The Future of Currency – The Global Challange

Currencies are influenced by social, economic and political change, so it is little surprise that all around the world they are in a state of flux. In Europe the future of the Euro is a real concern; the ASEAN markets, fearful of making similar mistakes, are backing away from their flirtation with a collective currency unit; in China, the ambition to extend economic influence and desire that the Yuan is recognized as an alternative reserve currency is being tempered by a financial slowdown; in the US there is growing uncertainty about whether the dollar will maintain its status as the primary unit of global currency, and on top of this, instability in the Middle East and the dramatic fall in oil prices have all combined to make the currency markets increasingly volatile. The result is a fragile global financial system continuing to face the real possibility of further financial crises.

While few are suggesting the imminent demise of the existing currency order, key questions stand out.  What will be the real role of currency in the next ten years? How will regulation adapt to this?  Given all the disruptions, how best can we stabilize the marketplace?  How can currency markets organize themselves more effectively?   In ten years’ time will the focus remain on national currencies or will alternative currencies, such as Bitcoin, Amazon Coins or BerkShares take a more prominent role?  The future seems like a complex game of musical chairs – positions are yet to be decided and it is by no means clear that there will be a seat for everyone when the band eventually stops playing.

The Future of Currency – Options and Possibilities

First let’s consider the role of currency.   Money acts as a store of value and as a means of exchange either between individuals, corporations or nations and as such its real value is derived from the faith we have in it. The buying and selling of currency effectively measures a nation’s credibility and helps to stimulate growth and stability in the global market place. But the opposite is also true. Attempts to control the impact of currency fluctuations have been unsuccessful and following the 2008 economic crises the global monetary system has become increasingly fickle, grappling with speculative investments while attempting to manage the imbalances between countries (their current account deficits and surpluses) and to control the gross capital flows that are currently overburdening emerging markets.

Given this role, there are 6 key themes expected to impact currency markets over the next 10 years:  the pace of trade; pegs and floating exchange rates; the role of the dollar as the global currency; the rise of the Chinese Renminbi; regulation; and emerging alternatives.

Technology has increased the speed and flow of currency trade.  This pace can often be at the cost of appropriate consideration and due diligence. With profit as the motivator and with deal speed at a premium, currency traders are rarely able to pause to consider what the impact of their transaction could be on a wider society.  Currencies change in nanoseconds. And yet it can take nations years to recover from a fall.  Perhaps it’s now time to recognise that the way we manage money is not fit for purpose in today’s world and is unlikely to adapt to the changes over the next decade.  We need a new order that can help stabilise the global marketplace and deliver appropriate returns.

A critical lesson that Europe has taught Asia is that combining currencies doesn’t work. Over the long term neither do currency pegs.  In many ways a single currency across a group of countries is simply an extreme version of a peg and in times of crisis its inflexibility imposes unnecessary constraints on national governments, limiting options and reducing their ability to respond to market conditions.  This can have a huge impact on the local population.  For example in Greece, a Euro member struggling under the weight of national debt, incomes have fallen by nearly 30% since 2007 while almost 26% of the workforce is unemployed.  In truth, Europe’s single currency, created to foster unity and ease trade, has become the source of significant issues for many member states.  As the challenges for continental Europe continue to increase many commentators expect that the next decade will see an unraveling of the European model, including a possible devaluation of multiple currencies in order for the smaller nation states to be able to compete globally. There are already major indications that this is taking place, including the Swiss National Bank’s decision to unpeg the Swiss franc and the European Central Bank (ECB) programme of quantitative easing.

Over in the US, the situation is in as much flux, but for different reasons.  The US has been the primary trading nation of the 20th century and it is no slouch in the 21st, accounting for 23% of global GDP and 12% of merchandise trade. This has allowed the dollar to dominate the markets.  This is, of course, good news for America as it has paved the way for US fund managers to run about 55% of the world’s assets. About 60% of the world’s output is in one way or another influenced by the dollar, either because currencies are pegged or because they move in relation to it.  It’s easy to see the advantages from a US perspective but not for everyone else, particularly because the current system does not include a guaranteed lender of last resort. Many countries have built up enormous safety buffers of dollar reserves to counter this but that means that they are obliged to mimic US policy. The result is that a rise in US interest rates or even the threat of it has knock on consequences across the world, particularly in emerging markets. For many, the cost of the dollar’s dominance is beginning to outweigh its benefits, particularly as the US share of world trade and GDP is in decline.  Countries would ideally let their currencies float so that they can more easily adjust to changing market conditions.  Despite all this, the reality today is that the dollar dominates global trade, with even China’s trade into Africa being contracted in dollars.  The question, however remains: is it sensible or sustainable for this to be centralised in one country?

As the US draws back China’s influence is extending.  Currently its share of world GDP is similar to the US, at 16% and 17% respectively[1] but all the expectations are that China will continue to grow.  Even if Chinese growth decreases as predicted, this will be the big political issue of the next decade.  Increasing international use of the Yuan is the result of the Chinese Central Banks efforts to slowly loosen the restrictions on cross border capital flows and to free up the country’s financial system. China is opening up and wants the natural privileges a vast economy might expect: a big say over global rules of finance and trade and a widely used currency. Special Drawing Rights (SDRs), are a start as they effectively mean official recognition by the IMF that the Yuan is acting as a reserve currency, despite China’s extensive capital controls. China’s government is preparing the way; the next ten years will see its financial markets continue down the path of liberalization, helping to cement its place on the world stage. Granted, the markets are still immature and no-one expects an easy ride, but the direction of travel is clear.

Regulation is key in all of this as, properly designed, it provides a basis for stability, security and confidence in the system. As with all regulation, however, it has to battle the speed of technology and come up with a process that allows innovation, competition and change but restricts malpractice, crime and terrorism.  As ever these are dynamic choices and as a consequence are not stable over time.  Ironically the response to the 2008 crisis has not had the desired effect, limiting the activity of bankers but enabling asset rich investors, sovereign wealth funds, hedge funds and the like, hungry for new investments, to take a greater share of the pie.  Because of their scale these funds bring with them huge influence and this has fundamentally changed the function of currency. Every day trillions of dollars are exchanged, much more than is needed for international trade. The currency markets are attractive to speculators whose measure of success is dependent on the yield.

Traditional currencies, despite their long history, are being challenged in other ways too.   The most important of these would appear to be the recent arrival of distributed ledger or blockchain technology.  Distributed ledger technology can be used to transact anything of value without requiring a trusted third party, with proven ownership and timestamps of transaction enabling instant settlement and clearing.  Blockchain is to trade and currency what email was for the postal service – allowing direct trade without recourse to a trusted third party and at a fraction of the transaction cost.  The mysterious Bitcoin is still the largest currency using distributed ledger technology, but both Central Banks and global banking institutions are taking seriously the potential advantages available, with initiatives such as SETL, Ripple, Uphold and Circle already showing the possibilities in currency, trade and payments.  One potential accelerator of adoption of the distributed ledger could be the growth of the Internet- of-Things, as this would allow objects to be connected directly to trade, payment and currency simultaneously.

Adjacent to this, there has also been continued exploration of more “local” currencies – be these defined by geography (e.g. the BerkShare – a hyper-local currency only accepted in the Berkshires, a region in western Massachusetts. More than 400 Berkshires businesses accept the currency, and 13 banks serve as exchange stations; according to its website “the currency distinguishes the local businesses that accept the currency from those that do not, building stronger relationships and greater affinity between the business community and the citizens”) or by a closed user group or corporate ecosystem (e.g. the Amazon Coin or Starbucks’ Stars).  None of these local currencies have yet to take off, and their widespread growth potential would appear to be limited.

There are of course other non-traditional currencies.  These include those that have been around for a few decades such as credit scores, loyalty rewards and points systems (e.g. airmiles). However, in recent years others have begun to emerge, most notably in the domain of authentication, validation reputation and trust.  Examples here include eBay seller ratings, TripAdvisor reputation scores, LinkedIn or Quora knowledge ratings – as well as the emergence of trust aggregators such as

Two final stresses adding to the pressure on traditional currencies as a means of exchange are also worth mentioning.  The first is the growth of peer to peer currency exchange and remittance firms (e.g. TransferWise; Western Union).  The second is the rapid growth of non-traditional payments systems (e.g. Paypal, AliPay, ApplePay, Mpesa).  In the case of AliPay (Alibaba’s equivalent of PayPal), it is worth noting that success has been not only due to its distribution via the Alibaba platform but also on the back of Chinese distrust of US based or influenced payment schemes such as Visa and Mastercard.

[1] measured at PPP

The Future of Currency – Impact and Implications

I believe that in the next decade we will all be able to establish a much clearer picture of capital flows and understand who is buying currency and where that currency goes.  The information around currency value is currently flat and limited in its extent, making it difficult for anyone to compare multiple market options concurrently. Technology will change this and allow multiple variables to be compared in real-time, producing a more rounded, three-dimensional view allowing traders to consider what they are buying, why they are buying it and the impact that this may have instantaneously.  In addition there will be more multi-currency platforms for all stock and commodity trading making it possible to see the real-time value of an Australian share in, for example Yuan.  Perhaps more importantly over the long-term, new data analytic capabilities will also help traders identify emerging trends before they happen.

Technology is also democratizing the financial sector. In the not too distant future anyone will be able to trade, immediately knowing the amount they are paying in the currency of their choice. This increased transparency will make trading accessible to a much larger base and in so doing will limit the ability of the largest institutions to use their size and scale to control the market. Technology also enables resources to be scaled like never before – entire populations can now be targeted in order to bring together huge numbers of small investors. The number of participants will drive the market rather than single, large-scale investors. The force of the crowd could begin to overpower the influence of the few.  When under threat, for example, it would be possible for thousands of individual investors to work together to stablise their national currency and prevent possible disruption. This sort of crowd intervention would be revolutionary but is indeed a real possibility.  At the very least it will reduce the influence of banks and similar institutions.

Given the shifts in global trade and the opportunities that technology offers, change across all regions is inevitable.  In particular, the emerging markets, free of constraint, are likely to seek to stabilize their currencies and so be able to support more foreign investment.  The crowd will be in control and many small time traders are likely to join in; if 100 million people all make the same $100 investment the impact will dwarf the power of the hedge funds.  Technology will also make the markets more integrated while the focus can remain fluid easily shifting from a global to regional to local perspective.  It doesn’t mean that the competition will be less fierce.

In summary, nothing is stable in the currency markets but I believe over the next ten years they will be shaped by three key elements.  Geopolitics, the rebalancing of power between East and West and change the flow of global trade will reduce the dominance of the US as a centralised power. Secondly, technology will continue to disrupt, enabling more insight than ever to be derived through the analysis of data and resources of the many to be amalgamated and scaled. In the process these dynamics will cause significant decentralization. Influence that has traditionally been held by select institutions will increasingly be moved to individuals and crowds. All of these factors are in flux and will interact with each other to determine the state of the industry in 10 years’ time. No-one can predict exactly what the currency markets will look like in a decade, but for the reasons outlined, it is likely to be unrecognizable from what we see today.

The Future of Currency – The Proposed Way Forward

The currency markets are chaotic and they are likely to become even more so over the next ten years as nations, increasingly unpeg themselves from the dollar and other currencies.  It is likely that many will look for a different system that bypasses the US clearing banks and indeed they may well return to using the gold standard as an alternative.

Advancements in technology will undoubtedly make a significant difference to currency trading and has the potential to fundamentally disrupt the industry entirely. Technology developments have overturned countless industries over the last decade and currency markets will be no exception. At its core, technology will enable data to be collected, analysed and then provided to traders in a way which allows multiple variables to be compared in real time. This will enable the true value of currency to become far more transparent.

Although the industry suffered from the impact of High Frequency Trading (HFT), which allowed securities to be bought and sold in a fraction of a millisecond and arguably caused the Flash Crash in 2010, the next decade will see a more mature technology emerge.  The analysis of Big Data will enable a more responsible use of HFT, driven by a processed response to accurate information and not on the knee jerk reaction of traders.

The collection and then application of Big Data analytics will in the process transform the industry. It has the potential to contribute to overall liquidity and to create a new paradigm that could even help to protect sovereign currencies from speculative attacks.

The Future of Privacy – Proposed Way Forward

That the technology mega-trends predicted for 2020 and beyond will continue on their march seems to me to be inevitable; we’re just left debating the timeframe. But it’s the counter-trends that I believe will determine whether privacy is a winner or a loser.

Business models that put the individual in control: Today, data about people is almost exclusively controlled by organisations, whether public or private sector. People have very little control over their own personal data. If data is power, then the scales are tipped heavily in favour of corporations and governments against the individual.

But the cost and complexity of processing, storing, transferring, computing and analysing data are such that it is perfectly feasible for individuals to control their own data – in fact, billions of people now do this daily in a rudimentary form, as they manage profiles on social media, and use smartphones to capture, manipulate and share data. There is no longer any reason why the organisation should be the default point of control of personal data.

What’s more, where organisations function as the default data controllers, the economic potential for personal data is limited, because data remains locked up in corporate silos (even silos as big as those controlled by Google are still silos). The utility of much of this data cannot be unleashed because it cannot easily, legitimately or lawfully be connected with other data from other sources. This data only becomes really valuable when it can be combined with relevant data across all services that relate to a person’s life – online, retail, financial, governmental and the myriad other sources coming available.

New entrepreneurs recognise this and are developing solutions that put the individual back in control. By making the individual “the single point of control and integration of data about their lives”[1], they are able to aggregate data about an individual from all sources and services. In doing so, they are creating an entirely new, and enormously valuable, asset class[2] that is currently diminished by being spread across the myriad data silos owned by the many hundreds of corporations and government agencies we interact with. And there is good evidence that this will enable entirely new services, and significant new economic growth and value[3].

Aside from enabling economic growth, these new models also happen to offer a market-driven solution to many of the privacy problems we are facing with the onward march of data-generating technology where the organisation is the default controller of that data. Shifting the balance of power back towards the individual must produce a positive outcome for privacy. And because it also offers the possibility of enabling innovation and economic growth, privacy is no longer trapped in one–sided conflict with forces it cannot hope to defeat. It does not require a balance, or a trade-off, between privacy and growth – it enables both.

