Posted: 23 May 2023 5 min. read

The future of money and… infrastructure investment

The future of money could have profound implications for those managing infrastructure, where investment will be both necessary and potentially costly. Rates of return, meanwhile, are uncertain, further adding to the challenge. Difficult questions will have to be asked concerning value for money, with ‘fast followers’ learning from the experiences of those brave enough to take the first steps. And, conversely, bravery will also be needed to resist calls for unnecessary expenditure as the future of money plays out. 

For financial institutions, their computing and data infrastructure may need to be rethought as the wider adoption of digital assets leads to an increased demand for computational power and storage capacity. Firms will need to be able to process, validate and securely store large volumes of digital assets transaction data, as well as manage complex underlying cryptographic algorithms and blockchain-related technologies. Hence, as firms evolve, so too will the number and capabilities of the staff needed to manage this change. 

Certain past investments may also need to be written off, though the extent of reform required will depend largely on the nature of financial activity and the need for interoperability, as well as the interests and demands of stakeholders, including both buyers of technology and those regulating the markets they operate in. 

More firms may therefore consider partnerships with payment services providers (PSPs) and other third parties that can remove the administrative burden and cost of running multiple systems. Options that favour efficiency – both in terms of raw cost and intrinsic energy efficiency – as well those that enable rapid change with minimum practical complexity for users will be much sought after. Third party providers that can furnish the high-performance computation, analytical capabilities and scalable storage that firms will need in the future will also be in high demand.

Payment providers, including banks, may choose to manage aspects of the work needed to retool systems and solutions themselves. For example, the adoption of low-code/no-code environments to support ‘home brew’ efforts will, for some, result in enhanced efficiency and flexibility. They can also leave firms better placed to deliver differentiated services in the future. However, it will be difficult for such firms to achieve their goals sustainably without the support of partners to augment existing internal knowledge and experience. Elsewhere, through canny investment, it may also be possible for firms to manage the costs of transformation by retaining their legacy systems for longer. However, for some providers, the moment to tackle outdated legacy core architecture may already have passed. In this scenario, transformation will become a major priority area given the more demanding infrastructure needs of a financial system increasingly dominated by digital assets. Indeed, unless consumers’ expectations of slick, frictionless digital experiences can be met, a failure to adapt here could have serious consequences in the long run.

Without tangible real-world benefits to articulate to budget holders and the board, the change that is needed will only come slowly. Convincing stakeholders to embrace change sooner rather than later then will be critical for those tasked with delivering that change. 

Those who do seize the opportunity to adapt could benefit in several important ways, including:

  • Automation savings – smart contracts will allow firms to automate large segments of the contracting process, across facilitation, verification and enforcement. 
  • Transaction cost savings – blockchain-enabled payment systems may lower overall transaction costs, providing benefits for banks, insurers, asset managers, central banks, tax collection authorities, corporates and consumers.
  • New revenue streams – beyond lowering costs, the characteristics of digital currencies, including their enriched data and ‘programmability’ will not only improve the provision of today’s services, but also support the creation of new future products and experiences. 

In addition, the increasing global interoperability of banking systems could also benefit consumers and businesses by making cross-border payments simpler and more affordable. In this way, international cross-border trade could be smoother, cheaper and quicker in the future. The wider adoption of real-time payments would also represent a departure from the current system in which transactions in some areas are still settled on a batch basis over a number of days. Indeed, the increasing availability of real-time payments could result in greater liquidity and improved financial stability. Similarly, the cost of regulation may fall as regulators themselves become more effective, supported by enhanced data and wider standardisation. 

From an infrastructure standpoint, some of what is needed is already in place in some countries – particularly in areas like real-time payments. The next step in facing the future of money will be to complete the work that has already been started, and plan for further development and deployment of parallel and/or replacement infrastructure. In addition, standards need to be agreed, customers prepared and partnerships – commercial, governmental and regulatory – forged.

Coming next: We consider the necessity of preparing for and investing in change, staying updated on innovation and regulation, developing capabilities and prioritising compliance and security. Forecasting the future is challenging, but by providing some insight and opinion on its known aspects and uncertainties, we aim to help you consider your own strategy, underlining the importance of collaboration in navigating the evolving financial landscape.

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Key Contacts

Hamish Thomas

Hamish Thomas

Payments and FutureMoney leader

Hamish has 29 years’ experience working with a broad spectrum of firms, from established international institutions to new entrants and fintechs across EMEA, the US, Asia & Oceania. He started his career in industry, designing satellite and mobile telco networks, before becoming fascinated by the role of payments as the connective tissue of financial services and commerce. Since then, he has focused on the biggest questions facing the payments industry, particularly on the role of modern technology, regulation and innovation to enhance payments ecosystems, achieving better outcomes for the individuals, businesses and governments who use them, and the banks, PSPs and others who provide services. His recent experience includes digital transformation, regulatory driven change, new product development, fraud & financial crime prevention, and the practical use of emerging technology, particularly advanced analytics of payments data, and DLT as a platform for CBDCs and Digital Assets.

Ed Moorby

Ed Moorby

Digital Assets Leader

Ed leads Deloitte UK’s Regulatory Change Delivery Team who focus on helping clients understand the practical implications of regulation, how they should respond, and the nature and scale of the implementation project. He co-leads Deloitte’s global team supporting clients respond to IBOR transition and is a member of the Bank of England’s Outreach and Communication sub-group. Recent relevant experience includes: Supporting a G-SIFI develop their initial understanding of financial exposures and developing plans to automate production of this on a monthly basis. Working with a US domiciled bank to mobilise their IBOR transition programme with a focus on identifying and mitigating the key delivery risks. Advising a global bank on their IBOR impact assessment and developing a business case and delivery plan for the full programme. Advising a global financial services firm on their options to respond to Brexit, establishing the contingencies required and triggers, and preparing the implementation roadmap. Working for the Exco of a bank impacted by operational continuity and UK ring-fencing requirements Ed assessed the service delivery options and recommended an approach that considered regulatory, legal, tax and business requirements. Led the definition of the structural reform delivery plan, including cost and head count estimates for a global bank. This work included defining the operational impacts for the functions, businesses and service model.

Tyler Welmans

Tyler Welmans

Innovation Portfolio Director

An experienced technology specialist and trusted strategic advisor focused on emerging digital, social and financial trends. Tyler blends technical, operational, commercial and regulatory expertise to lead and support the development of innovative products and services across complex opportunity spaces. Tyler directs research and experimentation activity across emerging tech and market trends such as Digital Assets and Digital Identity, and leads teams in shaping, validating and incubating new product/business concepts to fuel innovation both inside Deloitte, and in the marketplace with clients.