The accelerating adoption of digital technologies in emerging economies will open growth opportunities for investors.
“With the emergence of COVID-19, we saw an unprecedented step up in the pace of new adoption and integration, as the need to communicate and conduct business digitally became an imperative rather than simply a choice. As the year unfolded, we began to see digital growth at levels we had originally forecast only several years out. This included a decisive, swift transition to fintech (i.e., online payments and digital banking), e-commerce, food delivery, telemedicine, video gaming, etc.,” VanEck strategists Angus Shillington, David Semple, and Oksana Miller said in their latest research note, Harnessing Growth: The Disruption of Fintech Across Emerging Markets.
The Vaneck strategists pointed to the global coronavirus pandemic that has accelerated the shift toward online penetration globally.
“Consequently, we would expect an approximately $2 trillion transfer in value, affecting many industries around the world, with fintech leading the way,” the strategists said.
They highlighted fintech as the middle man or facilitator in the mass trend of disruption that is currently occurring with increased digitization. They argued that once consumers can transact without friction online, then basic analog, communications, and relationships will shift online as well.
“Our thinking around COVID-19 being a catalyst is: whatever was going to happen in the future will be brought forward—fast. For example, such industries as bricks and mortar global apparel, retail real estate, bricks and mortar global grocery, etc. – all of them will be brought online, with the strongest use cases, similar to DM, being price and convenience. All of this will result in permanent behavioral change that will result in material new investment opportunities and, at the same time, improve outcomes for consumers,” the strategists added.
Nevertheless, fintech in the emerging markets remain in its nascent stages. Affordability has been the major bottleneck to mass adoption, especially when compared to digital transactions in developed countries.
“We believe that fact alone creates one of the most exciting investment opportunities going forward as bottlenecks are resolved in each country by local entrepreneurs,” according to VanEck.
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