Financial research giant TAAB Group prefaced its 2018 predictions with a call to “embrace a technologist”. It’s advice likely to be echoed by experts and economists around the world, as they predict 2018 will be the year when technology takes over our currencies and roads, talks to regulators and makes financial advisers a thing of the past (or the future!).
Bitcoin May Hit $1 Million
Bitcoin’s inexorable rise will continue, potentially climbing to $1 million, said Dr Kevin Curran, a professor of cybersecurity at Ulster University in Northern Ireland and a senior member of the Institute of Electrical and Electronics Engineers.
But before that happens the currency is likely to face a number of crossroads that will test its credibility, Curran said. If hackers manage to penetrate the defences of bitcoin exchanges, the cryptocurrency’s scalability will be questioned and could unleash a backlash and crash.
Further, other strong alternatives will jostle to topple bitcoin from its cryptocurrency throne. One of them, World Mobile Coin, has the potential to overshadow the market leader because the technology backing it has been developed to scale up to handle more simultaneous transactions.
“The underlying architecture, which relies on Intel’s software guard extension (SGX) technology, provides protected areas of code execution,” Curran said. “This is a solid technology.”
Funding platform SeedLegals predicts initial coin offerings (ICOs) – fund raising through cryptocurrencies — will become commonplace as the regulation around them is simplified and becomes widely accepted.
“Today each party in an ICO is independently having to figure out the jurisdiction, deal offering, anti-money-laundering checks and other core issues, but that’s about to change,” said SeedLegals founders Anthony Rose and Laurent Laffy. “ICOs are about to get standardised into three-to-four groups and go mainstream.”
Research firm TABB Group goes further in its forecast, predicting cryptos are here to stay and that 2018 will see them become an established part of the financial landscape.
“Every bank will be trading cryptos in 2018 and we will see a massive workflow change because of it,” TABB’s Terry Roche said in a company broadcast.
Regtech Will Make Life Easier
The implementation of a range of far-reaching new trading and operation rules by the financial services industry will see the emergence of regulation technology, or regtech, from fintech’s shadow, said Kieron O’Brien, Sales Manager at Know Your Customer.
From updates to the markets in financial instruments and derivatives code (MiFID II) and the general data protection regulation (GDPR) as well as parts of the anti-money laundering directive (5AMLD), companies face a barrage of new operational rules, O’Brien noted.
Technology will increasingly play a role in companies’ case management and compliance of the new regulations, added Mash Patel, CEO of data tools provider Kurtosys.
“Compliance with these new regulations is essential for asset managers but it’s a costly and complex business,” Patel said. “Fortunately, the growth of regtech start-ups – which specialise in providing compliant technology solutions for finserv companies – will take much of the pain away.”
Cars Will Take the Wheel — For a While
Cars will take a huge step towards full autonomy as manufacturers begin producing vehicles with Level 3 autonomy – meaning they will be able to take the wheel at the flick of a switch. Some companies, including luxury makers Audi and Cadillac, have already built Level 3 models, but this year will see their refinement and progress towards the next stage of autonomy: Level 4, in which almost all operations will be automatically controlled.
“Level 3 cars will still require a lot of human control but these cars will be able to drive themselves until a hazard or a problem is encountered,” said Karthik Kannan, a management professor at Purdue University in Indiana. “You won’t be able to go to sleep at the wheel just yet.”
Cities will also become more wired to accommodate Internet of Things-enabled cars, with sensors and monitors connecting vehicles to road infrastructure such as traffic lights.
“IoT-controlled lights systems are already in use in some US cities, but soon they’ll be connected to in-car systems that will share information on road conditions,” Kannan added. “You can imagine a driver will soon be able to drive around town and only catch green lights.”
Say Goodbye/Hello to Human Advisers
Asset management will either witness the death of the human financial adviser or the crushing of artificial-intelligence driven robo-advisers, depending on who you ask.
Despite forecasting explosive growth for largely automated passively managed exchange-traded funds, Kurtosys’ Patel expects a the robo-adviser to decline in popularity.
“They are still failing to attract the biggest investors,” Patel said. “The marketing budgets might be huge compared to other asset-management firms, but some believe that their business model is unsustainable, and 2018 could be a make-or-break year for many robo-advisers.”
Not so, says SeedLegals’ Rose and Laffy, who see human financial expertise as outmoded and ill-suited to today’s data-dependent investing environment.
“We’ll see (their) role rapidly replaced by data-driven platforms that leverage data across thousands of deals and use data rather than “this is the way I usually do it” to provide a faster, better, cheaper service,” they predict.
The Recovery Will Strengthen
The key theme of 2018 will be the entrenchment of what has so far been a long, slow recovery from the economic slump of 2008, according to fund manager Legg Mason. While there have been several reflationary spikes in the past decade, the 2017 uptick is set to stay, the company forecasts.
“Stimulus measures have given way to broad, synchronized global growth, benign inflationary pressures, and the expectation that developed-market central banks will ‘go slow’ in removing monetary policy stimulus—a powerful combination of necessary ingredients for helping to sustain global growth while providing a recipe for continued outperformance of emerging markets,” it said in a note to clients.
The downside will be in the developed-market fixed-income space, which will have to learn to accommodate a new environment of rising interest rates – and yields – and deteriorating credit fundamentals, Legg Mason wrote.