A typical example of the sort of new service provider that is beginning to emerge is the personal data vault or bank[4]. A personal data bank provides the single point of integration for personal data under the control of the individual, and provides related services (much like a normal bank does with your money) that enables the individual to get value from their data – from eliminating repetitive form filling (providing address, delivery and payment data to online merchants), to monetising one’s own data through purchase preference and ‘intent-casting’, to enabling new, complex ‘decision support’ services[5].  In this model, the individual becomes the curator of their own personal data, able to volunteer more, or more relevant, data and manage that data to ensure it is relevant, accurate and as comprehensive as they want it to be.

Once consumers have realistic alternatives, we can expect to see an end to the ‘privacy paradox’, i.e. individuals’ actual behaviours defying their expressed attitudes, as it becomes possible, without disproportionate consequences, to act upon those attitudes by making meaningful choices.

While the emergence of personal data banks and similar business models do not in and of themselves prevent organizations from collecting and exercising control over personal data regardless, they have the potential to disrupt this simply by being inherently more valuable. Because the value of personal data is closely connected to its relevance and currency – think of personal data as having a ‘half-life’[6] –  ‘personally curated’ sources of data will have higher value simply due to the fact that they will represent the actual wishes and desires of an individual, rather than the presumed wishes and desires based on derived data. Plus, our personal data changes all the time (think of musical tastes, favourite bars or hangouts, travel interests, and, for many people, even where they live, or the job they are doing). Maintaining personal data at the level of accuracy and currency needed for many applications to be optimally effective is an impossible task for an organization without the individual’s direct involvement. Conversely, for the individual it is practically impossible to manage and keep up-to-date and accurate their own personal data when it is spread across hundreds of organisations, each with their own interfaces and approaches[7].

Technology development that supports social norms and values; It’s a cliché that technology is disruptive. And too often we hear that we should accept disruption to our sense of privacy because technology has made it an outdated and redundant concept, and we can’t turn back the clock. Not infrequently the people who express these views are the very people who helped to create the technology that has brought these things to pass in the first place. This is simply a form of technological determinism.

But technology should and can develop in a way that reflects and supports social norms and values. Since technology is created by people, we are perfectly capable of creating it in ways that take account of privacy and other values. Urban architects have learnt to do this with our physical environment – concerning themselves not just about function and aesthetics, but also with broader environmental impacts, the need for building communal living spaces and creating a sense of community[8].

More significantly, technology is largely the product of private enterprise. To understand why technology has developed the way it has, or how it will develop in future, we need to understand the economic motivations and drivers of those who create it, and the business models that justify investment.

Early applications for data processing technology were focused on efficiency – replacing manual processes with automated processes. Automated data processing requires data as input, but once used, remained surplus to requirements. Personal data was relatively scarce, and even though it was recognised that data needed to flow across borders, it was not seen as a valuable asset in and of itself. But it was recognised that automated data processing had the potential to cause harm to people’s privacy, and so new codes and regulations[9] were created that essentially treated personal data like ‘toxic waste’, to be contained and made safe. Now, today, rather than being a mere by-product of digitisation, data is a resource defined by superabundance, and has become perhaps the most important driver of economic growth in the digital economy. This will become even more so as we move towards 2020. Organisations are therefore incentivised to create and capture personal data and exercise control over it.

In short, technology continuously causes friction with privacy because commercial organisations haven’t really tried to address the problem. While “Privacy Enhancing Technologies” have a reasonably long history, particularly within academia, they have failed to be adopted commercially or at sufficient scale[10]. For instance, cryptographic tools have not been adopted by the general user due to a lack of commercial investment in embedding them seamlessly into products that consumers want[11]. This is because, beyond mere legal compliance, privacy hasn’t featured as a strategic priority, and correspondingly there has been insufficient investment by organisations in developing the broader range of skills and expertise needed to create and deploy privacy-enhancing products or services, such as in product marketing, engineering or user experience. There simply hasn’t been a sufficient incentive to do so. And now there is precisely the opposite incentive – to generate and use data as a revenue driver in and of itself.

However, if the individual begins to become the point of control, businesses that want to leverage the vast pool of personal data assets available will need to compete with each other to provide the most attractive destination for people’s data. And if businesses are competing to provide individuals with the best ‘personal data banks’ and other tools that enable them to gain control of their own data, and ‘invest’ it on their own terms, then it will become a business imperative to find innovative and attractive approaches to issues such as individual control and permission, transparency and usability, data portability and ownership, as well as data protection, anonymisation and other counter-surveillance measures. There will be an economic incentive to encourage technology development where personal data control and privacy are functional necessities, not regulatory pipe dreams.

This in turn will create a demand by organisations for new skills from technologists and service designers that enable them to create products that embed respect for privacy- related values from the outset. Universities and colleges will seek to meet this demand by providing courses and modules on the fundamentals of what privacy is and why it’s important, but also qualifications in new fields like privacy engineering and privacy design.

The contrast in this respect between privacy and security couldn’t be greater. One the one hand, the security industry has been estimated to be worth $350 Billion in the US alone[12]; security is a sophisticated and maturing market. The ‘privacy industry’ by contrast is hardly recognizable at all. The reason is simple – in an organisation-centric world, where data is valuable and where corporations control data, it is in their self-interest to secure that data. Hence, supply meets demand. But in the privacy arena, there has simply been insufficient demand to stimulate a supply.

But this is changing. Something approximating a privacy marketplace is now becoming a reality[13], consisting of tools that prevent tracking[14] and other counter-surveillance services on the one hand[15], and personal data vaults and banks that enable the curation and management of one’s own data on the other[16]. Major players in the internet and communications space have also already begun to lay down their markers[17]. As this market develops, consumers will benefit from the greater control over their personal data that results.

Second generation regulation: Nevertheless, we must be wary of substituting technological utopianism with economic utopianism. These competitive forces can be harnessed, but are unlikely to create change for the good all by themselves. Regulation has an important role to play. But we need a different type of regulation to the existing data protection and privacy regulation we have today.

Existing data protection regulation emerged in the 1970s and 1980s in response to computing and data processing developments beginning in the 1960s. The underlying assumption was that data processing would always be a complex and resource intensive activity, and hence would always be the preserve of large, well-resourced organizations. Individuals needed the protection of regulation against the impacts of automated data processing and the decisions it enabled. The regulatory frameworks were generally “command and control” style frameworks that provided rules that regulated the behaviour of large, static organization (the ‘data controller’), and were designed to protect the individual who lacked any means to exercise control themselves (the ‘data subject’).

This assumption that the organization is the natural point of control for personal data no longer holds. Yet our current data protection frameworks are built upon this assumption. Even the latest EU proposals are still essentially based on this model[18]. But with the real possibility for personal control over personal data, and business models emerging to support this, policy makers need to focus on helping this nascent market develop, rather than trying to stem the tide of technology with rules and guidelines.

What’s more, policy makers have struggled to find ways to effectively regulate technology in a way that produces commercially deployed technologies that reflect or support privacy norms and values, rather than disturbing them. While there are regulatory restrictions surrounding the use of personal data, this has predominantly resulted in legalistic methods of compliance. I would contend that these haven’t had any significant impact on the design of technologies themselves, how they generate data, or how they make that data available.

Issuing decisions and guidelines after technology has already been commercially adopted and has started to negatively impact privacy is like closing the stable door after the horse has bolted[19]. And yet while concepts like data protection or privacy ‘by design’ are constructive ideas, they are unlikely to translate into better technology design on a large scale simply because they happen to appear in a regulatory instrument[20]. What is so often needed on many aspects of privacy is creativity and innovation, and you cannot command an organization to innovate.

But you can incentivize it to innovate. If a market is encouraged to develop where individuals are placed in a controlling position at the centre of a personal data market and ecosystem, there will be economic incentives to look for better solutions to issues people care about. The role of regulation should then become less about issuing detailed rules and requirements (e.g. telling companies what to include in their privacy statements, or specifically how they should capture consent, or whether they need to seek regulatory approval to use data for certain purposes), and more about ensuring that fair and open competition develops and operates to produce beneficial privacy outcomes for individuals, while also allowing innovation and growth with data. This type of regulation has been called “second generation” regulation, a term coined by Professor Dennis Hirsch in the context of evolving environmental regulation[21]. Hirsh describes the evolution from the not-so-effective early post-war environmental “command and control” regulation to the more sophisticated and effective frameworks we see today that embrace a broad understanding of how economic incentives can stimulate innovation. Hirsch sees a parallel between regulating information privacy and environmental degradation – both require innovation if they are to achieve satisfactory and effective outcomes without stifling economic growth.

However, one very important principle that has emerged within Europe’s attempt to modernize its data protection regime is “data portability”[22]. This principle will require organisations to allow personal data to be exported to another entity at an individual’s request. While the mechanisms for achieving this are by no means trivial (look at how long it took the mobile industry to implement mobile number portability[23], which is a far simpler undertaking), this is the sort of measure that will facilitate a personal data market to develop and grow. It is both a typical “second generation” form of regulation, and an essential component of an individual taking control of their personal data.

[1] Alan Mitchell, Strategy Director, Ctrl-Shift, speaking on “The Business and Economic Case” at Personal Information Economy 2014, available at: (accessed 17/11/2014)
[2] World Economic Forum, “Personal Data: The emergence of a new asset class”, available at: (accessed 10/12/2014)
[3] Ctrl Shift, “Personal Information Management Services: An analysis of an emerging market”, available at: (accessed 12/12/2014)
[4] Some examples are You Technology (, ( and QIY (
[5]  An example of a complex decision support service would, for instance, enable a household to recalibrate its domestic energy consumption needs. For more information, see “Personal Information Management Services: An analysis of an emerging market”, supra note 27.
[6] Martin Doyle, “The Half Life of Data”, available at: (accessed 10/12/2014)
[7] Online contact books, like Plaxo (, and social networking services like Facebook ( and LinkedIn ( are good examples of how there has already been a shift of control to the individual. In these cases, the process of giving out contact information (e.g. via business cards) and allowing others to manage one’s contact data is replaced with the individual managing their own contact information and creating stable connections online with people they want to stay in touch with.
[8] Somewhat ironically, urban architecture is also concerned with other social issues, such as how to reduce crime in urban planning and design through ‘natural surveillance’.
[9] The 1980 OCED Guidelines on the Protection of Privacy and Transborder Flows of Personal Data (, 1981 Council of Europe  Convention for the Protection of Individuals with regard to Automatic Processing of Personal (, and the 1995 EU Data Protection Directive 95/46/EC (
[10] As this recent academic paper illustrates, solutions are available to many of the privacy problems highlighted with pervasive technologies - “A Roadmap for IoT/Cloud/Distributed Sensor Net Privacy Mechanisms”, available at:  (accessed 15/12/2014)
[11] Justin Troutman, “People Want Safe Communications, Not Usable Cryptography”, MIT Technology Review, available at: (accessed 12/12/2014)
[12] ASIS International, “Groundbreaking Study Finds US Security Industry to be Worth $350 Billion Market”, available at:$350-Billion-Market.aspx (accessed 17/12/2014)
[13] Mark Little, Ovum, “Personal Data and the Big Trust Opportunity”, available at: (accessed 10/12/2014)
[14] For example, Ghostery, Inc. Website available at:
[15] For example, devices like the Blackphone are designed to ensure highly secure and encrypted mobile communications. Website available at:
[16] Supra note 27
[17] CNET, “Google to encrypt data on new version of Android by default”, available at: (accessed 17/12/2014); and see supra note 14.
[18] The current draft of the EU Data Protection Regulation is available at: (accessed 17/12/2014)
[19] The controversy over the European Court of Justice decision in the so-called ‘right-to-be-forgotten’ case against Google is illustrative of this, where traditional data protection rules are applied to a technology, i.e. search engines, that was never designed to ‘forget’, to ‘age’ search results, or otherwise address the privacy issues with indexing against individuals’ names. The European Commission’s Factsheet on the case is available at:  (accessed 12/12/2014)
[20] Article 23 (Data Protection by Design and Default) in the Draft Data Protection Regulation, available at:  (accessed 17/12/2014)
[21] Dennis D. Hirsch, “Protecting the Inner Environment: what Privacy Regulation can Learn from Environmental Law”, available at: (accessed 01/12/2104)
[22] Article 18 (Right to Data Portability), available at:  (accessed 17/12/2014)
[23] For a general description of mobile number portability - (accessed 15/12/2014)

The Future of Trade – The Global Challenge

The exchange in physical goods, anything from raw materials, to food, to electrical items and luxury products has increased wealth, provided opportunity and improved quality of life around the world.  Over 80% of everything we purchase travels by sea and, as a result, over the years shipping channels have been established, road and rail networks have been built, and ports and cities have prospered.  The value of international commerce has grown almost tenfold in the past 30 years because more people have access to more products so, to satisfy this demand, we are now transporting more raw materials around the world than we have ever done before. The shipping lanes are full. But change is in the air. After centuries of Western dominance the rules are being rewritten as new trading patterns between Asia, the Middle East and South America evolve.  At the same time technology is revolutionising what we make and how we make it. The next decade will see transformational change as these new processes and markets develop.

The Future of Trade – Options and Possibilities

Four elements are key to ensuring the smooth transfer of goods and services; availability of product and market; a functioning, safe infrastructure; effective governance and the application of technology.

Availability of product and market - Since the onset of the global financial crisis many would argue that emerging markets are now the drivers of global growth providing a willing workforce and a growing middle class with money to spend. In 1987 these countries made up just 16% of global GDP, but today they account for 31%.  2013 was the first year in which they accounted for more than half of world GDP on the basis of purchasing power[1].  The opportunity this presents for trade is enormous, not only due to new and growing domestic markets, but also because many emerging economies, in Africa and South America for example, are richly blessed with the raw materials needed for growth and development  – and so can export them to others, in particular China and India.

As a result of this, the next decade will see the post-war routes gradually being eclipsed by the power of the Indian Ocean region where new port construction and proposed railways stretching from China to Turkey and from coast-to-coast across Colombia indicate the shape of things to come.   Now the world’s largest trading economy with a growing middle class China is set to challenge the US as the world’s major economic power. Its influence is growing: It owns five of the world’s top ten biggest container ports and is making huge investments in other developing markets, rich in natural resources. Boasting about a quarter of the world’s container trade and as the largest foreign investor in Brazil, Laos, Myanmar, Iran, Mongolia and Afghanistan, China’s commercial power is indisputable.  How it integrates alongside other new and important markets into the global trading system is complex.

In addition to the trade routes, the kind of products that will be needed over the next decade will change and manufacturers will have to adapt to consumer demand.  Generally speaking per capita income overall is still low so the goods and services that will be purchased will reflect this.  For example, cars for the next billion consumers will be more functional and probably of lower spec. It is increasingly likely they will be produced in the countries where they are needed rather exported from expensive established factories.  Over the next decade expect more local manufacturing, supported by more localised cross-border trades.

