Kathy Gibson is at SingularityU Exponential Finance Summit in Cape Town – True disruptive innovation causes rapid cost declines and demand growth, cuts across sectors and geographies, and spawns further innovation, stimulating growth over extended time horizons.
This is the word from Catherine Wood, investor and founder of ARK Investment Management, who adds that the global economy is undergoing the largest technological transformation in its history.
“If were measuring this on the Richter Scale in terms of the impact on the global economy, it would be a nine,” she says.
The only time that was somewhat comparable was the early 1900s when the telephone, automobile and electricity were all developed.
Wood believes that the technologies driving global innovation are blockchain, genome sequencing, artificial intelligence (AI), robotics and automation.
The modern financial industry evolved over the last 1 000 years – but technology has transformed that in just 20 years, Wood points out.
This has been driven largely by technologies like mobile payment. In fact, in China, mobile payment volumes were double the size of the country’s economy.
China has gone from a largely unbanked population to the leading mobile payment market in the world.
Fintechs are powering the digital economy, she adds. It can provide better, cheaper, faster and novel solutions that meet the needs of the digital economy.
Millennials are accelerating the fintech revolution, Wood points out, although older age groups are starting to adopt fintech platforms quite quickly.
Thanks to fintech, the 1,7-billion adults who are unbanked in the world can now have access to banking services. Since two-thirds of unbanked people own a mobile phone, they are potentially able to access financial solutions.
ARK believes digital wallets will become ubiquitous, and investors are looking for potential winners in this space.
In the US, digital wallet platform Venmo is already running a close second to JP Morgan in terms of digital users – and, together with other digital players, will probably overtake the incumbents soon, Wood says.
The second driver, artificial intelligence, is ready for prime-time now, she adds. “It’s ready because the human programmer has been taken out of a lot of the equation..”
With deep learning, AI could create three times the value of the Internet across industries, Wood believes. This could add $30-trillion to global equity market capitalisation in the next 20 years, across all industries.
Blockchain is another disruptor and will effect many areas of the financial industry. Low cost remittances and faster trade settlements are among the use cases for blockchain, possibly bitcoin.
Wood points out that the bitcoin blockchain last year accommodated $1,3-trillion in transactions. This is more than double PayPal’s volume of $578-billion.
“We do believe there will only be a few cryptocurrencies – two, three or four,” Wood says.
Bitcoin already sits with about 60% of the cryptocurrency universe, and will likely become the default reserve currency, although there will be a couple of other players in the long run.