You do wonder. Regulators all over the world are in a flap about AI and cryptocurrencies, and their potential dangers in the wrong hands. Meanwhile, every summer millions go on holiday and are literally robbed. Welcome to the “Wild West” of foreign exchange. Who hasn’t puked at the ridiculous margins/commissions charged by airport exchange bureaux, retail banks and various financial intermediaries for a basic financial transaction? One doesn’t need to be a financial guru to know that nowadays, in our ‘flash boy’ world of high-speed trading technology, the professional traders trade financial instruments like bonds, equities, commodities and currencies at ultra-low costs where commissions are struck at tiny portions of a single percent. The professional traders’ jargon monoxide might use the term ‘basis points’ for these tiny percentages but main street consumers will usually use expletives to describe commissions (plus margins or spreads) that can amount to a cost well over 10%…. or a thousand of those basis points. So, that’s the moaning over. Let’s look at the recent tech and money developments which might inspire…
Turning first to one of the better solutions to foreign exchange (FX) pain, Revolut, it was interesting to see the company just receive regulatory approval in the UK after a three year wait. The Revolut FX service is, on average, about 25x cheaper than the majority of consumer options. A new UK licence was also nicely timed for a share sale which put a $45 billion valuation on Revolut. That looks like a 50% uplift in valuation for the British fintech and illustrates a renewed investor enthusiasm for innovative payments platforms. Check out Ireland’s Stripe where a secondary share sale from early investors(and staff) to VC giant Sequoia was done at a $70 billion valuation. That’s an encouraging 40% jump from its March 2023 valuation low. However, it’s not just Irish international financial giants attracting foreign investment capital.
The recent Renatus Private Equity M&A H1 report on the Irish market showed activity picking up with 207 deals completed in the first half of 2024. That compares against a 30% fall in M&A deals globally (Source: PwC). For this writer, it was significant to see, in a high interest rate environment, that financial services was the second most active sector in the country after software. Indeed 21 of those 31 deals in financial services were in accountancy and insurance. Many of the acquirers were larger overseas groups looking to consolidate intermediaries rather than the wholesale providers of financial products. Maybe, there’s a bit more going on than just cost and brand consolidation? What about a seismic cost shift?
If you thought cryptocurrencies and blockchain were dead you’d be dead wrong. Bitcoin is flying high and supporting a digital currency ecosystem worth $1.3 trillion. Small stuff really, but think of my FX moan earlier and know that digital currencies and blockchain are ABSOLUTELY the route to cutting out the commission cowboys and intermediary ‘tolls’ which bedevil global financial services, and particularly the average consumer. Consider the following headlines:
Kamala Harris’ digital dollar vision: A new era of financial inclusion? – American Banker
“Bitcoin is a legitimate financial instrument,” Says Blackrock CEO Larry Fink – Yahoo Finance
Goldman Sachs to launch 3 tokenization projects by end of year – Fortune
You didn’t think I wouldn’t mention Kamala this week, did you! So, in the interest of political balance it should be noted that it’s not just the prosecutor getting involved in digital currencies. The felon too is due to headline the 2024 Bitcoin Conference. The former fella used to call cryptocurrencies a ‘scam’ but, not unlike his disastrous recent VP pick, he’s capable of the most marvellous position reversals (and debate commitments). It’s difficult to call or even visualise the US political future but there’s a fascinating visual story developing on the AI front.
We have written previously about a subtle technology shift in the investment world away from software and towards hardware. We all know the Nvidia chip story by now, but who knows EssilorLuxottica? Not quite the tech everyday name. And, that’s because EssilorLuxottica is not a typical technology play. It is, in fact, a luxury sunglasses designer and manufacturer – yep Oakley, Ray-Ban, D&G, LensCrafter and Vogue are all their brands. Moreover, Facebook/Meta who dived into the metaverse prematurely are now looking to buy a stake in the luxury glasses player. Of course, the potential of a worn screen/glass interface could be the next iteration of the 8 billion mobile phones on the planet. Early days yet, but AI continues to move at rapid pace. Of course, Meta’s move for hardware could be viewed as a strategically defensive move as the consumer information landscape shifts rapidly. Google had pretty robust quarterly results this week but latest breaking news could be interesting…
The AI pioneers at OpenAI have announced the launch of their own AI-powered search engine, SearchGPT. The product is only available in beta version for 10,000 users but I’m sure Google’s executives will be watching the feedback rather closely. So, despite the summer holidays it’s fair to say there is plenty going on. And hopefully, one day, holiday makers will have an AI assistant embedded in their ‘sunnies’ to spot an airport FX robbery in real time!