In addition to the change in political influence, globalisation has resulted in the biggest migration of people from rural areas to the towns that the world has ever known.  New cities and a growing middle class have made markets more easily accessible for consumer products and services.  The most rapid urbanisation will continue in Africa; the UN predicts that Kinshasa’s population will double by 2030. But on top of this, nearly 9% of the world’s population will live in just 41 megacities (those with more than 10m inhabitants).

As they grow cities will become increasingly influential in their own right.  Often centres for innovation, their reach will stretch far beyond the confines of national boundaries. In addition cities are positioning themselves as centres of excellence.  Cheonan in South Korea has been a trailblazer in digital displays, for example, and Tel Aviv and the surrounding ‘Silicon Wadi’ in Israel is a hub for wireless telecoms. As a result increasingly cities will compete with each other as centres for manufacturing and trading.  But, as technology and supply chain efficiency makes it easy for producers to relocate their factories to cheaper centres, cities will have to depend on the quality of their infrastructure (especially international transport links), the flexibility of regulations and their ability to attract talent to remain competitive as trading centres in the long term.

The benefits to be gained from bringing the same level of efficiency to the last mile as there is to the first thousand are attracting much attention and innovation focus. As more people live in cities there will be an increasing need to reduce inefficiencies around the last mile delivery for many items. Whether the winners will be Amazon’s proposals around drone delivery or the more pragmatic locally pooled collection points remains to be seen; many options are now being trialled.  The much-hyped concept of autonomous and driverless trucks is starting to have impact. The vision of long-distance platoons of trucks all running on intelligent highways without drivers has been a topic for many over the years but, as shown by the recent licensing of Daimler’s self driving trucks in Nevada, reality is not far away.

Safe Infrastructure – Trading flourishes in free and secure markets and so maintaining efficient, safe transportation is a perpetual challenge. This applies not only to transfer of physical goods but also to the provision of services where the protection of intellectual property and managing the threat of cyber crime that remain vital to the free flow of ideas. It’s an increasingly expensive issue.  The think tank The Centre for Strategic and International Studies (CSIS), puts the annual global cost at $445 billion[2].  Looking ahead, cyberspace is about to undergo yet another massive change as the Internet of Things connects billions of new devices making cyber-crime even more complicated to prevent and control.

Unreliable shipping routes, potholed roads and missing rail links are a perennial problem, particularly for some developing economies where transport costs can make up 50-75% of the retail price of goods[3].  Africa in particular suffers from this and, as a result, intra-regional trade across the continent is just 13% of total commerce compared to Asia where it is 53%. Inadequate infrastructure bites particularly hard amongst the poor, if the transportation and transaction costs for subsistence farmers means that they receive less than 20% for their produce there is little incentive for them to grow more. These shortcomings have had a knock on impact on international trade; one reason why you don’t see many foreign cars in Kampala compared to Dar es Salaam could be because, although the cost of shipping a car from China to a port in Tanzania is around $4,000, transporting it cross-country to Uganda can cost another $5,000[4].

However, significant foreign investment and a desire for change is set to transform African trading routes; the first dependable road across the Sahara is under construction; a double-lane tarmac highway with its own border terminal will soon connect Aswan and Wadi Halfa; and a new 1,000km-long desert road will run south to Khartoum alongside the River Nile.  Asia also has an almost inexhaustible appetite for investment in infrastructure. A study by the Asian Development Bank estimated that it would spend $8 trillion between 2010 and 2020, of which 68% would be for new capacity. This includes high-speed railways linking Yunnan province to South-East Asia; new ports in Indonesia, Pakistan and Sri Lanka and the new ‘Silk Road’ across Central Asia to Europe.

Across the world, much still also needs to be done to reduce the impact of bribery and corruption on every level.  The electronic free flow of ideas has created a new and profitable feeding ground for corporate hackers – costing companies billions of dollars to protect themselves – has made cyber-security a priority. Equally significant is the problem of defending physical goods in transit. Non-state actors, that have no stake in the waterways, are more likely to be disruptive. Thanks to international naval cooperation, once menacing attacks from Somali pirates are now under reasonable control, but new threats may be emerging in other areas – such as from Islamist militants in Egypt’s Sinai Peninsula. More prosaically, roadside checkpoints not only cause delays but in addition they are often collection points for bribes and “safety money”.  It’s a mundane but endemic problem; a recent survey found 54% of Indians said they paid a bribe in the last year, compared with 44% in Nigeria and 36% in Indonesia.

Effective Governance – Managing the changes in global trade requires clear governance. The World Trade Organisation (WTO), the body responsible for global trade, is in a good position to lead in this area. WTO agreements, are negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments and aim to help producers of goods and services, exporters, and importers conduct their business. But, as it seeks to put in place global rather than bilateral agreements, the WTO faces tough challenges in its quest to reduce trade barriers. Member states, although bound by a common purpose have dramatically different requirements so that the ambition to seek agreement across multiple industries has proved difficult to negotiate and cumbersome to execute. The Doha round of global trade negotiations, deadlocked since 2008, is a case in point. Decisions about how best to secure transparency around global trade policies and enforce appropriate standards in labour laws and environmental standards will remain a priority. A key question for the next decade will be whether we will be able to achieve true global agreements or will bilateral trade agreements remain the way by which nations can better manage and control economic influence.

Efficient use of technology – The falling cost of transport alongside powerful communication technology has allowed firms to co-ordinate production across great distances and separate manufacturing into component parts. Ideas first muted in Californian sunshine have become a reality as sophisticated supply chains have reached new labour markets scattered across the world. At the same time, the dramatic decline in the cost of technology has created opportunities for the provision of high-value services in seemingly unlikely places. Skilled programmers in India, Indonesia and Brazil, for example, now sell IT services around the world.  All of this is contributing to the global market place.

However, other advances include eliminating the need for human labour. Take for example the way that UPS has expanded its Worldport facilities in Kentucky: With over 250 miles of conveyors, 30,000 tilting trays and a thousand camera tunnels, it is the largest fully automated package handling facility in the world operating over 130 aircraft daily, and processing an average of 1.6m packages per day. Similar facilities around the world are making the supply chains of many companies ever more efficient without the cost of labour. Indeed such is the cost reduction, the use of robots is even attractive in India, despite the vast supply of low-cost labour. If the need for middle skilled workers continues to decline sharply across all markets while employment in high- and low-skilled occupations increases, over the next ten years the gap between the rich and poor will continue to increase.

Over the next ten years other technologies, such as 3D printing, have the potential to profoundly change the way we make and charge for products.  On one level this will result in cheaper, faster and more versatile manufacturing, reducing the need to ship goods across the world. On another its use raises a number of challenges for IP.  If, for a small fee, a digital file can be downloaded to make a spare part for a washing machine, manufacturers and consumers will both benefit as transportation costs will be reduced.  If however manufacturers fail to control the IP and therefore are unable to charge for the download, as has happened most significantly in the music sector, then IP will become irrelevant and replacement parts will be made for no fee other than the material cost.

[1] Source IMF

[2] The Economist

[3] WTO ref for Malawi, Rwanda and Uganda

[4] The Economist

The Future of Trade – Proposed way forward

We are witnessing the transition to a new order. New national interests, new trading routes, new products and services are all emerging.  How best to ensure the transfer of goods and the future development of trade in this environment will be key to our collective success.  However several key questions remain as yet unanswered.

  • Globalisation is lifting millions out of poverty but the cost to the environment has been huge and who knows the full impact?
  • Climate change can no longer be ignored. Will the increasingly visible impacts cause countries and companies to really adopt new approaches? While many are now looking at improving the resilience of their facilities to more extreme weather, how many will also seek to pre-emptively adapt to the new world of 4C of global warming including rising sea levels, more variable weather and more extreme temperatures?
  • Furthermore, as the global workforce becomes more mobile, how will organisations attract and retain top talent and how will governments ensure they provide them with the relevant education that will allow economies to thrive?
  • Finally how can we nurture innovation and encourage the free flow of ideas and products in an increasingly interconnected world?

It is very difficult to predict what the future will hold – at best we can anticipate it. What we know however, is that no one body will be able to influence all the factors which contribute to free and open trade. But, for organisations that are committed to facilitating economic growth, creating an environment that can adapt to change and improve quality of life for the majority without undue damage to the planet has to be the objective.

The Future of Payments – The Global Challenge

Commerce has always been defined as the interchange of goods and services for money. It still is, but the way commerce is conducted is in the middle of sweeping change. Merchants that anticipate these changes and prepare for them will win; others will struggle to survive.

Cash was invented in the 7th century and since then, broadly speaking, it has been the most common way to pay for the transfer of goods and services. Market places and shops have always been useful as central points to find products we need.  Shopkeepers have always played an important part in choosing the right transaction, providing valuable information about products and services and facilitating choice.  Over the last decade however these transaction stalwarts are being challenged because the retail payment process is undergoing a transformation.  As electronic payments get easier, is there a need for coins and notes? As the Internet gives the corner shop a global footprint, how will retailers respond to and support their new customers? And, logistics and supply chain issues aside, which payment options will ensure secure and efficient transactions?

The Future of Payments – Options and Possibilities

Starting with the cash debate. It’s true that developed countries are becoming ever less dependent on cash, as debit and credit cards, “virtual wallets” and other substitutes grow in popularity. In developing countries cash and bartering has been the prominent method of exchange particularly as the vast majority of people are unbanked. This however is changing; in Kenya, for example, over 80% of adults have a mobile money account[1].  Although electronic and mobile money systems are generally safe and effective methods of payment it is not all straight forward. Success of these systems depends on creating incremental value for consumers and merchants and changing behaviour. This is the reason that while there has been significant progress, 85% of global payment transactions are still made with cash[1].  So what is the future of cash? What electronic payment forms are likely to be successful in the future? If we really are heading for a cashless world then what would this mean for retailers?

It’s no surprise that, given the avalanche of technological innovation, retailers have had to extend the ways they accept payments, thinking of different ways to meet customer demand. There are myriad ways in which customers can now pay for their goods like e-shopping with a smartphone, laptop, tablet and even in store. “Omnichannel” is the current buzz word and is a multichannel approach to sales.  A key element of it is a consistent and integrated shopping experience across different channels such as a desktop or mobile device, by telephone or in a bricks and mortar store. Many brick-and-mortar retailers around the world including the likes of Walmart, Tesco, Target, and Best Buy have built an ecommerce presence to adapt to the new environment but perhaps more interestingly, even ecommerce giants like Amazon are now planning physical stores.   So is omnichannel just a buzz word? How important is the consistent shopping experience across channels? What is the future of physical stores? Can bricks keep pace with clicks or is it in fact the other way around?

These omni-channel options mean that retailers have to work hard to complete a sale.  Online or off line the challenge is the same, to provide a personal service but on a global scale; as the economist puts it despite a global market place retailers have to provide each customer with  “a single salesman with an unfailing memory and an uncanny intuition about their preferences”.  Few would argue that the judicial use of big data will help but although there is a lot of talk about its efficacy most of the opportunities big data can offer have yet to be fully exploited. The reality is that there are different chunks of data that are collected, stored and managed in multiple ways. On top of this much is still locked away, stuck on legacy systems that will take years to unpick.  Access to relevant information let along the crunching of it will take some doing. Big retailers like Walmart, Tesco, Target, and Best Buy are better positioned to leverage big data to tap the omnichannel trend. But what can smaller bricks and mortar stores do?

The point of interaction (POI), the moment where customers and merchants interact to complete the transaction has undergone significant change over the last decade and indications are that this will continue.  There are multiple ways to pay and we can expect the “can’t find my wallet” excuse to be a thing of the past as we increasingly grow used to mobile payments. Global standards such as EMV have added additional security, and many now think nothing of buying their coffee’s with a mobile phone thanks to innovations in Near Field Communication (NFC). Recently Apple Pay is looking to redefine the process again using biometrics and card tokenization. Holding a phone however is likely to remain just one of several widely accepted ways to pay but how the multiple options will combine to ensure a safe and convenient transaction method at the POI is a question that both merchants and customers are grappling with.

For retailers an age-old concern continues to niggle.  How can they offer value-add to their customers?  In a world of unprecedented information access customers are now better equipped to dictate what they want, what price they want to pay, when they want it, where they want it and from whom they want it. The buying process is no longer linear but ducks and dives from tablets to in-store to mobile via friends’ recommendations to the opinions of strangers then back to the computer again.  Retailers, striving to maintain an ongoing relationship with their customers, are faced with multiple ways to communicate and engage and can gather data from many sources.  Those who manage to connect to their customers can build a more detailed picture of who they are selling to than ever before.  The challenge for retailers is, in a world where social media drives commerce, how to build and retain loyalty and trust with their customers.

All the evidence suggests that the use of cash is in decline across the globe. The World Bank reports that there were 83 cash dispensers for every 100,000 adults in the US in 2008 but by 2012 there were only 68. The Federal Reserve Bank of San Francisco has also published a report showing that in America, the share of transactions using cash has fallen; between 1993 to 2013, although the American economy grew in real (inflation-adjusted) terms by 65%, notes of $50 or lower grew by just 19%.  In comparison to this share of debit and credit card payments increased by 20% in US in the 5 years starting 2006 based on analysis by MasterCard analysis.  There are several reasons for this. First, Cash takes time to get at, is riskier to carry, and by most estimates, cash costs society as much as 1.5% of GDP[1]. Second, merchants make fewer profits using cash. In fact when benefits of electronic payments such as driving greater customer satisfaction and loyalty for merchants over cash are considered, MasterCard’s research shows merchants can make $40K more in profits for $1MM in sales.

Third, Cash by comparison can be a hindrance to financial inclusion. Indeed in a recent study MasterCard found that electronic payments are an effective entry point for financial inclusion. With governments, international development agencies, academics and the private sector, making financial inclusion a priority on the agenda, it is likely we will see a significant portion of the 2.5 billion currently unbanked adults armed with electronic payments products in the future.  Over the next decade cash quite possibly will lose out to technology. And electronic payments are not confined to the developed world; in Kenya over 80% of adults—use a mobile-phone payment service called M-PESA that can also cater to business customers too.

Turning to the real world of bricks and mortar retail.  Retailers are finding it tough to keep up with their more nimble online counterparts.  First they have to contend with the costs of floor space but they also have to acknowledge that their customers have more choices and are more informed that they have ever been before.

