Industry Overview - The global payments industry handled 3.4 trillion transactions in 2023, accounting for $1.8 quadrillion in value and generating $2.4 trillion in revenue [6] - Payments revenue grew 7% annually from 2018 to 2023, driven by transaction digitization and higher interest rates, but growth is expected to slow to 5% annually through 2028 [6] - Net interest income contributes 47% of total payments revenue, up 3 percentage points from 2021 [8] - Asia-Pacific accounts for nearly half of global payments revenue, with commercial revenues increasing from 60% to 62% of total payments revenue from 2018 to 2023 [11][12] Key Trends Shaping the Industry 1. **Decline of Cash**: Global cash usage is at 80% of 2019 levels and declining 4% annually, with $26 trillion still transacted in cash [16] - Instant payments are rapidly replacing cash in developing markets like India, Malaysia, and Indonesia [18] - In card-dominated markets like the US, cash transactions represent just 5% of consumer payment value [18] 2. **Rise of Instant Payments**: Instant payments are displacing other methods, with two types of markets emerging - card-entrenched (e.g., US, UK) and cash-heavy (e.g., Brazil, India) [19][20] - In the EU, instant payment transactions are expected to grow from 3 billion to 30 billion by 2028, a 50% annual growth rate [21] 3. **Digital Public Infrastructure (DPI)**: DPI initiatives in markets like Brazil, Estonia, and India are catalyzing digital payments through digital ID systems and interoperability [22][23] - India's UPI has been successfully launched in 10 countries, including Singapore and the UAE [25] 4. **Platform Aggregation**: Commerce is aggregating onto platforms like Shopify and Amazon, which process 30% of global consumer purchases [26] - Vertical-specific software solutions captured over 50% of SME spending in the US in 2023 [27] 5. **Transaction Banking Evolution**: Transaction banking is becoming a differentiator for leading institutions, with banks like Citi and HSBC emphasizing these units [31] - Commercial customers are demanding intuitive interfaces and faster integration of bank and corporate systems [31] 6. **Central Bank Digital Currencies (CBDCs)**: Over 90% of central banks are pursuing CBDC projects, with more than 30 pilots launched [33] - CBDCs are expected to set the baseline for digital currency functionality and cost [33] Growth Opportunities - **Cross-Border Payments**: Initiatives like Project Nexus are connecting domestic instant-payment schemes across countries, with 23% of UK SMEs using nonbank providers for cross-border payments [36][38] - **Treasury Management**: The digitization of CFO offices is accelerating, with fintechs like Taulia and C2FO scaling their offerings [39] - **Payouts and Payroll**: Instant payments are enhancing gig economy worker satisfaction and customer loyalty through immediate compensation and refunds [42][43] Challenges and Investments - **Fraud Prevention**: Fraud in online commerce is rising twice as fast as transaction volume growth, with global losses from payment card fraud projected to reach $400 billion over the next decade [44][45] - **Infrastructure Modernization**: Payments players must invest in real-time infrastructure and technology to remain compliant and competitive, with instant payments requiring 24/7/365 availability and enhanced fraud prevention [48][49] - **Regulatory Pressure**: Regulators are intensifying demands for faster, more efficient payment processes while maintaining low costs and increasing consumer protections [51][54]

