The World of Payments is Changing
A Perspective from the Cambridge Centre for Alternative Finance at the University Of Cambridge Judge Business School
The ancient British university city of Cambridge may at first glance seem far removed from the sleek payments industry of modern Atlanta, but in fact Cambridge has emerged as a vital research link in understanding the fast-changing nature of today’s global financial transactions.
As digital technology transforms the world’s payment systems, the Cambridge Centre for Alternative Finance (CCAF) at the University of Cambridge Judge Business School looks far beyond Britain—to explore how payment systems are now intertwined with economic development in many parts of the world, particularly Africa and parts of Asia.
While people in the big cities of the United States or Europe may see payments as a matter of consumer convenience, payment through cell phones in countries like Kenya has become a vital tool for economic development and financial inclusion. This means that the studies we’re undertaking at the CCAF on how technology is changing payments and other financial channels and instruments is truly a global story that needs to be on the radar screen of a 21st-century financial centre like Atlanta.
To underline these shared transatlantic interests, Atlanta-based global investment management firm Invesco and Cambridge Judge have recently launched a multi-pillar research partnership that will allow the CCAF and other Cambridge Judge researchers to examine the digital transformations in financial services and related sectors occurring around the world. The partnership with Invesco, which manages $945.4 billion for clients worldwide (as of Feb. 28, 2018), is part of the firm’s wider global thought leadership initiative focused on bringing clients cutting-edge research and investment insights from world-class talent across the asset management industry and academia.
As part of the 809-year-old University of Cambridge, the business school and now the partnership with Invesco can also draw on the world-class research of many other university departments ranging from engineering to economics to law. Cambridge Judge Business School also works closely with many businesses and researchers in the Cambridge Cluster, the most successful technology cluster in Europe—which has been dubbed “Silicon Fen” given the flat topography of the Cambridge region. Among global companies to spring from Cambridge are ARM Holdings, whose computer chip designs are used in most of the world’s cell phones and which was sold in 2016 to Japan’s SoftBank for more than $40 billion.
Atlanta and Cambridge may be 4,200 miles apart, but they share the same need to understand how payment systems and other financial services are fast evolving. The CCAF envisages that the new Invesco partnership will also serve as a catalyst to increase other ties with Atlanta; already, the Centre has collaborated with Atlanta-based alternative lending platform Kabbage on its series of Americas Alternative Finance Benchmarking and Industry Studies (ITALICS), and a Research Fellow associated with the CCAF will soon begin teaching and researching at Georgia Tech too. One of the senior faculty at Cambridge Judge, Stelios Kavadias, the Margaret Thatcher Professor of Enterprise Studies in Innovation & Growth, previously taught at Georgia Tech for a decade, focusing on technology and operations management.
The CCAF was launched in January 2015, and has already produced 19 influential reports on the development of online alternative finance in the UK, Europe, the Americas, the Asia-Pacific Region, Africa and the Middle East, covering a wide range of research area from crowdfunding and peer-to-peer lending to cryptocurrencies and blockchain. The Centre also hosts an annual conference that attracts global industry leaders, academics, policymakers and regulators, with this year’s event in June focusing on “Global Perspectives and Local Insights.”
As an example of how local developments can have global implications, the CCAF is looking closely at how channels of mobile communications and financial payments have in effect merged in countries like Kenya. In Kenya, thanks to the proliferation of affordable mobile phones, communities have been able to ‘digitally leapfrog’ traditional branch banking by using the mobile-enabled M-Pesa money transfer and payment services offered by Safaricom, the largest mobile operator in Kenya. M-Pesa now processes billions of payments per year representing nearly 50 percent of Kenyan GDP annually.
And as millions of previously unbanked individuals are gaining access to the financial system through this sort of innovative payment platform, it’s important for payment processors in the developed world to realize how important these developments are to financial innovation and inclusion in many parts of the world. The CCAF’s research has also investigated the role of regulatory innovation in promoting sustainable development of alternative finance as well as how business practices are being reshaped to respond to opportunities and challenges brought about by this profound digital transformation. The recent research partnership between Cambridge Judge Business School and Invesco therefore is extremely timely.
It seems fitting that the P20 conference is being held at the Atlanta History Center, given that recent technological advances are changing the history of payments and the wider financial services sector before our very eyes. Given the rich history of the University of Cambridge—whose famous alumni include Sir Isaac Newton, Charles Darwin and the recently passed Stephen Hawking—the Cambridge Centre for Alternative Finance is delighted to be working with Invesco and the broader Atlanta community in chronicling and understanding these sweeping changes.