How to manage cross border commerce is a big challenge.  Our research shows that since 2009, international visitor arrivals and spending have grown faster than real global GDP.  It also forecasts that cross-border visitors to the 10 leading destination cities will spend $136 billion during 2014. Even a 1 percent share of a leading market such as New York or London is near $200 million in annual revenue. Despite its size and strong growth, cross-border commerce is a challenging area.  When international travellers arrive, merchants sometimes have difficulty recognizing them, anticipating their needs and catering to them. Even worse, most merchants neither recognize the size of the cross-border opportunity nor understand their current share. Cross border spending is not a trivial issue and the challenge for the next decade is to build wider understanding of the opportunity and create ways in which retailers can better understand customers from abroad.

The Future of Payments – Proposed way forward

It is clear that omnichannel commerce is here to stay. MasterCard’s SpendingPulse report is showing that U.S. ecommerce is growing at double digits year-over-year as compared to total retail sales (ex-auto), which are growing in single digits. While stores may be becoming less important, they are not dead and are an integral part of the purchasing process; close to 20 billion people visited US malls in Nov and Dec in 2013[2].  Providing a consistent experience across channels will be critical; our research shows that spend by omnichannel customers, those who shops across more than one channel and value a consistent experience, is significantly higher than single-channel customers, those who shop via one channel across all verticals (Figure 1).


Of course e-commerce is continually evolving but the biggest change may well happen in store. First stores will likely become smarter. Retailers currently don’t know who walks in the door so its difficult for them to provide a customized experience and individual offers. Beacon technology can solve this issue for stores.  With a larger range than NFC this technology has enormous potential for customers and retailers alike.  Widespread adoption of Beacon technology by stores and customers will make it quicker and easier for customers to access the information and products they are looking for, and for retailers to provide special offers or discounts to loyal shoppers. It may also provide retailers with invaluable insights about their customers’ shopping habits allowing them to make improvements to the store layout by identifying store flow, maintaining service standards and operations that will benefit everyone.

In ten years you may be able to expect to walk past a shop and your mobile will receive meaningful and personal notifications on discounts or deals that you are likely to buy based on your shopping preferences.  If you go inside you may be able to use your phone to pay with offers automatically applied. There may be other improvements. For example, checkout lines will likely become things of the past. By using mobile technology instead of a fixed till, customers will likely enjoy a much more personal experience. Pioneers in this include Apple, J C Penny and Nordstrom in the US but it will likely become a common phenomenon. Similarly, “order ahead” capabilities that allow customers to order and pay from their mobile phones before they even enter the store and generally speed up the sales process will likely become widespread.  Expect the food service industry to lead the way.

The second area of change will likely be in the way customers choose and buy goods.  It will likely be all about choice. You may be able to order online and pick up at the store, order at store and deliver online, get similar offers across channels and yet have the same payment options. The transformation between the virtual and the actual has already begun; in South Korea, Tesco has built virtual grocery stores on subway platforms that have a similar layout to actual stores. Customers can now do their grocery shopping during their daily commute using their mobile phones, pay online and have them delivered when they get home. Of course there are big variances in this depending on internet access and payments solutions like PayPal and Apple Pay are trying to provide a similar payment experience in other markets.

Looking at POI, Uber, which is in 40 countries, is a great example that is revolutionizing the way we think by actually embedding payments in the process and focusing on the customer experience. Another good example is PayByPhone that is revolutionizing paying for parking by focusing on the whole customer experience. No more grappling for coins or making trips to replenish the meter. PayByPhone lets you pay remotely from your mobile phone – even when you have left the car park and are on the train.   Look out for additional value added services like Bill pay and remittances that not only enhance the customer experience but also drive incremental revenue for retailers.  The key for retailers is to consider ways that digital payments can be used to enhance customer experience.  We expect many more digital payments applications in areas where cash currently dominates.  Vending machines are another example.

All of this is of course driven by the supposition that in the next ten years there will likely be a global acceptance of electronic payment products. We are nearly there; Square and iZettle’s mobile point-of-sale (mPos) solutions are demonstrating this by giving the small merchants who are the main driver of cash transactions the ability to accept electronic payments at affordable rates. Such is their success in fact, it is expected that by 2019 46% of POS terminals will be mPOS[3]. For the payment providers innovative ways of determining merchant credit risk, for example by using alternative data sources such as cell phone usage and bill payment receipts,  are critical to open the way for unbanked merchants, particularly those in developing economies where the majority may not have access to traditional banking facilities.

Security and trust are fundamental to the success of e-payments, the one supporting the other.  Given this we expect to see changes in two specific areas; customer authentication and the underlying infrastructure support for transactions.  In the future we expect multi-factor authentication will become the norm for most online and offline transactions.  This has already begun in the physical world think of EMV with chip and PIN which is now becoming a global payment standard.  The online transaction community is likely to follow particularly in Europe where the European commission is keen to add some regulatory pressure. In addition it seems clear that authentication itself will likely become more secure as biometric technology from hand geometry, via face recognition and fingerprints to iris recognition become more mainstream. It sounds a bit Hollywood but in ten years time it will likely be old hat. On top of this, although unsexy and unheralded, the all-important underlying infrastructure that supports transactions is expected to also become more secure. Consider the replacement of magnetic stripes with chips and use of card number tokenization for NFC transactions as illustrations of this shift.

Pay attention to two scenarios that demonstrate the dominance of social commerce. First, imagine Isabel, a 35-year-old professional. She opens her tablet. First stop is her homepage, from which she administers her universe. She has her favorite brands, her product wish list with the prices she’s prepared to pay (information she has shared with those same favorite brands) and an easy-to-manage dashboard defining what the outside world sees about her. Certain brands she trusts enough to share quite a lot about herself. These favorites, of course, know the most about Isabel, so that she can get exactly what she wants from them. Others aren’t as fortunate. They know only what Isabel wants to share with them — which isn’t much. If a brand is not on her list it won’t ever find out more, because she’s perfectly able and willing to control her digital information. In her digital life, she will “switch on” areas of interest and consider relevant offers.  She will also block out the untargeted, low-value offers and emails she receives all the time. Isabel, you see, values control and monetizes her personal data by the way she manages it. Isabel is a segment of one.

The second scenario takes the power shift to the customer a step further. This builds on the notion of the “Internet-of-things”, a scenario where household objects, fashion accessories and other objects can transmit data about themselves. For example, the water filter of your refrigerator may send a signal to your preferred suppliers when it its time to replace it with the supplier that satisfies the price point subsequently fulfilling the request. While it is too early to say which areas will be affected by this change, it is very likely that “things” in the home will be connected and be able to send and receive information in order to other “things”

Optimizing the intersection of digital payments and big data is critical for merchants to serve the new powerful customer. Data has become multichannel, multi sector, multifaceted and for retailers being able to understand the behaviour of their customers not to mention their fragmented media existence will likely provide a whole new level of understanding and opportunity. Take for example the recent experience of a retailer interested in reaching last-minute holiday shoppers in (for argument’s sake) the luxury sector. By analyzing aggregated purchasing behaviour, with last-minute holiday spending, the company was able to conduct a better, more targeted campaign as a result. The reward was a 31.7% lift over the performance of a control group.[1]

Cross-border commerce is growing faster than domestic commerce and so will likely become increasingly important and influential. In fact, based on McKinsey’s research, cross-border flow of goods, services and finance could increase three folds from $26 trillion in 2012 to $85 trillion in 2025 representing a 10% average growth rate. Innovations in digital payments and technology such as payment cards, eBay, and AliPay will fuel this by simplifying cross-border commerce.  Small businesses (SME’s) are likely to benefit significantly.  Consider that 90% of commercial sellers on eBay are SMEs who export to other countries vs. less than 25% of traditional SMEs[4].

Emerging economies are and will likely continue to be the main beneficiaries. China and India are the main drivers especially through trade with other emerging markets. Between 1990 and 2012 the share of trade of global goods between emerging markets quadrupled whereas between developed markets almost halved [4]. Similarly, share of trade of global goods between emerging and developed markets increased 40% during the same period [4].

Payment for transit by overseas travellers is one area of opportunity. Solutions like the one rolled out by London Underground that enables travelers to use their existing contactless bank cards (e.g., supporting MasterCard PayPass) without having to buy the local Oyster card are expected to continue to gain traction.

Merchants are also expected to become smarter about engaging cross-border customers using transactional data. As an example, many types of merchants – including airlines, hotel chains and luxury fashion brands – have established relationships with travelers through loyalty programmes. Analyzing the spending patterns of frequently traveling members of the program can help identify the merchant types with which members engage most often. This may uncover new partnership and ancillary revenue opportunities.

There will likely be several types of digital payments like payment cards, mobile money or digital wallets for different markets and applications. One area in payments that is likely to see significant transformation is low value payments (LVPs), everyday, high-frequency purchases for which cash is used (typically sub $10 transactions) and make-up the bulk of cash transactions today. Digitizing these will most likely require new payment solutions. It’s not simple.  Any payment solution must create equitable value for all parties to a transaction. And value is a confluence of factors such as faster checkout, sales increase, information, safety, not just a function of pricing. Existing payment solutions are successful because they arbitrate a wide range of stakeholders to ensure equitable distribution of value. Digitizing low-value payments will likely require the same approach to create new payment constructs/business models.

The Future of Payments – Impacts and Implications

Merchants should invest in key capabilities to position for the future. The first is big data. They need to start developing a big data strategy and develop a roadmap for the next 10 years. Big data will give merchants the opportunity to serve the increasingly powerful customer and enhance the retail store experience in order to create a truly omnichannel experience. The good news is that merchants don’t need to depend on in-house capabilities; there are third parties that can help making big data a reality for merchants big or small.

The second is POI and digital payments. Merchants need to assess the current usage of cash and develop a plan to reduce it. Perhaps the best way is to think about the end-to-end customer experience and assess what digital payments make business sense and how they may be integrated. There are more digital payments choices than ever before and they are only increasing, merchants are likely to find a solution that fits their needs.

Third, think about global expansion. In this digital world of AliBaba and eBay and digital payments like payments cards and AliPay, becoming global is much easier for all merchants big or small.

Online will be critical so invest in related capabilities. But go a step further, by thinking about it in the overall context of the omnichannel customer by focusing on a seamless experience across all channels.

We will see significantly less cash over the next ten years. Use of technology and big data will be more prevalent and will not be limited to large merchants or some industries.  Merchants will have to become more nimble and agile and continuously adapt their business as the environment has not been more dynamic before. Finally, new innovative players will continue to emerge across a range of functions including commerce, digital payments, big data and marketing; these will create both opportunities and threats for incumbent players.


[1] MasterCard Advisors Analysis, 2014

[2] Wall Street Journal, 2014


[4] McKinsey, 2014

The Future of Travel – The Global Challenge

The travel and tourism industry is often described as the largest industry in the world. It accounts for 9% of world GDP, $1.3tn in exports and 6% of world trade across multiple sectors, including transport (aviation, rail, road and sea), accommodation, activities, food and drink. It is estimated that it creates about 120 million direct and 125 million indirect jobs and is closely linked to other sectors in domestic and international markets, such as the manufacturing industry, agriculture and the service sector.  In turn, these create broad multiplier effects for local and national economies.

In 2012, for the first time in history, the number of tourists crossing international borders in a single year reached over one billion. While just over 50% of these arrivals were from Europe, much of the demand is being fuelled by rising household incomes in emerging economies – not only the Brics (Brazil, Russia, India and China) but increasingly across the rest of south-east Asia and Latin America. In addition another five to six billion people travel in their own country every year. Technological innovations are fuelling this growth, and include developments in low cost air travel and the widespread use of increasingly sophisticated applications that aid online researching and booking travel.

Mass tourism was one of the great game-changers of the 20th century. Thomson Holidays ‘Sustainable Holiday Futures’ report explains: “Cheap flights meant travel was no longer the preserve of a wealthy elite, enabling millions of people to travel beyond their border and dramatically widening the horizons, tastes and expectations of an entire generation in the developed world.” Today I see the mobilisation of the middle classes in the Indian Subcontinent, Asia and South America as the game-changer for the early part of the 21st Century.

In general people like traveling and which is probably why the industry has remained resilient, adapting in the face of a range of challenges such as armed conflict (particularly the Gulf Wars) and disease (Sars, H1N1, Foot and Mouth, and more recently Ebola), earthquakes and other natural disasters. Looking ahead the future looks positive; for example international tourist arrivals worldwide are expected to increase by c. 3.3% a year to reach 1.8 billion by 2030 with the majority of market share tipping toward the emerging economies over this period.

Despite the positive trajectory the Thomson Future Holidays report warns that the challenges for the industry are formidable: “The dream of affordable travel for all is being obscured by climate change, future long-term projections of rising fuel prices and a growing awareness among consumers that sustainability and responsible travel are set to have an impact on how we understand, embrace and manage our holiday plans.” Given this, I see that there are broadly two main challenges ahead for the development of a robust travel and tourism industry: how to continue to grow further to deliver jobs, exports, economic growth and development, and in doing so, how to manage this sustainably.

The Future of Travel – Options and possibilities

Considering growth, perhaps the first issue to be addressed should be the balance between convenience and security with border controls coming under increasing strain as they deal with huge volumes of people travelling internationally at a time when fears around global security are high.

The World Economic Forum’s Global Agenda Council believes that “the bureaucratic hurdles that often accompany visa procurement such as long wait times, absence of local consular offices and excessive documentation requirements discourage travel, constraining visitor spending and the jobs and growth it generates”, and that “The largest delays are caused by antiquated visa processes and can be easily reduced through utilization of commonplace modern technology”. Improved visa facilitation in G20 countries, it says, could create between 940,000 – 5.1 million jobs and generate US$149 -206 billion in international tourist receipts by 2015. It says that shifting away from in-person interviews and consulate-based application system to online applications, video interviews and application processing software can reduce staffing costs and produce immediate returns en route to widespread adoption of e-Visas and a coordinated global travel facilitation system. It’s paper ‘Smart Travel: Unlocking Economic Growth and Development through Travel Facilitation’ proposes “a smart travel model and blueprint that could revolutionize the travel and tourism sector, much the way smartphones have transformed the telecommunications and media industries”.