Industry Overview - The global banking industry generated $7 trillion in revenue and $1.1 trillion in net income in 2023, with a return on tangible equity (ROTE) of 11.7% [7] - The industry intermediated $410 trillion in assets globally in 2023 [8] - Banking remains the largest profit-generating sector globally, surpassing the combined net income of the energy and industrials industries at $1.15 trillion [10] - Despite strong performance, the industry faces skepticism with a price-to-book ratio of 0.9, the lowest among all sectors [12] Performance Drivers - Recent performance improvements are largely attributed to rising interest rates, with net interest margins (NIMs) increasing significantly [6][16] - Labor productivity growth in banking has been mixed, despite high tech spending, with US banks showing declining productivity [27][29] - Regulatory changes continue to require significant investment, adding to operational costs [6] - Competition from non-traditional players, such as private credit and fintech, is intensifying in profitable segments like payments and wealth management [6] Structural Challenges - The industry's profitability is uneven across geographies, with countries like the US, UK, and India showing improved performance, while others like Brazil and China face lower ROTEs [18] - Scale economies remain elusive in many markets, with tech spending not translating into proportional productivity gains [27][29] - The cost of funds is expected to rise due to quantitative tightening and increased competition for deposits [32] Winning Strategies - Top-performing banks focus on a combination of structural advantages (segment selection, scale, and geographic positioning) and operational execution (analytics, marketing, and tech) [6][36] - 14% of banks have achieved a price-to-book ratio above 1 and a price-to-earnings ratio above 13, indicating strong value creation [37][38] - Winners often operate in attractive markets with high margins and strong fundamentals, such as Australia, Canada, and India [41][42] - Execution excellence, including granular pricing, risk selection, and customer-centric strategies, drives outperformance [52][53] Future Outlook - If interest rates decline, NIMs could compress by 50-60 basis points, potentially reducing ROTE to near cost of capital levels [17] - Banks will need to reduce costs by 5% annually to maintain current ROTE levels, a significant challenge given historical cost reduction rates of 1% [31] - AI and advanced analytics offer potential for productivity gains, but widespread adoption and impact remain in early stages [27][57] Management as a Differentiator - 10% of banks have improved their ROTE by five or more deciles over the past decade, demonstrating the potential for breakout performance [58][59] - Management teams must focus on structural and executional leverage, including scale, portfolio mix, and operational efficiency, to drive value creation [62] - Successful banks often adopt a "management quotient" that emphasizes agility, talent optimization, and strategic focus to outperform peers [58][62]

Investment Rating - The report indicates a positive outlook for the medtech industry, highlighting the performance gap between top value creators and their peers, suggesting a favorable investment environment for leading companies [3][6]. Core Insights - The medtech industry has seen a significant divide between high performers and others, with top companies achieving above-average growth and profitability, while the rest struggle [3][6]. - Key strategies for value creation among leading medtech companies include prioritizing innovation, adopting digital tools, and focusing on clinical excellence [7][10][11]. Summary by Sections Value Creation Priorities - Top medtech companies have outpaced the S&P 500 since 2019, with a focus on quality, innovation, and rising profit margins [3][6]. - The report identifies six strategic moves that leading companies are making to create value, including innovation productivity, digital tool adoption, and data-driven management [7][8][9]. Innovation and R&D - R&D costs have increased significantly, with spending as a percentage of sales rising by 300 basis points since 2008, necessitating a focus on meaningful innovation backed by clinical evidence [4][6]. - Successful companies are leveraging digital tools to reduce development time by 20% and improve efficiency [8]. Clinical Excellence - There is a growing need for clinical data across all devices, with top performers looking to the pharmaceutical industry for improved trial execution and monitoring [10]. Portfolio Management - 2024 has seen a surge in acquisitions, with top performers making 3.5 times more acquisitions than their peers since 2019 [11]. - Companies are also actively divesting underperforming assets, with divestitures in 2023 and 2024 doubling previous years [11]. Cost Management - Industry margins have declined by approximately 100 basis points since 2019, prompting leading companies to undertake significant cost transformation programs [16]. - Successful cost management strategies include portfolio simplification, go-to-market optimization, and supplier renegotiation [16][19]. Geopolitical Adaptation - Medtech companies are facing challenges from geopolitical uncertainties, with top performers focusing on key markets and local partnerships to drive growth [32][33][35]. - Localization efforts are critical, particularly in emerging markets like China and Indonesia, to enhance growth potential [34]. Generative AI Utilization - Leading medtech companies are beginning to harness generative AI to enhance commercial capabilities, with significant potential for productivity gains and improved customer engagement [31][28]. - Use cases include sales rep support, account-level prioritization, and content generation, leading to increased efficiency and effectiveness [28][27].

