Ronit Ghose has been with Citi for over 26 years, serving first as an equity analyst, then moving on to Global Head of Banks and Co-Head of Fintech at Citi Research. Since, 2021, he’s headed Citi’s Future of Finance team, a Think Tank focusing on the future of tech and finance. Ghose also serves as an Advisory Board Member for several tech companies, VC firms, and one leading university.
NFM: Ronit, thanks so much for joining us for this interview.
Ghose: Thank you. It’s a pleasure to be here.
NFM: What is the most transformative trend impacting global finance at the moment?
Ghose: The predominant trend I see is how the nature of globalisation has changed. The globalisation we were used to in the 1990s and the 2000s isn’t the same as what we’re seeing today. We could call this new form Globalisation 2.0.
Globalisation always has profound implications for finance, technology, and economics.
In the 1990s and 2000s, we saw greater diversification of supply chains. Initially, blue-collar jobs, then white-collar jobs started getting distributed around the world. Large companies started using an integrated setup, such as manufacturing in one place and design in another.
The best example of that is this. [Ghose shows the back of an iPhone.] It used to say something like ‘Designed in California’ and ‘Assembled in China.’ This phone’s production cycle spans the globe.
People have said that globalisation is dying. We all certainly felt that way at the beginning of the COVID pandemic when the borders closed. But the previous form of globalisation had already started unravelling back in 2010 with some of the slowdowns in several megatrends caused by things such as rising protectionism, the Brexit vote, and China/US tensions. But we’re already seeing a bounce back of trade-to-GDP ratios to almost previous peak levels.
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Globalisation won’t look the same as it did before. And what’s really interesting about this so-called Globalisation 2.0 is that we’re seeing huge amounts of global flows.
For example, over 90% of Dubai’s population is made up of foreigners. Vibrant, global cities such as Singapore, London, and New York produce enormous amounts of data and intellectual property that passes across borders merely by the fact of the global nature of people living there.
The GDP produced by trade ships moving from China to the West Coast of the US won’t necessarily grow faster, but we’re seeing other trade patterns emerging from this data transfer.
The movement of physical goods might have slowed down during COVID, but the movement of data isn’t slowing down. And it’s only going to grow more once we give people even cheaper mobile data and start widely implementing 5G, 6G, and so on.
This globalisation will have profound economic impacts.
How would you summarise the difference between 1990s and 2000s-style globalisation versus what we’re seeing now?
That’s simple: In the 1990s and 2000s, globalisation was defined by container ships. Today, it’s driven by data.
NFM: What technologies are brewing at the moment that will change the way we bank in five years?
Ghose: AI is the major technology affecting many sectors, not just banking.
Banking, for modern finance, is all about data. And AI is, in many ways, all about doing things with data.
Despite some of the negativity surrounding AI, the great thing about it is that it’s a productivity boost.
New innovations typically lead to massive productivity boosts, like automobiles did in the 20th century and steam engines and electricity did before that. Historically, those boosts were mainly in the blue-collar sector.
What’s interesting now is that we’ll likely see similar productivity boosts in certain white-collar parts of the economy and in finance over the next five years. Even more interesting is that jobs requiring physical skill might become more valuable. I don’t know about you, but I don’t want a robot to cut my hair. So, prices will probably go up in those sectors.
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The matter of disappearing jobs is a common economic trend. Many finance jobs that existed 20 or 30 years ago don’t exist today. This is just a general trend over time: Jobs die, and then more jobs are created.
Economists call this the Lump of Labour Fallacy—the belief that jobs are a zero-sum equation. There’s no such thing as a fixed amount of work or a fixed quantity of jobs.
Obviously, these transitions do cause pain for some individuals. There are some negatives. But AI opens immense potential for the way we bank.
In the UK, for example, it’s extremely difficult to get personalised service unless you’re very wealthy. Sophisticated generative AI chatbots trained extensively on internal data could potentially help these customers gain insightful answers to their questions, thus further democratising finance.
NFM: How are AI and Machine Learning being adopted at the back-end in finance?
Ghose: Actually, banks have been using AI for about 10 years now in the back-end. One of the primary functions for back-end AI and Machine Learning is in Risk.
For example, language processing has become sophisticated enough for banks to use it to carry out predictive analysis of conversations and flag potential risk cases. This has been happening in the US and the UK for about seven or 10 years.
NFM: Where do we stand with crypto and blockchain? Do these still have relevance after the AI hype?
Ghose: Valid use cases for crypto and blockchain still exist. The perceived slowdown in crypto hype isn’t only due to AI, but also because of the regulatory clampdown, especially in the US. Several cases of fraud and market manipulation have also negatively affected public perception.
The majority of CBDC implementations that are currently being tested use blockchain. China has a centrally controlled CBDC that isn’t blockchain-based, but most CBDCs currently in testing use blockchain, so there’s a definite future for the technology.
NFM: A huge divide exists in the level of digitisation across markets. How should Fintechs approach this divide?
Ghose: We must define what we mean by digitised. If we’re talking about internet penetration, then one thing we’ve seen is the leapfrog effect: That is, markets with less penetration suddenly jumping ahead of more advanced markets.
I experienced that in Korea about 10 or 12 years ago. When we arrived, we were given Korean phones when we landed because our British phones only supported 3G, but Korea had progressed beyond this.
Another example is India. The cost of hardware has gone down while real income has gone up in the last 10 years. Data costs have also decreased, and a massive portion of the population now suddenly has data access. A fintech company from a more “digitised” market might be surprised to discover that these lesser-developed countries have now leapfrogged ahead of it.
Nigeria is yet another great example: They’ve had real-time payments for about 10 or 12 years through an internal system called NIBSS, yet Nigeria’s internet penetration is only about 40%. So, it’s important for fintechs from digitised zones to not jump to conclusions when entering a zone they feel is less digitised.
NFM: Ronit, thank you so much for taking time out of your schedule to answer our questions.
Ghose: Thank you. It was my pleasure.