Clearly the challenge is to make travel safer but at the same time more efficient. Innovations in travel facilitation is essential for growth so look out for different forms of frictionless travel – streamlining visa processes with the introduction of e-visas for example: “As the world becomes hyper-connected, circular and citizen-centric, the right legislative framework, innovative financing and partnership models are crucial to facilitate travel. This includes smart visas, smart infrastructure (i.e. smart airports) and skills.[1]

The notion of technology driven travel is not confined to border controls. Smart cards similar to those used for localized, multi-modal urban transport (such as the Oyster card in London and Tisséo smart card in Toulouse) will increasingly be used not just for local transport solutions and for booking accommodation, activities, food and drink, but also at the level of predicting personal choices in hotel rooms, such as smart showers that predict the temperature we prefer, and smart meters that optimise our use of energy, temperature control, and so on.

Beyond this, smart technology has revolutionized how we choose to travel. We are no longer dependent on the wisdom of our high street travel agent and prefer instead to make decisions based on the experience of online crowds from the likes of Trip Advisor. Browsers and indeed our browsing habits are becoming increasingly sophisticated allowing us to choose our journeys by cross-referencing and sharing ideas as well as influencing the buying choices of others.  Looking ahead expect searches to be even more refined, with users having greater control over whose opinion they seek.  Combine this with the increasing use of smart devices and it is clear that ensuring they stay ahead of technological innovation will be key to survival for many (from SMEs to the large corporates) across all sectors of the industry.

Regulation will continue to have a huge influence over the aviation and transport industry. The key regulatory challenges are likely to be Air Passenger Duty increases, compliance with the EU Emissions Trading Scheme (ETS) and volatile fuel prices. The effects of the deregulation of the European railways in 2010 that allowed open access (i.e. all railway operators can now compete on international routes, and private companies can now pick up passengers outside their home country and operate cross-border trains) have yet to be realised. It is hoped that it will lead to competitive pricing for tickets, more seats on more trains and increased variety of rail products and services. Perhaps the most significant improvement (and one that looks set to grow in the future) is the multi-modal approach to air and rail. Many large German airports, for instance, such as Frankfurt, Cologne and Dusseldorf, now have modern rail stations that allow air passengers to continue seamlessly by rail to many destinations. The Chinese have also already significantly invested in mass transit by rail. As fuel costs make conventional air travel more expensive, in some regions, rail travel may replace domestic and even intercontinental flights.

Given that the travel and tourism industry is a huge employer, the development of and tighter controls on employment rights are likely to be a significant factor in the future. It is worth noting in this regard that there are few NGOs lobbying the industry on human rights; the UK-based charity Tourism Concern is a small but vociferous organisation that campaigns for a variety of human rights issues, such as the right to water for local communities, displacement and land rights of indigenous people, and porter protection, while Survival International campaigns for the rights of tribal people worldwide. As the travel and tourism industry boom continues, it is likely there will be many more issues to contend with in this regard, particularly regarding the expansion of urban landscape into traditional land areas in Africa and the expansion of oil production and timber felling in the tropical rainforests of Southeast Asia and South America.

Tourism is an under utilized tool for socio-economic development. In general it has had a positive impact on local community empowerment, especially for women. There are other intangible assets, such as encouraging greater global connectivity and cultural understanding. Awareness of this is increasing and community based tourism is on the rise with a growing number of holiday makers eschewing the crowded beaches and all inclusive packages to enjoy a more authentic experience living in the culture rather than observing it from the outside. The demand for localized, personal experience will grow over the next decade.  As a result the travel and tourism industry is becoming increasingly aware of its social responsibility so look out for increasingly sustainable travel options. Over the next decade travellers will base their buying decisions not only around comfortable beds, leisure facilities or the proximity to cultural attractions, they will also be able to choose to stay in places where they know the staff are being treated well and the local economy is not being exploited.

Some in the industry are already changing their ways of working. Thomson Holidays (part of the TUI Group) reports that companies will increasingly be held to account over their commitment to issues of a more sustainable tourism industry. Jane Ashton, head of sustainable development at TUI Travel, said: “Our research shows that our customers want us to take care of sustainability issues for them. So our challenge is to influence destinations and hotels to supply an infrastructure that allows our customers to be more sustainable.”

Thomson Holidays also predict that during the next twenty years, UK travellers will agree to pay for their water on holiday; take ‘Tradecations’ – cooperating with radical plans by hotels and resorts to slash their carbon footprint in return for carbon reward points that can be traded for visits to local sites of interest, spa treatments or dinner and drinks; discover holiday super-hubs and aerovilles as a new integrated global rail and sail network replaces domestic and regional air travel. With regard to carbon quotas, it warns there is a “potential double-whammy for the travel industry with governments worldwide predicted to impose personal carbon quotas”. The British government’s plan to reduce carbon emissions by 80% by 2050 “would give UK citizens an annual carbon quota of just 3.1 tonnes per person”, so the report concludes: “Such low quotas will encourage families to carbon-comparison shop.”

When practiced responsibly, tourism can also be a tool for biodiversity conservation – many national parks and other protected areas would no longer be able to survive financially without large number of visitors, and there are an increasing number of examples where ecotourism has helped save individual species, such as the mountain gorilla in Rwanda and Orang Utan in Borneo. A census announced this week in India reports that tigers numbers are up 30% over the last four years, which is in part due to tourism’s influence on the understanding of the economic value of tigers; that they are worth more alive than dead.

Increased awareness of environmental issues (and the rise of the ‘green consumer’) has inevitably led to a growth in the interest in environmental travel. As far back as 2010, around 50% of Americans that traveled abroad were engaged in nature, culture or heritage tourism and research commissioned by Trip Advisor suggested that 71% of its members intended to make eco-friendly travel choices in the future. So, over the next ten years look out for continuous growth in travel focused on learning about, experiencing or positively affecting ecological conservation, economic development and local community improvements, cultural respect or human rights.

However, if poorly managed, tourism can be a double-edged sword, having a negative impact on local populations and their natural environment (including degradation of local environmental quality, water consumption and waste management) as well contributing to greenhouse gas emissions. Unchecked and unregulated, the continued growth of the industry will also have implications for areas of significant cultural and natural importance. Of the 1007 properties listed on UNESCO’s World Heritage List, 46 are identified as ‘in danger’, such as the Everglades in Florida, the Selous Game Reserve in Tanzania, the Rainforests of the Atsinanana in Madagascar and the Virunga National Park in the Democratic Republic of Congo. UNESCO includes “unchecked tourist development” on its list of challenges that it says pose threats to World Heritage Sites; the others are: armed conflict and war, earthquakes and other natural disasters, pollution, poaching, and uncontrolled urbanization. Regulators and law enforcement officers must address this.

Beyond everything climate change will undoubtedly affect the travel and tourism industry, both in terms of the regulation of greenhouse gas emissions and the effect on the tourist industry of destinations adapting to climate change, especially those regions that already are exposed to extreme weather, such as at the equator and the poles, as well as vulnerable island states, such as the Maldives and many Pacific Islands, and low-lying coastal areas of industrialised nations that are vulnerable to sea water rises. Tourism bears some responsibility for this currently accounting for 5% of global greenhouse gas emissions – approximately 4% from transportation (40% of those from air travel and 32% from car travel) and almost 1% from the accommodation sector. As demand for air travel is forecast to double by 2050, and carbon emissions from flights departing the UK alone are forecast to increase from 33.3 MtCO2 in 2011 to 47 MtCO2 by 2050 expect innovations in transport infrastructure to begin to mitigate the damage being done.

One of the other options for tackling aviation’s contribution to greenhouse gas emissions is the EU Emissions Trading Scheme – a market-based “cap and trade” mechanism whereby emissions are capped at a set overall limit but are tradeable. Another solution is to address the source of the emissions produced by aviation through use of future aircraft technology, better operational flying techniques and the development of sustainable fuels. ‘Sustainable Aviation’, an alliance of the UK’s airlines, airports, aerospace manufacturers and air navigation service providers, has produced a ‘CO2 Roadmap’, which it says could reduce the UK’s aviation emissions by up to 24% by 2050. It says the UK could have between 5 and 12 operational plants producing sustainable fuels by 2030, which could generate a Gross Value Added of up to £265 million in 2030 and support up to 3,400 direct jobs, and a further 1,000 jobs.

[1] World Economic Forum

The Future of Travel – Proposed Way Forward

Smart visas, indeed, smart ticketing in general for mass transit provides a tangible way forward in addressing some of the barriers to the seamless growth of cross border visitor numbers.

Given unpredictable fuel costs in a climate-challenged world, the future for the aviation industry must surely lie with greater efficiencies in the short term and with alternative fuels used in the future, even if a global emissions trading mechanism is put in place. The railways are likely to be the mid- to long-term solution for mass domestic transit, particularly linking to intercontinental airport hubs for leisure, work and shopping, especially in those countries with modern railway networks, such as China, Japan and the Middle East, but also across the high-speed networks of Europe.

Regarding World Heritage Sites already at risk from the sheer numbers of visitors, it has been suggested that charging a tourist levy for entry is one solution to limit the numbers, though critics have said this is elitist.

The Future of Travel – Impacts and Implications

It is uncertain how far climate change will impact destinations over the next 20 years, but it is highly likely that we will start to see the effects of a warming world in this time frame, especially in those destinations that already experience extreme weather, such as at the equator and the poles (as well as the Caribbean, the Mediterranean and Australia), where particularly water scarcity will impact on the tourism industry.

Companies will increasingly be accountable for their environmental and social impact, and demonstrate how close they come to providing a ‘net positive impact’ in the destination.

The Future of Food

The massive increase in the human population that has occurred over the last century is precipitating a cascade of environmental, economic, political and cultural changes that have far-reaching implications for the provision of an adequate global food supply.

The Future of Work – The Global Challenge

The global challenge of work is two-fold. First, will automation, in its various forms, destroy jobs? And second, even if not, will workers be paid enough to sustain the global economic system? This is why the former US Treasury Secretary Larry Summers has said the problem of “good jobs” is the central problem of the richer economies.

The combination of economic stagnation, global competition and digital technology has created something of a social and public panic about work. We are losing “the race against the machine,” or reaching “the end of labor”. But there are two diverging stories about the future of work, one dystopian, one utopian, as Flipchart Rick has observed. On the one hand: it “will revolutionise the workplace … and enable us to have more fulfilled working lives.” And on the other: a future “of factories without people, of vanishing jobs, of a hollowed out labour market and … vast profits with few employees.”

Our present model of work is, broadly, a creature of the industrial revolution, dominated by the division of labour, the supervision of labour, and payment of workers for their time or their tasks. This includes so-called “new economy” models such as Uber, whose casualisation of its workforce would be recognised by any 19th or 20th century dock-worker. Some of the big shifts shaping work reinforce this model. Others are starting to reshape it, potentially marking the start of a transition beyond it.

To understand how this is likely to change over the next decade and beyond, we need to understand the global landscape of work. These are a shift towards services, the globalisation of supply chains, the growth of ubiquitous technology, an increased squeeze on resources, and a shift in social values towards well-being. These pull in different directions.

Globalisation and digitisation take you towards rawer forms of capitalism, whereas resources and values take you towards more inclusive versions. The way you deliver services depends on which model of these two that you prefer. The version of the story about the future of work you subscribe to tends to depend on your assumptions about how these drivers will play out.

The shift to services: The deep shift in the global economy is in the long-term rise of services to “become the dominant economic activity” (UNIDO, 2009). The economists Timmer and Akkus (2008) describe this as a “powerful historical pathway of structural transformation,” which every country follows.

One of the reasons for the long boom in living standards in the 20th century was because of the long boom in manufacturing, the dominant economic trend for much of the century. Productivity growth and economic growth tends to fall as services become dominant, and the influence of trades unions, which are effective in maintaining the value of wages, tends to decline.

The globalisation of the supply chain: Manufacturing is also tradable, meaning that it is open to export competition. The growth of the Asian economies, in particular China, has been extensively driven by manufacturing. Taking a long view, Asia’s share of world production almost doubled between 1970 to 2008, from 15.5% to 28.5%, at the expense of Europe and North America. (Unido, 2009). This growth was driven largely by the development of containerisation, not digital technology, because it transformed shipping costs.

But globalisation is reaching its limits. Wages in export sectors in both China and India are now relatively high (a pattern seen in other emerging economies in the past) and companies are moving their production closer to their markets, both anticipating rising transport costs and wanting to be able to respond more flexibly to demand.

The other effect of globalisation, of course, is an increase in migration: more than 500 million people globally now live in a country they weren’t born in. Economists generally agree that immigration is good for economies. Migrants tend to be younger, more enterprising, and economically active, and their effect on wages, economic growth and tax contributions is almost completely positive. However, in weak labour markets migration also tends to push down unskilled wages by increasing competition for such jobs; such competition is gamed by unscrupulous employers.

The growth of ubiquitous technology: There is a widespread fear that the rise of robots – or more exactly, a combination of computing power, algorithms and robotics – will destroy the labour market, even, possibly, the very idea of labour value. A widely publicised study by Oxford University academics Carl Benedikt Frey and Michael Osborne argued that for the United States jobs are at high risk of being automated in 47% of the conventional occupational classifications (Frey and Osborne, 2013). In The Second Machine Age, Erik Brynjolfsson and Andy McAfee suggest a reason: that computing power is capable of exponential growth in performance over time, and that we’re just at the start of that progression. If robotics did for blue-collar work, then artificial intelligence will do for white collar work.

This argument, however, tends to miss the fact that technological innovation, historically, has created new jobs, typically after a period of turbulent transition. In his analysis of the labour market, David Autor (2014) finds that between 1999 and 2007 “routine task-intensive” jobs were indeed largely removed by computerisation, while knowledge jobs (“abstract task-intensive”) tended to survive or increase where human knowledge was complemented by computers. “Manual task-intensive” jobs, at the less-skilled end of the market, were much less affected by computerisation, and demand for them seemed to be rising. Yet their wages fell. His explanation: labour supply for these jobs increased because of the collapse in demand for “routine task-intensive” jobs.

The squeeze on resources: Population and consumption pressures mean that we are breaching many of the natural planetary boundaries. For capitalism this is a new game: traditionally it has been able to use resources without worrying much about the consequences. And after a century of cheap energy, the long-run trend is up, despite the current downward blip in the oil price. In our recent Futures Company report The 21st Century Business, Jules Peck and I argue that this resource shift is changing the way that companies behave; we are moving to post-sustainability (socially, economically, and environmentally). An important element is a shift from consumers to citizens, among both customers and employees, where the overall impact of a business matters. An example: it’s argued that one of the reasons why McDonald’s sales are slumping among Millennials is that eating there is depressing, because of “the feeling that the people behind the counter, flipping burgers and taking orders, have dead-end jobs where they’re treated poorly.”