Investment Rating - The report does not explicitly provide an investment rating for the agriculture industry Core Insights - Farmers are increasingly prioritizing productivity, focusing on operations-oriented solutions to enhance efficiency and sustainability [2][3] - The current macroeconomic environment has led farmers to emphasize improving productivity through agtech, biological products, and sustainable practices [3][4] - A significant portion of farmers globally are optimistic about future profit opportunities, with improved yields, higher crop prices, and lower input costs identified as key areas for potential profit growth [13][17] Summary by Sections Survey Overview - McKinsey conducted a survey of approximately 4,400 farmers across nine countries to understand their views on profitability, technology adoption, and sustainable practices [4][5] - The survey covered five main areas: profit risks and opportunities, future profit outlook, sustainable practices adoption, technology adoption, and purchasing channels [4] Profit Risks and Opportunities - Increased input prices (48%) and extreme weather events (42%) are the top two risks to profitability, with volatile commodity prices being a new concern for 30% of farmers [7][12] - Farmers are looking to improve yields, higher crop prices, and lower input prices as the top three opportunities for profit in the next two years [13][17] Regional Economic Outlook - Farmers in North America and Europe are more pessimistic about future profits, with 64% and 55% expecting lower profits, respectively [17][18] - In contrast, farmers in India and Latin America are more optimistic, with 58% and 76% expecting higher profits in the next two years [17][18] Adoption of Sustainable Practices - Adoption of sustainable practices is driven by the desire for increased yield and additional revenue streams, with crop rotations (68%) and reduced or no tillage (56%) being the most commonly adopted practices [21][24] - Farmers using biological products expect to maintain or increase spending on these products, indicating a resilient market for biologicals [33][34] Technology Adoption - There has been a slight increase in the adoption of technology, with North America leading and Latin America showing the fastest growth [36][40] - Digital agronomy and precision agriculture are the most widely adopted technologies, with significant regional variations in usage [40][51] Influences on Purchasing Decisions - Input distributors are viewed as the primary influence on farmers' purchasing decisions, with family and neighbors also playing a significant role [55][56] - Despite the rise of digital tools, farmers still prefer in-person interactions for purchasing, particularly for first-time transactions [61][62] Recommendations for Organizations - Organizations should focus on tailored solutions for farmers, helping them manage volatility and realize the financial benefits of sustainable practices [66][68] - Emphasizing ROI-centric solutions and deepening relationships with channel partners will be crucial for supporting farmers in navigating the complex agricultural landscape [70][71][72]

belfercenter.org/homelandsecurity ESSAY HOMELAND SECURITY PROJECT | OCTOBER 2024 Bounce Back Better: Four Keys to Disaster Resilience in U.S. Communities Mihir Mysore, Tim Ward, and Tom Dohrmann, with David Bibo Editors: Juliette Kayyem, Nate Bruggeman Disasters are accelerating in U.S. communities. An analysis of recovery efforts provides insight into actions leaders can take to help affected communities recover faster and emerge stronger. This essay is part of a continuing publication series for the Globa ...

McKinsey McKinsey Sustainability Practice Creating a how-to guide for climate tech start-ups and scale-ups How can a climate tech company get funding—and scale up—quickly? The Climate Brick, an open-source manual for entrepreneurs and investors, aims to provide some answers. October 2024 | --- | --- | |---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...

Investment Rating - The report does not explicitly provide an investment rating for the retail banking industry Core Insights - Retail banks globally are experiencing a period of profitability, with returns on equity (ROEs) reaching approximately 12 percent in 2023, the highest since the 2008 financial crisis, up from 10 percent between 2013 and 2020 [3][10] - The retail banking sector is facing three major challenges: cost inflation, increased fraud, and uncertainty regarding interest rates, which will compress margins and increase operational costs [4][28] - Banks are expected to focus on enhancing primary customer relationships and protecting margins through traditional and next-generation capabilities, including digitization and AI [4][7] Summary by Sections 1. The State of Global Retail Banking - The retail banking sector has seen significant growth, with global revenues surpassing $3 trillion in 2023, reflecting an annual growth rate of about 8 percent [12] - Regions such as Latin America and Emerging Asia have led in revenue growth, with Latin America achieving a 19 percent compound annual growth rate (CAGR) from 2020 to 2023 [12][10] 2. Challenges Ahead - Retail banks are expected to face sluggish deposit growth due to a high-interest-rate environment and tightening monetary policies [15] - The report anticipates margin declines of 5 to 10 percent by 2026 across various geographies, driven by rising costs and regulatory pressures [18][28] 3. Strategies for Success - Banks should adopt a mobile-first integrated distribution strategy to enhance customer engagement and streamline operations [34][36] - Developing relationship-based incentives and rewards can help banks deepen customer relationships and counter competition from fintechs [43] 4. The Role of Technology - Investment in technology, particularly in digitization and AI, is crucial for banks to improve pricing, mitigate losses, and enhance productivity [7][8] - The report highlights the importance of mastering mobile channels to orchestrate customer journeys and improve service delivery [41][42] 5. Competitive Landscape - Fintechs continue to pose a competitive threat, capturing significant market share in areas like payment services and remittances [21][22] - Traditional banks must focus on building deeper customer relationships and offering low-cost services to remain competitive [23][24]

