How the financial world may change by 2030: analysis of the Deutsche Bank forecast

Ten-year forecast is difficult, but in today’s reality it seems unreal. As in the 70s, some expected gold to lose its value in the era of fiat money, or in the 2000s, the Internet buffs said remote work would end the office. However, we all want to a certain extent be ready for the challenges and changes ahead. As Deutsche Bank research analysts truly said in their forecast “The World in 2030”, if the 2010s taught us anything, it was that the trends of the prior decade are no guide for the decade to come. Therefore, this report includes rather unexpected forecasts that are difficult for us to imagine in the current realities, even after a year. I have chosen some of them.

The end of fiat money?

We have been using a system of fiat money for decades, the value of which is based on the trust in the governments’ ability to guarantee the value of the money they issue and prevent its depreciation in case of inflation. The fairly sudden growth of China’s role in the global economy has become one of the biggest suppressors of global inflation over the last four decades. The current monetary system relies more on the set of global forces and processes than on the governments’ regulation. Nowadays, the forces that hold the fiat money system look fragile and can ultimately weaken in the 2020s. The record debt levels around the world undermine the confidence in the system. If so, the demand for alternative currencies — gold or cryptocurrency — could soar.

The end of plastic cards?

The possibility of the end of the paper money era has been actively discussed over the past 10 years. Of course, the trend towards non-cash funds is spreading, and Covid — 19 is an additional catalyst. However, a complete liquidation of cash is unlikely even in 2030. Cash is still well-ingrained in many advanced countries, including Japan, Western Europe, and the United States. According to Deutsche Bank’s “The future of payments” research, a third of people in developed countries prefer to use cash, and more than half believe cash will always be around.

Indeed, in Germany, nearly 60% of in-store purchases are paid in cash. Germans hold around €52 in cash on average — the highest rate amongst advanced economies. But whether the plastic cards will remain with us is a topical question. Although in the United States, the world’s biggest economy, contactless payment technologies are not taking root very quickly — just 16% of payments in stores weekly, and Americans also say that digital wallets aren’t so attractive without cashbacks and rewards.

The popularity of contactless payments is actively growing now. This trend is predicted to continue over the next five years for several reasons. Firstly, of course, consumers prefer mobile payments for their convenience, reliability and speed. Secondly, there is no need to type in a PIN or hand over cash. Physical contact today is a certain psychological barrier. Also, governments and leading companies of the field are working to provide the necessary infrastructure for digitalization and create an integrated ecosystem. China, where WeChat Pay is rapidly approaching dominance today, is a striking example of what is said above.

A cryptocurrency — the currency of the 21st century?

When the price of Bitcoin surged to $20,000, and Facebook, with its billion user base, announced the creation of a cryptocurrency payment system, the world paid significant attention to this payment method. And then the coronavirus has significantly promoted the use of digital currencies. However, this method has always been perceived as an alternative, rather than a substitution for the traditional payment methods. Government regulators, insufficient coverage of the global payment market and the unrediness of a significant part of the population — both merchants and customers — to switch to the full use of cryptocurrencies are the main barriers to digital currencies introduction. And to fix these issues, a lot of other obstacles need to be addressed — from the cryptocurrency market stability to the secure and proper work of the system on a global scale. But the world digitalization pace is amazing, so this scenario shouldn’t be excluded. And by the way, Lithuania has already released the world’s first central bank digital currency, and China, the USA, Great Britain etc also actively pursue this goal.