The shift to wellbeing: One of the long trends is a trend towards wellbeing, physical and psychological, individual and social. This complements one of the strong workplace trends: that significant competitive performance is typically produced only by empowered and engaged employees, who are intrinsically motivated to work for the business. This is true of lower-wage environments as well as higher-wage businesses.

Striking research by Zeynep Ton (2014) has found that companies such as Costco in the United States and Mercadona in Spain out-perform their sectors – by some margin – through a combination of better wages, significant investment in training, and appropriate technological investment to support staff. With such a “good jobs” strategy, increases in wages translate directly into far larger sales increases. High value work benefits individuals, businesses, as well as society as a whole.

The Future of the Company – The Global Challenge

Big business has become disconnected from the broader society within which it operates. A narrow focus on short-term returns has prevented businesses from investing in innovation to foster long-term sustainable growth.

The common understanding of the purpose of publicly listed companies, particularly in Anglo-American markets, is that they exist to maximize shareholder value. Publicly listed companies are under tremendous pressure from activist shareholders, takeover threats, and general market dynamics to generate short-term value by spinning off parts of the company, buying back shares, and laying off staff. External pressure is compounded by executive compensation schemes that are heavily weighted towards stock options. In theory, incentive compensation systems should reduce agency costs so that managers will act in the interests of shareholders. In practice, they create perverse incentives to extract value from the company at the expense of customers, employees, organizational health, the community in which the business operates, and ultimately society as a whole.

A number of unintended consequences result, including:

  • The failure of companies to adequately consider and respond to societal challenges, such as environmental damage and climate change, due to the perceived cost;
  • Erosion of trust between society and the corporate sector, including the role of corporations in shaping public policy, which in turn leads to a loss of trust in democratic processes; and
  • Firm mismanagement through stock manipulation, insider trading and tax evasion, with a number of associated firm-level and macroeconomic risks including treating employees as disposable; undermining investment, research and development; hollowing out whole organisations; turning executives into caricatures of self-interest and greed powered by narrowly focused remuneration schemes; focusing talent in the corporate world on systematically extracting value rather than creating it; stock price manipulation; and fueling market failure and economic crash.

Inequality has greatly increased in the last twenty years, in part due to the failure to translate corporate profits into increased salaries across the firm. Even as worker productivity has continued to rise, real worker wages have essentially flat-lined. At the same time, executive compensation has markedly increased due to the afore-mentioned stock option schemes. Rising inequality within companies has in turn contributed to macro-level inequality that threatens to concentrate economic and political power in the hands of a privileged few.

The biggest questions we face go to the very core of business: what is the purpose of the corporation, and specifically of the large listed company with dispersed shareholders? Will the current model of large publicly listed companies survive the next decade, and if not, what will it be replaced by?

Another question is about the alternatives to public companies, such as B-corporations, co-operatives, companies controlled by foundations, privately held companies, partnerships and family-owned businesses. Many of these alternatives have shown themselves to be capable substitutes for corporate bodies, but will they pick up momentum and drive the way forward? Will they eventually eclipse publicly listed companies? Research by the CFA Institute shows that global equity listings have declined by 17% between 1998 and the end of 2012, from 56,119 to 46,674. US stock exchanges were hardest hit, losing nearly 50% of their listings from their high of 9,253 in 1997. Europe has also seen a significant decline of 23% of its listed companies, while Asian exchanges have seen the least change with less than 5% lost. Given the sharp decline in number and longevity of public companies, it is unsurprising that many ask if a model of public limited company will survive the next decade.

Perhaps the most pressing issue today for financial regulators is the question of how to address short-termism in the markets and its significant influence on the strategies of public companies. It is widely acknowledged that an excessive focus on quarterly returns fed into the 2008 crisis but opinions vary widely on the causes of and solutions to short-termism. What is the role of financial markets and investors in promoting responsible capitalism? Can we turn institutional investors into patient capital, willing to invest in innovative research that will yield returns in the long-term? And conversely, is it possible to limit short-term trading, or at least to reduce its impact on the governance of companies?

Stewardship has become a central focus of regulators seeking to push markets to a long-term orientation. What do good stewardship and responsible investment look like in practice? Is it reasonable to expect institutional investors and corporate managers to serve as good stewards and act sustainability?

The Future of Work – Options and Possibilities

The current discussion about the future of work seems to be monopolised by the version of the future in which technology destroys jobs. It has gained an air of inevitability, as if it is the only possible future. NESTA’s open minded report suggested that the “robots hypothesis” resonated because it connected “two powerful themes in popular culture: the rapid advance of IT, and the startling growth in inequality.” But there is a problem: it hasn’t happened before.

Indeed, the idea that investment in more productive technologies leads to unemployment is dismissed by economists as “the lump of labour fallacy.” In the past, investment in the new technologies has created new capacity and new wealth, which was re-invested to create more, higher value jobs. If this time is different, we need to understand why this is so.

There are candidates. Brynjolfsson and McAfee’s claim that digital technologies are different because they create exponential growth is one. Another is that companies can no longer draw on plentiful resources or cheap energy to drive new investment platforms. A third is that previous waves were driven by manufacturing, which generated new value through productivity gains and created the social conditions for trades unions.

However, it is also the case that this fear typically recurs after a crisis. It is not coincidence that Keynes wrote his famous essay on the challenge of technological unemployment just after the 1929 crash.

So it is also worth considering reasons why it might just be a phase. The economic historian Carlota Perez has a model of technological development that describes five long waves, or surges, since the Industrial Revolution. Each is around 50-60 years and follows an S-curve pattern; the last quarter of each is marked by saturated markets, diminishing investment opportunities and declining returns. The first part of the 20th century was dominated by the oil and auto surge; the latter part by ICT. The ICT wave is now reaching the turning point at which returns start to fall.

On this model, finance is looking for new opportunities, and although it is too early to say what the next platform will be, and we’re still 10-15 years away from it, it is possible to imagine that the next technological surge might be built around, say, a material such as graphene.

David Autor concludes that much of “the labor market woes” of the past decade are not down to computerisation, but to the financial crisis and reduced investment (starting with the collapse) and the impact of globalisation on labour markets. And he suggests that many middle-skill jobs will prove more resistant to unbundling than advertised; while computers can do specific tasks, turning collections of tasks into self-contained jobs, and then automating them, requires substantial investment. In the long run, people are both more flexible and cheaper.

One implication is that the question of the future of work may actually be about power in the labour market. This leads to broadly political interpretations of the future of working conditions, ranging from Guy Standing’s formulation of the fragile “precariat”, facing intermittent, insecure work, David Weil’s description of the “fissured workplace”, in which many functions are sub-contracted, and the rise of campaigns for the Living Wage. Perhaps the dividing line is best-expressed in Alex Payne’s widely circulated open letter to the tech venture capitalist Marc Andreesen: “You seem to think everyone’s worried about robots. But what everyone’s worried about is you, Marc. Not just you, but people like you. Robots aren’t at the levers of financial and political influence today, but folks like you sure are.”

The Future of the Company – Options and Possibilities

There is little that is guaranteed but change is certain. In the words of Lawrence Bloom, the co-founder of B.e Energy (a triple bottom line energy company), we are no longer in an age of change but in a change of age. The world faces three converging crises – economic, environmental and social – that require urgent and visionary action. Behind these crises are the failure of a worldview based on the single-minded pursuit of growth and the failure to work collaboratively to ensure that benefits are shared widely.

In the next decade, we will certainly see the effects of our failure to proactively address challenges such as inequality, the regulation of financial markets and youth unemployment. The effects of our failure to make capitalism inclusive will become apparent: we have a generation of young people with uncertain prospects and we face rising inequality with a rising share going to the wealthy even as our wages stagnate. The corporation will be increasingly associated with these problems due to its status as the place where much of the distribution of the benefits of capitalism take place.

We have already started to see the effects of climate change and business has started to sit up and take notice. How will we react and will we be able to turn the ship around? The answer to this question largely depends on the readiness of the corporate sector to support progressive political solutions. It is becoming patently clear that exhausting the planet’s resources is not an option – a growing number of politicians and business leaders recognize we cannot burn our fossil fuel reserves without destroying the world as we know it.

Not all is grim; in the next decade we will witness the continued rise of a new generation of leaders pushing for responsible business, broader recognition of the need for gender and racial diversity in boardrooms and C-suites, and the shift of power from the global north to south and from west to east. Companies from emerging economies will certainly take on a key role in the global economy. They will bring with them different models of governance which might be more able to respond to changing conditions, although they will also introduce new challenges. Finally, the line between public and private will continue to blur. There will be mounting pressure from civil society and the general public for sustainability in business and for corporations to take responsibility for the impacts generated by their value chains and off-shore operations. The reordering of transnational legal and political frameworks will offer us the opportunity to revision the respective roles of the State, the corporation and civil society. Concerted effort is needed to nudge the process in the direction of democracy and broad-based participation.

On our current path, another crash of the financial markets is highly likely. We have not addressed the root causes of the 2008 crisis and momentum for a significant overhaul of the markets has slowed to a crawl. Will the erosion of trust in business caused by the cyclical boom-and-bust nature of markets have an impact on policy-making? It’s hard to say.

The relative power of stakeholders within companies is similarly uncertain: will employees regain their voice? Will responsible investors play a more important role in influencing companies?

There are several events that could occur at the world stage that would have a profound impact on the global economy: another global energy crisis, the eclipse of Western economies by emerging economies, and the dissolution of the European Union.

The overarching uncertainties are whether we will see a rebalancing of power between different stakeholders, whether big business and key interested parties will lead or resist a rebalancing of influence, and how big a crisis is needed to jar us from our current trajectory. The risk is that entrenched interests that benefit from the current state of play will thwart reforms that threaten to limit their influence.

The Future of the Company – Proposed Way Forward

The backlash against big corporations has already fostered interest in alternative business models that will continue to gain momentum over the next decade. There is not one perfect alternative to publicly listed companies but rather a plurality of legal structures that each have certain benefits and drawbacks, including privately held companies, partnerships, benefit corporations, cooperatives, and worker-owned enterprises.

Major changes are on the way for company boards. Although problematic, the concept of stewardship has become the go-to response for regulators seeking to address short-termism in the markets, along with increasing shareholder rights. In theory, strengthening ‘shareholder democracy’ by giving shareholders additional powers such as a say-on-pay seems like a good way to encourage institutional investors like pensions and sovereign funds to steer companies in the right direction. In practice, however, it is unclear whether we can expect investors to take on this responsibility. A slight variation on this would be to assign different powers to different classes of shares.

It may be that other stakeholders besides shareholders will take on an increasingly important role. Board level employee representation is well established in much of continental Europe and has started to receive some attention at the EU level. Board diversity is also a key topic now and will almost certainly be into the future. We may see reserved seats for women, visible minorities, and other traditionally under-represented groups.

The classic maxim says that what is measured is what matters. The traditional focus of firms on measuring and reporting on almost exclusively financial indicators is changing to look at a broader set of indicators. In the EU, the recently adopted Non-Financial Reporting Directive requires certain large European companies to disclose information about environmental matters, social and employee-related matters, respect for human rights, anti-corruption and bribery matters. Integrated Reporting (<IR>) was devised less than a decade ago but has been picked up by an increasing number of companies who welcome the ability to tell a story about the whole picture of the company, which is often overlooked in quarterly reports. Closely related is the question of how to share information about companies to potential investors and the public. There are several ideas out there for developing benchmarks and labeling standards to identify sustainable companies and financial products, similar to what has been done for Fair Trade products.

There are two main ways to influence behaviour: sticks and carrots. Ideally, we will push companies to be pro-social through a combination of both regulatory policy and economic incentives. For example, there has been a lot of discussion in the context of climate change about introducing taxation of externalities, e.g. carbon taxes, as well as a carbon market. The EU has also considered proposals to impose a transaction tax on financial markets to reduce volatility and generate revenue, which has been used in other jurisdictions with inconclusive results. We may see requirements imposed to devote a certain percentage of revenue to CSR, as is being implemented in parts of Asia.

The Benefit Corporation and similar models might be supported by governments, either by tax incentives or by preferential treatment in public procurement. Farsighted States may reform their company law to introduce mandatory elements of corporate purpose, such as, for example, the concept of making decisions with an aim to remaining within our planetary boundaries, and adjusting directors’ duties and responsibilities accordingly. These changes have the potential to have high impact because they could shift economic activity to a new model – and for that reason, they are unlikely to be implemented. Other debated regulatory reforms include caps on executive pay and/or pegging executive pay to non-financial returns; changing the rules on the legal liability of multinational enterprises to allow parent companies to be held legally liable for the actions of their foreign subsidiaries; and restrictions on firms’ right to buy back their shares. Each of these reforms is potentially important but it is only when they are taken together that they have a chance to lead to system-wide changes to business conduct.

In terms of incentives, almost any of the regulatory reforms discussed in the previous paragraph could be framed instead as an incentive with a bit of ingenuity. Additional ideas include introducing incentives for boards to change their composition or to balance the short-term financial interests of the company with long-term and/or non-financial interests. Thoughtful policymaking is needed; indeed, perhaps the best we can do is to try to ‘nudge’ behaviour in the right direction and closely monitor the results, ever ready to react to changes.

The Future of Work – Proposed Way Forward

The way forward depends on how you prefer to read this bifurcation between the technologists and the sceptics. We don’t know which group is right: there are no future facts. But there are some observations that can help shape our perspectives on this.

The first is that these widely divergent views are a feature of this point in the technology cycle. The most the most excitable projections of the future of the car were seen at just this point on the oil and auto curve in the 1950s. The technology S-curve in Figure 1, based on the work of Carlota Perez, helps us to understand why. At this point, when the S-curve is at or approaching its second inflection point, people have been experiencing rapid technological change for the best part of two generations. The notion that “the only constant is change” has become a breathless platitude in the public discourse. So, the technologists’ perspective (point ’t’ in Figure 1) is a projection of this steep ramp. The sceptics note instead sign of falling returns and declining customer utility – and see a flattening of the line (point ’s). The gap is large, and one’s perspective on it is a matter of worldview, not evidence.

Figure 1


Source: Carlota Perez/ additional analysis by The Futures Company

Second, almost all business innovation and new business value is driven by the application of knowledge, and the way it is embedded in individuals, teams, and systems. The Futures Company has explored this in recent research with the Association of Finnish Work on the idea of ‘high value work.’ The important point here is that this is true of a whole range of knowledge, including knowledge of service and customers, and knowledge of culture and place, as well as technological knowledge. The most successful businesses use technology to complement and enhance this knowledge, not to replace it.

