With world trade increasing six times in the last 25 years and looking set to reach $85 trillion by 2025, conventional methods of payment and the currencies in which deals are done could weaken or largely disappear.
While the total sum of all the money in the world is $69 trillion, only around one tenth is held in cash, with the vast majority of transactions taking place using electronic data, says the Future of Trade Report.
The advantages of digital money are that it is cheaper than cash, more easily traceable and less vulnerable to corruption. It can also be used in countries where the banking sector is less developed.
Using phone networks and secure payment schemes has led to the growth of services like Vodaphone’s M-Pesa which now has nearly 20 million users worldwide.
It may be too soon, though, to speak of the end of cash, which remains portable, widely accepted, reliable - and untraceable.
What currencies will dominate in the future is another question. Even if the dollar loses its prominence, experts believe companies and individuals may pick from a basket of currencies depending on what suits their needs at the time.
Banks will still play a pivotal role in trade, even if small business owners, in particular, remain wary after experiencing difficulties with borrowing during the last financial crisis.
The importance of SMEs - they represent around 99 per cent of all non-financial companies in Europe - means they will drive alternatives to banks when it comes to raising money, including peer to peer networks and crowd funding.
Banks also face the challenge of digital currencies, with some countries, like Denmark, already moving to a cashless society while companies like Amazon and Google developing their own financial services.
Funding major infrastructure projects remains heavily dependent on China, which has an estimated $4 trillion in sovereign wealth funds. Chinese growth may slow, but its importance as an investor will not diminish.
Beijing is using its wealth to fund trade initiatives like the One Road, One Belt project which seeks to add $2.5 trillion to economies along its route. Containers from China can now travel to Germany in just 14 days, compared with 60 by sea.
This all points to a new phase of globalisation and new models for payment, funding and even both regional and international trade.
For the last 12 months DMCC, the authority on trade, enterprise and commodities in Dubai, has teamed up with FutureAgenda on an odyssey to discover the future of global trade. We gathered industry leaders, academics and experts in five key cities to discuss how global trade will change in the next decade and how it will drive the global economy into the next phase of growth.Download PDF
Funding of Trade – Gary Dugan
There are multiple benefits to digital money not least that it is cheaper than cash to handle which by most estimates, costs society as much as 1.5% of GDP; it has low administration costs, reduced security costs and is traceable thus reducing the risk of loss of funds from corruption (e.g. according to a recent McKinsey report, it is estimated that 75-80 percent of the $22 billion in benefits of shifting India’s government payments to electronic would come from reducing leakage of funds in government transfer schemes ending up in the wrong hands).
Widespread adoption of digital money and connectivity has significantly increased the amount of trade taking place in emerging economies. Small businesses have benefited from the growth of mobile and fixed line networks underpinned by maturing technology standards and protocols such as credit and debit card payment schemes. Increased connectivity is also at the core of efforts to increase financial inclusion through digital money, where a lack of bank and cash infrastructure and ability of individuals to authenticate their credentials is traditionally cited as an underlying challenge. Vodafone’s M-Pesa solution, first launched in partnership with Safaricom in Kenya demonstrates how connectivity can assist in leapfrogging traditional cash based infrastructure and create an environment where businesses can flourish. Launched in 2007 there are now 19.9 million active users of M-Pesa worldwide.Share
At the same time, as money is changing in order for wider trade to flourish, there is a growing need for new forms of social interaction and ability to communicate across cultures. This may well emerge first around new, high growth trading routes. Many are looking for new mediums of exchange: As such some believe that, rather than the dependence on the USD, we may see growth in alternative currencies and money networks, and the first state issued fiat digital currency’s. Momentum behind the former is already clear with 9 major global banks already signed up to the Open Ledger Partnership (Barclays, BBVA, Commonwealth Bank of Australia, Credit Suisse, JPMorgan, State Street, Royal Bank of Scotland, and UBS), a partnership to draw up industry standards and protocols for using the block-chain in banking, initiated by R3 and overseen by the not-for-profit Linux Foundation. Few expect much clarity on which will be the dominant currency any time soon as companies, like individuals, will increasingly choose to use a basket of different options for trading dependent on their needs. While government backed official currencies will certainly still have a place, the rise of digital systems based on Block-chain platforms are seen to have an alternative set of benefits. As de-dollarisation takes place, we will likely see the emergence of a host of new trading currencies but there will inevitably be concern about viable alternatives. The digital, open source, IP sharing economy plays by different rules and agreements. As such, new trading options can quickly be designed, trialed, improved and scaled without the need for regulation.Share
The banking industry faces many challenges over the next decade in order to serve the needs of this fantastic growth ahead of us in terms of global trade. Unfortunately we start on a bad note that the world financial crisis has really crimped the scale of the banking industry.
