1 big thing: Dragged into the cashless future
In a trend that has been coming for about a decade, the developing world is dragging the advanced economies into the age of cashless, credit card-less payments in which we will do most of our business by smartphone.
- What's happening: Starting first in east Africa and spreading to China, internet-based, mobile payment systems may be on the verge of cracking the ultra-difficult U.S. and Europe markets, potentially threatening the long stranglehold of big banks and credit card companies.
The big picture: The world first began to move away from cash in a big way in the 1960s, when the advanced economies began to build up an immense payment infrastructure around convenient credit cards.
But this all-but left out the developing world. Then, a very different, localized revolution bubbled up.
- In 2007, Safaricom, Kenya's mobile phone giant, launched M-Pesa, a long-shot service that allows its customers to text small payments to each other. M-Pesa took off, eventually growing to more than 30 million people in 10 sub-Saharan countries.
- In China — where credit cards are also exceedingly rare — Alibaba and later Tencent meanwhile launched their own mobile payment systems linked to an app. They exploded in popularity to a combined 1.7 billion users — virtually the entire population of China, plus people outside the country.
Various similar stabs in the U.S. and Europe — Paypal, Venmo, Apple Pay and Bitcoin among them — failed to gain popularity in the same way.
But now, there is a new push to spread the mobile payment boom:
By far the most prominent is Libra, Facebook's planned cryptocurrency, which the platform announced 10 days ago. The idea is that, starting next year, Facebook users could message and receive money through WhatsApp, Facebook's Messenger or standalone apps.
- As Axios' Kia Kokalitcheva wrote, "With more than 2 billion users, Facebook is arguably better positioned to roll out a global digital currency than any other company, government or organization."
But, in a white paper released today, the IMF and the World Bank said that several central banks are also in the game — they are on the verge of launching digital currencies like Bitcoin. They include the central banks of Sweden, the Bahamas, and the Eastern Caribbean Currency Union. European Central Bank officials have also thrown their support behind the issuance of a digital currency.
"We are going through a digital transformation in banking. It is accelerating due to these new technologies," Tobias Adrian, director of the IMF's Monetary and Capital Markets Department, tells Axios.
- The shift is potentially "transformative" if it brings people currently outside the banking system — women, the urban poor and migrants — into contact with payments and credit, the white paper said.
- In terms of the central banks contemplating digital currencies, Adrian said, "Whether they are going ahead with them, we don't know. But many are exploring it."
The bottom line: "I think that developed economies are on track to move beyond cash and cards," said Itay Goldstein, a professor at UPenn. "But it will take more time than in many developing economies."
- "The current established infrastructure in developed economies is so strongly rooted that it is an impediment to fundamental changes," Goldstein said. "But better technology will eventually win, I believe. It will just take more time."
2. While dreaming, Detroit faces cuts
Detroit's dream is to leave its laggard valuation behind and join the turbo-charged, tech-infused world of Silicon Valley, and its sky-high Wall Street multiples. Its ticket: driverless cars and data-fueled riches.
But no one knows when the billions the Detroit automakers are investing in autonomous tech will pay off — if ever. And meanwhile, the companies are slashing costs and laying off workers as sales stagnate in the U.S., China and elsewhere, writes Axios autonomous vehicles reporter Joann Muller.
Driving the news: Ford is the latest automaker to announce layoffs, this time in Europe, as part of a broader corporate restructuring that aims to cut $25.5 billion in operating costs over the next few years.
- Ford said it would eliminate 12,000 jobs and close 5 European plants.
- GM, Nissan, Honda, Daimler, Tesla, Fiat Chrysler, Jaguar Land Rover and Audi have also announced job reductions in the past 6 months, totaling at least 38,000 people, Bloomberg reports. And more cuts are likely.
What they're saying: "The industry is right now staring down the barrel of what we think is going to be a significant downturn," Bank of America Merrill Lynch analyst John Murphy said at a recent Detroit forum. The pace of decline in China is especially "a real surprise," per Bloomberg.
- Mark Wakefield, co-leader of the automotive and industrial practice at global consulting firm AlixPartners, warns of a "multiyear profit desert" in the industry.
3. What you may have missed
We know — it's been a sweltering week. Not to fret: Here is the top of Future.
1. The new data capitalism: When nowhere is safe from the prying eye.
2. The U.S. reaches for the tech jugular: Squeezing China on chips.
3. Amazon, the new king of shipping: Will it be like books?
4. The AI-upped house advantage: Getting gamblers to bet more.
4. Worthy of your time
'Liberalism has become obsolete' (Lionel Barber, Henry Foy, Alex Barker - FT) (subscription)
A new freshwater supply — offshore (Andrew Freedman - Axios)
ADM slipped advanced chips to China (Kate O'Keefe, Brian Spegele - WSJ)
The 3-millennia-long Capuchin Stone Age (The Economist) (subscription)
Chinese election meddling in Taiwan (Paul Huang - Foreign Policy)
5. 1 fun thing: Vegetarian carnivores
We all know not to stray too close to crocodiles, unless we want to be whipped by a mighty tail or chomped by huge, pointed teeth. It turns out, though, that some ancient crocodiles — those who skulked the Earth in the age of the dinosaurs — might have been more of a danger to plants, the Economist reports, citing Current Biology.
Of course, most dinosaurs are thought to have been herbivores. But it's been hard to confirm whether now-extinct crocodiles were.
- To get to this conclusion, paleontologists studied ancient crocodile teeth.
- Using a new scanning method, two researchers at the University of Utah studied 146 teeth from 16 extinct crocodiles.
- From that, they separated out those that, from teeth complexity, seemed to be eating meat, plants or just about anything.
The bottom line: If a crocodile had complex teeth, rather than the simple chompers of carnivores, they were probably herbivores. And such crocs appeared several time through ancient history, the researchers said.
Thanks for reading! Have a terrific weekend!