The move from offline to online was well underway before we had ever heard of Covid-19, but now the pace has ramped up significantly. In the current edition of our Investment Guide, we take a close look at digital payments, digital health and cyber security. The Covid-19 lockdown experience has impacted our lives in a myriad of ways. Global lockdowns have required many of us to stay at home or at the very least, physically distance ourselves from others. Unless you are a ‘key-worker’, the chances are you have had to get used to working (and for parents of young children, schooling) from home. Social media has permitted social distancing.
Many have been forced to buy groceries, clothes and educational material online. Medical appointments have been conducted via online platforms. Grandparents have ‘met’ their new grandchildren via messaging systems, whilst others have had to say a remote last goodbye. Life will change for us all as we emerge from the coronavirus shadow but one thing is certain: we will all have more technology. And if the lockdowns have taught us anything, it is that when it comes to the digital world, the possibilities are endless. Here we highlight three particular topics in the area of digital disruption, which we believe stand out because of the opportunities that they offer investors
Over the last 10 years, payment network providers have delivered a remarkably steady revenue compound annual growth rate of around 10%. Going forward, we expect this positive trend to continue as digital payment solutions continue to take market share away from cash, partly due to their convenience and because of the structural shift towards electronic payments as life and work are increasingly going online. The corona crisis is only accelerating this trend, and shows clearly how important a proper online presence has become in order not to be too dependent on foot traffic. It has also highlighted the potential health risks associated with physical cash in a pandemic scenario. We believe that the crisis will further foster the transition to e-commerce.
The coronavirus outbreak has exposed the woeful shortcomings of some healthcare systems in developed and developing countries alike. Both governments and healthcare institutions will now be compelled to strengthen and improve the efficiency of their healthcare systems by adopting greater digital health technologies. And it doesn’t stop there. Individuals are also more readily taking on a role in assessing and monitoring their own health, purchasing more and more smart technology in terms of apps and devices. The latter have progressed from counting the wearer’s steps to watching their diets, and keeping track of their vital statistics. Many citizens are also now using track and trace apps in an attempt to keep Covid-19 at bay. Online medical consultations became popular among Chinese consumers during the coronavirus crisis and telemedicine has seen a global surge during the lockdown. In our view the outbreak should further foster a long-term transformation of the healthcare industry, rendering it stronger and more efficient.
As customer data becomes more valuable to hackers, and as governments enact regulations that penalise firms for customer data breaches and loss, nearly all firms that have an internet presence and collect information from their customers face increased risks. Cyber breaches cost the global economy around USD 1.5 trillion per year, and this is expected to increase, with some sources projecting it could cost the global economy a staggering USD 6 trillion by 2021. Companies simply cannot afford to treat cyber security as an afterthought in light of the way that the threat landscape is developing. With the rise of e-commerce, digitally-enacted financial theft is growing as well. Covid-19 has seen huge swathes of the global workforce working from home meaning more digital connections allowing for more potential attack vectors presenting a clear challenge to the cyber security infrastructure of corporations. Reshoring is certainly a trend in technology and security too as evidenced by the Huawei situation playing out between the US and China.