regulators must ensure that the legal and regulatory framework keeps pace with technological advancements so that basic ethical principles are respected and no civil rights are infringed.
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Banking as a service (BaaS), often used interchangeably with the concept of embedded finance, represents the provision of financial tools and services by non-financial providers. After hitting US$22.5 billion in revenue in 2020, this model is expected to reach approximately US$230 billion by 2025, causing significant disruption in the traditional banking value chain and processes.
According to traditional models, purchasing high-end goods and services requires an additional step, usually related to obtaining financing either through loans, insurance, or investments. The BaaS model streamlines the operations and customer experience by eliminating the extra step and allowing companies in various sectors (e.g., real estate, retail, leisure, etc.) to integrate these financial services into their processes, offering customers the possibility to purchase goods and services without the need to acquire additional funds from other parties.
The process is based on an API (Application Programming Interface) integration between customers, companies, and banks, which facilitates the exchange of messages, funds, and data. Even though API is a technology that has existed for decades, Banking as a service offers an innovative way of employing it in the financial sector.
Benefits for customers and service providers
BaaS has multiple implications across all parties involved in a transaction. For customers, it provides a frictionless and convenient experience, which in turn increases their loyalty to the brand. Their need for customized and tailored services is met, along with their sense of process ownership.
For providers of products and services, the benefits are even greater. The system provides additional data about consumers (i.e., spending habits and needs) and increases the likelihood of purchase. Moreover, financial integration through APIs allows providers to expand their offerings, combining features from multiple partners that they would otherwise not be capable of offering.
This model has also led to the rise of various fintech companies who are willing to facilitate and act as an intermediate in the relationships between banks and non-financial service providers, by developing the necessary technologies for communication, data exchange, and risk and compliance management.
Disruptions in the banking industry
However, BaaS is also set to disrupt the operational model of the banking industry. Initially, banks built their own products and systems and disseminated them through proprietary distribution channels. At this point, their control over operations and relationships with customers was at its highest level.
However, technological advancements and market changes have led to a new reality: On one side, customer dissatisfaction with existing banking offerings and lower levels of trust in the banking industry became a more serious issue, pushing clients to consider switching banks or embrace alternative options. On the other hand, the rise of FinTech and open banking, together with global trends such as decentralization and hyper-personalization, dramatically changed the role of these institutions in the financial field and limited customers’ direct access to bank services.
In order to stay relevant, banks have to re-invent their strategy and integrate new business models such as B2B2C and B2B2B. The conservative approach, where they continue to provide specific banking products such as licenses, deposits, loans, and payments to their existing customer base, might not be enough to assure the survival of financial institutions in the long run. To keep up with the market and social changes, banks will need to expand their offerings and capabilities through partnerships with FinTech and target end customers as well as banking products distributors and service providers.
Accelerated by the availability of technologies such as cloud computing and data storage, smartphones, and digital applications, the banking as a service trend is currently in a highly accelerated emergent phase. The number of startups developing the necessary technology is growing, while significant players in retail, real estate, leisure, travel, and other consumer services, etc. have already implemented it. Banks have also started to join the BaaS movement, either by stepping up their digital banking offerings or by facilitating the integration of banking products with non-financial companies.
For example, Walmart, one of the leaders in the US retail sector, has partnered with Ribbit Capital, a fintech investment firm based in Silicon Valley, to develop next-generation digital financial services for its customer base. Ingka Group, the parent company of Swedish furniture brand IKEA, is also looking into BaaS-based services through its partnership with Ikano Bank.
On the banking side, the BaaS model is taking root across multiple continents. At least five major banks in Australia are developing banking as a service systems, with Westpac leading the way. The Australian bank and financial service provider has already launched such a platform and established partnerships with various industry sectors.
Wells Fargo, one of the largest banks in the world, has built a BaaS platform together with MuleSoft aiming to deliver a more unified customer experience as well as services such as account servicing, foreign exchange, and payments. Under the motto “a world where financial services seamlessly sync with life,” the Berlin-based fully licensed Solarisbank has built a proprietary BaaS platform from scratch that enables non-financial providers to launch banking products.
The banking system is currently undergoing a significant transformation that will become even more acute in the near future. In order to “ride the wave” and stay relevant in the financial field, banks need to incorporate the BaaS model into their short and medium-term strategy, at the same time taking into consideration the talent and cost requirements that are necessary for this transformation.
