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CONTRIBUTORS

Sandy Kaul

Head of Innovation
Franklin Templeton

Robert Crossley

Head of Industry Advisory Services
Franklin Templeton

Alegria Apikelis

Senior Analyst
Franklin Templeton

Janice Deringer

Senior Analyst
Franklin Templeton

Samuel Huddart

Senior Analyst
Franklin Templeton

Franklin Templeton’s Industry Advisory Services recently conducted its annual survey and started publishing its findings based on opinions gained from the survey under a new “Future of Investing” series. This is the second article in the Future of Investing series, drawing insights from our annual industry-wide survey.1 Please refer to the Future of Investing: 2024/25 Edition—Overview page for a summary of the key findings.

Preview

Money is commonly defined as a “generally accepted medium of exchange, a measure of value or a means of payment” and is also thought of as a form of “wealth.”2 Most people today think of money as government-backed fiat currency, but that narrow view has been challenged by developments in recent years.

The definition of money is evolving. Alternative mediums of exchange and payment are emerging. Collectively, the expanding set of new money and money-like offerings is broadening the view of “wealth” and providing new choices of how to hold it and manage it.

Improvements to the mechanics of money movement have been occurring for some time, and initiatives are spread across the world. Fast and instant payment networks are enabling real-time payments to occur within many nations. India’s Unified Payments Interface (UPI) network had completed US$5.2 trillion of transactions by the start of 2024 and had more than 400 million users and 505 banks and payment service providers. Brazil’s PIX offering completed more than 66 billon transactions and had 163 million users in only its first three years. Thailand’s PromptPay was launched in 2016 and had gained a 34% share of total payments volume in Thailand by 2022 and accounted for 42% of all e-commerce operations.3 The European Union has pushed its financial institutions to develop the Single Euro Payments Area (SEPA), which launched in 2017 and manages euro-denominated payments across 36 European countries.

The United States launched its real-time payment solution, FedNow, in 2023, much later than other countries and adoption has been slower compared to similar payment systems in Europe and other regions. One year after launch, there were 700 banks and credit unions of varying size on the network as well as 30 service providers—only a fraction of the 11,000 financial institutions in the country.4

These instant payment offerings are resetting merchant and consumer expectations in much of the world, but progress is mostly being made at the domestic level, within each individual country. Progress in cross-border payments, which sit at the heart of international trade and economic activity, is seen as lagging, challenged by high costs, low speed, limited access and insufficient transparency.

Download the complete PDF to continue reading about the future of money.

For more information or to request a presentation on the 2024/25 Future of Investing findings, please contact your Franklin Templeton representative or reach us directly at [email protected]

Endnotes

  1. On an annual basis, Franklin Templeton’s Industry Advisory Services team conducts off-the-record, unscripted interviews of leaders across the financial services industry. This year, we were fortunate enough to hear from 85 leading thinkers controlling over US$50.1 trillion of assets under management across the financial services industry about their views on the future of investing between March and September of 2024. Input came from a broad cross-section of the industry—asset owners, private banks, wealth managers, consultants, investment managers, crypto firms, academics, industry leaders and fintech firms. Conversations took place formally as part of free-ranging, qualitative, off-the-record, survey interviews, and informally during one-on-one sessions where the implications and plans for each organization are discussed and explored. Each of these inputs added to an emerging picture of an industry that is changing rapidly and across multiple dimensions. Interviews were conducted globally with about two-thirds of discussions held with leaders of firms based in the United States, and the other third spread between Europe and Asia.
  2. Source: Merriam-Webster Dictionary. Accessed September 23, 2024.
  3. Source: Santana, Tonet. “Why are Real-Time Payments Booming in Some Countries but Not in Others?” PCMI—Payments & Commerce Market Intelligence.” January 09, 2024.
  4. Source: Nawrocki, Tom. “Instant but Slow: The Remaining Hurdles for FedNow Adoption.” Payments Journal. May 03, 2024.
  5. Source: “Cross-border Payments.” Financial Stability Board. August 16, 2024
  6. Source: Shanghai, Shi Jing. “Crude oil deal in e-CNY marks breakthrough” China Daily. October 21, 2023.
  7. Source: Ross, Katherine. “Digital yuan used to settle crude oil trade for Chinese oil company: Report Blockworks. October 23, 2023.
  8. Source: “Project mBridge reaches minimum viable product stage and invites further international participation.” Bank of International Settlements. June 5, 2024.
  9. Source: Singh, Amitoj. “India and UAE to Collaborate on Developing Digital Currencies.” CoinDesk. March 15, 2023.
  10. Source: Pessarlay, Wahid. “Russia BRICS Bridge eyed for cross-border payments with China, Gulf countries.” CoinGeek. March 2024.

     

WHAT ARE THE RISKS?

Discussion above is theoretical in nature and based on opinions. Concepts discussed herein are based speculation of future developments and may not come to pass.

All investments involve risks, including possible loss of principal.

Companies in the technology sector have historically been volatile due to the rapid pace of product change and development within the sector. Artificial Intelligence is subject to various risks, including, potentially rapid product obsolescence, theft, loss, or destruction of cryptographic keys, the possibility that digital asset technologies may never be fully implemented, cybersecurity risk, conflicting intellectual property claims, and inconsistent and changing regulations.

Blockchain and cryptocurrency investments are subject to various risks, including inability to develop digital asset applications or to capitalize on those applications, theft, loss, or destruction of cryptographic keys, the possibility that digital asset technologies may never be fully implemented, cybersecurity risk, conflicting intellectual property claims, and inconsistent and changing regulations. Speculative trading in bitcoins and other forms of cryptocurrencies, many of which have exhibited extreme price volatility, carries significant risk; an investor can lose the entire amount of their investment. Blockchain technology is a new and relatively untested technology and may never be implemented to a scale that provides identifiable benefits. If a cryptocurrency is deemed a security, it may be deemed to violate federal securities laws. There may be a limited or no secondary market for cryptocurrencies. 

Digital assets are subject to risks relating to immature and rapidly developing technology, security vulnerabilities of this technology (such as theft, loss, or destruction of cryptographic keys), conflicting intellectual property claims, credit risk of digital asset exchanges, regulatory uncertainty, high volatility in their value/price, unclear acceptance by users and global marketplaces, and manipulation or fraud. Portfolio managers, service providers to the portfolios and other market participants increasingly depend on complex information technology and communications systems to conduct business functions. These systems are subject to a number of different threats or risks that could adversely affect the portfolio and their investors, despite the efforts of the portfolio managers and service providers to adopt technologies, processes and practices intended to mitigate these risks and protect the security of their computer systems, software, networks and other technology assets, as well as the confidentiality, integrity and availability of information belonging to the portfolios and their investors.

Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.

IMPORTANT LEGAL INFORMATION

This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. All investments involve risks, including possible loss of principal. There is no guarantee that a strategy will meet its objective. Performance may also be affected by currency fluctuations. Reduced liquidity may have a negative impact on the price of the assets. Currency fluctuations may affect the value of overseas investments. Where a strategy invests in emerging markets, the risks can be greater than in developed markets. Where a strategy invests in derivative instruments, this entails specific risks that may increase the risk profile of the strategy. Where a strategy invests in a specific sector or geographical area, the returns may be more volatile than a more diversified strategy.

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