The market for digital wallets is predominantly dominated by FinTech and BigTech players. Traditional banks have indeed been slow to catch up. Despite this, the market is expected to grow significantly, with the number of digital wallet users projected to exceed 5.2 billion globally by 2026.

So, if you are a traditional bank - what should you do?

I believe, one viable strategy is to focus on Central Bank Digital Currencies (CBDCs). By influencing central banks to issue retail CBDCs through their established banking networks, traditional banks can offer a secure and trusted digital wallet solution. This approach could be the key for traditional banks to make a significant comeback in the digital wallet space and remain relevant to their retail customers.

Megatrends offer businesses a strategic compass in navigating the complex and ever-changing landscape of the future.These large-scale, long-term shifts in demographics, technology, environment, economics, and society provide invaluable foresight into emerging opportunities and challenges. By proactively understanding these trends, businesses can anticipate changes in consumer behavior, technological disruptions, and market dynamics. This enables them to develop innovative products, enter new markets, and optimize their operations to stay ahead of the competition. Additionally, megatrends highlight potential risks and uncertainties, allowing businesses to develop robust strategies to mitigate these factors and ensure long-term resilience. Ultimately, integrating megatrend analysis into strategic planning helps businesses to make informed decisions, allocate resources wisely, and ensure sustained growth and success in an increasingly dynamic world.

In short, megatrends help your strategy to

📌  Anticipate future change

📌  Identify new markets and opportunities

📌  Reduce risk and uncertainty

📌  Gain a competitive advantage

📌  Enhance strategic decision-making

This raises the question: 

❓ how to identify megatrends ❓

I particularly favor John Naisbitt’s 11 mindsets for identifying megatrends.

1. Look for the 'New Normal' - Identify the underlying shifts that represent a new baseline rather than temporary fluctuations.
2. Connect the Dots - See patterns and relationships between seemingly unrelated events to uncover larger trends.
3. Go Opposite the Flow - Pay attention to contrarian indicators and developments that challenge conventional wisdom.
4. Focus on the Global Southern Belt- Recognize the growing influence of developing regions and their impact on global trends.
5. Understand How Technology Changes Things - Assess how new technologies disrupt existing systems and create new possibilities.
6. See the Demographic Upheavals - Analyze how population shifts and changes impact social, economic, and political landscapes.
7. Know the Economic Realities - Understand the interplay of global economic forces and their influence on trends.
8. Accept the Contradictions - Acknowledge that megatrends can coexist with opposing forces and seemingly paradoxical developments.
9. Don't Get Stuck in the Past - Be open to new ideas and possibilities, avoiding nostalgia for outdated models.
10. Understand the Power Shift to the Individual - Recognize the increasing agency and influence of individuals in shaping trends.
11. See the Big Picture - Step back and consider the overarching context and interconnectedness of various trends.

John Naisbitt argues by cultivating these 11 mindsets, one can enhance their ability to identify and navigate the complex world of megatrends.

However, as the world moves on, the 11 mindsets need to be further developed to be fit for tomorrow’s digital world.

Enclosed are the updated 11 mindsets to make them more relevant to the complexities and rapid pace of change in the 21st century:

1. Look for the 'New Normal' -> Embrace Constant Change - The 'new normal' is no longer a static state but a continuous process of adaptation. Emphasize the importance of agility and flexibility in navigating constant shifts.
2. Connect the Dots -> Embrace Complexity and Systems Thinking - The interconnectedness of global systems demands a deeper understanding of complex relationships and unintended consequences. Encourage systems thinking and the exploration of non-linear connections.
3. Go Opposite the Flow -> Challenge Dominant Narratives - Questioning conventional wisdom remains crucial, but prioritize critical thinking and evidence-based analysis over simple contrarianism.
4. Focus on the Global Southern Belt -> Embrace Global Diversity and Interdependence -While the Global South remains vital, recognize the multi-polar nature of today's world and the need to understand diverse perspectives and cultures.
5. Understand How Technology Changes Things -> Anticipate Technological Disruption - The pace of technological change requires a proactive approach to anticipating its impact. Cultivate a mindset of continuous learning and adaptation to navigate disruption.
6. See the Demographic Upheavals -> Navigate Generational and Cultural Shifts - Demographic changes are more complex than ever, encompassing generational shifts, migration patterns, and evolving social identities. Recognize the diversity of experiences and tailor strategies accordingly.
7. Know the Economic Realities -> Understand the New Economic Paradigm - The global economy is increasingly shaped by digital technologies, sustainability concerns, and inequality. Analyze these factors to identify new opportunities and challenges.
8. Accept the Contradictions -> Navigate Paradox and Ambiguity - The world is full of contradictions and paradoxes. Embrace uncertainty and learn to navigate complex situations where multiple truths may exist.
9. Don't Get Stuck in the Past -> Foster Lifelong Learning and Unlearning - Unlearning outdated models and knowledge is as crucial as acquiring new information. Emphasize adaptability, curiosity, and the willingness to challenge assumptions.
10. Understand the Power Shift to the Individual -> Empower Collective Action - While individual empowerment is vital, recognize the power of collective action and collaboration in driving positive change.
11. See the Big Picture -> Cultivate a Global and Long-Term Perspective - Decision-making today must consider long-term implications for future generations and the planet. Prioritize sustainable and ethical solutions that benefit society as a whole.