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The world’s leading open foresight programme. In an increasingly interconnected, complex and uncertain world, many organisations are looking for a better understanding of how the future may unfold. To do this successfully, many companies, institutions and governments are working to improve their use of strategic foresight in order to anticipate emerging issues and prepare for new opportunities.
AstroLabs Dubai is the only Google-partnered tech hub in the MENA region, serving as a launch pad for the highest potential tech startups. The space features a Google-supported mobile device development lab, a training facility, meeting rooms, etc. Through a partnership with DMCC, the authority on trade, enterprise and commodities in Dubai, startups at AstroLabs Dubai will be able to easily obtain a free zone company license with no upfront costs.
Google Campus London is a unique tech hub, co-working and event space in the heart of the UK capital. Google began life as a startup in a garage in California, and have kept their passion for entrepreneurship. With Campus, they wanted to create a connecting space, somewhere for founders to network, learn, teach, and grow.
For 20 years the Centre for Economics and Business Research (CEBR) has supplied independent economic forecasting and analysis to hundreds of private firms and public organisations. Their predictions have a strong track record of forecasting accuracy at international, national and even company level, placing them consistently in the top handful of UK economics teams and winning them awards and headlines. They are still growing strongly despite on-off UK recession and weak trading conditions and their clients grow with them.
For two decades, Dubai-based CPI has published magazines and guides, organised events and run successful marketing campaigns across the GCC. From an initial start with B2B IT titles, it has grown its range to include industry, oil & gas, construction and finance. For the last five years, it has also published in the consumer space, bringing globally important brands to the regional market. CPI has grown organically from a single title to its current stable of over 25 titles, over 20 web portals, over a dozen awards ceremonies and numerous B2B events and conferences. Aggressive expansion plans mean more will follow in the next two years.
In October 2007, New York University announced its intention to open a complete branch campus in Abu Dhabi, financed by the government of the United Arab Emirates. The Abu Dhabi campus was planned by New York University, and the funding mainly came from the UAE government. The school was first opened in 2008 on a temporary site in downtown Abu Dhabi, where it held various public events such as academic conferences, workshops, and performances. New York University moved the Abu Dhabi campus to a new site in 2014 in the Marina district of Saadiyat Island. Christian Haefke, NYUAD professor of economics, is an expert on labor markets and econometrics and is a valuable contributor to the Future of Trade programme.
Since 1994 OBG has been at the frontier of mapping new waves of emerging economies. OBG now operates in many of the world's fastest growing markets, offering internationally acclaimed intelligence on regions that are shaping the future balance of economic power. OBG provides its global readership with the business intelligence they need to stay ahead. OBG has access to the most accurate statistics and independent analysis available, assisting clients in making fundamental long-term investment decisions in and about regions where access to knowledge is power.
S P Jain School of Global Management is an Australian business school with campuses in Sydney, Mumbai, Singapore and Dubai. The school offers undergraduate and graduate/postgraduate business courses. For the last five of its 11 years history, S P Jain has been ranked among the world’s top schools. In 2015, the School has been ranked #10 in the Best International Business School by Forbes for its one-year MBA program. In 2013 – 14, it was ranked in the Top 20 Best International Business Schools by Forbes. And in 2011 and 2012, UK’s Financial Times ranked the Global MBA in its Top 100 Global MBA rankings. S P Jain is the youngest business school to be in these prestigious rankings and attributes its success to its innovative education model.
The U.S.-U.A.E. Business Council is the premier business organisation dedicated to advancing bilateral commercial relations. By leveraging its extensive networks in the U.S. and in the region, the U.S.-U.A.E. Business Council provides unparalleled access to senior decision makers in business and government with the aim of deepening bilateral trade and investment.
For the last 12 months DMCC, the authority on trade, enterprise and commodities in Dubai, has teamed up with FutureAgenda on an odyssey to discover the future of global trade. We gathered industry leaders, academics and experts in five key cities to discuss how global trade will change in the next decade and how it will drive the global economy into the next phase of growth.Download pdf