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While the efforts to implement and increase the adoption rate of 5G technology are still at the starting line, researchers and players in the communication industry are already setting their eyes on the next frontier: 6G. Even though this technology is still in the research phase, it has the potential to propel the IT sector to a new level, allowing for very high processing speeds, low latency, and increased bandwidth. Moreover, adopting this technology will support the IT sector in aligning with societal goals (e.g., high-speed services available anywhere, anytime), satisfy increasing market expectations, and improve the efficiency of the sector’s operations.
Over a span of 30 years, mobile communications technology has gone from barely maintaining the connection during phone calls to secured conversations, networks that support rapid and clear transmission of data, SMS, roaming conference calls, multimedia services, VoIP apps, video streaming, and video conferencing services.
5G – one step away from market adoption
The current fifth-generation technology is faster than any other previous generation, promising reduced battery consumption, improved coverage, and seamless device-to-device communication. Commercial 5G networks are operational; however, the adoption rates are low, and the roll-out is proceeding at different speeds across the world. According to Ericsson’s Mobility Report, the number of 5G subscriptions is expected to reach one billion in 2022, while the GSMA, an industry organization representing the interests of mobile network operators, expects 5G to account for 21 percent of all mobile connections in 2025.
Even though the next logical step after 5G is 6G, there is also a significant intermediate evolutionary phase, 5G Advanced, which is now taking shape and starting to be implemented across industries.
6G – the next frontier
While 5G is still under roll-out, efforts to shape the 6G infrastructure have already begun. This technology will take IT applications for smart cities, smart farming, industrial automation, and robotics to the next level. Moreover, because 6G will be built upon the previous generation in terms of technological infrastructure and use cases, it will allow the IT sector to scale it up in an optimized and cost-effective way.
The vast majority of IT applications will benefit from this surge in terms of efficiency, capabilities, and speed: Digital twins, virtual models of physical objects or processes, will be operational at a larger scale, new types of man-machine interfaces will be enabled, and the potential of artificial intelligence and machine learning will be unleashed. In terms of localization and geospatial imagery, 6G will substantially improve positioning accuracy and potentially extend coverage into space while at the same time meeting extreme connectivity requirements, including sub-millisecond latency.
IT players that are already developing AI-based applications will benefit from a synergy between 6G and AI that can unlock new opportunities in an unprecedented way: On the one hand, AI will help improve 6G performance; on the other hand, 6G will provide the infrastructure to propel the use of AI across all sectors and in multiple use cases.
Innovators and early adopters
Important players in the IC&T field have already kicked off 6G-related research projects or experiments. In 2020, China launched the first 6G experimental satellite to test data transmission using the terahertz spectrum. The country also holds most 6G patents, closely followed by the US.
In April 2011, AT&T, one of the world’s largest telecommunications companies, applied for experimental licenses with the US Federal Communications Commission. This would allow the company to showcase the functionality and capabilities of 5G Advanced and 6G wireless systems.
Samsung, a multinational electronics and information technology company, plans to host its first 6G forum, where scientists and industry experts will explore next-generation communication technologies. Nokia Bell Labs, the Finnish multinational IT&C and consumer electronics company, has also begun research work in the 6G area, planning to make this technology commercially available by 2030.
Public or private organizations in Japan, Germany, South Korea, and Russia are also establishing research facilities or starting pilot projects. In the US, the Next G Alliance, launched in 2020, aims to advance North American leadership in 6G. On the same note, the EU initiated the 6G flagship project, aiming to advance the research in this area.
An eye on the future
The vision of the future of 6G tends to converge across business players, industry organizations, and research centers. The most optimistic prediction places 6G commercial roll-out as early as 2028, while more conservative approaches predict that it will become available in 2035. Most of the roadmaps of the important players in the telecommunication field envision 6G commercial availability in 2030.
However, there are still important challenges that need to be addressed before full deployment of the new generation of communication technology becomes possible, such as new technological advancements to differentiate the new generation from the previous one, global, unified standards in order to prevent market confusion and fragmentation, as well as diverse and secure supply chains.
Find out more about other technologies that will have a tremendous impact on the IT sector in the future.