Finance

The platform economy is revolutionizing the banking sector – technology providers and FinTechs are increasingly occupying the customer interface. Retail banks must reposition themselves: Instead of the mostly universal business model they operate now, they need to decide where their future focus will lie. Will they be relationship expert, product expert or technology provider?
Online platforms reach millions of people, enabling more and more products and services to find their way to the customer. This also applies increasingly to financial products, where platform operators are becoming serious competition for retail banks. Thus, banks face a fundamental decision: Do they position themselves in the future at the customer interface and actively design platforms or should they focus on primarily being product providers? Currently most banks are busy digitalizing their existing business model – without any sign of real innovation.

This paper examines current trends, uncertainties and wild cards in relation to international trade and investment. It then considers implications for the European Union.
The European Union’s interest remains clear: a rules-based order is better than a transactional or winner-takes-all approach to international trade. But it is wise to plan for the worst, while hoping for the best.
The future of international trade and investment may lie somewhere between the extremes of the status quo and a reversion to protectionism. This would involve a thorough revision and rebalancing of multilateral norms, to take account of major global changes on many fronts. The EU has traditionally been a leading player in the creation of international institutions and norms. But the days when Europe could dictate the global agenda are over. Europe’s role will be increasingly a matter of seeking to influence events, rather than asserting dominance. In the coming decades, internal unity and a strong sense of purpose will be all the more important.

Ten years ago, most observers predicted a period of smooth sailing for the world economy. Today, the world looks very different. The global economy experienced a major crisis in 2008, from which many countries have not fully recovered. Europe faces a series of major economic, financial, social, and political stresses, from outside its borders and from within. Many of the fastest-growing economies from that time, especially commodity exporters, are now experiencing serious difficulties. China is still growing at a reasonable rate, but more slowly than a few years ago. Much of the Middle East is in turmoil and its economies, with rare exceptions, are suffering. The Doha Round has proved highly disappointing, failing to meet lofty expectations. Global debt rose significantly, and job creation has stalled in many parts of the world.

US leadership in multilateral institutions such as the World Bank and regional development banks is flagging. These institutions, rated as some of the most effective development actors globally, provide clear advantages to the United States in terms of geostrategic interests, cost-effectiveness, and results on the ground. Those are among the reasons the United States played a leading role in creating the institutions and has continued to support them over many decades. Yet the US position in these institutions is less certain today. As a multilateral development bank (MDB) donor, the United States has fallen behind other countries, and it is increasingly seen as an obstacle to expanding MDB capital to address higher demand in the developing world for lending
and investment.

Small and medium sized enterprises (SMEs) are often cited as the major driver of economies and a force in job creation, but they still have difficulty securing proper financing to prosper.
The global financial crisis of 2007-2008, coupled with higher regulation and capital costs for loans to SMEs, has made it even more difficult for SMEs to secure financing. However, the financial crisis has also created a plethora of disruptors in the FinTech area (“FinTech”, a contraction of “finance” and “technology”, is defined as the use of technology and innovative business models in financial services) who, with their innovative ways to originate, assess credit risk and fund SME loans, have provided alternative ways for SMEs to secure funding for their growth.
Over the last year, the Global Agenda Council on the Future of Financing & Capital, formed of industry leaders, academics, finance ministers and central bankers, has tackled the question of the lack of financing for SMEs, although ample cash is ready to be deployed.
This report synthesizes the authors’ efforts to take stock of what the finance industry has provided to date and how the FinTech industry has taken over some of the funding with its innovative business models and products.

AUGUR is a forward looking study assessing the position of Europe in the world in 2030. One of the most intractable dimensions in forward-looking studies is the world of finance, despite the fact that finance will play a decisive role in the organization of our future world. This brief precisely sketches the key lines of research that AUGUR is following in its approach to the World of Finance, 2030.