By adapting and expanding upon Naisbitt's original mindsets, we can better formulate our business strategies to identify opportunities, anticipate challenges, and create a positive future in an increasingly complex and interconnected world.

http://www.FrankSchwab.de

The Charles Schwab Corporation, established in 1971, has grown into a significant financial services provider with a market capitalization of USD 115 billion as of September 2024. Schwab's acquisition of TD Ameritrade in 2020 marked a pivotal moment, expanding its balance sheet from USD 243 billion in 2017 to USD 667 billion in 2021. Despite challenges from the Federal Reserve's interest rate hikes since 2022, which reduced net interest margins from 94% in 2020 and 2021 to 59% in 2023, Schwab maintained strong cost management, with operational expenses at 0.16% of average client assets. The company has also made significant strides in digital transformation, implementing innovations such as a fully digital lending solution and enhancements to Schwab Personalized Indexing and iRebal platforms. Integration with Salesforce Financial Services Cloud and the Financial Planning Action Center further highlights Schwab's focus on improving client-advisor collaboration.

Schwab's operational efficiency, however, has faced challenges, as indicated by a rise in the Cost-to-Income ratio from 59.2% in 2017 to 66.1% in 2023. Despite growth in assets per employee from USD 13.82 million to USD 14.93 million and a modest increase in profit per employee from USD 0.13 million to USD 0.15 million, these metrics reveal limited progress. The acquisition of TD Ameritrade, while driving substantial growth, also introduced integration complexities, showcasing the delicate balance Schwab must maintain between growth, innovation, and operational efficiency.

Charles Schwab's strategic focus on expanding its investment and advisory business is evident in the threefold increase in active brokerage accounts and growth in client assets per employee. As of December 31, 2023, the company managed USD 8.5 trillion in client assets across 34.8 million active brokerage accounts, 5.2 million corporate retirement plan participants, and 1.8 million banking accounts. Its diverse product offerings include brokerage, trading, retirement, and small business accounts, alongside an array of investment products like mutual funds, ETFs, stocks, bonds, and fixed income securities. Schwab’s banking and borrowing solutions are designed to complement its investment services, with features like no-fee checking accounts linked to brokerage accounts and competitive lending products such as home loans and margin loans against securities.

Financially, Schwab's performance from 2017 to 2023 reflects significant growth and adaptation to changing market conditions. From 2017 to 2021, Schwab's balance sheet grew at a compound annual growth rate (CAGR) of 29%, driven by strategic acquisitions and favorable market conditions. This expansion was mirrored in its market capitalization, which increased from USD 69 billion in 2017 to USD 159 billion in 2021. However, the aggressive interest rate hikes by the Federal Reserve in 2022-2023, raising the Fed Funds rate eleven times, significantly impacted Schwab's financials, leading to a decline in net revenue from USD 20.76 billion in 2022 to USD 18.84 billion in 2023, and a reduction in balance sheet size to USD 493 billion in 2023.

Despite these headwinds, Schwab has maintained strong risk management practices, reflected in a consistent Liquidity Coverage Ratio that reached 130% in 2023. The company's operational challenges are underscored by stagnant operational efficiency metrics, as assets per employee only slightly increased, and the profit per employee growth remained minimal. Nevertheless, Schwab's focus on digital transformation has positioned it well for future growth, with initiatives such as the launch of fully digital lending solutions and significant enhancements to platforms like iRebal and Schwab Personalized Indexing.

Schwab's revenue generation primarily stems from its Investor Services and Advisor Services segments. The Investor Services segment provides a broad range of financial products and services, including brokerage and advisory services, while the Advisor Services segment supports independent investment advisors. Both segments have faced revenue pressures due to market conditions, but Schwab's commitment to innovation and cost management has helped sustain its profitability. In 2023, the Investor Services segment generated USD 14.4 billion in net revenues, while the Advisor Services segment contributed USD 4.4 billion.

Schwab's revenue is derived from four primary sources: net interest revenue, asset management and administration fees, trading revenue, and company deposit account fees. Net interest revenue has consistently been a key component, accounting for approximately 50% of total revenue. However, rising interest expenses due to the Fed's rate hikes have compressed margins. Asset management fees have shown a gradual shift toward trading revenues, reflecting Schwab's adaptation to changing client needs and market dynamics.

Charles Schwab's economic success is set against a backdrop of strong national economic growth, with U.S. GDP growing at an average rate of 2.25% from 2017 to 2023. Schwab's performance in this period has outpaced national trends, particularly in deposit growth and loan issuance, where it achieved higher growth rates than the national averages. Schwab's client assets also grew faster than the U.S. average, demonstrating its strong market positioning and ability to capitalize on economic opportunities.

While Schwab has demonstrated robust growth in deposits and loans, its operational effectiveness remains an area for improvement. Key operational metrics, such as assets per employee and profit per employee, have shown limited progress, highlighting the need for continued focus on enhancing efficiency. Despite these challenges, Schwab's strategic investments in digital transformation, such as the launch of a fully digital lending solution and ongoing enhancements to its platforms, underscore its commitment to long-term growth and operational excellence.

Schwab's digital transformation strategy has been pivotal in maintaining its competitive edge. The company has made substantial investments in technology, acquiring software and technology worth USD 2.25 billion from 2017 to 2023. Key digital initiatives include the launch of a fully digital lending solution, enhancements to Schwab Personalized Indexing, and the rollout of the Schwab Knowledge Assistant, which uses generative AI to streamline customer service. Schwab's focus on digital innovation has also been recognized through industry awards, such as the Most Trusted Bank Award from Investor’s Business Daily and the highest customer satisfaction score in the J.D. Power U.S. Satisfaction Study.

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