Third, the trend towards is a deep and powerful one. If Millennials express a desire for meaningful work, this is also true more broadly. We are on the cusp of a transition to a world where, as Hardin Tibbs (2011) has argued, half of the populations of Europe and the United States subscribe to post-modern values (drawing on Inglehart) of autonomy and diversity. The workplace will not escape this trend. One way in which this is expressed is in a transition from consumer or employee to citizen. Increasingly, anyone with any degree of choice in the labour market is choosing employees who recognise them as a whole person, not just as a unit of labour. The evidence suggests that the engagement that the employer gets in return (even, say, in retail) is a powerful driver of performance and profitability.

Fourth, the bargain that businesses struck in the 1980s and 1990s, as they enforced flexibility and “downsized” headcount, may turn out to be a Faustian pact. Shedding jobs and exerting tight control of labour markets increased short-run profits. But at the same time that same control squeezed out their sources of growth. And as both the OECD (Cingano, 2014) and the IMF (Ostry et al, 2014) have noted recently, wage inequality has been a further drag on economic growth. To regain growth, they are likely to have to increase wages and give back some control and power to their workforces.

My own best guess is that we are not headed for long-run technological unemployment. I have changed my mind about this over the past year as I have spent more time with the evidence.

The explanation that seems best to fit present state of work and labour markets is that it has been through a “perfect storm” of a globalised workforce, the deskilling of routine work (which was highly vulnerable to automation) and the shift of these workers into manual or service work, and aggressive deregulation of labour markets driven by a neoliberal political agenda.

The discourse around technological unemployment is not persuasive to me. The “abstract” jobs (using David Autor’s analysis above) will be complemented by technology, and so, in a different way, will be the manual jobs. Meanwhile, the projected gains from Artificial Intelligence and analytics are going to be harder to achieve than currently anticipated. As an example, big data gets less useful as the data sets get larger, and the driverless car, the poster child for the tech future, is a far tougher proposition than Google lets on. Meanwhile, these tech scenarios never seem to include the new jobs that will emerge as we understand better the potential of the technologies, other, sometimes, than as a panic about the possible speed of change.

But, and it is a big but, we’re only part of the way through the dislocation to work and to labour markets caused by this perfect storm. Things will not get better quickly.

The Future of Work – Impacts and Implications

Looking at the shorter-term impacts, then, it’s possible to see a range of approaches to this turbulence in the world of work. Government have options, largely about whether to intervene in labour markets to influence work outcomes, or not. But employers are also moving to new strategies not out of goodwill but through self-interest.

These options, highly simplified, are shown in the matrix (Figure 2), which contrasts laisser-faire approaches with interventionist approaches.

Figure 2


Source: Andrew Curry/The Futures Company

The race to the bottom: This laisser-faire option operates on the principle that labour market flexibility is the secret to increased employment in a globalised labour market. In practice, nearly all countries have increased flexibility and permitted more casualised work over the past decade – even somewhere with a strong tradition of labour protection such as Germany. The evidence increasingly suggests, however, that the pursuit of low value jobs leads to a vicious cycle of low productivity, low investment, low growth, and low tax and social contribution from business.

This policy approach also involves government subsidy to employers, as low-paid workers are supported by state payments. In the United States, a study showed that the fast food sector was effectively subsidised to the tune of $6 billion because its low paid workers were dependent on food stamps and subsidised housing. Increasingly this looks like a political choice that is no longer supported by economic evidence.

Enlightened self interest: It appears that employers who pay better and create better working environments do better financially. Walmart is a relevant case. Over the last decade, its share price has been broadly stagnant, while Costco has outperformed it “by a considerable margin”, in terms of sales, earnings or stock market returns. One reason: according to HBR, far lower staff turnover means knowledge is kept in the company – and drives customer engagement. Such employers also invest in technology to enhance the performance of their staff, using each to complement the other. The Spanish retailer Mercadona similarly invests heavily both in training and stock management systems.

Wages and labour performance are also becoming part of businesses’ reputational capital. See, for example, the increasing success of the UK Living Wage campaign in signing up large companies as “living wage employers”. The public sector can encourage this, for example by giving tax breaks or other forms of support to companies who deliver such commitments, and sharing evidence of business benefits.

Keeping the market honest: Turning to more interventionist approaches, the state can take the view that it wants to drive unscrupulous low-wage employers out of the market as a way of driving up standards and investment (because low-wage, employers are unlikely to commit to training, and have little incentive to invest in capital equipment, which reduces productivity.) This leads to approaches such as enforcing (and increasing) minimum wages, both through regulation and legal frameworks, and also through public procurement rules.

Such a policy complements the “enlightened self-interest” approach by removing free-riders from the market. Although conventional wisdom has argued in the past that minimum wage legislation costs jobs, this seems to be a weaker effect than claimed.

Re-imagining work: Much of our intervention in the labour market is driven by a view that it creates social goods, both from an economic perspective and also from a social perspective (over a long period studies have shown that worklessness produces adverse psychological and physical effects). But it is possible that such findings are linked to a set of “modernist” social values that are rapidly giving way to “post-materialist” values. Certainly, people with some income and a degree of social capital who do not have to work find worthwhile things to do, including volunteering. This is part of the argument for the Basic Income: that as we move to the “post-industrial” world envisioned by Daniel Bell, in which skills are more embodied in personal knowledge, that encouraging traditional work is no longer the only, or the best, way to get the social benefits from productive engagement.

The rise of the basic income: Until very recently, the idea of a basic income, a minimum sum paid to all people regardless of their work status, was right of the fringe of political discourse. But it has been moving rapidly towards the mainstream. The idea has deep roots:  George Bernard Shaw promoted it as “a vagabond’s wage” a century ago.

The analysis in this provocation helps to explain why. It is a policy idea that helps to improve outcomes whether the technologists or the sceptics turn out to be right. And in the meantime it helps to shore up economies, and individuals, that are struggling in the slow readjustment of labour markets.

If the “robots” hypothesis is right, we’ll need a basic income to make the economy work (markets need people who can afford to buy products). If the market power argument is right, then basic income keeps employers honest, by ensuring they have to pay good enough wages, in good enough conditions, to attract and keep their workers. One interesting side effect is that it would mean that our fundamental notions of the value of paid work could be about to shift, for the first time since the Industrial Revolution. A recurring feature of the ICT era has been that questions of power and politics have frequently been diagnosed as issues of technology. The future of work is just the same.

The Future of the Company – Impacts and Implications

Tailored solutions will be needed to respond to the unique characteristics of each region. For example, the continental European, Chinese, Japanese and Anglo-American economics and business models are each very different. Germany is characterized by a small number (less than 700) publicly listed companies with worker representation on company boards, whereas mandatory board-level employee representation would be a controversial proposition in the UK or the US. The EU will be forced to confront and reconcile these types of discrepancies in the corporate governance models of its Member States as it asserts an increasingly active role in company law, which has traditionally been under the purview of national governments.

Outside of the EU, we need to bring Asia, the Middle East and Africa into the discussion of sustainability, workers’ rights and human rights more generally. This will require thoughtful balancing of the local context with international standards. In the context of human rights, the UN Guiding Principles on Business and Human Rights outline the responsibilities of States to enforce the principles of international human rights law and of companies to respect those principles. But more work is needed to translate the framework into context- and industry-specific guidelines. It is in the implementation of general principles and the reconciliation of potentially contradictory rights that compromises will be most needed.

If this process is successful, we may see a gradual reduction in inequality leading to less social unrest and less partisan politics. We may also see an increasingly prominent role for business in developing both soft and hard law in a transparent way, acting individually and in concert through more progressive collaborative initiatives than the current trade and industry associations that dominate policy circles in Brussels, Washington and London.

We need a new vision for the role of business in society. Part of the reason why the focus on maximizing shareholder value and short-term profits has captured business for so long is due to the failure to create consensus around an alternative conception of the purpose of the corporation. A model of corporate governance narrowly focused on maximizing shareholder value in the short-term is unbalanced and self-destructive. The paradigm that will rise to replace the current one will need to have a more holistic understanding of profit as one indicator of the long-term health of the organization, amongst others. The profit-making motive will sit comfortably alongside a consideration of a broader responsibility to the interests of society.

This new paradigm must be translated into the existing framework of incentives and regulations for corporate governance and accountability. It needs to be reflected in market mechanisms, in particular in the way that financial markets interact and influence companies. The role of shareholders in corporate governance will have to be rethought in order to protect their role in ensuring management accountability, whilst freeing companies from the imperative to maximise the stock price as at all costs.

In order to achieve transparency and accountability, companies will need to provide an accurate accounting of their environmental and social impacts, through required disclosure and through increased pressure for meaningful information from consumers. Boards of directors will also need to revise their decision-making process to consider the effect of the company on the environment and society. Companies should be expected, encouraged and even required to develop long-term plans charting their way towards environmental and economic sustainability. It will be necessary to devise holistic measures for measuring corporate success in the long-term, reflecting their ability to create value in a responsible manner. These metrics should be reflected in incentives for corporate executives as well as for institutional investors. We need to consider whether the current level of public investment in research and development is sufficient and properly allocated to achieve transformative change. Public-private partnerships, while not without flaws, are one path to support and stimulate green growth.

At some point, we will be forced to acknowledge that the current approach to governing companies is broken. Perhaps after the next financial crisis, but hopefully sooner. Certainly as we are forced to respond to climate change, which cannot be addressed by governments alone without the support and investment of business.

The Future of Water – The Global Challenge

Climate change, population growth and increased urbanization pose great challenges to the provision of water for human use. Since 1950 cities have increased their water usage fivefold, not only through population growth, but considerably through increased per capita demand.  Currently half of the world’s cities with more than 100,000 in habitants are situated in areas experiencing water scarcity[1].  To date neither governments nor businesses have done enough to prepare for this. Collectively we did not recognize the macro trends soon enough and so opportunities to counter water scarcity have been lost, infrastructure investments have been inadequate, and climate change adaption measures too local and often only reactive.

At the same time as access to water decreases, world energy consumption is projected to grow by 56% between 2010 and 2040. This matters because approximately 90% of global power generation is water intensive so a country’s energy mix has fundamental implications for its water industry. Water security has therefore become one of the most tangible and fastest growing social and economic challenges faced today.

So, how can we meet the water needs of the future? Will it be possible to provide equitable access to water and sanitation services when by 2030 the world will face a 40% global shortfall between forecast demand and available supply?[2] Can we make the water cycle respond to the challenges of climate change and energy need?  How can we do more with less water?

[1] Brian D. Richter, David Abell, Emily Bacha, Kate Brauman, Stavros Calos, Alex Cohn, Carlos Disla, Sarah Friedlander O’Brien, David Hodges, Scott Kaiser, Maria Loughran, Christina Mestre, Melissa Reardon, Emma Siegfried. Tapped out: how can cities secure their water future? Water Policy. 2013;(15):335–63
[2] World Economic Forum 2014

The Future of Water – Options and Possibilities

The UN has sagely noted that “water is the primary medium through which climate change impacts will be felt by humans, society and the environment” and accordingly climate change will necessitate improvements in water resilience systems in cities across the globe. Increasingly they will have to focus on local water sourcing, reuse and recycling in order to sustain their ever-expanding population. There are multiple ways in which efficiency can be improved not least through significant investments in green infrastructure, the adaption of smart technology and widespread public education which will help to manage water demand through a broader understanding about its natural process. Water is a key contributor to life. We need to be constantly reminding ourselves of this and take action.

Many countries are currently working to maintain and improve the quality of their sources.  About 96% of the earth’s total water supply is found in oceans and there is broad agreement that extensive use of desalination will be required to meet the needs of growing world population.  Worldwide desalination plants are producing over 323 million cubic metres of fresh water per day, however energy costs are currently the principal barrier to its greater use. The State of Singapore has innovative water technology, aiming, despite its size and population density, to become fully self-sufficient by 2061.  Plans include tripling its desalinated water supply by 2030, the large-scale collection of rainwater, and the collection of recycled water which, as well as the standard procedures, uses micro filtration processes, reverse osmosis and UV treatment to deliver potable water to its citizens. In short they are converting their city into a catchment and focusing on source diversity.

Elsewhere efficiencies will be improved by the use of intelligent robots, which will play a greater role in the inspection of infrastructure.  New materials, such as graphene, that are lighter, stronger, smarter and greener will also become more popular replacing traditional materials such as stainless steel pipes.

Growing concern for the environment and for public health means that water companies will be held to greater account for their environmental impact and water quality. A stronger emphasis on green infrastructure will support a trend for companies to transform from providing base utilities to creating a system of amenities that support the water cycle. An example of this can be found at the Illinois Institute of Technology. Rain gardens have been reutilized as communal meeting spaces, through-ways turned in to permeable walkways and three acres of new native plant communities with underground cisterns collect rainwater for future non potable reuse. Once all the changes are implemented the IIT predicts a 70 – 80% reduction of run-off into Chicago’s sewer system while making the collected non-potable water available for irrigation. Expect this repurposing of public spaces for multi-functionality for both amenity and wider sustainability purposes to be widely adopted.

Alongside making improvements to the infrastructure, there is a pressing need to do more with less water. Smart technology and big data will help. Changing public behavior is a huge challenge however.  Although there is widespread understanding that rising consumption of raw materials is both intensifying resource scarcity and increasing competition, most people, certainly in the developed world, live materialistic lifestyles resulting in high levels of waste.  In Australia for example, on average around 20 million tonnes of waste per year is thrown away at a value of AUD10.5 bn. Digital lifestyles can increasingly link consumer behavior to consumption and growing connectivity, utilizing the Internet of Things, will mean that it will be possible to monitor the consumption and cost of water in real time allowing consumers to understand their impacts and take action.

Data analytics can help build understanding on how to use the water cycle to respond to the challenges of climate change. It can also lead to increased scrutiny of water utilities and a better understanding of cost. Companies will therefore be able to integrate the true cost of water into their decision-making. In addition the availability of data provides an opportunity to educate customers about consumption. Publicity campaigns and a growing sense of urgency will nudge consumers to reduce consumption and should be used in partnership with economic levers that recognize the true value of water.

