Digital Currencies: Defining Disruption & Demographic Shifts

Digital Currencies: Defining Disruption & Demographic Shifts Nick Colas, Co-founder Jessica Rabe, Co-founder

www.datatrekresearch.com

How Does Innovative Disruption Work?

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“Disruption” has a specific pathway to be successful: – It starts at the low end of a market, addressing an underserved population with a “good enough” product or service enabled by a new technology or business process.

– Incumbent companies don’t fight the upstart; they cede that market because profits/return on investment rise when they do.

– The new entrant moves upmarket over time, using the same competitive advantage it used to break into the market in the first place – Over time the incumbents belatedly adopt the upstart’s business model or go out of business. The process then repeats…

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The other disruptive pathway: create an entirely new market

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Examples: Japanese cars in the 1970s/Korean cars in the 1990s. Amazon started with books. Entirely new market: iPhone and Tesla www.datatrekresearch.com

Crypto Currencies/Digital Cash And The Disruption Paradigm • Bitcoin: the original disruptor – Started in 2009, during the depths of the Financial Crisis – Appealed initially to “hard money” fans, with a limited supply – Breakout use cases were in underserved markets: illicit dark web transactions and money laundering. Cheap, fast, secure, relatively anonymous.

• Online payments: part of several global disruptive trends – Enabled by global wireless broadband, smartphone adoption – Transactions are “data”, analyzed by surveillance systems – Existing systems are still expensive: 2% in-country, +10% cross border • Markets see the possibilities: bitcoin’s market cap is $180 bn, more than PayPal, American Express, Western Union or Goldman Sachs www.datatrekresearch.com

But… Money Is Complicated…

• There are 130 currencies circulating in the world.

• Economic “sovereignty” means controlling money/banking, monetary policy, and financial transaction regulations.

• Central banks are interested in issuing their own digital currencies, called “stablecoins” because: – They see the future of money as more digital than physical – There are still many people without access to banking services – Money laundering/tax evasion remain persistent problems – Projects like Facebook’s pan-national Libra currency are a threat • Bottom line: a recent BIS survey reported that in 3 years 20% of the world’s population will live in a country with a central bank digital currency. www.datatrekresearch.com

Millennials Will Decide the Future of Money in the US • Millennials (born 1981 to 1996) were projected to surpass Baby Boomers (born 1946 to 1964) as the largest generation in 2019 by Pew Research (73 million vs 72 million respectively).

• In 2016, millennials became the biggest generation in the US labor force at 35% (56 million).

• View money differently than their Boomer parents given their experiences with record student debt and the 2008 Financial Crisis.

• Gained a high digital literacy from an early age and live daily life online through their smartphones.

• Adopt new technologies that are free/low-cost, convenient and techenabled. Examples: embrace offerings, such as Venmo (free mobile payment service) and Robinhood (free stock trading app), that directly address their needs. www.datatrekresearch.com

My Payment Diary as a Millennial • • • • • • • • •

Use a debit/credit card for all daily transactions (gas, groceries, etc).

Automate monthly car, utility, internet and Peloton payments online.

Use Venmo to pay rent and split bills with friends.

Use PayPal for any online order (i.e. clothes or food, etc).

DataTrek newsletter customers pay with debit/credit cards and PayPal, and we’re in over a dozen countries because of that.

Use EZ Pass and Uber for business trips.

Own bitcoin personally through Coinbase.

Last wrote a check 9 months ago, to an electrician.

Only use cash when I tip at my hair and nail salons because they don’t accept anything else.

www.datatrekresearch.com

What Millennials Want In New Digital Payment Offerings • Free (i.e. Robinhood, trade stocks without fees) • Easy to use (i.e. PayPal, seamless online or payment sharing transactions) • Social aspect (i.e. Venmo, shares users’ payment activity with friends who can like or comment on it through a “Friends” feed) • Enables an experience-rich life (i.e. bitcoin, bypass exchange rates or invest) • Socially conscious/aware (i.e. Stash, renames ETFs with monikers, like “Clean and Green” for the iShares Global Clean Energy ETF) www.datatrekresearch.com