Investment Rating - The report indicates a positive investment outlook for the e-commerce industry, particularly for companies that prioritize technology and innovation [2][3]. Core Insights - E-commerce is experiencing a fundamental transformation driven by technology, particularly generative AI, which is reshaping customer interactions and company operations [2][3]. - Leading companies are investing significantly in technology and digital channels, distinguishing themselves from laggards who are more focused on cost-cutting [5][11]. - The report outlines five critical truths for success in next-gen e-commerce, emphasizing the importance of strategic investment, internal talent development, and technology integration [2][3]. Summary by Sections Investment Strategies - Leaders in e-commerce are adopting an "attack" mindset, prioritizing investments in generative AI and digital channels, with nearly 20% of leaders making generative AI their top priority compared to less than 5% of laggards [5][6]. - Approximately 30% of leaders plan to allocate over 10% of their e-commerce budget to generative AI in the next year, while fewer than 10% of laggards are making similar commitments [5][6]. Technology and Talent - Companies are increasingly recognizing the need to build internal tech talent rather than relying on external vendors, with about 50% more leaders increasing investment in hiring technical talent compared to laggards [17]. - Leaders are twice as likely as laggards to prioritize technology as a strategic asset, with nearly 20% planning to invest over $100 million in e-commerce technology infrastructure [17][18]. Digital Channels and Customer Engagement - Leaders are extending their digital touchpoints, with significant investments in online marketplaces (60% vs. 54% for laggards) and social commerce (63% vs. 50% for laggards) [11][12]. - More than 40% of leaders derive significant revenue from shopping events, while almost 25% of laggards do not participate in such events [12][14]. Integration and Omnichannel Strategy - Successful companies are integrating online and offline channels to enhance customer experiences, with 15% of leaders reporting well-integrated channels compared to only 2% of laggards [20][21]. - The report emphasizes the importance of a centralized operating model that empowers autonomous teams to drive e-commerce initiatives effectively [22][23].

Investment Rating - The report does not explicitly provide an investment rating for the healthcare industry or AI applications within it. Core Insights - Nurses express cautious enthusiasm about AI in healthcare, emphasizing the need to maintain high-quality care while integrating AI tools [2][7][24] - A national survey of 7,200 nurses reveals a significant interest in incorporating AI into their work, with 64% of respondents supporting more AI tools [4][7] - Concerns about AI include trust in accuracy, lack of human interaction, and insufficient knowledge on using AI technologies [13][15] Summary by Sections Survey Overview - The survey conducted by McKinsey and the American Nurses Foundation aimed to evaluate nurses' perceptions of AI, their familiarity with it, and the perceived risks and opportunities [4][6] Nurses' Perspectives on AI - 42% of nurses feel hopeful that AI will improve quality, while 23% express discomfort regarding its implications for patient care [10][11] - 61% of nurses rank trust in accuracy as their top concern regarding AI [13] Interest in AI Tools - 64% of surveyed nurses want more AI tools in their work, with higher interest among those aged 30 to 39 (71%) [7][9] - AI could potentially free up approximately 20% of a nurse's shift through technology [7] Addressing Concerns - To alleviate concerns, 73% of nurses suggest involving nursing input in AI tool design, while 69% want evidence of AI's effectiveness on quality and patient safety [15][17] - Enhanced training and education on AI usage is also a priority for 64% of respondents [17] Optimism and Engagement - Overall, nurses are cautiously optimistic about AI's potential to alleviate workloads and improve patient care [18][24] - The report emphasizes the importance of nurse engagement in the development and implementation of AI tools to ensure high-quality patient care remains a priority [24]

Investment Rating - The report does not provide a specific investment rating for the industry [1] Core Insights - The report discusses various factors affecting the industry, including market trends and competitive dynamics [1] - It highlights the importance of innovation and technology adoption as key drivers for growth [1] - The analysis indicates potential opportunities for investment in emerging markets and sectors [1] Summary by Sections - **Market Overview**: The industry is experiencing significant changes due to technological advancements and shifting consumer preferences [1] - **Competitive Landscape**: Key players are focusing on strategic partnerships and mergers to enhance their market position [1] - **Growth Drivers**: Factors such as increased demand for sustainable solutions and digital transformation are identified as primary growth drivers [1] - **Investment Opportunities**: The report suggests that sectors related to renewable energy and digital services present promising investment opportunities [1]