Growing populations and changes in diet mean that we need to produce more food. Water is a fundamental part of this process. In Australia, for example, the agricultural sector accounts for around 65% of total water consumption.  This could be greatly reduced if we could change consumer behaviour. It is estimated that Australians throw away AUD5.3bn of food waste every year. This is simultaneously wastewater. There is a real need to change this approach and developments in this sector will continue to have tangible knock on effects for the water supply industry and the natural environment from which this water is sourced.

Science will also have a key role in reducing the amount of water we use. Nano and biotechnology is a potential game-changer for the water industry, and can enable breakthrough products and technologies to tackle pressing global challenges such as reducing environmental footprints, using less and cleaner energy and decreasing water usage and waste generation. For example microorganisms are now being used to treat water that has been contaminated by hazardous materials. The global market for nanostructured product used in water treatment was worth an estimated USD1.4bn in 2010 and is expected to rise to USD2.1bn in 2015.[1]  Initial success in this area has also raised the possibility of the utility as a self-healing ecosystem.

Greater efficiency is the driving force for manufacturing companies where energy and water can be as much as 50% of the total manufacturing cost.  In the future expect more green manufacturing and increased co-operation when companies forge alliances across traditional boundaries, for example to share common costs. In the water industry this will manifest itself in knowledge sharing and contributions to joint research and development across catchment boundaries.  Through using resources more efficiently countries could also become more active trading partners; this would allow for more equal water redistribution amongst users. This could include a water balance concept similar to carbon emissions reduction strategies where water saved in one country offsets additional water use in another.

Looking ahead, users are likely to have to pay for the real cost of infrastructure. One short-term option is the financial recycling of assets and capital where old assets are sold or leased to fund the new. However, in the longer-term we will have to pay the true value for key resources. This shift could also lead to the greater application of the circular economy, which will help stretch resources through end of life recycling and reuse. More awareness will lead to increased scrutiny of water utilities and pricing of services as the widespread availability of data provides the opportunity to educate customers about consumption and managing resource use.  Looking through an international lens, water trading would allow for the efficient redistribution of water amongst users, so countries could become active trading partners. As the amount of water used in agriculture in arid regions is two to three times higher than in rain fed regions water trade could help save water on a global scale.

Once efficiencies and improvements are made, consideration should be given to the most cost effective way to provide access to basic services.  The fixed nature of water supply infrastructure and its history as an essential government supplied service gives rise to natural monopolies within supply areas. Governments need to ensure the pricing policy is appropriate to balance the essential need for water, the impacts on consumers (particularly those on lower incomes) and the requirements of the suppliers to remain financially viable.  To do this there should be better integration between urban water planning and urban development planning with considerations on limitation to green-field development.

Recognizing innovation opportunities for the future more and more companies are tapping into the public’s intellectual capital by crowdsourcing product ideas and solutions.  In exchange they are giving creative consumers a direct say in what gets developed, designed or manufactured. Crowd-funding added at around 270,000 jobs and injected more than US$65bn into the global economy by the end of 2014 with an expected industry growth of 92%.

[1] . Nanotechnology Now. Nanotechnology in Water Treatment. 2012; Available from:

The Future of Water – Proposed Way Forward

Over the next ten years our waterways and other water sources will continue to suffer from over-extraction. This will continue to compromise the quality of the environment and the organisms it supports. In particular mining and other activities will continue to move into our water supply catchments affecting water quality and altering inflows. This will mean that we may be obliged to move water long distances in times of drought to services existing cities. In turn this could lead to increased GHG emissions at the very time when we are trying to reduce these.

We need to change this trajectory.   In doing so it is important that we reconnect ourselves with water in its pure elemental form. We should all be able to enjoy access to clean water, not just for drinking, but also for recreation and connection to nature. Putting water at the centre of the urban design process and re designing our cities and towns to respond positively to water is fundamental to ensuring a better understanding of the water cycle.  We need to develop better Green infrastructures – the networks of green and blue spaces such as parks, agriculture, woods, rivers and ponds in and around cities systems – that replicate nature and enable communities to connect with water.  The benefits include the reduction of flood risk, improved health and well being as well as providing a habitat for wildlife. Extensive green networks can be formed over time to create encompassing city ecosystems that can support the sustainable movement of people, rebuild biodiversity and provide substantial climate change adaption and resilience.

The focus should extend to solutions that do more with less: irrigation efficiency, automated farming techniques and demand management in our cities.  Smart infrastructure will help responding intelligently to changes in its environment to improve performance. Smart water networks could save the industry USD12.5bn a year.  In Israel, data analytic company TaKaDu takes information supplied by sensors and meters dotted around a water company’s supply network to build a sophisticated picture of how the network is performing.  It can spot anomalies in its behaviour from a small leak to a burst water main.

We should also start to re-think our traditional approach to drainage.  Working with natural site conditions for example, water, wastewater and storm water could be combined into one cycle. The AJ Lewis Centre for Environmental Studies ecologically treats and recycles wastewater within its buildings, integrating processes of wetland ecosystems with conventional procedures and in so doing recycling wastewater into reusable grey water.  While conventionally supplied water is used for drinking and hand washing, the recycled non-potable water is used in the Centre’s toilets and for landscape irrigation and recharging the wetland pond. Others should and are following suit.

A multitude of new tools are available to help us.  Alongside smart technology there are new biodegradable materials made from natural fibres that can provide greater resilience at less energy and lower cost. Beyond this, innovations will transform wastewater into a resource for energy generation and humidity into a source of drinking water.  We can see the beginnings of this already; consider, for example, the Israeli company, Water Gen, which has developed a device for extracting drinking water from air. Other advances including fog catchers, thick mesh nets that collect the water contained in fog, will soon be more widely adopted.[1]

We need increased investment in basic water and sanitation services both in new and the renewal of existing services.  Water treatment can come at a high price. The OECD has estimated that around USD50 trillion would be needed worldwide in the period to 2030 to satisfy the global demand for infrastructure[2]. However, accessing funding is an ever-present challenge.  In the US alone, if current trends continue, the investment needed by 2040 will amount to USD195bn and the funding gap will be USD144bn[3].  While most infrastructure investments are local, the sources of finance are increasingly global.

Beyond everything we must improve public understanding about the value of water and the services it provides. Globally public opinion still varies on the issue of climate change.  Better engagement with customers including education and information will have a large effect on calls to action around water. Education is fundamental to help the public to accept the need to reduce overall water use and to increase the use of wastewater for potable purposes. In particular city dwellers must learn to conserve more or utilize different sources of water such as storm water to provide for their needs, allowing potable water to be freed up to feed a growing population. Small adaptions by multiple individuals will make a difference.

[1] National Geographic. Fog Catchers Bring Water to Parched Villages. 2009; Available from:
[2] OECD. Infrastructure to 2030: Telecom, Land Transport, Water and Electricity. 2006; Available from:
[3] American Society of Civil Engineers. Failure to act: the economic impact of current investment trends in water and wastewater treatment infrastructure. 2011; Available from:

The Future of Water – Impacts and Implications

In the future it is clear urban water utility companies must prepare to operate in a world which is expected to be utterly different from the one that we are experiencing today. It is necessary to acknowledge and prepare for this.

We know that there is a growing urban population; we know that the impact climate change is now taking effect and that the volatility in water supply can only be partially mitigated by improved efficiency.  We have yet to collectively decide how to address the problem.

Water is inter-twined with everything we do; energy, food, health and wellbeing, manufacturing are all dependent on its availability. At the very least we need to start a public conversation about its real role in our lives. We need to understand how people currently value water and then work with them so they understand its true value and all the services it provides.

Providing access to water is one of the greatest challenges we face and one of the defining moral and cultural issues facing the planet. To address it governments must develop national water strategies, businesses must consider the impact of water in their products, and individuals must change their behavior.  There should be investment in large scale recycling schemes, green infrastructure should have priority when planning new developments and renovating old: All this at a time of population growth and climate change. No one says it will be easy, but it is most certainly possible.

The Future of Privacy – The Global Challenge

The right to privacy finds its expression in all the major international human right instruments. They were all, without exception, drafted and agreed in different times to those we find ourselves in today. Even as we contemplate the years ahead, there is almost universal acknowledgement of the continuing value and relevance of these instruments and the rights enshrined. Yet, the subject of privacy has never been more in flux, facing a seemingly endless barrage of pressures. Privacy is becoming one of the most vexing public issues of our time, and will remain so in 2020.

Contemporary concerns and debates about privacy are essentially debates about technology and the role and impact of technology on our lives and societies. Practically every mega-trend in the world of technology is creating tensions for privacy, personal freedom and autonomy – ubiquitous connectivity, big data, the cloud, wearable tech, artificial intelligence, the internet of everything, connected health, drones – the list goes on.

It’s no longer just a case of leaving digital footprints from our movements around a digital landscape. As the size of computing continues to shrink to nanotech levels, and the cost continues to fall, technology will become embedded in both the physical world and our physical bodies. We will be living in a world where we are ‘surrounded by computational intelligence’[1].

Technology is becoming invisible. And its unobtrusiveness will aid its pervasiveness – there are already estimated to be 16 billion connected objects today and this is predicted to reach 40 billion by 2020[2]. And this pervasive connected technology will create ever more data. IDC estimates that by 2020 people and connected objects will generate 40 trillion gigabytes of data that will have an impact on daily life in one way or another[3]. This data will make known about us things that were previously unknown or unknowable (including to ourselves). And in doing that, it will enable actions and decisions to be taken about us that will have profound consequences far beyond the display of adverts on our variously sized screens, or personalised pricing based on profiles of our income and propensity to pay[4].

Evgeny Morozov, the author[5] and researcher, gave an example of this recently in his talk at the Observer Ideas festival 2014 in London[6]. In the Philippines, sensors have been placed in public toilets which emit an alarm if someone uses one of the stalls and then tries to leave without using the soap dispenser. You can only turn off the alarm by using the soap dispenser. The sensor thereby has a deliberately regulating effect on the behaviour of users, in this case encouraging hand washing. This is just a logical extension of the seat belt alarms fitted to most new cars built today or the use of speed cameras, the purpose in both cases being to use technology to regulate our behaviour and thereby reduce injury and the cost to health services of car accidents.

Let’s stick with cars for a moment. The installation of a wide range of new sensors in vehicles is already transforming other aspects of motoring, such as insurance. Usage based insurance schemes utilise sensors that collect data on location, speed, braking and acceleration to determine the risk profile of the driver, and consequently their insurance premium. The other touted benefit is that such technology acts to discourage  risky driving behaviours. In return, we subject ourselves to a degree of surveillance. It is not long before we can see the same technology being used for other ostensibly worthy purposes, e.g. perhaps identifying if you are too tired to drive and automatically disabling the engine.

Of course, it might be argued that none of this compels us to allow sensors into our cars, homes and other parts of our lives, and the collection of data about us – we are not compelled to use usage based insurance or drive “intelligent” cars, and so we have a choice. But if refusing to allow the collection of data by sensors begins to become a costly decision (e.g. increased car, home or health insurance[7] premiums), it’s a choice that is easier to make for those who can afford it. And, of course, once sensors and data-generating technologies become embedded in products as standard, there will come a point when there are few realistic alternatives.

This rise of technology that not only observes, but intervenes (I’ll term it “bossy tech”), is a consequence of placing sensing technology in more and more places where these ‘interventions’ can be automated, based upon the exponential increase in data sources that can be analysed in real time with intelligent computing. And as bossy tech gets a lot smarter it will no doubt get bossier, as public authorities acquiesce in the notion that technology can regulate our behaviour far more efficiently than traditional enforcement methods – why waste money on policing public spaces if cameras and audio sensors can detect potentially unsociable behaviours, use facial and voice recognition to identify the individuals involved, and then order them to stop or else face the consequences?

The value of digital identity, i.e. the sum of all digitally available information about an individual, has been estimated to be worth €1 trillion to the European economy by 2020[8]. The internet of things is predicted to generate a value-add of $1.9 trillion globally by 2020[9]. Much of that value is not likely to be from the ‘things’, but from data derived about those things that promise to transform every sector, bringing efficiencies and cost savings, but also entirely new service possibilities[10]. Whatever the figures, there is undoubtedly a huge economic incentive to generate and collect data from whatever sources it becomes available. As more data from more things becomes available, we can expect to see a data “land grab” by organisations.

The control of data provides organisations with valuable insights and enables influence over purchasing decisions and other behaviours. Increasingly, therefore, data is power, economic or otherwise. But there is already undoubtedly an asymmetry in power between organisations and individuals today, as organisations have an abundance of information about consumers and analytics tools to interrogate it, while consumers suffer information scarcity and possess few tools to make any sense of their own data[11]. And this appears to be getting worse, according to Sir Tim Berners-Lee[12]. In the 2014 – 15 Web Index, an annual report measuring the Web’s contribution to social, economic and political progress published by the World Wide Web Foundation, it is revealed that the web is becoming less free and more unequal.

In the absence of any countervailing forces, the current technology mega-trends look set to create further asymmetries in power resulting in less privacy for individuals in 2020.

[1] Brian David Johnson, Intel, Wired UK retail talk, available at: (accessed 10/12/2014)
[2] ABI Research, “The Internet of Things Will Drive Wireless Connected Devices to 40.9 Billion in 2020”, available at: (accessed 10/12/2014)
[3] ICD white paper, “The Digital Universe of Opportunities: Rich Data and the Increasing Value of the Internet of Things”, April 2014, available at: (accessed 10/12/2014)
[4] Blogger Alistair Croll declares that “Personalization” is another word for discrimination” in his post titled “Big data is our generations civil righjts issue”, available at: (accessed 23/11/2014)
[5] Evgeny Morozov homepage, available at: (accessed 01/12/2014)
[6] Observer Ideas - A Festival for the Mind, 12 October 2014. For an introduction: (accessed 17/12/2014)
[7] Barclay Ballad, “Now you can get financial reward for your personal fitness data”, 9 December 2014, available at:  (accessed 17/12/2014)
[8] Liberty Global, “The Value of Our Digital Identity”, available at: (accessed 10/12/2014)
[9] Gartner, Inc. newsroom, “Gartner Says the Internet of Things Installed Base Will Grow to 26 Billion Units By 2020”, available at: (accessed 09/12/2014)
[10] Harbour Research, “Where Will Value Be Created In The Internet Of Things & People?”, available at: (09/12/2014)
[11] Mark Little, Ovum, “Personal Data and the Big Trust Opportunity”, available at: (accessed 10/11/2014)
[12] World Wide Web Foundation, “Recognise the Internet as a human right, says Sir Tim Berners-Lee as he launches annual Web Index”, available at: (accessed 17/12/2014)